Issue: Disney Investment in Hulu brings ABC programming
Commentary by: David Vinjamuri

Today Walt Disney is reported to be taking an equity stake in Hulu under a deal that will bring ABC content like Lost and Desperate Housewives to Hulu.  In just over 24 months, Hulu has gone from being yet another silly startup funded by old media giants NBC (GE) and Fox (Newscorp) to the dominant long-form video destination on the web with ad revenue expected to surpass Youtube in 2009.

The formula to success however, has nothing to do with Web 2.0 wizardry.  Quite the opposite.  This advertising blog believes that Hulu is great because it’s brought the simplicity of the 1950’s to online video.  The magic formula has two parts:

1. Put everything in one place
2. Don’t overwhelm programming with advertising

Hulu defied corporate tradition by linking to content they did not carry.   If a prime-time television show could be found anywhere on the Internet, watching it was as simple as going to Hulu and searching, whether that landed you on Hulu or a media web site.  This probably seemed foolish to competitors at the time.  Why send customers away?  But it turned Hulu into the Google for long-form video content - the best, most relevant place to search and find television shows and movies.

The second part to Hulu’s success was dictated by the online environment, which is notoriously unfriendly to interruptive video advertising.  Consider two ways of watching an episode of FOX’s hit drama ‘House’.  Turn on FOX on a Monday night and you’ll get the full episode of House - 42 minutes - served up with 18 minutes of advertising.  On Hulu, watch the same episode with just five commercial breaks of thirty seconds each.

What’s not immediately obvious is that the second strategy works better - even before Hulu starts targeting the ads it shows based on your user profile.  Why?  Because you’re much more likely to watch a :30 second ad than a three-minute advertising pod.  In fact with DVR penetration increasing to record levels, it is becoming clearer that fewer and fewer television viewers are watching advertising at all.

Hulu is a great success, but the point here is that part of their magic formula is simple: they aren’t greedy.  If television networks hadn’t progressively crammed more and more commercials down viewer’s throats, we’d probably still be watching there, too.  Ask FRINGE …

A few quick thoughts for those of you still looking for the silver lining in the cloud of gloom that surrounds us …

1. Find your core customer  - This is trickier that it sounds because your core customers may not be the biggest spenders.  They are the people who attract others to your business, who are the “acid test” for your brand and who represent your brand in the minds of other customers.
2. Become a direct marketer - Test everything before you commit large dollars.  Instead of running a huge promotion, try it on a small group of customers and see how it does.  Send out an e-mail to 1,000 prospects before you reach out to 100,000.
3. Add value instead of cutting price - If your price is grossly unrealistic, lower it.  But first consider bundling in extra value at current prices.  Add samples, extra services or custom consultations.  You’ll increase the value of your offerings but help maintain your price points, which are harder to raise than cut.
4. Narrow your brand positioning - A recession is a tempting time to try to be all things to all people just to maintain revenue.  But people are drawn to expertise more than ever in a recession and nothing shows expertise better than a narrow focus.  Even if you don’t cut products or services, make sure your communications focus on your core expertise.
5. Look for opportunities - Save marketing dollars to spend opportunistically.  Large competitors in particular tend to make marketing cuts in big chunks and implement them very quickly.  This can leave bargains in media or even PR.  Watch your competitors closely to find the best moment to spend instead of pre-planning all of your expenditures.  If your business is seasonal, save extra money to capitalize on unexpected media or PR opportunities during your high season.

You may know the details by now (and if not see Jackie Huba, Susan Gunelius or Stuart Elliott at the NY Times for excellent recaps), but Tropicana has suffered a new media thrashing at the hands of brand advocates unhappy with the new packaging by The Arnell Group.The enthusiasts are correct here, the packaging does indeed look more generic than the familiar packaging it replaces.  The brand name is recessive and the product shot of the glass of orange juice stretched over two panels of the carton makes the product look like private label.  The new packaging is also less functional, as it is harder to identify the form (with or without pulp, with added calcium, etc) as that information was banished from the main panel to the top flap only.  Finally, in spite of Peter Arnell’s elaborate doubletalk, showing the juice on the package rather than the orange was a huge mistake for a brand whose primary competitive claim is that it is squeezed fresh from oranges and not made from concentrate.

The two more interesting questions from our point of view are:

1. When should I spend the money to redesign packaging?
2. How can I avoid a Tropicana fiasco with my own re-branding campaign?

Here are a few thoughts:

1. Rebrand when you have news - a significant product innovation or dramatic improvement is a good reason to rebrand
2. Rebrand if your market position changes - if a competitor threatens your brand positioning and you need to focus, narrow or shift the position
3. Rebrand if you have new, innovative packaging - a packaging innovation is a good time to rebrand or just refresh the packaging look
4. Refresh if you want to update the brand image - if the brand is stale and needs an update, make evolutionary changes to modernize the packaging

The Arnell Group would have served Pepsi and the Tropicana better to focus on refreshing the packaging rather than entirely rebranding it.   The Pepsi logo rebrand was no less pointless than the Tropicana packaging overhaul, but it will be far less damaging because Arnell merely refreshed the logo by tilting it and adding a bulge.

Part of the lesson here is that if you don’t really understand what a creative guy is telling you, there’s probably a reason for that.

Issue: Fox experiments with shorter ad blocks
Commentary by: David Vinjamuri

For a decade or more, advertisers and networks both have been bemoaning the loss of audience for advertising.  Part of the culprit was a drop in the overall prime-time television audience, which declined by a third or more in less than ten years (even as the overall U.S. population climbed).  To listen to the networks, however, we would think that digital video recorders and ad-skipping consumers were solely to blame.

Fox has just proven that this was never the case with an interesting experiment on the new prime-time drama, Fringe.   The show debuted with fewer ads in shorter blocks (Fox, of course, charged more per ad).  The result, according to AdAge:

Brand recall of ads that appeared during the first episode of “Fringe” was 32% higher than that of commercials appearing in traditional broadcast-TV programs, according to Nielsen IAG. The level of “program engagement,” or audience attentiveness, for “Fringe” was the second highest among debut episodes on broadcast TV in the past year (only NBC’s “Chuck” did better, IAG said).

We like this strategy for two reasons.  First, it re-contents television which for many years has been incrementally adding more commercials per hour (advertisements in the 1960’s ran for just 8 minutes in an hour - last year it was 18 minutes for the same hour).

Equally important in our view is execution.  Fox wisely inserted time markers before the newly shortened ad blocs.  “Fringe will return in 60 seconds” was a very effective inducement to keep viewers stuck in place, hands off the remotes.  Without these prompts, we doubt that the new strategy would have functioned as well.  They set expectations for consumers and allowed viewers to make rational decisions, which benefited the Fringe advertisers more than on similar shows.

Advertisers and networks need to continue to take responsibility for the sad state of broadcast advertising.  Showing more and more bad advertising just won’t work.  Thanks to Fox for taking a step in the right direction.

Issue: Marketing silos can hurt the brand
Commentary by: David Vinjamuri

Last week, Disney closed the door on one of the most successful promotions in its history. Virtual Magic Kingdom was opened in 2005 as an online role-playing game set in a virtual version of the Anaheim Disney theme park. The game allowed players to create characters (commonly called ‘avatars’) who would roam the park, interacting with other players, participating in promotions and playing games in the virtual world. Some of these yielded virtual prizes like hats, pins or furniture for the game. Others could be used to get real world prizes or promotions in the (real) theme park.

Virtual Magic Kingdom was intended to last only for the duration of the 2005 celebration of DisneyLand’s 50th anniversary. Because of the tremendous popularity of the promotion, however, it was kept running and only in April of 2008 did Disney announce that it would close forever on May 21st.
Which raises the question: why? Disney’s stated reasons sound like political talking points:

As many of you know, Virtual Magic Kingdom was created and launched back in 2005 as part of the Disneyland 50th Anniversary Celebration. VMK exceeded expectations in terms of performance, and as a result we extended the promotion (that is, VMK, the game) well beyond the 50th Celebration.

Eventually though, all promotions must come to an end, so I’m announcing today that on May 21, 2008, VMK will open our virtual gates for the last time. You read that right: VMK was never intended to last forever - we’ll close the game for good at the end of day on May 21st, 2008.

On its face, this would be a terrible reason to close a world which has drawn such a dedicated user community. The cost of maintaining this virtual world is minimal compared to attracting the same users with new promotions. Simple ROI analysis on the existing users of this type of virtual community would almost certainly show that their increased interaction with the (real world) Disneyland more than paid for the cost of maintaining the promotion.

The real answer is disarmingly simple:

Disney says it never intended the 50th-anniversary promotion to run this long, but money is also a factor: Virtual Magic Kingdom is free, and full access to Disney’s other online game sites — like Club Penguin and Toontown — costs as much as $9.95 a month in the case of Toontown. - Peter Sanders, The Wall Street Journal

Viewed from the narrow lens of a Disney division responsible solely for online promotions, Virtual Magic Kingdom is a loser. Even if most of the users never return, and think horrible thoughts about the Disney brand, the small percentage who will migrate to paid content make this look like a sensible economic decision.

And this is where typical corporate organization fails the brand. In fact, closing Virtual Magic Kingdom is a mistake for the Disney brand and certainly a dis-economic decision for the franchise overall. Disney like most consumer marketers spends millions of dollars in advertising hoping to engage consumers for a minute or less and get them to think about the Disney theme parks. Virtual Magic Kingdom got consumers to engage with a faithful representation of Disneyland for hundreds of hours, even tying in actual on-park activities, for a fraction of the cost. These consumers became brand evangelists - the type who get others to engage with the brand.

Disney should not fool itself that its paid games are a substitute. Those are pure branded entertainment, and will be judged by a different yardstick. Many consumers who interacted with the free promotion will never pay $120 a year to play the online game.

When I was researching Accidental Branding, I discovered that successful entrepreneurs understand that everything affects the brand. They are loathe to turn every corner of their business into a profit center, understanding that generosity often builds brand equity. Disney’s move to shutter Virtual Magic Kingdom will certainly spruce up the balance sheet this year. But it’s a bad brand move and one that could have been avoided by tearing down marketing silos.

Issue: Dove Accused of Retouching ‘Real Beauty’ Ads
Commentary by: David Vinjamuri

In Accidental Branding I write that brands need to ’sweat the details’ - meaning that paying attention to even small, innocuous details of the business that might not obviously affect the brand pays important dividends. A brewing scandal this week at Unilever with the Dove brand illustrates this. Dove has gotten into a mess because a profile of a professional photo retoucher in The New Yorker mentioned that he had worked on the ‘Real Beauty’ campaign - in which Dove explicitly argues against retouching reality. The details are complex, but Dove appears to have neglected to instruct a freelance photographer on the second iteration of the campaign in 2007 - the revered Annie Liebovitz - to avoid making any digital corrections to her photos.

The Dove Campaign for real beauty includes the following:

Original Print Campaign

Dove Pro-Age Print Campaign

Dove Evolution Video

Dove Onslaught Video

The campaign has been acclaimed for bringing body image issues to the fore. It has been criticized because Dove still sells products intended to beautify and because Unilever sells products like Axe that use the exact techniques that the Dove campaign criticizes.

Here are the facts in the unwinding mess:

Writing for the May 12th issue of The New Yorker, Lauren Collins profiled digital photo retouch artist Pascal Dangin. In her profile, Lauren writes:

To avoid such complaints, retouchers tend to practice semi-clandestinely. “It is known that everybody does it, but they protest,” Dangin said recently. “The people who complain about retouching are the first to say, ‘Get this thing off my arm.’ ” I mentioned the Dove ad campaign that proudly featured lumpier-than-usual “real women” in their undergarments. It turned out that it was a Dangin job. “Do you know how much retouching was on that?” he asked. “But it was great to do, a challenge, to keep everyone’s skin and faces showing the mileage but not looking unattractive.”

This paragraph was noted last week by BusinessWeek blogger Burt Helm on May 7th in his Brand New Day blog. Then Jack Neff from AdAge picked up the BusinessWeek story.

Unilever responded quickly, denying the accusations. Unilever’s PR department issued the following statement from the photo retoucher Pascal Dangin who was profiled in the article:

The recent article published by The New Yorker incorrectly implies that I retouched the images in connection with the [2005] Dove ‘real women’ ad. I only worked on the [2007 Dove Pro-Age] campaign taken by Annie Leibovitz and was directed only to remove dust and do color correction — both the integrity of the photographs and the women’s natural beauty were maintained.

Unilever also released the following statement from Annie Liebovitz:

Let’s be perfectly clear — Pascal does all kinds of work — but he is primarily a printer — and only does retouching when asked to. The idea for Dove was very clear at the beginning. There was to be NO retouching, and there was not.

The New Yorker responded by standing by its story - only noting that the word “undergarments” was misplaced - meaning that they agreed Dangin might not have worked on the first campaign.

From this muddle, it is not clear whether Dangin made substantial alterations to the Liebowitz photographs. What is clear however, is that he did touch them and at a minimum made the “color corrections” that he claims in the statement delivered through Unilever. So it seems clear that Unilever and the Dove brand did not explicitly ensure that the Liebovitz photos were completely unaltered. It seems possible that the photos met the standard set for the brand - not altering the appearance of the women - but any retouching of the photos leaves the whiff of impropriety. For the brand, this is a disaster which could have been avoided with more attention to detail.

Branding Bottom Line:
Dove gets mascara all over the brand

Issue: A small supplier decision comes back to bite Wal-Mart
Commentary by: David Vinjamuri

[Image from NALIP.org]

In Accidental Branding, I write “Do Sweat the Details”. By this I mean that very small actions that do not at first seem to be related to our brands often have very big consequences for the brand. What I meant when I wrote this is that consumers often cue off of small details that are of no interest to brand marketers, like how the package opens, how customer service handles complaints or how business partners speak about our business.

This week, Wal-Mart has provided an excellent example of how decisions seemingly unrelated to marketing can affect our brands. It’s a big enough deal that I would call this Wal-Mart crisis a textbook example of “Brand Karma” - meaning that what you put out into the world eventually comes back to you. Wal-Mart has never had a great reputation among its suppliers. For years it has been accused of sourcing goods locally in new markets only as a competitive tactic to drive out other retail customers and then ending the relationship in order to bankrupt the local supplier.

This general attitude towards suppliers bit back recently as The Wall Street Journal reports. The company which Wal-Mart used to capture video of sales conferences and other internal meetings for thirty years, Flagler Productions Inc. was dismissed two years ago. It does not take much reading between the lines to suspect that this termination of a longtime relationship was not handled well. INstead of maintaining a fondness for Wal-Mart and seeking to regain the Wal-Mart business, Flagler has gone into the business of selling these candid and embarrassing videos of Wal-Mart events to the general public. It appears that in spite of Wal-Marts general legal rectitude, they never secured exclusive rights to this video.

It’s a brand disaster. The videos, as Gary McWilliams reports, contain:

A former executive vice president and board member challenges store managers in 2004 to continue his work opposing unionization. Male managers in drag lead thousands of co-workers in the company’s corporate cheer. In another meeting, managers mock foolish or dangerous use of a product sold in its stores.

I have written a lot about Wal-Mart in the past several years, and I don’t think it’s an evil company. Their basic goal of trying to reduce prices for average working families is a good one. They have made some good steps forward (along with Target) on trying to bring prescription drug prices down. They’ve also tried, mostly unsuccessfully, to bring down the horrible, predatory purveyors of pay-day loans with fair competition.

Where Wal-Mart seems to falter is that they have no corporate instinct for the integrity of their brand. A corporate obsessed with costs is bound to bruise a lot of “little guys” in the process. (See Wendy Bounds nice blog post for more on this.) And not shockingly, one with the ability to really hurt Wal-Mart has finally bitten back.

The lesson? Everything affects your brand. If the way you treat your employees, suppliers or customers is not consistent with your brand, they will become a cancer in your system. Brands may not practice Buddhism, but they should believe in Karma. It all does eventually catch up with you.

If anyone has links to the Wal-Mart videos, please feel free to post them in comments.

Issue: Why bad packaging hurts your brand
Commentary by: David Vinjamuri

Today I suffered what might almost qualify as a repetitive-motion injury: I cut myself while trying to liberate a consumer product from its packaging. The offender is often the clamshell style of package.

This package can only be opened with sturdy scissors or - if you’re reckless - a knife

The offender today was actually a Zyliss Ice Cream Scoop which had a plastic band wound so tightly around the slender part of its handle that I briefly considered removing it with a soldering iron (which would have been safer). Instead, I used a pair of scissors which rebounded to nick my finger.

Other examples of this type of consumer-unfriendly packaging abound from CD and DVD jewel cases covered with that same clam-shell and clad in hard-to-tear plastic and sticky, sticky tape to pill bottles with shrink-wrapped plastic neck covers that defy tearing.

All of this is actually expense management at the cost of the brand. The problem is that the wrong people are in charge of elements that really affect the brand - either finance managers worried that packaging which is easy to open will invite pilferage or salespeople responding to pressure from retailers to make packaging which will be difficult to open and hard to shoplift.

But it’s a brand disaster. Why would any consumer product knowingly cause someone to bleed? It is unimaginable.

If you’re a brand manager, it is time to start examining your packaging closely. It might just be undercutting your brand message.

Issue: Online Communities and Brands - Our New Hometowns
Commentary by: David Vinjamuri

[Image from Church of the Customer]

Douglas Atkin, author of The Culting of Brands has a theory about people in the 21st century. We’ve mostly been torn from our hometowns. We don’t live with our grandparents or parents and may not even know our neighbors. We may share an income level with them but we might not share other core values or beliefs. Increasingly, we use brands as a short-hand to communicate our values to our neighbors and those we encounter socially. Driving a Volvo? I know you’re affluent, have kids and probably send them to private school. A Prius? We obviously are both Dems who share a passion for the environment. Wearing Ralph Lauren? You have money, like to make a nice impression but think fashion with a big “F” is vulgar.

The question brand marketers who see this are asking is: how will this translate to the online space? So we are all watching online communities very closely. With a few key exceptions, many online communities started by marketers are clunky, unusable affairs. We brand people are far too nervous about control to nurture communities well. Some good lessons come from urban planners. They have learned that tightly controlled or barren spaces actually attract ‘undesirables’ (drug addicts, homeless, vagrants, skateboarders) because they cannot be customized by the community. Thus, when Bryant Park was designed, over 1000 lightweight chairs were included, which were intended to be moved by park visitors. The park continues to be a safe and vibrant space.

There aren’t any definitive answers for brands with online communities, as the models are fast evolving. Sites like craigslist.org, FlyerTalk and TivoCommunity have created strong communities of interest, but they are not fully evolved social networks. Many social networks, like Facebook and MySpace are less efficient as brand havens (with the notable exception of the success of independent music on MySpace). Private label sites like NING allow brand marketers to create gated or single-interest communities, but are still in early stages of development.

The Church of the Consumer described an interesting framework (crediting Ray Bard for the visual reproduced above) for thinking about different types of online communities, or different stages in the development of an online community. Cliques are small, exclusive and anti-establishment. Networks are large and intended to facilitate introductions or the spread of information. Cults have rituals, belief systems and charismatic leaders. Finally, Nations are egalitarian, sovereign and committed to an all-consuming cause.

This leaves open the question of how a brand can create an online community. For this, I was happy to get a sneak peak at Forrester’s new report on Online Community Best Practices (thanks to Jeremiah Owyang and Tracy Sullivan). Forrester is careful to differentiate the different reasons that brands form online communities into Listening (an online standing focus group), Talking (get across a brand message), Energizing (nurturing brand enthusiasts), Support (allow brand users to support each other) and Embracing (involve brand faithful in developing the brand). The report goes on to describe some of the steps in creating an online community and - importantly - how to deal with different types of online troublemakers. At seventeen pages, it is still a brief summary, but very useful for those considering a plunge into the water.

Issue: Why are retailers suing their customers?
Commentary by: David Vinjamuri

We have been ranting for some time about companies that pursue business strategies that harm the brand. A Wall Street Journal front-page article yesterday highlights another such practice. Companies including The Home Depot, Wal-Mart and Lord & Taylor are hiring law firms to threaten or pursue civil litigation against suspected shoplifters to recover damages. They do this in addition to criminal proceedings.

If handled appropriately, this might not be a foolish practice for the brand. Recovering damages from those who have committed criminal acts against the brand lowers the cost for law-abiding consumers. Unfortunately, like many other practices administered by corporate financial people without any brand oversite, this one casts too wide a net with disastrous results.

In one case cited by the Wall Street Journal, a handyman in Miami named Glenn Rudge was detained at Home Depot after he checked out because a clerk observed a set of $8 drill bits poking from his shirt pocket. He was handcuffed in the store by a guard and the store refused to let him call home and ask his wife to bring the receipt for the drill bits in to the store. He was charged by prosecutors who then dropped the charges when he produced the receipt.

To add insult to injury, a month after the charges had been dropped, Rudge received a letter from the Palmer Reifler law firm demanding $3,000. That sum increased by another $3,000 when he ignored the letter. Mr. Rudge was threatened with a visit from the Sheriff’s office in the second letter. Fortunately, Mr. Rudge was doing handyman work for an attorney who filed suit for him and recovered undisclosed damages from Home Depot.

This example is one of many detailed by The Wall Street Journal and experienced by innocent consumers around the country. Retailers are combating a real problem - the estimated $40 billion annual cost of shrinkage (losses to theft, shoplifting and other consumer fraud) - but doing so in a manner that harms their brands and causes unmeasurable damage to their revenue.

This all stems from a very anti-brand attitude which assumes that consumers are all guilty until proven innocent. The price for this belief is huge reputation damage in word of mouth and negative publicity.

Retailers would be wise to adopt a more customer-friendly attitude towards potential theft. A few thoughts:

1. Approach customers politely - some of them will be innocent.
2. Do not forcibly detain customers - unless unambiguous evidence of a crime exists.
3. Allow customers to explain - accept reasonable explanations even if some may be false
4. Do not sue customers - who have been judged innocent in criminal court.
5. Add common sense to your shrinkage policy - why are customers purchasing hundreds of dollars being detained for $8 items?

It seems unlikely retailers will heed these warnings. In spite of repeated negative publicity, they continue to learn lessons from the music industry - suing their own customers until they have no business left.