Brand Strategy
Outlook: Illinois residential electricity deregulation
It’s been a year now since Illinois began allowing retail energy providers to serve the residential market, and a total of 261,000 ComEd or Ameren customers have “switched”. Almost 46% of those customers switched during the months of October and December, which is about the time that consumers began to see rate offers as high as 25% from companies like MC2, and when municipal aggregators won lucrative accounts in the ComEd region.
About 150 communities and counties in Illinois now have aggregation referendums on local ballots this spring, and we’ll see a big spike in the “switcher” numbers soon. However, competing for aggregation contracts is probably only an effective short term strategy. Competitors will really only be able to offer 20% to 30% savings on the energy portion of a consumer’s bill for another year or so. After that, the savings they’ll be able to offer may be quite modest. Winners of aggregation contracts in the future will be those who can sustain the biggest hits to their margin.
To date, the marketing we’ve seen from the competitive set can be characterized as “restrained parity.” Over the course of the next year, we would hope to see retail energy providers positioning themselves to appeal directly to the consumer based on brand differentiation, as well as value propositions that extend well beyond price. Forward looking brands who see the pitfalls ahead should be hard at work right now.
Door-to-door sales: timing is everything
It seems that Direct Energy is taking a little bit of heat this week. The retail energy provider is canvassing door-to-door to attract new customers in Con Edison’s service territory. Unfortunately, an urgent public warning was released by the utility last week…urging the public to be aware of scammers. Three types of scams were described in the utility warning. One was related to fraudulent meter readers. The neighborhood watch must have immediately gone on high alert.
It’s easy for the average citizen to fail to distinguish between a fraudulent meter reader and a salesperson who is asking to see their electric bill. And it’s easy to understand why Direct Energy would utilize door-to-door sales… to manage their cost per acquisition while reaching elusive consumers at a place where they have access to their electric bill.
Perhaps suppliers should test the use of door-to-door efforts as an education channel that drives sales, rather than a closing channel. Of course they’d need to weigh higher cost per acquisition vs. lower cost to reputation.
But retail energy providers should definitely suspend any door-to-door campaigns immediately after a utility scares customers out of their socks with threats of imminent home invasion.
Don’t you wonder, though, if this was just a case of unfortunate timing for Direct Energy, or a shrewd move by Con Edison?
Qwikster – Was Netflix Crazy Like a Fox?
Much has been made in the past few weeks about Netflix’s aborted attempt to split into two different services in conjunction with a new pricing structure. The initially announced strategy, keeping their streaming service as a product of Netflix, and moving DVD distribution to a new service called Qwikster – each service run separately and each priced at $8 a month. After outcry from their customer base and pillorying from the media, Netflix decided to keep DVD rentals by mail under the Netflix banner after all.
While I’m not completely certain, I have a sense that this back-and-forth was the plan all along. Here’s why:
First, look at where Netflix is today: providing the same exact services they were earlier this year, but are now charging double for it. Netflix was a great value at $8 a month for a combined streaming and DVD delivery service, and it’s probably not a terrible deal at $16 a month, but when you raise your prices 100% without any change in service model, you’re anticipating pushback from your customers.
Is it possible that the announcement of the DVD business being moved to a new company called Qwikster was a straw man that Netflix intended to knock down all along? Was that initial announcement meant to blunt the impact of a doubling in price of Netflix in a “You think that’s bad? It could have been worse…” kind of way? Continue reading
Black Friday. There’s an app for that.
Even though retailers have boasted wallet-busting holiday savings since Back To School sales ended, 
there is still competitive pressure for a mammoth take on Black Friday. So much so that some stores are infringing on Thanksgiving Day by offering online specials that evening. And some notable Big Box stores will be opening at Midnight to entice you to spend your holiday budget with them.
But alas, the consumer still has the upper hand in this melee. While waiting in line for the doors to open in the wee hours, or waiting for a parking spot, smartphone owners will already be shopping online getting great deals. Mobile search will play a key role this year as smartphone owners discover the joy of searching “Black Friday deals” to be met with search returns of popular e-commerce sites built for the small screen featuring “phone busters.” Some web sites are a resource aiding the shopping process by providing a comprehensive collection of the holiday newspaper ads and store routing maps in malls.
And of course, now there is a Black Friday app. On this handy app, you can view ads, create and manage a shopping list, comparison shop and plan a physical route to get to the stores you need to get to, unless of course you’re shopping online.
As a guy who disdains the shopping crowds, Black Friday has been something for me to avoid. But now that I can sit at Caribou Coffee sipping a cup of holiday mocha and do my shopping from my iPhone, this could be a whole new exciting day for me.
“Siri, please find me deals.”
Private label continues the march
The Private Label Trade Show was a big event last week here in Chicago. This year’s show was a major endeavor, with over 2,000 exhibitors representing a mind-boggling
assortment of food, beverage, wellness and home goods products. From high-end chocolates to pork rinds … even organics, one in four products purchased today are store brands – a category growing twice as fast as national brands.
So, what drives the consumer to buy private label? While the private label industry shed the “cheap bland generic” image long ago, store brands are still a bargain. Without the heavy spending on advertising and promotion, store brands won big during the last recession.
A 2011 Mintel study found that nearly half of respondents believe that store branded products are of better quality today than they were five years ago. And over 60% of shoppers believe that there’s no real difference between name brand and private label in the key categories of dairy, canned and shelf-stable products.
What impressed me most about the products on display at the PLMIA show is the move toward higher quality, more innovative products that store brands are seeking. Many retailers have invested in their own brand reputation that impacts the perception of the items that carry their name … often, products with enhanced health and wellness attributes as differentiators. Trust your retailer, trust their brand. Trader Joe’s has made a fortune on that philosophy.
I wasn’t quite sure what to make of the plethora of “sanitary wipes”, particularly the one pictured here. In chocolate!
Not sure I’d ever buy that, no matter what the label. What store branded “labels” or products do you buy?
Family farming vs. Industrial agriculture. What’s your take?
With Farmer’s Market season winding down here in the Midwest, venturing back into the grocery store environment seems a bit alien. While a visit to the weekly market rates
high in entertainment value, the best part is talking with the folks who grow or make the products they’re selling … and we’re eating. Family farming vs. industrial ag … which are you more comfortable with?
The just-released research findings of the 2011 Consumer Trust Survey from The Center for Food Integrity (CFI) would suggest that Americans are growing ever more disenchanted about the state of our global food industry. CFI is a non-profit coalition of agribusiness companies and industry associations whose mission is “to build consumer trust and confidence in today’s food system.”
Here is a paragraph from the study’s conclusion:
Consumers aren’t sure today’s agriculture still qualifies as farming. Why? Generational and geographic distance between farmers and consumers, technological advances in farming, and changes in farm size and structure. We see consumer alienation from agriculture and the food system expressed through concerns about nutrition, food safety, affordability, environmental sustainability, animal welfare, and other issues.
The study went on to gauge consumer’s attitudes toward farming styles and deduced that people believe that family farmers share their values; “big ag” simply does not.
Recently, various industry groups have begun to unite (such as the new US Farmer & Rancher Alliance) in attempts to improve the image of industrial farming and production. So we’re starting to see some interesting marketing and PR programs (which may be called “farm-washing” by some) such as Monsanto’s Americasfarmers.com appear across multiple media channels.
Yet, the CFI’s own research points to the difficulty in changing public perceptions with the following sentence taken from their presentation: No single program or initiative will reverse the growing trend of consumer alienation from today’s farms.
Can marketing solve these issues of consumer perception? Or are we likely to see bigger changes ahead in how our world produces food … and what or how we choose to buy? What do you think?
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