February 2008

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One hit, I wonder?

 

48% of kids did not buy a CD last year. iTunes is now the number two music retailer behind WalMart. The times they are a changin’.   
 
I just spend 2 days at Digital Music East in NYC and there were a bunch of people walking around with nervous stomachs. Here’s an example of why: one panel on marketing to teens and tweens comprised 30 and 50 year olds, drawing analogies and making references to Led Zeppelin and terrestrial radio. It was silly. The industry has lost touch, it seems. 
 
Back to digital downloads. The real problem with digital downloads, and I’m sorry for sounding like a broken MP3 on this subject, but it’s just too easy to pay for one song — the so-called good song. Fans can’t get to know bands and create affinity with bands through one song. One song is the short story. The album, the novel. Record companies need to sell full albums not single songs. That’s how you build up a fan base. Single songs sales lead to burn-out and one hit wonders.
 

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At Starbucks, there has always been a trade-off between fast and good. The best drinks at Starbucks require a fresh grinding of the beans, filling the espresso brewing cup (for lack of a better term,) the clunk-cluck of the cup to level the coffee, the twist of the heavy device into place as it is readied for the aromatic brew. This process, this aroma made Starbucks famous. But it took time. To do the work twice as fast, as crowds grew, they needed twice an many baristas and machines, so the made the business decision to  automate. Now espresso “shots” come out of a “two in one” machine that grinds and brews.
 
Howard D. Schultz complains that the breakfast sandwiches cover up the smell of the coffee. He is right, so say goodbye to breakfast sandwiches. But it’s also these new machines. The 3-hour training session last night was a brilliant stroke. It told the public “we care.”   But saying as he did in his training video “This is about the love and compassion and commitment that we all need to have for the customer,” is 21st century marko-babble. What he should have said was “passion and commitment” to the product. Make a great product and customers will line up.
 
Were Mr. Schultz to toss out all of the new automated brewing machines — putting them at the curb – he might no have to close 100 stores. And he might even be able to keep a breakfast sandwich or two.
 

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Mission Yahoo

The moving forward strategy for Yahoo has been something I’ve pondered the last couple of years as Yahoo the portal, start-page, search engine company has been losing steam.  In a post a few months ago, I noted Yahoo should invest its money in the best online beat writers out there and make Yahoo the premiere content source on the web. Get the best sports writer, fashion writer, political analyst, etc. and using the language of the web and bloggers, turn Yahoo into the “first” read of the Web. In thinking this way  I ceded search to Google, but I have always been a “content is king” guy.

 

Jerry Yang today announced his intent to not go quietly in the area of search, introducing Buzz which will improve Yahoo’s search capability and the richness of its results. This is a fight, and a focus, they should have had a couple of years ago. Yahoo is still all over the place. Ford makes cars and trucks and can’t get out of its own way. Imagine a company that has 3 or 4 missions. 

 

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In one of the world’s largest cities, in on of the world’s greatest newspapers, there is a serious recession going on. A recession of content. On Sunday February 24th and today, February 25th , the New York Times Metro section contained 8 pages. That’s 2 broadsheet folios. What’s up with that? Does the Times not have enough metro reporters to write stories? We certainly have enough people, neighborhoods and stories to generate many more pages. Are New Yorker’s looking to the Daily News and NY Post for their local news? Is ad revenue so far down that the Times can’t fill up 12 pages in the one section devoted to the New York area? 

 
Also, when I was a kid in the business, the most prime real estate in the Times was the back cover. One day late last week not one section of the NY Times had a back cover ad. Those babies sold at an extra 20-25% premium over regular full pages. No one was buying. 
 
Lovers of the New York Times beware. 
 

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My geeze is showing.

There has been much talk about mobile phone advertising over the months and years, but none more disturbing to me than that on the subject of ads being served up in realtime to phones based upon where the phone owner is geographically. For instance, if you are walking down the street approaching two competing donut shops one might “feel” you coming and server up a promotional ad.
 
CBS and Loopt a social network with GPS technology are dabbling with this application, which sounds like a major nuisance. The only way this can work will be if ads are served up on an opt-in mobile channel, but I’m guessing not enough people will opt-in to an ad or deal-centric channel to make it worth the while. So expect it to be served up in an intrusive way.
 
Call me a geeze, but I don’t want ads on my cell phone. I don’t want to be telemarketed on my cell phone and, frankly, I don’t want to be called on my cell phone to chat.  “Hey Steve, I can see your house from here.” If I’m not near a land line, I’m doing something. 
 

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Google has finally come out with a new program that supports its core brand competence. No, the program is not the newly announced ability to serve third party video ads, it’s a venture with the Cleveland Clinic designed to help patients take greater control over their medical records.
 
The idea of creating and aggregating one’s health information into a single patient profile (Where have I heard that word before?) is a core competence based on search that Google seems to have forgotten. If they can pull this off with the Cleveland Clinic and we can find measurable positive results in patient outcomes, Google won’t have to spend millions on other silly ideas like allowing people to place radio ads via the Google platform. This idea is big. And it’s ownable. 
 
I have long ranted that Google has lost focus in product development. This announcement gives me hope that there are actually some people at Google with their eyes on the real prize. Google’s initial mission, for those who never knew or forgot it, as articulated by co-founder Sergey Brin was We deliver the world’s information in one click.”
 

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I can’t for the life of me figure out Hewlett-Packard. When you think they make a good move, it doesn’t work. When you think they make a bad move, earnings rise. You read about new marketing focus, bad press follows. You read about board tumult and unrest at the top, earnings kick butt.
 
This company is an enigma. Never a Carly Fiorina fan, and I actually did call the downturn under part of her watch, I must admit I may not have given her credit she deserved for long-term planning. Today, 70% of HP’s revenue comes from outside the U.S. – the source of a good part of today’s positive earnings report — which I am going to attribute to the Compaq purchase she engineered. 
 
HP is doing well in printers, brilliantly in computers (who knew?) and, I suspect, well in services. It’s going to take a Harvard B School case study for me to figure out this company, but at the moment I’m digging their staying power and blocking and tackling.
 

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According to Stuart Elliott, the advertising columnist for The New York Times, J. C. Penny is launching a new clothing and home furnishings line called American Living. Using product designs by Ralph Lauren, whose name and sub-brands will not be associated with the new brand, the American Living launch will look and feel like Polo ads and be shot by Bruce Weber the photographer who has established Ralph Lauren’s consumer face.

 
This approach is so rear view mirror. Rear view mirror planning looks at things that have worked in the past and simply repackages them. Penny is not looking into the future with this approach and, frankly, neither is Ralph Lauren whose brands should take a hit due to the closeness of this new campaign. Brand dilution will occur.  
 
And the name “American Living,” could it be a more predictable pander? It’s straight out of the Lauren playbook, which if you ask me is beginning to get a little old. If Bruce Weber gets hit by a mattress truck (God forbid) both brands will be in serious shape. J.C. Penny is doing the right thing here, but they are looking through the rear window instead of the windshield. Their new customers are younger and out in front….waiting for something new. 
 

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Come Back Baby.

One of the reasons U.S. Airways has had such a rocky time over the years is because of all its purchases and mergers.  In order to strengthen itself, U.S. Airways allied with various other carriers with different regional and national strengths, but those multiple mergers proved its downfall.  It was always hard to manage all of the different planes in the combined company.

 

When new airline carriers start from scratch they purchase one, maybe two types of plane. The parts work for all the planes, the maintenance for all planes is the same, engines come from one manufacturer, training for pilots is simplified, and there is less complexity in the day-to-day management. It is a very efficient way to run an airline.  U.S. Airways, on the other hand, was the maestro of a cacophony planes, maintenance operations, equipment, and people trained in the various aspects of this patched together airline.  Not efficient.

 

Ford Motor Company has made a decision to manufacture one of its car models — the Fiesta — the exact same way in every country around the world. That’s efficient.  For the most part this is how Toyota does it and Honda does it.  With efficiency as job one, I’m betting Ford and the Fiesta, in particular, will begin a comeback.

 

 

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