Ries' Pieces

How Crocs Crashed

  Success is sometimes your own worst enemy. Just ask the management and stockholders at Crocs.

  A hot brand ends up in one of two different ways. It burns bright too fast and fizzles. Brands like this are known as fads. Or a brand burns hot then continues at a steady simmer. Brands like this are known as iconic.

  Believe it or not, whether your brand will become a fad or an icon depends on your strategy more than you think. The good news is the fate of your brand is very much in your control. The bad news is it may be too late for Crocs.

  While it’s true that no strategy could have turned the “Pet Rock” into an icon, many brands could have been saved from the fate of faddom.

  Brands like Crocs and Cabbage Patch could have been saved by better strategic decisions.

  Let’s start with the story of how Crocs took off. Then we can cover how Crocs crashed and burned.

The Rise of Crocs

  In the Western Rockies of Boulder, Colorado, in 2002 three longtime friends and created a lightweight antimicrobial foam they called Croslite using a technology created by a Canadian laboratory in 1999. They molded it into a boating and water-sports shoe they named “Beach.” Thank goodness, they abandoned the Beach name and the shoes became known as Crocs. The shoes quickly caught on and developed a loyal and vociferous following.

  By 2005, revenues were $108.6 million, net income was $16.7 million for a net profit margin of 15.4 percent.

  By 2006, revenues jumped to $354.7 million, net income was $64.4 million for a net profit margin of 18.2 percent.

  That same year, the company riding a wave of success sold shares to the public raising more than $200 million making it the biggest stock offering in shoe history. The company used the money to ramp up manufacturing, diversify the line and acquire new businesses.

  Things were looking fantastic, or so management thought. In 2007, Crocs hit a high-water mark of $847.3 million in sales with a net profit margin of an astounding 19.9 percent.

  In 2008, the wave came crashing down. Sales dropped slightly to $721.6 million, but the company lost $185.1 million. Crocs had to slash 2,000 jobs and its stock price has plummeted 76 percent. Today Crocs has millions of dollars of debt and a huge surplus of shoes.

  What caused the collapse of Crocs? Many articles have blamed the economic slowdown. But could the recession really be the reason for the fall of $30 Crocs? I think there is a far more likely answer.

  When a brand is hot, it is hard to predict anything but a bright future ahead. It seems anything and everything you do is a good move. But nothing could be further from the truth. A hot brand must be managed very carefully.

Here are the keys to keeping a hot brand “hot.”

1. Dampen Demand.

  Suddenly everybody wants to wear Crocs, buy a Cabbage Patch doll or stay warm with a Snuggie. There are lines of prospective customers and mass hysteria.

  Every company's dream right? But what to do next?

  The worst thing to do is over-produce. If you flood the market with your product, it can lose its appeal. Some people will buy it who don’t really want it. While you may rack up some amazing short-term sales, long term you will undermine your brand’s specialness and exclusiveness.

  Crocs did just that. The company rapidly ramped up production in 2006 which led sales doubling in 2007 but also created a fad not an icon. Instead of patiently fanning the flames, Crocs added fuel to the fire. Overnight everybody was wearing them and then nobody wanted to be wearing them.

2. Resist Line Extension.

   Crocs didn’t just flood the market with a wide variety of its classic Crocs in a rainbow of colors, it quickly added many other styles. Flip-flops, sandals and an assortment of other types of Crocs were developed. Especially troublesome was the fact that many of the expanded styles were meant to be attractive. The idea of Crocs is not to look beautiful but to be functional. If people want fashion, there are many other brands to look at.

  In addition, Crocs spent millions buying up other companies in order to line-extend. They bought Jibbitz which makes the do-dads used to decorate Crocs for $10 million. Buying Jibbitz was probably a smart purchase especially they kept the unique brand name. But Crocs made other horrible purchases like buying EXO Italia which made vinyl shoes like Teva and Fury Hockey which made sports-protection items like sticks, gloves, pants and elbow pads. There was even talk of launching Crocs clothing. Not surprisingly the expansion efforts fell flat. The Fury business was liquidated last year.

  The expanded line turned Crocs into just another brand. At first, Crocs had an enormous advantage because it owned an idea and an image in the mind. The multitude of styles undermined that image and destroyed the power of the brand.

 

3. Control Distribution.

  Crocs went from being available in just a few retail outlets to being available in every imaginable retail outlet. While that fueled sales, it also hurt the brand’s power with the distribution. Retailers no longer saw it special being able to stock Crocs.

  We normally recommend that new brands start with exclusive distribution deals. That way the retailer has an incentive to promote the brand.

 

4. Focus on Core Consumers.

  Crocs went from a sports enthusiast shoe to a shoe for everyone. A brand that tries to appeal to everyone ends up appealing to nobody.

  Croc loyalists saw Crocs on everyone and said Geez, they don’t make me stand out and look different anymore.

  The key to making a brand an icon is having a base of loyal consumers. Instead of chasing everyone, Crocs should have resisted that temptation and stayed focused. This is the key to keep a brand becoming a fad.

  What are the core consumers for Crocs? Kids, athletes, workers. Forget the soccer moms/dads, grandmas/grandpas, fashionistas and everybody else.

  Kids in particular were a big part of Crocs’ success. Kids are also great customers because they have feet that grow. Sure, Crocs may be indestructible, but when your feet keep growing you need a new pair every six months anyway. Kids also love the Jibbitz which allowed each pair to be personalized.

  Athletes are the customers Crocs started with. Athletes gave Crocs a natural distribution strategy of sporting-goods stores like Sports Authority. The shoe is not just trendy but functional. The anti-Sex in the City shoes.

  Workers on their feet. Nurses, doctors, chefs and workers of all sorts are the perfect target consumer for Crocs and could have been a long-term steady market.

 

5. Expand Globally.

  Crocs did understand the power of going global. But you should not try to go global all at once. Crocs used its stock-market cash to build manufacturing plants in Mexico and China as well as distribution centers in the Netherlands and Japan.

  That was way too much, too soon. Going global is important, but should be done carefully, strategically and slowly. Instead, Crocs flooded the global market with its shoes.

  Too bad. Crocs is a great brand with a great name built around a great idea. The missing ingredient was great marketing.

The Classic Mistake

Pizza Hut is now selling chicken wings and pasta as well as pizza.

Kentucky Fried Chicken is now selling grilled chicken as well as fried chicken.

Boston Chicken was once focused on rotisserie chicken, but then they wanted to expand, so they added turkey, meatloaf and ham to the menu. Then to explain the expanded menu to consumers, they changed the name of their restaurants to “Boston Market.”

And promptly went bankrupt.

It’s logical, isn’t it? If you want to grow your business then you need to expand your product line to sell more things to more people. And if your existing category is declining, then it would be criminal not to expand, right?

Wrong.

Of course, to left-brain, logical management people, expansion makes a lot of sense. That’s why Pizza Hut is not only adding pasta and wings it is also now using a more general name, “The Hut” in its marketing.

That's right, they are taking the "Pizza" off the "Hut" on signs and marketing materials. Why? Because management looks at reality and sees the chain as a massive delivery infrastructure machine not a pizza place. Big mistake.

Marketing is concerned, not with reality, but with perception. So right-brain marketing people understand that the place is perceived as pizza. After all Pizza Hut is the leading pizza chain with 18% of the $29 billion category, nearly double the share of the number two brand Domino's. While having more items to sell at Pizza Hut might be logical, but it undermines the perception of the brand.

Everybody knows what Pizza Hut sells, but what would happen if they changed their name to The Hut?

In the short run, nothing. But in the long run, some people are going to forget exactly what a chain like The Hut sells. And then there are the younger people coming into the market who have never heard of Pizza Hut. “The Hut” would be a strange name to them.

Would it make sense for Taco Bell to start selling hamburgers? And then change its name to “The Bell?”

And perhaps Burger King should change its name to “The King,” now that they sell chicken, fish, breakfast and a host of other non-burger items. 

Then there is Dunkin' Donuts? Surely they should drop the "donuts" and go by Dunkin' since they are more about bagels, muffins and coffee these days.

The management mantra at most companies is “more.” How do we dream up more items to sell to more customers? And especially how can we take advantage of our powerful brand name to sell those new items to those new customers.

Line extension is the most over-utilized strategy in business today. That’s true in spite of the fact that 90 percent or so of line extensions fail in the market place.

Line extension is a much-loved strategy because it’s logical. The more you have to sell, the more you sell. So almost every company is busy trying to figure out what new products to slap its brand name on.

They should study history. When Domino’s Pizza first got started, it sold pizza and submarine sandwiches. When Little Caesars first got started, it sold pizza, fried shrimp, fish and chips and roaster chicken. When Papa John’s first got started, it sold pizza, cheesesteak sandwiches, submarine sandwiches, fried mushrooms, fried zucchini, salads and onion rings.

Now do you suppose you would ever have heard of Domino’s Pizza, Little Caesars and Papa John’s Pizza if they kept expanding their menus? I think not.

Rather they all did the same thing. They all narrowed their focus to pizza only.

Good things happen when you narrow your focus. You should try it too, I think you will like it.

Line-extensions gone wild. White, Bright, Five, 2 & True.

In tough economic times, many companies launch new brands to keep the attention of consumers and stimulate demand at distribution channels. Nothing is wrong with launching new brands. As a matter of fact, now is a very good time to do that.

But to hedge their bets, top management at most companies have chosen to launch line-extensions instead of launching products with new brand names.

Why does this happen? Because line extensions sound so logical to top management that they can’t resist them, especially when budgets are tight.

“We already have a great brand that people trust. Let’s just leverage our powerful brand equity,” goes the thinking of management. “We’ll use our well-known and trusted brand name on this new product which will give our line extension instant credibility. And a line-extension will also be easier to get retail stores to stock the product on their shelves. And our advertising will be more effective because we can put all our money behind one name. Why waste our money on launching a totally new brand, it makes no sense.”

Trying to convince management otherwise is a very difficult job for marketing. The truth is that in the short term, line extensions usually do rack up some sales. Management loves that; they are more interested in saving their quarter than saving the brand.

 Look at this example. A product that is a short-term success and a likely long-term loser is G2.

With sales of $159 million, G2 from Gatorade was the top new food product of 2008. Hard to believe isn’t it? Since it is really one of the worst line-extensions ever, right up there with C2 from Coca-Cola.

But even dumb ideas can sell initially. Crystal Pepsi got a 5 percent share in test markets (unheard of, but one of the best test results ever) but the clear cola product quickly fizzled.

Why does that happen? Silly line-extensions, well supported and discounted at retail, receive the “oh I’ll try it once” effect.  

But rarely do they get repeat business especially at full price and in the end any remaining sales just cannibalize the core brand and even worse will undermine the core brand’s position and identity in the mind.

Today, G2 is a product without any buzz. G2 is a product most people tried once because it was part of a huge display and on-sale. G2 is a product is usually only bought by accident, since the package looks exactly like G.

Gatorade is a mess. Put Gatorade on your husband’s grocery list and you are guaranteed a panic call. “Honey is that G or G2 or G3 (probably coming soon and he is clueless.) Is that G with or without Tiger? Is that the power or the liquid? Or do you want this chocolate Gatorade protein bar?” Forget it sweetheart, just get some Red Bull. (Of course he’ll probably come home with Red Bull cola by accident.)

Despite marketing’s advice to the contrary, management just can’t seem to get enough of line-extensions. The store shelves are loaded with them.

But what to name the line extension can be tricky. Besides the “diet,” “light” and “2” extensions, companies have to get a little more creative when it comes to other line extensions. But not too creative. Management likes simple descriptive names. The thinking goes “consumers don’t have the time and we don’t have the money to educate them. So to make it easy for everybody we’ll just add a generic to describe exactly what our line-extension is.”

It sounds so simple and logical, how could it not work? Well it doesn’t. Because marketing is not simple or logical.

Here are three new products that management confidently signed off on, but marketing minds cringe at.

Spray 'n Wash

Spray 'n Wash is the leading pre-wash stain spray. But this new line extension is not prayed on or used before you wash. Instead Spray 'n Wash Bright & White is an bleach-alternative stain remover that you add by the cut into the washing machine. I kid you not.

Even the marketing director for fabric care at Reckitt Benckiser (owner of Spray n’ Wash) admitted that the “Spray ‘n Wash name sounds weird for an in-wash product.” No kidding. Yet she still said that it made sense “to extend an existing brand name.” No it doesn’t.

The product even has a differentiating benefit: It helps to extend the life of your clothes. But stain removers have the image of damaging your clothes it doesn’t make sense that they help save them too. About as logical as Woolite Rug Cleaner, oh yeah Reckitt used to have the dumb extension too.

Haagen-Dazs Five

Haagen-Dazs is the leading super premium ice cream. To take advantage of the trend toward more natural and whole foods they wanted to launch an ice cream composed of just five natural ingredient. (Which begs the question how many unnatural and natural ingredients does regular Haagen-Dazs have?)

So Haagen-Dazs is launching a new line-extension called Five. Haagen-Dazs brand manager Ching-Yee Hu explained that “part of the reason we called it Five is that we have modest marketing dollars and wouldn’t have a lot of money to explain what it was.” Most people still won’t get it and will have a hard time getting over all the junk ingredients in their regular Haagen-Dazs.

Besides, “I think I’ll have vanilla Haagen-Dazs Five tonight?” People just don’t talk like that. When will management listen to marketing? The truly scary thing is that regular Vanilla Haagen-Dazs only has 6 ingredients, so what is the point of Five anyway?

 

Quaker True Delights

Quaker is the leading oatmeal. Everybody knows oatmeal is good for you. But the glop isn’t necessarily appealing and messy to cook. On the other hand, bars are easy. But most are highly processed and many are high in calories.

Well Quaker has the whole dilemma solved with a new line extension. It has the Quaker name which stands for goodness. It has the name “True Delights” which tells you it tastes good. It has wholesome qualities with ingredients like raspberries, rich dark chocolate, and whole almonds. And the best part is it only has 140 calories! Wow! What more could you want?

Try this over the weekend “Hunny, how about a True Delight tonight?” His face will probably beam, until you throw the Quaker bar at him.

Good News! War in the Boardroom was reviewed in USA Today Monday!

It's the category, stupid.

A leader brand should own a category not just a word.

 

The harsh reality is that consumers care more about categories than they do about brands. It is categories like rubber shoes, DVD rentals by mail, delivery pizza or hard-drive music players that get consumers excited. Not the brands Crocs, NetFlix, Domino’s or iPod.

 

The brand name is just short-hand for the category in the mind. Companies often believe that consumers fall in love with their brands when what they really fall in love with is their categories.

 

For just that reason, leaders many times become the generic for that category. The brand becomes a short-hand device for talking about and asking for a particular category.

 

Need an energy drink? You think and say Red Bull.

Thirsty for a cola? You think and say Coca-Cola.

Could use a facial tissue? You think and say Kleenex.

Want to go in-line skating? You think and say Rollerblading.

 

That is why leadership and new category creation are so important in branding. Getting your brand to be the first in the mind and the leader of a category that matters to consumers should always be your goal.

 

So what happens when consumers stop caring about your category? Your brand is in trouble. Big trouble.

 

Kodak is not in trouble because people don't love the Kodak brand anymore. Kodak is in trouble because people don't use conventional film cameras anymore. Moving Kodak to the digital category makes no sense at all.

     

A Kodak digital camera is like saying a film digital camera. It's an oxymoron.

When your brand owns a category in the mind and your category is in trouble, you need to launch a new brand. You can't save your brand by moving it to a new category.

 

Strong brands are bolted to the ship and if the ship is going down like the Titanic there is nothing you can do to stop it from going down. Better to spend your time and money on launching a new brand.

 

Sometimes your category is flat and you see potential new growth by moving your brand name into an adjacent but perhaps competitive category.

 

This is also very dangerous.

 

Why? Because if a brand stands for one category, then using that name on another category is confusing. It diminishes the significance of that brand in the mind.

 

It also undermines the brand in another way. Every brand needs an enemy. The leader in a category does not have an enemy in its own category; its enemy is usually competition from other categories.

 

McDonald's enemy is not Burger King; its enemy is eating at home. That is why "You deserve a break today" was such a powerful marketing message. It said don't eat at home; take the kids out to eat.

 

Introducing a line of frozen McDonald's hamburgers you could eat at home would be a terrible idea. Yet that is exactly the type of strategy many brands are using today.

 

Here are a few that I found particularly problematic.

 

V8 Soup

V8 owns "vegetable juice" in the mind. Over the last 75 years they have been telling us to have a V8 in order to meet our daily vegetable requirements.

 

But now V8 isn't just a juice; it is also a soup!

 

A vegetable juice has three main enemies: vegetable soup, vegetable supplements and eating no vegetables.

 

Juice is a whole food and much more convenient to consume than soup. They should play up that difference.

 

Introducing V8 soup is confusing. The idea of eating hot V8 juice is not very appealing. Soup is thick; juice is thin.

 

 

Mac & Cheese Crackers

 

Kraft owns "mac & cheese" in the mind. And while you can argue that line extensions like Kraft microwaveable mac & cheese might be a good idea. But expanding into cheese crackers is crazy!

 

It is crazy for two reasons. If kids are craving cheese, they can have cheese crackers or cheese pasta. Cracker brands need to promote crunch while pasta brands need to promote comfort. Two very different ideas.

 

Secondly, the cheese-cracker category is already dominated by a very strong brand: Cheez-Its.

 

 

TagHeuer cellphones

 

One reason younger folks aren't wearing and buying as many watches is that they find them redundant. Since every self-respecting young adult has a cellphone attached to his/her pants or ear, he/she always has the time. Wearing a watch is no longer necessary.

 

TagHeuer owns the high-end sports watch category. But with sales flat and consumers using cellphones instead of watches to define status they are fighting back.

 

With a new watch marketing campaign? No. With a new $5,000 cellphone.

 

When under attack, you shouldn't let your brand fight on both sides of the battle. Instead of knocking out the enemy, you are more likely to just kill yourself.

 

TagHeuser is trying to fight two battles and they are losing both. They are losing the high-end watch battle to Rolex and they are also going to lose the high-end cellphone battle to Vertu.

 

The way to avoid these problems is to think category first, brand second.

Don't Tinker with your Brand!

 

 

The economy is in trouble. The stock market has gone haywire. And consumers have drastically reined in their spending. These are not good times for most companies and most families.

 

But now is not the time to panic. Now is the time to preserve. To preserve your brand, its meaning and its identity by staying focused.

 

In the face of uncertainty, focus is more important than ever.

 

Of course, it is not easy to be calm and steady amidst such economic turmoil. Your natural instinct is to get out there and do something. To actively tinker with your brand to keep it afloat.

 

Economic markets rise and fall like the ocean. Strong brands will survive no matter what the tide. The key to long-term success is riding the waves up and down using your brand as a steady rudder. You should not attempt to sail against the current. And you should not over steer the ship.

 

Changing your strategy depending on the economy is a trap that many companies fall into. That is the worst thing to do.

 

When times are good, companies often launch expensive versions of their brands like Folgers Gourmet. When times are bad, companies often go downmarket with coupons, discounts and sales.

 

Can't afford the $160 six-course meal at Wolfgang Puck’s Spago anymore? No problem, now you can get cheap Puck eats, like a BBQ Chicken Salad for $6.95, at Wolfgang Puck Express. “Express” is just a code word for cheap, many companies are using it.

 

Brands that stay strong and survive no matter what the weather are those that stay consistent. Your brand has meaning and strength only if it owns something in the mind. And the more you adjust and tinker with that meaning, the weaker your brand becomes.

 

Now that the economy is hurting, the worst thing you can do is to launch cheap versions of your brands or go the sale/coupon route. That just tells consumers your products weren’t worth the high prices you have been charging all these years.

 

Coupons are like drugs; once consumers get hooked they won’t shop without them. Only a fool would go to Ann Taylor Loft or Bed, Bath & Beyond or Cache without a coupon. Several times I've driven by these stores and wanted to shop for something but refuse to go in because I left the coupon at home.

 

Companies need to think long term not just short term. The choice is maintaining the brand or maintaining the sales.

 

Why not both, you may say. Well, when times are great that may be easy to do. But in today’s market that is going to be tough. Everyone’s sales are likely to go down. You need to focus on maintaining your marketshare and your mindshare not your sales.

 

The goal is to preserve your brand, ride the storm and wait for sunnier days that will eventually come.

 

If you only look at your numbers over the next few months, you are going to be in trouble. You need to think like a marketer and view the situation holistically. Because what might allow you to make your numbers today could sink your ship tomorrow.

 

Why should you care about your brand? Why not just look at the numbers?

 

Because your brand is what allows you to make a profit. Your brand is why people are willing to pay more for your product or service. And profits are what make company’s successful. Not just sales.

 

When you destroy your brand, you destroy your company’s ability to make profits.

 

Look at Sony, once a strong a powerful brand that has been decimated by years of reckless expansion. Compare Sony with Nintendo a company that just makes videogames and players.

 

In the last 10 years, Sony has had sales of $658.3 and net profits after taxes of $12.1 billion, or a net profit margin of just 1.8 percent. (In America, that would get a CEO fired. No wonder Sony is now run by an Englishman, Sir Howard Stringer.)

 

In the last 10 years Nintendo has had sales of $48.3 billion and net profits after taxes of $7.5 billion or a net profit margin of an astounding 15.5 percent. (More than eight times as much as Sony.)

 

No wonder Nintendo is worth more than twice as much on the stock market as Sony, a company more than 13 times as large.

 

Sony is worth $26.5 billion. Nintendo is worth $54.1 billion.

 

Sony is a well-known but weak brand. Nintendo is a strong, focused and profitable brand.

 

I know it is ugly out there in the marketplace, but do your brand a favor and don’t tinker. Stay true, stay focused and everything will eventually be alright.

 

 

 

 

 

 

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Line Extension Intervention

Line extensions are like drugs. And like drugs which we all know can be deadly, the long term risks are often overlooked for some short term fun.

 

 

A nightclub filled with young, beautiful, successful people high on cocaine doesn’t look so dangerous it looks like a rocking party. That first time club user never imagines becoming a junkie living on the street. But it often happens. And what seemed cool initially can take over your life destroying everything you once had.

 

 

Line extension works the same way. A little can feel great but soon you are addicted. The addiction takes over and you can’t stop. You end up losing your category, marketshare and meaning. For some it happens quickly for others is can take years but eventually you wake up and you have a brand like Chevrolet that doesn’t stand for anything anymore.

 

 

Why don’t people heed the danger of drugs or line extensions? Because drug use and line extension abuse have been romanticized. Line extensions get glorified in the trade press the way drug use gets glamorized in the movies.

 

 

You read about all the new and exciting line extension launches but rarely read about the abysmal results. Movies are filled with alcohol, drugs and cigarettes yet rarely address consequences from these vices.

 

 

So we the masses are left with a false impression that everybody is doing it, it’s fun and nobody ever gets hurt. Therefore, the few straight-arrows at the party not partaking in the fun feel like losers.

 

 

But like the losers in high school that studied and are now successful, rich and powerful; the losers that don’t line extend will be the ultimate winners in the marketplace.

 

 

Today, more than ever, the pressure is on to just maintain market share and sales numbers. So the temptation for a quick line-extension bump is hard to resist. But remember, that short term rush isn’t worth it, when you come down from the high in a few months time your branding problems may be far worse that today. It takes guts to just say no. But in the end you’ll be glad you did.

 

 

Big food companies in particular are addicted to line extensions. Corporate culture in these company rewards line extension internally. Brand managers spend an average of 16 months on a brand so an easy way to look busy and pad your resume is to launch a line extension. The problems caused by that extension are left to the unlucky guy or gal who gets the brand next.

 

That’s why new powerful brands are not being launched by big companies, they are being launched by entrepreneurs. VitaminWater would have never been launched by Cola-Cola. A company who had the bright idea to launch Diet Coke Plus with vitamins.

 

 

 

Coca-Cola had to buy VitaminWater for a pretty penny. Why can't the world's best beverage company launch a successful new brand itself? Because they only do line extensions and me-too products. It is a tragedy.

 

 

But you can’t blame the addicts, corporate culture pushed the idea on them and now they are hooked. Line extension is a disease. We need treatment for these people. Perhaps they should be locked up and forced to read Ries books.

 

 

The really scary thing is that line extension addiction has hit an all time high. Walk down the aisle of any supermarket and you can see the carnage. Almost every grocery brand is a mess. The shelves are crammed with too many varieties, flavors and extensions. The average consumer is overwhelmed, confused and usually disappointed.

 

 

How many of you are like me and came home with the wrong product? Bought caffeine-free Coke instead of Diet caffeine-free Coke? I have bought the wrong kind of Cheez-Its, Oreos, Cheerios, Campbell’s soup, Gatorade, Tide, Crest, Kraft cheese, Thomas’ English muffins and Coca-Cola more times than I would like to admit here. I am smart, I am careful, and even I have a hard time shopping.

 

 

Then imagine the disaster when I send my darling husband to the store. Even with a list in hand, the poor guy has no idea what to buy. I put Goldfish, English muffins, Oreos, Tide and Dannon on the list and the man is at a total loss and needs several phone calls home to get help. And even with all that he comes home with the wrong stuff and gets yelled at.

 

 

I say it is time for an intervention. You think America’s addiction to oil and drugs is bad, just take a look at our addiction to line extension.

 

 

Next time your kids rush to the side lines for some Gatorade ask them “Will that be with Tiger or without?”

 

 

Tiger is a line extension of Gatorade! It is just about the craziest thing I have ever seen. What executive green lighted this idea?

 

 

I think we need an intervention at many corporations, I would start with the executives at Gatorade. Perhaps it could be pitched as the next great reality show: Line Extension Intervention.

 

 

I'll lock up executives up in brand rehab and make them follow my 12-step program.

 

The Twelve Steps of Line Extension Anonymous 

 

Step 1: Admit our company has become powerless over line extension and that our brands have become meaningless.

 

Step 2: Believe that a brand guru greater than ourselves can help bring sanity and return brand focus.

 

Step 3: Make a decision to turn our brand over to the care of the teachings of focus.

 

Step 4: Make a searching and fearless inventory of what has weakened our brand.

 

Step 5: Admit to ourselves, our colleges and our shareholders the exact nature of our line extension wrongs.

 

Step 6: Be ready to remove every ridiculous line extensions from the brand portfolio.

 

Step 7: Ask distribution to take these line extension disasters off the shelf.

 

Step 8: Humbly ask consumers to forget our brand sins.

 

Step 9: Make direct amends to such people who got stuck buying terrible line extensions when possible.

 

Step 10: Continue to take a brand inventory to maintain focus.

 

Step 11: Practice daily affirmation of focus and promise to stay true to the mission of having a brand stand for something in the mind.

 

Step 12: Have a spiritual awakening as the result of these steps and take this message to other line extension addicts.

 

May the Focus be with You!

The Good, the Bad and the Smelly

The past two days I have been up early to appear on Fox Business' "Money for Breakfast" to count down my top 5 line extension winners and losers of 2007 or "The Good, the Bad and the Smelly" as I refer to them. I'll start today with the losers and follow-up later this week with the winners.

What is a line extension?

A line extension is taking a brand name in one category and using the same brand name in another category. Scott used to be just a toilet paper. The number-one brand in fact. Today Scott is into everything:

• Scott toilet tissue
• Scott napkins: Scotkins
• Scott paper towels: ScotTowels
• Scott facial tissue: Scotties

Line extension killed the brand. No longer is Scott the number-one brand of toilet tissue. Today Charmin is the number-one brand. While well-known, Scott is a meaningless brand in the mind because its name is on everything.

Put Scott on a shopping list and what do you buy? I put Coke on the list; I buy Coca-Cola. I put Charmin on the list; I buy toilet tissue. I put Scott on the list and what do I buy and where do I use it?

Are different flavors a line extension?

Line extensions are sometime confused with flavors and varieties. Vanilla Coke is a flavor and Diet Coke is a line extension. There are lots of varieties of Tostitos chips. But Tostitos salsa is a line-extension.

Why do companies line-extended in the first place?

It’s the cheapest way to introduce a new product. You don’t have to spend millions of dollars on advertising establishing your brand’s credibility because everybody already knows your brand name. That’s why 90% of new supermarket brands are line extensions.

Unfortunately most new brands fail. It is especially confusing when you have the same brand name in two different categories. And long term, line extension it can damage the core brand by undermining its meaning in the mind.

But if they didn’t line extend how would companies ever grow?

Instead of always thinking how to line extend, companies should think more about launching second brands. Many line extensions represent a missed opportunity. Toyota could have sold many expensive Toyotas, but they would have missed an opportunity to launch the Lexus brand which today dominates the expensive car category. Lexus is much more valuable than the sales that might have been generated by an expensive Toyota model.

The 5 Worst Line Extensions of 2007

1. Play-Doh Cologne.

Hasbro says the fragrance is "meant for highly-creative people, who seek a whimsical scent reminiscent of their childhood."

Play-Doh does have a unique and different smell, but I doubt too many adults want to smell like Play-Doh. Kids play with the stuff despite the bad smell, not because of it.

What is next Eau de Huggies?

2. Hooters energy drink.

Hooters is known for boobs and chicken. The brand has no credibility in energy.

Just because everybody is doing it is not a good excuse to launch a line extension. Today there are hundreds of energy drinks. In order to succeed, you need be first in the mind and have a good name. Hooters has neither.

3. Jeff Gordon fine wine.

Don’t the wine makers attend any NASCAR races? I have been to several since moving down to Atlanta. And while I have seen a lot of beer consumed, I have never seen a glass of fine wine consumed. Wine and NASCAR go together like water and motor oil.

4. Disney wedding gowns.

As a wedding destination Disney has had some success. Disney World is a great place to visit, and many weddings are part family reunion these days so in some ways a Disney wedding makes sense. I have been to a wedding at Disney, but having Mickey Mouse and Goofy characters dancing with the guests is not my cup of tea.

I just went to a Cinderella party for a three year old. And while little girls loved to dress up as Cinderella, I don’t think 25-year-old really girls do. Not too many brides want to look like a cartoon character on their wedding day. Looking like Princess Diana is one thing, a Disney Princess is quite another. A G-rated wedding night is not a fairy tail ending.

5. Trump Steaks, Trump Vodka, Trump Rugs, Trump Water, Trump Cologne, etc. etc.

Trump is the most line-extended brand in America today. The Trump extensions are novelty items. They might sell a few in the short term, but long term Trump Vodka/Rugs/Water will never be a big deal.

Of course, all Trump extensions are licensed. So Trump doesn’t stand to lose any money on these deals, he just gets a cut if they sell. Which, in the case of most of these won’t amount to much.

Halloween Tricks and Treats

Happy Halloween!

In honor of Halloween, I thought I would follow up last week’s post on great restaurant branding with some of the scariest restaurant branding ideas I’ve recently come across.

1. The worst restaurant name.

Humuhumunukunukuapua’s, located at the Grand Wailea Resort in Maui, Hawaii.

This terribly long and totally unpronounceable name is the worst I’ve ever seen. The restaurant has a nice view, good food and benefites from being in a popular hotel, but what a missed branding opportunity. Never underestimate the power of a good name.

My husband and I referred to it as the huma-huma restaurant. I was too embarrassed to call for reservations or tell anyone where we ate because I had no idea how to pronounce it. Not a good idea for generating word of mouth.

The name means Hawaiian Triggerfish. Triggerfish would have been a whole lot better.

2. The worst line-extension restaurant.

It is a mistake is thinking that a popular brand in one category will translate into another.

Tommy Bahama, the hot men’s resort ware brand has gone bananas. I saw a Tommy Bahama restaurant in Maui. And see advertisements from Tommy Bahama Rum almost daily in the New York Times.

What are they thinking? Obviously they must be drinking too much of the rum. Just because a brand is successful doesn’t give you carte blanc to take it anywhere.

It is one thing for a famous restaurant to sell t-shirts, it is quite another for a famous shirt maker to sell cheeseburgers.

3. The worst menu addition.

When you build a powerful brand by focusing on a core attribute it is best to stick to that attribute. It is unwise to introduce menu items that are the opposite of your position.

Subway owns fresh and healthy sandwiches in the mind. Jared’s weight loss and the new fresh fit menu reinforce that position in the mind.

So what do they do next? They recently introduced personal deep-dish pizzas! How unhealthy could you get? No much in my opinion. Let’s hope Jared doesn’t go on a pizza diet.

4. The worst company naming strategy.

Luckily this one is just a ghost story. Using current marketing thinking at most companies today, you can see how Darden, founder of The Red Lobster chain, could have named their other restaurants:

Italian Lobster, Steak & Lobster, Bahama Lobster, Lobster Grill and Healthy Lobster.

Instead Darden went with Olive Garden, Longhorn Steakhouse, Bahama Breeze, Capital Grille and Seasons 52 to give each its own brand identity. Good move.

Think the fake names were funny? Well think again, it is a strategy countless companies continue to use. Because most companies prefer to launch line extensions than new brands.

It is exactly what Toys R Us did. They launched Kids R Us and Babies R Us. A strategy that has left the company in trouble. Even though the Babies R Us concept has taken off, it has succeeded in spite of its lousy line extension name because it was first in a new category. And its success has come at the price of Kids R Us being shut down and Toys R Us losing its toy leadership position to Wal-Mart.

5. The worst steal.

Everybody has watched with envy the success Starbucks has had in coffee. Starbucks has single handedly elevated the lowly .50 cup of joe to a $3 experience and obsession.

Instead of launching their own brands early on before Starbucks was firmly established, they waited and now everybody is jumping on the upscale coffee bandwagon.

McDonald’s is serving “premium” coffee along with lattes and espressos. Wendy’s is launching a Javaccino’s menu in an effort to become a beverage destination. On the Javaccino’s menu: Rainforest select sustainable coffee, iced pomegranate green tea and confused turtle Frosty-chinos.

6. The worst Halloween candy idea.

Snickers Marathon energy bars. Sounds like a great idea, take the best-selling candy bar and make it into an energy bar. Because really, what is an energy bar anyway, but lousy tasting candy bar.

The Snickers brand is known for great taste so they will rule the energy bar market. Right?

Wrong. These treats are unlikely to trick any kids or adults. There is nothing wrong with the bars, but there is everything wrong with the brand. Or should I say brands. Snickers Marathon bars come in many different varieties including: energy, nutrition, multi-grain, low-carb and protein. Just to totally confuse you.

Snickers is a candy bar, they would have been better off telling people to just enjoy a Snickers. One bar only has 273 calories and almost 5 grams of protein, not much difference from the Marathon bar. Selling energy bars undermines the candy. It tells people the candy is bad, when in fact they are not much different.

* Snickers: 273 calories, 14 g fat, 33 g carb, 5 g protein.
* Snickers Marathon: 210 calories, 8 g fat, 26 g carb, 14 g protein.

Snickers satisfies because it tastes great. Snickers Marathon is a poor tasting substitute. Remember you taste in your mind not your mouth. A Snickers energy bar is never going to taste good up there. Want energy? Grab a PowerBar.

Halloween warning:

On Halloween, kids play dress-up, act silly and scare people by catching them off-guard.

None of these are strategies you should use for marketing. Dressing up as something you aren’t, acting silly and scaring people are all bad branding ideas.

So Marketers, leave Halloween to the kids and keep your brand true, authentic and focused. No tricks allowed.

EBay Express a failure, I'm shocked. (just kidding)

In today’s Wall Street Journal the top headline is “EBay’s Bid to Go Beyond Auctions Isn’t Selling Well.”

Really? I’m shocked!

Well, actually I’m not shocked. I could have told you that months ago because the idea of EBay going beyond auctions violates a fundamental law of branding. And when you violate a fundamental law your brand suffers.

The Law of Expansion states that the power of a brand is inversely proportional to its scope. In other words, expansion weakens a brand. When you try to stand for everything and appeal to everybody your brand loses its meaning in the mind.

EBay owns online auctions in the mind, a powerful and profitable position to own. EBay owns it because online auctions created the category by being first in the mind.

EBay selling goods at fixed prices make no sense for the brand or to consumers. EBay Express is totally confusing and contradictory concept.

So why do companies constantly mess with a good thing? A never ending demand for growth on a quarterly, monthly or even daily basis at all costs. Unfortunately, building a brand for long term with a solid focused strategy like Southwest Airlines and no frills is the exception rather than the norm in business today.

To attain growth business leaders constantly try to move beyond the boundaries of their brands for a quick growth fix. Unfortunately the quick fix usually fails and many times even leads to long term losses for the brand.

Some examples:

1. Volvo C70 convertibles & coupes.

A carefree sporty convertible is the complete opposite of what the Volvo brand stands for. Not surprisingly the sporty Volvo C70 models did not sell well and were the biggest automotive sales flops of 2005.

2. Kids “R” Us clothing.

At its peak Toys “R” Us, the former top U.S. toy retailer, expanded its brand into Kids “R” Us and Babies “R” Us. Babies “R” Us has succeeded in spite of its lousy line extension name because it was first in a new category and faces no serious competition. (It might have been a better idea to give the brand its own name.) On the other hand, Kids “R” Us was a total disaster. And the toll it took on management’s time and attention under minded the Toys “R” Us brand. Today, Wal-Mart is the leader.

3. IBM personal computers.

When IBM launched its PC line in 1981, the company was the most powerful, most admired company in the world. The PC line was even first in a new category (the first 16-bit business personal computer.) Yet IBM reportedly lost $15 billion in personal computers over a 23-year period. Finally IBM threw in the towel and sold out to Lenovo, a Chinese company.

Every company wants to increase sales. Fortunately there is a right way and a wrong way to do so. In most situations, line extension is the wrong way.

Launch a second brand.

A better strategy is to launch a second brand. As Toyota did with Lexus. As Sony did the PlayStation. As Apple did with iPod. As MTV did with VH1.

A second brand allows a company to expand while still protecting the integrity of its core brand. Even today, IBM still means mainframe computers. Twenty-three years of marketing personal computers didn’t change its basic perception.

The truth is that nothing in marketing or in life is more difficult than changing a human mind. Go home and try and change the mind of your spouse and you’ll see what I mean.

Wake up and smell the coffee.

The coffee category has undergone a metamorphosis. You can blame it on Starbucks. The upscale coffee shop has greatly impacted the mindset of coffee drinkers across the country. What used to be the best part of waking up is now barely tolerated by most self-respecting coffee drinkers. Today drinking the ground-up stuff from a big tin can is like drinking wine from a jug. Done, but not proudly.

So what does Folgers, the former king of coffee, do now? Well, you know you what they would do. And that is exactly what they have done.

Coming to a store near you is Folgers Gourmet Selections. Folgers has moved into the premium coffee shelf with a Folgers coffee brand dressed up in pretty shiny bags, gourmet flavors and $20 million dollars in advertising.

Terrific! Now everyday coffee drinkers can move up to a premium brand they trust. Good thinking, right?

Wrong! The last thing a consumer wants is to move up the ladder with a brand from the bottom rung. Astonishingly, here is the strategy Procter & Gamble, owners of Folgers, gives for the move:

“Folgers is going after customers who drink a cheaper coffee every morning at home, but consider finer coffee to be a special treat. The brand is hoping there is an opening in the category for a gourmet-inspired coffee that could be consumed on an everyday basis.”

In other words, Folgers is moving into the mushy middle. Folgers Gourmet Selections is a classic mushy middle brand.

A once powerful brand sees the category moving upscale so it tries to appeal to consumers with an upscale brand at less than upscale prices with a down-market name. It never works, guys.

The lure of the mushy middle has gotten some of the world’s most powerful brands in trouble.

To combat the move to diet soda, Coca-Cola introduced C2, a half-calorie soda. A total disaster. Pepsi-Cola tried the same thing with Pepsi Edge. Another total disaster.

To combat the move to ultra-premium vodka, Absolut introduced Level from Absolut. So far, Grey Goose has nothing to worry about.

The Zales jewelry story chain tried to chase upscale customers by replacing almost a third of its merchandise with more expensive products. Result: The CEO was fired.

Gallo wine tried to move upscale with $80 bottles of Gallo Family Vineyard Estate Series. Ernest & Julio would turn over in their grave if they found out.

So what should Folgers do? Once a brand is so firmly established there is not much to do if the market moves upscale. All you can do is keep the brand focused, suffer some loss of market share and launch a new brand to appeal to the changing market.

In fact, Procter & Gamble does have another premium coffee brand on the shelves already called Millstone. But as a brand it is been expanded into too many varieties, so many it boggles the mind. Improving the focus and power of that brand make a lot more sense that trying to move Folgers up into the premium category.

Let me also comment on Starbucks, because I think they are making a big mistake selling their coffee in supermarkets. It diminishes the power of the brand. If I can make the same coffee at home, why should I spend $4 to buy a cup in the store? Starbucks should be a brand focused on an experience that can only be had in a Starbucks store.

So what should Starbucks do about supermarket sales, a huge potential market? First they need to keep Starbucks as a coffee shop brand. Period.

Second they have the perfect solution for a separate supermarket brand. Starbucks bought a company called Seattle’s Best Coffee (which most people assumed was Starbucks anyway). I would use the Seattle’s Best Coffee brand name as the supermarket brand. It gives a gourmet feel without bastardizing the Starbucks name by putting on retail shelves.

The best part about waking up for me is knowing there will always be another nonsensical line extension introduced to blog about in the morning.