Fresh food at Walgreens. Delish?

On the one hand, now that I've seen that Walgreens is selling fresh food, my impression of the brand improves somewhat. On the other, I don't feel remotely inclined to buy fresh food at Walgreens.

Verdict?

Sears selling Craftsman tools at Ace stores: How screwed up is that?

Photo: Craftsman Tools by tedmurphy (Flickr)

A couple of years ago, Edward Lampert, Chairman of Sears Holdings, signaled his intention to sell Sears' proprietary brands such as Diehard, Craftsman and Kenmore through other retail outlets. Now Sears has announced a series of deals bringing his plan to life:

• DieHard: Accessories will be sold by retailers in the United States, Puerto Rico and Mexico. (Batteries not included!)
  
• Sears Auto Centers: Will be offered as a franchise opportunity to car dealers
  
• Craftsman tools: 10% of the tools will be sold through Ace Hardware in all 4,500 stores beginning this June

Back when this idea first surfaced, I offered a very balanced list of "pros" and "cons." Let me be unbalanced this time round. This is a bad idea that will hasten the demise of Sears retail stores. At a time when most other retailers are investing in their Private Label brands to create unique customer experiences to help differentiate themselves, Sears is trading away its strongest brand assets. While zagging while everyone else is zigging can sometimes be the right thing to do, this is not one of those times.

In an interview with Marketing News Exclusives, Guenther Trieb, the Sears SVP in charge of this initiative is quoted as saying:

“The fact is, unfortunately, not 100% of Americans shop at Sears. We want to reach those customers who do not come to our stores, who prefer to shop elsewhere. … Once we grow the customer base, there’s a much better chance some of those customers will go find [a greater] selection at Sears of Craftsman and Diehard [products].”

Alternative interpretation: Customers who've been schlepping to Sears because that's the only place to get Craftsman tools, DieHard batteries, Kenmore appliances etc won't have to go there anymore.

There is one scenario where this strategy makes sense: If the company's planning to shutter most/all of its stores. Then it would clearly be important to give these brands the opportunity to thrive elsewhere. Is that where this is headed?

Six of the best: In the buff edition

Facebook was ablaze with color and confusion this week. Those in the know were all black, beige and lavender. Those who weren't were wondering what it was with all the colors in the status updates.

1) OMG! TMI! 'What color's your bra?' becomes global Facebook fad for a day: NY Daily News
Turns out the point of the color status updates was to raise awareness of breast cancer and confuse men. Winner: Meme of the Week. Confusion: As many women not in the know as men. Impact on breast cancer awareness: Uncertain.

2) Lethal jellyfish stings World's Best Job guy: AdFreak (from @BrownhillJ)
Last year, the Australian tourist board scored a huge viral success when it advertised the Best Job in the World to look after and blog about a desert island off the Queensland coast. Ben Southall, the British charity worker who beat out 35,000 other people to win this job, may not have read the small print which might have mentioned the host of dangerous sea creatures living around the island. These include the Irukandji, tiny but extremely nasty jellyfish, one of which stung him. Luckily for the tourist board, he survived.

3) Weatherproof Blows a Presidential Naming And Branding Opportunity: Strategic Name Development

Apparel company, Weatherproof, has appropriated President Obama's image for a massive billboard in Times Square. He apparently wore the jacket on a trip to China. The White House "disapproves" and William Lozito says it: "Smacks of sleaziness and makes the company look tawdry." Fair?

4) Dove Takes Its New Men's Line to the Super Bowl: AdvertisingAge
The perfect case to pit the battling camps of brand extenders vs. brand focusers. Dove spent time, effort and money to position itself to women with its Campaign for Real Beauty. Now it's going back to the Superbowl with an ad launching a line of cleansing products for men. Good for the brand or destroying its positioning?

5) Avatar' = 'Pocahontas' In Space: Huffington Post
First, let me say that I saw Avatar in 3D on an IMAX theater and I thought it was incredible. That said, I think this book report style edit of Pocahontas into Avatar is pretty funny.

Disney's Pocahontas: In 1607, a ship carrying John Smith arrives in the lush "new world" of North America. The settlers are mining for gold; under supervision of Governor Ratcliffe. John Smith begins exploring the new territory and encounters Pocahontas....

James Cameron's Avatar: In 2154, a ship carrying Jake Sully arrives in the lush "new world" of Pandora. The settlers are mining for unobtanium; under supervision of Colonel Quarty. Jake Sully begins exploring the new territory and encounters Neytiri....

6) Star Wars: The Phantom Menace Review (Part 1 of 7): RedLetterMedia (from @sbicy)



While, I am in movie-mode, here's the first of a seven-part epic critique of George Lucas' Star Wars prequels. Starts off: "Star Wars: the Phantom Menace was the most disappointing thing since my son... the unfortunate reality of the Stars wars prequels is that they will be around ..forever. They will never go away. They can never be undone." The narrator's voice alone makes at least some of this worth listening to.

That's it! Off to India at the end of next week so there will be no "Six of the Best." But, maybe I'll have some pix from Mumbai instead. Meanwhile, more thoughts and comments also available on Twitter (@martinjbishop).

Remorseful Starbucks tries to revive the category it strangled half to death

The new Starbucks ad (wait, it's a 1985 Folgers ad, apparently). The real ad (aired on SNL) is here

Once, in America, there was a thriving instant coffee market. There were brands like Brim, Maxim and Sanka and manufacturers came up with fun, technical ways to differentiate themselves: Folgers had its crystals, Taster's Choice had its freeze-dried process. There was even Postum, a roasted grain coffee substitute. The coffee, to be honest, didn't taste that great but you could get used to it. It wasn't like unlimited refill, diner-style coffee or even coffee from the famous "Anthony's in Atlanta" was all that fantastic either.

Then, blowing in from Seattle, came the winds of change. Not only did Starbucks coffee taste better, but you got a whole third-place-experience thrown in too.

Those were cruel times for those (like me) working in the instant coffee business. We watched, aghast, helpless, as people changed their drinking habits and abandoned us. The average age of the dwindling instant coffee population kept going up and up and the shelf space allotted to us by supermarkets kept going down and down.

Now, after all hope should logically have been abandoned, it's Starbucks itself riding to the rescue. After a seven-month test, Starbucks is going national with VIA, its own instant coffee product. And it's giving the launch the full treatment. There's a TV campaign and taste challenges and it all adds up to what CEO Howard Schultz calls "the biggest investment that we've made in a national launch."

Who knows whether the launch will work? It seems unlikely but what's to say that there can't be an instant revival? It could be like the Mustang, leggings or Space Invaders.

For long-suffering instant coffee manufacturers, one thing's for sure. It's a chance and a lifeline. Time to get moving. It looks like at least one of the players is alive to the opportunity. Nestlé has already launched some (for them) aggressive comparison marketing. That's a start but, hopefully, they've got some new products in the works as well. Now that VIA is out there with a previously unimaginable price point (almost $1 per cup, 5x as expensive as a cup of Taster's Choice), there's all sorts of ways that they can come up with to deliver a better tasting product.

Good times for instant coffee may yet be rolling again.

Earlier Brand Mix posts about VIA:
1) Starbucks VIA instant coffee taste test. Is it as good as they say?: Where I confirm that VIA does live up to its claims that it tastes as good as Starbucks brewed product and ask the question: So what?
2) Taster's Choice welcomes Starbucks to the Hood: Where I report on Taster's Choice initial marketing response

Size matters: The verdict on the Angus Third Pounder

Photo: me

Fresh back from a trip up the coast to Oregon where we drove in our car down the Avenue of the Giants, home of some of the world's largest trees; rode in a dune buggy up and down the Oregon Dunes, the largest expanse of coastal sand dunes in North America and, in another size-related moment, sampled the now nationally released Angus Third Pounder at a conveniently-placed McDonalds.

So my thoughts on this burger, the first McD's has launched in 8 years? A hit? Or another Arch Deluxe?

1) Taste: Thumbs up from me on taste and, based on a quick search of other reviews (1, 2), that's the consensus. But the Arch Deluxe burgers also tasted pretty good (apparently) and that wasn't enough to save them.

2) Positioning: The Arch Deluxe was positioned as a sophisticated burger for the adult palate, sold on taste. In its first set of ads, McD's illustrated this positioning, perhaps unwisely, by having kids say how yucky they were. Well, that didn't work. This time around, the Angus Third Pounder is positioned primarily on the basis of its 1/3lb size with its premium quality given an Angus seal of approval. That seems a much better place for McD's to be and one that separates the Angus burger from the rest of McD's hamburgers without implicitly disparaging them.

3) Competition: McD's is late to the larger-size burger market. Carl's Jr. has its Six Dollar Burger, Burger King has its Steakhouse Burger (and, before that, its own Angus Burger) and, of course, other slightly-less-fast food restaurants all have their own versions. Now that McD's is diving in as well, a real battle is shaping up. The most likely result of this battle is that this market segment will grow (like the consumers). From McD's perspective, the earlier presence of others with even bigger, pricier items provides it some cover against Fast-Food-Nation-like criticism for the calory inflation of these products and their premium price point.

4) Timing: How about the timing of this national launch coming as it does on the heels of the McCafe launch and in the middle of a recession? Overall positive, I think. Even though these burgers are more expensive than its other burgers, they are competitively priced against equivalent sized burgers at other restaurants and McD's is still a cheaper meal out than almost anywhere else. As far coming soon after the big investment in McCafe, I think that the Angus launch is actually an important and complementary investment. As Denise Lee Yohn pointed out in a recent article in QSR, McD's focus on coffee had presented an opportunity for its traditional competitors to try and gain ground on the food front. Launching the Angus burger now helps rebalance McD's efforts and block competitive inroads.

5) Operations: One of the biggest advantages of the Angus vs. the Arch Deluxe is that it has not required the installation of expensive new equipment. The new burger is prepared on the same cooking equipment as the rest of the burger products. Franchise owners, who have already been on the hook for all the new McCafe equipment this year(estimated at $100,000 per store), would surely have pushed back hard if they been asked to invest in any more equipment. Even if the Angus fails completely it will not be the disaster that the Arch Deluxe became.

Conclusion: The Angus Third Pounder has been in test market for two years and McD's must have the data and confidence that this new product is going to hold its own and warrant the launch investment. From a taste, positioning, competitive, timing and operations perspective everything checks out. The ultimate test will be whether McD's can attract enough of the target market (young men) to its store despite its relatively stronger family appeal. As for me, I don't need to be indulging in 590 calorie burger experiences, however good they taste. Luckily for McD's, that doesn't matter. I'm definitely aged out of the target market.

Can you love the Shack? RadioShack tries a makeover.

Photo: Landor

I'm rooting for RadioShack if for no other reason that it sports an identity that Landor developed back in the 90s. It's also encouraging to see that, after years of cost-cutting and in spite of the tough economic environment, RadioShack is tweaking its business model and investing in a new marketing campaign to reinvent itself. Unfortunately, it seems to me that the new approach has some serious flaws:

1) Business model/customer experience: RadioShacks are not big stores. That's part of the business challenge. Where Best Buy can make money selling big TVs with big margins, RadioShack has to find something else, something smaller. Mobile phones fit the bill and are already driving 1/3 of sales and that's before a new deal with T-Mobile. The challenge I see with this expanded role for phones is that it will crowd out the rest of the business, especially the traditional business of accessories and replacement parts. It's already hit-and-miss whether you actually find the part you are looking for when you go to a store and, with less space, there'll be less chance. And who, going into a store to find a cable stupidly left in a hotel room or some part for something that you should really be getting rid of anyway, wants to be power-sold a new and unwanted phone? Perhaps the plan is to get out of this traditional business or, move that business completely online?

2) Call us "The Shack": The part of the brand reinvention that has generated the most interest and comment is the plan by RadioShack to refer to itself as "The Shack" in marketing promotions. The logic behind the idea is that Radio sounds old-fashioned and that "The Shack' is more friendly. But brands need to be careful going down this path. There's a contrived familiarity about The Shack that is similar and just as bad as "The Hut" (a shortened version of Pizza Hut). It's we the customer that get to decide whether we want to give a brand a nickname. Can you imagine sending an email to all your contacts on Facebook and LinkedIn saying: "Hi there! Just wanted to let you know that, from now on, I'd like you to know me as (insert over-friendly nickname here)?"

3) That doesn't matter. Call us "The Shack" anyway: There's another problem with using "The Shack." "The Shack" already has meaning to people and none of these various meanings are particularly helpful to the cause or consistent with the message. What does it mean to you? Shaquille O'Neal? The Love Shack (B52s)? An actual wooden shack? The Shack is just not a particularly classy, quality kind of word. Focusing on it just reminds people of that.

So, overall, I'd say I'm not particularly optimistic that the new campaign is going to work. What do you think or are you all-Shacked-out already? I think I've said all I can on this issue what with this and, last week, two press interviews on the subject. Thanks to both journalists for calling me and selecting quotes that made some sort of sense:

1) RadioShack Plans Reinvention: Douglas MacMillan, Businessweek
2) RadioShack would like you to call it 'The Shack': Theresa Howard, USA Today

What do you think about the Baked! Lays' makeover?

Baked! Photos: Twig and Thistle

Baked! Lays is celebrating its 15th year with a packaging design makeover. We could debate the merits of the design but that's been done already by those who are more on the ball than I am (the new design was announced in March).

What I'm more interested in is what you think about the product architecture. Specifically, the fact that there's no more dispute: It's the Baked! line of products and Lay's, Cheetos and the rest now play the role of, essentially, ingredient brands. Take a look at the before and after for Doritos to see what I mean.

Now intuitively that seems all wrong to me. Even if this new hierarchy works from a design perspective and resolves the previous mess, should a generic name that's already used by many of its competitors and can easily be adopted by store brands take prime position away from the iconic brands like Lays and Doritos? Surely not. But, the more I think about it, the more sense it makes.

The advantage of this new hierarchy is that it allows Frito Lay to put more distance between the Baked! snacks range and other Frito Lay products. This allows it reposition the range, move it further into healthy snack territory and focus on women as the primary consumer target. With market and legislative trends putting pressure on regular snacks, the development and growth of healthier products is a strategic imperative for the company. This explains why it has backed up the repositioning with a new marketing campaign: Only in a Woman's World which connects Baked! to the other healthy snacks in the portfolio (Flat Earth and Smartfood). (Whether this marketing is effective or not is a matter of another debate with comments I've read both on FL's own Snack Chat site and elsewhere mainly critical.)

But I'm still left with the vague feeling that something's wrong with this new architecture. What do you think? Thumbs up or down? What do you think of this U.S. solution vs. the solution that Frito Lay came up with in the UK (where it markets under the Walkers brand it acquired back in the 90s)?

Photo: Brand New

Jack Bauer: Not your typical green recruit

Photo: tyger_lyllie (Flickr)

24 has gone carbon neutral. So, in between between car chases and terrorist tortures, Jack Bauer now finds time to make PSA announcements like this one. Says Jack/Kieffer: "Global warming is a crime for which we are all guilty."

This, to me, is an example of a good idea gone bad. An idea that might have made sense had it come from the corporation but which makes no sense when it comes from the show.

Just think of the show's audience. Not one that's generally sympathetic to the whole global warming thing to begin with and even less happy about having their show hijacked by this kind of issue. Here are just a few comment snippets left by 24 fans below an article in E! Online about 24's carbon-neutral story: "I am turning off 24 because Global Warming is contrary to everything 24 is supposed to be about" and " I'm very sorry to see that the "24" cast and crew are among the successfully deceived by the global warming fraud" and "Are you kidding me? What is Jack now going to be against water boarding? OH geez, DON'T YOU KNOW WHO YOUR AUDIENCE IS? Who cares that 24 is chasing after a myth?"

The problem that Fox had and failed to solve for is that there's no Fox corporate site for these kind of stories so press announcements have to either come from individual shows like 24 or from News Corporation, the parent company. Except that News Corporation itself only carries press releases about business and investor-related issues so it doesn't really fit there.

Were there a Fox corporate site, the angle that could have worked would have been along the lines of: 1) Fox is committed to doing its part to reduce global warming 2) To prove this commitment we've take our worst offender (24) and made it carbon neutral 3) This shows that anything is possible and we encourage other TV shows as well as the general public to do the same 4) Except 24 fans--you can do whatever you want.

Instead of which, fans are mad and Bauer's perimeters have been compromised.

Dove calls its competition scum

It's not often that you can talk about your competition as "scum" and get away with it. Even political candidates, nasty as they sometimes get, avoid such language. But Dove is in the happy position to be able to use "scum" in the technical sense and cast all its rivals in this light. Dove's new campaign, as seen on Yahoo! says: "Soap leaves soap scum. Dove doesn't. See the difference for yourself."

A while back, I wrote a post on the issue of whether Dove had moved too far away from its product roots with its second and third generation of "Campaign for Real Beauty" advertising. My question now is: Has this round of advertising swung the pendulum too far back the other way?

If you click on the link to the ad on Yahoo!, you arrive at this landing page which includes an "artistic dramatization of soap scum in hard water." There is an attempt to link the two campaigns with a link called: "Real women react to soap scum" but, honestly, this campaign feels to me like a jarring disconnect. Or am I wrong?

Is Folgers smokin'?

You might think, given that it's all you ever read about, that the only coffee people drink these days is Starbucks or one of the other gourmet coffees. But you'd be wrong. Last year, there were more than three times as many people drinking traditional coffee as gourmet coffee(1).

Now Folgers, the market leader of the traditional coffees, is trying to increase its leadership and get a few people to switch back from gourmet coffee with a new roasting method that it calls “the biggest innovation since the launch of decaf.” It's getting behind this new method with its biggest ever marketing campaign under the general theme: "Roasted with Care." (Here's a link to the new TV ad.) But will this move the needle?

Vote yes if you think:
1) The timing is right: People are looking for ways to save money and this innovation will give people an excuse/reason/rationalization for switching back to home brewing
2) The ad spending will work: Whether there's anything to this new roasting method or not, it gives the ad something to say and the brand team has been given a hefty budget so that alone will drive sales
3) The coffee will taste significantly better and the word will spread

Vote no if you think:
1) The coffee won't taste that much different: Folgers hasn't changed its product formulation (the percentage of arabicas in its blend) and it's doubtful that a roasting change alone will be noticeable, except in side-by-side comparisons
2) The coffee can't taste much different: There are a lot of loyal, heavy Folgers coffee drinkers out there, used to and satisfied with the taste of Folgers today. Folgers could not make a significant change in taste without risking this important franchise
3) The ad campaign is confusing and won't be effective

The most likely result, I think, is that Folgers will increase sales somewhat and possibly enough to pay for the investment. But sales will come primarily from market share gains rather than category growth. Very few people will change their coffee habits and start brewing at home again if they've already given that up. Once the coffee brewer has been put in the back of a kitchen cabinet, it's unlikely to make it out to the countertop again. Things aren't that bad (yet).

Still, overall, a nice present for the J. M. Smucker Company which bought the brand for $2.95 billion in stock earlier this year. The deal is expected to close soon just in time for the positive sales from this initiative to start kicking in.

Source/Link:
1) The National Coffee Drinking Trends 2007 market research study from the National Coffee Association: This showed that 57% of American adults drank coffee daily including 17% who drank gourmet.
2) Folgers Markets a New Coffee to Cost-Cutting Home Brewers: The New York Times

The Army marches into Sears, sets off the alarm

Sometimes finding a way to sell your product to customers can seem like the least of your problems when compared to the needs and demands of other stakeholders.

550 Sears stores nationwide are about to start selling a line of clothing with the Army's 1st Infantry division's Big Red One insignia. That's come as a big and unpleasant unsurprise to a whole bunch of groups including:

Congress: "I'm astounded," said Rep. John P. Murtha (D-PA) who chairs the House appropriations panel that oversees the military budget.
Army leadership: Apparently not everyone was in the loop. "There is a great deal of concern among the senior Army brass about this deal" according to a Defense official
Veterans: "That patch is to be worn by only people who served in the 1st Division. What right does the Army have to sell our patch?" Charles Horner, a retired Army officer. And, more strongly by CrowMeris in a comment in Forbes: "As a veteran (not of the 1st Infantry, but a veteran none-the-less), this saddens and sickens me. What's next? Purple Heart jewelry?"
Concerned parents: “It’s reasonable for anyone that’s a parent ... to be worried about the infusion of militaristic trappings into children’s culture,” said Robert Weissman, managing director of Commercial Alert. “It really has the potential to put the Army or any other branches of the military in the wrong position of marketing themselves directly to kids.”

The original intentions of this licensing deal may have been good. (Army spokesman Paul Boyce summed these up as to: "enhance Army recruiting and the public's general goodwill toward the Army and its activities") But the strong negative reaction to this program shows the danger of failing to get enough of the right people on board (especially those with the power and money).

It's often tempting and sometimes necessary to get things done by working with a small group and not involving a broader audience. But this story speaks to the need of making an accurate assessment of the future consequence of such an approach.

Links:
1) Army, Sears clothing deal irks lawmakers: Politico
2) Army, Sears partner for 1st Infantry clothing line: Forbes

LPGA speaks a tough language many don't understand

Considering it was supposed to be at least partly for them, at least one LPGA sponsor doesn't seem to be showing much gratitude for its decision to suspend players from the tour if they don't speak English.

State Farm, a general sponsor of the LPGA as well as the sponsor of the State Farm Classic Tournament was "flabbergasted" and "dumbfounded" by the news. "We don't understand this and don't know why they have done it, and we have strongly encouraged them to take another look at this," said Kip Biggs, a media-relations specialist at the company.

I first heard about this story yesterday when I read that Lorena Ochoa of Mexico had called the new LPGA policy "a little drastic". My first reaction was that the LPGA's No. 1 player has a career as a diplomat if she wants or needs it after finishing with golf. Drastic? Some of the other words that have been flying around in the press and blogs include "shameful" (Advertising Age), "offensive"(New York Times) "way out of bounds" (Boston Globe) and even "racist" (various blogs and blog comments).

What struck me about the decision was how last-century it seems (and not the last half of the century either). Carolyn Bivens, the LPGA Commissioner, upset by the negative press, told Golf World: "If these players don't take this step [and learn English], their ability to earn a living is reduced. They will be cut out of corporate and endorsement opportunities." But clearly she thinks they are not smart enough to figure that out for themselves so some tough love is needed. Paternalism with a big stick.

All this happens as the LPGA aspires to become a "global tour" holding more tournaments than ever before held outside the United States and with more international stars playing in its competitions. Already revenue from Korean television is the LPGA's biggest single source of income but it's the Korean players who are most at risk from this new policy.

Can you imagine another international or international-minded sport governing body acting the same way? Wait. It might be a great idea for the IOC--it would certainly help Britain win more medals in London. And no more French at the opening ceremony!

UPDATE (Sep 5th): LPGA scraps English 'exam' plans: Just two days after this blog posting, the LPGA changed its mind and scrapped the idea of suspending players who couldn't speak English. Coincidence? (Yes)

Links:
1) State Farm Blasts LPGA English Proficiency Policy: Advertising Age
2) What Was the LPGA Thinking? Advertising Age
3) Bivens speaks out about LPGA Tour's controversial English ruling: ESPN.com
4) Storm clouds gather after LPGA's English rule: IHT

PG&E donates $250,000 to keep California same sex marriage legal

Same sex marriage is a deeply divisive issue. In California, latest polls show that 50% are for and 50% against. And most people are not on the fence. So why would a company take a high profile position and donate $250,000 to fight Proposition 8 (the one that seeks to limit marriages in the state between a man and a woman)?

Some possible whys:
1) Its most important stakeholders are local and state government and the government, especially in its San Francisco home base, is solidly against the Proposition
2) Another key stakeholder group, its employees, are much more in favor of same sex marriage (than the average Californian)
3) Relative to most companies, PG&E can discount customer opinion since customers have no choice in service provider
4) PG&E has a long history of supporting diversity--it has received a 100% rating on the Human Rights Campaign's Corporate Equality Index for the last five years
5) It wants to build a reputation as a forward-thinking, progressive company and put its (bankrupt) past behind it

Still and all, pissing off up to half your customers? Thoughts?

Links:
1) Slim majority of California voters would uphold gay marriage, poll finds: Los Angeles Times
2) PG&E sparks Prop. 8 opposition: Examiner.com
3) PG&E backs gay marriage rights: Sacbee

Should Sears sell its exclusive brands everywhere?

Edward Lampert, Chairman of Sears Holdings, is thinking about whether to start selling Sears' proprietary brands such as Diehard, Craftsman and Kenmore through other retail outlets. In his annual letter to shareholders he floated this idea, something that's been discussed for years but always rejected because of the anticipated impact on sales at Sears stores.

This time around it looks like it really might happen. Sears just reorganized and created a new business unit dedicated solely to these brands. And, last year, in a highly innovative financial move, Sears created $1.8 billion of securities based on their strength and brand equity.

This is certainly a "zag" when everyone else is zigging. Most retailers have been working hard in recent years to introduce proprietary brands or at least spruce up their Private Label offerings. Their thinking has been that they need to differentiate what's sold in their stores to increase store loyalty and make sure it's not all about price.

So, is Lampert crazy or smart?

Smart:
1) Sears needs the revenue: Its 4th quarter earnings report showed a 48% fall in profits from accelerating sales declines. No doubt that selling these strong brands in other outlets would increase sales.
2) These brands are not living up to their potential: Craftsman, Kenmore and DieHard are all stronger brands than Sears itself (Source: Brand Asset Valuator) and they are held back by their limited distribution. Lampert points out in his letter that Diehard has great consumer recognition but "lags dramatically" in market share.
3) Selling these brands outside Sears could give them a dose of healthy competition: Sheltered within the walls of Sears, it's likely that these brands, strong as they are, are not fully optimized. Exposing them to open competition could force them to be both more innovative and more efficient.
4) Sears itself would have to shape up: Sears would no longer be able to depend on these brands for a good part of its sales and revenue. It would have to radically improve to survive.

Crazy:
1) It could kill the Sears stores: This is the reason it has never been done before. These strong brands are magnets for store traffic pulling consumers in who otherwise would have no reason to go.
2) It would weaken the Sears brand: These strong, exclusive brands help differentiate Sears from its competitors.
3) Selling to other retailers is not a core competency: Sears has no experience selling products outside of its stores. It would need to find people comfortable sitting in, for example, the Bentonville sales cell block pitching its products. The boot would very much be on the other foot.
4) Potential margin decline: To gain distribution and be competitive in side-by-side shopping, there could be price pressure that would result in a margin decline.

I started writing this post with the intention of being strongly against this idea of selling the brands outside Sears. But, now I'm done with my list, I'm not so sure. It certainly could be a killer for the Sears stores themselves but maybe it would be just the jolt they need to shape up. Meanwhile, these strong product brands would certainly have the chance to become true national powerhouses.

Now, I don't know. What do you think?

Links:
1) Letter to shareholders: Edward Lampert, Sears Holdings
2) Sears considers selling signature brands in other venues: Chicago Tribune
3) The New Alchemy at Sears: BusinessWeek
4) Brand Asset Valuator: Description

Brand architecture sense or nonsense? fit.lite by 24 Hour Fitness

24 Hour Fitness is experimenting with slimmed-down workout clubs in San Francisco. The smallest format is called fit.lite, not much bigger than the changing rooms at one of the large clubs. These fit.lite clubs are targeted at people who want a 30 minute quick workout so, rather than a full range of amenities, they just have cardio equipment.

They've chosen to brand these new clubs: fit.lite by 24 Hour Fitness. In brand architecture terms, this is an endorsement strategy, a bit of a "cake and eat it" approach and, therefore, fairly common (Ted, part of United, or Linksys a division of Cisco Systems, for example). It's a strategy that often makes better sense conceptually than it works in reality.

What 24 hour Fitness is hoping is that its fit.lite endorsement will give potential members extra confidence about joining without giving them the wrong idea about what to expect. They want these new clubs to have their own identity but still get the benefit of association with the better known brand. To be part of the family but not living at home.

Despite the logic of using parent company endorsements, they often don't work very well in practice. Take a look at the photo - you can see how the 24 Hour fitness logo looks out of place and doesn't fit very well. Even more of a problem is the almost irresistible temptation for companies to overvalue the endorsement and then underinvest in the new brand. These businesses typically either fail or are eventually brought back into the fold.

In this case though, I'll give 24 Hour Fitness the benefit of the doubt. These new clubs are so slimmed down vs. a typical offering that it had to put some distance between them and its core brand. But its endorsement will still carry some weight and can help the fit.lites gain traction in a category where they are way behind the established leader (Curves).

Sense or Nonsense Verdict = Sense (just).