May 05, 2008

Where Has All the Competition Gone?

[Authored by Jeremy Smith, MBA Candidate] As consumers, do we really have a choice when it comes to where and what we purchase? While most businesses have many competitors, there are quite a few that don’t. In many different business sectors, competition seems to be shrinking as large players grow and dominate the field.

A good example is the retail marketplace. Competition is high when it comes clothing retailers or restaurants. If you are looking for a place to buy some new shoes or a dinner for the evening, the choices are abundant. There are many cases where this isn’t true. Retailers like Wal-Mart and Target, Kroger and Publix, Lowes and Home Depot, Barnes and Noble and Books-a-Million, and Best Buy and Circuit City may compete with each other, but not usually with anyone else. There are exceptions to this rule as retail giant Wal-Mart carries just about everything. However, they specialize in nothing. In addition, the competing products are usually of a lower quality.

For example, if I need to buy a kitchen sink on a Sunday afternoon, I basically have two options, Lowes or Home Depot. If I need a popular book to read, Books-a-Million or Barnes and Noble are my two choices. Other small local or online retailers are available, but sometimes the consumer needs something right away or it might want “to touch” the product to feel comfortable with it. These companies have essentially created local oligopolies and compete only with each other. As a result, the big-box stores who used to offer big savings are now only marginally cheaper than their local predecessors.

Best Buy.jpgCircuit City.jpg A bigger question might be what happens next? In many of cases, one player within each pair is starting to outshine the other. In the fourth quarter of 2007, Best Buy, the No. 1 consumer electronics retailer, posted an 18.5 percent jump in sales while Circuit City lost money. Lowes is continuing to gain substantial ground on Home Depot, and Barnes and Noble is the only national book retailer doing well financially. Will the market eventually support only a single competitor in each such space?

Wal-Mart has already gained this position in several small geographic areas and they are using this position to increase profits. In my hometown of Fayetteville, TN, Wal-Mart is the only major retailer. Grocery stores like Food Lion and Bi-Lo have left town. The market is too small for the addition of a store like Target and the prices reflect this lack of competition. Every item in the Fayetteville store is more expensive than the same item in the Murfreesboro Wal-Mart. Are the fates of larger markets the same? In retail, the rule is to grow or fail. However, should one company win, it is the consumer who would suffer.

--Jeremy Smith, MBA Candidate


Product Placements on the Rise

[Authored by MBA Candidate Mitch Walker] Product advertising through media is experiencing many changes. The industry is switching away from direct advertising to more of a product placement approach. Although, this concept is nothing new, more and more companies are utilizing this approach. The next time you watch television or a movie, try and identify certain products that appear or are mentioned over and over. Some of them will become more obvious than others. Unless the viewer is really thinking about it, they may not realize that they are being exposed to certain product placements.

Camaro from Transformers.jpg In the movie You’ve Got Mail, AOL, Apple, IBM and Starbucks were products that were frequently displayed. Apple computers were exclusively used and displayed in the movie Mission Impossible 2. Chevrolet made excellent use of the Camaro in the recent Transformers movie.

More and more television shows are being broadcast “commercial-free” and obtaining more and more advertising revenues via product placements. Recent examples of television series that have been broadcast without ad interruptions include Gideon’s Crossing, 24, and Alias. Furthermore, with the advent of digital video recorders, viewers are switching from watching live programming to watching recorded programming and fast forwarding or skipping through commercials. By placing products into the show’s content, viewers have no choice but to be exposed to advertisers’ products. Reality TV has changed the rules of the game by creating brand entertainment. The Apprentice reality TV show has positioned the product as an integral part of the show. In many of the show’s challenges, the company’s own executives introduce the task which involves their own product. Staples, Pontiac, QVC, Sony, Best Buy and Pepsi, to name a few, are companies that have placed their products in tasks on The Apprentice.

Reality TV hit show Survivor has made product placements extremely obvious with reward challenges centered on food products as the reward such as Doritos or Mountain Dew.

Product placement is also evident in books, music videos and video games. Children’s books feature product brands right in the titles. Skittles Riddles Math, The M&M’s Brand Counting Book, and The Hershey’s Kisses Addition Book are just a few examples.

Product placement in video games isn’t anything new. In the 1980’s, Sega placed banners advertising Marlboro in its auto racing games. More recently, Sega has placed ads for Dole Food Company in its Super Monkey Ball video game.

Coke on Space Shuttle.jpg Product placement is accomplished under various arrangements including 1) it merely happens within programming without any intentionality (see example in the picture to left of a Coke displayed from the space shuttle), 2) the placement is arranged and a certain amount of the product is supplied as compensation, or 3) the placement is arranged in return for monetary compensation.

--MBA Candidate Mitch Walker


April 24, 2008

Are you in the Loop?

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My husband works in interactive marketing, so I tend to learn about new technologies and how to best capitalize on them as he does. He’s been utilizing search-engine marketing for years now, knows all about the latest Mac offering before it goes public and started blogging long before I did.

We recently discussed the concept of a “viral expansion loop” after reading Fast Company’s Cover Story “Ning’s Infinite Ambition.” According to their website, “Ning is the only online service where you can create, customize, and share your own Social Network for free in seconds.” As users contribute to and create more networks that engage more users that contribute to and create more networks that engage more users...you see the workings of a “viral expansion loop.” Facebook, MySpace, YouTube, etc. have all benefited as a result of this concept.

My takeaways — regardless of product/service offering or which dimension(s) you do business, we should all recognize the value in consumer networks and power of word-of-mouth messaging. Inspiring customer evangelism by delivering on (better yet, surpassing) expectations EVERY TIME reaps exponential rewards. Perhaps by becoming “friends” with your target, you can gain all of their “friends” in the process.

Also, it pays to pay attention. Ning’s developers recognized a good thing and took advantage of the opportunity to take social networking to the next level. Keep trend-watching, and feel free to comment and share emerging trends/technologies that have caught your attention.


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