marketers of the year

Transcription

A SPECIAL REPORT • OCTOBER 10, 2005
Marketer of the Year 2005
36
CONTENTS
8
4 editor’s note
8 jim stengel
20
At Procter & Gamble, his new focus on consumers has
yielded a fresh twist on brand strategy.
20 jed connelly & jan thompson
Their surehanded focus on the “Shift_” campaign
drives Nissan’s success.
42
26 mike boylson
J.C. Penney’s no-nonsense CMO is remaking an
American retailing icon.
32 barry sternlicht
Meet the man behind Starwood’s hotel empire, who taught rival brands they can be functional AND fabulous.
36 geoffrey frost
Motorola’s hip new phones and design-loving cmo have reinvigorated the venerable tech giant.
42 anne saunders & ken lombard
With a foray into the music biz,
Starbucks is becoming America’s trustworthy deejay.
26
52
Nancy Kaszerman/Zuma Press/Newscom
46 john mackey
Whole Foods is proof that
natural food isn’t just for hippies anymore.
52 scott greenstein
With Stern, Martha and Eminem on board,
Sirius Satellite Radio is beaming brightly.
56 dean harris
Oddball ads and a strong value proposition have made
Vonage the dominant player in an explosive sector.
62 kevin morefield & brian woods
32
www.brandweek.com
62
Their mix of pro sports and
the Stones tour has Ameriquest on a roll.
OCTOBER 10, 2005
m3
EDITOR’S NOTE
a
cross the business landscape, 2005 has been one tough year.
From rising ingredient costs, to a spike in gas prices and the
sudden dislocations to life and commerce wrought by natural—and manmade—disasters, today’s leaders are facing numerous, unexpected challenges. While some marketers might have been caught off guard, the
smartest minds in the business didn’t retreat. They simply
declared, “Game over. It’s time to reinvent the game.”
Take Procter & Gamble, where global
CMO Jim Stengel, took on sagging morale
caused by management overhauls and a
dearth of innovation. He earns Brandweek’s
Grand Marketer of the Year award for helping P&G see its passel of billion-dollar
brands as more than mere products to
brighten teeth, remove stains or keep
babies dry. By realigning the traditional
organization around its consumer needs,
P&G found a way to tell better stories
about its products—and how they fit into
everyday lives. With its $57 billion purchase
of Gillette this year, P&G will add a stable
of men’s grooming brands, securing its
place as the world’s largest maker of consumer products and extending its reach
among more global audiences.
Industry-changing tactics were the key
to winning moments elsewhere too: Star-
wood Hotels & Resorts’
Barry Sternlicht found that
after amassing so many
name-brand properties,
most hotels had overlooked one thing that roadweary travelers crave the
most: a good night’s sleep
on a “heavenly” bed.
J.C. Penney’s Mike Boylson brought
much-needed pizzazz back to the midscale
department store, by honing its selection
of brands and augmenting them with private label exclusives from colorful designers like Nicole Miller and Nick Graham
of Joe Boxer fame. Starbucks’ Anne Saunders and Ken Lombard helped the coffee giant establish a new footprint in the
distribution of music, especially for relatively unknown artists. Now industry
Note of Credit
Editor: Karen Benezra
Executive editor: Barry Janoff
Managing editor: Chuck Stogel
Senior features editor:
Michael Applebaum
News editor:
Todd Wasserman
West Coast bureau chief:
Becky Ebenkamp
Senior editors: Jim Edwards,
Kenneth Hein, Rory J.
Thompson (online)
M4
OCTOBER 10, 2005
Senior reporters:
Production managers:
Mike Beirne (Chicago),
Diane Anderson (San Francisco)
Reporters: Karl Greenberg,
Sandra O'Loughlin, Sonia Reyes
Adeline Cippoletti,
Elise Echevarrieta
Contributing editor:
Assistant production managers:
Salvatore Destro, Noah
Klein, Cindee Weiss
Matthew Grimm
Art director: Amy Camo
Production assistant:
Photo editor:
Production coordinator:
Debbie Cohn-Orbach
Senior researcher: Jim English
Copy editor: Ian Blair
Editorial director: Sid Holt
Publisher: Thomas P. Woerner
Michelle De Roche
watchers predict it will become an even
bigger force in entertainment. Under
Geoffrey Frost, Motorola regained its
cool by hiring a designer from Apple to
create super slick, razor-thin models.
Frost, a one-time Nike marketer,
approached style in cell phones the way
he did in sneakers. Whole Foods’ John
Mackey revisioned the natural foods market from a tight, dimly lit
space to retail theater, while
still adhering to strict ingredient standards.
Nissan’s Jed Connelly
and Jan Thompson, however, stuck to a winning
plan with the carmaker’s
“Shift_” campaign, which
they extended to new nameplates, while elevating Infiniti with elegant luxury models. Said Connelly, echoing a
sentiment expressed widely among this
year’s winners: “If you don’t wake up every
day thinking that you’re behind, you have
a tendency to become complacent.”
Others, like Sirius Satellite Radio’s
Scott Greenstein and Ameriquest Mortgage’s Brian Woods and Kevin Morefield,
grabbed headlines—and headliners like
Howard Stern and the Rolling Stones—
to give their brands the star treatment.
Cool brands have a way of attracting
interest. Perhaps not so coincidentally, some
of our winners already do business with one
another: Sirius radio broadcasts can now be
heard in Starwood’s W Hotels in select
cities. P&G’s Stengel serves on Motorola’s
board of directors. The latter has a hot new
phone with Apple’s iTunes, one of
Brandweek’s previous winners.
Makes you think that even in the
toughest environment for business, great
ideas—and their brand champions —can
win the day.
Eileen Cotto
www.brandweek.com
seizing the
www.brandweek.com
Procter & Gamble 2005
grand marketer
of the year
JIM STENGEL
t
he annals of business are stocked with sto-
ice provider, to the all-access iMac and iPod, the
ries of mighty blue chip firms that somehow
strategic shifts that rallied them back to relevance
lost their way. Think Coca-Cola before Roberto
always start with relocating the pulse of their cus-
Goizueta or IBM before Lou Gerstner, or Apple
tomers. “The consumers told us—loud and clear—
before the second coming of Steve Jobs.
that they are the real owners of this product,”
The story’s always the same. Once-respected
Goizueta once said.
company loses focus and gets lost in a sea of same-
That insight has clearly resonated at Procter &
ness or cultural miasma. Be it an endless cola war
Gamble, which has dramatically reversed its for-
over minor share fluctuations, letting niches erode
tunes of late by adhering to a homegrown mantra:
to nimble upstarts like Dell and Compaq, or shun-
the keys to the marketplace do not reside within
ning the basic consumer-friendly hook that got you
its Ivory towers, but deep in the minds—and
there. But from Goizueta’s “share of stomach,” to
hearts—of the consumers who put P&G’s vast port-
Gerstner’s recasting of IBM as a high-margin serv-
folio of brands to the test every day.
moment of truth
At Procter & Gamble, his new focus on consumers has yielded a fresh twist
on brand strategy and a slew of new initiatives to better compete.
BY TODD WASSERMAN Photograph by Ross Vanpelt
www.brandweek.com
OCTOBER 10, 2005
m9
P&G considers that interaction
between brand and customer in store
aisles and checkouts as the “First
Moment of Truth.” CEO A.G. Lafley has
wheeled the company back around on
that nexus, with Jim Stengel, P&G’s top
marketer, re-igniting the company’s myriad marketing efforts around an almost
monomaniacal focus on the notion: “The
customer is boss.” Stengel insists that his
overseer is not Lafley, but rather some
woman of indeterminate age and ethnicity even now pushing a shopping cart
through a supermarket somewhere.
In talking to Brandweek, Stengel
referred to the boss (as “she”) several
times. “You begin with the understanding of where you fit into her life and
everything goes from there,” he says
when asked about P&G’s new marketing model. “It’s a total part of our culture
that she is boss. It’s a sweeping concept
and one that doesn’t get old.”
t
he customer is king—or queen—as it
were, is hardly a new concept and too
often a hollow catchphrase. But P&G’s
numbers seem to indicate it is more steak
than sizzle in Cincinnati. In its most recent
fiscal year, P&G’s annual sales jumped 10%
to $56.7 billion and earnings rose 12% to
$7.6 billion in a market where raw materials costs climbed higher, private label continued to grow and Wal-Mart, among others, kept demanding lower prices. At the
same time, P&G welcomed its 16th billiondollar brand, Dawn, into the fold. Now
that its $57 billion Gillette deal has closed,
P&G boasts 22 billion-dollar brands.
cast for the second half of 2000 from an
increase of 7-9% to a 10-11% shortfall.
Though P&G attributed the poor performance to a variety of factors, the real
culprits were two major reorganizations
in the ’90s, including one in 1993 in which
P&G closed 30 plants and cut 13,000
positions across the globe, and another
in 1998 that took P&G from four geographically based business units to seven global units based on product lines.
“The company lost control of cash flow
and costs and suffered delays and frustrations in untangling ambiguous and
overlapping responsibilities,” according
to Rising Tide: Lessons from 165 Years of Brand
Building at Procter & Gamble by Davis Dyer,
Frederick Dalzell and Rowena Olegario.
“To reach ambitious revenue targets, managers attempted to sustain high prices in
the face of fierce competition and pushed
new brands into the market before they
were ready,” the authors concluded.
The turmoil prompted then-CEO
Durk Jager to resign. Lafley, his replacement, came in with a manifesto of “10
Things I Believe.” No. 2, behind “Lead
change,” was “The Consumer is Boss.”
Stengel, whose job is to guide P&G’s marketing, seized mainly on that point and
made it his personal crusade.
“I think we lost focus on a lot of important things and the first one was consumers are at the center of what we do and
you’ve got to internalize that,” he said.
Some at the time thought P&G’s problems went deeper than the restructuring.
P&G’s last hit product was Always feminine protection pads in 1983. Meanwhile,
“We probably thought about ourselves too
narrowly. So we thought, what does it mean to
the consumer and what do we mean?”
Matt Barresi, P&G Oral Care
By adding Gillette’s male-skewing
brands to its portfolio, P&G has solidified its ranking as the world’s No. 1 maker of consumer packaged goods, further
extending its global reach. That’s a far cry
from five years ago, when P&G promoted Stengel to global CMO. The company had lost 10% market share in the ’90s
and by early 2000, its reputation for innovation was highly suspect. Most new
ideas were coming from hungrier rivals.
Rumors of a merger with Warner-Lambert and American Home Products
prompted a 15% drop in its stock price
and then P&G revised its earnings forem10
OCTOBER 10, 2005
big brands like Tide and Crest were losing market share. “I think we got a little
bit enamored of new business opportunities at the expense of our big brands,”
Stengel said.
A good illustration of the problem was
the rise, fall and rise of Crest. After its halcyon days as the leader in fluoridated
toothpaste and its Norman Rockwelldrawn “Look ma, no cavities!” ads,
Crest’s market share plunged from 42%
to 28% between 1979 and 1985. P&G
fought back and Crest gained a 40%
share with a Tartar Control Crest formula, but that was a last hurrah as nimbler
Good clean fun: Sniff-happy kid samples
Febreze-scented boxers in recent ad, while
ads for Crest lampoon presidential elections.
competitors and specialty brands battered it with a flurry of innovations for
the category. In 1988, Church & Dwight
rolled out Arm & Hammer baking soda
toothpaste and quickly grabbed 10% of the
market. P&G resisted launching its own
baking soda toothpaste until eight years
later and also balked at another trend:
using peroxide as a whitening ingredient.
One small company, Den-Mat, claimed
success with Rembrandt, a toothpaste
positioned as a whitener (since bought by
Gillette). In 1993, Unilever rolled out Mentadent, a combo baking soda/peroxide
toothpaste in a pump.
Even when it tried to stir the pot, P&G
floundered, as with Crest Gum Care, which
tasted bad, stained teeth and attracted few
users. Colgate’s big splash with Total toothpaste—an antibacterial triple threat that
fought gingivitis, plaque and cavities—
backed by a $100 million media blitz, finally vaulted that company to category leader,
with the newcomer grabbing Colgate a
29% share of the market versus 26% for
Crest, the first time P&G lost its No. 1 status since the Kennedy Administration.
To save Crest, P&G had to start looking at the brand differently, as it began
doing across its portfolio. Pampers would
no longer stand simply for diapers, but
baby care. Tide was not just a detergent
but an expert in fabric care. Crest had to
become more than cavity prevention, but
in fact, make consumers feel good about
(Continued on page M14)
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(Continued from page M10)
their teeth. The new flexibility allowed
P&G to release several new products
under the brand’s umbrella. Crest
Whitestrips, a home whitening kit that
bowed in 2000 and was followed by
SpinBrush, a $5 electric toothbrush. (As
part of the Gillette deal, P&G agreed to
sell Rembrandt, but will keep Oral-B;
SpinBrush was sold to C&D last month.)
P&G would not stop there. Looking
at the explosion of flavors and fragrances
taking root in candy and gum aisles, it
saw an opportunity to give Crest extra
freshness. Crest Whitening Expressions
toothpaste boasts eight SKUs in four flavors—Vanilla Mint, Cinnamon Rush,
Extreme Herbal Mint and Fresh Citrus
Breeze—in two formulations. The fastgrowing line had sales of $71.2 million for
the year ended Sept. 24, up 24.3%, per
IRI. Crest also rolled out a mouthwash
and dental floss this year. As a result,
although Colgate continues to sell more
toothpaste, Crest leads the oral care category, an example of changing the game
when the old one hit an impasse. (Colgate’s new enamel-strengthening Luminous entry bowing this month is likely
to solidify its 34.6% share lead in toothpaste vs. Crest’s 31.7% share.)
i
t was about stepping back and putting
the consumer at the center,” said Matt
Barresi, associate director of marketing for P&G Oral Care. “We probably
thought about ourselves too narrowly. So
we thought, what does it mean to the consumer and what do we mean?”
Stengel pushed for innovative solutions,
greenlighting the extensions plus new ways
to talk about them with the company’s first
foray into product placement on NBC’s The
Apprentice. Later, P&G brought consumers
directly into its brand development
process by staging a contest to help
name one of its new Whitening
Expressions’ SKUs; Lemon Ice
was the ultimate winner in ads from
Saatchi & Saatchi, New York, that
spoofed election year punditry
with man-on-the-street interviews
and fake newscasts.
That push for smart innovation was
writ large across all of P&G’s big brands.
Febreze would reinvent the market for
hard-to-stamp-out odors with a spray
pump liquid that could be used directly on
fabrics, rugs and furniture. Though P&G’s
huge franchises long stood on their own,
Stengel encouraged meaningful combinations like Tide with a Touch of Downy
and Tide with Febreze last year, among
other branded duos and line extensions
m14
OCTOBER 10, 2005
(see related story, this page). Mining the
humorous side of everyday household
tasks, P&G recently advertised three of its
Febreze-tinged products with a TV ad via
Grey, New York, where a kid taken with
the fresh scent can’t help but sniff everything from the couch to boxer shorts.
a
lmost as important as raising the
profile of its core brand franchises,
Stengel saw a bigger challenge that
needed mending: morale among P&G
marketers had plummeted and layoffweary managers were afraid to take risks.
“Five years ago, our heads were not up,”
Stengel said. “And you can’t just go to
people and say ‘Feel better.’ There has
to be a confidence in the company, a confidence in the leadership, winning—we
have to see results—and they also have
to feel like they’re working to their potential, that they’re being challenged.”
Stengel decided to tackle the morale
problem like any good marketer would:
with research. He e-mailed questionnaires
to 3,500 P&Ger’s asking how they felt
about their marketing jobs. Stengel also
recruited two University of Cincinnati
professors, Chris Allen and Andrea Dixon,
to interview respondents and shadow 10
marketers each for a full day. Some
employees vented about P&G’s training
A New Concept: Borrowing Success
Certs has Retsyn. Intel has Inside. Chevrolet has OnStar. They’re all examples of ingredient branding, a practice that has spread widely over the last few years—everywhere
except for Procter & Gamble.
That is, until a year ago, when the company introduced Tide with a Touch of Downy.
P&G archivist Ed Rider said it marked the first product that sported more than one P&G
brand on the label, unless you count the ill-fated Pringles potato crisps with Olestra in the
early ’90s. “It’s a very recent thing,” Rider said, adding that the company had previously
run cross-promotions for related products like Duncan Hines and Crisco around the holidays and co-branded a Duncan Hines cake with Hershey’s chocolate bits. But ingredient
branding with two P&G brands wasn’t encouraged under the go-it-alone policies of prior
regimes, where the brand management process was more siloed.
No more. Under Jim Stengel, P&G is looking for growth in new and unlikely places. This
year, the company took the co-branding concept further with three products—Tide with
Febreze Freshness liquid laundry detergent, Downy with Febreze Fresh Scent liquid fabric softener and Bounce with Febreze Fresh Scent dryer sheets. A Tide rep said the company was encouraged by the success of Tide with a Touch of Downy. (Information Resources
Inc., did not break out sales for that product.) P&G also rolled out Crest Plus Scope, combining two brands in oral care.
While some branding gurus applauded the move, David Aaker, vice chairman of brand
consultancy Prophet in San Francisco, was ambivalent. “There are a lot of tradeoffs,” he
said. “When you put Febreze on a lot of
Out, damn spot: Tide plays to the needs of
things it becomes less dramatic for Tide, but
messy people with a portable stain remover.
on the other hand, it helps Febreze.”
Al Ries, chairman of Ries & Ries, Atlanta,
suspected P&G had an ulterior motive for
the move. “It’s going to force competitors
off the shelf,” he said, adding that store managers will find that “products with teenytiny market shares have devoted followings,” making it more difficult to remove
slow-selling extensions.
Speaking of extensions, P&G has also grown brand share by stretching usage occasions
for its products. That was the thinking in July behind Tide to Go, the brand’s first stain-removal
pen that sells for $2.99, or $6.99 in a three-pack. The product was designed to clean up food
and drink stains quickly, without water. For home use, there’s Tide StainBrush, a battery-powered device launched last year that loosens stains before washing. Then there’s Mr. Clean
Auto Dry, a car-cleaning product that took the brand out of the kitchen and into the driveway.
The strategy could eventually backfire as consumers get confused by too many extensions and charges of “di-worsification” are leveled for playing in unfamiliar terrain. But for
now, extra flexing seems to be working at P&G.
www.brandweek.com
regimen: “There’s a lot about process and
terminology that’s unique to P&G that
nobody tells you upfront,” said a woman
with an MBA from an elite institution,
who was quoted in an article by Stengel,
Allen and Dixon in the Harvard Business
Review. “I turned to my [brand manager]
for help and was told, ‘That stuff is mundane; you have to figure it out.’”
Stengel resolved to address those
issues via Marketing University, a weeklong intensive program that goes over
such gaps. All marketers are “strongly
encouraged” to attend Marketing U., but
it’s not mandatory. The program centers
on such things as strategy development,
consumer understanding and target definition. Barresi said one other benefit of
Marketing U. is that you get to meet
Proctoids from all over the world. “I can
find out what we’re doing wrong in fabric care in Central Europe and apply it
to oral care here,” he said.
More than minutiae, respondents also
lamented that marketing was devalued as
a profession and not considered as prestigious a job at P&G as general management. And because of a long-standing
practice of promoting capable marketers
within two years or so, they left half-finished projects in their wake to be cleaned
up by someone else. Stengel extended
that period to three or four years. And
to underscore how crucial the marketing
function was to P&G’s success, he resurrected the company’s Harley Procter program, in which hot-shots were dubbed
“Harley Procter marketers” and given
more responsibilities.
strength of our marketing.”
The 50-year-old Stengel, per colleagues, takes the stress pretty well. Those
who work with him say he’s rarely rattled and is energetic, often visiting stores
and interviewing customers when he’s on
the road. “No matter how difficult the situation, no matter how tense, I’ve never
seen him get flustered or lose confidence,” said Wehling. According to
friends, Stengel has been juggling several roles successfully throughout his life.
Growing up in Lancaster, Pa., Stengel was captain of the high school football team, served on the student council,
took part in school plays and earned
good grades—preparation, it seems, for
the overscheduled lives he’d eventually
try to ease with P&G products. Childhood friend Mark Diehl, now an executive at footwear company Dansko, notes
that Stengel had a wild streak too. “I
remember there was a Halloween skit
that we did very spur-of-the-moment at
a high school dance,” Diehl said. “We carried him in a coffin and he jumped out
on stage with a guitar and devil ears.”
Perhaps more revealing, Diehl remembers working with Stengel one summer
paving asphalt in the heat. When a
woman offered them iced tea, Stengel
paused to ask, “‘What kind is it?’” eager
to discover its brand name.
Stengel joined P&G in 1983 on the
Duncan Hines team and after working
his way up the ladder at Jif and on
Olestra, became a general manager for
P&G Europe in the Czech Republic. By
2000, Stengel was vp-global baby care
“We wanted to send a signal to the advertising
and creative industry that we’re ready, we’re ready
to change to be a better client.” Stengel, on Cannes 2003
s
tengel, by most accounts, actually
has a harder job than most CMOs.
At P&G, the global marketing officer has no control of the budgets of individual brands. “It’s a tough job because
you don’t have a great deal of authority,
so you have to convince based on the
facts,” said Bob Wehling, Stengel’s predecessor, who is now retired. Meanwhile,
the CMO is responsible for all of P&G’s
marketing. “I don’t run a business,” said
Stengel. “I’m not running Pampers or
Tide or anything, but I am accountable
to the company for the quality, health and
m16
OCTOBER 10, 2005
and was promoted to his current role the
following year.
Under Stengel, P&G has loosened up.
Industry watchers applaud the new sense
of flexibility and say the company is more
open to looking outside its walls for new
ideas. By taking 30 P&Gers with him to
the Cannes advertising festival in 2003,
Stengel sent a message that the household products giant prized award-winning ad efforts and was not as insular as
once thought. “We wanted to send a signal to the advertising and creative industry that we’re ready, we’re ready to change
to be a better client,” Stengel said.
Niel Kreisberg, group evp and executive managing director at Grey, New
York, has worked on P&G’s business for
37 years. Kreisberg said top P&G brass
has always treated its agencies as partners,
but “some were better than others.” Stengel, he said, is the best yet. “He came in
Soaking it up: Line extensions are aimed at
growing established brands, like Bounty.
last week to thank all the people who
work for me for giving them such a great
year with a handshake,” he said. “It’s that
kind of stuff he does so well. Even when
he has to be critical, he’s a gentleman.”
Traditionally, P&G’s huge marketing
budget—it eclipsed $6 billion globally last
year—has given it unusual power on Madison Avenue. P&G notoriously forced
Eurocom to drop one of its biggest clients,
Henkel, after the agency merged with
RSCG in 1987. Likewise, when Ted Bates
Worldwide became part of Saatchi &
Saatchi, a longtime P&G agency, Bates lost
the $100 million Colgate business. So,
many were surprised that P&G kept Grey
on its roster even after the agency was
bought last year by holding company
WPP, whose agencies do work for P&G
archenemy Unilever. “It’s OK with us,”
said Stengel. “We want the top talent.”
David Luhr, COO of Wieden +
Kennedy, Portland, Ore., said he was initially intimidated by P&G’s reputation as
a client. “We were polite, but a little nervous about discussions with P&G just
because of their traditional reputation,”
he said of this past spring’s talks that
brought his agency the Eukenuba pet
food brand and a Canadian project for
Ivory soap. “We discovered a man and a
company that were doing incredibly well
and trying to do things differently.”
Stengel and P&G are open to having
agencies be a big part of the marketing
process, Luhr said. “He wants agencies to
create a holistic view of the brand, to think
and own that brand in a big way. He wants
and expects them to come together on products, distribution points and packaging.”
www.brandweek.com
Likewise, as P&G gears up to integrate
Gillette into its system, it is likely to break
another hide-bound habit. “In the old
days, they would have gone into Gillette
and fired all the ex-P&G people there,”
said a longtime company observer. Now
it is more open to matching up managers
according to business needs.
When it comes to strategy, Stengel’s
priorities are creativity and a strong ROI.
To illustrate, Stengel points to a 2004
program from Israel aimed at increasing
sales of P&G’s Biomat laundry detergent
among Orthodox Jews. With charity a
strong component of the sect’s belief system, P&G encouraged people to bring
in their old clothes, which were washed
by machine in a roving truck (using Biomat, of course) before they were donated to charity. The effort led to a 50% jump
in sales among the desired demo.
But to keep up with changes in the
market, Stengel doesn’t just look for
creative advertising and promotion.
Everything else—the media plan, the
packaging, the retail distribution—must
be creative, too.
A few years ago Stengel declared
P&G’s marketing model was “broken.”
“I think a model that says, ‘We assume
she’s watching television, we assume she’s
paying attention to our ads, we assume
that if we do the same thing we’ve been
doing for 20 years, it will work,” he said.
That model is gone forever.
To that end, P&G took the broadcast
community by surprise earlier this year by
pulling back 25% of its cable TV spend-
“The shift is very real.
P&G will spend media
dollars where there is
demonstrable ROI.”
Ken Harris, Cannondale
ing and cutting broadcast media by 5%.
“The shift’s very real,” said Ken Harris,
founding partner of Cannondale Associates, Evanston, Ill. “P&G’s been very clear
about its desire to spend media dollars
where there’s demonstrable ROI.”
At retail, P&G has installed a new
director of that “First Moment of Truth,”
who is charged with producing more eyecatching store displays. In the U.K., some
P&G retailers put their bathroom doors
high up so parents can imagine the world
from a child’s point of view. Other new
areas include online and Tremor, a wordof-mouth program targeting gregarious
“connectors” that has been expanded
from teens to moms.
a
ll that activity—the new products,
the expansion of marketing
beyond the 30-second TV spot, the
recharging of the marketing staff—have
contributed to P&G’s comeback. But the
underlying reason may be less a reflection
of Lafley’s 10 commandments than with
the source of the original 10, particularly this line from Proverbs: “When pride
comes, then comes disgrace, but with
humility comes wisdom.”
For his part, Stengel didn’t bristle at
the “h” word.
“We’ve never been complacent, but we
look outside a bit more,” he said. “We
always have a lot to learn. We’re always
restless, in a good way.”
B
Past Marketers of the Year • • • • •
2000
2001
2002
2003
2004
• Matt Wisk*
Nokia
• Alan Cohen/
Mike Benson
ABC
• Sue Wellington
Gatorade
• Susan Thompson
Chrysler PT Cruiser
• Jackie Stern
Priceline.com
• Edward G. Razek
Intimate Brands
• Steve Davis
Heineken
• Jim Davis/
Paul Heffernan
New Balance
• Ian Friendly
Yoplait Go-Gurt
• Scott McNealy
Sun Microsystems
• Casey Keller*
• John Hamlin*
• Mark LaNeve*
• Ross Ralenkotter*/
H.J. Heinz
• Chris Albrecht/
Eric Kessler/
Richard Plepler
HBO
• Bob McKnight
Quiksilver
• Dave Larson
Nike
• Peter Waxman/
May Shana’a
Unilever
• Markus Pichler
Red Bull
• Mark Guibert
BlackBerry
• Bob Lachkey
Budweiser
• Chris Carroll/
Bill Schettini
Subway
• Finbar O’Neill
Hyundai
Dell
• Cie Nicholson
PepsiCo
• Jeff Blake/
Geoff Ammer
Sony Pictures
• Reed Krakoff
Coach
• Deb Carosella
ConAgra Foods
• Don Calhoon/
Jack Schuessler
Wendy’s
• Ellis Mass
Listerine Pocket Paks
• Cindy Spodek-Dickey
Microsoft Xbox
• Sergey Brin/
Larry Page
Google
• Jim Press
Toyota
Cadillac
• Gary Briggs
eBay
• Eliot Spitzer
N.Y. attorney general
• Brett Yormark
Nascar
• Jon Jameson
Panera Bread
• Todd Cunningham/
Tina Exarhos/
Brian Graden/
Van Toffler, MTV
• Dr. Robert Atkins
Atkins Nutritionals
• Carrie Eiting
Expedia
• Jochen Zeitz
Puma
• David Pyott/
Lester Kaplan
Allergan’s Botox
Billy Vassiliadis*
Las Vegas Convention
& Visitors Authority
•Larry Light, McDonald’s
• Julie Roehm
Chrysler Hemi
• Robert Siegel, Lacoste
• Mel Gibson/
Michael Moore
The Passion of the Christ/
Fahrenheit 9/11
• Steve Jobs, Apple iPod
• Tom Wilson/
Craig Turnbull
Detroit Pistons
• Rick Lenny
Hershey Foods
• Doug Levine/
Linda Palczuk/
Suzanne Delaney
AstraZeneca’s
Nexium/Prilosec
• Mark Burnett
Reality TV producer
* Grand Marketer of the Year
m18
OCTOBER 10, 2005
www.brandweek.com
‘shift’ing in
Thompson (l) and Connelly (r)
BY KARL GREENBERG Photography by Tom Alleman
m20
OCTOBER 10, 2005
www.brandweek.com
Nissan 2005
JED CONNELLY &
JAN THOMPSON
t
he more successful a tagline becomes, the
“shift” their views on what they wanted not
more it takes on shades of new meaning.
only from their cars, but also their lives.
In 1998, Apple urged computer users to “Think
The campaign supported a product renais-
Different,” but it was Apple who later learned
sance led by CEO Carlos Ghosn. From the well-
to heed its own advice. In 2003, Burger King
muscled Altima sedan to the upstart Titan pick-
brought back its iconic 1970s refrain “Have It
up and a raft of rugged SUVs, the Japanese
Your Way” to show it could market itself in
automaker shed its status as an also-ran to Toy-
more creative ways than simply offering cus-
ota to carve out a distinctive brand of its own:
tomers a choice of pickles or bun.
athletic, stylish, performance-oriented. Now,
to higher gear
Gaining U.S. market share by expanding its “Shift_” campaign and adding luster
to its Infiniti brand, Nissan is proving the value of the moves you don’t make.
While Nissan has achieved tremendous suc-
however, Nissan must confront its own lofty
cess operating under its “Shift_” campaign,
ideal. Will it abandon its messaging and “shift”
the tagline has not yet risen to a higher level
strategy to keep pace in the fickle and over-
of consumer consciousness. Launched in 2002,
heated auto market?
its DIY “Shift_” ads allowed Nissan to fill in
So far, the answer is no. In the last 12 months,
the blank with words such as “perception” or
Nissan marketers have kept a steady hand on
“expectations,” and to cajole consumers to
the wheel as the company racked up higher sales
www.brandweek.com
OCTOBER 10, 2005
m21
Nissan 2005
and market share, embracing the
“Shift_” campaign and expanding the
core strategy while elevating sister brand
Infiniti to a higher luxury position.
Nissan’s mantra? Shift, but don’t
change course.
“They have kept the message extremely simple with ‘Shift_’, [expanding] it
into every new model launch,” said Todd
Turner, an analyst with Car Concepts,
Thousand Oaks, Calif. “That has been
very successful in building the brand.”
As it continues to maneuver through
its turnaround—Nissan’s sales hit the 1
million vehicle milestone in the U.S. during the last fiscal year—credit for such deft
handling of the corners goes to our Marketers of the Year: Nissan veteran Jed Connelly, svp-sales and marketing, and Jan
Thompson, vp-marketing.
Connelly, 60, has seen Nissan through
its darkest days, including its escape from
bankruptcy in 2002. He joined the company in 1989 as a direct marketing manager at Infiniti, and returned in the late
’90s after a stint working with Mitsubishi.
Thousand points of light: In ads for M, Infiniti
uses the Japanese art of brushstroke calligraphy.
Despite Nissan’s newfound success,
Connelly continues to strive for a higher
gear. “The balance between success and
failure is very fine,” he warned. “If you
don’t wake up every day thinking that
you’re behind, you have a tendency to get
complacent.”
There’s no evidence of complacency so
far. Since 2002, Nissan has executed a series
of stellar product launches that boosted
sales 40% through the period, while its
overall market share continued to climb.
Although it ranks third among the “Big
Three” Japanese car makers in terms of
m22
OCTOBER 10, 2005
U.S. market share, Nissan is on the move.
It grew its share from 5.7% to 6.3% through
August, per Ward’s Automotive Report, and
is steadily gaining on Honda. Toyota leads
that group with a 13% U.S. share, per
Ward’s, followed by Honda at 8.4%.
In 2005, despite rising fuel prices and
aggressive employee discounts from
rivals in Detroit, Nissan managed to post
a hefty 14.8% increase in overall vehicle
sales through August, the biggest gain
of any automaker in the U.S. market.
A key juncture came in June 2004,
when Connelly hired Thompson to
replace vp-marketing Steve Wilhite, the
former VW wunderkind and now Nissan’s
global marketing director at its Tokyo
headquarters. Thompson, 55, is a golf
industry veteran who previously headed
up Nissan’s direct marketing agency, The
Designory, Los Angeles. “She knew
where we were and she looked in from the
outside, so she could be a lot more objective,” said Connelly.
Wilhite, meanwhile, lauds Connelly for
championing his efforts during his own
two-and a-half-year tenure in the vp post.
“He’s really focused on making sure
there’s strategic alignment and good collaboration in the organization,” said Wilhite. “Although he didn’t drive the adoption of ‘Shift_’ or its actual execution,
he provided the forum and the environment for us to do the work. He got the
support we needed from employees and
from the people in Japan.”
As for his successor, Wilhite said
Thompson’s experience outside the
industry helps her avoid the “myopia”
that often plagues lifelong auto execs.
Thompson began her career in 1972 as
one of the first women to join Chrysler’s
management training program, and later rose to national marketing director for
Lexus. In the ’90s, she spent five years
overseeing interactive programs at Callaway Golf. “She has a much broader
grasp of brand building,” said Wilhite.
In one of her early strategic moves last
fall, Thompson unveiled Nissan’s first
multiple-vehicle “family” ad push. The
2005 Pathfinder, Xterra and new full-sized
Armada SUV were grouped together
under the “Shift_” banner with the
extended tagline, “A shift has been made.”
Similarly, the Frontier mid-size pickup
was placed into ads with the full-size
Titan, arguably creating a strong halo
around the younger brand.
“The campaign told people that if they
hadn’t thought of Nissan as a full-line
automaker, we’ve expanded our portfolio,”
said Fred Suckow, director of marketing
at Nissan division, Gardena, Calif.
Supplemental campaigns included
TV/print ads for Pathfinder that wrapped
an active lifestyle theme around the concept of “Tell better stories.” A Web site
prompted consumers to share their stories relating to driving the vehicle, and
garnered 70,000 entries, according to
“For every dollar we
spend on paid search,
we get a $36 dollar
return. Who’s going to
argue with that?”
Jan Thompson, Nissan
Suckow. “The underlying principle was
self-expression and adventure,” he said.
The Xterra campaign, meanwhile, targeted an active lifestyle demographic
with teaser ads showing surfboards, ski
poles and bicycle chains crossed to form
an “X.” The ads directed consumers to
www.newX.com, where they could enter
the Xterra Schooled sweepstakes with
prizes such as trips to a kayak, surfing or
snowboarding school. Nissan didn’t just
pepper the Web with banners. More typical were efforts targeted at enthusiasts,
such as sponsoring real-time footage of
surf conditions at popular spots on the
site surfline.com
Its efforts in the truck/SUV category
are paying off. Nissan/Infinity truck sales
were up 55% last year, despite rising gas
prices and aggressive competition from
Toyota and Honda. The online efforts
were typical of automakers’ recent push
away from traditional media, though Nissan hasn’t exactly weaned itself from the
medium yet: Its $4.8 million online spending figure, per TNS Media Intelligence,
was a small fraction of its total $910 million outlay in 2004, a 15% increase over the
previous year, per TNS.
Thompson sees the Internet as a gold
mine for reserarch and demonstrating
return on investment. “We know today—
and we didn’t know this three years ago—
that for every dollar we spend in paid
search, we get a $36 return on investment,” said Thompson. “If any particular key word or site isn’t working, we can
change it immediately . . . Who’s going
to argue with that? Finance loves it. Purchasing loves it. It’s all measurable.”
www.brandweek.com
Nissan 2005
t
he centerpiece of Nissan’s marketing
in 2005 revolved around the February launch of the redesigned Infiniti
M sedan, a $40,000-plus nameplate that
aims to compete in the luxury sector with
the likes of Mercedes and BMW.
It’s gotten off to an excellent start. Nissan sold nearly 15,000 of the vehicles
through August—a mere 2,090 units
were delivered last year—putting the
company within reach of its year-end
goal of 25,900. That would place it well
behind No. 1 BMW 5-series and Mercedes E-class, but ahead of Lexus GS,
Audi A6 and Cadillac STS.
The M35/45 is one of the final
pieces in Infiniti’s overhaul of its vehicle portfolio, which also includes the
successful FX SUV and G35 sports
coupe. Connelly, who like former Callaway exec Thompson, sees life in golf,
observed, “It’s like what they said
about Phil Mickelson: You win one
major, you’re in the record books;
when you win two, you’re in the history books. Once you develop three successive model launches that all compete
very well in [the] tier-one luxury segment,
you’re no longer a newcomer. You’ve started to establish yourself as a solid player.”
Nissan broke new ground on M in terms
of both its design and marketing. Execs at
TBWA\Chiat\Day, Playa del Rey, Calif.,
which had created the “Shift_” mantra,
dispensed with the usual templates for touting luxe cars—villas, rain-slicked roads, smiling 30-somethings driving to the yacht
slip—and looked outside the realm of cars
for inspiration.
“Luxury brands operate differently;
luxury doesn’t mean add some leather,
some auto lipstick and we’ll charge more,”
said Rob Schwartz, executive creative
iconography, whose guideposts would
help market the new M to consumers in
the 40-50 age bracket with incomes above
$175,000. Thompson, however, was quick
to send the agency back to the drawing
board upon seeing the first effort.
The campaign the agency offered a
theme of “harmony” that, Schwartz admitted, was too close to Lexus’ positioning via
Titanic might: Nissan battled Detroit’s Big
Three in pickups with Titan, then Frontier.
“Art of Perfection.” When Thompson
“blew it up,” as Schwartz put it, she forced
the agency to go back to what they had
learned about luxury.
“We weren’t happy with it, so we sent
everyone back down to our design studio
[Nissan Design America, La Jolla,
Calif.],” said Thompson. “The vehicle
exuded vibrant design, and when we
found out that Infiniti [designers had
begun with] a gesture for each vehicle, we
were enraptured with that.”
The agency returned to the source of
that “gesture”—Japanese shodo, or brushstroke calligraphy—and unveiled a series
The M broke new ground in luxury car advertising.
“Everybody knows an Infiniti goes fast. We said,
‘Let’s treat the car like a Cartier watch.’”
Rob Schwartz, TBWA\Chiat\Day
director at the agency. “Everyone knows an
Infiniti car can go fast. Our approach was,
‘Let’s treat the car like a Cartier watch.’”
The car’s designers looked to musical
instruments for their cues. Ultimately, a
piano console inspired the car’s beveled
dash, and a violin led to the interplay of
steel and wood in the car’s interior.
At the time of Thompson’s arrival, the
agency was finishing a study of luxury
24
OCTOBER 10, 2005
of short TV launch ads for M, shot using
amber rays of light to reflect the designers’ use of simple lines. Opalescent light
outlining the vehicle, speakers, instrument cluster or the dashboard became
the “glue” for the campaign, said M model manager James Detrude. “It opened up
all sorts of possibilities,” he said.
Ad inserts ran the following months
in Car and Driver, Forbes, Fortune and Wine
Spectator, with a wall-of-words approach
that echoed a former effort on Altima.
Sample: “Take everything you know
about design and nudge it. Push it. Simplify it. Modernize it. Liberate it.” Guerrilla stunts followed with light projections
with on buildings in Detroit, New York,
Los Angeles and Chicago.
“Since we launched the ads, we are [at
an] in all-time high for purchase intent
for the Infiniti brand,” said Thompson.
Infiniti expanded the M’s shodo
theme in a brand campaign that
bowed last month. TV spots featured
an artist who mixes red paint from
powder and uses a large brush to “perform” a single meditative stroke in profiling a car. The stroke is hoisted on a
white canvas as silks fall around an
Infiniti. In one ad for the G35 sedan,
the car is shown sliding through a veil
of water as the voiceover intones,
“Behold, the shape of performance.”
w
hile Thompson implemented the campaign strategy, Connelly kept a steady
hand on the tiller, said others within the
Nissan distribution chain. Dealers, for
one, said Connelly manages without
being heavy handed and aims to build
strong team spirit.
Charlie Hicks, a Nissan dealer in Corpus Christi, Texas, lauds Connelly as a
bridge between dealers and company
honchos. “Of all the executives of different brands I’ve dealt with, Jed has been
the steadiest dealer advocate I’ve known,”
said Hicks. “He doesn’t force factory
issues on dealers; he presents them in a
way that you feel there’s compromise.”
In 2004, when Nissan was prepping
Titan as its first full sized pickup, there
was a problem: Dealerships and service
areas weren’t built to handle it. Connelly recognized that this was an opportunity to go further than just Titan readiness programs by upgrading facilities
and signage that hadn’t been revamped
in 20 years.
“We had the oldest dealerships in the
country,” said Connelly, who folded the
operational readiness program into a
dealership upgrade called “N Ready.”
Nissan is currently midway through the
upgrade, with a quarter of its 1,050 dealerships completing the project.
“I don’t think I could overstate how
much of an impact Jed has had at Nissan,” said Wilhite. “He has been the primary disciple of Ghosn’s belief in transparency and having a global view.”
And in knowing whether to shift, or
stay on track.
B
www.brandweek.com
JC Penney 2005
MIKE BOYLSON
penney ante:
fashion mee
What’s ‘inside’ the revival of J.C. Penney? Better-looking stores, a thriving
private label business, crafty image building and a no-nonsense CMO.
i
t’s another blustery day this past February, and
One might not expect a J.C. Penney marketer
J.C. Penney’s evp/CMO Michael Boylson is
to have much to say on the subject of technolo-
addressing a group of fellow marketers and agency
gy, fashion or branding. But this is not the vanilla
executives at the annual Retail Advertising Con-
J.C. Penney we grew up with, or the humble Mid-
ference in Chicago. Boylson is speaking intently
western retailer our kids may know.
about his company of 26 years, highlighting his
A staple of the American department store land-
plans to make J.C. Penney’s Internet operation a
scape for more than 100 years, J.C. Penney is where
key facet of its image rebuilding process.
shoppers went for value packs of Hanes underwear
A week later, Boylson is working a room packed
or a pair of sensible shoes. For those bargain
with New York’s glitterati at the Four Seasons
hunters, J.C. Penney’s “brand” was of lesser concern
restaurant. He is using the fashion show portion
than the price shoutouts on its Sunday circulars.
of the evening to unveil J.C. Penney’s nicole by
Today, consumers who are not yet sold on the
Nicole Miller designer collection and six saucy
“new” and more fashionable J.C. Penney may step
new TV spots that aired on Feb. 27 during the
onto its floors to find an inviting selection of mer-
Academy Awards telecast.
chandise and a well-edited assortment of clothing
M26
OCTOBER 10, 2005
www.brandweek.com
ts value
BY SANDRA
O’LOUGHLIN
byName
Linda Lux
BY WRITER’S
NAME Photograph
Photgraph by
Here
www.brandweek.com
OCTOBER 10, 2005
M27
JC Penney 2005
In Penney’s Private Label, Far From Alone
that promises both style and value. There
are still good deals on Dockers and
BVDs, but young women in particular are
more likely to be drawn to that animal
print halter top from the flirty Bisou
Bisou collection, slim-fitting Mixit velvet
jacket or a pair of trendy Arizona jeans.
As J.C. Penney continues to sell
America on its hip new look, it has
racked up consistent mid-single-digit
sales increases at its department stores
in an age when growth in that channel
is increasingly difficult to come by.
Comparable store sales for the year ending Jan. 29, 2005, increased 5% over the
previous 12 months on total revenues of
$18.4 billion. The company continued its
momentum with a similar 5.4% overall sales
increase in the second quarter of this year.
Much like Target did
for big-box retailers in
the ’90s, J.C. Penney is
propping up the midscale
department store by
offering affordable luxury to younger, style-conscious customers. In contrast to the wave of consolidation that spawned
the Sears/Kmart megamerger and Federated’s recently completed $11.9 billion takeover of May
Department Stores, J.C. Penney’s comeback is arguably a triumph of marketing over the notion that lower prices are
the only answer to Wal-Mart.
“We are a promotional retailer, and
although we like to lessen our dependence
on sales promotion, that is a critical part
of driving store traffic,” cautioned Boylson.
However, he added, “We’re trying to
change the perception of a 103-year-old
brand, which is the most strategic thing.”
When he became CMO in April 2003,
Boylson’s challenge was to transform the
company into a modern retailer that
relied not only on sales and promotion,
but on branding.
With a budget in excess of $1 billion,
Boylson has seamlessly executed a turnaround plan that began in 2000 under
CEO Allen Questrom (who was replaced
in January by Mike Ullman). Having
watched its stock price plummet below $10
per share that year (it’s now close to $50),
the company centralized operations and
streamlined inventory management, closing more than 100 underperforming
stores, remodeling others and opening 10
new off-mall formats. Last year, it sold off
its Eckerd drugstore chain, using some of
the money to eliminate $1.7 billion of debt.
Meanwhile, J.C. Penney began launching proprietary brands and a new marM28
OCTOBER 10, 2005
Surf’s up at J.C. Penney in November with the rollout of its new private clothing label,
Solitude. Inspired by coastal California living and created in 1998 by surf icon Shaun Tomson with his wife, designer Carla Tomson, Solitude includes shirts, shorts and swimwear
at affordable price points in line with J.C. Penney’s existing collections.
Oxford Apparel Group, a sportswear division of Oxford Industries, acquired Solitude in
August 2005. Oxford also produces and markets Tommy Bahama, Ben Sherman and Oxford
Golf, and holds the exclusive licenses to produce and sell product under the Tommy Hilfiger,
Nautica, Geoffrey Beene, Slates, Dockers and Oscar de la Renta labels. J.C. Penney will be
the exclusive retailer for Solitude, which previously was sold through department stores such
as Saks Fifth Avenue, Barneys, Bloomingdale's, Nordstrom and high-end sporting goods stores
including Galyans and REI. Bruce Willis and Julia Louis-Dreyfus, notably, are fans of the brand.
Tomson and Oxford unveiled the new arrangement at the Magic apparel trade show
in Las Vegas this past August. “I felt there was a gap in the marketplace for 25-45 yearolds who felt young and connected to nature,” said Tomson. “Our concept is easy care
and simple, but also quality."
Solitude will be produced by its existing supplier base, he noted, with the same fabrics and producers. “I think J.C. Penney is at the cutting edge of retailing right now."
Tomson will help promote Solitude during personal appearances, and both he and
his wife have appeared in ads for the brand.
Peace of the action: Coastal California living
Tomson is regarded as one of the most
attire is coming to a J.C. Penney near you.
influential surfers of modern time. A native
of South Africa, he captured the World
Championship on the International Professional Surfing Tour in 1977 and spent 14
years on the World Tour, including a recordsetting six-year winning streak.
—S.O.
keting platform with the now-familiar
tagline (cue lilting music): “It’s all inside.”
In 2004, Boylson, 50, helped record
a breakout year with J.C. Penney’s fourth
consecutive annual earnings increase—a
satisfying result for the career Penney
exec, who joined the company in 1978 as
a selling specialist in its Niles, Ill., store.
“When I came into marketing, I found
that knowing every other area of the company so well made it very easy to connect the dots,” said Boylson.
Those who’ve worked with Boylson
agree that his experience at the store level has proven invaluable in his latest role.
“Because he has such a deep legacy
with the organization, he has seen a lot of
ideas over the years and has a pretty strong
sensitivity as to what he thinks will work
and what won’t,” said David Polston, svp
at J.C. Penney agency DDB, Chicago.
“Once he buys into an idea, he becomes
a tremendous advocate for the organization in helping to sell it across the
entire franchise.”
Mark Mears, a former director of sales
planning and promotions at J.C. Penney
and now CMO at Blimpie, concurred.
“Mike’s forte is that he understands
merchandise and the J.C. Penney system,
so he is better able to coordinate the marketing efforts to maximize the return on
investments,” said Mears. For example, he
credits Boylson with helping J.C. Penney
reap its fair share of co-op dollars from marketing partners for its weekly circulars.
Boylson’s hard work enables him to
project a no-nonsense image that suits
J.C. Penney perfectly, added Mears.
“He’s a roll-up-your-sleeves, get the job
done, substance more than style kind of
guy,” he said. “In J.C. Penney’s culture,
that is what was needed, which is why he’s
been so popular and effective.”
Central to J.C. Penney’s renewed vitality is the growth of its private label business, which accounts for 40% of total
“Mike’s a roll-up-yoursleeves kind of guy. In
J.C. Penney’s culture,
that’s what was needed.”
Mark Mears, Blimpie
sales. Its stable of apparel private brands
includes the billion-dollar Arizona jeans collection, Stafford tailored clothing line, Delicates intimate apparel, Worthington career
wear and St. Johns Bay sportswear, as well
as the Chris Madden and Colin Cowie
home collections. Access to such affordable
products means more middle-class shoppers are trading up at J.C. Penney.
www.brandweek.com
JC Penney 2005
“Regardless of age or income, people
aspire to a better quality of life,” said
Boylson, noting that the average annual
income of J.C. Penney customers is
between $35,000 and $85,000. “We
know that 98% of Americans trade up in
at least one category, and we believe our
further by communicating its multichannel offerings in newer stores with
signs and a customer service area where
shoppers can place catalog orders for
items that are not available. J.C. Penney’s
Internet business, said Boylson, will reach
$1 billion by year’s end.
“J.C. Penney had suffered from ‘this is my mother’s
store,’ but they’re elevating the style of the apparel and increasing the lifestyle presentation.”
Robin Lewis, fashion consultant
private brands deliver [those trade-ups]
at a smart price.”
Industry observers laud his private
label efforts. “J.C. Penney suffers to a certain degree from its past image of ‘this is
my mother’s or grandmother’s store,’” said
Robin Lewis, who runs a fashion consultancy in New York. “But they’re elevating
the style of the apparel and increasing the
lifestyle presentation in the stores.”
J.C. Penney has made additional
inroads with the elusive young male market with Arizona jeans and nick(it), a
British-inspired collection that launched in
March via Nick Graham, the colorful
designer behind the Joe Boxer brand. At
least one analyst believes the hip new duds
will draw some teen customers away from
the likes of Abercrombie & Fitch.
“They’re performing well in youth
apparel,” said Rob Plaza, senior retail analyst for Zacks Investment Research, Chicago. “Getting kids into the store . . . is bringing in apparel that is more fashion-forward
and updated J.C. Penney’s image, especially with a younger consumer who may
have gone into Abercrombie.”
This summer, J.C. Penney united its five
core private apparel brands under a new
marketing umbrella led by vp Laurie Van
Brunt, director of brand development.
Now, instead of having those brands
report to product development, her group
works directly under Boylson at the company’s headquarters in Plano, Texas.
This fall, J.C. Penney will launch its
newest private label collection, Solitude,
developed by former surfing world
champion Shaun Tomson. Solitude will
launch in 90 resort locations this November, followed by a wider rollout next February (see related story, page M28).
Even as J.C. Penney draws more shoppers through its doors, it is banking on
the Internet to keep the brand at their fingertips 24/7. Most retailers today have an
online operation, yet J.C. Penney goes
M30
OCTOBER 10, 2005
f
lash back to the year 2000 and J.C.
Penney’s search for a new marketing
message. “At that time, sales were soft
and the organization had lost its focus
in terms of what the brand stood for,”
said DDB’s Polston. The answer came in
the form of the “Its all inside” tagline,
with TV ads airing for the
first time that year during
the Academy Awards.
The tag works on two
levels, said Polston. One is
to reinforce the idea of J.C.
Penney as a resource with
a wide array of offerings.
“It also draws a connection
between what’s ‘inside’ the
female shopper as an individual and her desire to
create self-expression in
her life,” he said.
New life: Bisou Bisou label
(right) thrives while Penney
dances with back-to-school ad.
During the 2005 Oscar ceremony, energetic spots—set to tunes such as “One Way
or Another” and “What I Like About
You”—featured women going about their
busy days. One ad touted a sweepstakes
with a grand prize of $100,000 and a trip
to the Oscars’ red carpet in 2006. Ads in
fashion magazines, online, direct mail and
newspaper inserts supported, all under the
revised tagline, “For all the sides of you.”
Back-to-school efforts, meanwhile, tar-
geted kids with the theme of “All access.”
The idea was to promote the concept of
having a “backstage pass” to J.C. Penney clothes, dorm décor, smart prices and
events. Dance competitions with an American Idol-style format were held in conjunction with Seventeen and Cosmo Girl in
front of J.C. Penney stores in New York,
Chicago, Los Angeles, Dallas and Miami.
The campaign featured the return of J.C.
Penney’s bobblehead dude from 2004 in
TV ads, store signage, print ads and on
its Web site, jcpallaccess.com.
“J.C. Penney has done a great job refocusing on who its consumer is,” said Allen
Montgomery, vp/gm at Wrangler Specialty Apparel, a division of VF Corp.
“Within the past 18 months, they’ve
[cleaned] up the stores and [made] them
bright, fun places to shop.”
Howard Davidowitz, chairman of a
namesake retail consultancy and investment banking firm in New York, agreed.
“They have reinvented the company,
identified top talent
and started to gain
share back.”
With the FederatedMay merger, he added,
J.C. Penney may pick
up store locations (and
customers) that Federated will divest. In the
coming year, May will
begin phasing out
stores and folding some
of its Marshall Field’s
stores, Filene’s, Hecht’s
and other locations into
the Macy’s or Bloomingdale’s banners.
J.C. Penney’s main
competition is the regional department
store Kohl’s, located mainly in the Midwest. Kohl’s racked up a 13.8% sales
increase last year and is looking to expand
with a similar marketing strategy of airing
ads during the Emmy Awards. “Kohl’s is
half the size dollar-wise and in the number of stores,” noted retail/ fashion consultant Lewis. “In those markets where a
Penney’s is located, Kohl’s is the new exciting kid on the block.”
J.C. Penney, however, is carving out
more convenient locations in strip malls
and lifestyle centers. In Bolger Square,
Independence, Mo., consumers can drive
right up to a storefront, which is located
in a residential area and offers longer
hours and central checkouts.
Customers may still bring their Sunday circulars, but might want to leave
those sweats home and find something a
bit nicer in which to roam the aisles. B
www.brandweek.com
good knight:
awakening an
BY MIKE BEIRNE Photograph by Adam Nadel/AP Photo
M32
OCTOBER 10, 2005
www.brandweek.com
Starwood 2005
BARRY STERNLICHT
t
hanks to Barry Sternlicht, hotel kingpin
est mattress, furniture and food money can buy.
J.W. Marriott Jr. has taken a keen interest
“When people go on the road, they want to
in the threadcounts of cotton bed sheets. Stern-
be productive, they want a good night’s sleep
licht also explains why InterContinental Hotels
and they want to eat well. There wasn’t any
tapped Back Lot Productions, the retail con-
hotel product that was delivering that,” said
sultants behind the Hollywood Video stores, to
Eric Sieb, president the Sieb Organization, a
design its New Age boutique brand, Indigo.
hospitality consulting firm based in Phoenix.
During his 10-year reign as chairman of Star-
“Barry has made being on the road bearable.”
wood Hotels & Resorts, Sternlicht trans-
To say nothing of profitable. Operating
formed a real estate investment company
income from Starwood’s North American
worth less than $10 million into a $15 billion
hotels jumped 49% to $664 million last year,
hotel empire. His two biggest innovations—
with a 12.1% increase in revenue per available
the W boutique hotel chain and Westin Heav-
room among same-store units, versus the 7.8%
enly Bed—revived the hospitality industry by
industry average. If its forecast for 10-12%
establishing the practice of branding ameni-
growth is correct, annual net income in 2005
ties that were once considered mundane.
will increase 39% to $484 million.
In stark contrast to major airlines, today’s
Sternlicht, 44, left the company in May to
hotels address consumer lifestyles and are no
focus on running his real estate investment firm,
longer stuck padding margins with the cheap-
Starwood Capital, and declined to be interviewed
industry
www.brandweek.com
By building the Starwood empire and creating W,
he proved that beds can be brands, and boutique hotels can be functional and fabulous.
OCTOBER 10, 2005
M33
Starwood 2005
for this story (more on that later). His recognition as one of Brandweek’s Marketers of
the Year, it should be noted, does not come
from being first. Choice Hotels installed
Serta Quality Sleepers four years before
Westin Heavenly Bed’s 1999 debut, but
failed to promote the product with distinct
branding. Ian Schrager had been creating
hotels around nightclubs for years with chic
meeting places like Morgans in New York
and Mondrian in Los Angeles.
Yet no other hotelier in recent memory has managed to create the same “wow”
factor for new products and services. Far
from cringing at the fake bathroom countertops or laughing at the immovable art
above the bed, consumers are ordering
W furniture from catalogs and purchasing the Heavenly Bed at Nordstrom.
Even industry rivals tip their hats to
Sternlicht’s accomplishments.
“You really have to give Starwood their
due with what they’ve done with Heavenly Bed,” said Mark Snyder, svp-brand
management at Holiday Inn Hotels and
Resorts. “Remembering when that was
coming out, the category thought they
were nuts. We thought they were nuts. But
[they’ve taken] the basics of a hotel stay
and done them very dramatically.”
Now, the industry is playing catch-up.
Marriott’s new bed, part of a $190 million
upgrade, won’t be completed until next
year; the category leader also is contemplating a boutique brand. Radisson
launched a recent ad blitz touting its new
Sleep Number beds. Crowne Plaza rolled its
Sleep Advantage program complete with
hotel quiet zones, guaranteed wakeup calls,
lavender spray and relaxation CD. Hilton
Hotels is installing Hilton Suite Dreams bedding into its full family of brands. Mid-tier
JMB, Chicago. In 1991, he
founded Starwood Capital
Group, Greenwich, Conn.,
and in 1994, formed Starwood Hotels, White Plains,
N.Y., after acquiring control
of Hotel Investors Trust, a
nearly bankrupt company.
Three years later, he outbid
Hilton to buy ITT Sheraton
for $14.6 billion. Later in
1997, he acquired Westin
Hotels for $1.8 billion.
W stands for ‘wow’: Guests at the W in Sydney can unwind
Early on, Sternlicht disin the hotel’s techno-cool lounge, a hallmark of the W concept.
covered loopholes in the tax
Sternlicht was dubbed petty.
code that enabled Starwood to own and
“There was a lot of turnover, and Barmanage hotels and distribute shareholdry is always the grass-is-greener type of
er dividends without paying taxes. That
guy,” said David Van Kalspeek, vp-sales
practice ended when competitors alertfor MGM Grand, a Sheraton and Stared the Clinton administration and Conwood vet. “There were a lot of times when
gress passed the IRS Restructuring Bill,
he would throw an idea out there and not
which limited the benefits of a pair-shared
understand the impact it had on a comreal estate investment trust (REIT). Starpany this size. He might be having cockwood Hotels converted to a corporate
tails with somebody and then on Montax-paying C corporation in 1999.
day morning, you get a note saying we
Before buying a conversion property,
should be doing [this or that]. Did he
hotel companies typically look at factors
intend for a note to throw the whole
such as room sizes and available space for
organization into a tizzy? No. But those
conferences. Sternlicht tossed those
kinds of things from the chairman do.
requirements aside and bought hotels,
Some people liked it; some people dealt
including the dumpy Doral Inn in midwith it, and some didn’t.”
town Manhattan, based on whether its
Managers knew where their ideas
Lexington Avenue location would make
stood with Sternlicht because he was very
it profitable.
direct, even gruff, said a former Starwood
While young and gifted—he was chairexecutive who wished to remain anonyman of one of the world’s top hotel commous. While his detail-oriented style
panies at age 36—Sternlicht was also
sometimes bordered on interference, the
impetuous and lacked operating experiexec said, ultimately his intent was to
ence. Critics argued that he overpaid for
arrive at the best possible answer.
Sheraton and Westin; analysts said he was
Starwood is now being led by Cocain over his head. They appeared to be right
Cola veteran Steven Heyer, who declined
when Starwood’s stock took a dive in 1999
to allow company executives to be interviewed for this story. Sternlicht had
recruited Heyer to be CEO and, according to one former manager, there are “sensibilities” between the two.
That could mean feud. Sternlicht and
Heyer squared off during a press conference in September 2004, vying to answer
Mark Snyder, Holiday Inn questions first and contradicting each
other. On the surface, perhaps, Heyer,
who last year was passed over for the top
while it wrestled with an $8 billion debt.
job at Coca-Cola, doesn’t want his preNine senior executives left the compadecessor’s accomplishments to overny during 1999 and 2000, and the assimshadow his own vision.
ilation of former competitors Westin and
Or possibly Sternlicht has learned to be
Sheraton was looking like an operations
a better CEO, said former Starwood CMO
nightmare. Sternlicht’s image didn’t fare
Keith Ferrazzi, founder of the Los Angeany better. Stories questioned whether an
les based consultancy Ferrazzi Greenlight.
executive preoccupied with paint schemes
“People have got to give Barry credit for
and carpet patterns was CEO material. In
growing as a leader of that company,” Ferdemoting former CEO and college pal
razzi said. “Maybe he’s being sensitive
Richard Nanula—whom journalists cast
enough to Steve, saying, ‘Hey this is your
as Starwood’s guiding and stable leader—
“When Heavenly Bed was coming out, we thought
they were nuts. But they’ve taken the basics of a
hotel stay and done them very dramatically.”
lodger Choice Hotels, meanwhile, entered
the “lifestyle” boutique sector with Cambria
Suites, and Hyatt intends to convert
AmeriSuites into the stylish Hyatt Place.
t
hat Sternlicht triggered a movement
in hotel branding is especially
impressive given that he is not a formally trained marketer. After earning his
MB A at Harvard Business School (with
a liberal arts degree from Brown University), he began closing real estate deals for
M34
OCTOBER 10, 2005
www.brandweek.com
Starwood 2005
ship, and I don’t want to steal the limelight.’ Barry would be thrilled that this story is being written, but [he wouldn’t want
to] embrace it in a way that would subjugate Steve. Not doing so shows a lot of
maturity in his leadership style.”
The stories of “Barry’s bravado”—which
many say killed his bid to acquire Wyndham Hotels and rubbed subordinates the
wrong way—are repeated more often than
the accounts of Barry, the family man, Barry the diabetes fundraiser and Barry the
practitioner of self-deprecating humor.
“Confidence in some cases can be mistaken for arrogance,” opined consultant
Sieb, “because people are envious about
what he had been able to do.”
i
n the mid ’90s, as consumers were
stuffing their homes with Viking
stoves and affordable luxuries from
Bed, Bath & Beyond, Sternlicht saw a
void in the hotel business: Travelers were
sacrificing their sophisticated lifestyle
upon stepping inside a hotel room. The
glitzy Four Seasons, Ritz-Carlton and St.
Regis were exceptions, but those brands
were too stuffy for a younger generation
of well-heeled travelers and too pricey for
road warriors’ T&E reports.
Around the time of the Westin deal,
Sternlicht was working with architect
David Rockwell on the first W Hotel in
New York. The project was racking up
enormous costs, however, and Sternlicht
decided that using a high-priced architect
wasn’t the way to go.
Instead, he sought out Hilary Billings
during a business trip to Los Angeles.
Billings, then vp-product development at
Pottery Barn, had built the retailer’s catalog business with contemporary and casual merchandise like coir rugs made of
coconut husks and curtains with iron rods
that dressed the home like a private retreat.
As a buyer, Billings had done her share
of traveling, sleeping on 100% cotton
sheets, down comforters and luxury bedding in European hotels. She was all too
disappointed with the U.S lodging experience of a foam pillow, polyester sheets and
a terrible mattress. Though initially she was
not interested in jumping to the hotel category, her interest and Sternlicht’s vision
came together during that first meeting.
“What he was looking for was very
clear,” said Billings, Starwood’s svp-brand
development and design until 1999, when
she left for the dot-com gift company
RedEnvelope. (She’s now a part-time
brand consultant.) “We had a different
emphasis. His was a sort of hip experience
for the hotel customer. Mine was more
focused on the business traveler because
www.brandweek.com
I saw that was where the biggest gap was.”
At the time, boutique hotels delivered
high design to leisure travelers but lacked
the conference rooms, Internet access and
quality business centers that road warriors
found at the Westins, Sheratons, Hiltons,
Hyatts and Marriotts. Sternlicht wanted
to bring back the Algonquin days of the
hotel as a meeting place, and update it
with hip restaurants and clubs so that
locals, too, had a place to hang their hats.
Billings and her creative team of 15
employees worked in San Francisco, insulated from the corporate culture clash in
White Plains between the risk takers of
Starwood and the more conservative Sheraton and Westin hotel veterans. Some carried an asset management approach, but
Sternlicht pushed marketing to the forefront of the organization and plucked
product development from the operations
domain to exist as a marketing function.
Sleep sensation: A Nordstrom event in
New York helps promote the Heavenly Bed.
He tore down geographic divisions of
management and assigned responsibilities by brands. Ferrazzi arrived in 1999,
and hired Scott Williams to lead the creative services unit that served as Starwood’s in-house marketing agency.
In hindsight, it seems incredible that
W was launched with little market analysis or brand position research. Rather, W
was simply put in front of the consumer
so they could respond to it. Some Starwood honchos labeled the project as a
“crazy Barry idea,” but there was no mistaking their boss’ passion for it.
“Barry said to me, 75% of the time a
guest spends in the hotel room is on the
bed,” recalled Billings. “[I figured] if we
can make that experience great, just think
about what it would do for the hotel.
Rather than thinking about the cost, he
was thinking about the experience.”
Still, the new brand had to compete on
cost with Westin and Sheraton. Billings’
team removed the armoire and invested
in a luxury bed, a longer mahogany desk
with a sleek TV, chaise lounges and shelving for the closet. In her biggest stroke
of genius, she recommended replacing the
seemingly bulletproof, floral-colored bed
spread with a linen-colored duvet, cotton
sheets and down pillows.
Operations staff fought against bedding that had to be cleaned frequently, but
Sternlicht loved the idea. He increased the
number and load capacity of hotel laundry machines so the W bed could be
rolled out to all hotels. Billings started
retrofitting Westin beds the following
year, and the all-white Heavenly Bed
quickly became the symbol of the brand.
Sternlicht’s wife, Mimi, came up with
the enigmatic name W, which was meant
to signify witty, warm and wonderful.
Billings said she loved W because it had
a built-in logo. The first W opened to oohs
and aahs in New York in December 1998.
Far from fading, the 19 W Hotels continue to be seen as sophisticated and relevant. The power of minimalist furnishings and a hot nightclub can last only so
long, but W is enduring thanks to promotional events such as W Happenings,
which inject the brand into the local scene
with art previews, celebrity book readings, film screenings, DJ classes and concerts by Moby and the Wallflowers. Signature products such as “Whatever,
Whenever”—the 24-hour room, laundry
and concierge service—are perfect for
guests who want style without sacrificing service. Partnering with Bliss has
made its spa services top-notch.
“It turned out to be a great product
for him, not only for W itself but it also
had spillover effect onto the luster of
Starwood,” said Van Kalspeek.
The buzz spread with minimal traditional marketing. Print ads by DDB
Chicago focused on amenities, followed
by a campaign from Gwhiz Entertainment, New York, to position W as an
experience with the mantra, “There are
hotels you stay in. And one that stays in
you.” A guerrilla stunt featured models
in a mock boxers-versus-briefs boxing
match atop a W in Chicago to promote
specially designed Joe Boxer underwear
for W guests. (RDA, New York, is W’s current agency. Deutsch, New York, handles
Westin and Sheraton.)
As its guest satisfaction ratings soared,
W soon migrated to the rest of the portfolio. Thousands of beds and signature
OCTOBER 10, 2005
M35
Photo shot on location at the W Hotel
moto: razor sh
BY TODD WASSERMAN Photograph by Chris Casaburi
M36
OCTOBER 10, 2005
www.brandweek.com
Motorola 2005
GEOFFREY FROST
d
espite his job, or maybe because of it,
ed. “Maybe I am a little weird, I don’t know,” he said.
Geoffrey Frost isn’t crazy about the word
If that’s so, Motorola CEO Ed Zander may want
“phone.” Motorola’s chief marketing officer pre-
to consider giving teddy bears to the rest of his
fers to use terms like “the device formerly known
staff. Frost, who joined Motorola in 1999, deserves
as the phone,” “ability amplifier” and “intelligence
a good portion of the credit for getting Moto’s
enhancer” to describe the wireless gizmos that do
mojo back. Once known for unfashionable
much more than make and receive voice calls.
phones and clunky advertising, Motorola now has
arp again
He may have a few quirks, but Motorola’s
design-loving CMO has some hot new phones
and a hip new brand image to show for it.
Frost’s penchant for euphemism extends to engi-
probably the hottest phone on the market (Razr),
neers at Motorola, whom he refers to as “people
a deal with Apple’s iTunes and a hipper image
from the future who happen to be here now” and
thanks to its catchy “Moto” ads. One might say
he describes upcoming offshoots from Motoro-
that Frost has done for Motorola what Quentin
la’s Razr and Pebl phones as “genetic mutations.”
Tarantino did for John Travolta with Pulp Fiction.
In short, Frost looks at things a little differently.
Consider the numbers: After steadily losing share
One former colleague—a fan of Frost’s—went so
in the wireless market since 1996, Motorola gained
far as to say that the marketer “cultivates a repu-
3.3 points in its most recent quarter, largely on the
tation for being odd,” noting that Frost has been
strength of Razr. As of the fourth quarter of 2004,
traveling with a teddy bear for the last 20 years.
Moto held a 16.4% share worldwide. Samsung had
Frost laughed at the mention of the bear, a gift from
10.9%, down 3% from the previous quarter, while
his British wife’s vast collection, but wasn’t offend-
LG was at 7.2%, per IDC, Framingham, Mass.
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OCTOBER 10, 2005
M37
Motorola 2005
The gains awarded a slight boost to
Motorola’s standing among Interbrand’s
Top 100 Brands. Last year, Motorola was
No. 76 on the list, which is based on projected earnings. This year it was No. 73,
though Interbrand estimated its brand
equity had jumped about 12%. “They pretty much owned the handset game at one
time, but other handset makers trumped
them,” said David Martin, president of
Interbrand, New York. “But lo and
behold, they turned themselves around.”
Making Motorola hip again was quite
a feat. Formed in 1928 as Galvin Manufacturing, Motorola is one of those companies, like Hewlett-Packard or Xerox,
that was traditionally run by engineers.
Engineering breakthroughs determined
much of its strategy and direction. Originally, Galvin made a battery eliminator,
a device that let battery-powered radios
run on a household electric current.
In the 1930s, the company started making car radios and, in the next decade, pro-
Rock the ages: Moto TV spot for Rokr is set
to a new Madonna dance track and includes
cameos by Iggy Pop and Alanis Morissette.
duced a two-way radio that was widely
used by the U.S. forces in World War II.
By the early ’80s, the company now
known as Motorola was focused on two
markets: semiconductors and wireless
devices. In 1983, Motorola introduced
DynaTAC, the first cellular telephone
approved by the FCC. From then on,
Motorola ruled the growing market and
hit its apex in 1996, when it introduced
StarTAC, the first flip phone.
Frost, then a marketer at Nike, recalled
the reaction in the room when a colleague
whipped out a StarTAC during a meeting:
“Everyone in the room looked at each other and said, ‘I’ve gotta have one.’”
What happened next was a textbook
case of a fat, complacent company being
bested by an upstart competitor. In this
case, the whippersnapper was Nokia, a
Finnish firm that many thought (and still
M38
OCTOBER 10, 2005
think) is Japanese.
Nokia’s insight was as
post-StarTAC phones
became more portable,
they also became fashion
accessories. Nokia spent a
lot of time deciding what colors its phones should be and
was the first to offer changeable faceplates for those who
couldn’t decide. By 2000, Nokia
had captured a 27% worldwide
market share (and Grand Marketer of the Year honors in this magazine) versus Motorola’s 17% share.
Motorola now has 18% versus 33% for
Nokia globally.
t
hat was the situation when Frost,
now in his 50s, arrived at Motorola.
With his preference for sneakers,
khakis and T-shirts, Frost was not cut from
the same cloth as past Motorola marketers.
“He’s a man on fire, he’s out there
throwing ideas at a million miles a second,” said Rich Goldstein, co-chairman
of Goodby, Silverstein and Partners, San
Francisco, who worked on the Nike
account. “He was always encouraging us
to look at new film and new people. I
think he really enjoys the new.”
Brendan Ryan, a former and current
colleague at Foote, Cone & Belding, New
York, recalls the 6-foot-6 Frost in meetings “towering over everyone in the room
physically and mentally,” but at the same
time being very down to earth. “He very
much is not looking at the next mountain, but two or three beyond that.”
For his part, Frost thinks he’s effective
because he loves tech. He’s the first to
admit his sensibilities wouldn’t necessarily work everywhere. “Design is
important and that’s particularly true in
tech. I’m not sure how that would translate to the dog food business,” he said.
“I don’t think I’d be a terribly good marketer at McDonald’s or Kraft.”
Frost worked his way up the ranks
through ad agencies J. Walter Thompson, Grey and FCB before joining Nike
in 1996. There, as global director for
advertising and brand communications,
he was behind ads like “The Fun Police,”
which showed NBA star Kevin Garnett
reassigning CEOs to the cheap seats and
moving the hoi polloi to the floor; and
“Frozen Moment,” a 1996 ad that
showed Michael Jordan driving to the
basket as people across the world
watched on their TVs.
Perhaps the biggest influence on his
thinking was Ed McCabe, the legendary
Madison Avenue copywriter with whom
Fun with phones:
The new Pebl
features rounder
edges, perhaps a
more feminine look.
he worked at Scali,
McCabe, Sloves.
McCabe
penned
some of the most
memorable ads in history,
including “It takes a
tough man to make a
tender chicken” for Perdue and “We answer to a
higher authority” for
Hebrew National. Frost,
who seems to have a Bartlett’s Quotations edition lodged in his cortex, likes
to quote McCabe’s maxim that the way
to learn is “by being crushed.”
If that’s the case, then Motorola was
learning quite a bit. In his interview for
the job, then-CEO Christopher Galvin
asked Frost point blank what he thought
of Motorola’s advertising. “I told him
any company that would pay a million
dollars to the Rolling Stones to say ‘You
Can’t Always Get What You Want’ probably hadn’t really nailed it,” Frost said.
Galvin, an affable—maybe too affable—
chief executive, laughed.
Galvin, son of former CEO Robert
Galvin, had his hands full at the time.
Iridium, Motorola’s satellite-based wireless venture, flamed out in 1999 after
costing the company more than $5 billion. While Galvin, who joined in 1997,
couldn’t be blamed for that project,
many investors at the time singled out his
hands-off style for the company’s woes.
The chief executive delegated responsibility to his top managers and was said
to ask few questions during his meetings
with the wireless group.
At the time of Frost’s arrival, Motorola executives were betting on a peanutshaped phone called Shark that was
designed to take on Nokia. Galvin was
skeptical about the phone’s chances, but
approved the launch anyway. When
Shark hit, his initial instincts proved correct. Shark, which was larger than
Nokia’s slim phones, flopped. (Galvin
was eventually replaced by Sun
Microsystems veteran Zander in 2004.)
With Frost on board, Galvin was ready
to take some chances. “You always miss
the shot you don’t take,” he said, quoting
hockey’s Wayne Gretzky. John Dooner,
CEO of McCann Erickson, was a close
friend of Galvin’s, but he allowed Frost
to assign Motorola’s account to Ogilvy &
Mather, New York. Frost had other
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Motorola 2005
changes in mind. On his third day on the
job, he got a note from a former Nike colleague at Wieden + Kennedy, Portland,
Ore., congratulating him on the move: “I
understand why you did it. Cell phones
are the new trainers.”
Frost was on the same page. He knew,
just as Nokia did, that cell phones aren’t
phones at all, but little devices that tell
people who you are. Frost also recalls getting a note from a Motorola engineer
whose son had asked, “Dad, why does
Agent Mulder [of the show The X Files] use
a Nokia phone?” That prompted Frost to
open a product placement office in Los
Angeles charged with getting the brand
more exposure. His favorite placement so
far is an episode of The Sopranos, in which
Tony checks out a phone and says,
“Motorola’s supposed to be the best.”
Another change came in Motorola’s
advertising. Frost has said he found
McCann’s “Wings” campaign, which
played on the wings in Motorola’s logo,
“weird and unmemorable.” Through
Ogilvy’s research, he found something
better. Kids in Taiwan had been referring
to Motorola’s phones as “Motos,” but
the term had been gaining currency elsewhere as well.
“‘Moto’ means something in just
about every language,” said Frost, who
speaks French, Russian and Italian. It
means “hot” in Swahili, for instance, and
“fat person” in Japanese.
Ogilvy’s ads, which launched in 2002,
played on the concept with shots of young
and hip-looking consumers and headlines
In a bid to make Motorola’s phones
cool again, the company hired Tim
Parsey from Apple in 2000. Now at Mattel, Parsey was behind well-received
models like the v70, which looked a bit
like a magnifying glass and included a
cover that swiveled 360 degrees.
m
oto’s greatest success this
decade was the Razr phone.
Introduced in July 2004,
Motorola has sold more than five million
of the $499 metal-clad flip phones. Razr,
the brainchild of designer Chris Arnholdt,
was a direct swipe at Samsung, which had
made its name in the category with sleek,
high-end metal models. Only a half-inch
thick and made of anodized aluminum—
the same material as Apple’s G4 laptop—
the super slick Razr (as in “razor thin”)
indeed looks like it could have come from
Steve Jobs.
Frost can take some personal satisfaction from that. Peter Pfanner, head
designer at Motorola’s North American
design studio, said Frost becomes heavily involved in product development. “I
spent an hour with him this morning and
he was actually sketching things,” said
Pfanner last month. “He’s got a very
good eye and a good sense of what works
in the market.”
Pfanner also credited Frost, along
with Zander, for coming up with the
name “Razr,” whose vowel-truncated
four-letter formula (Pebl, Rokr, etc.)
lends an extra bit of hipness to the brand.
Pfanner said he knew right away that
“Razr is so successful they may become too
reliant on that single design—which, by the way,
is Nokia’s problem right now.”
Iain Gillott, research analyst
like “HelloMoto” and “DivaMoto.” TV
ads included music from cutting-edge deejays like Paul Van Dyk and Felix Da Housecat. In a 2003 TV spot, cars bounce and
pool water undulates to the music, which
stops as the phone rings and a Germanaccented voice answers “Hello, Moto.”
While important, though, advertising
was icing on the cake—often a truism in
tech. Apple’s iPod silhouette ads, for
instance, may be brilliant, but there’s little doubt that iPods wouldn’t sell if they
were poorly designed. “I think a lot of
marketing is design,” said Frost. “The
ultimate marketing medium is the product itself. Nike knew that.”
M40
OCTOBER 10, 2005
Razr would be a hit, but Frost acknowledged that he was taken aback by Razr’s
success. “Frankly, it surprised even me,
the way the thing took off,” he said.
Razr’s just the beginning, though.
This fall, Motorola’s planning to roll out
Pebl, a rounder, curvier successor that
surfs the Web. In Frost’s view, Razr will
be the father, and Pebl the mother, of the
new family of Motorola phone “mutations.” Frost was mum about those products, but the company has trademarked
other anti-establishment sounding terms
including “Mjik,” “Mgik” and “Twst.”
Such rebelliousness has its incubator.
Two years ago, Motorola built an engi-
Slick image: Ads featured cool-looking people
and catchy headlines, including “HelloMoto.”
neering and design center in downtown
Chicago to help the company brainstorm new products. The center allows
proximity to urban trends (Chicago is
deep into design) and is intended to lure
those who consider themselves too
young and hip to work in Schaumburg,
Ill., the firm’s Chicagoland headquarters. Its designers work in an open-air
setting, no land lines allowed.
Will the center churn out more Razrs?
Iain Gillott, principal of Gillott
Research, Austin, Texas, is skeptical.
“Motorola has a wonderful track
record of brilliance followed by mediocrity,” he said, recalling StarTAC. “Razr is
so successful they may become too
reliant on that single design, which, by
the way, is Nokia’s problem right now.”
Gillott wasn’t very impressed by Pebl,
but did like Q, a device that in his view,
“looks like the Razr and [Research in
Motion’s] BlackBerry had a baby.”
To combat fears of being a one-hit
wonder (again), Motorola also struck a
partnership with Apple that gives it and
wireless carrier Cingular exclusive access
to Apple’s iTunes technology. The first
fruit of the deal was the Rokr phone, a
much hyped stand-in to the iPod (it can
hold 100 songs) that launched last
month with supporting campaigns from
Cingular and Motorola, both via new
agency BBDO, New York.
Frost believes Nokia stumbled by betting too much on camera phones. The
future, he believes, belongs to music.
Of course, Frost is just guessing, but
as he pointed out, unearthing another
Bartlett’s quote: “Science is what you do
after you guess well.”
B
www.brandweek.com
Lombard (l) and Saunders (r)
this java joint
BY BECKY EBENKAMP Photograph by Rick Dahms
M42
OCTOBER 10, 2005
www.brandweek.com
Starbucks 2005
ANNE SAUNDERS &
KEN LOMBARD
l
ong after all the artists have left the stage, the
Even an imprint dedicated to new acts has done
past year in music will go down as the period
what few labels could, as evidenced remarkably
in which moody Coldplay got the critical raves
by this summer’s release of female rock band
(and the girl), emo band Death Cab for Cutie got
Antigone Rising’s From the Ground Up. Through an
its due (and its cameo on The O.C.) and Green Day
exclusive deal with Lava Records, 85,000 units
got political (along with all those VMAs). But
(per SoundScan) sold across its coffee counters,
another unlikely entity also deserves a full-stadium
an unheard-of number for a relatively unknown
cigarette lighter salute: This is the year Starbucks
band. Such has been Starbucks’ impact on a gen-
Coffee pulled a Nigel Tufnel and cranked its musi-
erally moribund music business.
Behind all these eclectic aural offerings are Ken
cal amplitude up to “11.”
High-profile releases by Ray Charles (Genius Loves
Lombard, president of Starbucks Entertainment, and
Company, a CD of duets), Bob Dylan (Live at the
Anne Saunders, 44, svp-marketing for North Ameri-
Gaslight 1962, an exclusive live set) Alanis Morissette
ca. Lombard, 50, and his entertainment team works
(a 10th anniversary, all-acoustic version of Jagged Lit-
closely with Saunders’ marketing unit, which is
tle Pill), along with the coffee chain’s exclusive dis-
responsible for relaying all of Starbucks messages
tribution deals and stealth marketing plan are lead-
with a minimum of traditional advertising. The team
ing many to say that Starbucks is modifying the mod-
has coalesced something remarkable: a selective, yet
el of how music is sold.
no-pressure record club that has both enhanced the
jumpin’
www.brandweek.com
With music on its menu, Starbucks has
programmed our coffee breaks and is taking
the lead as a purveyor of pop culture.
OCTOBER 10, 2005
M43
Starbucks 2005
all-important Starbucks “experience” and
created a must-have CD retail environment even as traditional music industry
gatekeepers have been steadily losing the
ears of music fans.
“We’ve stepped into a void in the
music industry,” Saunders said. “We’ve
added to the retail availability of CDs, and
it’s kind of new news for the industry.”
Beyond its pr and real estate prowess,
Starbucks’ capacity to find audiences for
new and different voices means it is filling an even greater void, proving that
respect for customers’ tastes can move the
cultural needle where homogenized radio
can’t. It has become a new kind of DJ, a
trustworthy one. Which is why some people are screaming that Starbucks is all but
reinventing the disc.
t
oo much hype? Perhaps. Take a step
back and the brand’s opportunities
and influence in the entertainment
arena become more apparent. What
emerges is not a coffee company slinging
songs on the side but a real reinvention
of how consumers sample and buy music.
Jack Anderson, CEO of Seattle
design firm Hornall Anderson, a friend
and client of Starbucks founder
Howard Schultz since 1991, had that
impressed upon him at dinner with
Schultz about a year ago.
“I asked Howard, ‘What really gets you
up in the morning?’ and he said, ‘What’s
got me so excited about right now is entertainment,’” Anderson recalled. “At the
time—and I think it’s still the case—Howard
was sitting on the Dreamworks board, and
he’s around people in entertainment and
music and he enjoys that. He was very excited about the potential of where Starbucks
could take music or entertainment. This
is their first step in the water, but it’s not
a trivial endeavor for these guys.”
Richard Gay, svp-strategy and business
operations for VH1, gives the chain high
marks for its efforts so far. “How smart
they’ve been in getting into music. They
didn’t say, ‘We’re a retailer, let’s do what
Wal-Mart and Best Buy do.’ They said,
‘We’re a different type of retailer, one with
recurring traffic,’ so the plan was built
around what already works for their loyal
consumers. They found their own niche.”
Despite more than 7,000 stores in the
U.S. (4,748 of them company-owned, the
remainder licensed) and 9,600 international locations, Starbucks’ music business in itself will never pose a serious
threat to, say, Universal Music or Virgin
Megastores—although it should be noted that the coffee company has moved
775,000 units of Charles’ Genius Loves ComM44
OCTOBER 10, 2005
pany and 190,000 of Jagged Little Pill Acoustic.
Instead, the brand architects see themselves as complementing the coffeehouse
experience, not as music moguls.
“I think there’s been a lot of restraint,
which is great,” said Scott Bedbury, the
company’s CMO from 1995-98 and
founder of brand development consultancy Brandstream, Seattle. He recalled
a period in the late ’90s when Starbucks
was flirting, perhaps misguidedly, with the
idea of carrying a lot of merchandise, from
perk paraphernalia to polenta. But Starbucks managed to winnow those ideas
down to its basic brand essence of workaday escape and enabler of quality time—
and its adult alternative music selections
fit that to a tee. “The coffeehouse should
be about that oasis,” he said.
Of course, the brew is not totally new
for Starbucks, which began its phenom-
Big gulp: Under a partnership with Pepsi,
the Starbucks experience hit the road.
enal growth on Schultz’ vision of a retail
brand in which look, smell, sound and feel
communicate as much, if not more, than
any marketing tactic. Schultz’ famous
epiphany during a 1982 trip to Italy when
visiting its leisurely cafes and his subsequent purchase of the local Seattle retailer
seeded a concept that was fairly alien to the
U.S.: a relaxed coffeehouse/salon in which
quiet introspection is as welcome as conversation and where the sense of community is as strong as the espresso.
Schultz purchased a brand that had
already made aural ambience a big part
of its appeal. As early as the mid-1980s,
word spread around Seattle that the
manager at the University Village store,
Timothy Jones, had a knack for creating and playing awesome mixtapes. Customers responded, often asking the
names of artists who performed particular tunes. Word of this homegrown talent spread and Starbucks promoted
Jones to program the entire chain’s musical menu. In 1994, with Starbucks building its distinct élan across the country, he
asked, “Why don’t we market our own
CD or tape?”
As Starbucks began its ascent onto
every American intersection, so did the
company’s musical philosophy. Evolving
Jones’ carefully crafted comps, the company teamed with Blue Note Records for
a Starbucks-branded Blue Note Blend CD
that played and sold in stores and ultimately served as a model for other retailers, notably The Gap, which were quick
to create their own “lifestyle” CDs. The
partnership spun many more discs as
Starbucks dabbled in diverse genres with
titles such as Mambo Mia, Baroque Blend and
Cafe Cubana.
Collaborations with individual artists
came next. The Opus Collections line,
billed as “our favorite songs by essential
artists,” has been dedicated to acts such as
Sly & the Family Stone, Etta James, Louis
Armstrong, Frank Sinatra, Otis Redding
and Miles Davis, while the Artists Choice
sub-brand lets musicians serve as song
selectors (Elvis Costello picked songsmiths ranging from Randy Newman to
Rilo Kiley on his disc). The Debut line is
dedicated to breaking emerging acts, such
as Antigone Rising.
“Starbucks is tapped into providing
what their customer wants, and they are
very trusting of its recommendations—
they’ll even buy bands they’ve never
heard of before,” said Alan Miller, coowner/publisher of indie music mag Filter and co-owner of Filter Creative Group.
Perhaps its biggest step into music
came in 1999, when Starbucks acquired
Hear Music, a five-unit chain with a reputation as a trusted music source and cool
place to shop. It has since become the
muse for Starbucks’ artistic release, retail
and distribution efforts.
The label also stands for “the voice of
music at Starbucks” and graces everything
from its branded CDs to its XM Satellite
Radio station. It has expanded the retail concept of Hear Music’s Santa Monica store—
where customers can burn and buy CDs
along with their coffee—to 40 Hear Music
media bars in Seattle and Austin, Texas, with
plans to spread out to Miami and San Antonio by year’s end. While the stores are not
intended to replace the Starbucks model,
they serve as an incubator for musical notes
that could be relayed to the chain.
“Starbucks is a minor player in this—I
can’t see myself saying, ‘I need to buy a CD’
and running down to my local Starbucks,
and I don’t see them as a threat to iTunes
or anything,” said Christopher Ireland,
principal at Cheskin Research, Redwood
Shores, Calif. “But it’s a logical add-on, an
artifact of the Starbucks experience.”
Music is but one of several evolving
products that fall under the marketing
www.brandweek.com
Starbucks
Starbucks 2005
2005
Can you hear me now?: Hear Music media
bars act as barometers for music at Starbucks.
purview of Saunders, who began working for the company’s interactive division
in the summer of 2001 and went on to
helm the Starbucks reloadable cash card,
and its wireless initiative. Its new brews like
Green Tea Frappuccino, Starbucks coffee
liqueur or Ethos water—whose profits help
build clean water systems in developing
countries—all have one thing in common:
They are imbued with the notion of discovery that is at the heart of the brand. “We
think we’re providing something interesting for people who continue to come in,”
said Saunders.
Lombard, who formed urban development company Johnson Development
Corporation in 1992 with partner Earvin
Magic Johnson, joined Starbucks in the
spring of 2004—just in time to orchestrate a major project in the company’s
cascading musical portfolio, Ray
Charles’ Genius Loves Company. The
August 2004 release was Starbucks’ first
note in a stepped-up music strategy in
which the brand took on the role of facilitator, distributor and marketer along
with label Concord Records.
“When we were looking for someone
to take the helm of a new division, Ken
was a natural choice,” said Saunders.
About a month after Lombard took on
the ambitious project, Ray Charles died.
“Literally, we were in a marketing meeting
discussing how we were all going to come
together for this project when we heard
Ray had passed,” he recalled. Charles had
been sick, so the label had contingency
plans in place. The team took a moment
to pause, but soon moved forward with
what everyone felt they owed to Charles
and released his final recording. The CD
went platinum in less than two months
and won eight Grammys along with the
coffee customers’ seal of approval: 30%
of the discs sold at Starbucks outlets.
www.brandweek.com
“With Ray Charles, we were watching
our customers’ reaction, whether they
would give us permission to go beyond
coffee,” Lombard said.
Over the past 18 months, the entertainment department has delivered 40 musical offerings from Beck (Guero) to early
Dylan, and grown from 18 employees to a
team of 61 music lovers with industry experience and what Lombard defined as “a
laser focus on putting together the music
strategy.” His key players include Timothy Jones (manager-compilations/programming), the one-time manager whose
mixtapes sparked the brand’s musical conscience, Don MacKinnon (vp-music/entertainment), one of Hear Music’s founders,
and Geoff Cotrill (vp-entertainment/sales
& marketing), a Coca-Cola vet.
“Ken and his team all sing from the
same song sheet,” said Gay from VH1,
which supported the Alanis Morissette and
Antigone Rising releases with complementary programming on the network.
“The way we market music is much like
how we’ve approached our entire business,” Saunders said. “Community events
are important to our customers. We think
that’s a better way to create a lasting relationship than with a 30-second ad. Music
is very similar: We support it in our stores,
at music festivals, things that are more
experiential and meaningful.”
m
uch has been written about Starbucks’ floor space and how it
can be used more effectively in
off-peak dayparts. About 70% of transactions occur before 10 a.m., when customers
spend less than five minutes in stores, while
the remaining 30% happen after 10 and last
diverse portfolio of music illustrates how
the brand is positioning itself long term
to its core Gen X and boomer consumers. These patrons, Saunders said,
find themselves somewhat baffled and
intimidated by their current music retail
options, in which, arguably, 1% of labels’
artists are marketed down their throats.
As for the remaining 99% of potential
audio jewels, the traditional music store’s
strategy seems to be file ’em all and let
Todd sort ’em out.
“They aren’t necessarily going to go to
a record store or a Best Buy to get music,
but they’re already buying coffee each
morning,” said Filter’s Miller. And hell,
since they’re there and maybe even paying with plastic to perk up, why not just
add a Ray Charles or Sheryl Crow CD
to the tally while they’re at it?
Frequency is also a factor, as the chain’s
most loyal fans visit 18 times a month. “One
thing we realized early on was the fact that
we have a unique set of assets that could
provide a solution to [the challenge of]
retail distribution,” Lombard said, “and
part of those assets is the 34 million people that come in to Starbucks each week.”
The simple-sounding goal: to combine a breadth of selection with convenience. “Where do you learn about music
today, and where do you go to buy it?”
Saunders said. “We have music playing
overhead all the time, and people have
come to trust the editorial voice we have.
We like to think of Hear Music as a
friend recommending music, whether it’s
a new band or [a classic artist].”
While it will reach out to younger consumers entering the fold, it has a knack
for listening to the musical experiences its
“We have a unique set of assets to provide a
solution to retail distribution: the 34 million
people who come in to Starbucks each week”
Ken Lombard, Starbucks Entertainment
20 minutes or longer on average.
While these slower hours and longer
visits present better sampling opportunities, “we don’t think of music so much as
[a driver] for other dayparts—the music
is still relatively new at Starbucks, and the
people buying music are customers who
are coming in to buy coffee,” she said. “But
we think as people become more aware
that we offer it, we can become a destination where people go to buy music.”
Rather than experiment to discover
what works and sells best, Starbucks’
customer covets. And it ain’t—right now,
at least—Mrs. Kevin Federline.
“We feel our customers have spoken very
loudly. They want to go beyond Top 40 and
limited formats,” Lombard said. “It’s critical that we provide very unique music
opportunities they can’t get anywhere else.”
An Etta James fan, Lombard listens to new
music each day to stay in touch.
Traditional music labels, retailers and
artists are struggling in this era of marketing
over artistry, monopoly over competition,
OCTOBER 10, 2005
M45
Whole Foods 2005
JOHN MACKEY
c
an a person actually fall in love with their
case holds naturally farmed fish; samples are
supermarket? Strange question, perhaps, but
abundant, just as they are in the nearby health
for the residents of lower Manhattan, the arrival of
and beauty products section.
a gleaming new Whole Foods Market earlier this
And oddly enough, on a recent Sunday night,
year sent even the most jaded downtown shopper
three long lines of shoppers—some with baby
into a veritable swoon.
strollers in tow—snaked far past the checkout, with
The Union Square store—Whole Foods’ third
nary a complaint to be heard. As Harvey Fierstein
location in the Big Apple and the chain’s first three-
has belted out on Broadway, “If that’s not love,
story structure—is more of an adventure than a
what is?”
shopping trip. An artsy design fuses with Old
World flair to house acres of organic and natural
bounty. Tightly stocked shelves are bathed in the
type of lighting usually reserved for art galleries.
An unobtrusive abstract chandelier, created especially for the location, softly glimmers above the
street-level entrance as strains of George Benson’s
“Turn Your Love Around” waft in the background.
Inside, typical supermarket sections have been
for shop
With a taste for the finer things in (a natural)
life, Whole Foods’ founder has legitimized
organics into a $3.9 billion empire—and
reshaped the supermarket experience.
reborn, Whole Foods style: The butcher offers a
wide array of prime meats and poultry that are min-
Credit these smitten masses to John Mackey,
imally processed, never fed animal byproducts and
chairman and CEO at Whole Foods Market, who
raised to the company’s exacting antibiotic- and
almost single-handedly has legitimized the organ-
hormone-free standards. A 38-foot-long seafood
ic and natural foods market to the point where
M46
OCTOBER 10, 2005
www.brandweek.com
pers, it’s love
BY SONIA REYES Photograph by Mark Matson
www.brandweek.com
OCTOBER 10, 2005
M47
Whole Foods 2005
industry giants—from Safeway to WalMart—have been forced to respond. And
he’s done so with only a little emphasis on
traditional marketing, but a terrific focus
on getting the customer experience right.
In the process, he’s given hope to a whole
generation of brand stewards who don’t
have money to burn, yet want to create a
premium brand in a mature category.
“Whole Foods is a blend of retail engineering and retail theater,” said Simon
Williams, CEO at consultancy Sterling
Brands, New York. “It sets out to wow
people. They are magicians when it comes
to merchandising.”
Whole Foods, also known in some circles as “whole wallet,” may not stock Tide
detergent, Frito-Lay snacks, Sweet ’n Low
sugar substitute or other mainstream
brands whose long list of artificial flavors
or ingredients are verboten. But its shelves
are a coveted destination for smaller natural products purveyors who’ve learned
that if you’re playing in the
alternative market and can
get into Whole Foods, you
can create demand (see related story, this page).
m
ackey,
52,
entered
the
world of supermarket retailing in 1978,
when he and partner Renee
Lawson Hardy opened
Safer Way Natural Foods,
a health food store in Austin, Texas, with
an initial investment of $45,000 borrowed from friends and family. The store
was not a financial success and two years
later, he merged with another local health
food retailer, Clarksville Natural Grocery,
to open Whole Foods Market.
Think Texas, think big. It was the first
supermarket-style natural foods store in
the country, with 10,000 square feet of
space and 19 employees. By 1992, with
12 stores and $92 million in sales, Mackey took the company public. Through a
series of acquisitions—among them,
Bread & Circus (1992), Mrs. Gooch’s
(1993) and Fresh Fields (1995)—and
expansion, the chain would blossom to
170 stores in the U.S. and Canada and
$3.9 billion in fiscal 2004 sales. This year,
Whole Foods is celebrating its 25th
anniversary with more than 36,000
employees and roughly 5.8 million square
feet of retail floor space.
International expansion is clearly on
Mackey’s radar, too. Having entered the
U.K. market in 2004 with the acquisition
of seven Fresh & Wild natural and organic food stores, the company in August
M48
OCTOBER 10, 2005
revealed plans for the first flagship Whole
Foods Market in central London, a
75,000-square-foot location on Kensington High Street expected to open in early 2007. In all, his stated goal is to hit a
lofty $10 billion in sales by 2010.
All of which makes Mackey—who
refused several requests for interviews—
an atypical supermarket executive in
another key way: His company makes
money and is not in a defensive mode
the interior of a typical Whole Foods environment. Whole Foods earmarked nearly
$18 million for total marketing support in
2004, though it spent a mere $3.3 million
on measured media for the year; $1.8 million through July 2005, per Nielsen Monitor-Plus. Most of those dollars went for
local media, per the discretion of regional managers, and in-store efforts.
“In the beginning, we couldn’t afford
to advertise,” Whole Foods co-president
From Truffles to Bison, Naturally
Whole Foods carries an extensive line of private label goods, including organic items,
under the “365” brand. Lest one think it’s all granola and nuts, consider that the line
covers everything from pantry staples to frozen fish fillets to cappuccino dusted truffles. The latter hews to Mackey’s understanding that natural consumers have sophisticate palates and don’t want to equate good-for-you foods with “boring.”
Mackey extended that concept to healthier meat products when he approached
restaurateur George McKerrow, CEO of Ted’s Montana Grill, a chain of 41 eateries in the
Midwest and Northeast, to produce a line of its popular Bison Chili to augment the fresh
bison meat offerings Whole Foods was already selling. After
all, McKerrow should know a thing or two about bison, given that his partner is media titan Ted Turner, who also happens to be the largest bison rancher in the U.S.
For McKerrow, it was a seamless partnership of two companies that share similar values on what it means to be
organic. “We admire the way they do business. We share similar philosophies of steroid-, pesticide- and hormone-free,”
said McKerrow. “They were ahead of the curve in making
bison more widely available to their consumers who are looking for healthier, more natural sources of protein.”
Bison Chili is one of the more popular items at the three-yearold eatery, whose menu is a celebration all things bison, which
Straight from Ted’s grill: McKerrow stressed is lower in fat than chicken, is cholesterolBison chili from media big free and contains healthy omega 3s.
For two months last year, McKerrow and his team tested
Ted Turner and Co.
batches of the chili recipe, per Mackey’s standards. Pinto
beans, for instance, were nixed from the chili sauce because they were deemed too high
in preservatives. The finished product would ultimately be sold as a frozen, not shelfstable, product in an 18-oz. container that (naturally) used recyclable paper and bio-friendly plastic. McKerrow and Turner’s images are on pack.“They are flying off the shelves,”
McKerrow reported last month. More bison items—meatloaf, pot roast and stew—are in
the works. Meanwhile, McKerrow plans to open a Ted’s Montana Grill in New York City
next year. Could a restaurant-within-a-store concept be far behind?
seeking Chapter 11 bankruptcy protection
(à la supermarket chain Winn-Dixie) or
exploring a possible sale (like Albertsons)
due to the presence of the 4,000-pound
gorilla, Wal-Mart, which has slowly
begun adding natural-product SKUs to
its own merchandising mix. And, unlike
at many of its competitors, growth has
come without significant media outlays.
Albertsons spent $134 million on media
in 2004 and Kroger $121 million for its various divisions, per TNS. Safeway launched
a $100 million effort to tell customers that
it was redesigning many of its stores, whose
description came “this close” to depicting
Walter Robb told the Austin AmericanStatesman in July. “We did lots of advertising experiments. They didn’t work,
didn’t deliver results.” So the company
funneled its money into improving store
infrastructure (for example, merchandising, signage, a revamped Web site), consumer outreach and employee training.
Word-of-mouth also helps. When
Whole Foods opened its new flagship
store in Austin this past March, it attracted national media for a “Whole Block
Party” that included sampling from the
store’s 600 varieties of cheeses and tastings from Candy Island, which features
www.brandweek.com
Whole Foods 2005
High taste,
high touch: At
its new Austin
flagship, patrons
can get customorder pizzas; the
365 house brand
extends from
baked goods to
frozen items.
way,” added Harris.
Mackey, who once took off five months
from work to hike the 2,168-mile
Appalachian Trail, prefers a Japanese-style,
highly decentralized approach to management. It prizes input from “team members”
(employees) who have broad powers that
range from deciding what products to buy
and from which vendors, to voting for their
preferred health insurance plans, to how instore signs should look and which community events should be sponsored.
“Mackey is smart enough to know not
only the marketing but the operational
M50
OCTOBER 10, 2005
strategy needed to make his vision possible,” said John Stanton, a professor of
food marketing at St. Joseph’s University in Philadelphia. “He knew he couldn’t
have a company structure like most traditional retailers where it takes a year to
make a decision because of the bureaucratic red tape.”
It’s worth noting that, like Wal-Mart,
Whole Foods is strictly a non-union shop,
yet team members seem not to mind.
Since 1998, Whole Foods has ranked
among Fortune’s top 100 best companies
to work for, coming in at No. 30 in 2004.
“There is a passion in that business that
is clearly Mackey’s. It’s felt by both consumers and employees,” said Williams.
“And it gives the brand a rhythm that is
flawless and necessary in today’s retailing environment. Look at the passion and
spirit of its workers; they believe they are
all vested in the welfare of the chain.”
That dedication has helped Whole
Foods pull off a seemingly impossible task:
Post consistent double-digit gains of at
least 20% for the past five years in an industry where conventional food retailers are
happy to grow 5% a year. Profits climbed
31% in the third quarter ended July 2005,
while same-store sales rose 12.6% in the
period, higher than what Whole Foods
itself had anticipated. The surprise
prompted Goldman Sachs analyst John
Heinbockel to rave: They “breathe the rarified air of true retailing excellence that
most companies aspire to, but most,
inevitably, are doomed to fall short of.”
o
verall, natural and organic food
and beverage sales are strong—
$10.3 billion in 2004, up 18%
from the prior year, per the Natural Marketing Institute—but are just a fraction of
the nearly $500 billion in total U.S. food
sales. While that leaves Mackey a very targeted demo to cater to, there is strong evidence that American appetites for healthier, natural fare is growing closer to European tastes.
That could spell a big opportunity for
food industry giants like Kraft Foods,
Dean Foods, Wal-Mart and others, who
are currently lobbying Congress to relax
organic standards by “approving a broad
list of synthetic ingredients and processing aids” in organic production, per a
Web site posting for the Organic Consumers Association, a group which has
raised a firestorm of protest over the proposed addition to the 2006 Congressional Agriculture Appropriations Bill.
On Sept. 21, the Senate reached a compromise amendment calling for further
study of the issue.
For natural food purists, Mackey’s
strict approach to organics at Whole
Foods is the gold standard.
He’s even lobbying the Department of
Agriculture to label milk as “organic”
only if it comes from dairy cows that can
freely graze in pastures, not just those fed
organic feed that is free of antibiotics and
“There’s a passion in
the business that gives
the brand a rhythm,
that is flawless and
necessary today.”
Simon Williams, Sterling Brands
growth hormones. Barring federal action,
Mackey is expected to issue his own
“compassionate” guidelines for the treatment of cows within a year.
Annie’s Homegrown, a mainstay
organic brand, has 35 SKUs at Whole
Foods nationwide. “When we create a new
product, we do so keeping in mind Whole
Foods and their standards,” said Sarah
Bird, vp-marketing for parent firm Homegrown Naturals.
It is safe to say that Whole Foods’ presence is being felt by traditional supermarkets nationwide: Publix, Shaw’s,
Dominick’s and Stop & Shop have all
recently either launched or expanded natural/organic store-within-a-store concepts. Cities like St. Louis are courting
Whole Foods as an anchor tenant for proposed shopping centers.
Where else might Mackey roam?
Whole Foods last month said it will
open its first “lifestyle” outlet offering
environmentally friendly clothing, housewares and more in a separate 2,000square-foot store adjacent to its location
in West Hollywood, Calif. The concept,
first tested at the Austin flagship, will offer
a range of items including organic blue
jeans, recycled handbags, organic baby
clothes, toys, paint and natural shoes.
Whether the Whole Foods brand can
stretch that far is still an open question,
one that will likely require Mackey to
keep checking his compass.
Said Stanton: “There’s no question in
[Mackey’s] mind what he has to do.
Because if you’re going to lead the troops
into the unknown land, then you better
know where you are going.”
B
www.brandweek.com
Ron Jenkins/Newscom
a chocolate (natural, of course) fountain.
“They are growing because the product they offer consumers is just better,”
said Ken Harris of retail consultancy Cannondale Associates, Evanston, Ill. “And
they’ve communicated their message
without using traditional media, but
rather focused on a grass roots approach
that is aligned with their message of genuine goodness.”
Unlike other high-end stores where
salespeople can bristle when asked a
question, Whole Foods employees are
encouraged to be enthusiastic helpers—
who can explain the complexities of
“light” and “medium” roasts of its private
label Allegro coffee and how a bean actually goes from tree to store, or offer
“express” passes to harried customers
during busy hours at the checkout.
“Mackey has instilled a service mentality in the Whole Foods culture that is
rare in today’s retail environment. They
became ‘big’ before other conventional
retailers could respond in any effective
Sirius 2005
SCOTT GREENSTEIN
radio’s brave
new frontier
Thanks to a universe of big names—including a despised shock jock, an unmanacled
Martha and a skate punk—he’s turning Sirius into an out-of-this-world star.
e
nter the offices of Sirius Satellite Radio high
celebrities jot down their John Hancocks once
above midtown Manhattan and you’ll find
they’ve come for a visit. On this particular late sum-
an environment that’s closer to outer space than
mer day, members of the newly reunited death met-
terrestrial. Bright lights illuminate a two-story
al band Obituary, who looked more likely to flash
glass-enclosed lobby. Nearby, a videoscreen maps
a knife than a Sharpie, were making the rounds
the orbit of three giant satellites. Typical corporate
to promote their new album, Frozen in Time.
suits have been replaced by alien employees with
Only a rolling stone’s throw from Radio City
purple mohawks and tattooed triceps. Half of the
Music Hall and Rockefeller Center, the Sirius
first floor is obscured by white plywood covering
offices have become a must-see attraction for a vari-
a major construction project that by January will
ety of artists. “Even if they aren’t appearing on a
yield Sirius’ very own Area 51: the studio for its
program, they just want to take a look around,”
crown jewel of content, Howard Stern, where (if
beamed Scott Greenstein, Sirius president of enter-
you believe all the hype) anything can happen.
tainment and sports.
While the plywood will soon come down, the
Be it high-powered executives like new CEO
graffiti wall across from it is permanent. Here,
Mel Karmazin, on-air talent like Stern and Martha
M52
OCTOBER 10, 2005
www.brandweek.com
BY KENNETH HEIN Photograph by Frank Veronsky
www.brandweek.com
OCTOBER 10, 2005
M53
Sirius 2005
ages 18-55 could name Sirius unaided as
of July 31, per a study conducted by
DR/Added Value, Los Angeles, on
behalf of the company.
Still a distant second to XM, which
is projected to have six million subscribers by year’s end, Sirius has become
a company to watch; its stock price has
doubled in the last year, trading earlier
this month at $6 to $7 a share on Nasdaq. While the company recently disappointed Wall Street by posting a wider
second-quarter loss of $177.5 million,
from $136.8 million a year ago, revenue
grew to $52.2 million
from $13.2 million and
subscribers were up 184%
over the same 2004 period. If growth continues
accordingly, Sirius is
expected to turn a profit
as soon as late next year.
“We’d written Sirius
off until they started making aggressive moves.”
said Rob Enderle, a technology marketing analyst
based in San Jose, Calif.
“Howard Stern put them
on the map. Inking him
Channeling content: New TV ads showcase Sirius’ array of
was a solid hit for them.
entertainment options compared to regular radio.
Up until that point, XM
was beating them soundly. In this world,
He hasn’t disappointed. The one-time
it’s about perception and even though
protegé of Hollywood powerhouses HarXM has been better funded for a longer
vey Weinstein and Barry Diller, Greenperiod of time, now Sirius has them on
stein almost immediately began spinning
the defensive. This showcases the power
out sharp marketing campaigns and
of effective marketing.”
pulling in top names like Stern, whom he
landed with an eye-popping five-year,
$500 million contract. Greenstein also
self-assured former M&A lawyer
inked deals with a diverse roster of talent
whose tastes run more to CNBC
that runs from Eminem to Lance Armthan Run-DMC, Greenstein took
strong, Jimmy Buffet and Tony Hawk.
a moment away from the din of deal-makMore recently, the company—which has
ing to reflect on his success. The setting
a long-term equipment alliance with Ford
was a conference room filled with a cache
and Audi—extended deals with BMW and
of pop culture paraphernalia worth a tidy
Sprint. The early returns: Sirius’ subscripsum on eBay: a Stratocaster signed by the
tion base nearly tripled in 2004, while revmembers of Blink 182, an autographed
enue is set to hit $230 million this year.
copy of Coldplay’s Parachutes and a skate
What’s more, Sirius has now become
deck bearing Tony Hawk’s signature. “You
an established brand name that is arguably
have to break through,” Greenstein said of
more closely aligned with satellite radio
winning over fans. “You have to be out there
in the minds of consumers than its larger
selling, but you need to do it in a way that
rival, XM Satellite Radio. True, XM may
it’s at least, in some form, entertaining.”
count more subscribers (4.4 million) and
Rather than dance around their core tarrevenue ($500 million projected in 2005)
get of men 25-45, Greenstein and his marand some of its own big deals, but Sirius’
keting team delivered some eye-catching
ability to rebound from early missteps and
celebrity ads. For the 2004 holiday season,
build a unique mix of mostly commercialsultry sex symbol Pam Anderson starred in
free music and talk on its 120 channels has
a smutty, double entendre-laden series of
generated a lot more juice.
ads. This year, they turned to “It girl” Eva
In one year, Sirius tripled its brand
Longoria of Desperate Housewives fame. If
awareness among consumers. Almost
anything else, it’s helped serve up muchhalf (45%) of the U.S. adult population
needed water cooler buzz.
Stewart, sports leagues from the NFL to
Nascar, or subscribers—who will number three million by year’s end—Sirius
is attracting all the right people these
days. And the man wielding the big magnet is Greenstein, 45, who joined the pay
radio service nearly two years ago after
having served as an indie film exec in
Hollywood, most recently as chairman of
USA Films. Greenstein, who oversees all
of Sirius’ marketing and programming,
arrived with a reputation as an aggressive
executive with a knack for creating newsbreaking deals.
a
M54
OCTOBER 10, 2005
When Greenstein signed the $220 million broadcast deal with the National
Football League, he brought in one of
sports’ best assets—John Madden—to
lend credibility and preach the gospel of
satellite radio to sports fans. Sirius paired
Madden with New England Patriots quarterback Tom Brady, a Madison Avenue
fave in his own right, to deliver the soft
sell in TV ads. Creative had Brady telling
viewers that Sirius is his “favorite receiver,” much to the disappointment of the
wide receivers on the Patriots.
Sirius spent $33 million on measured
media in 2004 and $7 million for the first
half of this year, per Nielsen MonitorPlus. But those numbers don’t begin to
approach the millions of untracked
impressions the brand receives because
of one very big mouth.
Nary 10 minutes of Howard Stern’s
four-hour syndicated morning radio
show go by without him mentioning his
excitement about satellite radio. Actually, Stern has taken to sounding out the
syllables “ugh-ah-ugh” rather than calling Sirius by name, so as not to tread too
much on his current terrestrial radio bosses. In many ways his show is one long
commercial for the pay service, which
posts a real-time countdown on its Web
site of the months, days, hours—even seconds—until Stern’s arrival.
“Our awareness is phenomenal, far
better than our competitors. It dramatically shot up once Howard signed on,”
said Karmazin, former Viacom president.
“He was a very important factor in me
joining the company.”
Stern has also done his part by appear-
“Our awareness shot
up once Howard signed
on . . . He was a very
important factor in me
joining the company.”
Mel Karmazin, Sirius
ing on David Letterman’s show and staging a rally in New York’s Union Square
Park in November 2004, snarling traffic
as the masses assembled for free Siriusenabled radios. “I think he’s a comedic icon
and a legend,” said Greenstein of his prize
acquisition. “I am also excited that his
marketing acumen is as good as anyone’s.
www.brandweek.com
Sirius 2005
face names. “A lot of the big names we
have that generate a lot of publicity
were not necessarily expensive deals,”
said Greenstein, an avid skier and tennis player. “Radio for
years and years looked
at the same pool of talent. I always believed
there were other people
in the world that could
do radio shows.”
ill they follow?
In this vein, he’s
Stern’s
fan
tapped a diverse array of
base of 12 milinteresting, if unexpectlion is devoted and pased, personalities like Vinsionate and Bridge Ratcent “Big Pussy” Pastore
ings & Research, a Glenfor the Wise Guy Show
dale, Calif.-based ratings
(a celebration of life, the
firm, is projecting that by
arts and meatballs), Bill
February 2006 some 1.4
Walton, Richard Simmillion of them will make King of all media: Stern brings
the switch to Sirius. The $500 million of star power to Sirius. mons, Bill Bradley, Fred
Schneider of the B-52s, as
service will foment the
well as known properties like Cosmopolimarch with a “give Howard for the holitan magazine for female listeners.
days” push later this year.
“He’s probably one of the most creative
Though he downplays his ability to
guys I’ve ever worked with,” said Mary Pat
pull in big names, Stern, for one, thinks
Ryan, evp-marketing. “He has relentless
Greenstein deserves praise. “I can’t
energy about what new things we can
believe someone as illiterate as me is
about to quote someone,” Stern said,
“but here goes: C.E. Montague once said
that there is no limit to what a man can
do so long as he does not care a straw who
gets the credit for it. Scott, it’s OK; for
once, take the credit.”
Greenstein is really no stranger to
accolades. Under his watch at USA
Films, he outbid competitors for the drug
underworld caper Traffic that would go
bring to our customers. He sees how
on to win four Academy Awards. While
music and entertainment come together,
co-president of October Films, he helped
and looks at the world of content in an
acquire and market such critically
unusual and innovative way that beneacclaimed films as The Apostle and The Last
fits our listeners.”
Days. At Miramax, where he was often
Still, the amount that Greenstein &
referred to in the trade press as “the third
Co. have spent has come under fire from
Weinstein” brother, Greenstein landed
Wall Street. Stern’s half-billion payout
the The English Patient, which pulled in nine
over five years and the $220 million, sevAcademy Awards.
en-year NFL pact would usher in a $100
Some unkind portraits of Greenstein
million annual deal for five years with
were painted in Down and Dirty Pictures:
Nascar beginning in 2007. Millions more
Miramax, Sundance and the Rise of Indepenhave secured pacts with the NBA, NCAA
dent Film (Simon & Schuster, 2004). The
and NHL, the English Premier League,
book characterized him as an “attack
Arena Football and horse racing.
dog” and a “crime scene laundryman who
Karmazin justifies the spending spree
wipes the blood off the walls.”
in one sentence: “Compelling programMore than just cleaning up after the
ming doesn’t come cheap.”
Weinsteins in Hollywood, Greenstein
Taking into account that the scrappy
learned that the finer side of deal-making
Sirius launched nationally roughly a year
is in the details. And in some ways, he is
behind XM, Sirius’ growth remains
more proud of landing picks like cycling
respectable and its 1.5% average churn
great Armstrong who appears on Faction
rate (of people leaving the service) is low(Sirius’ Channel 28)—which targets
er than that of cable TV. “Sirius is legitisports enthusiasts via personalities like
mate. The trick is not to peg their numsurfer Kelly Slater and skier Bode
bers versus XM to the same date, since SirMiller—than some of Sirius’ other boldHe is a great promoter of Howard and his
brand to his audience in a unique and
credible way.” Greenstein gives Stern
much of the credit for the street stunt,
whose aim was to warm
listeners to the idea of
paying $12.95 a month to
listen to content they’d
once gotten for free.
w
ius is a year or more behind XM. You have
to peg them to the point they are in their
lifecycle,” said Laura Behrens, an analyst
at the Gartner Group, Stamford, Conn.
Unlike XM, Sirius had a number of
aborted launch attempts; its introduction
was delayed a year by technological
glitches like chip-set problems in its
receivers, until it took off in July 2002.
Meanwhile, XM was soaring since its
November 2001 debut, signing deals with
DirecTV and General Motors, and winning subscribers. XM’s inventive $100
million campaign, “Radio to the Power
of X,” via TBWA/Chiat/Day, New York,
featured instruments, sporting equipment and musicians like David Bowie
and B.B. King falling to earth and into
people’s homes and cars.
Just prior to its unveiling, Sirius’ former CEO, David Margolese, stepped
down, ushering in successor Joe Clayton—a cult hero who successfully
launched satellite TV for RCA—and who
has since been replaced by Karmazin.
“When you look back, it’s almost like
the chicken and the egg. You wouldn’t
want to have all this content and not have
Nancy Kaszerman/Zuma Press/Newscom
“He sees how music and entertainment come
together, and looks at the world of content in an
unusual and innovative way.’’ Mary Pat Ryan, Sirius evp
www.brandweek.com
everything be perfect,” said Greenstein.
XM still would prefer to paint Sirius
as a distant runnerup in a two-horse
race. “While it’s relatively easy to generate hype, what’s important is generating subscribers,” said David Butler, an
XM rep in Washington. Prestige properties like Major League Baseball have
been also been a coup, as 23% of XM’s
subscribers said they selected the service to receive MLB games. XM also
recently locked in the NHL to an exclusive deal beginning in 2007.
Gartner’s Behrens said the battle
between the two warriors is exaggerated.
“People tend to paint business in black
and white by saying there can only be one
player, that Sirius can only survive if they
overtake XM. That’s not true. It’s just like
there is room for two colas in the world,
only at this point in time XM is more like
Coke and Sirius is more like 7 UP.”
Sirius will try and close the gap this quarter with a $15 million-plus marketing campaign, created by Doner, Southfield, Mich.,
OCTOBER 10, 2005
M55
talk is cheap:
will he kill the pho
BY DIANE ANDERSON Photograph by Peter Murphy
M56
OCTOBER 10, 2005
www.brandweek.com
Vonage 2005
DEAN HARRIS
g
earing up for his recent move to a new home
Perhaps, but Pietrowksi’s early-adopter status
in south Florida, David Pietrowksi knew he
(which he’s confirmed by jumping on the satel-
would be making a lot of long-distance calls to
lite radio bandwagon and purchasing the latest
family back home in the Midwest. Surfing the
Xbox PlayStation2 the day it was released) means
Web one day, the 31-year-old sales executive saw
that he is not just “anyone.” For Vonage to reach
an ad for Vonage at Yahoo.com and signed up
critical mass with its Voice Over Internet Proto-
for its discounted offer of $15 per month VOIP
col (VOIP) service, it must continue to convince
service, complete with a free adapter.
not only tech-savvy consumers like Pietrowski to
Why not, he figured? Monthly local calls alone
dump their phone lines, but also a fair number
would have run him around $30 with a company
of people who are still dialing up to the Internet,
like Southwestern Bell. “It was a no-brainer,” he said.
if not asking their kids to program the VCR.
Pietrowksi bought wireless headsets to go with
“We are beyond early adopters now; we’re in the
the service, which allows him to forward calls to
early majority stage,” said Dean Harris, 55, chief
his cell phone and send voicemail to his e-mail
brand officer at Vonage. “You can’t have our num-
account, and added a business line for an extra
bers and have them be only early adopters.”
$40 monthly fee. “My wife can talk on one line
Others may debate that point. In the meantime,
and I can do business on another,” he said. “It’s
Vonage has been so successful in pioneering the
color-coded. Anyone could set it up.”
early growth of the category known as Internet
ne line?
www.brandweek.com
He’s sold one million Americans on the notion of
Internet phone service and turned Vonage into a
household name. No one could call him stupid.
OCTOBER 10, 2005
M57
Vonage 2005
telephony, Harris has more pressing matters on his hands. His Edison, N.J., company is now facing an uncertain future, one
that includes fierce competition and the
possibility of a public offering or buyout.
How Vonage got to that stage, of
course, is the reason Harris has been
selected as one of our Marketers of the
Year. Through a combination of its strong
value proposition and eccentric message—complete with a missive to warn
consumers against doing “stupid”
things—Vonage has established the defin-
its peer-to-peer communication works so
well. Others say new “SkypeBay” or
“Skype-Pal” options may take a cut of each
call that takes place when a consumer
“skypes” a commercial business.
Microsoft, meanwhile, bought the
VOIP software provider Teleo, San Francisco, earlier this year, while Google introduced its GoogleTalk VOIP service. AOL
and Yahoo! are also making inroads with
VOIP offerings of their own.
Analysts believe that cable companies,
led by Comcast and SBC, may have the
“Vonage may have created the category, but
watch for the likes of SBC and Time Warner to
come in and take ownership.”
Fred Burt, Interbrand
itive VOIP brand. It currently leads the
category with one million subscribers (a
third of the U.S. market), up from
300,000 last November. Time Warner is
second with about 600,000 subscribers,
followed by Cablevision with 250,000.
Many analysts predict that the market
for VOIP in the U.S. is set to explode,
which explains why both cable companies and Internet giants like eBay,
Google and Microsoft have jumped into
the fray. Research firm IDC, Framingham, Mass., forecasts the total number
of U.S. residential VOIP subscribers to
grow to 27 million by 2009, up from
three million in 2005. More than half
of households that subscribe to the service have disconnected or replaced their
landline phones, per research group
Telephia, San Francisco.
Perhaps most noteworthy is eBay’s
$2.6 billion-plus purchase of Skype, the
Luxembourg-based company whose
free peer-to-peer Internet phone service has 54 million users worldwide.
(Skype users talk via computers with
a headset or a mike, whereas Vonage
and other like-minded providers
require a broadband feed to talk
through cyberspace using a regular
telephone.)
Reports are mixed on how eBay’s purchase of Skype changes things for Vonage,
though an acquisition of such magnitude
surely legitimizes a new product category. Some argue that eBay may use Skype
simply to enhance its auction process,
thereby lessening Vonage’s concern. But
eBay users might be introduced to Skype
during a buyer-seller transaction and then
continue to use the technology because
M58
OCTOBER 10, 2005
inside track. “It’s very difficult to prevent
the owner of the pipe from providing a
competitive service, and if you can get it
all bundled from one provider, why go to
Vonage?” said Fred Burt, senior director
at Interbrand, New York. “Vonage may
have created the category, but watch for
the likes of SBC and Time Warner to
This is only a test: Above: storyboards from
the movie theater ad test this past August.
come in and take ownership.”
Others note that new rivals could soon
throw their hats in the ring. “VOIP is easy
to build and distribute. No one’s stopping, say, TurboTax from entering the
business,” said Jim Nail, an analyst with
Forrester Research, Cambridge, Mass.
So, how does Harris, a former ad
agency executive and dot-com marketer
at HotJobs who came to Vonage as chief
marketing officer in 2002, plan to beat
back competitors and negotiate the rapidly changing VOIP landscape?
“Through a combination of excellent
product and a robust feature set,” he
declared. “We represent value and our
brand certainly helps. VOIP is becoming
more mainstream. The category is growing and so are we.”
Harris has reason to be confident, given that much of Vonage’s marketing is
measurable. The company continues to
build its customer base through an
aggressive direct response campaign that
combines TV, print, radio and online
advertising. Chalk up that lesson in
accountability to Harris’ dot-com days.
“I learned how to move quickly and
how to be accountable,” said Harris.
“One of the lessons [of that era] is that
it isn’t just branding. It’s also about
results.”
Internet users have likely caught the
flood of Vonage pitches, many of which
include an offer for a free month’s service and a call to action to its Web site. In
an implicit recognition of its early tech
audience, a recent banner ad insists that
“no nerds are needed” to take advantage
of the service.
Of the $189 million that Vonage spent
in the first half of this year, nearly two
thirds ($122 million) was devoted to the
online medium, per TNS. Vonage consistently ranks in the top five companies
in terms of online ad impressions. The
company increased the number of unique
visitors to its site to 6.2 million last month,
up from 1.3 million a year ago, according to Internet tracker comScore Media
Metrix, Reston, Va.
Offline, Vonage has produced some
of the most distinctive clutter-busting ads
of the past year with its “Stupid Things”
campaign, featuring a series of punchdrunk TV spots via Arnold One, Boston.
With its infectious “woo-hoo” musical
backdrop (a tune courtesy of the 5.6.7.8’s
band on the Kill Bill soundtrack), the ads
culled footage from a variety of sources
including America’s Funniest Home Videos
and online forums. Individuals were
shown attempting an assortment of boneheaded stunts, such as skiing off a roof,
attempting to balance on a rolling treadmill or sawing a tree that falls on a car roof.
In one spot, a child wielding a baseball bat
swings and misses, and the bat goes crashing through a sliding glass door.
The message: Humans do stupid
things, but paying too much for phone
service shouldn’t be one of them.
Some observers might assert that craftwww.brandweek.com
Vonage 2005
ing a message that’s tantamount to insulting your target audience is itself “stupid.”
In retrospect, however, the campaign
looks pretty shrewd.
Harris, of course, only agrees with the
latter. “I don’t think we insult. We got
people’s attention and provide them with
a solution,” he said. “Humor is a proven
way of getting attention, and the ads have
a degree of humanity.”
Arnold execs say one of the keys to the
effort was to avoid the usual pitfall of barraging consumers with a list of features
when introducing a new technology to a
general audience.
“The temptation is to go into [things
like] antilock brakes,” said Matt Lindley,
svp/executive creative director at the
agency. Instead, his team reeled people
in with price as a lure, but in the context
of irreverent humor. As evp Greg Johnson said, “We’re snarky, a little bit of a
smart ass, and very cheeky.”
w
hile Harris argues his VOIP service reaches varied audiences—
“our demographic skews are
wide-ranging, including over 40,” he
said—sports is an important component
of the strategy. Harris recently launched
an ad (independent of Arnold) with Phil
Esposito, the former hockey player who
once famously crashed into the ice rink.
The ad, which runs on cable channels
from Lifetime to Spike, shows a tape of
Esposito’s spill from 1972, with the modern-day man claiming he’s smarter now
that he’s a Vonage customer. An 800number urges consumers to sign up.
hero, who installed a new Vonage device
for them with a free year of Internet phone
service. The star visitors included the
NBA’s T.J. Ford, Daniel Ewing and Sean
May; and the NFL’s Keith Bulluck,
Desmond Howard and Chris Simms.
Vonage has sponsored Major League
Baseball, launching a campaign during
the start of the 2004 MLB season with
Woo-hoo! Culling footage from sources like America’s Funniest Home Videos, Vonage launched
ads showing a guy skiing off a roof (left) and a child sending a baseball bat through a glass door.
national cable and radio touting price
deals such as 500 minutes of local and
long-distance service for $14.99 per
month. The ads featured a fictional head
of a major phone company on the verge
of a nervous breakdown.
Vonage also built awareness by latching onto other areas of entertainment.
The company is currently sponsoring its
second season of MTV’s The Real World,
with the Austin, Texas, set featuring product placement including a Vonage videophone and branded mouse pads, as well
as a PC screensaver showcasing a “Stupid Things” advertisement.
“The temptation is to go into antilock breaks . . .
We’re snarky, a little smart-ass, very cheeky.”
Matt Lindley & Greg Johnson, Arnold One
“Sports is a part of American life and
that is another good way to connect with
Americans,”
said
Harris,
who
approached Esposito after discovering
he was a Vonage user, then shot the ad
in the ex-hockey player’s living room.
“[Phil] isn’t an overly aggressive male;
he gives a human performance and he
seems really likeable.”
To celebrate its one millionth subscriber milestone, Vonage partnered with
professional athletes on a consumer promotion to thank its customers. Nine select
Vonage subscribers last month received
surprise “thank you” visits from a sports
M60
OCTOBER 10, 2005
and Denver this summer. Dubbed “Psychic Powers,” the ad looks like a Beavis &
Butt-head cartoon, with a character who
hopes for a world in which he gets the dinner he ordered and asks the phone company not to overcharge him. Arnold execs
are still weighing the merits of the ad.
“We’ll get the results and decide whether
to give it a wider rollout,” noted Finch.
According to Harris’ colleagues, one
of his personal strengths is a willingness
to try new things. “Dean is always up for
experimenting,” said Caroline Finch,
director of marketing at Vonage. “He’s
a bright, innovative guy who loves marketing and has a sense of humor.”
Harris’ own characterization of his
style is “participatory.” He said, “I’m collaborating. I would hope people think
I’m fair. I used to run an agency, so I’ve
been on both sides of the fence.”
As an example of experimentation,
Finch got the green light from Harris to
run an ad test in movie theaters in Boston
Winning customers has been the name
of the game for Vonage to this point, but
it won’t necessarily remain the same.
Competition will force already low prices
even lower, and the problem of customer
“churn” looms.
Analysts estimate that Vonage’s costper-acquisition (CPA) is around $250 per
head, with each customer representing
income of between $15 and $25 per
month. “It’s not a bad formula from a
direct-marketing perspective,” said Forrester’s Nail. “But you are counting on
loyalty.”
Such a high CPA isn’t sustainable forever. By comparison, Netflix spends
around $38 to acquire each customer and
then earns $17 off each of them per
month. DirecTV spends hundreds of dollars per acquisition, but gets more monthly revenue from each customer it gains.
Industry watchers believe cellular
phone VOIP will be the next killer app,
and think Vonage should find partners in
the mobile space pronto. When SBC
completes its acquisition of AT&T, for
example, it likely will aggressively market its VOIP offering, CallVantage. And
Verizon’s VOIP offering VoiceWing costs
just $19.95 per month.
Or, perhaps the category will not reach
the heights many anticipate. After all,
people do stupid things (like clinging to
familiar ways when better ones exist).
Just ask those who may have caught
a Vonage billboard that resurrected one
of the more foolhardy missteps in recent
presidential history: “Oval office. Humidor. Intern . . . Paying too much for
phone service is just as stupid.”
B
www.brandweek.com
they’ve found t
Woods (l) and Morefield
BY BARRY JANOFF Photograph by Vern Evans
m62
OCTOBER 10, 2005
www.brandweek.com
Ameriquest 2005
KEVIN MOREFIELD &
BRIAN WOODS
i
t was simple, but effective, irony: A woman
bolts of mortgages to arguably the most active
in a business suit talking about refinancing
brand in the financial services business. By
a home from the thick of screaming rock fans,
sponsoring the Stones, Major League Baseball,
getting picked up and “surfed” toward the
the NFL and a raft of other venues, the com-
stage, screaming, “I love you, Mick!” Yes, that
pany does not expect to convert everyone who
was Ameriquest Mortgage sponsoring the U.S.
attends a concert or sports event into its core
leg of the Rolling Stones “A Bigger Bang” tour,
business, $30 billion annually in sub-prime
resounding across national TV. If it seemed like
mortgage loans for people with lower-than-
a stark contrast between blazing guitars and
normal credit ratings. But, in the aggregate,
three-button blazers, Mick Jagger himself put
these marketing partners form a landscape of
heir groove
Alliances with baseball, the
NFL and rock ’n’ roll’s longtime
bad boys are more than just
dreams at Ameriquest.
it in some context. Between “Tumbling Dice”
family activities that both transcend its indus-
and “Rough Justice” at the band’s Sept. 13 con-
try’s
cert in New York, he observed, “This is our
Ameriquest’s ambitious brand theme: “Proud
20th show at Madison Square Garden. Now
sponsor of the American dream.”
I see people who were at our first concerts
bringing their kids.”
stolid
stereotype
and
underscore
For sponsors, however, those same deals carry high price tags and serious logistical issues,
In those words lay the essence of
especially where global activation is required.
Ameriquest’s demographic polestar, which has
“Literally, to us, that means a home,” said Bri-
guided the company beyond the nuts-and-
an Woods, Ameriquest’s chief marketing officer.
www.brandweek.com
OCTOBER 10, 2005
m63
Ameriquest 2005
“But when you expand upon that, it
means the ability to see a baseball game,
to go to the Super Bowl, to see a Rolling
Stones concert. These are all great aspirational dreams that Americans have. It
helps us to have this broad umbrella platform that certainly means home ownership but also can apply to various promotional or targeting activities.”
Woods and Kevin Morefield, Ameriquest’s evp-strategy planning, have
indeed blazed trails across this marketing
spectrum. Not just by linking percentage
rate pitches with Major League pitchers
and ubiquitous home ownership touchpoints with NFL touchdowns, but also
by opening the eyes of the privately held
firm’s own management to the disciplines
of brand building.
According to Morefield, Ameriquest
reached its target audience and essentially paid for the NFL deal within a month,
based on the response rate from consumers. Analysts valued Ameriquest’s deal
at roughly $55 million over three seasons,
with the last two years optional. The payoff: Ameriquest booked $2 billion in sales
revenue in 2004, per financial industry
watchers, and is on track to exceed that
figure by 10-12% this year.
“Right now, in terms of unaided awareness, we are the No. 1 mortgage company,” said Morefield. “And that’s the space
we saw was there to be filled. It’s a frag-
Bang the drum: Concert links brought online lures, direct mail and ads with Stones imagery.
aspects of “American dream” lifestyles has
covered a wide canvas, from the zenith of
the Super Bowl halftime show to becoming title sponsor of Nascar Busch Series’
Ameriquest 300 race at the California
Speedway, signing on as associate sponsor
of Don Prudhomme Racing’s Miller Lite
dragster on the National Hot Rod Association circuit, team-specific affiliations
with MLB and NFL clubs and acquiring
30-year naming rights to Ameriquest
Field, home of MLB’s Texas Rangers. But
the transition from traditional mortgage
firm to active brand marketer did not
come to life without a difficult birth.
Morefield, 41, joined the company 13
years ago as a branch loan officer. “Then,
about eight or nine years ago, someone
said to me, ‘Along with your other duties,
“I look for activated, all-in partners. To their
credit, they went after top-tier partnerships that
really resonate with people.” John Brody, MLB Properties
mented industry, and there aren’t a lot of
branded mortgage companies.”
However, not all of the public’s perception of Ameriquest has come from the
sports and entertainment sections of the
paper. In July, Ameriquest Capital,
Ameriquest Mortgage’s parent company,
earmarked $325 million to help resolve an
investigation into complaints of overcharges, hidden fees and other incongruities raised by 30 state attorneys general. Earlier, the company agreed to pay as
much as $50 million to resolve a classaction lawsuit alleging that thousands of
borrowers in California, Texas, Alaska and
Alabama received more expensive loans
than they had been promised. In both cases, the company denied any wrongdoing.
Ameriquest’s strategy to make the
brand synonymous with the brightest
m64
OCTOBER 10, 2005
now you’re in charge of marketing,’” he
recalled. “One of the first things I had to
do was explain to the chairman [Roland
Arnall] why we had a marketing budget.
He didn’t want one. So to go from there,
from about a $3 million budget to where
we are now, is personally very fulfilling.”
That figure has since grown to measured media expenditures of $126 million
in 2004, per Nielsen Monitor-Plus, and
$66 million through July 2005. An equally telling stat: Ameriquest spent about
$26.9 million on sports-related advertising in 2004, which placed them 80th in
that category; in 2003, the company was
not even among the top 100.
Not that today’s battles over marketing budgets are any less taxing. “I remember the types of hoops I had to jump
through to get the baseball stadium deal
done, to get the NFL deal. It was difficult,” recalled Morefield. “And that’s
understandable because we’re talking
about investing a lot of money in areas
not directly related to our core business.
It wasn’t just the budget. It was the idea
of doing these things.”
d
espite the high-profile ROI, Woods
and Morefield closely scrutinize
spending. For example, the company is “altering the nature of the [NFL]
relationship to where it makes more sense
for the brand,” Woods, 45, said. It opted not to sponsor the Super Bowl XL
halftime (Sprint takes over) or renew as
the NFL’s official mortgage company. It
will continue as a broadcast sponsor on
this season’s telecasts and as a local sponsor on a team-by-team basis. The company will break two ads during the title
game and Morefield and Woods have not
ruled out a return to halftime sponsorship. Meanwhile, Ameriquest will put
more eggs into its MLB basket—which
extends across more terrestrial and media
real estate than the NFL’s weekly game
structure—including official mortgage
company status and sponsorship of instadium and online balloting for the AllStar Game. “MLB fits very well from a
brand perspective,” Woods says.
“Ameriquest was the first deal I cut when
I rejoined the league [in April 2004 after
two seasons with the NBA’s Boston Celtics]
and I view them as my lucky charm,” said
John Brody, svp-corporate sales/marketing
at MLB Properties, New York. “I like that
they are not content to sit on what they
have. I look for activated, all-in partners
who want to grow a relationship. To their
credit, they went after top-tier partnerships
that really resonate with people.”
Through the bats and balls and guitar
riffs, Ameriquest keeps its focus on the
hard interactive returns vital to its business.
“We are a private company, so our goal
with branding is not to raise stock prices,”
said Morefield. “It’s to have more people
www.brandweek.com
Ameriquest 2005
respond to our direct marketing and convert better. One of the places we can look
at is the MLB deal because we use the official sponsor logo on our direct mail. We
can measure the difference when it’s there
and when it’s not.” On a personal level,
Morefield said part of his ROI comes
when he watches ESPN’s SportsCenter.
“Even if you don’t count Ameriquest Field,
it’s hard [for me] to sit through the baseball season without seeing our logo four
or five times in stadium signage.”
t
his is response marketing at its roots,
with ROI at its center,” said David
Hennagin, managing director at
DDB Direct, Los Angeles, Ameriquest’s
lead agency of nine years.
Mind you, the agency is no slouch
when it comes to standalone creative
hooks. One of this year’s spots, “Surprise
Dinner,” cleverly translated Ameriquest’s
“Don’t judge” mortgage mantra line into
an easily identifiable situation: A man is
preparing dinner when his cat knocks over
the pasta sauce. His wife walks in to find
her husband holding the cat, drenched in
blood-red marinara in one hand and a
knife in the other, cuing the tag: “Don’t
judge too quickly . . .” That earned DDB
Direct the 2005 Creative Arts Emmy
award for outstanding commercial. But
at day’s end, said Hennagin, all of
Ameriquest’s marketing must move the
needle. “They make money when the
phone rings, when people go to their
Mick, mortgages and murder?: DDB Direct
flexed creative muscles in concert-themed spots
(top) and one that warned: “Don’t judge.”
www.brandweek.com
Web site or respond to a direct mail
piece,” he said. “We measure everything
for them. I call it sticks, throttles and
gauges. We’re sitting in the co-pilot seat;
we bring them ideas and then navigate
with them. Knock wood: the brand is the
strongest it’s ever been.”
Morefield brought on Woods this past
January to help expand the company’s
lifestyle platform. A marketing veteran
with stints at NetZero, Blockbuster and
Planet Hollywood, Woods admitted that
he hadn’t heard of Ameriquest, but a look
at its growing roster of sports ties
impressed upon him the potential to
reach more deeply into consumer’s lives.
Woods ushered in a switch from the central theme, “You are more,” to the even
more encompassing “American dream.”
headlined by Paul McCartney and thinking, “Where can we go from here?”
The deal—with Mick Jagger and Keith
Richards signing off on every decision—
ultimately gave Ameriquest rights to use
the Stones’ music, logo and images in
marketing. When the Stones appeared on
the cover of the Sept. 22 issue of Rolling
Stone magazine, Ameriquest bought an
inside cover spread. Like the “Surf” TV
spot, it melded mortgages and music,
showing an executive in a suit holding a
briefcase, his tie emblazoned with the
Stones’ tongue and lips logo. Holding a
lit cigarette lighter, his arm extends over
a photo of a crowded concert, with the
text, “Ameriquest Mortgage is proud to
sponsor the Rolling Stones and the American dream.”
“Based on Brian’s goals and consumer
demographics, I felt the Stones and Ameriquest
would be a real interesting fit.” Jay Coleman, EMCI
The former was “a good message
because it means that people who come
to us are more than a credit score and more
than a financial background,” said Woods.
But, he added, “Part of my mission was
to take a tremendous foundation and
expand it to a broader audience. Not just
to people who were in the market for mortgages, but a broader swath of consumers
who, when the time comes, will think of
Ameriquest for their mortgage needs.”
That led to a new alliance with someone
he’d worked with extensively in previous
entertainment ventures. “Brian told me
that, after he got to Ameriquest and found
out where the bathroom was, that we
should talk,” said Jay Coleman, founder
and CEO of entertainment marketing firm
EMCI, New York. “He wanted to extend
their lifestyle marketing platform from
strictly sports to other areas that would
build emotional connections between the
brand and their customers, and also provide the brand a great communications and
integrated marketing platform.”
Coleman had represented the Rolling
Stones for tour sponsorship sales since
1981, and the band was planning a new
tour. “Based on Brian’s goals and the company’s consumer demographics, I felt that
the Stones and Ameriquest would be a
real interesting fit,” Coleman said.
“Talk about having things fall into
place,” said Morefield, who recalled sitting at the Super Bowl halftime show
Beyond its creative splash, the Stones
deal brought Ameriquest vital interactive
components, including online lures with
ticket sales and tour info, and 20 million
pieces of direct mail emblazoned with the
rock group’s logo. “From a marketing
perspective, the Rolling Stones’ biggest
fans from the ’60s and ’70s are now
grown up with kids and own homes and
have mortgages,” Woods said.
Morefield realized almost immediately
after the Stones tour began that the company’s strategy was on target. “Some articles read, ‘The Stones are selling out, all
they think about is money, Ameriquest is
sponsoring the tour.’ I looked at that and
thought, first, many of the articles are not
in the entertainment section, they’re on the
front page.” Plus, he stressed, “The articles didn’t have to explain who we are.
They assumed people knew about
Ameriquest. That’s a complete change
from even a year ago. That’s a big impact.”
According to Coleman, “You can
judge a brand by who they stand next
to. Ameriquest is standing next to MLB,
the NFL and the Rolling Stones. Hello!
With the Stones, we ended up with a platform that integrates the band very well,
celebrates Ameriquest and humanizes its
employees.” Not to mention a lasting
image that must bring a smile to the faces
of Woods and Morefield. “Even a guy
who sells you a mortgage,” said Coleman,
“can rock out at a Stones concert.” B
OCTOBER 10, 2005
m65
good knight
M66
brave new frontier
sheets and pillows were sold to consumers.
Westin had a little fun with its “Who’s the
best in bed?” print campaign, yet the newly minted brand pushed its way to the
upscale/luxury tier above the Pritzker family-owned Hyatt, which had invested little in modernization until last year.
In 2001, Westin introduced the Heavenly Shower, featuring dual showerheads,
curved rod, oversized cotton towels and
kimono terry robes. Sternlicht and Westin
svp Sue Brush fixed cramped hotel exercise
rooms by partnering with Reebok to create spacious fitness centers with state-of-theart-equipment, specially designed workouts, and fitness and wellness classes.
The once-drab Sheraton also received
a lift with a $750 million, three-year renovation that included sleigh beds, branded the Sheraton Sweet Sleeper and the
Sheraton Service Promise, offering instant
discounts, loyalty club points or moneyback satisfaction guarantees. Lounging
pillows and fluffy duvets also have made
their way into the midscale Four Points by
Sheraton brand with the Four Points Bed.
“Starwood may not be the first hotel
with a great bed, a spa or even with an
experience, but it is the first to articulate
it to a growing travel market,” said Tom
Thomas, founder of Tom Thomas & Co.,
a branding consultancy in New York.
“Sternlicht may not have the imprimatur
of a great hotelier, but he is great at being
certain that the discipline and the seamlessness of his vision are executed.”
Sternlicht’s investment firm recently
acquired Le Meridien’s assets, to be managed by Starwood Hotels & Resorts. Heyer’s team will spin some of the new properties into lifestyle brands using dynamics
such as branded entertainment that made
Coke ubiquitous. Heyer brought in Javier
Benito from Coke to be CMO; Nike and
Starbucks vet Scott Bedbury is a brand
advisor and Hollywood talent agency Creative Artists Agency is on his roster.
Starwood Hotels is said to be in talks
to sell half its 140-owned properties (it
manages a total of 752 hotels), ostensibly
to raise money while real estate values are
peaking. Already, more W Hotels and
condominiums are in the pipeline for Las
Vegas and the Maldives, and a mid-tier
version, currently dubbed Project XYZ,
will launch during 2007.
“They’ve made a big push in becoming
managers of their properties,” said Matt
Quinn, travel analyst at Zacks Investment
Research, Chicago. “[Hotel owners] say, ‘This
company does a great job with their brands,
and we want to be a part of that.”
B
promoting the superiority of its content.
The ads, helmed by Rob Cohen who
directed The Fast and the Furious, attempt
to bring the viewer inside the radio.
“Why is Sirius the choice in satellite
radio?” asks a voiceover in one ad. “It
feels like you’ve got every song ever
made,” answers a woman in a Jeep.
Another guy in a car offers: “No bleeps,
you know what I mean,” while three guys
tailgating testify, “If it involves a uniform,
a stick or a ball—bam, it’s in there.”
Another man sums it up: “It’s flat out better than regular radio.”
Ryan, who has been at Sirius for three
years, says the campaign is aimed at
demystifying satellite radio, something
the previous “It’s_on” effort, via Crispin
Porter + Bogusky, Miami, failed to do in
2003. Those ads played up the genre’s
commercial-free music aspect, but left
consumers confused. “It had high emotional appeal but didn’t answer enough
questions,” said Ryan,
These days, Sirius can talk to a more
educated consumer and now offers a
wider array of available satellite radio
receivers, which average around $99. The
new portable Sirius S50, for example, can
OCTOBER 10, 2005
jumpin’ java
burning over buying. Mp3 downloads,
MySpace-type communities and retail partnerships—à la Starbucks and Alanis, but
also Garth Brooks and Wal-Mart, the
Rolling Stones and Best Buy—are emerging as alternative means to distribute tunes.
The music store of the future will not
be a store, per se, because it won’t be able
to justify its square footage. Instead, it will
be composed of many smaller models. Consolidate their power and add in the rise of
self-publishing and digital purchase and
delivery from Amazon to iTunes and you’ve
got a landscape shifting too quickly for traditional models to remain entrenched.
With lattés and coffeehouse ambience its
core business, Starbucks can avoid the doldrums plaguing the music industry. A host
of other brands—from Pottery Barn to
Heineken—are taking a page from its playbook and moonlighting as music marketers.
In a recent Cheskin study, Starbucks
ranked No. 6 among 50 global brands on
“brand extendibility,” defined as how
much latitude consumers give it to stretch
to new markets. Would consumers flock
to buy tickets at a Starbucks’ Web portal
or attend concerts at branded venues? Will
store and play back 50 hours of music.
Sirius couches it as an iPod “without all
the work.” Pioneer, JVC, Audiovox and
others also sell a range of Sirius receivers.
Outside of traditional auto partners
like Ford and Hertz, there’ve been some
new names in Sirius’ orbit: Sprint signed
a deal to serve up Sirius content through
cell phones; Starwood’s W Hotels now
offers in-room service at select properties and satellite player Dish TV is also a
partner. Next up: Sirius-provided videos
for cars equipped with TVs.
“You’re going to see us continue to
take our content and make it available
to the consumer wherever they want to
get it: online, cellphones, satellite TV,”
said the always-confident Karmazin.
“We’re going to be known as the best
radio content in the world by more people five years from now than we are today,
and Scott’s going to help lead us there.”
Greenstein, who just signed a five-year
contract, welcomes the challenge to keep
the company flying. “I want it to feel like
this is the early days of MTV or Miramax,
where there’s a real sense of creation of
something exciting that will last for a
long time.”
If his early successes are any indication,
Sirius will deliver on that promise.
B
they one day listen to Hear Music tunes
on Starbucks-siren-logoed Mp3 players?
“I think they could move toward doing
some live stuff—the goal is to find venues
where music can be performed,” Bedbury
said. “Who’s to say Starbucks can’t also sell
tickets, perhaps through a Web site? Whatever they do, it won’t slow down the
process—coffee is a quick experience.”
Saunders isn’t sure patrons would, say,
queue up for Queens of the Stone Age seats
while their ’ccinos get frapped, but music
will remain a hot prospect. “Other parts of
our business have extended to other stores
and channels, so we can’t see why music
wouldn’t have legs outside our stores.”
Lombard’s title—president of entertainment, not just music—absolutely hints of
more to come. But he’s in no rush to define
the brand; he’ll let his audience do it.
“We are convinced that in five years we
would have transformed the way that individuals will explore, discover, personalize
and buy music,” Lombard said, “and we’re
working hard at executing the first phase of
our strategy. “We’ve achieved success so far,
but we’ll continue to monitor what our customers tell us—we’ll learn from them [how
we should program] our CDs and our WiFi network. This is a work in progress.” B
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