Belmont University

March 27, 2008

New Economics

The Long Tail.jpg
If you haven’t read it yet, I encourage you to pick up a copy of Chris Anderson’s The Long Tail. The book discusses the transition from mass to niche markets, facilitated largely by the Internet and contributions of "Generation C."

Anderson writes, “In short, though we still obsess over hits, they are not quiet the economic force they once were. Where are those fickle consumers going instead? No single place. They are scattered to the winds as markets fragment into a thousand niches.”

Consumers have more options (thus more control) today than ever before. It is important to understand your target’s preferences and deliver a customized experience that satisfies expectations to keep them coming back. Opportunities abound when you celebrate the individuality that keeps things personal.


March 21, 2008

emPowered by HGTV

poweredby HGTV.jpgI have been an HGTV fan for the past few years now…House Hunters, Divine Design, Design to Sell, and of course, Carter Can. Having recently purchased my first place, my affection for the channel has only magnified as I continuously watch for design ideas I can incorporate into my home and compare others’ buys to my own. The brand has certainly capitalized on (and undoubtedly propelled) the DIY trend and allowed consumers to vicariously shop for houses, even when the market is down.

So I’m happy to see the brand I love apply its core competencies to the real estate market, powering the HGTV FrontDoor search. I saw FrontDoor.com advertised for the first time a few days ago, and I knew the “just a matter of time” cross-over had been devised and was in place to continue leveraging the brand.

The site is easy to navigate and clearly communicates important consideration points in the search (including an estimated monthly mortgage). There’s even a “Foreclosure Guide” to help those taking advantage of today’s “buyer’s market.” Compared to traditional sites, such as Realtor.com, HGTV’s site is much more eye-catching and engaging. Of course, they do know a thing or two about design.

While I won’t be in the market for a house again any time soon, I will certainly plan to go through the FrontDoor in the future.


March 20, 2008

Co-Branding: Cinnabon

[Authored by MACC candidate Meredith Little] When it comes to a food weakness, cinnamon rolls are it for me. And it doesn’t get much better than a Cinnabon World Famous cinnamon roll either. However, these mouth watering, calorie-laden, bites of goodness are generally found only in shopping malls and airport food courts. Yet with some co-branding techniques that Cinnabon is now employing, we may start seeing glimpses of our favorite cinnamon roll in other products on supermarket shelves.

Cinnabon Carvel Co-Brand.jpgWhat could be more loved than a hot gooey cinnamon roll? Some would say ice cream. Both are sweet and delicious; one is hot, the other is cold. This is the perfect match for a co-branded operation. Since 2002, Carvel has worked closely with Cinnabon to develop several successful co-branded locations. As a result of the initial success, Cinnabon is planning to accelerate their co-brand plans by providing current and future franchisees the option to offer two of the treat industry’s most sought after products under one roof. Separately, both these brands have brand equity- adequate brand awareness and a sufficiently positive brand image. The two brands logically fit together, and research studies show that consumers are more likely to perceive co-brands favorably if the two brands are complementary rather than similar. This is a recipe for success!

Cinnabon Mrs. Smith's Co-Brand.jpgCinnabon has also engaged in a special case of co-branding called ingredient branding. By creating brand equity for Cinnabon through co-branding with other food products, Cinnabon increases their brand awareness and encourages consumer preference for goods containing their product. For example, Cinnabon has teamed up with Betty Crocker for a Cinnabon Cinnamon Streusel Muffin Mix (These are really good, by the way!). Also, Orville Redenbacher’s popcorn and Cinnabon come together in cinnamon popcorn with a pour-over Cinnabon frosting topping. Sounds good huh? Just be prepared…your hands will be sticky after consuming this product. If this isn’t good enough, you can also find Mrs. Smith’s pies and coffee cakes made with Cinnabon cinnamon and frosting. This is sure to be a yummy combination, since Mrs. Smith’s Cinnabon Apple Crumb Pie was a First Place winner at the American Pie Council's 2005 National Pie Championship.

With each of these products, the distinctive Cinnabon logo is clearly visible on the outside packaging, signaling to consumers that the host product contains the Cinnabon ingredient. By successfully marketing their ingredient brand, Cinnabon can promote awareness for their product, develop loyal customers, and generate greater sales.

The good news is that we don’t have to wait till we’re at the airport or the mall in order to enjoy Cinnabon goodness. By co-branding and ingredient branding, Cinnabon has brought their sweet, famous, taste to other foods that we can enjoy even more now.

Meredith Little, MACC Candidate



March 19, 2008

Hard Marketing Road Ahead

[Authored by MBA Candidate Jamie Shanks] Mortgage lenders have a hard road ahead of them. They are faced with the task of repositioning their product and company image in both directions of the supply chain. Customers of lenders no longer have faith that lenders such as Countrywide, Bank of America and JP Morgan have their best interest at heart due to the loose underwriting standards which dominated the industry for years. Suppliers (in this case the suppliers of capital, i.e. investors) no longer trust that lenders are accurately reporting the underlying asset which is being packaged and sold on the secondary market.

Struggling lenders, such as the soon to be acquired Calabras, CA giant Countrywide Financial, have continued to run TV and newspaper spots pushing some of their more exotic products such as home equity loans and home equity lines of credit. Yet none of the troubled companies have begun campaigns which attempt to reposition their fallen product in either the mind of the consumer or those on Wall Street.

It seems that the sub-prime mess may have opened up opportunities in many markets for those brave enough to take it. However, the first step will be for a large lender to acknowledge their mistakes and wrongdoings (outside of hundred million dollar writedowns) and begin to shift the consumer perception of their product and industry through a different kind of advertisement. It will be interesting to see the first company that tries to gain a competitive advantage in repositioning its products and services by distancing itself from the likes of Countrywide and Bank of America.

Wells Fargo.jpgWells Fargo is one such institution that has viewed the subprime shake up as an opportunity. There have been talks of the bank acquiring a regional bank and taking advantage of the deep discount which such an acquisition would offer. However, Wells Fargo can only take advantage of such an opportunity due to their band equity and positioning in the market. Wells Fargo is the country’s oldest bank and has a reputation of playing it safe during times of volatility when other institutions are putting it on the line. This brand image which the company strives to promote and protect has resulted in the company being the only US based financial institution to maintain its AAA bond rating. As such, the company can obtain financing at a much lower rate than many of its competitors; this allows the company to issue debt to fund such an acquisition whereas many competitors cannot. Clearly, brand equity and brand identity are crucial pieces to Wells Fargo’s past and future.

Jamie Shanks, MBA Candidate



March 15, 2008

Lose Your Ethics--Lose Your Business

[Contributed by Joe Scarlett, retired Chairman of the Board of Directors, Tractor Supply Company and founder, Scarlett Leadership Institute at Belmont University] The recent tainted meat scandal in California further demonstrates why uncompromising ethics in business is the only path to long term business success. One-hundred forty-three million pounds of meat were recalled all because of a lapse of ethics. Who wins in this mess? Absolutely no one. Was it avoidable? Certainly.

Ethics Graphic.jpg Since so many of the senior executives of Enron, WorldCom, Adelphia, Tyco, etc. were exposed and subsequently jailed, you would think that every businessperson in America would have learned the importance of maintaining a high level of integrity in business practices. It is a real shame that some still have not seen the light and grasped the obvious. High standards, honesty, and ethical leadership all pay off in the long run, and the opposite is simply a path to ultimate failure. Wake up business leaders!

In February Westland/Hallmark Meat of Chino California issued a recall for 143 million pounds of beef – six times larger than any previous recall. The company slaughtered cattle that could not walk and failed to notify an inspector, which is a clear violation. Cattle that cannot walk have a higher risk of mad cow disease and bacterial contamination. What were they thinking? Where is the leadership?

Federal inspectors did not identify the problem nor did the company report the problem from its own control processes. A video provided by the Humane Society showed employees attempting to get sick cattle to stand up using forklifts, electric cattle prods and high pressure water hoses. And now speculation suggests that the plant will close. Owners will lose their investment, executives will lose their salaries and perks and the workers will all be unemployed. The only good news in the story, if there is any good news, is that there have been no reports of illness or meat contamination.

Employees clearly violated the rules, so you have to ask a few questions. Were the rules posted, communicated and discussed? Was there a clear path to discuss and report dilemmas and violations? Did the employees believe that the company strived to operate with a high degree of integrity in all aspects of its operations? The obvious conclusion is that the answers to some or all of these questions is no.

The ethical and moral direction in any organization must be set by the CEO and the senior executive leadership. When that direction is set according to high standards and then communicated effectively and repetitively, the organization invariably lives by those standards. We follow our leaders; when they set the right direction, we follow; when they set the wrong direction, or more commonly no direction, we wander into “no man's land.”

Leadership in business is everything. We follow with pride and confidence when our leaders set a clear path that embraces high ethical standards. Workers at every level deserve the right to work for leaders who demonstrate business and personal integrity. -Joe Scarlett, March 2008


March 09, 2008

The Far Reaching Effects of Foreclosures

RealtyTrac, a firm that keeps up with residential property in foreclosure, reported in January that the number of mortgage foreclosures is increasing faster in some states than the number of new homes sold. Reports are that there were 153,745 initial foreclosure notices sent out in the United States, which was almost half the total sales figure of newly built single family homes and existing homes and condominiums over the same time frame.

Floreclosure Map of U.S. May 2007.gif Of course in some states, California and Nevada, the percentage of homes affected is far worse than others (e.g., Vermont and West Virginia). The map to the left is based on May 2007 numbers. Therein is a major concern; nationwide homeowners should be mindful of the insidious effects that foreclosures and the rising inventories of homes for sale will have on home prices—and household wealth.

Foreclosures not only cause dislocation for the homeowners being forced out of their homes, but also represent an increased supply of homes for buyers and additional competition for other sellers. Homes in foreclosure or those that are about to be foreclosed force sellers to accept lower prices since they are in no position to wait for better offers. Those sales can help to push prices lower for everyone.

The “wealth effect” which has powered consumer spending during the housing boom is likely to further deteriorate as home equity declines as home prices fall. The Federal Reserve reported Thursday that for the first time in record-keeping dating back to 1945, home equity was below 50% for the last nine months of 2007. The newly issued number highlights the problems that millions of Americans are having keeping their homes, as their mortgage rates adjust upward and their property values decline.


Knowing vs. Doing


ideate from ax09001h on Vimeo.In the above recent TV ad, IBM pokes fun at those businesses (and consultants) who seem to over-value planning while under-valuing the implementation side of management--sort of a "knowing instead of doing" problem. In IBM's ad, a manager opens up a quiet room and flips the light on, only to find a large group of employees all lying on the ground quietly on their kindergarten mats and staring up at the ceiling. When he questions what they are doing, one employees responds "Ideating." Others separately join in to flesh out the answer by tossing out words such as, "Structure," "Process," and "We need to innovate." When they're finished, the manager asks how they intend to do all of those things. Their answer? "We haven't ideated that yet." The manager wishes them good luck, turns out the light and closes the door.

Knowing-Doing Gap Pfeffer and Sutton.jpgIt's all in good fun, of course, but what makes it funny is that we've all found ourselves scratching our heads at times and wondering the same thing. How come we seem to spend so much more time talking about doing than actually getting something done? At work, at church, at home, even personally. If you're interested in how to change this paradigm and didn't get around to this resource when it first came out, I urge you to take a look at Pfeffer & Sutton's The Knowing-Doing Gap: How Smart Companies Turn Knowledge Into Action (Harvard Business School Press, 2000). The book's certainly a great resource to read but also then to keep in a visible place in your office or at home where you won't be sucked back into the land of ideation. For a nice summary of Pfeffer and Sutton's work, visit this link at FastCompany There's also a nice summary of the book available in FastCompany.com.


March 05, 2008

Success and Failure: Two Necessary Sides of the Same Coin

Success is 99% Failure - Honda.gif Most of us enjoy reading recipes for success. The topic of failure tends to be far less popular. And yet, in business we say "If you're not occasionally failing at something, you're probably setting your sights for success way too low." I like Soichiro Honda's quote. Here's a business legend who set very high expectations for himself and his automobile company. Yet he viewed failure in the context of it simply being a necessary means to achieving an outstanding end.

Over the years, I've also grown to appreciate the comparison of two of history's outstanding major league baseball players, Lou Brock and Max Carey. In 1922, Carey played for the Pittsburgh Pirates and stole 51 bases while only being caught twice. That's an unbelievable success rate of 96%! Yet, far Carey Max - 1924.jpg more of us recognize the name Lou Brock, a St. Louis Cardinal who for many years was the major league career leader in stolen bases with a total of 938 successes. Almost unnoticed in the recordbooks, though, is the fact that Brock was thrown out a total of 307 times in his career. That's a far less impressive career success rate of 76%. Still pretty good, but less than Carey-like. Yet, Brock's the guy people still talk about, not Carey.

What got me thinking again about this whole failure to success sequencing was a post earlier this week by Michael Hyatt, President & CEO of Thomas Nelson Publishers. Hyatt offers some great reminders that ultimately what determines whether past failures lead to future successes depends more on our individual responses to failure (i.e., how you respond to failure when it happens). Worth reading.

By the way, as I'm sitting here on the couch wrapping up this post, Michael Dyson (yes, the vacuum cleaner guy) was just on TV bragging about how his latest vacuum wonder product was the result of 5,000 earlier prototypes, or as he put it, 5,000 failures. I think these folks are onto something.


March 04, 2008

Low Prices vs. Right Prices

wal-mart germany.jpg [Authored by Zac Cooke, MBA Candidate] In a little over 40 years Wal-Mart has grown to become one of the largest corporations in the world, with annual revenues topping $350 billion. They have achieved this position as retail market leader by delivering products at a low price to all consumers. They are able to deliver these lower prices to consumers while maintaining a position as the 67th most profitable company in the U.S. in 2006, and they've done this by selling up to 40% of their offering as private label goods. These privately branded items, many of which are made in foreign countries, offer Wal-Mart an opportunity for higher profit margins.

Over time this strategy has led to huge growth, but now, as Wal-Mart continues to expand globally, their domestic pricing strategy is not leading to uniform success in all of their foreign markets. Recently, Wal-Mart completely pulled out of Germany and South Korea. Their strategy of offering low priced items led consumers in both countries to perceive the products offered by Wal-Mart as being of low quality. This has proved disastrous in countries like Germany where quality is valued heavily in the buying decision. Wal-Mart is also seeing problems in Japan with their Seiyu retail outlets. Last year, Seiyu posted losses of $195 billion. This is even after attempting to drive higher Japanese sales through the use of higher end goods.

wal-mart japan seiyu.jpg Seiyu began to alter their product mix and offer higher end goods in 2006, but sales continued to fall short of expectations, and profits are suffering even more due to the slimmer profit margins on many of these higher end goods. Although Wal-Mart is struggling in some foreign markets, they do continue to make headway in China and are quickly becoming one of the strongest retail presences in urban areas of the country.

Back in the U.S., Wal-Mart is also dealing with new issues, and their competition is gaining market share. Target is one competitor who is gaining on Wal-Mart through a strategy of higher prices on a product mix that appeals more to a hip and more design-conscious consumer. This shift in product perception is also becoming evident in America. In the end, it just goes to illustrate once again that a low price strategy does not always work, and continuing to monitor the market's perceptions remains the key to an effective pricing strategy.

Zac Cooke, MBA Candidate