Whole Foods, the Life Cycle and the Matrix

Whole Foods announced the opening of its first 365 by Whole Foods Market, a smaller store concept than its main outlets, stocking fewer and less expensive items. The store name is based on Whole Foods’ lower-priced private label. The company’s same-store sales, a key metric for retailers, have declined for three consecutive quarters. Whole Foods is under pressure from traditional grocers, such as Kroger, that are selling organic products at lower prices. Overall, sales of organic foods are rising.

365 inaugural store under construction in Silver Lake, CA. (Photo by Amy Seidenwurm)

Beyond its classification as hub of the “Place” strategy, the Whole Foods retail concept can be considered a “Product” in its own right, a branded offering marketed to targeted consumers. As such, it is subject to analysis through the product life cycle, four sequential stages in a product’s duration:

    • Introduction–the launch period when the market is small and costs can be high.
    • Growth–the climb of a successful product with improved profit margins stemming from higher revenue and economies of scale.
    • Maturity–the plateauing of sales as competition increases and price becomes more critical in the marketing mix.
    • Decline–the reduction of demand for the product, typically the result of a saturated market or the emergence of a new product.

Entire industries have a life cycle similar to the one for products. The life cycle for organic foods indicates the growth stage with sales increasing and more competitors joining the market. The life cycle for Whole Foods indicates maturity with the flattening of sales. Less than a year of same-store drops may not be enough to declare the decline stage.

The Wheel of Retailing is another concept to track marketing lifespan, applied to retailers as they become more complex–and less agile–with success, inviting streamlined startups to take the place they occupied in early stages of the wheel. The downturn at Whole Foods does not align completely with the wheel since the store is losing share to even more complex competitors–major grocers selling their own organic lines. However, this consequence is in keeping with the product life cycle as competitors will attack the leader with lower prices. Whole Foods’ derisive nickname of “Whole Paycheck” depicts the company’s reputation for high prices.

When facing product maturity, companies must change the product, target a new market, and/or lower costs to avoid decline. To develop and select such strategic alternatives, companies will use Ansoff’s Matrix as a decision-making tool.

Ansoff's Matrix

Ansoff’s Matrix. (themarketingagenda.com)

The matrix allows companies to contemplate combinations of new and existing products and markets. As the grid shows, risk increases as the company adds more new elements. “Diversification” becomes the riskiest strategy with Unrelated Diversification–a product new to the company being marketed to an unfamiliar market–being the point of greatest risk.

Whole Food’s 365 store concept can be considered Related Diversification led by a different but well-understood offering: a smaller store with lower-priced items. The different market comprises the ever-elusive millennial, per media accounts. As it places its chips in the far quadrant of Ansoff’s Matrix, Whole Foods is also seizing the Wheel of Retailing by creating its own nimbler startup. In turn, 365’s simpler product array and shrunken footprint fulfill the cost reductions dictated in the mature stage of the life cycle.

It is a difficult time for many retail segments, from electronics, to clothes, to food, as shopping habits change and prices remain a concern. Whole Foods is responding with the 365 store, a new concept that draws on existing branding and know-how. Does the consumer prefer a dedicated destination for organic products? Or will a separate shelf in the regular supermarket suffice?

 

Posted in Marketing | Tagged , , , , , , | Leave a comment

Donald Trump and the PESO Model

Immediate disclaimer: This post is not about Donald Trump, Mexico, and his proposed big, beautiful wall. This is about Trump’s use of the PESO model for his campaign communications. PESO divides the promotional mix into the following categories:

      • P: Paid media–ads, sponsored posts, direct mail
      • E: Earned media–coverage in news media, blogs
      • S: Shared media–social media presence
      • O: Owned media–content produced and controlled by the subject

PESO Model (Gini Dietrich, as shown in Mashable)

Trump has emphasized the “E” and the “S” of the PESO model, earned and shared media, driving a commanding media presence that his rivals have struggled to match. The shift away from the historic dominance of paid media in political communications is key. The “P” in PESO has been the realm of Super PACs, political action committees that are not officially aligned with candidates but allowed to raise money for their own operation and launch communications to support (or attack) candidates of their choosing.

Paid Media. Trump pledged his own money to fund his campaign, but he has not had to rely heavily on such financing due to traditional ads and mailers being unnecessary to introduce himself to voters or keep himself in the public eye. In the meantime, other GOP candidates looked to direct donations and the establishment of supportive Super PACs to fuel traditional paid media. Their overwhelming use of paid media versus that of Trump has failed to improve their fortunes, with the most vivid example being Jeb Bush who amassed a huge war chest and enjoyed a well-funded Super PAC, only to drop out of the race.

Earned Media.
Convincing news outlets, bloggers and “third parties” (with the subject and the public being first and second parties) to cover a subject is the essence of earned media. These third parties devote their media “space” to the subject when they believe audiences will be interested. The common descriptor for a subject that earns media is “newsworthy.” The “E” in PESO has been the crux of Trump’s communication strength. While Right to Rise, the Super PAC supporting Jeb Bush, was paying millions for ads, Trump was in front of media audiences without writing such checks. This content is not controlled as it is in an advertisement, which can actually be a plus when reaching a public that tunes out and/or distrusts ads. A prime example of Trump’s ability to earn media was the surprise endorsement from former rival Gov. Chris Christie, crowding out news coverage of Ted Cruz and Marco Rubio’s attacks against him in the previous night’s debate.

Shared Media. This category began to emerge in presidential politics with the 2004 race and became a key factor in 2008. In his initial victory, Barack Obama showed a facility with the new communications technology of social media likened to Franklin Roosevelt’s grasp of radio in the 1930s and John Kennedy’s skill in the televised debates of 1960. The ideal for social media is to provide a direct connection to the subject, an opportunity to hear an authentic voice and build community. Donald Trump has accomplished this by being an avid social media user, responding in real time to challenges and threats using his trademark bombast. Trump’s social media presence is a far cry from the soothing words of FDR’s Fireside Chats; however, he confirms and amplifies his earned media messaging and persona with the “S” in PESO, enabling his supporters to share, curate and contribute content.

Owned Media. Content created and disseminated by politicians allows them to express uninterrupted and unchallenged information on their positions and qualifications. Jeb Bush used the “O” in PESO to present policy papers on his website, illustrating his depth of thought on major issues. Like his other tradition-based communications, TV ads, Jeb Bush’s owned media failed to sway voters. Trump has position statements as well on his website; however, his opponents and numerous media commentators routinely criticize him for a lack of specifics. Trump’s emphasis on owned media is reduced given his strength in other areas of the PESO model.

Will Trump’s PESO model boost him to the GOP nomination? Are his unique personality and decades of notoriety the only means to sustain such a PESO model, or could other candidates use this mix as well, either in current or future races?

Posted in Communication, Marketing, Public Relations, Social Media, Web Content | Tagged , , , , , , , , , | 2 Comments

The Affront of Front Groups

“A Frank Statement to Cigarette Smokers,” a report to allay growing fears of smoking’s health risks, from the Tobacco Industry Research Committee, 1954.

In “Law and Ethics for Public Relations,” a course I developed for Mid-America Christian University, we will study front groups, “an organization that purports to represent one agenda while in reality it serves some other interest whose sponsorship is hidden or rarely mentioned.” This definition comes from Sourcewatch.org, one of many organizations dedicated to communications transparency that reveal front group backgrounds. Critics of the public relations industry have denounced front groups as communications professionals using their skills to deceive the public, disseminating information from seemingly authoritative and neutral bodies that is an actual effort to sway opinion in favor of the obscured–and often mistrusted–backers of these groups.

Coca-Cola is the latest among a long list of industries and companies sponsoring front groups. The New York Times and the Associated Press reported that Coke gave $1.5 million to the Global Energy Balance Group, a scientific body that claimed physical activity has a significant effect on weight and can offset the consumption of high-calorie foods and beverages. A damning string of emails showed the depth of Coke’s involvement with the group, down to guidance on logo design. Principals of the group, Professors James Hill and Steven Blair had provided numerous quotes to media and received millions in funding from Coke in prior years.

The history of front groups spans decades. Author and professor Patricia J. Parsons cites PR pioneer Carl Byoir as a pioneer as well of front groups. In the 1930s, he launched groups such as the National Consumers Tax Commission to argue against taxation. Such groups’ names and aims sounded noble enough. Less noble was the fact that Byoir did this work for his client, the A&P grocery chain, to stop higher taxes on chain stores.

In the study of front groups, the tobacco industry is frequently used as an example. In the 1950s, new scientific reports presented cigarettes’ health risks. In response, the tobacco industry formed the Tobacco Industry Research Committee under the counsel of leading PR firm Hill and Knowlton. The committee released regular communications to doctors and media disputing the link between lung cancer and smoking, citing other possible causes including air pollution. The tobacco industry kept broadcasting messages to defend its position even after the Surgeon General’s 1964 report on smoking’s dangers, including the claim that nicotine increased mental acuity and the demand to “Get Government Off Our Backs.”

The Public Relations Society of America, PRSA, clearly advises public relations professionals regarding front groups:

RECOMMENDED BEST PRACTICE: PRSA members should recognize that assisting front groups and individuals that represent undisclosed sponsorships and/or deceptive or misleading descriptions of goals, cause, tactics, sponsors or participants, even if such activities are lawful such as 527 organizations, constitutes improper conduct and malpractice under the PRSA Member Code of Ethics and should be avoided.

Professor Parsons offers more in the way of best practice:

The bottom line is that there is considerable opportunity for public relations professionals to be more innovative in their approaches to solving PR problems or capitalizing on PR opportunities. But in the heat of the creative process, we cannot afford to lose sight of the potential ethical quagmires into which we may be falling.

Posted in Bad PR Examples, Public Relations | Tagged , , , , , , , , , , | Leave a comment