Do Those Super Bowl Commercials Increase Sales?

Companies will spend an enormous amount of money on Super Bowl commercials during Sunday's big game.  Sporting News reported that companies will spend an average of $7 million for a 30-second Super Bowl commercial.  Of course, you might be wondering:  How much of an impact do those commercials have on subsequent purchases?  I dug through some research on the topic, and I found one particularly interesting paper by Wesley R. Hartmann and Daniel Klapper.  They published their research in Marketing Science several years ago.  

Hartmann and Klapper examined how commercials impacted sales after the Super Bowl.  They found a positive relationship between the advertising and product purchases during a subsequent sporting event.   Specifically, they examined how Super Bowl ads impacted consumption of products such as beer during the March Madness college basketball tournament, which takes place about 5-6 weeks after the Super Bowl.  Here is their summary of the findings from the research: 

We measure the effect of ad viewership on post–Super Bowl sales. Without an obvious horizon for the effects, we measure the effect separately for each week following the game. While the first few weeks appear to follow a typical decay pattern, the advertising effects show resurgence in weeks when shoppers make purchases to consume during subsequent major sports broadcasts. This pattern suggests the hypothesis that Super Bowl advertising may build a complementarity with sports viewership more broadly.  To test this, we collected market-week-level data on viewership of the National Collegiate Athletic Association (NCAA) basketball tournament and interacted it with the Super Bowl ad exposures. We found that purchases for consumption during viewership of the NCAA tournament were augmented if the brand’s Super Bowl ad viewership was high.

Who Makes Those Private Label Products In Your Grocery Store and Why?

Ever wonder who manufactures the private label products you purchase at the grocery store?  Most of us suspect it is one of the large branded consumer products companies, but it is sometimes difficult to determine which firm specifically supplied that product to the grocer.   Why do these big national brands choose to produce private label products?  Scholars Yu Ma, Kusum Ailawadi, Mercedes Martos-Partal, and Oscar Gonzalez-Benito have conducted an in-depth study of private label manufacturing, and they offer some interesting insights.  They studied the private label market in Spain, examining data for six of the largest retailers in the country.   

First, they confirm a well-known fact about private label production.  The large brands have an inherent advantage when producing private labels.  They can leverage economies of scale to produce those private label goods at low costs.  Moreover, manufacturing the private label goods, and further taking advantage of scale economies, can lower their costs of producing their branded products.  

Second, they find that manufacturers may be supplying private label products in hopes of strengthening their relationships with key retailers.  In so doing, they hope to gain more shelf space for their branded products.   The scholars confirm that retailers do carry more of a manufacturer's branded products if that company supplies private label goods to their stores.   If a manufacturer exits the private label business, they tend to lose shelf space for their branded goods.  

However, interestingly, they find that the national brands do not gain market share in their categories simply because they have more shelf space and more availability of their product in the stores.  In the end, the consumer drives the success of the brands.  More shelf space doesn't mean more sales, and ultimately, a retailer may take shelf space away if products don't sell.  

One thing that they do not examine is why some branded manufacturers are more successful at private label production than others.  I suspect that some branded goods companies simply do not have the efficiencies and cost structure required to offer private label goods at competitive prices.  Moreover, attempts to become more efficient might harm the quality of the branded goods the firm supplies.  

Rethinking The Push to Sign Customers Up for Your Loyalty Program

Source: www.technologyinsights.com

Black Friday is almost upon us.  As consumers shop at many retailers, many people will be asked if they are members of the company's loyalty program.  If not, associates will ask customers if they would like to join.  Do loyalty programs add value?  Clearly, most retailers seem to think so.  Yet, I'm always intrigued by the retailers that don't have loyalty programs.  Consider Trader Joe's, one of the most successful grocery retailers in the world.  They have developed a cult-like following without offering customers a rewards program of any kind.  

Recent research suggests that companies might want to rethink the standard approach to loyalty programs.  Scholars Wayne Taylor and Brett Hollenbeck conducted a fascinating study of a major home improvement retailer's loyalty program. Thye examined transaction data for more than 10,000 customers at five store locations over two years.  15% of these customers were members of the retailer's loyalty program, which only offered customers rewards for purchases in a particular product category.  The scholars found that customers do spend more when they join the program, but the cause-effect relationship is unclear.  Did customers spend more because they became members, or did they become members in advance of making some planned major purchases?  Overall, the scholars don't see a substantial positive impact on profits from signing new people up for the program.

Interestingly, however, the scholars do find that a certain subset of customers do deliver additional profits when they become new members of the retailer's loyalty program.  The customers that reside a considerable distance from the retailer's store locations, but in close proximity to a rival's store locations, tend to be quite valuable as new members of the loyalty program.  In other words, loyalty programs work best when they induce customers to switch.   Otherwise, the rewards simply eat into your margins on purchases that would otherwise occur at your stores anyway.  For marketers, the results imply that one could and should focus direct marketing efforts on specific customers in particular locations when trying to increase membership in a loyalty program. 

Super Bowl Ads: Teaming Up is the New Trend

This year's Super Bowl will feature an interesting new trend.  Companies increasingly are partnering with other brands in their commercials.  For instance, several brands have partnered with Netflix to create Super Bowl ads.  Above, you will hear and see Will Ferrell appearing in a General Motors commercial in which he drives GM electric vehicles "through" several highly popular Netflix shows.  Michelob also will be running a Super Bowl ad in partnership with Netflix.  Molson Coors is teaming up with DraftKings in a Super Bowl promotion. 

These partnerships have several potential benefits. First, they spread the cost of very expensive Super Bowl ads across two or more firms.   Second, they help some older brands tap into younger audiences by teaming up with brands that have more Gen Y and Gen Z fans.  Third, they help these ads stand out among a sea of the usual Super Bowl ads that simply try to offer a quick laugh during the game.    

By the way, you might be wondering whether Super Bowl ads truly generate a positive return on investment.  Several years ago, scholars Wesley R. Hartmann and Daniel Klapper conducted a study showing that the ads do generate a positive return, unless a direct rival also runs an ad during the big game. 

Equinox vs. Planet Fitness: Twitter Clash!

Several years ago, I wrote a case study about Planet Fitness, the "Judgement Free Zone" chain of fitness centers.  Therefore, I tend to follow the gym industry.   On New Year's Day, premium fitness center chain Equinox posted the following message on social media.  It created quite a stir.  

 Planet Fitness responded promptly with a humorous and blunt retort.  

Others on social media criticized Equinox as well.  What was Equinox doing scaring potential customers away with what seemed like an insulting tweet.  Yet, we should ask the question: Did Equinox really make a mistake?  To understand the intent of these dueling tweets, we need to assess the contrasting strategies of these two firms.  Equinox targets serious fitness enthusiasts and provides them a premium experience at premium prices.  Planet Fitness focuses on the person who previously may have not enjoyed going to the gym at all.  They are after the person who is trying to get some exercise, but is most certainly not a "gym rat" at all.  Planet Fitness doesn't cater to the fitness enthusiast at all. For instance, they don't have heavy weights at all in their gyms, and they don't offer exercise classes.  Their gyms focus mostly on cardio machines and light weights.  Given their target audience, this humorous rebuttal is right on the money.  It fits their customer quite well, and it provides that sharp contrast with the upscale gym, Equinox.  

Interestingly, both firms are telling certain people they are NOT very welcome at their gyms.  Recall Planet Fitness' famous "I lift things up and put them down" advertisement in which an employee shows a bodybuilder the exit!  That Planet Fitness advertisement is very much like this January tweet from Equinox.  So, neither firm is off the mark here.  They are each addressing their customers with distinct messages that fit their contrasting audiences and their associated needs and wants.  They are both trying to attract their core customer by explicitly describing who doesn't fit at their gyms.

Why Companies May Benefit from More Transparency about Product Drawbacks

Source: Pixabay

Most companies, quite expectedly, focus intensely on the positive attributes of their products and services when communicating with customers.   They market all the benefits, and typically, they minimize any discussion of the limitations or drawbacks of the product. After all, who would want to shine a spotlight on negative attributes of your products? 

Well, Harvard Business School scholars Ryan Buell and MoonSoo Choi decided to challene the conventional wisdom.  They sought to examine whether a bit more honesty and transparency might actually be beneficial for companies.  Buell and MoonSoo Choi published their findings in a paper titled, "Improving Customer Compatibilitywith Operational Transparency."   

The scholars worked with Commonwealth Bank, a large Australian financial services company, to conduct a randomized field experiment.  On the bank's website, potential new customers received one of two offers: one highlighted the best attributes of the company's credit card, while the other also mentioned key drawbacks that firms often tend to place in the fine print only.   In short, the company made explicit some of the key tradeoffs inherent in the company's strategy and product offering.   In other words, you get these wonderful features, but here's what we don't offer, or what we don't provide at the same level of service.   Think about Southwest Airlines... we offer you on-time flights, low fares, friendly service, and no baggage fees, BUT we don't assign seats, have no first class and no meals, and won't transfer your bags to other airlines.  The company makes the trade-offs quite clear to consumers.  

The scholars tracked customer behavior at Commonwealth Bank for the next year.  What did the researchers find?   HBS Working Knowledge summarized the key results:

"The researchers found that people who opened an account after learning about a card’s downsides spent 10 percent more each month than customers who heard only the benefits. Their nine-month cancellation rate was also 21 percent less, and they were 11 percent less likely to make late payments on a month-to-month basis... Although the team didn’t probe why customers spent more, they suspect that providing more information helped people choose products that were more compatible with their financial needs, creating a better customer experience."

Now, clearly, companies need to be careful with this added level of transparency.  They can't just dump a bunch of negative information on customers and hope to succeed.  However, they can think about how providing more transparency may help them gain consumers' trust and help customers self-select in a way that creates a more enduring and better fit between company and customer.  

Elmer's Glue: The Slime Craze

In 1947, Borden introduced Elmer's Glue packaged in a glass bottle. Over the years, it became a key item for elementary school classrooms throughout the country. Seventy years later, Elmer's Glue (owned by Newell Rubbermaid now)  has experienced an interesting phenomenon, fueled by social media.   Product sales have skyrocketed over the past year, as young people throughout the country enjoy the "slime" craze.  They've all learned how to make slime using Borax and Elmer's Glue.   In March, Money magazine reported on the remarkable profit-making venture launched by Theresa Nguyen, a 13-year old from Texas.  She earns $3,000 per month selling her slime creations.  Her Instagram account has 665,000 followers.   Her most recent post already has 149,000 views.  Unbelievable! 

Newell has ramped up production of its glue to meet skyrocketing demand.  Meanwhile, the company has also set up an extensive website with its own videos, recipes, and the like.  It all sounds like a terrific story.  Why should Newell be careful though?   Kids are fickle.  Fads come and go.  Will the slime craze be sustainable, or will kids move on next month or next year?   Newell will have to be careful as it ramps up production.  The company will want to be cautious about making large investments to extend capacity.  Moreover, it will have to careful as it manages inventory.   It should strive to meet rising demand while the craze is ongoing... after all, you have to take advantage of the fad while it's ongoing.  However, you don't want to get caught with huge amounts of excess inventory if the fad suddenly stalls out.  In addition, you have to think carefully about how to extend the surge in demand. How can you take steps to insure that it's not just a passing fad? How can you come up with new recipes or ideas that build upon what kids are already doing?   How do you create activities that art teachers and others can use that enable sales to continue to grow?  Finally, and perhaps most importantly, you don't want to damage the authenticity of this craze.  You don't want kids and parents to begin to perceive Elmer's as pushing sales in an inauthentic way.    You want kids such as Theresa to spread the word more so than the corporate social media managers.   Authenticity should be a key priority as the company takes steps to market its product.   

Marketing Your Products as Designed by Users: Benefit or Hindrance?

The Boston Globe reported this weekend on the fascinating new research of Vienna University Professor Martin Schreier.   He studied the marketing of crowdsourced products.  Schreier found that marketing an item as user-designed tended to increase sales more than marketing a product as created by a firm's own designers.  Why this positive effect?  Schreier discovered that, "People believe their peers understand their needs better, and therefore, come up with better solutions."   Moroever, Schreier found that people tend to react more positively if informed that the user-designers had something in common with them.   For instance, female consumers tended to prefer user-designers who were women similar to them.  

Is there a potential downside to marketing a product as "user-designed"?  Schreier found that the effect does not appear to be positive for luxury items or high tech goods.  Why?  For technologically sophisticated products, the consumer trusts experts with high levels of knowledge and expertise more so than fellow users.  As for luxury items, the explanation is quite different.  In those cases, consumers "want to set themselves apart."  Thus, they tend not to prefer something sourced from the crowd.  

Merchandising, Choice, and Shopper Satisfaction

Wharton's Barbara Kahn explains her new research on how merchandising layouts affect buying behavior as well as shopper satisfaction.

Great Commercial: Using Cliches to Your Advantage

Fast Company's Jeff Beer has a short piece about a new commercial from Bobble, maker of reusable water bottles.  The advertisement features a fake brand (Once), and it ridicules those who drink bottled water from disposable plastic bottles.  Beer writes,

If you watch enough advertising aimed at anyone aged 14 to 30, certain patterns of tone, image, and style emerge. Young people, just livin' the good life, embracing the moment, seizing the day and all that. To draw attention to the huge amount of waste created by single-use plastic water bottles, reusable bottle brand Bobble has tapped all these well-tread commercial cliches to reach the exact same audience.

The advertisement is fascinating precisely because it highlights another side to these cliches about how millennials should live their lives.   Moreover, as the advertising agency managing director, James Townsend noted, "It's more effective to make something look uncool than it is to say it's bad for you."  

Google Changes Its Logo: Does it Matter?

Google announced today that it has changed its logo (see the before/after comparison here).   While the shift may not be substantial, it did cause me to ponder the impact of a logo change.  After all, some companies spend considerable amounts of money on logo redesigns.  Does it matter at all?  I found an article from several years ago in Business Week that addresses this topic.  It describes research by Rice University Professor Vikas Mittal, West Virginia Professor Michael Walsh, and Penn State Professor Karen Winterish.   The scholars found that customers with high brand commitment tend to have the most significant negative reaction to logo changes.  These high commitment customers also reported that they would be less likely to buy that brand in the future.  Casual customers did not have this type of strong adverse reaction to logo changes. Mittal explained how managers must apply this research as they redesign logos from time to time:  "One strategy may be to manage the reactions and expectations of strongly committed consumers by actively soliciting their input and perhaps pre-notifying them before the changes are revealed to the broader public. Giving the strongly committed such a feeling of being an 'insider' may strengthen their self-brand connection and mitigate the potentially negative effects of logo redesign."

Jimmy Kimmel Strikes Again: The Cold Pressed Juice Craze

Juice bars have become the new craze.  We see many of these stores opening up around the country.   Here in Boston, many new juice bars have opened in recent months.   Customers $8-$10 for a freshly created juice at these stores.  Jimmy Kimmel decided to see whether people really knew what they were buying. Let's take a look at this hilarious sketch!

GM Turns "Chevy Guy" Gaffe Into Positive Promotion

During the presentation of the World Series MVP trophy, a Chevy manager (Rikk Wilde) became very nervous.  He had a hard time getting the right words out, and eventually he described the Chevy truck as, "class-winning and leading, you know, technology and stuff."   Soon, #chevyguy and #technologyandstuff began to trend on Twitter.  GM didn't reprimand the employee.  Instead, Wilde's bosses understood why he had become so nervous.  Moreover, GM decided to capitalize on the social media buzz created by the gaffe.  They even incorporated the gaffe into their online promotions.  Jamie Barbour, a social media manager at GM, began the company's efforts by tweeting at 1:29am: "Truck yeah the 2015 #ChevyColorado has awesome #TechnologyAndStuff!"  Then the company used #TechnologyAndStuff with three online video ads the next day.   They even bought prime time spots during late night comedy shows to run one of those ads.   I love these types of stories.  Companies should be willing to laugh at themselves sometimes, and they should turn these types of gaffes into marketing opportunities whenever possible. 

Experts Buy Private Label

Bart J. Bronnenberg, Jean-Pierre Dubé, Matthew Gentzkow, and Jesse M. Shapiro recently published a working paper titled, "Do Pharmacists Buy Bayer?  Informed Shoppers and the Brand Premium?"  Here's an excerpt from the abstract of their paper:

In a detailed case study of headache remedies we find that more informed consumers are less likely to pay extra to buy national brands, with pharmacists choosing them over store brands only 9 percent of the time, compared to 26 percent of the time for the average consumer. In a similar case study of pantry staples such as salt and sugar, we show that chefs devote 12 percentage points less of their purchases to national brands than demographically similar non-chefs.

Private label products certainly have taken a much larger share in many categories over the past decade.  Nevertheless, the scholars still found this "brand premium" effect, particularly for non-experts.  As private label products continue to rise in quality and availability though, we should expect more people to act like the informed consumers in this study.  Consider, for instance, the success of firms such as Trader Joe's and Aldi, both able to persuade consumers that private label products can deliver solid quality.  

Newcastle: Creative "If We Won" Ad

How about this for a funny, creative ad?  Newcastle Brown Ale imagines what it would be like if the American colonists had never declared and won their independence.  The ad features comedian Stephan Merchant.  It seems to hit that sweet spot that many companies strive to find, but fail in doing so. That is to say, they have created an irreverent and funny advertisement that is not offensive or distasteful. 

Brands: Embrace Your Haters

Tom Denari wrote a thought-provoking column for Fast Company this week.  The article is titled, "Why Being Hated Isn't the Worst Thing For Your Brand."   Denari stresses that, as brands become popular, haters may emerge.   The typical reaction of a brand manager might be to become very concerned about these negative reactions from some portion of the public.   Denari argues that we shouldn't necessarily panic if we encounter some "hate" from certain consumers:

Despite the lip service that some marketers pay to “breaking through the clutter,” many more are too often concerned that they actually might stand out, and possibly even offend someone. Being conspicuous does create the potential for negative feedback, since everyone can’t like everything.  But a successful brand manager knows the brand can’t be for everyone. The more salient a brand becomes, those that aren’t a part of that brand experience can sometimes become opponents.

Denari argues that many brand managers are risk averse.  They worry about what their bosses will think.  They are concerned about the risks associated with negative public reactions to a brand, its image, and its marketing.  

This argument reminds me of Harvard Professor Youngme Moon's great book, Different: Escaping the Competitive Herd.  In that book, she describes "hostile brands."   These companies truly stand out in a crowded marketplace by deliberating taking a hostile approach toward certain consumers, so as to make themselves highly popular to the target customer that they wish to attract.   She uses the MiniCooper as an example, describing how their initial marketing did not apologize for how small the vehicle was.  It did not try to convince us that the car was quite roomy.  Instead, the company positioned vehicle as a sort of "anti-SUV."   Being making themselves "hostile" to the SUV consumer, MiniCooper became immensely popular with the customer it hoped to attract.  In sum, Moon seems to agree with Denari.   Embracing the haters, or at least becoming comfortable with some haters, can be productive if you are truly trying to build a brand that stands out.  

Beware the Maximizing Mindset: The Dangers of High Expectations

Kellogg School of Management's Neal J. Roese and Jingjing Ma have conducted some new research on consumer expectations.  They have shown that marketing professionals need to be aware that creating high expectations in consumers' minds can be dangerous.   Roese and Ma compare two different consumer mindsets:  the maximizing mindset (searching for something that is "best") vs. the satisficing mindset (searching for something that is "good enough").   In their experiments, they found that those in the maximizing mindset are more thorough in their evaluation of alternative products.  However, they also found that those in the maximizing mindset were more likely to experience "greater regret and lower satisfaction" than those in the satisficing mindset.    Marketers, therefore, must be cautious about setting unrealistic expectations for their product, thereby pushing the consumer into a maximizing mindset.  They may find that those consumers are very difficult to satisfy.   Ultimately, they may spend a great deal to acquire those customers, only to see them defect quickly. 

The Customers You Do Not Want

New product launches often do not succeed.   That's the unfortunate reality facing many business leaders.  Strong early sales presumably are a leading indicator of a profitable success story to unfold in the near future.  However, some new research suggests that not all early sales, and all early customers in particular, are a positive thing.  Scholars Eric Anderson, Song Lin, Duncan Simester, and Catherine Tucker have conducted a new study examining new product launches.  They have identified a set of customers that they call "harbingers of failure."   If these customers are buying your new product, you might not want to celebrate... you may want to become concerned, quite concerned.   Here's an excerpt from Kellogg Insights: 

The researchers found that just 40 percent of new products are still in stores three years later, a number in line with previous estimates. But critically, a product’s chances of succeeding depend not only on how much is sold but also on who is buying.  The surprising finding is that when sales increase to a segment of consumers whom the authors label “harbingers of failure,” then the new product is more likely to fail.  This finding contradicts nearly every metric of new-product success: How can more sales signal that your product is about to fail?  

Who are these harbingers of failure?  Apparently, there are a set of consumers who consistently demonstrate unique niche tastes.   Their preferences clearly fall outside the mainstream.   According to Kellogg Insights, "Harbingers with a history of making four or more repeat purchases of a failed product are nearly twice as likely as other customers to buy another product that fails."  If these harbingers are involved in your early market research, they may convince you to launch a product that is ultimately going to fail.  So, you have to be on the lookout for harbingers long before launch.   The scholars suggest talking to consumers about the OTHER PRODUCTS that they like, not just the product that you are launching.  If they like mainstream popular products, you are probably on solid ground.  If they cite other niche products that have not become hits, you should be cautious.  They might be harbingers of failure. 

Attention Marketers: Consider How Age Affects What Makes People Happy

As companies look to market their goods and services, they should pay careful attention to how age affects happiness.  That's what a new study by Cassie Mogilner and Amit Bhattacharjee suggests.  These scholars examined how particular types of experiences affects our happiness.  Here's an excerpt from Knowledge @ Wharton that summarizes their findings:

After conducting eight different studies looking at a variety of influences and experiences, Mogilner and Bhattacharjee conclude that “younger people who view their future as extensive gain more happiness from extraordinary experiences.” As people get older, and more aware that their time on earth is finite, ordinary experiences become increasingly associated with happiness, and even begin to catch up to the extraordinary in the amount of joy and contentment they produce.

What's the break point in terms of age?  It appears to be the mid-30s (ouch, I'm in the older group!).  What do they define as ordinary vs. extraordinary?  Ordinary may be a wonderful meal shared between mother and daughter.  Extraordinary might be a trip to Paris or a weekend hiking in the Rocky Mountains.   

How can marketers capitalize on this research?  The scholars argue that firms can even tailor their advertising to account for these findings.  Featuring the extraordinary might be useful in an advertisement for a product aimed at teenagers.  Featuring a happy ordinary event might be best-suited for an advertisement targeted at Baby Boomers. 

The Controversy Sweet Spot in Marketing & Public Relations

Wharton Professor Jonah Berger has conducted some fascinating research on the role of controversy in marketing and public relations.  Berger and his co-author, Zoey Chen, discovered that increasing the level of controversy can increase the volume of online conversation about a company or brand.  However, the relationship is not linear.  A moderate level of controversy increases conversation.  Increasing the controversy even further, though, starts to dampen the level of online conversation.  

In one study, they examined 200 articles posted on a particular online site, and they asked independent evaluators to rank them in terms of level of controversy.  Then they counted the number of online comments posted by readers.  They found that higher levels of controversy increased the number of online comments up to a moderate level of controversy (4.6 on a 7.0 scale).  Beyond 4.6, however, they found that high controversy articles tended to elicit a lower number of online comments.   In a series of experimental studies, Berger and Chen confirm this same curvilinear relationship. 

Berger notes that high controversy diminishes online conversation because people sometimes feel uncomfortable chiming in on a highly explosive topic.  Berger says, "“At the core, the key [question] is … how will talking about an issue affect how people see me?”  

Berger argues that the findings do not suggest that firms should avoid controversy.  However, they should consider the "sweet spot" for their firm.   That sweet spot will differ among firms.  In some cases, controversy quickly creates a great deal of discomfort.  Thus, the controversy doesn't create the online buzz that they seek.  People instead get quiet, for fear of how others will perceive them.  For other companies, it takes quite a bit to reach that level of discomfort where online conversation, buzz, and word-of-mouth actually becomes suppressed.