Jack Greenberg of McDonald's ("retired" January 1, 2003) and Betsy Holden of Kraft ("reassigned" December 2003): Both were CEOs of international brand powerhouses, both were corporate casualties in 2003. They didn't fiddle with the company's books to hide poor performance; use company money to buy strange art and host Roman-theme parties; or resign in disgrace because a financial scandal and SEC investigation broke on their watch. No. Greenberg and Holden succumbed, not to financial scandal, but to the marketing vacuum they created at their respective companies that sucked the life out of their brands and ultimately their careers.

Under Greenberg, known as an operations whiz, marketing at McDonald's devolved into a game of trial and error. First the company rolled out "Made for You," a new food preparation system which promised to deliver tailor-made burgers in record time (introduced a mere 25 years after its rival BK promised "you can have it your way"). Restaurants also changed exterior colors (where town and city zoning allowed) to red and white. When these changes, not surprisingly, didn't drive the customers in, McDonald's reversed course and launched the "Great Tastes Menu," with an emphasis on new products. But the new products failed to catch on and sales remained flat, so the Golden Arches changed course again and tried more restaurant remodeling and a $1 value menu. All the while the "We love to see you smile" ad campaign, which replaced the meaningless "Did Somebody Say McDonald's?" in 2000, promised "to bring smiles to customers' faces every time they visit." But the smiles didn't happen—the restaurants had a hard time delivering on the promises made in the commercials.

Meanwhile at Kraft, there was no trial, just error. A recognized brand-extension guru, Betsy Holden led the company through the launch of one new, slightly different version of its core brands including Jell-o, Chips Ahoy!, and Kraft Macaroni and Cheese after another. Advertising, for the most part, focused on promoting the latest extension of the old favorite. It worked for a while, but without a successful totally new brand launch since the mid-1990s when DiGiorno frozen pizza hit stores, along with dwindling shelf space and declining customer interest in yet another version of Oreos, sales began to flatten. The response from Kraft? More line extensions, some only marginally successful, other downright disastrous (e.g., Ooey Gooey Warm N' Chewy Chips Ahoy!). Now, not only have results taken a turn south, but also the company has no offerings in emerging categories such as organic and soy and its old reliable brands are tired and out-of-sync with consumer concerns about transfats and general nutrition. As the Wall Street Journal summarized, "years of failing to develop new categories and products has given Kraft a lineup that seems stuck in a time warp."

Simply put, there was no marketing leadership coming from the top at either McDonald's or Kraft. Greenberg and Holden deployed their forces without a clear strategy to guide decisions. Neither said, "This is what our customers want (based on rigorous analysis of unimpeachable data), this is what our brand stands for, and this is what we are going to do to deliver on it." Instead, they seemed disconnected from the needs and motivations of consumers, as well as market trends and realities. Not only did sales and profits decline as a result, but, more disturbingly, brand equity—the overall assessment of "good will" associated with a brand that reflects past marketing performance and predicts future sales and profit potential—was also negatively impacted.

To avoid the destruction of brand equity, which has taken a significant investment of time and money to build, our advice to corporate boards is to start making the CEO's primary role that of a brand guardian, not an operations general, line-extension artist, distribution guru, or financier extraordinare. Require them to develop brand strategies that give buyers a compelling reason to buy. Make sure they are stewards of communications programs that clearly and consistently communicate this "reason to buy" brand message. Lastly and most importantly, compensate CEOs not just on short-term sales and profitability, but on increases in brand equity. In the long run, companies with the strongest reputations and brand equity are the companies that will leave a legacy of performance that outlasts current management.

While Greenberg and Holden blundered their brands, McDonald's and Kraft can rebuild their businesses. In fact, since Greenberg left, the marketing vacuum has been filled with exceptional leadership from CEO Jim Cantalupo and CMO Larry Light. The McDonald's brand along with sales and profits are getting back on track.

What retailer holds the world record for largest number of line extensions from its core brand, carrying the same brand name through different iterations of itself? A few hints: It's not Wal-Mart. It's not a department store. It's a specialty retailer. No, not the GAP—a good guess, but we count only three extensions (GAP Body, Baby GAP, GAP Kids). ToysRUs? No, it has just two extensions and it's closing one. Give up? It's Talbots, the purveyor of high quality, classic women's apparel with a catalogue, website, and over 900 stores with the signature red doors in the U.S., Canada, and the UK. And with a total of six multi-store retail concepts all carrying the Talbots brand name, it has to at least lead the category, if not the entire retail industry in line extensions. There's Talbots, Talbots Petites, Talbots Woman, Talbots Accessories and Shoes, Talbots Kids, and Talbots Men.

After an unsuccessful attempt at selling trendier items to its female customers in the late 1990s, Talbots decided to embrace its heritage and all things "classic" in the female wardrobe and regained popularity among professional, 35+-year-old-women. As Arnold Zetcher, Talbots' CEO, explains, "What Talbots focuses on is providing women with apparel that they can wear in the real world…great, high-quality classic clothing that looks stylish now—and five years from now."

Within the last 10 years, Talbots added Talbots Petite and Talbots Women stores to attract even more women shoppers of different sizes. It also added Talbots Accessories and Shoe, offering the extras of classic dressing. These extensions certainly maintained the solid positioning of Talbots as an experienced and knowledgeable retailer of women's fashions and reinforced the brand's image as female-focused.

But then there's Talbots Kids. Believing that it's customers would love to dress Junior in the same classic manner as Mummy, Talbots opened Talbots Kids in 1989. A questionable move as, even at a young age, kids have their own proclivities about what they will wear, don't necessarily share Mummy's style preferences, and even Mummy may not want to buy a week's worth of "classic" clothes when Junior will get them dirty and grimy on the playground and in art class. More importantly, it was a deviation from the core, female-focused positioning. Not exactly a rip-roaring success, Talbots Kids has basically held its own through the years, with comparable stores sales flat in 2002 and down through November 2003.

And now there is Talbots Men. Believing its customers would welcome the opportunity to dress not just Junior, but also Hubby in same classic style, Talbots opened Talbots Men last year. The retailer points to research that over 60% of people shopping in men's stores are women buying clothing for men as evidence of the potential of the extension and are "manning" up the men's shops with rugged, masculine imagery and plenty of male sales people to draw in men. But unlike the kids category, there are already "classic" clothiers (e.g., Brooks Bothers, Jos. A. Banks) for men, so will women think of the same place they bought a dress for Cousin Jane's wedding as the natural place to look for a sweater for Hubby? Will men want to wear a Talbots sweater when the brand is associated with women's clothes? More importantly, will it be worth the erosion to the brand's core positioning?

Talbots, we fear, is in grave danger of undermining a positioning it has worked diligently to establish and maintain. We predict men will kill it. This time, Talbots has gone too far.

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It happened to Prozac. It happened to Claritin. And now it's happening to the "little blue pill" that has worked wonders for the sex lives of millions of Americans. After five years with 96% of the U.S. erectile dysfunction market to itself, Pfizer's Viagra is facing some stiff (sorry) competition from newcomers Levitra, a joint venture between GlaxoSmithKline and Bayer, and Cialis, another joint venture between Eli Lilly and Icos.

Focused not on current Viagra users, but on the estimated 80-90% of sufferers not receiving treatment, Levitra started down the warpath this past August with an aggressive, multifaceted advertising campaign. According to published reports, Bayer and GlaxoSmithKline have to date invested between $50-$75 million on DTC advertising for Levitra and new prescriptions for the drug have come from bringing new customers into the market. More recently, Cialis, nicknamed the "le weekender" because of its 36 hours of effectiveness, jumped into the fray with a promised $100 million ad blitz. Rather than play-up restored masculine virility, Cialis capitalizes on the greater "window of opportunity" offered by the drug. "When a tender moment turns into the right moment, you'll be ready," promises the Cialis tagline. In Europe where it was approved earlier, Cialis has taken a big bite out of Viagra's sales and threatens to do the same in the U.S.

In spite of insurgent competitors, Pfizer reportedly does not plan any major shifts in strategy, which we believe is a mistake, yet is prepared to spend more to hold the top spot for Viagra, one of the most widely known consumer brands in the world generating $1.74 billion in sales in 2002. Naturally, this pledge begs the questions, how much more do they need to spend to keep Viagra on top? Moreover, how should the company spend it—more advertising, more celebrity sponsorships, web/direct marketing, etc.—to reach consumers and counteract competitive moves? Is there a best defensive strategy for Viagra to employ to save and even recapture market share?

The best way we know to answer these questions is to use DRM—Defensive Response Modeling Technology (a spin-off of DTC simulated test marketing modeling)—which represents a complex set of very sophisticated equations that predict real world output (including new and repeat prescriptions) from marketing plan inputs (such as basic strategy decisions such as targeting and tactical decisions such as the spend on primetime television).

The advantage of DRM is that it permits marketers to experiment with inputs to instantly see their effect on the output. Will television advertising, for example, have the greatest impact on sales? More than direct marketing? Which day-part will have the most effect? How much how much more? At what cost? It also enables marketers to quantify the specific effects of each element at different levels of investment. What are the sales if we increased each component in the marketing mix by 20%? By 100%? What happens if we decrease it by 10%?

Importantly for Viagra, DRM can account for competitive efforts by including factors such as share of voice. Advertisers define share of voice as the advertising percentage individual companies spend in the market. As an example, if all the companies in a product category spend a combined $100 million in advertising in a year, and one of those companies spends $15 million, it has a 15 percent share of voice. The share of voice tempers the effects of gross rating points (GRPs). The GRPs purchased by a firm with a low share of voice, for instance, would not produce the same level of awareness as the same number of GRPs purchased by a company with a high share of voice.

Using DRM technology, Pfizer could not only forecast what share of the market Viagra is likely to lose to Levitra and to Cialis, but also develop the most effective and efficient defensive marketing plan to save or recapture share based on actual or anticipated spending levels. Obviously, Levitra and Cialis could use simulated test marketing to develop the best offensive strategy. And if everyone used these evolving technologies, we'd see some of the highest performing marketing plans in the pharmaceutical business—in the world, for that matter—today.

For more insightful marketing discoveries, visit http://www.copernicusmarketing.com/discover/index.htm

Have a hot discovery for our next release? Contact us at info@copernicusmarketing.com

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We've always admired the investment and business prowess of the second richest man in America, but after reading the book, we're absolutely in love.

Miles demonstrates the key attributes of Warren Buffet's management style that have pervaded the culture at Berkshire Hathaway and made the company so successful: A focus on the long-term; a focus on the business, not just making money; a focus on partnerships—between the holding company and the business and the business and its customers—for life.

In close to 40 years, none of the CEOs of companies Berkshire Hathaway has purchased have left the company, except to retire, which is an incredible track record for a company. The interviews with close to 20 CEOs from the different companies are insightful and excellent case studies in solid management.

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Mark your calendars for what will be one of the most insightful, informative, and important conferences of 2004. On May 10-12, at the Westin River North, Chicago, Illinois, the American Marketing Association will present the Strategic Marketing Conference, featuring a powerful line-up of speakers—most authors of top marketing books—including positioning guru Jack Trout, expert on "Influentials" RoperASW's Ed Keller, customer relationship authority Chris Hart, trend-spotter Sam Hill, and Copernicus' very own Kevin Clancy, talking about cutting-edge concepts including customer equity and marketing ROI measurement.

More details to come. In the meantime, save May 10-12 now!

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