Remember Arizona

J.C. Penny’s scored strong sales growth in the late 1980s and early 1990s with its private labels such as Strafford men's dress line, Hunt Club collection of casual clothing, and Arizona Jean Company. However, quality suffered and sales dropped. How much did Penny’s acquisition of Eckerd’s hurt the company's focus on its private label lines?

Now, the Plano, Texas, wants to reinvigorate the brand, but not necessarily reposition it. How will Levi’s and Wrangler’s respond? Will those labels bolster relations with retailers that lack private labels such as Kohl’s? Given the competitive pressures from Kohl’s along with Target, Sears, Wal-Mart, and Gap among others, should Penny’s management spend another amount of its company’s resources on Arizona Jean Company?

I think the decline in quality will prove hard to overcome. Customers fled to mass retailers like Foleys, specialty stores like Eddie Bauer, and discounters like Target. Penny’s faces a daunting but not an impossible task in getting those customers back to these anchor stores. I do not think those retailers will let Penny’s take its new customers away without a fight.

Penny’s should drop quietly its private labels and concentrate its resources on better relationships with manufacturer labels and end customers. Does that make Penny’s too close to Kohl’s?

Bell Tolls for Whom

As part of 1996's Telecom Deregulation Act, Congress required local phone companies such as Verizon and SBC to open its telephone networks to competitors. The act set the rates, which were far below market value according to the local phone companies.

A judge ruled last week that the FCC lacked the authority to enforce the rate structure. Local phone companies could determine the price that AT&T, Sprint, MCI, and smaller telephone companies would pay to run local phone calls over the networks. In the past few days, there has been a rash of articles detailing how phone companies are responding.

In this Wall Street Journal story, many of the companies are raising fees. MCI, for example, increased fees on 18 plans. Why does MCI have 18 plans? Actually, the company formerly known as WorldCom offers more calling plans. This represents a gross inefficiency and suggests that MCI managers are not stewarding the company's resources to the best of its ability.

AT&T has announced it will no longer seek residential customers. Qwest, a local telephone service provider in the Midwest, will execute a print campaign to poach current AT&T residential service customers according to this New York Times story.

As we will discuss later in customer relations management, there are occassions when we do not want a customer or a group of customers. Rivals to Verizon, Qwest, Bell South, and SBC may have a pricing point when they no longer want local residential customers.

Of course, local phone service may become moot. Despite AT&T's waffeling over its Voice Over Internet Protocol, or VOIP, cable companies are quickly adding the service to its customers. This New York Times article questions AT&T's decision because VOIP could provide a better competitive advantage against local telephone providers.

When the 1996 Telecom Deregulatin Act became law, its framers, industry lobbyist one and all, could not have foreseen the techonological changes. In less than 5 years, the local telephone service providers will not be Verizon, Bell South, SBC, and Qwest; rather, they will be Comcast, Time-Warner, and Cox.

That prediction assumes that a form of KaZaa will not destroy the pricing structure of the market. In this Wall Street Journal article, Skype relies on similar software that powers KaZaa to emulate a telephone network. As of this writing, the difference between Skype's service and those offered by Verizon, AT&T, and Vonage looks like price.

Clearing the clutter

Clear Channel, the nation's largest chain of radio stations, made two significant announcements. In the first, posted here, the San Antonio based company will limit the number of commercial time. In one market, advertising breaks were reduced from 16 to 12 minutes. However, the article does not mention whether this will include house advertisements. In other words, will the station reduce its clutter? Also, where will the reduction occur? During the morning and evening drive time? For all day parts?

In the second story, posted here, Clear Channel will spend $100 million over 10 years to test the feasibility of digital radio. The technology promises to deliver stronger, clearer signals.

Neither article really mentions the force behind these actions. XM and Sirius have achieved enough subscriber mass for Clear Channel to perceive the two satellite operators as competitive threats. Although XM and Sirrius carry commercial stations, its competitive advantage comes from a commercial-free service with a sound quality perceived as superior to FM or AM stations.

Are Clear Channel’s two strategies examples of sustainable competitive advantages? Will these decisions make its time inventory more desirable to media buyers and marketing strategists?

Buf's Big Bluff

At least $25 million later, the University at Buffalo cannot out draw high school football teams in Texas. The opportunity cost stagger the mind when considering UatB's bonfire to the vanities, a Division I-A football team at a public university in New York.

Think about the July 19 lecture. What is UatB really selling? What are they marketing? Is the core football group large enough to support a Division I-A team? Do the schools that also suffer from low attendance face the same problems as Buff? These are not hypothetical questions. This is a real problem with real consequences.

Buff's sister institution, Binghamton, spent a ton of money on its men's hockey program. Binghamton plays to sell out crowds and attracts top flight hockey recruits. University at Albany upgraded its men's and women's basketball program. University at Stony Brook is building up its men's lacrosse and basketball teams. I would argue that those three institutions better spent its money when using service marketing as the criteria.

How is UatB trying to improve its crowds for the 2004 season? How are these efforts different than 2003?

I think Buff would have been better off giving every incoming student $1000 just for enrolling. That would be a better use of the money that has been thrown down the hole known as Division I-A football.

Alt Misses the Web

About two years ago, I advised a chain of weekly newspapers in southern New York and northern New Jersey about putting together a web site. As part of that process, I scoured web sites from different stripes of newspapers and other media outlets such as radio and television.

It quickly became apparent that newspaper web sites were achingly dull. Their presentation was horrific; the content limp. There were a few web sites here and there that offered some nice surprises. But the good stuff was found outside of mainstream media's domain. Where was the interactivity? Where was the feature that kept me hitting reload every hour? The alternate papers were the worse about it. A feeling of be happy we put the content out there pervades these web efforts.

Few industries are more market oriented than media especially print journalism. Why then are blogs and home grown web sites the places to go? I am not talking about content, but interactivity. When companies - newspapers, television stations, magazines included - launch a web site, it neglects what it is really doing. A web site launch should be treated like a new product launch.

We will discus new product launch on Monday, July 19. But you should be familiar with the steps of creating a new product, the various types of new product, and the diffusion process. When a company launches a web site, what type of a new product is it?

By not treating a web site for what it is, a new product, explains why so many horrible web sites exist in this world.

Gender Games

When the Atari 2600 and the Intelivision video game systems roamed the Earth (circa 1981), boys accounted for nearly 9 out of 10 console and cartridge buyers. As hard core gamers moved from the consoles to the Commodore 64 and Apple IIe computers, boys continued to account for 90% of game title sales. Where were the girls?

In this Wall Street Journal article, the title sellers and the console manufacturers may have ignored the girl market at its peril. Females prefer to play more low key games. Sony and Micro$oft may have poured money down a hole convincing boys to play games on line.

We talked Thursday, July 15, about the consequences of targeting the wrong market. Ford's Mustang survived the company's target market miscue. What should Sony and Micro$oft do?

For these companies and the software titles like Electronic Arts, the market leader, and Sega, a fading star, women playing online could bring a needed product shift. Critics say that games are predictable, pedantic, and trite. The titles offer nothing new as far as gaming experience.

The women were there all along. Now, will the software people be there too?