Tobacco, Restaurants and Donuts: Be in Touch With Your Consumer

We live in an age where individual consumers can comment about products and services on the Internet, and make an immediate impact on the companies who provide them.

That is, if the companies are listening. And, when they are, how they use this close-contact data, and then, to what extent they rely on it as a reliable gauge of public opinion. This kind of data can be an amazing boon to a company looking to achieve true consumer feedback, and, simultaneously, it can be a crutch which eschews the expense of market research for the morass of what can amount to cheap Internet trolling.

Here are two extreme examples:

LD GOLD CIGARETTES 2001

I was Sales Director at Gallaher in Russia from 2000 to 2003. Having successfully launched “LD,” a traditional American Blend cigarette at a low price following the 1998 financial crisis, the company had a top-five brand which kept the machines happily humming 24/7. In late 2000, the company acquired the technology to produce round corner King Size packs, and the decision was taken to add “LD Gold” to the assortment. It would sell at a premium due to its pretty new pack and gold version of the logo. The cigarettes inside were exactly the same as standard LD Full Flavor. Or, at least they should have been.

One cold night in January 2001, in Moscow, I hailed a gypsy cab to get home from a bar, and I noticed a pack of LD Gold on the driver’s dash. I asked how he liked them.

He said he liked ‘LD’ because of the price/quality ratio, but was disappointed that the Gold variant, at a few rubles higher in price, had a specific problem: The end of the cigarette, when lit, would, almost always fall out of the lit paper tube.

I identified myself, and thanked the driver for his input. I said ‘keep the faith’ and I’ll tell the factory tomorrow morning.

I did. The problem was endemic to the entire first production run. Millions of sticks were unpacked and recycled, and the “end fallout” issue, which had now infected a second round corner brand as well, was made a top priority for Production. Some heads rolled. Understandably.

That cab driver’s comments, coming when they did, made as much of a contribution to Gallaher’s P&L that year as that of any salaried manager in the company.

RESTAURANTS 2009 (NYC)

The restaurant business in the US in the 21^st century has become increasingly dependent upon reviews which come from individual consumers over platforms such as Yelp and Urbanspoon. Having developed out of the aggregate Zagat rating craze of the last twenty or so years, individual diners can have a real impact on how a single restaurant, whether independent, or part of a chain, operates. Some chain operators have their own websites for commentary, and their owners/Directors claim that all such comments are sent ‘straight to their Blackberries.’

One suffering restaurant owner in LA recently cried to Gordon Ramsay on TV that he’s losing business due to the fact that Yelp dropped its 5-star rating system, to which he, of course, called ‘Bullshit’ before proceeding to dissect the man’s business and reduce his family to tears.

I also know that these systems are abused by restaurant employees to sting their employers, either to get their managers fired, or exorcise the bad blood they feel for having been fired themselves. The unnamed restaurant chain in New York, a sandwich chain, was rife with employees disguised as consumers firing shots at management. I am a close friend of someone who watched it firsthand. The Head Office in Illinois would then dispatch the local District Manager to fix what was, ultimately, a non-existent problem. In a pinch, one manager fabricated a complimentary story about himself, and got immediate kudos for it from HQ.

This company could have at least funded a ‘Mystery Shopper’ program (paid spies who report on each unit), but it relied solely on these reports from the Web. Utterly failing to understand its consumer base, the chain is on the balls of its ass.

WHAT IT MEANS

It is quite common for Marketing Directors to rely on ‘data’ to make decisions about brands. Pepsi changed the Tropicana OJ designs a few years ago to a massive uproar and drop in sales, and the high-flying Director pointed to ‘the research’ as the need for change. Pepsi is world-renowned for changing logos around, and losing volumes consistently. It must be part of the company’s succession planning for its marketing department. The Tropicana ‘uproar’ was significant because it came from individual consumers, rather than independent research.

Another falsehood would be the 11%-are-smokers rate in Sweden. Take a walk around Ostermalm or Sodermalm in Stockholm on a warm Spring weekend evening, and you’ll think you’re in China from the amount of smoking and discarded butts you’ll see. The reason? Market research in tobacco asks:

1. Do you smoke?
2. Are you a regular smoker? (The ‘11%’ number comes from here)
3. Are you a party smoker? (social/when I drink, etc.)
4. Do you use other tobacco products?
5. Etc.

Swedes are horrible research guinea pigs generally, but it is known that most regular smokers will always tick the ‘party smoker’ box out of denial that they are regular smokers, and many true party smokers will say they do not smoke at all. It’s generally known in the industry there despite the purchased research that shows otherwise. Cigarettes are a EUR 200m profit pool in Sweden.

Any Marketing Director or Department which relies on the data purchased by the Employer as a sole basis for decision making should really be flipping burgers, and not spending other people’s money on useless things. New Coke, Crystal Pepsi, Zima, McDLT, Pepsi Free, etc. were all multi-million/billion dollar projects backed by research, but with apparently little to no actual knowledge of the market by the executives who managed the products.

WHY IT GETS SO BAD. AN EXAMPLE FROM TOBACCO

Marketing in tobacco targets the YAS demo (“Young Adult Smoker” 18-25 y.o.) because it assumes the consumer, as an impressionable youngster, will become loyal early. And that’s important as that consumer will also die earlier than most or worse, eventually quit. It creates the need to ‘force-feed’ a young demographic with something it may not want. Let’s go back to brand LD:

In 2001, after Gallaher Group had purchased the Liggett-Ducat factory in Moscow, and brand LD, they decided to throw some London-based marketing muscle behind the brand, which was already number 2 in Russia based on a modest price/quality campaign. From our own personal customer contacts throughout Russia, we knew that the base was male and female working class smokers between the ages of 30 and 65. The agency’s job was to make it seem like an 18-25 y.o. brand. We, from Moscow, argued “But it’s not.”

Regardless, the brand was reflected image-wise in HQ’s global portfolio as a young twenty-something smiling man rolling in a cart down a supermarket aisle. Not a factory worker or a taxi driver. And did that approach attract younger smokers? FAIL. This is not your father’s Oldsmobile.

It gets bad when marketeers spend time in the office, and not out with the sales reps. They should talk to people on the street consuming the product the company pays them to market, and spend time in supermarkets and shops where the products are sold, and realize that a consumer’s opinion, when polled, may differ strongly from what he or she really thinks. They should submit new product ideas, designs and redesigns from their own offices without going to agencies. Live the Brands.

When I opened Poland for Gallaher in 2003, I traveled the country, saw what brands were selling, and for what price, and called in my order for the national portfolio. I called HQ from next to a kiosk in Krakow: “All 3 LD plus menthol, Level + Lights, St. George, B&H, Mayfair, etc.” It required no research to get almost 8% share in 6 months. Because I knew the brands and the regional tastes/price points. I earned my salary there, for sure.

THIRD PARTIES

Research provides important information. Volumes and distribution figures geographically, plus competitive analysis, are always important, as long as you are looking at trends. Yet, they are capable of failure, and the data must be scrutinized by the company (their client) for inaccuracies every month.

It is the Focus Group approach which requires the most scrutiny and participation from the side of company management. Before LD became the leading brand in Russia, it failed miserably in the Groups. The company’s instinct, combined with economic factors, proved the agency’s results wrong.

Market research agencies exist to, apart from actually research markets and trends, take the blame in front of company shareholders and within management when a project/product fails. “Nielsen said 77% of consumers in urban settings would accept a guarana-infused carbonated pickle drink” is what is often heard when asses need to be covered all the way on up to the CEO and the Board when a bad idea goes horribly worse. Poor Nielsen. They get paid for it so you don’t have to get fired.

FOOD FOR AFTERTHOUGHT

I remember talking to the Marketing Director of Krispy Kreme Doughnuts, a brief stop in my career, as we visited their highest volume store at the time, a franchise in Brea, California in summer 1999. As we approached the store in a company bus, there was a massive line outside, plus a mile-long drive-through queue.

I asked: “Why is the brand so popular?”

He said: “We’re trying to figure that out.”

I guess they never did.

At least he was honest.

ANDREW ROMEO
Live from New York on SnusCENTRAL.org