Nestlé Ozempic

Danone, Nestlé And America’s Changed Eating Habits

Something amazing is happening when it comes to food, nutrition and brands. After all the decades of low fat, no fat, fat free, fewer calories, Olean cookies and chips, keto-paleo-Atkins-South Beach diets, macrobiotics, vegetarianism, veganism, fruitarians and other dietary regimens, the CEO of Danone just informed us that “The food industry is at a tipping point: health, and the role food plays in health, will become more critical than ever.”  All of a sudden, the healthy foods landscape has grasped the attention of American eaters.

Put your yellowed, dog-eared copy of Mollie Katzen’s Moosewood Cookbook aside and shelve your well-read copy of Frances Moore Lappé’s Diet For A Small Planet. Apparently, America has finally found a reason to change the way it eats; change the way it ages and change the way it lives. 

All because of drugs. Forget the War on Drugs. We are now embroiled and engaged in the Way of Drugs. Those diabetes drugs that help you lose tonnage – the GLP-1 winners such as Ozempic, Mounjaro and Wegovy – have altered the landscape for dieting and food-focused packaged goods companies.

Now, that does not mean that millions of Americans have stopped clamoring for Whoppers, Big Macs and fries. Not everyone is on GLP-1 drugs. But, a sizeable number of people are taking the drugs. 

Both Danone and Nestlé are reviewing their strategies so each company can cater to users of weight loss drugs. The guiding principles seem to be helping users to keep weight off while providing proteins and other nutrients that are lost from massive weight loss. These drug-users account for a large enough segment  of our population that food companies used to selling Kit Kat bars and Danette desserts are now suddenly seeing opportunities for weight-loss designed protein-laden, keep-the-weight-off foods.

According to CNN, Nestlé will offer frozen food meals for people taking GLP-1 drugs, such as Ozempic. Named Vital Pursuit, the line of GLP-1 associated foods is currently  “12 portion-controlled meals, high in protein plus fiber, intended to be a companion for GLP-1 weight loss medication users and consumers focused on weight management.” 

CNN commented that this line of Nestlé foods and other offerings from other food giants is a golden opportunity to stay relevant in a world where the parameters for weight loss have dramatically changed. 

Apparently, CNN says, customers perceive Nestlé’s Lean Cuisine, its 40-year-old diet-focused, low-calorie brand, as “old school.” Vital Pursuit, says one retail analyst, is “… a much more scientific approach with an emphasis on nutrition and balance. Nestlé is hoping to gain new customers and widen its audience.”

Vital Pursuit is not just a knee-jerk reaction to a growing or full-grown trend in eating. Nestlé has a lot to worry about. To quote CNN, “J.P. Morgan last year said that current GLP-1 users purchased around 8% less food – including snacks, soft drinks and high-carbohydrate products – over the prior year, compared with consumers who were not on these drugs.”

Danone reports a different strategy. Danone is already invested in a portfolio of dairy, plant-based and water brands. Its current portfolio is very weight-loss compatible. After jettisoning underperforming businesses, Danone is now viewing the acquisition of businesses that will contribute to expanding its health-and-wellness focus. The Wall Street Journal stated, “The French food producer (Danone) said it see changes in the way people eat, age and live as structural tailwinds for its business. It (Danone) is confident a focus on health and nutrition will help (it) deliver profitable growth.”

For those Boomers who worshipped at the altar of George Ohsawa and Michio Kushi; who spent time filling jars with organic peanut butter and brown rice at Erewhon stores carefully noting the empty jar and full jar weights; and who mixed lecithin into sticks of butter to make better-butter, this must be some kind of karmic, cosmic redemption.

Danone and Nestlé are not the only brand businesses gaining perspective from losing weight with GLP-1 drugs. With J.P. Morgan predicting that obesity drugs will soon be a $100 billion market, with about 9% of the US population being on a weight-loss drug by 2030, there is a brand battle to get on the drug-weight-loss bandwagon.

This year Weight Watchers abruptly changed its strategy, with a CEO apology, telling customers that will-power, point-counting and group support may have caused more harm than good. Weight Watchers now has a program for drug-focused weight loss, once considered the “easy way out.” Through Weight Watchers, members now have access to physicians who can prescribe GLP-1 drugs. Weight Watchers is also buying a telehealth company that provides “virtual prescriptions to patients for these weight loss drugs where appropriate.”

Weight Watchers’ new strategy now competes with retail giant Costco, now offering its warehouse way tow eight loss.  Costco provides Ozempic at its in-store US pharmacies. Costco uses Sesame, its affordable health care partner. Like Weight Watchers, Costco provides users an online consultation with a weight loss physician who is able to provide prescription for a GLP-1 or other weight loss drug. And, like Weight Watchers, Costco is offering personal support “through unlimited messaging and guidance with a health care provider.”

GNC, the vitamin and supplement store, now in Chapter 11 and closing at least 1200 retail outlets, says it will sell “vitamins, protein shakes and supplements tailored to people on GLP-1 medications.” GNC told CNN that there will now be a dedicated GLP-1 user section of the store. 

What some might see as opportunistic is really an example of how brands can adopt and adapt quickly to changing circumstances. Innovation and renovation are the lifeblood of brands. Cynics may comment that brands will do anything to make shareholders happy for the short term. And, in many cases, this may be true. However, the idea of health and wellness has been around for a long time. Health and wellness have gone through many iterations leaving legacies such as spas, wellness cruises, herbal supplements, plant-based beverages and proteins and all sorts of dietary regimens. 

Brands are not passive. Brands are active promises of relevant, differentiated experiences. Being able to adopt and adapt quickly saved many brands during COVID-19 lockdowns and the aftermath. 

Brand management is fundamentally about attracting more customers who purchase more often and become more loyal, generating more sales while becoming more profitable.  Brand management is about generating value for customers and creating value for the company. Brand management is business management and vice versa. 

Instead of seeing this new food revolution of new GLP-1 offerings as crass, observers and critics should understand that brands can live forever but only if properly managed. Proper brand management means understanding customers, staying relevant, satisfying users, not doing business as usual, innovating, renovating, creating news and being aware of the changing world. 

CVS and the Paradox of Do-It-Myself Vs. Do-It-For-Me

There is a powerful conflict raging in brand management. This conflict reflects how brands define customer service. The conflict is a paradox that most brands have not yet solved: it is the paradox of DIM vs. DIFM: Do-It-Myself vs. Do-It-For-Me. At its heart, the DIM vs. DIFM paradox is about customer control.

Technology, apps, mobility, digitalization, robotics, constant contact, 24/7-time spans and artificial intelligence create everyday customer control issues. For years, data showed that customers are willing to cede control for increased personalization of services.

Kiosks, voice-activated applications, digital wallets, conversing bots, self-tracking of physical and mental functions (the quantitative self), driverless cars, connected cars, connected-smart appliances in the connected-smart home – all of these shift accountability of actions to things other than ourselves, changing our perceptions of what we can accomplish. We may set the parameters, but the operations are no longer ours.

However, we expect the technology to deliver outcomes just the way we want. Wearables track our movements, sleep, health, etc., yet, we set our own goals expecting the wearable to participate in helping us to deliver against our personal strategy.

Robotics and AI (supposedly) make our choosing and using easier. But, can robots or AI deliver humanized ease of mind? What happens when you take the person out of personal? What happens when we take the self out of self-service?

We appreciate the convenience benefits of the digital world. However, we desire the experience of human contact. In an increasingly digital world, we seek person-to-person contact. Of course, each cohort perceives self-control and the relationship of man and machine differently. One challenge for brands is to maximize each customer’s desire for being in control while in many cases not being the controller. In the battle for the soul of control, the best brand experiences will be the optimization of DIM and DIFM: control delivered my way, regardless of who or what is in control.

To understand how at odds are these two sides of branded customer service look no farther than CVS and your local grocery store.

The chief digital, data, analytics and technology officer at CVS, Tilak Mandadi, spoke with The Wall Street Journal about the future of the CVS customer experience. Mr. Mandadi stated that CVS research indicates customers want “accurate real-time status of their order, wanting to know where is their prescription and when that prescription will be filled.“ So, CVS is building a new self-service app. This new CVS app will employ “conversational AI” using natural language. Mr. Mandadi believes the conversational app will be able to answer most customer questions. And, this new self-service will not include “annoying menu-based options such as press 1 for this and press 2 for this, etc.”

In real life, pharmacies are struggling. Profits are at risk. For example, Walgreen’s is closing stores. Walgreen’s dismal reporting to analysts detailed the challenges facing drug stores. Walgreen’s says that its store closings will not entail firing employees, just reassignments. On the other hand, CVS “cut costs and thousands of jobs” according to The Wall Street Journal. Pharmacies including CVS say they are committed to staffing stores but there have been complaints and mistakes. The Wall Street Journal indicates that there are reports of overworked staff and “dangerous” order-filling errors.

Self-service, according to CVS, will place some of the pharma responsibility onto the shoulders of the customer while reducing the need for pharmacists to attend to phone calls. The tacit understanding seems to be that there will be less need for extra personnel.

The CVS app will also test how much trust customers will invest in the CVS brand. After all, this is our personal health and wellness. Pharmaceuticals go beyond aches and pains to life and death. AI, conversational or not, takes the human out of experiences, especially service. Who or what do we trust?

Trust is at the heart of all relationships. Can customers trust voicing their feelings, fears and their human interactions to AI? Is trustworthiness related to degree of technology or to depth of human service? Can trust be digitized? Can pharmacy services be trusted if it is an algorithm? Or an inanimate conversationalist? Is CVS having these discussions?

Trust is earned, not given. Customers must trust the technology to deliver the promised brand experience in a quality manner. Customers must trust the machine to perform the task and without depersonalizing and dehumanizing the task. Doubt damages trust. Damaged trust destroys brand value.

Another challenge for brands is whether trust can be de-humanized. To what degree? Brands must determine how much is technology and how much is human. Then, ensure quality delivery of both. There are going to be areas where human autonomy is needed. Can the app know when to turn the conversation over to a real person?

There is a definition of service as “a set of one-time consumable and perishable benefits. It relies on the human connection aspects of a relationship.” But, the CVS app is allocating the services to a non-sentient operation. Helpful assistance makes life easier. But, each brand experience requires different levels of technological integration. Sometimes it is necessary to have a human on the other end.

Digest this CVS story along with another story from The Wall Street Journal about the issues surrounding self-service check-out in grocery stores. Self-service check-out in grocery has not turned out to be the panacea grocery store owners envisioned. Many stores are eliminating their self-service kiosks. Even Amazon has stepped back from its people-less, smart-cart stores. Amazon’s lesson is described as not grasping the desire for human interaction in the supermarket.

Regarding self-checkout, as with all technology, there are always glitches. This necessitates an employee standing by for assistance. There is theft. Just like the behaviors on National Geographic’s How To Catch A Smuggler, self-service check-out seems to attract those with sneaking and cheating behaviors where certain items can be manipulated to lower prices on larger items. California has a new proposition ready for a vote that would post one employee for every two self-check-out registers. The only function for these employees is to assist customers and, hopefully, spot the sneaky ones. Self-checkout is supposed to be an efficiency provider: fewer employees at registers. Now, those employees are still on payroll, just doing a different job.

As for customers, only 26% of shoppers over 60 like self-service check-out. Under 45 year olds are most likely to approve of self-service, with a little more than half of the under 45-year olds saying the preferred self-service. As with everything, age matters. Brands need to find ways in which to satisfy customers of different cohorts without trespassing on the brand’s core reason for being.

Furthermore, new data in an article in Harvard Business Review reveal that for office personnel AI can make office workers feel lonelier and less healthy. Is there a possibility that grocery and pharmacy customers, looking for assistance and solace will feel the same way as office workers from frequent interactions with a conversational bot? Will cashiers and other grocery staff start to feel lonely?

So, with contradictory needs of Do-It-Myself and Do-It-For-Me, what happens with brands like CVS? All brands must continue to build and nurture a strong, adaptable, flexible intelligent and empathetic corporate culture. Digitized does not mean dehumanized. Yet, the technological changes in the workplace should not allow a dehumanized personal experience. CVS may be treading a fine line. Brands must determine by customer set where the line is between machine and me.

At the same time, brands must deploy self-service and control within the framework of their mainspring fundamental ethos. Don’t allow technology to impinge upon the brand’s core essence and reason for being. As the executive vice president and chief information and technology officer at CarMax told a Deloitte interviewer, “We’ve done a lot of cool things through machine learning and AI. I’m now focused on ensuring that whatever we deploy as a company is being used responsibly and in ways consistent with our core values.”

Value Meals And The Decline of Brand Experience


KFC, Wendy’s, Jack in the Box, Arby’s, McDonald’s, Burger King are all offering value meals. Even Starbucks is offering ‘Pairing Menus,” a euphemism for value meal along with steep promotions on coffee drinks.

Here is the problem. Value is more than price per offering. Value is not on the menu board. Price is on the menu board. Many brands today are defaulting to the bad habit of equating value and price. Over the years, marketing has corrupted the meaning of value equating value with price. Price is important. However, a brand’s worth depends on a lot more than price.

By focusing only on price per offering, these brands seem to be saying that the total brand experience and other total brand costs (time and effort) are irrelevant. Only price per pieces matters. 

And, this behavior is odd because increasingly our economy is experience-driven. Yet, these establishments, including Starbucks, are forgoing the total brand experience in order to gain immediate sales, albeit, from possibly deal loyal customers. Starbucks is saying that the café experience is no longer an issue. Visit us for the great price. This rankles Starbucks founder and ex-three-time-CEO, Howard Schultz. Mr. Schultz believe improving the Starbucks experience is the road to redemption.

The days of value being price per offer are gone. It is no longer “the price is right.” The better communication is “the great, branded experience is right for the price.” What you get for what you pay is now defined as the total brand experience relative to the total brand costs (price, time effort). Brands must deliver the total brand experience at an exciting cost to generate value. 

Defining value as merely low price is one of the riskiest practices of modern marketing. Brands have been their own worst enemies by letting “low price” become a substitute for the idea of “value.” 

Price and value are not the same thing. Yet, many brands continue to use these terms interchangeably.  Price is what marketers charge. Value is what customers perceive an offer to be worth. Price is the amount of money required to pay for something. Value is about worth. In fact, the actual word, value, comes from the Latin valere, which means, “to be worth.” Price means, “How much money does it cost?” Value means, “How much is it worth?” That is why we have two different words.

Worse yet, it is a marketing sin when owners of brand portfolios refer to a particular brand in their portfolio as a “value brand.” Each brand in the portfolio is a value brand. Each meal in the portfolio is a value meal. We value each offering for different reasons. The customers of a Toyota Corolla and the customers of a Lexus ES are both looking for a good value. Value can happen at any price point: “That’s a great value” can apply to a Porsche and a Prius; great value can apply to a shoe from Designer Shoe Warehouse and from Saks Fifth Avenue. Great value applies to Aldi supermarkets and to Whole Foods. Value is in the eye of the customer. It is learned from interaction. 

This means that it is a major marketing misdeed to identify a market segment as the “value conscious” customer. Every customer is value conscious. It is wrong to say that customers have become more value conscious. Customers have always been, and will always be, value conscious. And, yet, this is what brands are doing: brands are saying that lower income customers are value conscious while higher income customers are not value conscious. And, brand are saying that certain offerings are better value than others. Please keep in mind that the “good-better-best” approach to selling is a classic of brand mismanagement. Every offering must be a great value.

Value is relative. Brands must calculate value for each brand in the customer-defined competitive set. A specific brand’s value is indexed to the average of the competitive set.

Additionally, a brand’s perceived value must be seen as a fair value for the promised experience. Again, brands do not determine fair value. Customers do. Brand marketers set price. Consumers decide fair value. Fairness is more than mere price. Fairness contains justice. Justice means that the benefits-per-costs equation is equitable, just, dependable, trustworthy and fair.

The fast food industry has always used the terminology of Value Meal. This nomenclature has educated customers to the relative “cheapness” of the deal. However, Starbucks has always been uninvolved in this Value Meal marketing. Starbucks was created with a premium caché as the convivial place for coffee connoisseurs. 

But now, Starbucks has entered with its Pairings Menu. Starbucks is also touting deals, especially on its app. Starbucks’ CFO indicated that there is a “value perception” with Starbucks. Starbucks also is offering BOGOs and 50% libations.  Is a value meal the way to go? Are discounts part of Starbucks’ DNA? What about the Starbucks experience? Howard Schultz indicates that current management has been skimping on improving the experience as current management kowtows at the altar of data.

The looming danger is the loss of true loyalists and the temporary accrual of deal loyalists. And, the diminishment of the Starbucks experience; an experience that has relevantly differentiated the Starbucks brand. Restaurant Business thinks that the value menu for Starbucks is a good thing. 

Starbucks value perception must rely on more than a good deal. Starbucks is a great brand. Communications must focus on the great brand experience that is the best value.

The recent iteration of Forrester Research’s customer experience survey indicates that customer experience ratings have declined for a third year in a row, according to Wall Street Journal reporting. The Forrester study polls 98,363 consumers across 223 brands. The Wall Street Journal writes that the scores are the lowest since 2016.

Although Forrester points out that the pandemic did create customer “frustrations,” right now, “… consumers are skeptical of the value they believe they are getting from companies.”  A Forrester principal analyst indicated, “Somebody is paying more but then they’re not seeing the benefit of paying more. They’re not getting a better experience that they think should accompany that higher price.”

A brand is a promise of an expected relevant, differentiated experience. Once you determine that the experience is incidental to the price, you damage the brand. Once you determine that price is the prize rather than the total brand experience, you place your brand into the commodity corner. The data appears to show that experiences are not always the focus of marketing efforts. 

Howard Schultz recently complained – publicly – that the in-store Starbucks experience was declining and management needed to focus more on the store. Operational issues are marring the Starbucks experience. Now, Starbucks is falling into line with the fast food brands when it comes to price deals.

So, what happens next? Will Starbucks continue to offer promotions? When the prices return to higher levels what will happen? And, what about the Starbucks experience? Starbucks’ total brand experience – which drives value – has always been at the core of the brand. Starbucks has always been about more than the coffee. 

And, what about Burger King, KFC, Wendy’s, Jack in the Box, Arby’s, McDonald’s: what happens when the promos go? What will define value at these brands? Until brands start understanding value as something much bigger than price, brands will continue to harm their essential experience.

Southwest Airlines Tendencies for Trouble And Elliot Investment Management’s Plan

Whatever your opinion of private equity companies, their potential for financial engineering when taking over a company or their forcing of operational and managerial changes, the Elliot Investment Management letter and presentation to the Southwest Airlines’ Board of Directors is insightful. 

However, as Forbes points out, all of Elliot Investment Management’s ideas are about “extracting more revenue from customers to better reward shareholders.” Let’s be clear: customers define brand value. If brand value is diminished or negligible in the eyes of customers than there is no shareholder value. 

Diluting the unique identify of Southwest in order to stuff the pockets of shareholders will erode the specialness of the Southwest brand. Forbes writes that “Turning (Southwest) into a clone of United, American and Delta could be a fatal mistake.” Even The Wall Street Journal indicated that “Southwest’s culture helped to make it uniquely successful. Delivering much-needed modernization without damaging it will require more than cold numbers.”

Standing his ground, southwest CEO Bob Jordan indicates that the Southwest brand adapts to its customer needs. The brand is willing to change certain deliverables but within the framework of the brand’s purpose and promise. Mr. Jordan indicated to CNBC that it has been a while since Southwest researched customer preferences. But, this is underway and operational and financial benefits are being reviewed.

Lining shareholder pockets can be detrimental to any brand. However, there do seem to be some internal warning flags as to how Southwest has been managing over the past years.

On the other hand, and If Elliot Investment Management is correct, Southwest Airlines is suffering from some of the most troubling tendencies that lead to brand decline. Elliot Investment Management explains that with Southwest’s early successes, Southwest fell into 1) the comfort of complacency and 2) thinking that worked yesterday will work today.

These two tendencies and other troubling tendencies are the result of brand mismanagement. Elliot Investment Management is correct. These are “stop-now” behaviors. When it comes to a brand turnaround, these tendencies for trouble must be eliminated as these are impediments to brand invigoration.

The Comfort of Complacency

The Elliot Investment Management letter to the airline’s Board of Directors states the following, “Even as the Company’s performance has deteriorated, Jordan (Southwest Airlines’ CEO) has demonstrated a surprising level of complacency, describing each quarter as ‘great’ or ‘strong’ while the earnings outlook continues to fall.”

Complacency is comforting but it is also concerning.

Complacency stops ideas, innovation. Complacency stops brands from keeping up with customers and competition. Complacency allows employees to keep on doing what they are most comfortable doing. Complacency lulls people into laziness and inaction; crushing creativity and curiosity. Complacency gives a brand’s management the opportunity to stop looking at the changes in the world and the brand’s specific market segment. Complacency takes management’s eyes off of the competition. 

Brands are not passive. Brands are promises. Brands are active promises of an expected, relevant, differentiated experience. Brands can be quiet, traditional and chill but brands must move if they want to deliver. Complacency creates inaction and, eventually, irrelevance.

The more successful the brand, the easier it is to walk off the complacency cliff. Complacency leads a brand to believe that there is now nothing left to do but live off of the success.

Warren Buffet wrote in one of his well-read shareholder letters, “… complacency is another corporate cancer.” Mr. Buffet wrote that complacency is dangerous because it has its roots in past success.  

Elliot Investment Management wrote that Southwest Airlines’ Board has reinforced an insular culture and outdated thinking in the face of indisputable evidence that change is required.

Believing That What Worked Yesterday Will Work Today

One of Elliot Investment Management’s key criticisms of Southwest’s strategy and actions is the brand’s  “rigid commitment to an approach developed decades ago,” an approach that “has inhibited its (Southwest’s) ability to compete in the modern airline industry. This ethos pervades the entire business with outdated software, a dated monetization strategy and antiquated processes. This failure to modernize is vividly underscored by the December 2023 operational meltdown that was caused by the Company’s outdated technology, which led to Southwest stranding over 2 million customers over the holidays.”

Elliot Investment Management added that Southwest Airlines’ Board of Directors keeps “doing things the way they have always been done.” To be fair, CEO Jordan does seem to be willing to consider certain changes such as premium seating, as long as customers perceive these changes as desirable.

Change happens. Doing what once worked when the current landscape is different makes no sense. The management guru, Peter Drucker, had a lot to say about “doing what has always worked in the past” in the current environment. 

Mr. Drucker pointed to these three lessons:

  • “Environments change. Continuing strategies and actions that created past successes will eventually lead to failure.” 
  • “Being defensive and unyielding will also lead to failure. Organizations must be willing to (quickly) abandon formerly successful approaches.” 
  • “Believe that change will happen and that sometimes the change will be revolutionary. Enterprises should create the future by making changes even though it means ‘obsolescing the products or methods of its current and past success.’” 

Warren Buffet indicated that having past success is very dangerous because there is a tendency to see past success as generating present and future success. Mr. Buffet wrote that past success does not mean subsequent success. CEO’s who continue to ride on the wave of past success create a culture that is lackadaisical and lazy.

Markets and customers change quickly. So, companies must be flexible, agile, and quickly decisive. However, it is also important to have a leader who is willing to look outward rather than backward. 

Building a culture that is not afraid of letting go is critical. This does not mean giving up the enterprise’s core values. But, it does mean being ready to take leadership in a fast-moving, changing world.  Staying out of trouble hinges on how willing the brand’s top executives are to recognize when it is time to move on and jettison a strategy that is holding the brand back. 

At its core, however, and according to the business press, the Elliot Investment Management approach appears to be a financial play for better margins and better performance and higher stock price. In other words, more profit. Sure, Southwest Airlines has a lot of issues that affect all stakeholders.. The fear is that the Southwest Airlines brand will take a hit. A lot of observers see the end result of this activist action as grounding what Southwest stands for in the eyes of its customers just to satisfy shareholders.  

Satisfying shareholders at the expense of customers is another tendency for trouble. One of Peter Drucker’s mantras was” The purpose of business is to create a customer.” Losing customer focus is a certain path to trouble. The future belongs to customer-focused businesses that are best at attracting and retaining customers resulting in sustainable, profitable share growth.

Of course, stop the bleeding must be the first step in a turnaround. But, turnarounds require 1) stopping any decline in the core customer base by clarifying the brand’s purpose and promise; 2) achieving cultural alignment; 3) defining an immediate 90-day plan and 4) defining and implementing a Plan to Win.

One critic stated that Elliot Investment Management has no plan to “fix” Southwest Airlines. The critic posted that Elliot Investment Management’s entire plan, as clear in the presentation, is to turn Southwest Airlines into an ATM for its shareholders. If Elliot Investment Management is actually interested in fixing Southwest I order to generate enduring profitable growth as opposed to just profit, believing that the Southwest Airlines brand is a valuable asset to be properly managed and nurtured and grown might make Elliot Investment Management changes more palatable and more profitable.

The Arrogance of Brands Finally Meets The Perils of Purchaser Pushback

What do McDonald’s, Target, Walgreen’s, McCormack, Applebee’s, Campbell’s, Kellogg’s and other national brands have in common today? Each is having a comeuppance. This is long overdue. 

Consumers are saying “no” to over-priced brands and for good reason. There is increased pushback from customers who have just had it with continual price hikes. Brands such as McDonald’s, Target, Walgreen’s, McCormack, Applebee’s, Campbell’s and Kellogg’s are impacted by consumers’ reluctance to pay the exorbitant prices that these brands are charging. According to Adobe Analytics, and reported in Axios, low priced items are accounting for a significantly higher share of online unit sales in numerous product categories compared to five years ago.

Brands were successful during the ravages of Covid-19 because brands had good reasons for raising prices to cover the high costs of manufacturing, distributing and selling during a pandemic. Now, post-pandemic, consumers notice that prices continue to be higher. And, data from NewsNation reveal prices are 26% higher than pre-pandemic.

The pandemic allowed brands to become greedy and reliant on the increasingly higher prices. Fueled by their success during lock-downs, post-pandemic, brands continued to behave as if coronavirus still existed. Brands continued to raise prices, publicly stating that their consumers are so loyal, these consumers will continue to pay whatever brands cost. Brands boasted that their consumers would continue to bear the brunt of high prices helping to preserve brands’ margins.

Newspapers such as The Wall Street Journal and The New York Times report the current news of high prices as “because of coronavirus.” These prestigious reporters seem to forget their own reporting. Yes, there were price hikes due to the pandemic. But, those days are gone. Reporters cited CEOs and CFOs discussing margin preservation and multiple price hikes quarter-to-quarter. Reporters described the kudos from Wall Street when brands raised prices. 

Reporters should be reporting on the singular worst behavior that brands adopted: falling into the arms of arrogance.


Arrogance is possibly one of the most destructive brand-business behaviors. And, so many of our favorite brands chose arrogance over deference, respect and esteem. These brands took their most avid customers for granted.

Nothing succeeds like success.  Success is everybody’s aim; no one aims to lose. However, for some, nothing fuels arrogance more than success. Arrogance fosters an environment of “I can do no wrong.” Arrogance is at the core of the mind-set defined as “we will sell what we know how to make” rather than focusing on the customer-focused mind-set, “we will promise and deliver what customers want.” Or the mindset, “We will sell at the price we define” rather than “we will sell at the price customers perceive as value.”

In 2009, Jim Collins, the management and leadership guru, after studying success and failure, wrote, “When an enterprise becomes successful, it can cover up a lot of sins. It is not success that makes you vulnerable, it is when you respond to that success with arrogance.” He related arrogance to hubris, the great downfall within the Greek tragedies. 

In an interview with The South Africa Star, Mr. Collins quoted a Classics professor’s definition of hubris, the ruin of many in Greek tragedies: that is, “an outrageous arrogance that inflicts suffering upon the innocent.” In contrast, Collins found that all the leaders he discussed in Good to Great displayed a common trait: a genuine humility about their success that Collins saw as “the real antithesis of arrogance.” 

CEOs used to understand the perils of arrogance.  CEOs understood that arrogance is a corporate killer. 

In 1991, Pepsi CEO Wayne D. Calloway stated that arrogance was the single biggest reason people did not succeed at Pepsi. “He said that there is nothing wrong with having confidence, but arrogance is something else. Arrogance is the illegitimate child of confidence and pride. Arrogance is the idea that not only can you never miss [shooting] a duck, but no one else can ever hit one.” He said, “Arrogance is an insurmountable roadblock to success in a business where the ‘team’ is what counts. The flipside of arrogance is team-work, the ability to shine, to star, while working within the group.”

In 2015, Warren Buffet referred to business arrogance in his Berkshire Hathaway Annual Report letter to shareholders . He said, “It was arrogance, more than any other factor, that caused the banking crisis. In any area of life, arrogance is a damaging character defect, undermining interpersonal relationships, but in business it’s potentially lethal. A CEO who is arrogant will ignore the advice of col- leagues who may have a far better insight into risks threatening the company. That leads to bad decision-making, low corporate morale and loss of contact between senior management and employees. It destroys the culture of collegiality, of shared opinions and objectives that is crucial to the effective functioning of any organization. Once a CEO becomes isolated in a boardroom he has lost his ability to lead the company effectively.” 

Arrogance is bad for business and bad for brands. Why? Because how you manage your brands is how you manage your business. When the CEOs of the Detroit automotive industry flew down to Washington, D.C., on private jets and then asked Congress for money (except Ford) to sustain their businesses, that was arrogance. Their stance affected their car brands’ perceptions as well as the perceptions of the brand Detroit and the brand “cars made in America.” When the CEOs of the U.S. cigarette brands stood in front of Congress and swore their brands were safe to use, even in the face of decades of data beginning with a landmark Surgeon General’s Report in 1964, that was arrogance. 

Thinking that consumers will continue to buy your brands because you know best is arrogance. Thinking that consumers will buy your brands at any price you choose is arrogance. Thinking that consumers, no matter how loyal, will stick with your brand even if your brand is over 10% higher than a second choice brand or a store brand is arrogance.

Cereal brands continue to believe that consumers will wake up every morning and fill a bowl with sugared grains, no matter how high the price; that is arrogance. 

And, thinking that consumers will continue to buy your brand because it is high quality and iconic rather than a high quality affordable store brand that tastes the same is arrogance. Food Industry Association data show 65% of shoppers choose store brands or private labels over big national food brands because of lower prices, according to a Wall Street Journal report. Research from Circana indicates that dollar sales of store brands increased 6% in 2023. 

The Wall Street Journal reported on 20 categories of grocery items where store brands have out-powered national brands. Retail establishments have spent resources on ensuring that their store brands are credible, delicious, high quality alternatives to national brands. And, this strategy is paying off. So, thinking that just because your mustard brand is French’s will appeal to consumers at a high price while the store brand is perceived to be affordable quality that tastes the same as French’s is arrogance.

Brands see the same patterns in casual dining and fast food. Starbucks is perceived to be too higher priced. Analysts at Deutsche Bank report that, “Among the 45% of consumers buying less or no longer buying from Starbucks, the top reason was related to price, with 47% saying ‘it’s become too expensive.’” Apparently, the cost at Starbucks is “well above every other reason indicated.”

Dine Brands’ brands, Applebee’s and IHOP, are generating deals to attract customers who have been unwilling to pay the higher prices at these establishments. At an analyst meeting, Dine Brands said publicly that lower income diners were shunning Applebee’s and to a lesser extent, IHOP. To combat the decreased frequency and loss of diners, Applebee’s and IHOP are doing deals. Applebee’s is hoping that its deals will attract customers who will then order something else at the high price. 

McDonald’s is also dealing. McDonald’s CEO echoed Dine Brands by saying that McDonald’s was losing its lower income customers. Even with the furor over the $5 meal deal only lasting for one month, Burger King copied the idea and started selling prior to McDonald’s rollout.  And, it did not help that the president of McDonald’s US publicly addressed the viral price issues plaguing McDonald’s by saying McDonald’s prices were not 50% higher but just 20%-21% higher. 

Campbell Soup has put emphasis and resources behind its snack portfolio. Now, according to CEO Clouse, consumers are moving from Campbell’s expensive snacks to similar, less-expensive alternatives. The snacks division fell 2%for the last quarter according to The Wall Street Journal.

You do start to wonder on which planet these CEOs are living. It is as if these CEOs do not see the perils of their pricing policies.

First, price and value are not the same thing. The brand sets price but the customer perceives value. Consumers are saying that the value of the brand is not as high as the brand thinks. Price is a cost, as are time and effort. Cost is the denominator of a consumers’ value equation. The numerator is total brand experience. The higher the costs with the same brand experience, the less customer-perceived value. And, of course, there is trust.

Second, trust is a must. Once trust is busted, it takes time to rebuild. Consumers are not dumb. Consumers see that their favorite brands are the same, only price has changed and changed. In fact, consumers have been quite aware of the continual price hikes so brands can make more money (to protect profit margins and keep shareholders happy). Since trust is part of a brand’s value equation, losing trust greatly impacts brand value. Without brand value there is no shareholder value.

Third, deal loyalty is not the same as brand loyalty. Deals are nice and make money. But, deals attract deal loyal consumers who are loyal to a deal. Once the deal is gone, these customers are gone. They are leaving for the next deal. And, deal loyal customers are very price sensitive. Loyal customers are not. Brands need to be smarter by finding the best price for the brand and communicating, “Great brand at a great price” rather than “Great deal.”

Fourth, taking advantage of your loyal customers by continually raising prices is mismarketing at the highest level. Losing loyal customers affects profitability.  Data are clear on this. Over the past 2 years, brands have been shooting themselves in the pocketbook by raising prices.

Fifth, while brands were happily reporting huge profits to Wall Street, the competitive sets changed. Now, brands are facing serious high quality contenders challenging them for market share. Brands such as 365 (Whole Foods), Market Pantry by Target, Aldi, Great Value by Walmart, Kroeger Simple Truth and private Selection are high quality, affordable alternatives. It is not just price. Store brands have greatly improved quality. 

Sixth, focusing on satisfying analysts at the expense of customer satisfaction is death-wish marketing. 

Not every brand is receiving the message that continually raising prices is bad brand business. According to The Wall Street Journal, Spotify “… is testing the loyalty of its customer base by raising prices for the second time this year as it aims to become more consistently profitable, sending shares higher in early trading.” Wall Street is probably the only entity other than the executive suite at Spotify who think this is a good idea. It appears that Spotify continues to promise Wall Street that it will be more predictable in profitability. 

And, even as the leader in its category, adding millions of subscribers, Spotify still needs to increase profits. Spotify sees the only way to satisfy Wall Street is to dissatisfy customers. Focusing on shareholders at the expense of customers is another tendency for trouble and that tendency for trouble is wrapped tightly around Spotify. The risk of losing customers, especially loyal ones is high when a brand sees its analysts as tis customers.

Seventh, offering discounts at the expense of the brand promise and provenance can be deadly.

Do not stray from the brand’s promise and provenance. Revitalize but do not ditch what your brand means to customers. Some brands like Starbucks never had value in its promise .

“There is a difference between putting a deal out there and how it relates to the totality of the brand,” said Todd Sussman, chief strategy officer at FCB New York told Ad Age. “Creative done right can make value part of a brand’s story and not just a reaction to the economic times. You should be reacting, but in a way that does not discount the brand … You need to have a higher empathy for the moment and not just give a deal, but a value exchange. Consumers don’t want to feel like you’re giving them a handout.”

Peter Drucker, the respected management guru, once said, “The purpose of business is to create a customer.” Losing customer focus is a certain path to trouble. The future will belong to customer-focused businesses that are best at attracting and retaining customers resulting in sustainable, profitable share growth. 

As for brands that are finally seeing the results of their bad behavior, it will take more than deals to drive enduring profitable growth.

Avoiding arrogance takes character and effort on the part of leaders. It is a test of true great leadership to fight the inclination of focusing on oneself rather than the brand and its customers. The leader who creates a ego-trip culture of arrogance, letting success go to the head, is a leader who is more committed to self than to brand. There are perils to arrogance. Some brands are feeling the pressure now. Brand responses of deals and a race to the price-bottom will probably not be the answer.

The Toyota Way? Brand-Businesses Need A New Quality Revolution

What has happened to quality? This is no trivial question.  When you think about all the quality issues plaguing products and service, you recognize how shocking is the current state of quality. Brand-businesses need a new quality revolution.

Think about the state of quality:

Of course, there is Boeing. Which is a horrible situation. But, not a total surprise when you read about the financial engineering that created the current Boeing brand; financial shenanigans that allowed Boeing to morph into a business where seemingly maximizing shareholder profits over customer safety took priority; where seemingly executives believed you can cost-manage your way to enduring profitable growth. Poor quality components from Boeing’s supplier was only part of the problem. At Boeing’s manufacturing plant, safety problems were just pushed down the line, until no one took responsibility or the problems were forgotten about. Even with the tragic deaths, the safety problems lingered and grew. It took a door falling off in-flight to put the spotlight on just how serious are the safety issues.

The FAA is allowing Boeing to create its own safety and quality plan. The FAA told The New York Times, “ We need to see a strong and unwavering commitment to safety and quality that endures over time. This is about systematic change and there’s a lot of work to be done.”

But, Boeing is just one example.

There are driverless car incidents. There are outbreaks of E-coli produce. There are multiple salmonella and listeria contamination issues with some cheese products. There are recalls of Fiji bottled water. It seems as if there are bacteria and high levels of manganese in at least 1.9 million bottles of (recalled) Fiji water. Even Cheerios, a beloved cereal brand has problems with forever chemicals.

Bayer is still figuring out how to fix the Round-Up issue, and not just financially. Sure, there is a financial problem; but court cases infer that users developed cancer and/or died from Round-up’s usage.  

3M has had to pay serious fines for its problems with military earplugs. It is disappointing. The brand so closely associated with innovation created ear plugs for our military that actually do not work, apparently causing hearing loss and worse. How does this happen?

Philips, the maker of toothbrushes and medical systems, designed CPAP machines that actually harm users. When users initially complained about noise from CPAP machines, Philips used noise abatement insulation for the CPAP machines. But, noise abatement insulation breaks down in the machine. The machines become filthy with bacteria. People breathe this in at night, harming users. We learned that 560 users died. Reports state that Philips hid the complaints and deaths until it could not hide anymore.

Court cases seem to reveal that J&J, which recently spun off its consumer products, such as Band-Aid and Listerine as well as J&J baby products into a company called Kenvue, used asbestos in its talcum powder for decades. Women became ill with ovarian cancer. Women died. 

The FDA warned doctors not to use Getinge surgical heart devices as these apparently do not work and can cause death.

Starbucks asked Toyota for help with quality control in Starbucks operations. It appears as if the very long wait-times for a Starbucks order is upsetting customers and impairing the Starbucks brand.

GM’s Chevy Bolt, an original EV offering at an affordable price was shut down due to unfixable battery fires. Now, GM is resurrecting the brand again. Do we know what GM doing differently to make Chevy Bolt vehicles that do not catch on fire?

Ford recalled its new Maverick pick-up trucks due to tail light malfunctions. The malfunctions are in the vehicle’s electrical system. Ford determined that the malfunctions can cause accidents; accidents that can be serious.

A week does not go by without a recall of something, even  cinnamon. Cinnamon from certain manufacturers has contaminants. Certain applesauce products have recalls.

What has happened? 

The manufacturing revolution that maximized quality and deified quality proponents, ensured that production focus on zero defects. The quality revolution embedded the thought that quality is everyone’s responsibility. Toyota used the quality principles of Dr. Edward Deming and brought cars into America that were beyond reliable. 

There once was a time when new cars had screws and bolts on the floor of the vehicle. Or, your new car would not start. When GM introduced the Chevy Blazer, the roof leaked. So, when Toyota broke into the US automotive market with cars that looked a bit strange but started each and every time, we Americans were stunned. 

Toyota is still the quality leader in manufacturing and mindset. Lexus and Toyota are the top two most dependable, reliable vehicles in the 2024 J.D. Power survey.

Today, it is as if we have reached some threshold on quality. We, as consumers, seem resigned to products and services with defects. We do not flinch. We live in a beta-test world where we are the guinea pigs. We just accept the quality issues and move on. It is as if no one cares about quality anymore. 

Looking at the article listings for Harvard Business Review, there has not been an article about quality, quality processes or quality in manufacturing since 2019.  Just one article in 2019. Before that, one article in 2014. 

It used to be multiple articles a year.  In the 1990’s, there were not only articles in HBR, but HBR Press published books and compendiums of articles on quality. At HBR, there were lots of books and articles about quality customer service, as well.  James Heskett, W. Earl Sasser Jr. and Leonard Schlesinger were frequent contributors on service quality up until 2008.

To back up, a bit, there once was a major quality revolution in the US. There were a handful of quality proponents who led the quality revolution: Philip Crosby, Joseph Juran, Edward Deming, Peter Drucker.

Edward Deming was a statistician and the president of the ASA, American Statistical Association. He was run out of the USA because he had a radical view about quality. He believed that quality was consistent conformance to expectations. Using that definition, the highest quality restaurant would be McDonald’s. This caused derision. Dr. Deming’s view was, “Build quality in, don’t test it out…”

Many manufacturers believe quality control is all about a testing and inspection systems. They see quality is an evaluation tool. Which do we want: quality evaluation or quality management? These two are very different mindsets. Physical and technical compliance are not unimportant. But, quality is more than that, much more. 

Dr. Deming said quality control is not a department. He said quality is an organizational commitment. It is not someone’s responsibility. It is everyone’s responsibility. He said that every employee is in charge of quality. But, ultimately, quality is determined by customers in use, not by occasional inspections and audits. In other words, the customer has the “say” on quality.

Dr. Deming’s objectives were 100% customer satisfaction, zero defects and zero variability from expectation. These are conditions that most manufacturers and service providers adhere to now.

You can boil down the ideas of Juran, Deming, Drucker and Crosby as follows:

  • Crosby… Conformance to requirements and customer specifications 
  • Juran… Extent to which a product successfully serves the purpose of the user  
  • Deming… Efficient production of the quality that the market expects 
  • Drucker… Quality is not what the supplier puts in; it is what the customer gets out 

These ideas had a profound effect on manufacturing in the 1950s, 1960s, 1970s and had a major influence on quality work conducted in the 1980s and 1990s.

In 1987, the US Congress established The Malcolm Baldrige National Quality Award (MBNQA) to raise awareness of quality management and to recognize U.S. companies that implemented successful quality management systems. The award was and continues to be the nation’s highest presidential honor for performance excellence.

So what is quality? 

Quality is consistent conformance to customer expectations. Quality is not what the brand promises. Quality is not what the brand intends. Quality is perceived and defined by customers. Living up to expectations consistently is how a brand becomes a trusted brand. Building trust builds brand power.  Quality is a condition for generating enduring profitable growth.

A quality brand is more than a quality product or service. A quality brand is a quality product or service marketed and managed in a quality manner. Quality must permeate every aspect of every contact with the customer. Perceived quality is overwhelmingly the most important determinant of brand strength.

Research consistently shows that brands perceived as high quality have double the earnings of brands seen as low quality.  

In 1990, a marketer named Peter Doyle published an article on research he conducted. He said: “Quality generates higher margins in two ways: 1) quality boosts market share, which results in lower unit costs through economies of scale. And 2) by creating a differential advantage, quality permits higher relative prices.”

We know through other quantitative data that high quality brands are the strongest price competitors. They can hold a high market share and higher prices.

Quality people, quality results, quality experiences, quality attitudes, quality behaviors, quality profits allow a brand to attract and retain quality people who produce premium quality branded experiences that users love. 

As Phillip Crosby said, quality is not an investment in the future;  it is a present day cost of doing business. Quality does not increase costs; it reduces costs. Quality does not cut into profits; it increases profitability. This is because quality leads to increased customer satisfaction. And, this leads to increased customer loyalty; reduced price sensitivity; higher repeat purchase and loyalty; leading to more sales. In other words, quality does not cost money.  Quality makes money. Quality leads to profits.

Failing to consistently live up to brand promises costs money.  Delivering quality does not cost a lot of money to do, but costs a lot if you do not do it. The answer: Continuously improve.

Quality is critical. But, quality is not one thing. Quality is different on the manufacturing line than it is in a call center or at a hotel front desk or behind the cash register at a fast-food restaurant. Having a solid quality control process and quality standards along with engaged employees and an organizational commitment to quality are essential. 

In 2007, the president of Toyota was interviewed for an HBR article. Here is what Katsuaki Watanabe said: 

“To me, becoming number one isn’t about being the world leader in terms of how many automobiles we manufacture or sell in a year, or about generating the most sales revenues or profits. Being number one is about being the best in the world in terms of quality on a sustained basis. I attach the greatest value and importance to quality; that lies at the root of my management style. It’s critical for Toyota to keep making the highest-quality vehicles in the world—the best products in every way, manufactured without any defects. Unless we enhance quality today, we can’t hope for growth in the future. That’s why we are investing in the development of new technologies, new processes, and human resources. My top priority is to ensure that we do that resolutely, sure-footedly, and in a thorough fashion. We’ve never tried to become number one in terms of volumes or revenues; as long as we keep improving our quality, size will automatically follow.”

Beyond Meat Tries Again

Beyond Meat, the plant-based protein alternative, just concluded its Quarter 1 2024 earnings call. Creator and CEO Ethan Brown spent a good portion of the call explaining the rationale behind the brand’s new strategy. 

From observations, strategically Beyond Meat never really focused on its brand promise. Customers never really understood what was relevant and differentiating about Beyond Meat. This was unfortunate because Beyond Meat’s brand promise would have relevantly differentiated the brand from its competitor, Impossible Foods. What we knew was that these plant-based burgers, nuggets and crumbles were a non-animal alternative to cattle-based protein. We also knew that Impossible Foods chose restaurants as the preferred channel and Beyond Meat chose grocery as the preferred channel.

Weak communications allowed the association of cattlemen to skewer Beyond Meat as ultra-processed, lab-generated, bad-for-you food. This relentless attack impugned the brand irking Mr. Brown. To be fair, there were some taste issues that only hard-core vegans could excuse. However, Mr. Brown became laser-focused on returning fire. Innovation has helped. The latest iteration of Beyond Meat is supposedly better-tasting and even better for you. 

This brings us to Beyond Meat’s new strategy and communications.

Beyond Meat decided that gaining the approval of highly reputable, trusted organizations would be the best counterweight to the aggressive derision of cattlemen. Beyond Meat decided to use dietary, nutritional and health science information to gain institutional approval hopefully leading to consumers’ approval.

Reaching out to third-party signifiers such as the Good Housekeeping Institute for its Nutritionist approved seal of approval, the American Diabetes Association for its imprimatur, the Clean Label project certification, the Non GMO project verification and the supremely trustworthy American Heart Association checkmark, Beyond Meat believes that consumers will realize the cattle-meat industry has been remiss in its accusations. Beyond Meat believes that consumers will change their minds about eating Beyond Meat’s plant-base alternatives because eating right for your heart and health are serious drivers in which foods we choose.

It is also important to note that the tag line – Serve Love – has a steer in the “O” of the word Love. Possibly to subtly remind us that cows are loved but are killed to make meat protein items.

Beyond Meat is betting on three things for its revitalization: 1) the power of third party expert testimony; 2) the consumer’s actual purchase of food that is better for them; and 3) the improved taste of offerings.

  1. Third party expert testimony has been powerful, no question.

Decades ago, when advertising agencies and researchers spent time and money understanding how advertising works, we learned the value of third-party testimony in marketing. Crest toothpaste is one of the oldest and best examples of the power of third-party testimony. Crest obtained the seal of the American Dental Association (ADA) for its fluoride (Crest’s formula “flouristan”) toothpaste. People with TV sets saw black and white ads with a kid coming home from a dental visit saying, “Look Ma, no cavities.” 

We also learned the power of peer testimony. Pillsbury used children as peer testimony in its cake mix commercials. Cakes were now easy to make and less time-consuming. But, many people thought that all this convenience took the heart and the taste out of baking. Pillsbury had a grinning child say, “Thank you, Mom” after eating a piece of Pillsbury cake mix cake.

The 2003-2005 McDonald’s turnaround used peer testimony. The idea behind “I’m lovin’ it” was speak in the voice of the customer. Up until “I’m lovin’ it,” McDonald’s had always used the corporate voice, telling customers what McDonald’s could do for them, such as “Your deserve a break today” or “You… you’re the one” or “We love to see you smile.”

Third-party experts and peer testimony have been important reinforcements for consumers. Over time, however, we lost trust in institutions and experts. The annual Edelman Trust Barometer 2024 data show the continuing decline in institutional trust. Today, we trust peer testimony over expert testimony. Social media has spurred this default to peer testimony.

Edelman data indicate that peer testimony (people-like-me) is equal to scientists’ testimony when it comes to “telling me the truth about innovations and technologies.” Both scientists and people-like-me were tied at 74%.

As for third-party seals of approval, research from 2018 indicates that “… the success of a seal is dependent of consumers’ knowledge of the brand being marketed, their awareness of the third-party seal being applied in marketing material and the seals ability to convey information important to the consumer in differentiating offerings.”

  1. Buying For Health Benefits

Studies show that when food shopping, prices and quality are more important than health, safety and environmental impact. And, other data show that price, quality and convenience are more important than having a seal of approval relating to health or environmental issues.

A recent US survey indicated that 37% of those interviewed were in the highest bracket of concern (a 5-point scale) when asked “How conscious or concerned are you about your current or future heart health?” Thirty-three percent (33%) of respondents placed themselves in the second highest bracket. Aggregating these data, 70% of consumers said their personal health concern was high.

This high level of concern did not seem to translate into purchasing heart healthy products. So, when asked what is most important in maintaining or improving heart health, a mere 40% of respondents said “physical exercise “ Only twenty-one percent (21%) said foods that have heart-healthy benefits, while only 13% said exercise and heart-healthy foods. Asked about “food making heart healthy claims,” only 3% said this was important.

  1. Taste

And, then, of course, there is taste. Being vegan or vegetarian is difficult. There are many products designed for vegans and vegetarians that taste great and there are many offerings  that do not. CEO Brown tells us that the new versions of Beyond Meat are “loved” by people who have tasted the products. 

Taste is critical. Especially when many people believe that good-for-you foods do not taste as good as foods with fats, sugar and salt. Just think about all those chips, pretzels, crackers and cookies made with olestra – a fat substitute introduced into foods in 1998 – that died on grocery shelves. Even if the new iterations of Beyond Meat offerings are delicious, consumers will compare Beyond Meat offerings to cattle and chicken offerings.

Wall Street did not seem very impressed with Beyond Meat’s performance and strategy as the brand’s share price fell post-call. One reason may be pricing. To be profitable and demonstrate that this “next generation” of Beyond Meat is of the highest quality (and to protect while growing margins), Beyond Meat raised prices. Beyond Meat products are already at a premium to animal-based protein offerings. Prior to these new versions of Beyond Meat, consumers looked at the price of meat and the price of Beyond Meat and chose meat. 

It may be that once again Beyond Meat is missing the compelling, uplifting message of its core vision and essence. Seals of approval are nice to have and meaningful but only if customers understand the seals. Peer testimony is critical; relying on expert testimony alone is probably not as strong. And, it is unclear whether customers will understand the meaningfulness of each seal. Hoping that people will eat for their heart health is nice but what people say and what they actually do, especially when it comes to food tend not to match. Most people say they will eat healthy but do not follow through. 

The first Earth Day was in 1970. That was 54 years ago. We still are divided on issues such as climate change. Expecting people to change attitudes and behaviors on food may take just as long. After all, during the 1960s and 1970s, vegans and vegetarians introduced tofu, brown rice, kelp, daikon, nori , miso, tahini, dates, seeds, turmeric, ginger and kale that are not only now mainstream but highlighted in restaurants including fine dining. But the 1960’s were 64 years ago; Molly Katzen’s Moosewood Cookbook and Michio Kushi’ Book of Macrobiotics were published 47 years ago

It is difficult to change behaviors. But, changing behaviors can be easier than changing people’s attitudes. The questions are: Will seals of approval change behaviors? Will seals of approval make a relevant difference in a world where the opinions of people-like-me carry equal or more weight than the opinions of experts? The current strategy and communications from Beyond Meat may make employees and executives happy and show shareholders that Beyond Meat is challenging the status quo. But, is this approach the way to generate users, loyalty, revenue and enduring profitable growth?

Starbucks And The Third Place

After Starbucks recent second quarter 2024 earnings call, founder and past three-time CEO Howard Schultz posted comments about his hand-picked successor’s strategy. Mr. Schultz reacted to statements made to analysts by Starbucks’ CEO, Laxman Narasimhan and CFO, Rachel Ruggeri, where both executives described Starbucks’ “underperformance.” Mr. Narasimhan and Ms. Ruggeri also handled analyst questions with an abruptness that seemed to leave a lot unsaid. Both Mr. Narasimhan and Ms. Ruggeri stated, however, that Starbucks is a great brand with enormous opportunity ahead. The comments sounded hollow as Starbucks is already a great brand with enormous opportunity, but only if properly managed.

The press picked up on Howard Schultz’ very public concerns. Mr. Schulz was quite clear: Starbucks’ problems are not the weather and not “headwinds.” Mr. Schultz sees Starbucks’ problems stemming from a loss of focus on the US stores. There was some concern on the part of analysts as well. As one analyst said when questioning the quarterly performance and Starbucks’ C-suite responses:

“I guess, you know, I’m trying to think through the sequencing of how we got here today, and it seems like in October, and early November, at the Analyst Meeting demand was not a problem in the U.S.

“And, I hear you saying that you have a lot of unmet demand. But could you, excuse me, kind of help us do a hindsight on how these issues have come to a crux, so quickly just four or five months hence since those kind of very ambitious goals that were given?

Mr. Schultz wants Starbucks to remain the customer’s Third Place. Mr. Schultz understands that Starbucks Third Place between home and work, its “café society” positioning, has evolved due to technology and changed customer behaviors. But, the Third Place experiential context is still important and compelling. In a world where customers want and where brands create experiences, why are Starbucks executives seemingly not focusing on the Starbucks experience?

Mr. Schultz worries that Mr. Narasimhan’s executive team is more focused on transactional issues than experiential issues. And, judging from the earnings call transcript, there is a sense that how a person purchases Starbucks is front and center. The earnings call did not highlight what actually makes Starbuck’s so compelling and what can continue to keep Starbucks growing and profitable in the experiential role that it originated.

In his third stint as CEO, Howard Schultz provided a roadmap, a vision of a “reimagined” Starbucks Third Place. Mr. Schultz recognized that how we live changed over the past 35 years of Starbucks history. But, he also understood that the emotional and social rewards delivered by Starbucks were, and still are, critical human needs: the need to belong and the need to be uniquely independent.

We all need to belong. We want to belong to something bigger than ourselves: a community, a network, a business, a family, a cause, a union, a nation, a neighborhood or a place. Belonging requires connecting. Connections are part of the Starbucks experience. 

At the same time, we want to be ourselves. We want to be individuals. We want to be seen and respected as individuals with special characteristics. We want to be independent and unique. 

Starbucks offers both: belong to a community, a place and individualize your beverage. Be unique like all of your friends.

Social behavior research suggests that both independence and belonging are essential for finding and securing our place in life.  And, sociologists, psychologists, behaviorists and those who study culture speak of the power of the independent self and the interdependent self and the ways in which these interact. The personal self and the social self “mutually reinforce each other.”

Technology may have enhanced and altered how we behave independently and interdependently, but technology has not changed our driving human needs. The need for a place where we can be both individual and inclusive still remains.  Starbucks’ café society experience satisfied our desire to be part of something, to connect while allowing us to be individuals.

In his post, Mr. Schultz suggested that focusing on the channels of how we receive our Starbucks is important but channels are all about the way in which we deliver a brand promise. Starbucks needs to work on making the third place experience contemporary.

In September 2022, Starbucks offered this vision for the brand:

“Fast forward 35 years, and as the world has evolved, so has the Third Place. Starbucks stores are serving more people each day than ever, with customers often ordering on their phones instead of at the counter. The menu has grown from just a handful of drinks to dozens, with stores built for mostly hot beverages straining to meet the demand for more customized drinks and cold beverages. And food is an increasingly important part of the mix – what was once a case of mostly breakfast pastries case is now a food platform that includes warmed sandwiches, available all day long.

“As Starbucks is reinventing the company, it is also reimagining the Third Place – keeping coffee and connection at the center.”

Additionally, Starbucks stated:

Today, we find ourselves at another unique moment; a moment that challenges us to reinvent and think differently,” said John Culver, group president, North America and chief operating officer. “Our partners have come to expect more from us. Our customers have come to expect more from us.  And it is clear our physical stores must modernize to meet this moment.”

Starbucks described its brand essence as “delivering experiential convenience, in a way only Starbucks can.” To do this, Starbucks needs to make it easier to work there and easier for its employees to connect with customers and vice versa.

Mr. Schultz provided a strategic map. There were three must-do’s: 1) purpose-built store design, 2) coffee and craft, and 3) elevating experiential convenience. 

All three of these must-do’s focused on keeping Starbucks’ Third Place experience contemporary. 

Purpose-Built Design would “’reimagine our store experience for greater connection, ease and a planet positive impact.’ Starbucks purpose-built store design approach would modernize physical stores to serve the increasing demand while creating an environment that is inclusive and accessible, through the lens of sustainability. To help drive innovation, Starbucks has turned to the team of R&D experts and baristas working side-by-side in Starbucks Tryer Center, to help streamline the work behind the counter, and enable more time for genuine human connection.”

Coffee and Craft would “reimagine the coffee experience with breakthrough beverage innovation that elevates coffee craft and quality. Whether the coffee is hot or cold – Starbucks is turning to proprietary, patented technology invented in-house, like the new Clover Vertica™, which offers every customer a freshly brewed cup of coffee in just 30 seconds. Coffee is at the center of who we are and remains on the forefront of anticipating what customers love and our partners are proud to deliver.”

Elevating Experiential Convenience would focus on the total brand experience. “The Third Place has never been defined solely by a physical space, it’s also the feeling of warmth, connection, a sense of belonging Starbucks. Digital technology is helping augment and extend that feeling of connection with customers – whether they are in Starbucks stores, in their cars, on their doorsteps.

“One way Starbucks is doing this is through Mobile Order on the Starbucks app. Starbucks is enhancing Mobile Order to make it easier for customers to order, anticipate when their order will be ready, and make it easier and more efficient for partners to serve mobile order customers, eliminating some of the stress at peak times. Mobile ordering is also being extended to more licensed locations at airports and grocery stores.

“The company also unveiled Starbucks Odyssey, a new experience powered by Web3 technology that will foster connection and unlock access to new experiential benefits and immersive coffee experiences for Starbucks® Rewards members and partners in the U.S. Starbucks is one of the first companies to integrate Web3 technology with an industry-leading loyalty program at scale, while creating a community online that will enable new ways for Starbucks to engage with its members and its partners. As of Monday, customers and partners are now able to join the waitlist for a chance to be among the first to receive access to the Starbucks Odyssey experience, which will launch later this year.” “We have a heritage of continuously adapting how we serve customers, anticipating where they are going and innovating to take them there. Connection is who Starbucks has always been.’”

Nothing happens until it happens at retail. 

Very few people are like Howard Schultz who deeply understand this idea. Place is more than a space. Place is more than its operations. Place is more than its offerings.

Years and years ago, with the Surgeon General’s report on cigarettes, Philip Morris decided to forgo the emphasis on the “smoke” of Marlboro and, rather, evoke a place. The place was Marlboro Country. Marlboro Country spoke to all Marlboro’s benefits and rewards. Philip Morris did the same with Miller Beer. Miller Beer created Miller Time, that special time and place after a hard day’s work.

The wonderful southern writer, Eudora Welty, believed place was the anchor when crafting a story. She understood how the powerful description of place grounded a story. She wrote,

“Place has a more lasting identity than we have, and we unswervingly tend to attach ourselves to identity. Experience has ever advised us to base validity on point of origin. Place … is the named, identified, concrete, exact, and exacting, and therefore credible, gathering spot of all that has been felt, is about to be experienced. Location pertains to feeling; feeling profoundly pertains to place; place in history partakes of feeling, as feeling about history partakes of place. Place is seen in a frame. Not an empty frame, a brimming one. Point of view is a sort of burning-glass, a product of personal experience and time; it is burnished with feelings and sensibilities, charged from moment to moment with sun-points of imagination.”

True of writing and true of retail. Place has power. Mr. Schultz loves the Starbucks “place.” He is committed to Starbucks thriving as a Third Place. Of course, he sees the financial issues and the shopping issues that are troubling Starbucks. But, he also knows that fixing the place which drives the total brand experience, making the brand place beloved, is task number one. Place is the face of your brand.

Mr. Schultz’ concern is that the current management focus is only on the sale and not the sensibilities. There is also a heavy focus on attracting new customers. The problem is that core customers, new customers, occasional customers will become increasingly transactional if the place loses its relevance and its differentiation.

As Mr. Schultz wrote, what is missing is a “maniacal focus on the customer experience.” And, he pointed out that data are OK, but “The answer does not lie in the data, but in the stores.” Falling under the spell of data allows management to put the onus on measurement. Further, Mr. Schultz reiterated his 2022 strategy that galvanized the brand around the total brand experience. “Through it all, focus on being experiential, not transactional.” 

Current management has the opportunity to increase Starbucks‘ brand value by enhancing the Starbucks brand experience relative to the customer-perceived costs of money, time and effort. And, by building trust. Letting the third place become no place would be tragedy.

Peloton Is Not Netflix

Another crisis at Peloton. CEO Barry McCarthy is suddenly gone. Possibly, the strategy Mr. McCarthy created, to apparently turn Peloton into Netflix, is gone with him. Mr. McCarthy was seen as a technology business pro, someone who had experience in lower-price, subscription-based businesses like Netflix. 

But, anyone who follows Netflix knows that the streaming subscription business is a business of scavenger brands. Streaming businesses strategy is to scavenge for new customers. Scavenger brands are all about growth by acquisition of new customers. Streaming brands are just voracious vultures for viewership while they take their current customers for granted. And, this was what Mr. McCarthy started to implement. Create ways in which we can grow digitally capturing new customers for Peloton’s app.

When newly minted CEO, McCarthy first spoke with analysts, he Peloton needed a turnaround plan. He said that a turnaround plan is hard work. He said that in turnaround situations there are always a lot of surprises. He said the turnaround would take a lot of time. If he was hoping for support, he did not receive any kudos. Analysts and investors were not impressed.  Maybe this is because most of what Mr. McCarthy said were not elements for a turnaround plan but elements for a conventional growth plan. There is a big difference.

A conventional growth strategy is not appropriate for a brand in urgent need of a turnaround, which was Peloton’s situation. A growth strategy is very different than a survival and revival strategy, which was what Peloton needed. A conventional growth strategy is for a brand that is on a sustainable upswing. Peloton was not upswinging or even swinging. A conventional growth strategy is a longer term outlook. Typical growth plans are either a 3-5 year mid-term plan or a 5-10 year long-term plan. A conventional growth strategy is for going forward, full speed ahead. It is designed to accelerate quality revenue growth. Peloton did not have the luxury of time.

Sure, Mr. McCarthy aimed to stop the bleeding by cutting costs. And, some of this cost-cutting has finally resulted in a quarter of free cash flow. But, as Peloton is learning, you cannot cost-cut your way to enduring profitable growth.

Further, Mr. McCarthy’s focus on acquisition à la Netflix worried some analysts who believed expansion via acquisition would cost a great deal of money that Peloton did not have. Going after new customers is expensive. It costs at least 4-6 times as much to attract a new customer than it does to maintain a current customer. Data show that with the plethora of devices, social media and apps, acquisition costs continue to rise. And, using cheaper fees to attract new customers will attract the wrong kind of customers. These will be customers who love the deal rather than the brand. By attracting deal-focused customers, Peloton’s churn rate may rise. (Just recently, Peloton canceled one of its deal-loyal customer acquisition tactics.) And, as we have just learned, the equipment rental program also has a large churn number.

Focus on acquisition created the “subscriber acquisition funnel.” A “funnel” strategy of acquisitions is a flawed approach: just ask the automotive companies whose focus continues to be “conquest” new users to the brand.

Anyway, Motley Fool Money states that Mr. McCarthy’s turnaround is “difficult to assess… just don’t see it happening.” Rather than a turnaround, Motley Fool Money says Peloton is in stabilization, like a patient in ICU who is still very sick but in stable condition. “Stable is one thing. Turnaround leading to growth is another. … Peloton is not there yet.”

After 2 ½ years of Mr. McCarthy, guess what? Peloton is not Netflix. According to Peloton observers, the acquisition strategy has been a money loser.

Peloton is not, and never was, a scavenger, subscription-driven brand.  Peloton was, and still is, a community of individuals who are like-minded others. Peloton actually loves its core customers while Netflix is continually focused on new acquisitions. Scavenger brands tend to forget about you, once you sign up for the service. Not so at Peloton. Even in the sorely-info-lacking, investor relations lingo-filled third quarter earnings call, Peloton executives reminded analysts about the power of Peloton’s community.

Peloton was at birth, and throughout its formative years, a brand that generated a community of dedicated users who believed in Peloton’s vision of “discovering a best version of themselves through the power of sweat anytime, anywhere.” Peloton was a connected, bonded community of unique individuals who were empowered and inspired to grow stronger together. True, it was a more affluent group of individuals who could afford the bike. But, even The New Yorker, in an article on a Peloton event, was impressed by the numbers of Peloton passionate acolytes, their connections to each other and to the Peloton instructors. Let’s not forget that prior to Covid-19, Peloton was growing by attracting people to its fitness mission. Peloton can modernize that mission for today.

Whoever choses to be the next peloton CEO will probably have preferred strategies to implement. Also, any new CEO will need to decide whether Peloton is a brand in need of a turnaround or a brand ready for a growth strategy.

Regardless, after watching Peloton over the past six years, here are some brand-building recommendations.

1. Stop The Excessive Price Marketing

Peloton communications have been price-focused, not brand-focused. Peloton has been luring customers with incentives. This has serious implications for brand loyalty. Brand loyalty cannot be bought with bribes. True, the communications show lots of different people on Peloton cycles and treads or people taking off-equipment, mat classes. But, the main message point is that the cycles, row machines and treads are now cheaper. Making the brand’s experience cheaper does not build brand strength. Reminding people that a brand is affordable is important. But, emphasizing price alone damages brands. Peloton’s communications should say “Great brand at a great price” instead of this is a great deal. Unfortunately, Peloton’s recent messaging has not emphasized the “great brand”.  The message has been “We are on sale. This is a great deal.”

2. Connect With The Brand’s Purpose

Peloton’s communications have not connected with Peloton’s core mission. A brand must be in sync with its desired spirit. Mission statements express the brand’s intent, its purpose. Peloton’s original prospectus offered the following: “Peloton uses technology and design to connect the world through fitness, empowering people to be the best version of themselves anywhere, anytime.” Clearly the instructors are aligned. You understand this if you actually take classes. But, for a prospective customer, the brand’s purposeful message is unstated. There are probably a lot of people who would appreciate the opportunity to participate in Peloton’s world view. Peloton’s uplifting, positive, you-can-do-it message is not communicated to the uninitiated. It is a best-kept secret.

Peloton advertising sells its equipment with a price point included. Equipment is a feature of the brand. For a while, Peloton was using it advertising dollars to sell the home fitness category. Peloton was telling people that moving your body was great for you. The campaign used instructors telling customers that they should get off of their butts, listen to their inner voice and move. This did not sell Peloton memberships or hardware. In fact, Bowflex, another indoor fitness training offering, now in Chapter 11, communicated the exact same message as Peloton in its last-ditch-attempt-for-solvency-prior-to-bankruptcy TV advertising. Bowflex stated: the best you is inside, listen to that inner voice and move. Selling the category tends to work against you. Campbell’s tried it with “Soup is good food.” Customers agreed and bought Progresso instead.

Sadly, executives on the recent earnings call stated that one area of current and continuing McCarthy cost-cutting is marketing. The executives dish it up as marketing will be “very efficient.” 

This is a shame. For decades research has shown that a key benefit of advertising is customer reinforcement; reinforcement that you made the right decision with your purchase. This is highlighted in a recent Wall Street Journal article about Zillow house buyers who continue to receive post-purchase emails from Zillow. Those post-Zillow-house-purchasers feel as if they made the right choice after perusing what is on the market in the emails.

Describing Peloton’s business model in a Harvard Business Review article, the authors concluded that even though participants are in different locations, participants exercise “…with a virtual community of peers and instructors” and “… the brand’s meaning extends beyond what they would experience with the bike alone.” 

This is true. But in order to increase owners/subscribers, Peloton must share its meaning with prime prospects. Peloton’s meaning has to be meaningful to both users and like-minded others. As Peloton states on its website: “Millions of Members use our platform to connect, bond, inspire and grow stringer together.”  

3. Maximize The Paradox of Inclusive Individuality 

People want to be seen and respected as individuals. At the same time, people want to belong so something bigger than themselves. People want both independence and interdependence at the same time. People savor their uniqueness while wanting to share that uniqueness with like-minded others. People want to respond as individuals and they want to share as members of a community of common interests. “I am an individual with unique wants and needs. But I am not alone. I belong to communities of people who want the same things as I do.”

This is what Peloton does really well. This is what Peloton is: the epitome of Inclusive Individuality. And, yet, you would not know this unless you were actually part of the Peloton family. There is no relevant distinctive messaging around this critical connective social force. Peloton must manage its brand messaging differently, articulating that its brand experience promises to respect, encourage and strengthen individuality while belonging to a supportive family. Peloton is the ideal place where people are praised for who they uniquely are and what they can uniquely do while belonging to a group that shares their distinctiveness. Peloton’s messaging lacks this compelling, powerful promise of inclusive individuality. Going to a gym pales in comparison.

4. Ditch The Netflix Strategy: Love Your Core Customers

Streaming brands make one of marketing’s biggest mistakes. Streaming brands lust after the customer they do not have more than they love the customer they do have.  Streaming brands focus on growth only by attracting new customers. So, Wall Street penalizes them if new customer counts are too low. On the other hand, Wall Street wants growth. But, Wall Street also wants profit. And, as streaming brands are finding out, growth is expensive.

Streaming brands have not figured out that a brand cannot survive on customer acquisitions alone. To generate quality revenue growth, a brand needs to both attract new customers and build brand loyalty among their current customers. 

Current customers should be retained, respected and loved. Brand loyal customers are a brand’s most valuable assets. Brand loyal customers are less price sensitive; they are less willing to abandon your brand for a competitive brand; they are more forgiving when the brand makes a mistake; and, they are more willing to consider new products and services from the brand they love. 

Peloton has a very strong core customer base of about 3 million users: people who own the equipment and pay the $44 per month for all access. This core customer base has very low churn; they stick with the brand.

One podcast stock observer and analyst said that any private equity firm interested in buying Peloton should focus on this core customer base and forget about the app because the app continues to lose money. The core customer base is profitable. “focus on profitability not on the app growth.”

Peloton was on a roll prior to Covid-19. Ramping up during lock-down years generated errors. Poor decisions were probably rushed into implementation. However, this does not mean that Peloton is dying because coronavirus is over. Peloton has a unique, compelling vision and an incredibly compelling set of user benefits and emotional, social rewards. Whoever takes the reins at Peloton should not ignore the brand’s provenance and its fierce customer base.

Huggies, Pampers And The Demographics That Matter

Recent data show that US fertility rates are dropping. US women are giving birth “at record low rates,” according to the CDC. Demographers’ current concern is the “replacement rate.” Replacement rate is the total fertility rate at which women give birth to enough babies to sustain population levels – that is, replace a generation. Replacement rate assumes that death rates remain constant and net migration is zero.

Right now, the US replacement rate is well below the 2.1 children necessary for generational fulfillment. This number affects many socio-economic issues including labor pools, Social Security funding and the military. The current and future landscapes of brands are already being and will continue to be affected as well. 

It is true that there is a US youth population similar in size to the Baby Boom generation. This demographic phenomenon means that manufacturers and brands are dealing with a population that is both older and younger at the same time. However, the lower number of babies relates to a different impact altogether. The fewer babies born, the more the challenges and the opportunities for brands. The impact of fewer babies on brands is already significant.

Demographics matter. Demographics matter for brands, not just demographers and army recruiting stations. 

Brand-businesses must focus on more than digital and AI. It is imperative to focus on the actual people who will be buying brands that are marketed digitally or experienced through advanced AI technologies.

Forget about the past when demographics was the sleepy section at the end of every survey. Demographics is no longer just for survey screening. Demographics is the way in which our world is shaping up. And, unless there is some major global apocalypse, far beyond the scope of the recent coronavirus, demographics will happen. 

Brands must be ready.

Let’s look at diapers. P&G and Kimberly-Clark face a new reality. The issues with diapers are not just about competitive features and benefits, as well as prices, which increased steadily. Diapers are one business where as demand goes down, price goes up.

A critical diaper issue is the fact that there are fewer babies to wear those diapers. Diapers are serious, profitable businesses for P&G and Kimberly-Clark. As reported on, the “stagnating birth rate” is intensifying the “rivalry” between these two diaper manufacturers. 

The conflict came to a head recently. Kimberly-Clark changed the fit of its Little Movers diapers and advertised this change to customers as the best fitting diaper. P&G challenged the claim with the NAD (National Advertising Division of the BBB National Programs) and won. Little Movers will alter or remove its ads. Previously, Kimberly-Clark challenged a P&G claim and won.

Bloomberg points out, “P&G and Kimberly-Clark…  together claim more than half of the US diaper market. P&G’s yearly sales for Pampers alone are more than $7 billion globally, almost 9% of company sales. But the volume of baby-care products sold declined in the fourth quarter amid higher prices. The category is also large for Kimberly-Clark, which gets more than a third of its revenue, or about $7 billion, from baby- and child-care items.”

Both Kimberly-Clark and P&G spend money, time and effort innovating and renovating their lines of diapers. Bloomberg states that Huggies has moisturizing baby wipes, fragrance free diapers and baby clothes.  P&G has focused on bigger sizes and overnight training pants. These are not for newborns. Pampers is a high priced brand, so revenues may be up but fewer people are buying. Luvs, P&G’s more affordable brand, is having a difficult time. 

Adult diapers are a fast-growth category especially since Baby Boomers are well into their 70’s.

But even with adult diaper growth, data show that adult diapers are still not even half of the baby diaper marketplace.  

Diapers for toilet-trained older children who need some extra protection at night is also a focus. P&G told Bloomberg, that the company is producing diapers for larger kids. In the past year, Pampers introduced a size 8, for children weighing 46 pounds or more. One observer stated, “The diaper makers have been finding ways of extending the lifetime of their customer—overnight pants for toddlers, overnight pants for even older kids. So that’s helped a bit.”

From a brand standpoint, the lower birthrate is problematic not just for diapers. There are problems for makers of baby toiletries such as shampoo, soaps, lotions, diaper rash balms. There are concerns for baby wipes, baby foods, baby furniture, baby formula, baby bottles, breast pumps, maternity clothes, strollers, books, car seats and baby toys. 

Toys are an especially fickle market. Just look at how quickly people lost interest in Barbie after its blockbuster movie. Toys R’Us is precariously balancing its comeback with stores within Macy’s stores. And, even though Macy’s is in trouble, the demographic troubles will also be significant hurdles to Toys R’Us revitalization. Toys for babies and toddlers are big business. Once a kid discovers digital adventures, they are glued to the family computer. Toys R’Us becomes a less interesting place.

But, let’s take the word baby out of the picture. Imagine the consequences for public education, for example. School districts rely on funding based on number of students. What if there are fewer students? Child care is very expensive. But, imagine there are fewer children to be cared for by non-family members.  Or children’s sports such as T-ball or soccer.  There are entire infrastructures built into kids’ sports.

Zoo visits might decline, As will grandparents. You need children for grandparents to exist. Food purchases will be lower. Houses will not need as many bedrooms and bathrooms. Cities and towns will put fewer dollars into playgrounds. It is a rare occurrence to have a playground with activities for adults as in Philadelphia’s new Anna C. Verna Playground in FDR Memorial Park.  There you can find a megaswing that can handle more than 20 people at a time… not just kids.

Medical practices might alter. There would be fewer maternity wards; fewer children’s wards; fewer obstetricians; fewer children’s hospitals; fewer pediatricians; fewer pediatric dentists. Health care costs would change as well.  

Lawyers will have fewer custody cases. Theme parks will have fewer kid visits. Child services will need to refocus. Some colleges may disappear. The pet industry may continue to grow.

A couple of years ago, McDonald’s promoted an adult Happy Meal. It was a big hit. But beyond being a sentimental traffic-driver, the fact is that when there are fewer kids, there are fewer kids’ Happy Meals sold. Burger King is urging crew members to put crowns on adults. Possibly because there are fewer kids to wear the crowns.

Although the demographic data may sound bleak, there are still babies in the US and woman are still having babies. There are just not enough babies being born. For all sorts of reasons, women are delaying pregnancies. Demographers indicate that women are saying they want to have children, just not now. Knowing how long the “not now” will last is tricky to forecast. 

In the meantime, brands as well as organizations such as the military or libraries or municipalities must realistically focus on future-proofing themselves for a world with fewer infants leading to smaller cohorts of youth and young adults. Future-proofing means being prepared. Being prepared means that your brand is ready, agile and able to accept, withstand and make changes for enduring profitable growth. Future-proofing is not foolproof, but it is a serious step in the right direction. 

What can brands do to be prepared? 

To maintain market relevance, brands must do the following: 

  • Begin with having a thorough knowledge of the marketplace. 
  • Develop a true understanding of customer-defined market segmentation. 
  • Generate relevant insight into customers’ behaviors. 
  • Prioritize the market segments. 
  • Use knowledge and insights, define the Promise of the brand to appeal to the prioritized market segments.

Here are three fundamentals for creating or adapting products or services to a new demographic landscape.

Conduct Needs-Based Occasion-Driven Market Segmentation

The purpose of market segmentation is identifying and understanding a brand’s customers. Viable, actionable market segmentation addresses several key areas to assist in directing brand-business strategy and brand policy. Segmentation can also help in managing resource allocation. 

Market segmentation requires craft as well as research skill. Contrary to what many academics, researchers, and consultants say, the output of a segmentation study does not reveal truth. In fact, it can raise more questions than you had beforehand. If analyzed and synthesized with intelligence and creativity, market segmentation can provide insight into the following: 

  • Superior understanding of the customer so the brand can pro- vide outstanding competitive advantage 
  • Strategic focus that is fundamental to effective marketing 
  • Identifying market priorities; effective market segmentation drives business strategy, not just brand strategy 

A proper market segmentation study should help you answer these three key questions: 

  • Who are the prime customers and prospects? 
  • What are their needs and problems? 
  • What are the occasions in which these needs and problems occur? 

Satisfying customer desires and understanding the occasions in which these occur is the key differentiator between marketing and selling. Selling is about convincing customers to buy what we know how to provide. Marketing is about providing what we know customers want or might want or that satisfies their problems. Superior understanding of consumer needs and occasions provides the basis for outstanding competitive advantage. 

Generate Genuine customer-Driven Insights

Real insights are incredibly valuable. 

Unfortunately, insight is now a marketing cliché. Insight is mis-understood, misused, mistaken and meaningless. Marketers made it a meaningless, useless term. Why? Because marketers have turned everything into insights. And, when everything is an insight, nothing is an insight.

  • Is it insight to discover that people’s incomes are under strain and stress? 
  • Is it insight to learn that people want an easy-to-use clothes washing- machine?
  • Is it insight to learn that people like food that tastes good? 
  • Is it insight to learn that people prefer a dog food the dog will eat?
  • Is it insight to learn that a business-to-business customer wants a computer system that won’t go down?

These are not insights. These are observations of the obvious. Yet, in each case, these were reported as insights based on extensive research.

Meaningful insights are more than mere information. Meaningful insights need to meet two criteria:

  1. Surprise at what you learned. And, as a result of this surprise, 
  2. A change in behavior based on this learning.

Real, actionable insight will not come from superior data analysis. Business schools are turning out MBAs who are analyzers rather than synthesizers. MBA has come to mean, “manage by analytics.” Soon, if not already, with all the MBA financial engineers, MBA will come to mean “murderer of brand assets.”

Superior analysis provides understanding of where we are and how we got to where we are. Superior analysis does not provide insight into what kind of future we can create. 

One thing we do have today is lots of information. To generate genuine insights, go from information to insight. This insight will be informed insight; informed judgment not guesswork. Insight means seeing below the surface of information.  Insight relies on synthesizing rather than analyzing.

Analysis travels backward. But, brands move forward. Brands are a future promise as in “This brand will promise to do.…” So we must use synthesis. Synthesis means… “the combining of diverse concepts into a new coherent whole.” Analysis leads to understanding what is happening and why. Synthesis leads to  genuine insight into what might happen.

Solve Problems

Problem-solution is one of the best ways to generate a new or improved product or service.

For example, in 2004, McDonald’s had a problem with mothers of small children. Kids loved Happy Meals. Children were happy with the Happy Meals, but mothers were unhappy. Mothers told McDonald’s there was nothing for them to eat while their kids enjoyed the Happy Meal. All mothers found on the menu board was coffee. OK, sometimes, moms picked at their kids’ fries.  McDonald’s solved the mothers’ problem with a chicken Caesar salad accompanied by Paul Newman salad dressing.

Dyson solved a problem by eliminating bags from vacuum cleaners. TravelPro solved a problem by putting wheels on suitcases. Problem- solution should be at the basis of innovation and renovation. Products and services must address customer problems, satisfy customer needs or anticipate customer needs. 

Demographics will happen. How a brand-business addresses the demographic waves is not so certain.  As one consultant told Bloomberg, “I wouldn’t count on the birthrates suddenly changing direction, it’s a cultural fact.”

But, by understanding potential market segments, generating genuine insights about these segments and solving problems, you can be confident that what you are doing is the better road to enduring profitable growth.