When Protecting Your Brand Goes Too Far: The Nutella Story

Photo credit: Teymur Madjderey

I remember being introduced to Nutella when visiting my grandmother in Italy as a kid.  I loved Nutella then, and I still do today.  Apparently, Sara Rosso REALLY loves Nutella.  In fact, she founded World Nutella Day, which takes place on February 5th each year, in case you are interested.  Rosso also has an extensive website featuring recipes and lots of other information about the product. 

This year, though, Rosso announced that World Nutella Day would not take place.   Apparently, she received a "cease-and-desist" letter from lawyers at Ferrero, the Italian company that makes Nutella.  The company sought to protect its copyrights and trademarks.  It worried that Rosso was infringing on its intellectual property rights. 

When Rosso revealed the news about the cease-and-desist order, her many fans (also big fans of Nutella) became upset.  They began to write about their frustrations with Ferrero's action on Rosso's Facebook page.  Nutella had a brewing controversy on its hands.

Fortunately, the company reacted fairly quickly.  They caught wind of the negative feedback from many fans of the product, and they backed off.  Rosso was free to orchestrate World Nutella Day each year and to feature recipes and other information on her website.

What an amazing story.   Here's a woman who is the ultimate brand evangelist, and the lawyers almost stifled all enthusiasm.   Leave it up to the lawyers to mess up a good thing!   Actually, there is a great lesson here.  Companies do want to watch carefully for copyright and trademark infringement.  On the other hand, what's better for a brand then an authentic customer evangelist?!  When a company has diehard fans, and not just customers, it should very pleased.  A customer evangelist can provide the type of authentic promotion that a company would have a very hard time creating. 

Read More

I Can't Get No Satisfaction: The Rolling Stones & Ticket Prices

Rafi Mohammed has a good blog post at HBR about the Rolling Stones and their concert tour pricing strategy.  The Stones chose to price their tickets for this tour very high, and numerous reports indicate that they are discovering soft demand for those expensive seats.  What should they do now?  Should they simply cut their prices?   As Mohammed notes, brands often worry about simply slashing prices in the face of weaker-than-anticipated demand. They don't want to tarnish their brand in any way, or anger customers who previously paid full price.  How can the Rolling Stones proceed?   Mohammed offers numerous ideas, some stronger than others.  I found one particular tactic interesting and thought that I would share it.   Mohammed explains that companies can choose to add value to their product or service, while maintaining price, as opposed to offering a steep discount.  Here's his explanation: 

"The most common remedy to this malady is to maintain price but add value, so customers feel they're getting more for their money. Guitarist Keith Richards could casually drop in an interview that this may very well likely be the band's last tour (the "hedge" in the wording is intentional). Or, as the band did at its opening gig in L.A., they could bring in special guests such as Gwen Stefani and Keith Urban. These additions make the experience more memorable, so customers value it more." 

I don't agree with the point about promoting it as the last tour... music fans have heard that one all too often, only to discover that bands keep coming back.  However, the concept of adding value makes good sense, and the example of Stefani and Urban is a good one.   The Red Sox have done something quite similar this year, as demand has dropped for tickets at Fenway.  Rather than simply slash prices, they have added breaks on concessions to some tickets.  The concept applies to products as well.  You could add a small complementary product as a free gift to entice people to buy a particular good (think accessories along with an electronics item or a piece of apparel). 

Read More

What happens if your favorite brand is attacked?

Think about one of your favorite brands, one to which you are quite loyal.  Perhaps you might even describe yourself as a fan.  How would you react if you heard some very negative news about that company?  Would you be less willing to purchase that product?  Or, would you become very defensive?

Monika Lisjak, Angela Y. Lee and Wendi L. Gardner set out to examine these questions through a series of experimental studies.  In one study, the researchers examined how people would respond to a critical editorial about a favorite brand - Starbucks or Facebook.  According to Kellogg School of Management Insights, "Sure enough, after crunching the numbers, Lee and her colleagues found that self-conscious, low-self-esteem subjects who said they liked Starbucks initially actually rated the coffee company more favorably after they had read the critical editorial."   Interestingly, in a subsequent experiment, they found that individuals get less defensive about a favorite brand if they are given some other opportunity to affirm themselves.  According to Lee, "If Starbucks is part of you, and you read something negative about Starbucks, you feel attacked.  But I now give you another way to feel good about yourself. Then, once that need is being satisfied, you may not feel that you need to defend Starbucks anymore.” 

I'm not surprised by the findings.   People do develop a strong attachment to certain brands.  Several questions do remain.  Specifically, I wonder whether the level of criticism attached to the brand matters.  Where do people draw the line?   What would it take for someone to "turn" on one of their favorite brands?   You would imagine that people might begin to "turn" on their favorite brands if a pattern of alleged misconduct emerges over time.  How much of a pattern does one need to see though?  Finally, I wonder if there may be other attributes of individuals that might signal whether they are likely to be defensive, or if they would lessen their loyalty, to favorite brands that have been criticized.   In other words, what are the characteristics of the "hyperloyal" customer who will be likely to stand firm even in the face of criticism for their favorite brand?

Read More

P&G's Organic Growth Strategy

Business Week reports on new P&G CEO Bob McDonald's strategic push to emphasize organic growth over acquisitions, particularly growth in emerging markets.   I must say that I applaud any CEO who is willing to put a priority on organic growth vs. acquisitions.  I think too many chief executives fall in love with doing deals, rather than doing the hard work required to grow existing brands.   Moreover, too many firms pay an overly high price tag for deals.

Having said that, the P&G organic growth strategy has some risks.   First, a company of that size must generate a ton of new growth simply to "move the needle" - i.e. to grow the overall top line by a small percentage.  Second and perhaps more importantly, P&G must take care not to diminish its brand equity in various product lines as it tries to grow in emerging markets.  Under McDonald's predecessor, A.G. Lafley, P&G definitely shed many of its lower-priced brands and focused instead on premium positioning of its products.  That strategy proved very successful.   Now, however, to grow in emerging markets, P&G will face pressure to offer lower-priced versions of its products.  The question is this:  Can P&G effectively maintain its premium strategy in the developed world while catering to lower income customers in emerging markets?  In an increasingly global economy, might that strategy dilute certain brands?  In the past, it may have been easier to position brands differently in different countries.  That has become a bit more difficult with globalization, increased international travel, and the like. 

Read More