evan-horvath96-blog

[evan-horvath96-blog]

Non-store Retail Surpasses Brick and Mortar (not surprising)

The US census Bureau reported that online retail surpassed in-store sales for the first time in February. Although retail industry trends are moving toward online retail, it still only accounts for about ten percent of overall retail revenue. As you can see in the graph contained in the link below, Online retail sales skyrocketed from under ten billion to nearly 60 million today. Marketers at any organization need to understand the implications of this movement in the way consumers want to buy. The statista graph contained in the link below does a really great job of depicting how much non-store retailing has grown over time since the early 1990′s

https://www.statista.com/chart/17626/nonstore-retail-vs-general-merchandise-and-grocery-store-sales/

We spoke about the Border’s case in class. Their major mistake was not keeping up with industry trends as far as website development and electronic readers go, therefore, they went out of business in the early 2000s. Other retailers could implement online retailing into their business model to integrate this industry trend into their business. The underlying consumer trend is that people want convenience. 

Will Brick and Mortar retailers be able to survive in this non-brick and mortar market place? Wal Mart has taken steps to offer preordered grocery pickup for many locations. What efforts will other brick-and-mortar retailers implement to try and stay relevant to this trend?

[evan-horvath96-blog]

Craft Beer Revolution

In recent years, small craft breweries are growing in volume relative to the overall beer market. In class we discussed the importance of uncovering and taking advantage of both industry and consumer trends. The industry trend is moving toward craft beer. Revenue in craft beer is up 7% while Market share grew to 24.1% of the total beer market. In addition, the number of craft breweries has grown from 1500 in 2008 to over 7000 present day. These two pieces of information are vital to understanding the direction that the beer industry is trending. I think the graph contained in the link below is very effective in communicating the growth in craft beer.

https://www.statista.com/chart/3568/craft-beer-in-2014/

Craft breweries face a variety of unique challenges from a marketing perspective that we had discussed in class. First, pricing is often very difficult. In the case of Sam Adams, the price they charged for their beer was initially higher than what consumers were willing to pay because they were unable to leverage economies of scale. Distribution is also a challenge for many craft brews. For example, Troegs does not have the same distribution channel capabilities that annheuser busch has. Even marketers at the big beer brands are picking up on this trend. For example, Blue moon is now the market leader as far as craft beer is concerned. 

Despite the growth in craft beer, there has been a downturn in beer consumption by less than 1% in the last few years according to the article we read in class about beer and alcohol trends. This article revealed that lower alcohol beverages, and non-beer alcoholic beverages such as twisted tea are taking over some of the market. The thought I will leave you with is this: We know that the non beer alcoholic beverages have adversely effected the beer industry as a whole. Will growth in non-beer alcohol effect craft beer in the same way?

[evan-horvath96-blog]

Platform Businesses and Organic Growth

Nike is part of a platform business model. Meaning they have scaled either vertically or horizontally to expand value creation. Vertical Integration refers to owning and integrating a greater length of the delivery pipeline. This would look like Nike purchasing a production plant (upstream) or a distributor (downstream). The other way is horizontal which would be creating value by expanding their own product offerings.

The very subject of these two different ways to grow applies directly to the four quadrants of growth that we discussed very early on in the course. Vertical integration would most likely be through diversification and buying out other companies at different stages in the pipeline. Horizontal integration is more aligned with what marketing strategy is chiefly concerned. Horizontal integration is characterized by creating value through creating new products and brands. This would be either market expansion or product expansion in the four quadrants. 

Another class application is abundantly clear as well. Horizontal integration has to do with growth through introduction of new products or new brands. We brand extensions in class. The emphasis of this concept is to introduce line extensions regularly for your most successful brands. There are two ways to do this. First, vertical stretching would be offering almost the same product with added features and benefits at a higher price point, OR less features and benfits at a lower price point. The idea is to gain access to different markets through manipulation of price. This could also fit into Market expansion in the four quadrants model. The other type of lie extension is called a horizontal category extension. This entails keeping the price relatively constant while changing something about the existing product offering. For example Nike has many basketball shoes that are seemingly not differentiable to the average consumer. But every time they change the smallest aspect of a successful brand, it is a horizontal category extension. The video included in the link to the article includes examples of both vertical stretching and horizontal category extension.

One thought that I have regarding Nike’s expansion over the years is as follows: Their progression as a company  goes running shoes --> athletic shoes --> athletic apparel --> now even athletic equipment. Does Nike have any more room to expand into new product categories? At what point will horizontal category extensions no longer be different enough to entice a consumer?

[evan-horvath96-blog]

Competition Brewing

https://www.fastcompany.com/3034572/dunkin-donuts-and-starbucks-a-tale-of-two-coffee-marketing-giants

This article focuses on the developments in marketing strategy over two brands that now control well over 50% of the international coffee market. On a global level, Dunkin and Starbucks combine to make up 60% of the world’s coffee market. Which brings me to our first Marketing Strategy application. In class we had discussed different types of competition across industries. There are Monopolies, Oligopolies, and Monopolistic competition. This particular scenario is an oligopoly because two major brands dominate the coffee market making up well over half. 

As far as marketing strategy goes, each of these brands has fundamentally different approaches to promotion of the brand. As a whole, Dunkin’ has a focus that is much more aligned with traditional advertising through commercials and celebrity endorsements. My personal favorite is the 2007 Ace Frehley commercial. It emphasizes Dunkin’s brand positioning as the coffee for the average human by showing a stark contrast with Ace Frehley not being a typical human. It was very comical. See video below.

https://www.youtube.com/watch?time_continue=21&v=mmxWnCnSwXk 

On the other hand, Starbucks has typically relied on word of mouth and other untraditional means to promote the brand. Starbucks has always focused on customer experience to in a way promote itself. They started a red cup holiday advertising campaign in the early 2000s. In 2005, one creative thing they did to promote the brand was by affixing the red coffee cups to the roofs of cabs in Boston and elsewhere to make it look like someone had forgotten their beverage. This was a creative, non-traditional way to promote the Starbucks brand.

As far as a SWOT analysis goes, each of the brands has a unique profile of internal strengths and weaknesses as well as external opportunities and threats. Let’s start with Dunkin’. Strengths would include a superior ad presence, mobile Dunkin app, which allows customers to use their phones to check out in the store.  A weakness would be that although Dunkin’ is a large company, Starbucks nearly doubles their American presence. Opportunities would be to continue using momentum in TV programming such as shark week.   They should expand their presence into other TV programs. A threat would be that Starbucks has a superior presence as far as corporate social responsibility goes. 

From the perspective of Starbucks, strengths would include corporate social responsibility initiatives, brand reputation for premium ingredients and coffee, and superior store presence in North America. Weaknesses would be the affordability of a cup of Starbucks coffee. Many people are willing to spend that much on coffee but Dunkin’ appeals to the average coffee drinker.  Opportunities would include expansion upon their equal rights initiatives and their support of the LGBTQ. In 2014 they flew a huge rainbow flag atop their headquarters. Starbucks has a reputation for being socially responsible in the way they treat their employees, the environment, and societies in which they operate. Threats would include the higher expenses related with using environmentally friendly materials in their cups, and increased costs surrounding employee benefits packages and premium coffee ingredients. 

Since Starbucks is stilll the market leader, I wonder what Dunkin’s next strategic moves are from a marketing perspective. They’ve saturated TV with ad time in the past. How else could they stimulate demand to be even more competitive with Starbucks? I think one possible course of action is to use the actual Donuts and Dunkin to draw in more consumers because that is something that Starbucks can’t quite imitate. What other avenues could they take?

[evan-horvath96-blog]

Snap’s IPO

In anticipation of Snapchat’s upcoming IPO, expected in March, it has become pertinent to examine Snap’s future growth prospects. In the highly competitive social media market, Snap has seemed to lose traction in the industry. For this reason it is not a good investment option. There are many factors that must be considered when evaluating Snap as a potential investment such as average change in unique viewers per Snap, changes to in-app features, stagnating user growth, increased competition, lack of investor voting power, and rapid increases in losses despite impressive revenue growth, all of which will be obstacles if Snap is to achieve its goal of raising $3.2 billion in external funding. 

The release of Instagram Stories in August, 2016 prompted a steep decline in Snap usage. In a sample of 21,500 Snapchat stories, it was revealed that the average unique viewers per story decreased by 40% following the introduction of Instagram Stories to the market.

https://techcrunch.com/2017/01/30/attack-of-the-clone/

As the above graphic shows, average unique viewers per Snap story decreased significantly after the summer introduction of Instagram stories. Furthermore, in the second half of 2016, new downloads of Snap fell to record lows of 11th within the industry.

Changes to in-app features have also affected On October 7, Snap opted to remove the auto-advance feature so users could no longer instantly watch every story in their list in a row. Snapchat users now have to manually select each story they want to watch. The removal of auto-advance is the main reason why unique viewership of Snapchat stories has declined. Snapchat users are no longer being shown stories that don’t interest them. In the past, users would simply fast forward through stories that do not interest them while still triggering view counts. However, without the auto-advance feature, the viewership of less interesting stories is being bypassed altogether, therefore, leading to decreased view counts. After the removal of Auto-Advance, the residual views are more valuable because they are more intentional. So when considering the 9.64% drop in views, keep in mind that the user’s manual selection of stories increases consumer engagement. Overall, the change influenced users to open Snapchat less often because it is no longer convenient to view stories. Furthermore, Instagram usage has increased partially because they offer the Auto-Advance feature.

As Snap’s IPO date rapidly approaches, some investors are concerned with Snap’s stagnating growth. In the most recent quarter, Snap’s user base only grew 3.3% to 158 million users in the most recent quarter. This figure is down from the 7% growth posted by Snap in the third quarter of 2016. The first graphic demonstrates the recent stagnation in Snap’s growth while the second graphic provides meaningful insights to how other social media companies have performed post IPO.

https://www.wsj.com/articles/the-next-facebook-wall-street-sizes-up-snaps-ipo-1486920692

Conversely, Instagram is trending in the other direction with rapid increases in popularity because of the added reach that social media users experience. Not only can users see traditional photo posts, but they can also watch Instagram stories that are delivered in a conveniently located banner across the top of the screen. Consumers enjoy the increased scope that is offered through the Instagram explore tab, which promotes photos and videos that they may enjoy based on their viewing history. In addition, it is important to note that people that were late to build a profile on Snapchat are seemingly abandoning the platform altogether due to the fact that it is easier for them to reach more people through their existing audiences on Instagram. Another advantage enjoyed by Instagram is the large international market in which they operate. 80% of their users are international, further improving the reach and growth potential of Instagram relative to Snapchat. The below graphic is evidence of Instagram’s accelerated growth.

The rapid growth of Instagram could have negative implications to Snap’s upcoming IPO.

Another concern for investors is that Snap’s reported revenues for 2015 and 2016 were $58.7 million and $404.5 million respectively. Despite the impressive growth in revenues, losses widened from $372.9 million in 2015 to $514.6 million in 2016.

Perhaps the chief objective for any firm is to maximize value and wealth of the shareholders. Snap Inc. is pitching an IPO that’s more expensive and comes with less shareholder control than any social media company that came before it. Shares will be priced at $14-$16 with the aim of raising $3.2 billion in funds. Snap will be the first publicly traded company to offer non-voting shares.Only majority holders, Evan Spiegel and Bobby Murphy, will have a voice in the direction of the company;therefore, investors will be forced to trust management to maintain revenue growth.

https://www.bloomberg.com/news/articles/2017-02-16/snap-seeks-to-raise-as-much-as-3-2-billion-in-initial-offering

In order for Snap to reach its projected valuation of $19.5-$22.2 billion, it is imperative that they continue to excel in two areas. Because of Snapchat’s decelerating user growth, they will be forced to rely on ad revenues and user engagement. The latter is looking very promising for Snap, as revenue per user grew from $.31 per user in 2015 to $1.05 per user in 2016. This figure indicates that communication objectives should be geared toward increasing engagement of current users. In other words, Snap should focus on increasing current user’s preference for the brand in relation to other social media. In addition to increasing consumer engagement, Snap needs to form more long-term relationships with ad partners of higher value. Currently, Snap is directly responsible for approximately 87-93% of all ad revenue within the company which indicates that Snap has been self-sufficient in ad revenue growth up to this point. When considering that Snaps growth in user growth is declining, growth in ad revenues becomes much more crucial to success. For that reason It could prove very beneficial for Snap to form relationships with large media partners such as NBCUniversal or Turner to improve ad revenue growth potential. 

Snap’s viability as an investment option is ultimately determined by competitive and market forces. Although Snap is largely self-sufficient in generating ad revenue,  It will not be enough overcome the troubling growth metrics, increased competition, and lack of shareholder voice detailed above.  

https://www.wsj.com/articles/snaps-ipo-filing-offers-peek-into-its-advertising-strategy-1486078983?cx_campaign=poptart&mod=cx_poptart#cxrecs_

[evan-horvath96-blog]

Apple Turns Up the Volume on Wireless Headphone Sales

In a recent Statista report, it was revealed that Apple has become wildly successful in the US wireless headphone industry. Apple’s decision to acquire Beats in 2014 is paying off in a big way as their overall market share has increased to nearly 50%, and their overall unit sales account for over one quarter of industry totals

https://www.statista.com/chart/7993/headphone-market-share/?utm_source=Infographic+Newsletter&utm_campaign=e9f1edfd4e-All_Camp_InfographTicker_EN_pm_00041&utm_medium=email&utm_term=0_666fe64c5d-e9f1edfd4e-295461685

Apple’s recent success can be partially attributed to the releases of The Solo 3 Wireless on-ear Headphones and Powerbeats 3 workout headphones. However, the manner in which Apple products are promoted also proves to be a cornerstone to their success. Click the link below to view Apple’s 60-second ad entitled “stroll”.

https://www.youtube.com/watch?v=CvVvwh3BRq8

As part of Apple’s ongoing “Practically Magic” campaign, this advertisement for AirPods produces a reverberating impact on many levels in the hierarchy of effects. Apple accomplishes three communication objectives through this ad. First of all, it increases consumer awareness of the product. Secondly, it increases consumer knowledge of the AirPods through creative demonstration of some of its features. For instance, convenience through freedom of movement is succinctly communicated through the absence of wires and the freestyle dancing of Lil’ Buck. Furthermore, Apple creatively demonstrates that AirPods will not hinder your daily activities, regardless of how you move. To reinforce the message that AirPods will not impede your lifestyle, Apple shows Lil’ Buck defying the laws of physics. Noise cancellation is another product feature that is successfully communicated to the consumer. Near the end of the ad, Lil’ Buck removes the AirPods from his ears to hear the sounds of his surroundings for the first time. He then puts the headphones back in his ears and is seemingly able to tune out the rest of the world. Finally, Apple accomplishes the objective of increasing consumer liking of the product by using Lil’ Buck to help promote the brand. 

The graphic shown below demonstrates that Apple was also successful on the basis of increasing online sales. Since the launch of the AirPods, Apple’s share of the wireless headphone market increased to 26%. Part of the reason for this sudden increase is the functional benefit positioning used to convey that the consumer was better off if he/she bought AirPods in conjunction with the new iPhone 7. Unfortunately, the increase in Apple market share led to a crowding out effect of one of Apple’s subsidiaries. Beats, acquired by Apple in 2014, experienced close to a 10% reduction in market share as a result of AirPod’s launch.

http://www.forbes.com/sites/ianmorris/2017/01/13/haters-gonna-hate-but-apples-airpods-are-a-huge-hit/#9132490c2f93

In addition to successfully completing a wide array of objectives, “stroll” makes use of a variety of positioning strategies. Product attribute positioning is utilized through the depictiion of the color, size, and design of the product. This strategy works well in conjunction with functional benefit positioning because the product attributes of being wireless reinforce the reasons why the consumer is better off after purchasing the AirPods. Experiential benefit positioning is also critical to the effective positioning of the AirPods in this ad. Lil’ Buck appears to be liberated in expression when he uses these headphones. Furthermore, his disobedience of gravity conveys the message that AirPods provide the user with a magical experience.

http://www.adweek.com/brand-marketing/ad-day-lil-buck-defies-gravity-apples-first-big-tv-spot-its-airpods-175581/

Apple has a storied history of masterful execution of Integrated Marketing Communications, so their domination of the wireless headphone industry is not in the least bit surprising.