The Big Spenders
WHAT RETAILER has sold the most copies of Ray Charles’ final CD, Genius Loves Company? Starbucks. Surprised? That’s just one of the marketing gems you won’t see on TV. Brands that are led by promotion are built as much in the store and on the street as they are on the screen. They show other marketers how to weave together advertising, promotion, direct marketing and p.r. for a consistent message.
These brands were chosen by PROMO editors on the basis of marketing spending and promotion strategy. We chose brands with heavy below-the-line spending — some significantly more than their measured ad spending — and smart, aggressive consumer promotions.
Most won’t talk about their marketing budgets, and promotion spending isn’t tracked like media advertising. Still, we’re confident that we’ve identified the companies that lead their categories in promotional spending, based on budget estimates. We know we’ve picked brands with strong promotional strategy.
Starbucks and McDonald’s have both embraced music as their marketing platforms. Home Depot brought its TV spend back in-store when Trading Spaces’ on-air crew hosted in-store Do It Herself Workshops. Nestlé gave away its Nescafé Ice Java touring lounge in a sweepstakes. Talk about getting extra mileage.
The companies here (presented in alphabetical order) are among the country’s biggest advertisers, and they’re even bigger promoters. Whether or not it’s genius, it is good company.
Diageo
Distilled and Brewed Beverages
Captain Morgan was out on the town often, promoting the spiced rum named in his honor. Stamford, CT-based Diageo said there’s no better way to pitch the product than with the three-dimensional character.
“We have always been focused on experiential marketing,” says Captain Morgan brand spokesperson Stuart Kirby. “We can leverage a physical icon, so we try to leverage him as much as we can. We feel it is important to bring to life the icon.”
Kirby says Diageo prefers to take a grassroots approach to experiential marketing. “What we’ve forced ourselves to do is leverage existing sponsorships by going under the radar [with] events on the streets and not paying the sponsorship premium.”
With the Catch the Captain campaign, Captain Morgan crashed parties from Seattle to Key West to raise brand awareness with the 21 to 24 crowd. Winners of the Captain’s scavenger hunt attended a V.I.P. party and vied for a team trip to Rio de Janeiro.
Like thousands of other California hopefuls, the Captain ran in the gubernatorial recall election of 2003. Though he wasn’t able to terminate eventual winner Arnold Schwarzenegger, his faux-candidacy spawned guerrilla tactics statewide. Parties included on-site ballots, samplings and even flash mobs. During his three-month campaign, Captain Morgan brand awareness hit 84% with men 21-24 and 76% with women 21-24.
And the Captain has his eyes on the White House, accepting the nomination from Americans For a Better Party. Targeting drinkers 21 to 39, politics-free zones sprung up around the Democratic National Convention. During the Republican National Convention, the Captain gave New Yorkers a free escape to the Hamptons.
Diageo’s Crown Royal brand this year became the title sponsor of the long-standing International Race of Champions (see p. 36), and has leveraged that to promote the brand and race as a pair of champions. Johnnie Walker continued its partnership with Latinobaseball.com and presented Chicago Cubs slugger Amaris Ramirez the Latino Player of the Year Award. And Guinness extended its St. Patrick’s Day strength with a parody of the holiday season. Volume growth exceeded plan, rising three times faster than normal. Guinness Draught in cases rose 29%, and 12-packs were up 82%.
— Tim Parry
Estée Lauder
Health, Beauty and Cosmetics Estée Lauder always said there were three ways to communicate: telephone, telegraph and tell a woman. That insight paid off decades ago with her innovative use of gift-with-purchase and heavy sampling.
“She firmly believed that experiencing the product was one of the best ways to sell a product,” says spokesperson Janet Bartucci. “It’s a much deeper experience than just looking at an ad.”
Gift-with-purchase, purchase-with-purchase, sampling, in-store appearances and makeup artists continue today as the mainstay in Estée Lauder Cos. marketing plan.
An estimated 84% of its advertising and marketing budget go toward below-the-line marketing. In fiscal 2004 the company spent $1.6 billion, or 28% of total sales, in advertising and promotion globally, up from $1.3 billion in 2002. Historically, the company spends about 25-30% of total sales on advertising and promotion.
Top brands Estée Lauder and Clinique garner the vast majority of the marketing spend while the other brands have little or no advertising budgets, thus rely heavily on promotion.
As the numbers indicate, lots of the dollars are put against gaining personal contact with the customer for its stable of brands, which also include Aramis, Prescriptives, M-A-C, Bobbi Brown, Tommy Hilfiger and others.
The company posted 2004 revenue of $5.79 billion, a 14% jump, with international business growing at double digits and a domestic rebound that generated solid sales increases. President and CEO William P. Lauder called ’04 a “year when we exceeded our expectations.”
The company attributed the growth to expanding its markets globally, building on existing brands and launching new products in the skin care, makeup and fragrance categories. The company expects to continue to invest in advertising, sampling and in-store merchandising and promotions during the first half of 2005 in support of significant launch activity.
As an example of the fanfare that can swirl around a new launch, the New York-based company in September signed Donald Trump to launch a new fragrance named after himself. To kick off the launch, fans crowded into Trump Tower in New York City where The Donald selected five participants to step into a money machine to grab as much “Trump” money as they could in 15 seconds. The contestant who grabbed the most cash won a trip to Trump’s Taj Mahal Resort in Atlantic City, NJ. The scent debuts this month at Federated Department Stores selling for $60 for a 3.4 ounce bottle.
The company suffered an enormous loss in April with the death of founder Estée Lauder at age 97 despite the fact that she had not been active in the company since her retirement in 1995. The company will celebrate its 60th birthday in 2006.
— Patricia Odell
General Motors
Automotive What did General Motors have to do to get you behind the wheel of this beauty? The auto giant teamed with its OnStar subsidiary for a sweepstakes to drive dealership traffic, gave away automobiles on national TV, gave away options on its new model and ran a retail-like clearance sale to push 2004 models out the door.
The biggest media blitz for GM came in September with a giveaway of 276 Pontiac G6s to kick off the 19th season of The Oprah Winfrey Show. Winfrey told the audience the theme for the season was to make people’s dreams come true. After an extensive nationwide search and after receiving hundreds of letters and e-mails asking for help, the show’s staff filled the season-premiere audience with people whose dreams could be fulfilled. Winfrey surprised the crowd by giving everyone in the audience a new Pontiac.
The idea to give away cars on national TV was “a yearlong process, it wasn’t just a quick pitch. But it all came together in a three-week time period,” says GM spokesman Jim Hopson.
The winners could choose their car’s color and add a panoramic sunroof, heated leather seats, remote start, telescoping steering wheel, adjustable pedals, OnStar Safety and Security and XM satellite radio.
Traffic on Pontiac’s Web site soared the next day to almost 250,000 hits (from an average 30,000), and Detroit-based GM received priceless amounts of free publicity through news stories distributed globally.
A separate Hot Button sweeps gave consumers the chance to win one of 1,000 GM vehicles by visiting a dealership and pushing the OnStar “Hot Button” in a specially designated vehicle. They were told immediately if they were a winner. The total value of the prizes was approximately $25 million. McCann Worldwide, Detroit, handled.
To heighten interest in the 2005 Chevrolet Cobalt, those who pre-ordered the car were entitled to several free options.
A 72-hour 0% interest sale designed to kick start sluggish sales ran in September. All 2004 Buick, Chevrolet, GMC, Pontiac and Oldsmobile cars and light duty trucks were included in this program.
— Tim Parry
Home Depot
Retail/Home Improvement Home Depot knows the value of a work crew. The home-improvement leader has built an impressive collection of partners to boost its image — and traffic. This year the chain brought celebrity power to its Do-It-Herself Workshops: The stars of TLC’s Trading Spaces (which Home Depot sponsors) hosted clinics in Atlanta, Boston and Sacramento stores in July for 27,000 women. More are planned for 2005.
Home Depot’s quarterly Do-It-Herself Workshops, an extension of its popular Do-It-Yourself workshops, have been hugely successful: One store drew 500 women on a Monday night — with no advertising. This year, Home Depot set a national schedule for Monday night clinics. Women give suggestions that Home Depot uses to shape clinic content. “By turning it over to our customers, it went beyond a local store idea and became a national media event,” said Executive VP-Merchandising and Marketing John Costello at a marketing conference this spring.
Home Depot re-upped to sponsor the U.S. Olympics Team through 2008; its contract was set to expire after the 2004 Summer Games. Seventy-one Home Depot staffers competed as Olympic and Paralympic athletes. The chain’s Olympic Job Opportunities Program schedules athletes’ work hours around training.
In August, the retailer cut a three-year deal with the U.S. Postal Service to advertise in its MoverSource program. Home Depot also launched its own site, homedepotmoving.com, to court the 43.5 million people who move each year.
Hispanic marketing got a boost when Home Depot sponsored the Mexican National Soccer Team’s 2004 U.S. tour. Home Depot uses local festivals and ads on Spanish-language programming to reach Hispanics. The Richards Group, Dallas, handles mainstream advertising. Octagon Worldwide, New York City, and Velocity Sports & Entertainment, Wilton, CT, handle sponsorship activation.
— Betsy Spethmann
McDonald’s
QSR Who’s singing that jingle now? Destiny’s Child cut a sponsorship deal last month, on the heels of McDonald’s yearlong partnership with Justin Timberlake, who launched the QSR’s first-ever global tagline, ‘i’m lovin’ it.”
“We’re building a bridge from the music charts to consumers’ hearts,” said CMO Larry Light at a marketing conference early this year. Research showed that “children loved us, but grew out of our brand. We had to change our brand voice.”
And menu. McDonald’s stopped Super-sizing in April, rolled out adult Happy Meals (with a pedometer as the premium) and added McVeggie Burgers to its New York City menus.
Promotions are a mix of old (think Monopoly) and new: A summer tie-in with Sony Connect gave away music downloads with the purchase of a Big Mac Extra Value Meal.
Once-troubled Monopoly is back in full force, with a Best Buy tie-in that proved so popular in fall 2003 that McDonald’s ran out of its 275 million game pieces early. The fall 2004 version adds an online overlay awarding electronics and downloadable prizes. The Marketing Store Worldwide, Oak Brook, IL, handles.
The sudden death of CEO Jim Cantalupo in April shook McDonald’s staff. Charlie Bell took up the mantle and continues McDonald’s “Plan to Win” turnaround plan to improve customer service and food quality.
And Destiny’s Child? The band adopted “i’m lovin’ it” for the 2005 “Destiny Fulfilled and lovin’ it” world tour. Band members star in TV spots and P-O-P worldwide.
— Betsy Spethmann
RJ Reynolds
Tobacco In September 2003, R.J. Reynolds refocused brand strategy and cut costs by shifting marketing dollars to Camel and Salem, with limited support for Winston and Doral.
RJR also dropped its sponsorship of NASCAR’s premier racing event, The Winston Cup, citing conflicts with the 1998 Master Settlement Agreement. RJR’s competitive pricing program includes retail buy-downs, coupons and free product promos such as a free pack with the purchase of two packs. Coupons are distributed via packs or direct mail.
The company increased Salem’s brand awareness with the Stir the Senses campaign. New packaging touted different flavors. Pleasure to Burn initiatives promote Camel’s three product families — Classic, Turkish and Exotic Blend.
With the Aug. 1 Brown & Williamson merger, RJR inherited KOOL and its controversial KOOL Mixx campaign. Three states’ attorneys generals have said the campaign targeted kids, and therefore violates the MSA. RJR counters that the hip-hop KOOL Mixx DJ competitions were held in adult-only establishments. 141 Worldwide, New York, handles.
In October, RJR agreed not to distribute its promotional KOOL-branded CD-ROM in magazine ads, but could include the discs in direct mail or distribute them in adult-only facilities. The discs can no longer contain interactive elements. RJR also agreed to stop selling special-edition KOOL Mixx four-packs at retail that when put together created a mural — which had come to be considered collectible — but could use them for sampling at adult-only events. The company also agreed to pay a $1.5 million fine to four non-profits.
— Tim Parry
Nestlé
Packaged Food Nestlé USA has a reputation for solid, conventional consumer promotions. Even its trade promotion plans for 2005 — a reported pay-for-performance system — is playing catch-up with trade promo programs at Kraft Foods, Procter & Gamble and others.
“For years, Nestlé has been roughly the same size as Kraft Foods, but unable to command the same respect,” says Cannondale Associates partner Ken Harris.
That’s starting to change. Retailers rate Nestlé higher on the importance of its brands and quality of its sales teams and consumer data in Cannondale’s annual PoweRanking survey. And Nestlé is reinvigorating important categories, especially infant formula and pet food. Nestlé’s 2001 purchase of Ralston improved its portfolio and spurred more promotion, such as club store sampling for Purina ONE.
Its 2002 Coffee-mate relaunch shows how Glendale, CA-based Nestlé can reinvigorate a brand and a category. Nestlé made Coffee-mate a liquid, put it in a flip-top bottle, added flavors, and then gave the brand heavy FSI and sampling support. Nestlé brewed a Guinness-record latte in May 2004 to launch Coffee-mate Latte Creations. Coffee-mate sales hit $139 million for 52 weeks ended Sept. 5, per Information Resources, Inc. Harris calls it “a success story in a most unlikely place.”
Nestlé gave away its Nescafé Ice Java Chill Out Lounge after the lounge finished its 2003 summer tour of festivals, music and sports venues. Tour visitors went online to vie for the 1967 trailer, which had been remodeled into a coffee house. Publicis Dialog, Glendale, CA, and Makai Events, Manhattan Beach, CA, handled the tour.
Nestlé also replays successful promos. The Nestlé Very Best in Youth contest, conducted with non-profit Reading Is Fundamental, is in its eighth year. Twenty-five or more winners (kids 10 to 18 who do well academically and do community work) fly to Los Angeles for a red-carpet awards ceremony and get $600 for themselves and $1,000 for their favorite charity. Nestlé will profile winners in a book it will send to schools and libraries nationally next year.
Nestlé Crunch’s Hot Shots Camp is six years old. Kids 12 to 19 submit a video of their basketball skills and “Crunchy attitude” to win one of 10 slots at camp, including a chance to play one-on-one with Crunch spokesperson Shaquille O’Neal.
The quarterly FSI book “Good Food, Good Life” touts a range of Nestlé brands to 44 million households, reinforcing the umbrella brand.
— Betsy Spethmann
Starbucks
Retail Cafe A little jive with that java? This year Starbucks Coffee Co. made music its mission — and marketing platform. It opened its first Hear Music cafe in California, launched its own satellite radio network, and got dibs on producing Ray Charles’ final album.
The key is Hear Music. Starbucks bought the compilation CD cataloguer in 1999, but really started using it as a marketing platform this year. Hear Music compiles the CDs that have long been the soundtrack in Starbucks stores; now it bridges the Starbucks brand into radio and music retail.
Starbucks opened its first Hear Music Coffeehouse in Santa Monica, CA, in March, where patrons can mix and burn their own CDs. That innovative service expands with Hear Music Media Bars going into 45 Starbucks shops in Seattle and Austin, TX, this year and 2,500 shops by 2007.
This summer, Starbucks partnered with Concord Records to produce Charles’ CD, Genius Loves Company. It’s Hear Music’s second original recording made specifically for sale at Starbucks, and Starbucks says it has sold more copies of the CD than any other individual music retailer or mass-merchandiser. Concord and Starbucks will produce more albums together, beefing up Hear Music’s catalog and expanding Concord’s distribution to reach 30 million Starbucks customers each month.
The Starbucks Hear Music Channel debuted nationally on XM Satellite Radio last month, reaching 2.5 million subscribers. It launches in 4,100 Starbucks shops early next year. “We are extending the music experience outside our stores,” says Ken Lombard, president of Starbucks Entertainment — a division Starbucks formed in May to amp up music marketing.
Starbucks juices its Seattle’s Best Coffee brand (bought in 2003) with branded cafes in 400-plus existing Borders Books & Music stores and new stores as they open. Borders starts converting its cafes in 2005 under a licensing deal with Starbucks; Borders staff cafes, Starbucks oversees in-store promotion.
— Betsy Spethmann
Unilever
Household Products When it comes to marketing, Unilever says it’s all about integration. It’s not about singling out TV, contests, radio spots or even POS materials, it’s about rallying behind one big idea, tied to one product and then using the appropriate channels to push the message out.
“We have tried to not dictate which way to go; it’s not that we’re going to say, ‘OK, you must have this percentage of TV.’ It’s more about what is the right opportunity to drive this particular program,” says Michael Murphy, VP-marketing resources, Unilever. “With the portfolio of brands we have, some absolutely should get significant TV time, while others can be driven just by below-the-line.”
In one major campaign that ended last month, promotion played a key role. Local communities collected on-pack points and the “team” with the most points at the end of the effort won a visit from Cal Ripken, Jr. and a ball field makeover.
Groups registered at Wisk.com, then entered on-pack codes from 8 million bottles of Wisk to bank their points. (Groups could submit labels by mail.) The team with the most points won the grand-prize makeover of a public ball field and a visit from Ripken. Five first-prize winners each got $5,000 worth of sports equipment and apparel, and 50 second-prize winners got $1,000 worth of gear. Draft, Chicago, and Alcone Marketing Group, Irvine, CA, handled.
The contest was part of Wisk’s Go Ahead Get Dirty outdoor and poster campaign. Tongue-in-cheek ads “endorsed” Dirt; there’s even a Web site AmericaNeedsDirt.com that advocates getting dirty — especially for kids, who don’t always get enough exercise. Lowe & Partners, New York City, handles.
A contest was a key component in another campaign this year for Unilever’s Suave brand. Called Smart Shopper, the contest worked to find America’s smartest shopper. In partnership with the Style Network’s Look for Less, a show for people who love bargains, the winner got to appear on the show with host Elizabeth Hasselbeck to tell viewers why they were the best at finding deals. TV ads, retail promotions and p.r. supported the contest.
“It’s about the courage to take the risk and try something different,” Murphy says.
— Patricia Odell
Victoria’s Secret
Apparel Victoria’s Secret has angels in the wings. The lingerie retailer this month breaks Angels Across America, bringing five supermodels to stores in four cities over the course of five days for holiday fashion shows. The tour replaces its popular Victoria’s Secret Fashion Show, which aired from 2001 to 2003. (The live fashion show began in 1996.)
The chain pulled the plug on the televised fashion show in April when CBS came under investigation by the Federal Communications Commission over Janet Jackson’s “wardrobe malfunction” during the Super Bowl. ABC aired the first fashion show in 2001 but Victoria’s Secret shifted to CBS in 2002, reportedly after ABC fielded complaints about indecency. Victoria’s Secret declined to comment.
In 2002, a Backstage with Victoria’s Secret sweeps awarded a grand-prize trip backstage during the taping of the show. Consumers got instant-win game cards in-store; the 7.5 million game cards also carried promotional discounts. A catalog and Web overlay awarded a second grand-prize trip.
Direct marketing — primarily catalogs, but also promotional offers — gets a hefty chunk of the marketing budget. Catalog sales are about $870 million, a fraction of the $2.4 billion that its 1,000-plus stores ring up. Its Web site hit a glitch in 2002 when the site inadvertently revealed some shoppers’ personal data; Victoria’s Secret settled with the New York attorney general in October 2003.
The Limited Brands division has done well with CD gifts-with-purchase via Universal Music Special Markets, Los Angeles. Its fall 2003 flight featured Songs of Love, a CD sampler from Sting, who performed in the 2003 fashion show. A 2001 tie-in with classical vocalist Andrea Bocelli (from that year’s fashion show) sold four million sampler CDs.
But the real musical hoopla came this spring when Bob Dylan appeared in a Victoria’s Secret TV spot. The “Angels in Venice” ad, created in-house, spurred criticism of Dylan but huge awareness for the brand. Victoria’s Secret CMO Ed Razek called it “probably the most talked-about commercial of the year.”
— Betsy Spethmann
BRANDS LED BY PROMOTION
| Brand | U.S. sales | Est. below-the line spending† | Est. consumer promo spending | 2003 Ad spending* |
|---|---|---|---|---|
| Diageo (N. America) | $4.79B | $471.3MM | $460MM | $202MM |
| Estée Lauder | $5.79B | $1.34B | $938MM | $165MM |
| General Motors | $1.34B | $1.2B | $817MM | $2.36B |
| Home Depot | $64.8B | $665MM | $575MM | $639MM |
| McDonald’s | $22.1B | $754MM | $700MM | $666MM |
| Nestlé (Americas) | $22B | $1.2B | $570MM | $506.9MM |
| R.J. Reynolds | $5.27B | $525MM | $375MM | $150MM |
| Starbucks | $4B | $90-$150MM | $30MM | $31.6MM |
| Unilever (N. America) | $11B | $1.32B | $665MM | $591MM |
| Victoria’s Secret | $3.27B | $372MM | $111MM | $83.7MM |
| †Includes consumer promotion, direct marketing and p.r. | ||||
| Source: PROMO Magazine *Source: TNS Media Intelligence/CMR |
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