The Day That Wal-Mart Dropped the Smiley Face

Case I The Day That Wal-Mart Dropped the Smiley Face Retail giant wal-mart annually spends close to a half billion dollars on advertising, so the company’s decision in the first month of 2005 to run full-page ads in more than 100 newspapers was not really surprising. What was surprising was the copy in those ads, which said nothing about low-priced toasters or new music CDs. Instead, the ads featured a photo of workers in their blue Wal-Mart smocks and a letter from Wal-Mart CEO Lee Scott. Scott’s letter was blunt and to the point: â€Å"When special interest groups and critics spread misinformation about Wal-Mart, the public deserves to hear the truth. Everyone is entitled to their own opinions about our company, but they are not entitled to make up their facts. † Not the sort of message many would expect from a company whose television ads often feature a yellow â€Å"smiley-face† flying around a Wal-Mart store lowering prices. But it is a clear sign that Wal-Mart believes it can no longer afford to ignore several societal trends that threaten the company’s success and profitability. Wal-Mart is the largest and most successful retailer in the world. It employs more people than any other private company in the United States (almost 1. 2 million) and has world-wide sales of over a quarter trillion dollars, more than four times that of its nearest competitor. The foundation of this impressive record is the company’s ability to keep it promise of customer-friendly service and low prices. But with success comes attention and not all of it good. Several lawsuits claim Wal-Mart shorts overtime pay and one lawsuit claimed female employees face discrimination in pay and promotions. Wal-Mart’s expansion plans have also run into trouble, as some cities and states, citing concerns ranging from low wages, inadequate benefits, environmental damage, and harm to local economies, have passed laws to make it difficult or impossible for Wal-Mart to build its giant superstores. In response to past criticisms of its diversity policies, Wal-Mart created company-wide postings of promotional opportunities, created a new position for a director of diversity, and slashed the bonuses of managers who fail to achieve diversity hiring targets. Scott himself stands to lose $600,000 from his annual bonus if Wal-Mart does not meet diversity goals. Recent years have also seen the CEO spend more time meeting with investors, community groups and the media. But in recent years Wal-Mart has begun to use advertising as a way of addressing criticisms that the company is not a good employer. At first, much of this advertising was â€Å"soft-sell† emphasizing happy Wal-Mart employees. The new campaign is clearly more direct: The copy seeks to address misperceptions about employee wages and benefits, noting that full-time company employees are paid an average of $ 9. 8 – substantially higher than what is required by federal law (%5. 15). The copy also notes that a majority of Wal-Mart employees said benefits were important to them when they chose to take a job at the retailer. Complementing the ads is a PR campaign in select cities using employees and press conferences. In Tampa, Florida, for example, employee Michael Mar tin told reporters, â€Å"I’m making more after working four years at Wal-Mart than I did after nine years at Winn-Dixie. † Martin, a department manager, noted, â€Å"I left Winn-Dixie because I couldn’t get a promotion. Here I got one after six months. † Why is the company using a new approach? â€Å"For too long, others have had free rein to say things about our company that just are not true,† said lee Scott, president and chief executive office. â€Å" Our associates [Wal-Mart speak for employees] are tired of it and we’ve decided to draw our own line in the sand. † It is too soon to know if the campaign will succeed, although some are already skeptical. According to retail marketing consultant Jordan Zimmerman, aggressive mage campaigns like Wal-Mart’s are rare and costly. And ads that directly address the company’s critics will not likely replace the company’s regular advertising (including the smiley face), which is not scheduled to change any time soon. But the new ads do constitute a small change in the nature of the dialogue Wal-Mart has with consumers and society. Only tie will tell if they help Wal-Mart to stay on top. Questions: 1. What is Wal-Mart doing with its latest campaign? What are the difficulties involved in such an effort? 2. A recent Advertising Age article noted that Wal-mart customers are less likely to read newspapers and more likely to watch television than the population as a whole. Why, then did Wal-mart choose newspapers for its new campaign? 3. Analyze this Wal-Mart campaign and explain its purpose referring to the discussion in this chapter of the roles and functions of advertising. What is its primary purpose? Do you think it will be effective at accomplishing that purpose? Case II Toyota Goes after Tuners Young people with limited incomes often look for a great deal on a new car. One way to save money is to forgo options and upgrades, like a sunroof or a CD player. But when Toyota introduced its funky â€Å"Scion† brand, it considered offering a version without something most people assume comes standard: paint. Although they ultimately decided against the idea, at one point Toyota’s plan was to sell the brand with just gray primer. Toyota wasn’t really targeting people so cheap they wouldn’t spend money on paint. Just the opposite – the car company was going after a group with money to burn, called tuners. Tuners are young car buyers who live to customize hteir cars. The trend really began among young Asian Americans, who typically bough t inexpensive Asian import cars and then spent thousands of dollars customizing them. The hobby has spread to other young people, so that today Asian Americans are a minority of tuners. But Japanese brands remain the cars of choice among those dedicated to creating a work of art on wheels. Explaining the idea of a â€Å"no paint† option, Jim Farley, Scion general manager, says, â€Å"As much as possible, we want to give them [tuners] a black canvas. † What does a tuner do with his car? He (or she; women make up almost 20 percent of the tuner subculture) might take a basic Honda, add a large and loud exhaust system, paint the intake manifolds, and add ride-lowering springs. Other popular add-ons are technologies that increase vehicle speed, like turbochargers, superchargers, and nitrous kits. And there are some serious bucks involved. The Specialty Equipment Market Association estimates that auto after-market spending (spending on car accessories after the original car purchase) increased from $295 million in 1997 to 2. 3 $billion in 2002. The motivation? â€Å" You build a car for yourself,† says one day install on Acura RSX Type-S engine into his Honda Civic. â€Å" The satisfaction is in making it your own and knowing that nobody will ever have something that’s the same. † The amount of money tuners spend is reason enough to attract the attention of marketers. GM hoped to interest tuners in its Saturn Ion, Chevrolet Cavalier, and Pontiac Sunfire when it when it launched a â€Å" Tuner Tour† of 10 National Hot Rod Association races. GM allowed young car enthusiasts to play games and enter contests for prizes, as it in turn collected names and e-mail addresses. GM’s focus on relationship marketing makes sense because tuners don’t watch a lot of TV. Both Mitsubishi and Ford believe the best way to reach them is with product placements in movies (Mitsubishi bought air time in the popular for (â€Å"2 Fast 2 Furious†). But even companies selling products unrelated to cars are interested in the tuner lifestyle. Pepsi has hired tuners to customize some of its promotional vehicles. Which brings us full circle back to Scion, Toyota’s goal is to make the new car an immediate hit with tuners. So rather than spend a great deal of money on network television, Toyota decided to sponsor a 22-minute movie On the D. L. The movie is a comical docudrama that tells the story of a pair of musicians trying to obtain their first drivers licenses. The stars are musicians trying to obtain their first drivers licenses. The stars are musicians from youth-oriented bands: Ahmir â€Å"Questlove† Thompson, from the Roots, and DJ King Britt, who played for the Digable Planets. The film premiered at the Tribeca film festival, after which segments were shared on peer-to-peer networks such as Kaazaa. Toyota hopes that enthusiasts will download the segments and share them with friends. Questions: 1. Why are tuners so attractive to marketers, even after accounting for their spending power? 2. Evaluate Toyota’s strategy of targeting tuners with the Scion campaign. What are the difficulties for a large company in marketing effectively to a youth-oriented subculture? What techniques do you think companies like Toyota are using to try to understand their market? 3. Explain how â€Å"tuner† campaigns, such as those by GM and Toyota, work. Analyze these campaigns using the Facets Model to identify the effects they are designed to achieve. How would you determine if these campaigns are effective? Case III Starbucks Makes TV Less Intrusive Starbucks coffee is now sold in grocery stores but how many people realize it? To get that message out, the well known coffee house chain needed to reach its customers nationwide with that message. Television commercials would be the obvious way to reach those people, but Starbucks’ management knew that their customers are not big fans of television commercials and resent the interruption of their favorite program. That’s why starbucks has been such an infrequent advertiser on TV. Its on-air promotional activities have been limited primarily to radio and its only previous use of TV had been support announcements on public TV. That was the problem facing Starcom’s MediaVest group. The agency used a creative solution: It recommended a partnership with the Bravo cable network. Bravo would run four Independent Film Channel (IFC) movies on Friday nights for a month and Starbucks would buy all the commercial time surrounding the movie airings. The MediaVest team knew that Bravo’s â€Å"IFC Friday† night films would be a good way to reach the stakeholder audience because research had described that customer base as people who are up on the latest trends, like to attend live performances of the arts, are apt to see a movie during the weekend it opens, and generally are interested in cutting edge things. Mediavest calls this customer â€Å"the attuned explorer. † Even though Starbucks bought all the commercial time, the MediaVest team recommended letting the movies run uninterrupted. Starbucks’ advertising message was delivered in supporting Bravo promotions of the movies during each week leading up to the Friday night telecast. About 40 seconds of each 60-second preview spot showed scenes from the movie and 20 seconds promoted Starbucks s the movie sponsor. Other promotional activities were also used in support of the campaign. One month before the movies aired, a $1 off coupon for a bag of Starbucks Coffee was sent to 3 million targeted consumers around the country, along with a viewer guide introducing the Starbucks-sponsored independent movie festival. Starbucks billboards also appeared during the movie month coinciding with the independent film industry’s annual telecast, which aired on both Bravo and IC. The innovative Bravo partnership wound up not only increasing sales of Starbucks Coffee by 15 percent for the month the campaign ran, but also increased viewership on Bravo by 33 percent. These results led the campaign to be named a Media Plan of the year by Adweek magazine. Questions: 1. What was the problem Starbucks wanted to overcome in order to effectively advertise that its coffee brand was available in supermarkets? 2. How did the partnership work? Is there anything you could recommend that would extend the reach of this campaign? Case IV Wpp’s Owner-a British Knight with Every (Marketing) Weapon at His Disposal To the uniformed, nothing about Martin Sorrell or his company, the WPP group, may be quite what it seems. Although he was awarded a knighthood, Sir Martin is anything but a reserved aristocrat. And while WPP is one of the four largest agency holding companies in the world, the initials actually stand for Wire & Plastic products, the British company Sorrell used to gobble up some of the world’s most famous advertising agencies. The roster of agencies now under the WPP’s wing includes industry leaders Ogivly and Mother, Burson-Marsteller, Hill & knowlton, young & Rubicam, and J. Walter Thompson, to name just a few. Large conglomerates like WPP made frequent headlines in the 1990s, a period of great consolidation in the advertising industry. Faced with harsh economic and business realities, individual advertising agencies chose to give up independent existence in order to become parts of large communication companies that offered clients all the tools for an integrated campaign, including advertising, direct marketing, public relations, and sales promotion. In the new millennium, dealing with one (or several) of the four large holding companies, WPP Group (England), Interpublic(U. S), Publicis Groups (France), and Omnicom (U. S), is the way the world’s biggest advertisers do business. While each of the conglomerates is led by a charismatic and dynamic individual, none appears to have an edge on Sorrell, who was described in a recent Fortune article as â€Å"†¦confident, witty, and a tod arrogant, talking rapidly about the future of advertising and the challenges of keeping fractious clients and ad agencies happy. † Fortune also noted that â€Å"In an industry populated by shameless schmoozers, the 59-year-old Sorrell is in a league of his own. † These characteristics have served Sorrell well, In 2004 he squared off against rival Publicis Groups and its CEO, Maurice Levy, in pursuit of one of the last great independent agencies, Grey Advertising, New York. During the battle Advertising Age opined that Publicis had a big advantage because Levy and Grey chair Edward Meyer were friends and had spoken about merging in the past. In addition, both Grey and Publicis created ads for consumer giant procter & Gamble, while WPP agency Ogilvy & Mather counted P&G’s competitor Unilever among its most important clients. It is customary for agencies not to work for competing accounts. ) A Unilever spokesperson, asked for his thoughts about the possibility of working with an agency that created ads for his most important rival, suggested that â€Å"In the past, we’ve not seen it to be such a good idea. â€Å"But nobody familiar with Martin Sorrell was surprised when at the end of the day he convinced Grey to sign with WPP and persuaded Procter & Gamble to stay as well. Unlike many of his peers, Sorrell has never written a word of copy, nor has he ever penciled a print design or directed a broadcast commercial. Sorrell’s talents are organizational and strategic; although he is an expert in the world of finance, Sir Martin cautions, â€Å"I may be a bean counter, but I’m not an accountant. † To drive home the point he posed for WPP’s annual report surrounded by lima and pinto beans. So how does Martin Sorrell continue to win in the high-stakes agency world? His vision, developed years before most of his rivals caught on, that twenty-first-century clients would want a complete menu of marketing communication services, all of which work synergistically, is one important reason for his success. Tenacity, energy, focus, and a willingness to do whatever is needed to win are also traits that come to mind. All these are illustrated in the story of Sorrell’s drive to land Korean giant Samsung when the company put its advertising up for review in the spring of 2004. Samsung spends almost $400 million each year supporting its brands, which is reason enough for agencies to salivate for the account. Sorrell believes that the company holds even greater appeal because of his forecast that advertising growth in the twenty-first century will come disproportionately from Asia. So Sorrell did whatever he could to attract Samsung’s attention. Like any savvy agency head, he assigned his best people to generate creative ideas to pitch to Samsung executives. But unlike most agency heads, he didn’t stop there. After discovering that a Samsung-financed museum was having a grand opening in Seoul, Sorrell jumped on a plane and ended up being the only agency person there. Samsung executives found themselves receiving emails from Sorrell at all time of the day and night. Peter Stringham, marketing director of HSBC, a company that Sorrell landed after several years of trying, commented, â€Å"Martin can be quite persistent. He was there from the first meeting to the last. He’d pitched to us a couple of times before and not gotten the account, but he’d had his eye on it for years. † Needless to say, in the fall of 2004, Samsung announced it was awarding its account to WPP. In the new millennium, British knights may not wear armor, carry a crest, or rescue damsels in distress. But Sir Martin Sorrell knows how to triumph in the competitive world of advertising agencies. Questions 1. Why do large clients like Samsung wish to work with giant holding companies like WPP instead of with smaller agencies? 2. What qualities help Sorrell to be successful? Why are these qualities so important for his company’s success? 3. Explain how Martin Sorrell wins clients and builds positive agency-client relationships. How does he see the agency’s role in marketing? Case V Boycott This! A recent ad for a Nike hiking shoe used copy that was probably intended to be humorous. The copy suggested that Nike’s shoe could help the use avoid turning into â€Å"†¦a drooling, misshapen non-extreme-trail-running husk of my former self, forced to roam the earth in a motorized wheelchair with my name embossed on one of those cute little license plates you get at carnivals†¦. Marcie Roth, an advocacy director for the National Council on Independent Living, didn’t find it funny. â€Å"Nike is trying to be sensationalist, and they’re doing it on the backs of the disabled,† thundered Roth, adding, â€Å"We won’t tolerate it. † Nike apologized and immediately pulled the ad. But Roth announced that her group was interested in more than just an apology, because the disabled, in Roth’s words, had been â€Å"dissed. † Nike was asked to include disabled actors in its ads and hire a greater number of disabled workers. Otherwise, suggested Roth, Nike could expect a boycott. Boycotts are certainly one way for consumers to let advertisers know when they’ve gone too far. While some advertisers, notably Benetton, delight in creating controversy, that vast majority try to avoid the unwanted attention and possible loss of sales that a boycott might bring. Armed with this knowledge, consumers and interest groups regularly threaten boycotts and there are several Web sites that track the dozens of product boycotts that re occurring at any given time. Recently the Web site â€Å"Ethical Consumer† listed boycott of Adidas (for allegedly using kangaroo skin in the manufacture of some boots), Air France (for allegedly transporting primates), Bayer (for allegedly supporting policies favoring the use of genetically modified crops), and even entire nations (Israel, China, Morocco, and Turkey). Although Ethical Consumer’s rationales for supporting boycotts appear motivated by left-leaning or pr ogressive concerns, conservative groups use them too. The American Family Association, based in Tupelo, Mississippi, has sent tens of thousands of e-mails threatening boycotts to advertisers Geico, Best Buy, Foot Looker, and Finish Line. The AFA is not upset with the ads placed by these companies, but rather with the program in which the ads appear: South Park. The AFA claims its e-mail campaigns caused Lowe’s, Tyson, ConAgra, and Kellogg’s to stop placing ads in ABC’s surprise hit Desperate Housewives. Some companies resist boycott pressures. Proctor & Gamble ignored AFA pressure to stop its support for gay-friendly legislation in Cincinnati. Subway Vice President Chris Carroll said his company ignored threatened boycotts caused by the company’s decision to run ads in a documentary that was unflattering to Democratic presidential nominee John Kerry. And then there’s Pepsi. In 2003 the brand signed hip-hop artist Ludacris to appear in a â€Å"fun-oriented† campaign, but outspoken cable show host Bill O’Reilly immediately ripped Pepsi and urged â€Å"†¦all responsible Americans to fight back and punish Pepsi for using a man who degrades women, who encourages substance abuse, and does all the things that hurt†¦the poor in our society. I’m calling for all Americans to say, ‘Hey, Pepsi, I’m not drinking your stuff. You want to hang around with Ludacris, you do that, I’m not hanging around with you. † A Pepsi representative appearing on O’Reilly’s show denied that the artist’s provocative lyrics (one album featured a song called â€Å"Move Bitch†) were relevant to the Pepsi campaign. But the following day Pepsi canceled the campaign. For viewers of a certain age, the entire affair was reminiscent of the controversy that erupted several years earlier when Pepsi canceled ads featuring Madonna after she appeared in a controversial music video. But Pepsi’s decision did not mark the end of the controversy. After the announcement, Ludacris and the Hip-Hop Summit Action Network, an organization run by his producer, Russell Simmons, threatened their own boycott. Following several days of negotiations, the second boycott was called off. Ludacris would not be a spokesperson for Pepsi, but the soft-drink giant agreed to a deal to make a multi-million-dollar donation over several years to the rapper’s foundation. Questions: 1. What do you think about consumer boycotts? Are they unhealthy attempts to infringe on the speech rights of others? Or are they a healthy sign that consumers can take action against the ethical lapses of advertisers? 2. How should a company respond to the threat of a boycott? Consider the different responses of Nike, Subway, Lowe’s, Proctor & Gamble, and Pepsi. How well do you think each of these companies reacted to boycott pressure? Did any of the companies hurt their brand because of the way they reacted to boycotts? 3. How would you review advertising ideas that you suspect are controversial and might generate a backlash? Is it ever justified to â€Å"push the envelope† in the areas of good taste and social responsibility? How would you decide if such approaches are effective? Case VI How Advertising Works If It Walks Like the Aflac Duck You’ve probably never heard of the American Family life Assurance Co. , nor likely to be familiar with its primary service: supplemental workplace medical insurance, a type of insurance that is used by people to help cover the many loopholes and deductibles in their primary insurance coverage. Then again, if you are like 90 percent of U. S. onsumers, maybe you have heard of the company. In its advertising it calls itself â€Å"AFLAC. † The four-year AFLAC campaign is the work of Linda Kaplan Thaler, owner of the New York agency that bears her name. Thaler’s ads are not known for their subtlety. Among her credits are the Toy’s R Us jingle â€Å"I don’t want to grow up,† and the successful campaign for Clairol Herbal Esse nces, featuring on â€Å"orgasmic† hair-washing experience. The Herbal Essences ads strike some as funny, others as quite possibly offensive, but sales of the product have skyrocketed to almost $700 million a year. In many ways Thaler’s ads hearken back to the 1960s, when it was common to feature â€Å"sex, schmaltz, chirpy jingles and ‘talking’ babies and animals,† as the New York Time’s advertising columnist Stewart Elliott puts it. Industry insiders have been known to snipe at Thaler’s work, and few would describe her campaigns as â€Å"edgy. † But as Maurice Levy, CEO of the giant advertising company Publicis, observes, â€Å"There are people who do advertising for what I call the advertising for the consumer. She is doing advertising mush more for the consumer. Thaler herself notes, â€Å"We’re doing our job when we find ways to get people to buy things. † Thaler’s AFLAC ads, by almost any measure, are her best. Almost all feature a white duck desperately screaming â€Å"AFLAC† at people who need supplemental insurance. Unfortunately, the duck’s audience never quite seems to hear him. Most of the ads contai n a fair amount of slapstick, usually at the expense of the duck, whose exasperated-sounding voice originates with former Saturday Night Live cast member Gilbert Gottfried. He’s got the right answer but nobody is listening, and that’s a situation that resonates with people,† says Kathleen Spencer, director of AFLAC’s corporate communications. â€Å"There’s also just something inherently comical about a duck. † The campaign has been enormously successful. Since the ads first began running, brand name awareness has increased from 15 percent to 90 percent. Over the same period year-to-year sales increases have almost doubled. Dan Amos, CEO for AFLAC, believes that â€Å"our name recognition with our advertising campaign to truly help our company. In 2003 Ad Age named the commercial featuring the duck and the Amazing Kreskin (who hypnotizes a man into thinking he is a chicken) the most-recalled spot in America. But what makes the AFLAC campaign truly remarkable is how little it has cost the company. The duck has a higher Q score (a measure of a character’s familiarity and appeal) than both Ronald McDonald and the Energizer Bunny, but whereas Energizer has spent almost a billion dollars over 15 years on advertising, and McDonald’s spends almost $700 million every year, AFLAC’s ad budget is only $45 million a year. There is no denying that Thaler’s work for AFLAC is a triumph of both effectiveness and value. Questions: 1. Some viewers don’t like the AFLAC ads. Can an ad still accomplish its intended purposes if people find it annoying? 2. The AFLAC campaign is more than four years old. In your opinion, will the campaign stay effective for the foreseeable future? 3. What makes AFLAC ads so effective? Is it something more than their entertainment value? If so, what else contributes to their success?