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 to weight loss. Costco provides Ozempic at its in-store US pharmacies. Costco uses Sesame, its affordable healthcare 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 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.

Contributed to Branding Strategy Insider by: Larry Light, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I

At The Blake Project, we help clients worldwide, in all stages of development, define or redefine and articulate what makes them competitive at critical moments of change. Please email us to learn how we can help you compete differently.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education

FREE Publications And Resources For Marketers

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 further 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, Walgreens 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 the degree of technology or to a 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.”

Contributed to Branding Strategy Insider by: Larry Light, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I

At The Blake Project, we help clients worldwide, in all stages of development, define or redefine and articulate what makes them competitive at critical moments of change. Please email us to learn how we can help you compete differently.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education

FREE Publications And Resources For Marketers

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. 

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.

Contributed to Branding Strategy Insider by: Larry Light, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I

At The Blake Project, we help clients from around the world, in all stages of development, define and articulate what makes them competitive and valuable at critical moments of change. Please email us to learn how we can help you compete differently.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education

FREE Publications And Resources For Marketers

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 Bloomberg.com, 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 women 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 provide 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.

Contributed to Branding Strategy Insider by: Larry Light, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I

At The Blake Project, we help clients worldwide, in all stages of development, define or redefine and articulate what makes them competitive at critical moments of change. Please email us to learn how we can help you compete differently.

Join 20,000 Marketers Who Have Taken A Transformative Journey To A Bigger Future In Mark Ritson’s Mini MBAs In Marketing And Brand Management Courses.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education

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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.

Contributed to Branding Strategy Insider by: Larry Light, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I

At The Blake Project, we help clients worldwide, in all stages of development, define or redefine and articulate what makes them competitive at critical moments of change. Please email us to learn how we can help you compete differently.

Join 20,000 Marketers Who Have Taken A Transformative Journey To A Bigger Future In Mark Ritson’s Mini MBAs In Marketing And Brand Management Courses.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education

FREE Publications And Resources For Marketers