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May 9, 2005Nike and Sears: Protecting the brandNike announced last week that it will withdraw its products from Sears in a move that a Nike representative called a "brand management decision", according to the Chicago Tribune. Brandweek , citing anonymous sources, said that the decision was intended to prevent the Nike brand showing up in Kmart stores. An academic quoted in the Trib said, "My guess is they don't want the products they sell to Sears to be distributed through Kmart because Kmart is not, at least in their view, consistent with what Nike means." The decision couldn't have been an easy one; Sears, whatever its recent woes, is still the third-biggest retailer in America, with annual volume of $55 billion. But the possibility of Sears diverting product to Kmart was a realistic one. Kmart/Sears boss Edward Lambert cited the sharing of brands as one of the benefits of their merger: "We don't have Craftsman, Lands' End, Kenmore, DieHard. Even brands like Champion, Adidas, Nike and Reebok." That comment had to send chills down Nike's spine. Mismatches between products and stores have long been a pet peeve of mine. Too many manufacturers get blinded by the possibilities of huge volumes and forget the importance of maintaining their brand image. Can selling through the wrong retailer damage a brand image? You bet. Psychological studies of cognitive dissonance have shown that when people see two items together that they don't think belong together, they'll adjust their image of both to bring them closer into line (Osgood's Congruity Theory). Marketing studies have shown that the same thing happens when two brands are promoted together in a co-branding or trade promotion setting. When the brands are relatively equal and complementary, it works great (e.g., McDonald's and Disney promote together, apparently to their mutual benefit). When the brands are not complementary, however, cognitive dissonance sets in and consumers have to adjust their images of the brands. And that means a downward adjustment for the premium brand. And for a manufacturer this can be doubly painful because of co-op/mdf spending. The manufacturer is going to be expected to pay for the privilege of destroying its brand. In doing trade promotion consulting, I often argue with my clients: "Why are you spending tens of millions on national advertising to promote a brand image, and giving other tens of millions to mass merchants to destroy it?" Kudos to Nike for recognizing that protecting their brand is worth the sacrifice of some volume. More on chaosThe last TPM Update, commenting on Ad Age's article on the collapse of broadcast TV and what it could mean in terms of a growing role for trade promotion in reaching mass audiences, brought an unusual number of responses. One of them was from my friend/partner Rob Hand: I would mix one more thing into this ... direct marketing and the inevitable (and currently ongoing) tie-in with the retailer. If rebates go away, why not use more direct mail to the consumer, with response-pinging like plugging your Blackberry (or cell phone) into a kiosk and upload your shopping list, then download the deals (and directions within the store to go to get your stuff). See what I mean? TV will soon be nothing more than three things: (1) a medium for the poor (reality shows, daytime and game shows), (2) sports coverage (big events only, because local cable will chew up the remaining regional and local stuff; and (3) prime time drama shows. And you know what? If the cost of production continues to grow, actors' salaries and increased ad rates to cover it, with shrinking audiences, you'll start watching CSI Miami at the local movie theaters in serial form like the old days! Interesting thoughts. And the need for giving more thought to marketing through stores rather than through traditional media was underlined when newspaper circulation figures were released last week. It certainly was not a surprise that the numbers were down - that has been happening for decades. But the sizes of some of the drops were shocking. The Baltimore Sun down 11.5%? Ouch! Some of the articles I read on the subject quoted newspaper spokespeople as saying that part of the reason for the big declines was a renewed emphasis on "quality circulation", which is a newspaper term for papers that people actually pay for, as opposed to giveaways or deep discounts. They were blowing smoke, apparently. A couple days later came news of a study of the circulation numbers by Merrill Lynch showing that paid-circulation drops were even bigger than the total-circulation numbers. For example, the Los Angeles Times , which originally was announced as down 7.7%, turned out to be down 12.9%. Double ouch! Some other major local papers:
Again, the beneficiary of this collapse would likely be the store, which is the most effective means of delivering mass audiences. |
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