Can Your Brand Wallop Wal-Mart?

I live in Northbrook, IL.  The big issue in our town is whether to allow a Wal-Mart to be built here.  I am not going to give my opinion, which half of you would like and half of you wouldn’t.  But I do want to mention one argument against that, as a marketer, I have a tough time accepting.

That is the argument that Wal-Mart is bad for small business.  The argument is simply that when Wal-Mart moves in, small businesses close. 

The statement itself is true. And in fact, that is just the free enterprise system working the way it is designed to.  (Here is a great column about this.)  http://www.forbes.com/sites/timworstall/2013/03/31/of-course-walmart-destroys-retail-jobs-thats-the-darn-point-of-it-all/

But why is that the case?  Why do small businesses close?  Here is what happens.

After a Wal-Mart moves in, small businesses shut down if too many of their customers defect.  Why do customers defect?  They defect because Wal-Mart offers lower prices, these smaller businesses cannot compete on price, AND (the key) they do not give their customers a compelling reason not to switch, because they have not differentiated themselves on other factors. 

This is not just true for businesses competing against Wal-Mart; it is true for any company with a competitor (domestic or international) that offers lower prices.  And this is not a new phenomenon.  The same was said in the 1890s when Sears distributed its first catalog. 

Remembering that Wal-Mart itself was once a small business, the question is: how can small businesses compete, if not on price?  The answer: develop a brand that differentiates them from Wal-Mart.  That could be done in a few ways.  Here are just two examples.

First, differentiate on product quality.  The argument goes that Wal-Mart sells low quality merchandise.  If your merchandise is better, communicate that, and explain why higher quality is better.  Higher quality clothing may keep you warmer in the winter or may last longer.  Higher quality toys may not break.  A higher quality furnace (not that Wal-Mart sells these) may cost more, but it could last longer and provide more energy savings in the long run.  “You get what you pay for” may be a cliché, but it is true.

Second, differentiate based on service.  Real world example.  My brother is a wholesaler who sells to various retail outlets.  His customers could go to Wal-Mart and buy the exact same products for a lower price.  Why don’t they?  Because over the years, my brother has provided exemplary service.  His customers know if there is a problem, they can call him.  If they need a rush order, he can take care of that.

Two other quick examples, not having to do with Wal-Mart.  I have had the same property and casualty insurance agent for decades.  I know I could get insurance cheaper elsewhere.  But I don’t even shop it because my agent is always there for me when I need him.  The other example: we recently bought a digital camera from a store we have shopped at for decades.  I could have gotten the exact same camera for 25% less online, but I trusted the store I got it from.

So what are your takeaways?

 1. Do not compete on price.   You are going to attract price shoppers and you are going to lose.  Be prepared to be undersold, and be willing to lose that portion of your customer base that buys solely on price.

 2. Find out what is important to your customers other than price.  Why do they shop with you now?  Once you learn that, communicate it and make it a core component of your brand.

 3. When Wal-Mart or somebody else moves in, don’t just throw up your hands in resignation.  Get aggressive.  Tell your customers you don’t want to lose them.  Remind them why they shop with you in the first place (provided you know).  Ask them what it will take to keep them (just asking them will show them you care; can you imagine a Wal-Mart worker asking that?).

 

Finally, any idiot can sell or market based on low prices.  The challenge and the fun is not being the cheapest place around, but winning anyhow because your brand is valued. 

THAT is how you wallop Wal-Mart.

What do you think?

The Game of the Name

This past week both Abbott and Kraft announced new names for the companies they are spinning off: Mondelez for the Kraft spinoff and AbbVie for the Abbott spinoff. Some thoughts:

1. First I understand that naming is not easy. In addition to getting customer feedback, the names have to work globally from a language perspective, and have to pass legal hurdles.
2. Both announcements apparently came with instructions on how to pronounce the name. That is not good right off the bat.
3. Apparently, both companies also saw the need to explain the names. That isn’t good either. If the reason for the name is not self-evident, maybe the name choice is not that good.
4. I am going to give both organizations the benefit of the doubt and assume they did research as part of this. This is not a given. I personally was involved with one U.S. brand with a lot of brand equity here that was acquired by a global brand. The global brand said it would not research the appropriate name in the U.S. The global company name was the brand everywhere else; it would be the brand here.
5. So even if the brands did research, the question is how aided the research was.

a) If people were just asked what they thought of the name on an open-ended basis, that is OK.

b) If people had to have the name explained to them before rendering an opinion, not so good. After all, these brands are not going to spend a lot of effort explaining the name in their marketing efforts.

6. For AbbVie specifically, it appears the company is really trying to leverage the Abbott connection with both the Abb, and the Vie. The Vie is based on the Latin for life, and ties into the existing great Abbott tagline of “A Promise for Life.” This may not be a bad strategy in the near term, as the Abbott brand is strong. But long-term it may hinder the organization’s name to establish its own identity.
7. Mondelez supposedly is meant to convey “delicious world,” using a derivation of the Latin word for world and “delez”, which apparently has Romance language roots signifying delicious. I am a pretty smart guy (IMHO), but if I do not get it, I am not sure who else would. Combined words and made up words are tough. Earlier this week, my daughter taught me the word “bracktastrophe,” which is an upset in the NCAA basketball tournament. I got that. I don’t get Mondelez.
8. In the end, these companies will spend hundreds of millions if not billions marketing these names, and the name itself might not make that much of a difference.
9. But if you don’t have hundreds of millions to market your name, do your due diligence, and make sure your name resonates with the target market.

Time will tell. Let me know what you think.

When the Easy Answer is the Right Answer

Recently, I was part of a team developing brand architecture for a healthcare organization. The organization had one hospital, and was in the process of building another hospital. For the sake of argument, let’s call the original hospital Brothers of Sisters. And let’s say the new hospital is being built in Northbrook.

So we brainstormed and came up with a bunch of different names to test. Some were geography-based, some were mission-based, some were competency-based.

Next step was to test the names in research. Research was conducted, and here is the winning name: Sisters of Brothers – Northbrook.

I told this story to someone, and it was greeted with a rolling of the eyes, a smirk, and a caustic “and how much did they pay for that?”

Frankly, I don’t know how much they paid for that. But I will tell you this – it was worth the price, and it is a fraction of what they will spend to communicate and promote the brand.

Maybe it is the easy answer. Maybe it is the obvious answer. Maybe it is not an especially creative answer. But here’s the point: It is the right answer.

We know it is the right answer because data tell us it is the right answer. So when millions are spent communicating and promoting the brand, there is confidence that the right brand is being promoted.

Which would you rather have: an obvious answer that has been tested and you know is right? Or some novel name that has not been tested, and you haven’t a clue whether you are right?

So when you hear what appears to be the easy answer, don’t ask: “How much did they pay for that?” Ask “Did they test it?” Until then, hold the smirk.