Our article last month, "By God, They've Got It! Evidence Marketers Losing Price-Obsession and Raising Quality-Consciousness," sparked the interest of many of our readers who wondered if we knew of any cases of industries and/or companies that had demonstrated success at taking a counterintuitive approach to marketing during a recession, focusing on quality or another point of differentiation other than a low, low price. We do and thought, as businesses prepare for the final quarter of 2003, we would share a few from different categories to further bolster the confidence of marketers looking to move away from a reliance on price:

• Even with prices 10% to as much as 50% higher than conventional counterparts, the organic foods category—from meats to ketchup, yogurt to chips—is growing by 15%- 20%. Sales have doubled over the past five years—even with the recession—to $11 billion, prompting food giants such as General Mills, Heinz, PepsiCo, Tyson, and Unilever to introduce organic versions of their products.
  
  
• While WalMart, Costco and BJs supercenters and club stores battle for the hearts and minds of the price-sensitive grocery shopper, Whole Foods, the world's #1 natural food chain, pioneered the concept of health foods retailing during the recession of 1980. Same-store sales are up 8 percent over the past two years and its stock has jumped 131 percent over the past three years. Its margins, at 3.1 percent, are almost double those of Safeway, and revenues hit $2.8 billion, double what they were just five years ago.
  
  
• McDonald's has focused on the quality ingredients of its new products in recent months instead of out-cheaping competitors. Sales have been booming—in July hitting an increase of 9.9% in stores open more than a year—and are attributed directly to the new products and the quality-focused ad campaign that supported them.
  
  
• The imported luxury/sports sedan and SUV segments of the automobile industry are working and enjoying price and sales increases in this recessionary economy. In fact, the Wall Street Journal recently reported a new trend, more and more car buyers paying a higher-than-sticker price for an SUV or sports sedan to get the car sooner.
  
  
• In the financial services industry, Deluxe Financial Services, the country's leading supplier of paper checks to banks and other financial institutions, has taken a counterintuitive approach. While their competitors are cutting costs to banks and consumers to drive sales, Deluxe recently decided to assume its rightful position as the industry thought-leader by giving consumers and banks what they want: more variety in checks, higher quality, and faster, better service. An improved bottom line is the natural result.
  

This is just a small sampling of companies that have discovered, through better targeting, positioning, and enhanced product/service features, they can raise prices rather than lower them in tough times. Given their successes, why not add your company name to this list?

These are good news/bad news times for the economy. The good news is the recession has officially ended, but the bad news is the labor situation has not improved and unemployment remains high. Good news that GDP and sales of new homes are up, but bad news that consumer confidence is down. Good news retail sales are up, but bad news, so is the budget deficit. As the Wall Street Journal commented, "With so much data giving such mixed signals, it's not surprising that many economists are waffling about the state of the U.S. economy." Nor is it surprising that businesses remain uncertain about the future and subsequently seem particularly concerned about the return on investment of marketing programs.

In part III of our series on what companies can and should be doing now to keep their businesses moving forward in the face of uncertainty about the economy, we spoke with Charlie Kreitler, Vice President of Client Services at Marketing Management Analytics (MMA) (www.mma.com), to get his thoughts on marketing measurement and ROI opportunities. MMA is our nation's premier consulting firm dedicated to teasing ROI insights out of sophisticated econometric analyses of large databases which capture marketing investment inputs (such as advertising expenditure) and macroeconomic inputs (such as gasoline prices or consumer confidence) and relate them back to sales, market share, and profitability. Here's what he had to say:

Copernicus Mzine: Marketers seem to have a higher ROI-consciousness these days. Do you think an unintended, but positive consequence of this most recent recession and this period of economic uncertainty was to make the practice of marketing more accountable, or have you seen upswings during tough times before, only to see it wane once the business environment improves?

MMA: During the 90's boom, many traditional companies couldn't grow at the same rate as their technology counterparts. The excitement of the bull market made investors pay less attention to corporate profits, allowing many companies to spend aggressively without too much concern for returns. With the downturn in the economy, the focus has returned to corporate profits. One positive outcome of this pressure has been increased attention to marketing efficiency. Also, big advances in technology have allowed us to collect much better data over the past few years, which has greatly improved marketing measurement. I don't believe that top companies will lose their focus on the marketing best practices derived from those improvements, even if the economy swings higher or lower.

Copernicus Mzine: We hear more and more marketers says that they are moving away from traditional forms of advertising—TV advertising, for example—and switching to non-traditional methods such as product placements on shows, email campaigns, and grassroots and guerilla tactics. Is there data out there on how effective these non-traditional methods are? Do they really represent high ROI opportunities for marketers? How should marketers measure and assess the effectiveness of these kinds of activities?

MMA: As traditional media becomes more splintered and audiences more sophisticated, it's tempting to try something new to rise above the noise. We can pick up industry magazines and read successful case studies for guerrilla marketing campaigns. We go to the movies and see the star flashing a company's brand on the big screen. These marketing practices may be sexy, but do they sell more product? Before initiating these programs, we need to develop reasonable estimates of their effectiveness using existing benchmarks.

Ask yourself whether this new tactic fits into your brand strategy. Is it a cost effective way of reaching your consumer? While it's very exciting to try something new, how does it fit into your marketing plan? Is it 5% or 50% of your budget? What can you reasonably expect in terms of sales performance?

It's important not to ignore more traditional marketing communications like TV or print. A more significant improvement to the bottom line can often be achieved through better execution of existing tactics than by chasing something untried. This requires a sound understanding of how you've executed marketing in the past and the ability to accurately measure the impact of those efforts on sales. Don't be afraid to try new tactics, but make sure you've got sound fundamentals first.

Copernicus Mzine: Based on the trends that you have seen, where—as in what marketing channels—should a marketer look for high ROI opportunities today?

MMA: Wherever your target consumer is! TV reaches the largest audience and, therefore, will be most appropriate for mass appeal brands. Guerrilla marketing tactics have proven themselves successful for some products appealing to trendy young urbanites. But to answer the question, I've seen time and time again the power of print especially for categories like pharmaceuticals. It's cost effective and targeted. Oh, and, it usually works really well. But if you're Coke, the reality is you can try all the new channels you want, but TV is the real thing.

There is no one recipe for success. Once you understand who your consumer is you can develop a communication plan that fits your goals and marketing budget. Accurate performance measurements of past marketing efforts are essential for optimizing your media mix. Performance measurements help you identify the best and worst performers and allow you to adjust your plan accordingly. If your brand hasn't tried a particular marketing tactic, seek benchmarks to estimate what the likely performance will be. Budgets are getting tighter, so we have to invest our marketing dollars wisely.

Copernicus Mzine: If you had the ear of every CEO in the world for five minutes, what would you say to them about marketing measurement?

MMA: There is no silver bullet but continual marketing measurement can help. Marketing must be a continuous cycle of improvement: planning drives execution, which is followed by measurement, which in turn drives planning. Actively embracing marketing measurement in the planning process can bring millions of dollars to the bottom line.

Here at MMA, we often see marketing budgets sacrificed for short-term earnings. CEOs, resist the urge to throw next year's performance under the bus in order to make this year's numbers! It only creates a vicious cycle. Continual marketing measurement will help you understand the impact of major cuts (or major spending increases) before they happen. How much you spend is important, but watch the tactics as well. Promotional tactics driving high short-term returns are important, but equity-building marketing messages that drive long-term growth or protect our customer base against competitive efforts can be just as critical in the marketing plan. Without rigorous marketing measurement, we're guessing at the best approach. Putting substance and quantitative power into the planning process creates better decisions and ultimately better brand performance. And who doesn't want that?

At MMA, Charlie Kreitler works with Fortune 100 clients in a variety of industries including consumer packaged goods, pharmaceuticals, and entertainment. He currently heads MMA's pharmaceutical practice. Prior to joining MMA in 2000, Charlie worked as a marketing consultant for global consumer packaged goods companies where he specialized in trade promotion and category management. He can be reached at charlie.kreitler@mma.com.

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The case of Frozen Coke demonstrates everything that's wrong with traditional test markets. In 2000, Coke and fast-foodie Burger King were in talks to launch Frozen Coke, a new icy dessert drink, in all U.S. stores. The equipment required for mixing the drink cost $30 million and a supporting marketing campaign $10 million, so BK naturally wanted to run a test before making such a sizable investment.

BK selected Richmond, Virginia, as the test market with Tampa, Florida, as the control—based on what reasoning, we don't know—and a short two-week test run in March—when Richmond has a winter chill but Tampa is warm as ever. In a TV ad campaign, BK promoted getting a free coupon for a Frozen Coke with the purchase of a burger, fries, and drink combo (a.k.a., a value meal). If value meals sales went up, Frozen Coke was in.

The first few days of the test yielded poor results and BK complained Coke wasn't doing enough to support the test. Lacking any information as to why sales were so poor, Coke's sales team descended on Richmond's Burger Kings en force to ensure the coupons were getting distributed and rewarding BK employees with T-shirts and prizes if they sold more value meals. As was recently disclosed in a company audit, the sales team also bought more than their fair share of value meals. A rogue Coke employee furthermore provided cash to local Boys & Girls Clubs to treat the kids to a value meal and a Frozen Coke. Value meal sales did go up in Richmond and Frozen Cokes were selling at well-above the average daily rate.

Encouraged by this seemingly strong performance, BK went ahead with the new product launch, offering a coupon for a Frozen Coke with the purchase of a spicy chicken sandwich. The promotion was disappointing and sales of Frozen Coke have fizzled.

The problems with this test are far from unique. Companies typically select test markets based on ease of management or willingness of retailers to participate, rather than fit with the new product's/service's target. They can either be very expensive and take a long time to complete, or cheap, quick, and dirty, done more to satisfy a request than to gather important intelligence. They are open to sabotage—either external from competitors or, as in the case of Frozen Coke, internal "ballot-stuffing"—and provide little in the way of diagnostic information about what's working and what isn't if performance is not as expected.

Beyond the illustration of the problems inherent in traditional test markets, the case of Frozen Coke also demonstrates a frequent problem with implementation. A company tests one promotional program, but runs something completely different for the national launch, yet expects the same results. BK tested a coupon with a value meal, not a chicken sandwich. It's also unclear that Coke's sales team as enthusiastically supported compliance nationally as they had done in Richmond (we're talking the store visits and rewards for crew, here, not buying chicken sandwiches). Still, the company expected the same sales results.

Coke only padded sales results by a few hundred meals so, while unethical, the company did not dramatically skew results. Hence, the failure of the product has other sources. But because BK and Coke used a traditional test market, they are left with little direction on how to salvage the product and the original investment.

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

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

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Innovation is always a hot topic of conversation: How do you come up with ideas? How do you translate ideas into products and services? How do you make the product and service a success? The co-founder, chairman, and former CEO of DoubleClick, the technology behind most of the advertising on the Web, Kevin O'Connor offers his advice on methodically translating ideas into products, services, and companies.

We appreciated his approach to applying a method to the madness of brainstorming. His Brainstorming Prioritization Technique offers a framework for coming up with and sorting through a plethora of ideas, which includes getting the "right" people—including the CEO—in a room. For the entrepreneur, there is also interesting and helpful information about approaching venture capital firms and recruiting investors. DoubleClick's business plan is also included and is a good read in and of itself.

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We have some exciting news to report: The American Marketing Association Foundation (AMAF), the non-profit arm of the American Marketing Association (AMA), has selected Counterintuitive Marketing: Achieve Great Results Using Uncommon Sense by Kevin J. Clancy and Peter C. Krieg as a finalist for the Berry-AMA Book Prize for best book in marketing. The award recognizes titles that presented innovative ideas and greatly impacted the practice of marketing and related fields.

A prestigious group of judges including marketing guru Phil Kotler screened the nominees and selected these five finalists from among all the marketing books published within the past three years:

• Counterintuitive Marketing
• Convergence Marketing: Strategies for Reaching the New Hybrid Customer, by Yoram Wind and Vijay Mahajan
• Loyalty Rules! How Leaders Build Lasting Relationships in the Digital Age, by Frederick F. Reichheld
• The Myth of Excellence: Why Great Companies Never Try to Be the Best at Everything, by Fred Crawford and Ryan Matthews
• Will & Vision: How Latecomers Grow to Dominate Markets, by Gerard J. Tellis, Peter N. Golder, and Clayton M. Christensen

A panel of current and past members of the executive board of the Marketing Science Institute will choose the ultimate winner and make an announcement about their selection later this month.

For more information about the award, visit: www.themarketingfoundation.org/berrybookprize

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