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Friday, June 17, 2005

More from McDonald's Clowns

Hard to believe that my first book, The Revenge of Brand X, was published as many years ago as it was. Harder still is believing that even after its prediction of McDonald's slow descent into brand oblivion, the management at the golden arches still hasn't wised up.

If you read the book, you'd recall that McDonald's was one of ten brands I marked as good, but could do much better. I also subsequently warned that if they didn't get their brand strategy together soon, the company would experience its first quarterly losses ever.

They didn't and it did.

In its latest effort to shore up its withering fortunes, McDonald's has apparently succumbed to a combination of Political Correctness and Sheer Panic, attempting to re-create itself into a source for healthier food. In case you missed it, the Business Section of the Los Angeles Times has it right there on the front page: Ronald McDonald in his specially-prepared bright yellow skin suit, outfitted with the oh-so-protective, color-coordinated safety gear, launching an "ollie" on his newly-branded McDonald's skateboard.

According to the Los Angeles Times, "As part of its recent campaign to revamp its image, McDonald's Corp. said this week that it would begin selling branded skateboards and bikes this year at retailers such as Target Corp. The aim, the company said, is "to help make fitness fun. 'About time," said Dr. Naomi Neufeld, a pediatric endocrinologist at UCLA, who works with obese children. "They have the marketing clout if they can get these kids off the couch and onto skateboards and bikes.' "

Okay, so let me see if I have this right: A company that's spent billions of dollars developing and marketing burgers and fries is now supposed to be healthy and cool. Hmmm. Let's see. I get the part about being healthy, now that McDonald's is offering salads that have as much or more fat and sugar in them than anyone would reasonably ingest. But I just don't get the "cool" thing.

I mean, what 14 to 18 year old is going to relate to a clown on a skateboard? Say what you will, but Paris Hilton grinding up against a sports car has a lot more appeal than some Ringling Brothers reject trying to pass off salads, although neither is going to move any food any faster. But don't tell the marketing people about that.

Once again, I'm going out on a limb here, chastising the Caretaker Managers at McDonald's that branding works from your strengths, not political pressure. McDonald's was built on beef and Coca-cola and salty french fries. I don't care how many showings of "Supersize Me" they screen, a clear look at history is all you need to know that people are going to eat burgers and fries as long as they can buy them.

Oh, you want proof? How's this:

Years ago, the Wall Street Journal did a survey of consumer eating habits. The hypothesis was that with all the bad press fast food, red meat and processed sugar was getting, Americans must have vastly shifted their consumption habits. Companies were busy reacting to all the press hype and fluff, changing product lines and doing whatever they could to jump on the health bandwagon.

The only problem was that the survey came back to show that over 20 years, Americans hadn't changed their eating habits at all. Except for a 1% shift from beef to chicken, they were sucking down just as much junk, fat and sugar as they always had. It was sort of like those days when the ratings people would call to ask which television show you were watching. The caller would ask and the respondents would lie about the shows they were watching. For every "Masterpiece Theater" response, you could guarantee at least five "Flintstones" viewers.

But I digress.

Here you have the desperados at McDonald's, gasping for something - anything - to get them off their losing streak, doing exactly the opposite of what they should be doing, because they've forgotten what their brand was all about: convenient, good-tasting food. Instead of pandering to the media hype, the boys at the Golden Arches should focus on making a better burger.

And for God's sake, stop clowning around with skateboards.

Wednesday, June 08, 2005

AOL's Bubble Bursts Again

Not sure if you heard the news today, but CNN had it on their Business page (I hope the link is still good) at:

http://money.cnn.com/2005/06/08/technology/aol.reut/index.htm?section=money_latest

America Online, the one-time darling of the internet bubble, announced that it was considering "offering for free many of the features once available only to its paying subscribers." That's right, AOL is lifting the heavy gates, providing their content to all who would enter.

The problem is that nobody's rushing in. Or ever has.

Many people think that the internet bubble burst some time around 2001. The truth is that the biggest bubble did burst then. But there are still a number of little bubbles floating around out there, waiting to be popped. AOL is just one of them.

AOL has always been a mystery brand. From the very beginning, it was a juggernaut that bypassed its competitors' membership numbers with daring and speed. While dinosaurs and fossils like CompuServe and Prodigy were fumbling around, trying to patch the leaks in their boats with band-aids and wads of cotton, AOL was littering every American checkout counter with free floppy disks and CD-ROM's. It didn't matter if you were a PC or Mac user, AOL was giving away 100, 500 or 1000 free hours of usage, signing up members faster than they could count their money.

The plan worked. Until AOL got into the game, the internet was perceived as a technical toy, too complicated for everyday people to use. AOL changed all that, by promoting its ease of use. Of course, what AOL didn't tell anyone was that the internet they provided wasn't "real" internet; it was AOL's version of the internet.

AOL didn't tell a lot of people about a lot of things. For example, while they spent a lot of time and money trumpeting their soaring membership rate, they effectively dodged every question about their abandon rate, which was rumored to be almost as high. At one time, the unsubstantiated rumblings placed that figure at 50% over an average membership life of just nine months. Which means that for every two members that came in the front door, one was walking out the back.

AOL was able to blitz the market, fueling the bubble that pumped its growth to the point where the juggernaut consumed Time Warner in one of the most laughable mergers in modern history. The buzz on the deal was that AOL had the delivery and Time Warner had the content. Together, they were supposed to be invincible, delivering content and making even more money than either could imagine.

Yet here we are today, with AOL announcing that it simply can't seem to make its subscription business work. Even with Time Warner's content -- we're talking movies, images, text and sound -- they still can't figure out how to make a buck. And for a very good reason:

AOL never has had a brand strategy.

AOL was never about building a brand. It was a stock play, pure and simple. A sales pitch, powered by opportunism and greed. Sure, light users of the web who surf and send e-mail might stick with it, but increasingly, AOL is losing members. No more do they trumpet their membership rate, because it's already fallen from the historical high of 26 million to just over 22 million. Still a lot of bodies overpaying for inferior service, but a far cry from the pre-bubble puffery and a trend that Wall Street would just as soon avoid.

Oh, to be a fly on the wall at the board meeting this week, when AOL's CEO pounded on the table, raking his minions over the coals. If you close your eyes and listen hard, you can hear it, too: "Hey, we built this company by giving it away. We gave away free floppies and CD's and built a monster. We have to get back to basics." Right. Now they're leaving the front door wide open, and the only people going through it are the ones leaving the party.

Of course, if AOL had built their company on a real brand strategy, none of this would have happened. They could have built a real core of truly loyal subscribers who'd have been only too happy to pay a premium for limited internet access. They could have cultivated a sense of brand ownership in paying customers, turning each one into an evangelist, recruiting in new members -- who would have stayed longer than nine months.

They certainly had the tools. They definitely had the technology. And they absolutely had the budget. The one thing they never had is the one thing that killed them: a solid brand strategy.

Hey -- did you hear that? I think another bubble just popped.