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.

Lest we forget

 

9-11

I wanted to write something about the twin towers disaster anniversary.  The way I begin these posts is to find an appropriate poem.  It may not be a poem that narratively expresses the situation but it usually expresses my emotional state when I am writing the piece.  This is the reason I include the poems.  You remember history and events well, but the emotional zeitgeist can slip away over time.  Poetry is emotion embodied in word, and I use it to fix my emotions at a point in time.

So I searched for poems about towers and by chance I came across this poem by Countee Cullen, one of the Harlem Rennaissance writers of the 1920’s.  I never read Cullen before and I was delighted to find this poem in particular.  You will see why.

When you read the poem from the perspective of a Negro in the USA of the 1920’s it is quite clear that this is a poem which dreams of a future equality of man, even a celebration of being black.

But this is the 11th of September, the anniversary of the attacks on the World Trade Centre.  Imagine you are standing at ground zero.  Imagine a crowd before you of those bereaved by the disaster.  Now read the poem to them.

How powerful is this?

From the Dark Tower:  by Countee Cullen

We shall not always plant while others reap
The golden increment of bursting fruit,
Not always countenance, abject and mute
That lesser men should hold their brothers cheap;
Not everlastingly while others sleep
Shall we beguile their limbs with mellow flute,
Not always bend to some more subtle brute;
We were not made eternally to weep.

The night whose sable breast relieves the stark
White stars is no less lovely being dark,
And there are buds that cannot bloom at all
In light, but crumple, piteous, and fall;
So in the dark we hide the heart that bleeds,
And wait, and tend our agonizing seeds.