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Trust me, I'm a celebrity

Every week the analyst firm Datamonitor sends me a very informative email newsletter (you can get your own by registering free at www.datamonitor.com). Today’s issue reported on of a survey of UK consumers which revealed that celebrity endorsements are regarded as one of the least trustworthy ways to deliver product information. Datamonitor’s analyst concluded that this is bad news for celebrity-obsessed advertisers that have come to rely on the technique to drive sales. Nonsense. Advertisers with any sense apply the blend of techniques that are most effective and there’s no reason to believe that celebrity endorsement won’t continue to give them value.

The survey, entitled What Assures Consumers?, was sponsored by AccountAbility (a non-profit think tank) and the National Consumer Council. Its findings listed consumer information channels and messengers in order of trustworthiness.

1. Packaging
2. Consumer watchdogs
3. Family and friends
4. Trusted third-party ‘standard’ logos
5. Store salespeople
6. Consumer TV programmes
7. Company websites
8. Advertising
9. In-store promotions
10. Internet sources not controlled by the company
11. Press articles
12. Government departments
13. NGOs and campaign groups
14. Celebrities
15. Leaflets delivered to home

That celebrities only ranked above “junk mail” is seen as a damning indictment of their worth, but it ignores reality to look at this technique in isolation. Packaging, websites and advertising fare well, but this is where the celebrity endorsement is manifested. The fact is that effective marketing uses a variety of methods to deliver and support its messages, of which endorsements are but one part.

Datamonitor’s analyst cites “an increasingly bizarre array of product/celebrity matches” as an indication that some advertisers are no longer in touch with the marketing savvy consumers whom they are targeting. This is a good point, but it’s no revelation. Celebrity endorsements that make no sense will always be a waste of time. And as consumers become ever more sophisticated, so needs to become the application of the celebrity endorsement technique. It’s just smart to keep up with the Zeitgeist (which incidentally owes much to the actions of celebrities and advertisers).

Even in a challenging marketing environment of cynically minded shoppers, an instantly recognisable face will still be useful. More so when they have a direct relevance to what’s being promoted. And celebrities entertain us, so as marketing has to become more engaging to win our attention, they become the reverse extension of the increasing use product placement in television shows and movies.

Any advertiser that has celebrity endorsement as their entire promotional strategy will be undoubtedly caught out by a consumer public weary of celebrity culture. The Dr West's "Bob Hope's Toothbrush" ad of yesteryear now looks laughably naive, but I can’t think of any company today that takes such a primitive approach. Can you?

Tesco targeting America’s soft underbelly

Tesco, UK’s leading supermarket chain, is set to open about 100 stores in California and Arizona based on its wildly successful Tesco Express concept. Having visited one of these stores on The Strand in central London last May, I can report that it is an idea that might just catch on here in the US, unlike homegrown concepts and acquisitions of many other UK-based retailers who have suffered for their dalliances in our market (I’m thinking Marks & Spencer with its mishandling of Brooks Brothers or Midland Bank’s doomed acquisition of Crocker National Bank, both of which make the Telegraph’s worst financial decisions hall of fame). http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=M3&xml=/money/2006/06/02/ccjeff02.xml).

A Tesco Express seems purpose-built for the emerging US lifestyle. A smallish store, maybe 2,000 square feet, it provides essential grocery and beverage items. But the innovation is in bringing to the US convenience store sector a feature of UK supermarket shopping that the British have keenly integrated into their lifestyles. Prepared entrée and side food items are abundant, and offered in three categories (value, good and best). The best items, or “Finest” as Tesco has it branded, are good enough to be – and frequently are – presented to guests in the UK alongside, or instead of, home-prepared meals. Takeaway dinners are a growth market in the US, and the multi-level range of meals offered by Tesco seems perfect for our market (although there is the obvious need for tailoring of menu to local tastes).

A fat market that's expanding

In US supermarkets, prepared foods have become the most profitable area of an otherwise marginally profitable enterprise. Tesco seems poised to steal market share from supermarkets as well as convenience stores and individually-owned takeaway specialists. It’s a lot of work to navigate today’s very large supermarkets just to get the few things you want for dinner and the Tesco Express concept seems spot-on.

Overall, the US consumer spends more than $1 trillion on food, so you can see why Tesco might be interested (see http://en.wikipedia.org/wiki/Food_industry). On July 8, 2006 The Orlando Sentinel in a very well reported article by Mark Chediak published the following statistics (http://www.orlandosentinel.com/orl-takeout0806jul08,0,3850200.story):   

According to market-research organization NPD Group, the average American last year ordered takeout meals 122 times from restaurants and grocery stores, compared with just 80 meals eaten at a restaurant. Twenty years ago, the average American ordered takeout 84 times and ate 93 meals at a restaurant. Ten years ago, 65 percent of all dinners eaten at home were made from scratch; that number declined to 58 percent in 2005 with further decline expected

Tesco will compete with our largest retailers for "share of stomach"

Tesco is clearly targeting a growth area in the US, but it’s not alone. Wal-Mart’s Neighborhood Market chain is aiming at the same consumer. But here is where branding might pay a dividend: Wal-Mart doesn’t have a brand that most Americans would equate with upscale prepared food.  Tesco has the opportunity to fashion a brand identity from scratch (pun intended); it can become the home for prepared foods that are just about as good as homemade with convenience of a mid-size, neighborhood store.

In 2005, sales of prepared foods at US grocery stores reached $20 billion, out of a total food-and-beverage market of $420 billion at retail food stores, according to Technomic, a Chicago food-industry consultant. Sales of ready-made meals at grocers have been increasing by about 2.5 percent to 3 percent a year, according to the research firm.

According to the Los Angeles Times, Tesco Express stores in the US will be called Tesco Fresh & Easy, and are expected to be much larger than their UK brethren at about 15,000 square feet. The Wikipedia entry on Tesco rightly compares this to Trader Joe’s, a chain popular for its un-corporate style and innovative merchandising. An interesting log of stories about Tesco from industry magazine Supermarket News is here on the Web http://www.supermarketnews.com/xref.cfm?&ID=10385&xref=Tesco and Convenience Store News joins us in writing about Tesco here... http://www.csnews.com/csn/search/article_display.jsp?schema=&vnu_content_id=1002538856.

Will Tesco succeed? It’s way to early to know. But, in contrast to historical failures of international expansion from other UK supermarkets, Tesco’s genuine ability to adapt to local markets could be a strategy for success. Many of its 100 stores scheduled to open in the US will be in California, a market that leads the US in adoption of new ideas (that’s why many auto firms have their styling studios there). It has the ability to invest in infrastructure, management, product development and marketing to make a real go of it. The fact that Warren Buffet has invested a not insubstantial $329m (£174m) is a strong vote of confidence. And the market is highly fragmented. There is no clear leader in small grocery stores that cater to our on-the-go lifestyle.  Maybe we’ll soon all be serving Tesco’s Finest to our friends and families.

Inspiration and idiocy from the auto industry

News that China’s Nanjing Automobile Company (NAC) has entered into a joint venture to build MG cars in Oklahoma, USA, makes perfect sense for a brand that, despite its long absence, is still held in affection by American fans of great British marques. The proposed three-way marriage between General Motors (GM), Renault and Nissan, on the other hand, makes no sense whatsoever. These recent stories from the automotive sector show an emerging Chinese carmaker that’s more than on top of its game, and the desperate flailing of an American manufacturer falling apart under its own mismanagement.

When MG Rover went under in 2005 it looked like the end of the road for two famous and once revered automotive brands. Several companies scrabbled to pick over the remains, with NAC and Shanghai Automotive (SAIC) of China emerging as the eventual winners of the confusedly shared spoils. Now SAIC is finalising an evolution of the Rover 75 (though it has not yet gained rights to use the Rover name). More significantly, NAC has announced plans to re-launch the MG brand worldwide with a full model range of sports cars and saloons/sedans, first in the UK and Europe and then in North America.

The venture shows NAC to be a very smart player. The majority of manufacturing will take place at its low cost factories in its home market, assembly for the US market will be completed at Oklahoma, and British heritage will be maintained (which SwelledHead stressed as being vital to the value of the brand) by building specialist sports models at the historic Longbridge plant near Birmingham in England. The newly designed MG TF Coupe planned for Longbridge is pictured here.

This shrewd distribution of production demonstrates that NAC has got its plans right if it wants to succeed against tough competition in the global car market. Costs are kept low, there’s international reach and the claim to British heritage is just about intact. Building in Britain and the US also helps assuage fears that Chinese industry will simply steal jobs from the West. The final stroke of genius is the appointment of experienced American auto executive, Duke T. Hale, to be chief executive of the North American and European revivals. He understands better than the Chinese how to market the MG brand to Western consumers and, particularly for Americans, puts an innocuous face on a scary Chinese corporation.

A welcome and seemingly well thought out return for MG in the US gives ironic contrast to the state of affairs at GM. It was decades of mismanagement that brought British-owned volume car manufacturing and its many brands to the end or to the brink, and the same charge can be levied at the American leviathan across the pond. Though The General has embarked on a massive cost cutting drive aimed at turning the business back to profitability, many analysts see it as being too late. It seems distinctly odd then, that the united force of recently turned-around Nissan and about-to-be-revived Renault might be interested in buying a major stake.

Just how little sense a GM/Nissan/Renault deal makes is best explained by automotive journalist and blog writer, Robert Farago, on his website The Truth About Cars. Follow this link to read his account of some real motor industry madness.