Are spirits haunting the beer industry?

A May article in Ad Age sounded last-call for beer, citing a list of societal factors and marketing blunders and triumphs that have helped hard liquor knock beer off its bar stool. Sensing that a creeping sameness had rendered beer marketing flat (and, some would say, tasteless), spirits makers in the late ’90s began advertising on cable and radio (new media for them) and spent millions on on-premise marketing. Their goal was to demystify and inject some fun into their product offerings. At the same time, the lovely ladies of Sex in the City introduced the younger generation to cosmopolitans and consumers became more and more interested in the finer things in life. Suddenly a bottle of Bud didn’t seem to measure up.It’s way too early to play taps for the brewers. The industry has long been buffeted by trends of one kind or another and managed to survive. But the rising of the spirits offers a lesson on how one group of marketers can exploit another group’s flaws and find real success. 

“The Death of Beer,” Advertising Age, May 2, 2005

How to become consumer-centric, the P&G way

Marketers are talking a lot these days about wanting to establish relationships with consumers. At many firms, these sentiments come off as flavor-of-the-month lip service. But as a Wall Street Journal profile of Procter & Gamble CEO/übermarketer A.G. Lafley showed, P&G’s research has helped it develop products that form strong bonds with customers.

A section on P&G brand Tampax’s Pearl tampons, for example, mentioned that the individual tampons are packaged in noncrinkle plastic, which means that “teenage girls can open them in a bathroom stall without anyone knowing.” What better way to forge a long-term relationship with a customer than by easing their fears or helping them avoid embarrassment?

The article implied that the idea for noncrinkle plastic arose from research, and based on P&G’s recent history, odds are that it did. The act of talking to consumers is one crucial step but it doesn’t mean much unless you also listen to what they are saying.

Lafley seems to have mastered the art of observing and listening. While on a visit to P&G’s South American headquarters in Caracas, Venezuela, he and other execs ventured out for some ethnographic research to find ways to undermine Avon Products Inc.’s stronghold on the local cosmetics market. They visited the apartment of a 29-year-old woman and talked with her about her beauty and hygiene products. Noticing her well-thumbed Avon catalogs, complete with dog-eared pages marking interesting products, Lafley said, “Her entertainment is looking at the Avon catalogue at night, and we need to remember that.”

The article made it clear why P&G is the poster child for consumer-centric marketing and it offered proof of the impact that a CEO can have on a huge company. Since Lafley took over in 2000, the company’s stock price has doubled and earnings have increased, on average, 17 percent a year.

Focusing on consumer wants and needs isn’t easy, but P&G is proof that it can be very profitable.

“P&G Chief’s Turnaround Recipe: Find Out What Women Want,” Wall Street Journal, June 1, 2005 

The penny is in the mind of the beholder

Contrary to popular belief that the “.99” part of a price such as $19.99 makes the difference in purchasing behavior, new research by Vicki Morwitz, NYU Stern professor of marketing, and NYU Stern doctoral candidate Manoj Thomas finds that it’s the left digits - the numbers that come before the .99 - that determine whether or not consumers perceive a penny reduction as a bargain.

For their study, Morwitz and Thomas conducted five experiments in which a statistically significant sample evaluated how high or low they perceived a product price to be. The participants either saw product prices that ended in nine (e.g., $19.99 and $23.59), or prices that ended in zero (e.g., $20.00 and $23.60).

In half the cases when the price ending changed from zero to nine, the left digit changed and the price became lower (e.g., $20.00 changed to $19.99). For the other half, the left digit stayed the same (e.g., $23.60 changed to $23.59).

In the condition where the left digit changed, participants thought the price with the nine ending (e.g., $19.99) was much cheaper than the price with the zero ending (e.g. $20.00). However in the condition where the left digit did not change, participants perceived the nine- and the zero-ending prices (e.g., $23.60 vs. $23.59) to be essentially the same.

These results demonstrate that the “left digit effect,” changing the left digits to a lower number (20 to 19) rather than the right digits (.60 to .59) is what affected the participants’ perception of the price. The research suggests that the human mind converts numerical symbols to analog magnitudes, processing the numbers from left to right.

What does this mean for consumers? You’re still saving the same penny, but the next time you go to the mall, you’ll know that it’s the “left digits” - in other words, the dollars, not the cents - in the price that make you feel like you’re getting a bargain.

Morwitz and Thomas’ research, “Penny Wise and Pound Foolish: The Left-Digit Effect in Price Cognition” was featured in the June issue of Journal of Consumer Research.

Researchers need the soft skills

Seventy percent of surveyed market research executives acknowledge that "soft" interpersonal skills such as negotiation and listening are critical competencies for market research professionals - yet most organizations do not have training programs or systems to monitor and develop these skills in their research staff. Training and development gaps in market research programs are one of the insights that emerged in a study from Best Practices, LLC, Chapel Hill, N.C., which sampled 85 market research organizations across 20 industries. The study probed best practices that market research organizations use to train and develop effective market research staff. Findings include:

  • Market analysis, competitive assessment and launch-tracking were identified as the top three of 22 skills and competencies important to high performance.
  • More than 50 percent of market research professionals have a master's or Ph.D.
  • More than 95 percent of senior market research managers identified market trends and changes as the top two topics about which researchers must provide insights to business leaders.
  • Nearly 90 percent of market research heads identified "anticipating future business needs" and "challenging brand thinking" as other top activities most valued by their internal business customers.
  • More than 80 percent of market research leaders identified essential marketing management and brand management skills lacking in their research staff.