When Markets go Dark

Darkside

Traditional marketing theory holds that there are three broad strategies for positioning a product.  You can be the best, you can be the cheapest, or you can serve a specific niche.

It is most simple to communicate that you are the best or the cheapest.  It is more difficult to communicate niche benefits.  One great boon of the arrival of the internet was to support niche communications.  Using the internet you can target communications at tiny market segments and still succeed.  As a result we get the “long tailed comet” and the weakening of mass market simplification.  We don’t all have to settle for a white sliced loaf simply because it serves the broadest audience.  You can get your loaf of yeast free pumpkin seed bread made with stone ground flour from a mill operated by orphan refugees.

What is interesting about Dark Markets is that this niche power is removed.  Tobacco is the most dark market we have.  Some nations are very dark, Australia, Canada, Ireland and England seem to be in a competition to win the race to be the darkest tobacco market.  In Ireland the product is no longer visible in-store.  The packs are hidden behind closed doors, and no advertising, promotion or communication of any sort is permitted to the end consumer – other than the price list.

Absent any communication it is impossible to convey the benefits of niche products.  As a result people select using simplified heuristics.  They can see the price.  So it is either high price or low price.  Highest price must be the most premium product and lowest price is assumed to be best value.  Consumers assume that lower price products will be of inferior quality, and in the case of tobacco they will be less “healthy” than the premium price products.  It is interesting that the biggest markets for low price brands, and for counterfeit brands, are in the “full strength” tobacco products.

Profit margins on low price products are derisory.  It is in the interest of the manufacturers to keep as much of the business as possible up at the premium end.

So what?

Other markets are going dark.  Pharmaceuticals are partially there, Alcohol is being targeted, Baby Milk Formula, Childrens Cereals.  Many products run the risk of following tobacco down the path to the dark side.  What lessons can you learn from Tobacco?

1.  Stop fighting for share.

If you treat a dark market the way you treat an overt market, and fight for market share, you will lead a race to the bottom on price, and drive value out of the market.  The major players in the market have to move away from using share points to reward sales teams.  Focus on profitability measures.

2.  Build premium positions.

Forget the middle market.  Devote your resources now to building strong premium positions that are simple, clear and relevant in the minds of your consumers.  Don’t waste money building brand positions for marginally profitable lines.  Be patient!  Take your time to build your premium position.  You will come under relentless pressure from sales to use sales promotions and discounts to push share.  You have to fight that.  A premium brand should never be on sale.

3.  Cheap must have a compromise.

If one player is building a fighter/Tiger brand, you need to communicate to your consumers why Premium is different to Value.  Why is cheap also nasty?  You must convey this effectively before the market goes dark, or the consumer will simply buy on price.  But you also need to be careful not to damage the category.  If cheap vodka is bad for your health, it must also be clear that premium vodka is at least health neutral (ceteris paribus)

4.  Motivate stakeholders early.

Get the retailers to buy in on premium.  Make sure they understand that it is about CASH margin, not percentage margin.  So what if you get 15% on a $10 bottle of Vladiawfull vodka.  It is far better to get a tight margin on a €60 bottle of Grey Goose.  Also, get them to fight for light.  Make it clear to them what the negative impact of a dark market means to their business.  Organise them into lobby groups.  Help them to advocate their positions with  grass roots political representatives.

5.  Build a network of ambassadors.

Find the people who like your product now and recruit them for the long haul.  Not barmen or shop staff.  They have to have longevity, so they need to be business owners.  Get long term buy in for your brands now, and it will pay back handsomely when the market goes dark.  Bring these people together, make a community where they can help each other and help your brands.  The market may be dark, but you can have online buzz as members plan their next outing of the eg John Player Amateur Golf Classic.

Budget Baby

budget2014

Today the Irish Government announces the budget for 2014.  This is the one that is supposed to free us from “the clutches” of the Troika.  What a joke!  Not so long ago those “clutches” were “helpful hands”, perhaps even “comforting arms”.  Beware the pejorative language of politicians and journalists.  Beware pejorative language in general.  When someone couches a noun with an adjective ask why did they use that adjective?

Language aside, the government is making an attempt to step out of the controls that the Troika insist upon in exchange for financial surety.  This is not to say that the government can have a party, blow money and spend like it is 2005.  I wonder if the Irish Government is being sensible about this.  As long as you are under Troika control you can deflect negative sentiment away from yourselves.  As soon as the Troika is out of the picture the full weight of economic angst will fall squarely on the government parties.

Have we reached an end to recession?  Can the Irish government count on an upward trajectory in the coming years.  If the situation in the USA continues then I would say no!  Until the US financial crisis is settled the global economy hovers on the brink of another collapse.  Political brinkmanship by the Republican Party in the USA is a threat to the world.

What is most interesting is to hear the Chinese premier state that the world needs to move away from the US economic model.  Perhaps he is right.  The US model seems to be broken.  Perhaps a society driven by oligarchic capitalists, unmitigated greed and founded on debt funded rampant consumerism doesn’t work after all.

A radical idea, but one that has been around for a while:  http://vimeo.com/60345640

My first Grand-Nephew was born yesterday to my niece Eavan.  What world will he face?  When he is 50, in 2063 I will be 100 years old, if I am still alive.  He will hopefully be paterfamilias of his own clan.  Will he look back fondly at us and the legacy we have left for him?  Or will he spit on the generation who mortgaged his future so that we could have oak flooring, a newer car and an iPhone?

Infant Joy’ by William Blake

“I have no name;
I am but two days old.”
What shall I call thee?
“I happy am,
Joy is my name.”
Sweet joy befall thee!
Pretty joy!
Sweet joy, but two days old.
Sweet Joy I call thee:
Thou dost smile,
I sing the while;
Sweet joy befall thee!

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