Why are there puppies in toilet paper commercials?

Toilet paper is a consumer brand that has been around for over 100 years. The basic product proposition has evolved very little, and the marketing is a tricky issue. You can’t really depict the product in use, or even go into detail on its performance!

Luckily, marketing often works best when it ignores those issues and uses metaphors to talk to people. By the 1920s, the Scott company had a mascot called Mr Thirsty Fibre. As you can see, he’s a fighter, (tough) but made of loops of paper (soft!).

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Fast forward about 90 years and the basics of TP marketing are basically the same. You’re selling the idea of softness and strength. But the metaphor chosen is different. It’s a puppy.

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In the 20th century, the whole science of meaning-making blew up, with experts like Chomsky and Lakoff exploring how humans make meaning out of language and symbols.

Keen students of this evolving science  were the “Mad Men” – advertising executives. And so it was that advertising gave up on lengthy texts:

Screen Shot 2014-11-24 at 10.14.21 amIn favour of signs and symbols that any semiotician can tell you are just as easy to interpret. Especially if you’ve been subject to a barrage of advertising your whole life.

Puppies are softer than a full-grown dog but still strong. They are not scratchy like a kitten might be – in fact puppies may be the perfect TP metaphor.

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While Kleenex chooses a cute yellow puppy, Purex goes for a brown, wrinkly one. Are they trying to convey what I think they’re trying to convey? Best to not think about that too much.

But the toilet paper market stands on the brink of a revolution. Kleenex are trying their best to break the habits of a century and sell us a new product, called Flushable Cleaning Cloths

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This is basically moist towelettes for the bathroom. But they’ve given up on metaphor. The marketing message is wordy and long.

If they are keen to convey the need for water to really clean, they needs to use something that is wet and clean as a metaphor. If they don’t want to leave the animal kingdom, I might suggest a dolphin.

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Aren’t dolphins more or less the puppy of the sea?

Another thing that seems synonymous with being clean and wet might be a car.

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In fact, sn advertising campaign where a smirking guy drives around in a just-washed car while everyone else drives around in a car they’ve tried to wipe with paper might be exactly the marketing message that Kleenex needs.

The new, smaller Coke can is momentous: the End of Cola is Nigh.

In Australia, Coke is launching a 250mL coke can with a big hullaballoo. Spin it all you want, but this is an admission the industry is in giant trouble.

The normal procedure for shrinking portion sizes is to be damn sneaky about it. Toilet paper companies shrink the number of squares per roll, chocolate bar companies shrink the grams per Snickers, detergent companies shrink the bottles and put the words “ultra concentrate” on the front.

But Coke is upfront.

““The 250ml pack size provides Australians with a perfect serve of their favourite beverage from the COCA-COLA range. Priced at a maximum of $2, the 250ml can is expected to be popular with consumers,” said Antoinette Tyrrell, Marketing Manager COCA-COLA South Pacific.

After decades of watching Pepsi stalking them, Coca Cola got hit by a different sort of market change. Functional drinks have slashed the market share of soft drink. Energy drinks, sports drinks, juices, water etc. are all in the space. Coke has bought and built these brands up when it could, but when consumers are not choosing cola, Coke can’t ever hope to control the market like it did once.

Coke brands

The rise of functional drinks means people are thinking about what their drinks will do to them. That can never help Coke.

Aware of the perception that Coke is not that good for you, Coke manages it by giving you less!

They don’t even pretend to hope people will buy more of the smaller cans. They just hope people will buy them at all.

The last great marketing campaign Coke had was “share a coke with“. Now that was brilliant, completely. But its link with the underlying product is very weak, and it can’t overcome the long-run trend.

The global soft drink market is growing far more slowly than global economic growth (2 per cent vs 5 per cent) Coca Cola’s reported net revenues are down 3 per cent in the year to date, and Australia’s Coca Cola Amatil is a shambles. The share price has fallen from $15 to $9.

The end of Cola is a good thing. Much of Coca Cola’s revenue growth now come from the poorer parts of the world. But the model is there for them to follow – when they grow rich they will likely also no longer “Enjoy” Coke.

Why Bunnings prices are so damn clever.

Bunnings is more than a gigantic hardware store. Its canyon-esque aisles whisper to you of self-reliance and ruggedness, if not quite suggesting a log cabin of your own construction then at least the sort of Barbecue a man can be proud of.

Once you’re over about 26 it seems to slowly turn into a refuge, a bit like Thoreau and his woods.There’s always a sausage sizzle out the front on weekends and it has become an Australian institution.

Nevermind that it is based on an American big-box retailing model, or that it has only been a national chain since 1994, after it bought out McEwans hardware, closed most of the outlets, then sold itself to mega conglomerate Wesfarmers.

The reason there are now around 280 Bunnings nationwide is that the store is so good. We don’t begrudge the many hours spent lost in its chasms and nooks.  It’s like that because it is cheapest. Right?

A tentative Google suggests, um, well, :

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At Bunnings, $34.99
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Online, $27.50!

There are three big tricks that Bunnings uses to reinforce the widely-held belief they are so cheap.

1. They often choose prices that to the first glance look odd. For example, they sell hammers for $8.45, $37.97, and $62. Apparently the theory is a range of irregular and specific numbers make customers think the price has been ratcheted down as low as it possibly can be.

Rather than having all the prices in the format $X9.99, the prices imply Bunnings takes the trouble to price everything at its minimum.

2. Using people from the stores in the ads. (I thought they might be actors but the internet says no. There are 33,000 staff so I guess some must be able to pass a screen test).

The point is, this is signalling. Bunnings has ads on during high-rating shows – they are not stinting on their marketing budget.

But if they deploy great cinematography and a highly polished vibe, like you might see in a car ad, it creates the impression they are wasting money on ads. Instead the ads look cheap and cheerful. The same motivation is behind The Good Guys using their staff in ads even though they too are a heavy-hitting national chain. (Baker’s Delight use their staff in ads to signal something else – that the bread is made by real people, not a factory.)

The signalling effect even flows through to the way stores are designed. Here’s Cotsco founder Jim Sinegal talking about his store’s budget vibe.

“We try to create an image of a warehouse type of an environment … I once joked it costs a lot of money to make these places look cheap. But we spend a lot of time and energy in trying to create that image.

3. “Lowest Prices guaranteed” / “Lowest Prices are just the beginning.”

This slogan seems to have moved away from using the word “guarantee” recently. But the claim is still a strong one. The only way Bunnings can get away with it is their price-beat guarantee: “Find a lower advertised price and we’ll beat it by 10 per cent.”

That is an extremely clever business plan. While anyone might think they could mock up an ad that offers something very cheaply and trick Bunnings into giving them a deal, the reality is the store would happily accept being tricked to get the benefits of such an offer. They would probably rather more people took them up on the price-beat guarantee.

Let me explain:

The effect of the price-beating offer is to permit price discrimination. They can sell things at a higher price to people that don’t bother shopping around, and at a lower price to those that care about price. That means they charge different prices to different types of people, just like a hotel or airline does, maximising yield.

But the real killer of a price guarantee is the way it discourages other chains from discounting and promoting. If I run Think Engine Hardware, why would I put an ad in the paper telling everyone Cordless Drills – Now 30 per cent Off!? I know customers can and will still go to Bunnings. Offering to beat advertised prices is very close to being anti-competitive behaviour, as it can cause all firms to raise prices.

From the great knowledge fount:

“While a store with price matching guarantees has no fear of losing customers to rivals’ price cuts, it has every incentive to raise its own price to charge a higher price to its loyal customers. It is an anti-competitive tactic that warns competitors not to attempt to steal market share by undercutting prices.”

So, Bunnings is like any other retail operation, playing clever psychological games to disguise healthy mark-ups.

It had earnings of $900 million on revenue of $7.7 billion last year, and contributed 26 per cent of Wesfarmers earnings before tax, etc. Wesfarmers is currently working on “conversion of the property pipeline into trading locations at a higher rate than historically achieved” in order to help Bunnings contribute even more to its annual profits, which were, last year $2.2 billion.

Hate the Porsche Cayenne? You’ll feel sick when you hear about the Lamborghini SUV.

Should Moet start selling lemon squash?

It seems like the answer may be yes. Brands that once zealously guarded their integrity are now stretching for brand extensions every which way.

Porsche – which some grey-beards in the audience may know as a sports car company – now sells more big four-wheel drives than speedy two-seaters. The Cayenne SUV shifted 42,000 units last year, compared to 13,000 of the “cheap” Boxster sportscar and 16,000 of the “classic” 911 range.

But how long until the excitement of driving a Porsche wears off? At $220,000, the Porsche Cayenne does not top any category. You can get a real Porsche for less, and you can pay a lot less for a perfectly good Range Rover that has real four-wheel-drive capability.

Porsche can obviously tell it is in a goldmine, and they have a plan. A new obnoxious Porsche SUV, the Macan, will be released in 2014.

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If you’re thinking: “Wow! what a radical redesign!” You probably have never seen a Porsche Cayenne.

It is smaller and even less expensive than the Cayenne, with a base model coming in at $87,000. The motoring press is pretty enthused about it, but when Porsche is competing with the Nissan patrol ($82,000) that sends a message about Porsche to the market.

When you make a brand extension like this, you sacrifice some buyers for others. The hardcore sports car enthusiast views your product more dimly. The middle-of-the-road consumer’s eyes light up. Whether that is a good idea in the short run is a matter of simple mathematics. Do you lose more customers than you gain?

But long-term, there’s a bigger risk. Pierre Cardin was once a luxury clothing brand in the vein of Hermes. Then it went wild.

From the Harvard Business Review.

“Initially, the brand extensions into the perfumes and cosmetics categories were successful because the premium degree of the Pierre Cardin brand transferred undiminished into the new, adjacent categories. The owners of Pierre Cardin, unfortunately, attributed this to the strength of the brand rather than to the brand’s fit with the new product categories.”

I have a Pierre Cardin dressing gown that I believe came from Target. While it is terrific in its way, the brand impression I now have means I would not buy a Pierre Cardin suit.

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iSnack2.0 was an example of a bad brand extension. Not because Vegemite is too fancy to go into other products but because iSnack2.0 filled a niche that no customers lived in.

Jack Daniels and cola in a can is a good example of a brand extension. Laphroaig whisky and cola in a can would be a bad brand extension. What matters is not just the quality of the ensuing product, but how important exclusivity and purity was to the brand in the first place.

That’s why the fact that Lamborghini is preparing an SUV for launch is such a shock. Lamborghini is the quintessence of hand-made cars that cost an absolute fortune. Existing Lambo owners who paid around $600,000 to get their hands on the badge may not be too happy about the emergence of a Lamborghini lump costing “just” $200,000.

(In fact, this is not their first brand extension in the field. They made and sold 320 “Rambo-Lambos” between 1986 and 1993, after attempting to build a military vehicle but not finding any buyers. The market for SUVs is admittedly now much much larger.)

But will Kanye want to name-check the Urus like he did with “mercy me, that Murcielago?”

Lamborghini Urus

Not unless he is making a kiddies album.

The chief of Lamborghini has hinted the new SUV might not even be the end of the brand extensions. And the people most excited about  that can probably be found working at Ferrari. It means one less competitor for the position of top pure sports car maker.

“We will never build an SUV”, said Ferrari in 2013, before going on to claim that “an SUV cannot deliver genuine driving emotion”.

The story of McCafe: when competing on price can fail

US McCafe is failing, according to an article in Bloomberg today that quotes McDonald’s executives conceding Starbucks has them on the ropes. It also cites market analysts who say the attempt to move into coffee is hurting their burger business.

This is despite a McDonalds latte costing only around $2.50, compared to around $3.50 for a Starbucks latte. But that price is hurting them – McCafe in the USA is seen as too cheap, too nasty.

From that Bloomberg article:

“Pushing coffee is “probably a good idea if they can get their customer to buy more of it,” said Peter Saleh, a New York-based analyst at Telsey Advisory Group. “I don’t think they’re going to be attracting the Starbucks customer to go there — I really don’t.””

Why is McCafe unpopular? For the same reason people won’t buy a suit at KMart – because coffee is a social signifier.

Coffee is not just a drink over there. It is redolent of sophistication. And Starbucks is Louis Vuitton. It would be shocking if a celebrity was papped without at least one mermaid-emblazoned frappuccino.

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Frappucino Styles

If you think that there’s no prestige in something produced by a global chain, look in your cellar. See any Moet? Look in your wardrobe. See any Nikes? Just because in Australia we think we value independent coffee does not mean we can sneer at “masstige“.

But this is not just an American story or a business story. It’s a personal story. Melbourne is a coffee town. When McDonalds launched the McCafe in 1993, they launched it in Melbourne.

I remember when they opened a McCafe near my school. I drank their $1 cappuccinos, and it was good. There may not be a lot of quality there, but there was a lot of value. I have a soft spot for McCafe that I will never have for Starbucks.

And McCafe Australia is thriving.

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Wait! What? Why is McCafe succeeding here but not America? I thought we were the sophisticated ones!

Pradoxically, the success of McCafe in Australia is because of our well-developed market.

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I bought this McCafe latte today in the interest of research. At $3.55, it was too hot and overpriced. The longer I sat the better the coffee tasted – the beans were fine. But sitting in McDonalds – with the TV blaring and the bland-on-bland decor –  palled fast.

Latte-sipper was an insult once, a signifier of being a toff or a snob or a Vaucluse doctor’s wife. Now baristas are taking complaints that their latte ‘had shit mouthfeel’ from blokes with prison tattoos.

This is not despite, but because we have a more developed coffee culture.

They call it product life cycle. Something new starts off as being for just the few. A mobile phone, for example was once a sign you were or aspired to be Gordon Gekko. But if that product is good it will spread to all comers. They call that maturity, or saturation. The reason Australia can support both Seven Seeds (“carefully sourced single origins” $4+) and 7-Eleven (“freshly ground beans: $1) is that the market for coffee is … everyone.

Melbourne has had espresso for fifty years, since the first espresso machine was installed in Lygon St, at the venerable University Cafe.

Maccas has strived to keep themselves just out of the reputational gutter. In 2011 they issued a public apology for their coffee and pledged to train up baristas.

That depth of history means there is a strong bottom end as well as a strong top end in Melbourne’s espresso market. (But no room for a brand that peddles a unique combination of expensive and ordinary. In 2008 Starbucks announced it would close three-quarters of its 80 stores and it is still waiting to make an official profit.)

Not like America, where Starbucks is expanding into tea (and also expanding people’s body sizes. Starbucks offers a drink that, at 30.9 ounces, is larger than the human stomach.)

What American McDonalds needs to do is this:

Stick at it.

Eventually US coffee culture will mature. Espresso drinks will become a staple not a luxury. Then their years of offering McCafe will pay off.

As for me, after visiting a McCafe today in the name of research, I pledge to stick with Melbourne’s independent scene for the rest of my life.