Marketing flops: Typology and cases


Bachelor Thesis, 2010

78 Pages, Grade: 1,3


Excerpt

Table of contents

List of tables

1. Introduction
1.1 Relevance
1.2 Scope and objectives
1.3 Methodology
1.4 Structure

2. Typology and overview of marketing flops
2.1 Product flops
2.2 Branding flops
2.3 Pricing flops
2.4 Promotion flops
2.5 Placement flops
2.6 Crisis management flops
2.7 Selected observations

3. Case studies: Reasons for flops and mistakes in decision making
3.1 Coca-Cola Company: New Coke
3.2 Maytag Corporation: Hoover UK
3.3 Source Perrier: Perrier
3.4 Selected observations

4. Conclusion
4.1 Summary
4.2 Limitations and avenues for further research
4.3 Implications

Appendices

References

List of tables

Table 1: Product flops - physical attributes

Table 2: Product flops - features

Table 3: Product flops - functionality

Table 4: Product flops - assortment

Table 5: Branding flops - creation of a new brand

Table 6: Branding flops - rebranding and brand management

Table 7: Branding flops - naming a new brand or a product under an existing brand

Table 8: Branding flops - brand extension

Table 9: Pricing flops - inappropriate price regarding the value offered

Table 10: Pricing flops - inability to generate a healthy profit margin

Table 11: Promotion flops - design, content and consistency of advertising campaigns

Table 12: Promotion flops - choice of spokespersons, sponsorships and product placement opportunities

Table 13: Promotion flops - loss of control

Table 14: Placement flops - inappropriate distribution channel

Table 15: Crisis management flops - communication

Table 16: Crisis management flops - service recovery

1. Introduction

1.1 Relevance

Products that do not sell well are maybe the most obvious type of marketing flops. But there are endless possibilities for companies to fail in marketing. The mainstream press and industry specific magazines regularly publish articles about the most disastrous blunders; some have even set up a particular category where they award the “flop of the week” (e.g. „Flop der Woche”, Horizont ).

But marketing flops do not only receive a lot of media attention, they are also of interest to firms - the ones who failed as well as their competitors. Severe failures can cause financial damage to the company, weaken the employees’ pride in their employer, unsettle customers’ trust in the company’s products or services, drive away investors and have legal consequences (Dalgic, Heijblom 1995). Every year, 75% of all newly marketed products fail, causing costs of about €10 billion in Germany alone (Weiß 2010).

It is thus logical that companies hope to learn from mistakes - theirs and those committed by others (Dalgic, Heijblom 1995). That is why there is a vast variety of “How to…” marketing literature (e.g. Dalgic, Heijblom), numerous case collections (e.g. Hartley 1995, Ricks 1983, Ricks 1999) and scientific studies about specific problem areas and their effects on stakeholders’ behavior (e.g. Kelley, Hoffmann, Davis 1993).

Despite all these efforts, to the best of my knowledge still nobody has published a recipe for guaranteed success. Many companies have experienced major marketing flops at some point in their corporate history, destroying value, making customers churn and turning business partners away. A company’s reputation can be seriously damaged by one single bad decision.

It is thus overdue to develop a typology of flop areas in the marketing domain and to analyze why mistakes are made when it comes to important decisions. Furthermore, for companies to have the opportunity to learn from past mistakes and prevent similar failures in the future, it is crucial to understand how and why wrong decisions are made.

1.2 Scope and objectives

This thesis introduces a typology of marketing flops developed in case study-based empirical research. Some marketing failures, such as “New Coke”, are well-researched, others are not. Nevertheless, all cases mentioned have one thing in common: They mark major failures where things went spectacularly wrong and the company’s reputation or financial health was at risk.

There are two different kinds of failures. Firstly, failure describes the state of not achieving a goal. Secondly, failure means not only to miss the target, but to actually achieve a reverse effect such as driving away customers when introducing a new product instead of keeping them and attracting new clients at the same time.

For several reasons this research will focus on the latter kind of failure. On the one hand, missing goals is a very common and tolerated phenomenon in the business world, and thus these minor failures do not get a lot of attention in the popular press on which this research is based. Dramatic failures account for more headlines and are simply easier to find because of the quantity of material available. On the other hand, not achieving a goal is not necessarily linked to a mistake in decision making, whereas a major marketing flop is.

In this thesis, I aim to answer the question if there are different kinds of marketing flops, and if so, how they can be categorized. Based on practice cases I will develop a typology of flop areas. Furthermore, I will search for commonalities and differences among the examples in each flop category. Another question that I will research is what causes marketing flops in the first place, differently said: why people make wrong decisions and mistakes. I will also investigate how those mistakes could have been prevented.

1.3 Methodology

In a first step I searched scientific databases (e.g. EBSCO, ABI inform, Google Scholar) as well as marketing books and the mainstream media (particularly the business press, business- related magazines and online publications) for articles about marketing failures. I focused on the key words “failure”, “flop”, “mistake” and “blunder” in combination with “marketing”.

While searching and scanning more than 300 sources, commonalities and differences became apparent so that I was able to determine the typology’s flop areas.

I then entered the relevant details (company, case summary, consequences and reactions) of these cases in a table and classified them as belonging to one of the previously defined flop areas. In that table, I also distinguished between the obvious reason for the failure and the real reason at the heart of the mistake made. I then analyzed each area’s cases to discover characteristics and commonalities in the reasons and consequences.

In a second step I chose three case studies - Coca-Cola Company, Maytag Corporation and Source Perrier - to analyze why these companies made mistakes in decisions regarding their products, branding, promotion, pricing and crisis management. To examine their decision processes, I based my research on Nutt’s (1993) formulation process theory. Furthermore, this second part of the thesis is supplemented by results from decision analysis studies.

In a third step I condensed my findings from the first two parts to reach a more general conclusion about in which areas marketing failures occur and why.

1.4 Structure

The aim of this thesis is to come up with a typology of marketing flop areas. Therefore I will present 90 marketing failures and analyze them in regard to the obvious and less obvious reasons for the failure.1 Furthermore, the case studies will be categorized according to the marketing function in which the mistake occurred. I will then present characteristics common to the cases in each category. To ease the accessibility of the text, references will only appear in the tables integrated into the section.

In the second part of this thesis, three cases will be analyzed in-depth concerning how the decisions causing the marketing mistake were made. Therefore I will provide a summary of the decision in question as well as of its objectives and consequences, to then retrace the different steps that lead to the wrong decision. For each of these cases, I will also outline how the failure could have been prevented.

Finally, I will shortly summarize the most important results of my research. I will also mention which limitations I encountered while preparing this thesis, and suggest further questions that, in my mind, are relevant to research in the field of marketing flops.2

2. Typology and overview of marketing flops

In this first part of my research project, I am going to define the different marketing flop areas to then classify 90 cases and search the different categories for similarities and characteristics. Whereas this section presents a broad selection of marketing failures, the following section will focus on the in-depth analyses of three cases.

Each case qualifies for at least one of the following flop areas: Product flop, branding flop, pricing flop, promotion flop, placement flop and crisis management flop. The sequence of the failure categories is based on the understanding, that the product itself constitutes the core of the value proposition; it satisfies the customer need and provides functional and economic benefits. The product or service is marketed under a brand that contributes social and emotional benefits. Companies operate to generate profits. Thus a pricing decision has to be made. The price has to match the customer’s perception of the value offered as well as the firm’s cost structure. The product then has to be promoted so that customers actually want to buy it and do not choose an alternative item to satisfy the same need. The placement decision determines where and how customers can access a company’s products and services, and how much assistance customers receive during the decision, purchasing, usage and recycling phase. The last category, crisis management flops, refers to the case that a company does not react appropriately when something has gone wrong.

2.1 Product flops

The product constitutes the core of the value proposition that a company offers its customers (McCarthy, Perreault 1990, p. 260). According to Kotler and Keller (2009, p. 361-363), products can be differentiated in several dimensions: the form, the features, the performance quality and the style.

Based on these dimensions of product differentiation, a marketing decision is classified as product flop if the product or service did not appeal to potential customers in one or several of the following aspects:

- Physical attributes
- Features
- Functionality
- Assortment

A product’s physical attributes include the design of the product itself and also the packaging. In the case of services, the physical attributes refer to those of the service facilities as well as to the appearance of the service employees. Furthermore, in the case of products belonging to the food and drink category, taste and smell do also belong to the physical attributes.

The BMW C1 is a good example for a product design that did not satisfy customer needs. The vehicle was technically-sound and comfortable, but the concept was not perfectly executed in all details. Furthermore, the design did not appeal to the target customers (hip youngsters) but rather to an older market segment whose appreciation rendered the product even more unattractive for the target group. Renault had a similar problem with the initial design of the Twingo, Cadillac’s Allanté experienced the same difficulties. When Daf Trucks exported their transporters to Saudi-Arabia they discovered that their design and their service facilities did not meet customer expectations. All four automotive companies either pulled their cars from the market or made major changes. As the redesigned Twingo became successful later, it is to assume that a more rigorous research of consumer needs and the mind-set of the target segment would have had the potential to avoid these failures.

The same holds true for Pfizer’s insulin inhaler. Product developers did not take into account that using a medical device in public is inconvenient and unpleasant. Instead of easing the consumption of insulin, they made the process even more embarrassing for patients by designing an inhaler resembling a bong. The ignorance of customer needs cost Pfizer $2.8 billion.

An example from the food and beverage category is “Crystal Pepsi”. The beverage was marketed as an un-cola drink but had a slight cola taste. Customers were confused because the clear color did not match the taste and Pepsi lost $100 million on advertising.

That packaging is a vital part of a product’s design is illustrated by Tropicana’s attempt to redesign its packaging. The change lead to a sales decrease of 20% in just two months and customers actively asked the company to reinstate the original design. Tropicana had underestimated the importance of the packaging design for the brand image.

But the packaging of a product does not only make it attractive, it also has a guiding function for customers to know how to use the content. Gerber, unaware of the low literacy rate in Africa, did not design its baby food accordingly and scared consumer. Heublein did not understand that the concept of convenience is not limited to the product’s use, but does also apply to the packaging. Their design made consumers misuse the components of the “Wine & Dine Dinner”, causing a very unpleasant experience.

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Table 1: Product flops - physical attributes

A mistake in decisions concerning the product’s features can lead to a lack of features that potential customers expect in a certain type of product (with support services also qualifying as features), features that customers judge irrelevant, or a product overcharged with features making it too complex for users to be satisfied with the experience (Thompson, Hamilton, Rust 2005).

The following cases illustrate that companies need to focus on what their customers really want. They should not forget that what customers say they want is not always equal to what they really buy. Ford’s attempt to build the ideal American car is a telling example of this fact.

Furthermore, firms have to research what consumers do not want. This consideration could have saved Motorola and Pepsi huge amounts of money, because they would have realized that there is no profitable market for a low-orbited satellite communication system or a morning-coke. R.J. Reynolds made a similar mistake by misunderstanding its core customers and developing a smokeless cigarette. While non-smokers appreciated the feature, smokers complained about the bad taste and the inconvenient smoking experience. The company alienated the product too much, to the discontent of loyal customers.

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Table 2: Product flops - features No product testing.

Focus on technology, Competitors won the Shanklin no market research. market. (1987)

Failures in functionality mean that the product malfunctions or does not work at all. A special case of failure in functionality occurs if the product or service is harmful to consumer in a way that could not have been anticipated before (McCarthy, Perreault 1990, p. 264).

A common aspect of the following cases is that products had not been tested thoroughly enough. Otherwise the companies would have been able to reveal the deficiencies before distributing the product and causing damage or harm to customers. It seems that the typical reaction is to withdraw the deficient product from the market instead of working on the defects. This is possibly because the negative impact of the products in the following cases has been very important (cardiovascular events, damaged cars) or the product did not work at all (no network, no cleansing effect) so that the brand name suffered from substantial damage and the firms did not expect being able to reestablish it among customers.

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Table 3: Product flops - functionality

The last problem area when it comes to product flops is the assortment. Decisions regarding the product line-up under a certain brand name qualify as failures in case the range does not follow the customer’s logic, is too complex or simply overwhelming so that customers have troubles distinguishing between and deciding for items.

Both of the following cases illustrate that customers do not always value the biggest possible variety. Choosing actually becomes harder the more different items are available (Gourville, Soman 2005). Kit Kat experienced this effect when sales dropped by 18% following the launch of various new flavors. Customers did not only reject the new bars, they also had troubles finding the very popular classic version and finally did not buy anything.

When Unilever marketed “enjoy!”, a range of precooked meals, none of the twelve items sold well. The company inquired about the reasons and found that customers were confused and unable to choose. When they cut the range down to four meals, sales increased.

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Table 4: Product flops - assortment

When a product does not sell as many times as the company planned for, managers often attribute its failure to the price. Obviously, the price has to match customer expectations, but when the product itself is not attractive, the price is not even considered as factor in the buying decision. A second commonly named reason for a product failure is that what customers wanted was not properly realized in the product’s design, features or packaging. But more often the company did not understand what the customers wished for in the first place. So what the company thought customers expected was well-executed, but missed the mark with customers. This is mostly caused by a lack of consumer research, but it also happens that managers are so excited by an innovative idea that they assume there will be a market for it (e.g. smokeless cigarettes).

Most product failures get pulled from the market, only some of them are relaunched after changes in design and feature composition (appendices 19, 20). Few firms try to reposition the original product to sell it to a different group than the initially targeted customers. This approach is risky because negative word-of-mouth spreads across segments and can cause an unattractive image.

To develop a successful product it is important not just to ask what customers expect, but also to test different variations because what people think they want and what they actually spend money on differs. It is equally important to research what customers do not want.

Concerning the packaging and the assortment, simplicity is crucial. Even though consumers prefer a wide variety of items to one single alternative, choice makes decisions more complex and can lead to purchase refusal (Gourville, Soman 2005).

2.2 Branding flops

The brand is the intangible part of a product. It provides the customer with emotional and social value, allows to identify the manufacturer and to assign responsibility. Moreover, companies benefit from successful branding because it fosters customer loyalty (Kotler, Keller 2009, p. 277). While branding offers many advantages, it does not come without pitfalls. In this research, cases are classified as branding flops if wrong decisions were made in one or several of the following processes:

- Creation of a new brand
- Rebranding and brand management
- Naming a new brand or a new product under an existing brand
- Brand extension

As defined by the American Marketing Association a brand is “a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or a group of sellers and to differentiate them from those of competitors” (Kotler, Keller 2009, p. 276). Creating a new brand thus involves setting up a sound system of these symbols, designs and names that appeals to the target segment. It is crucial that the values a brand represents are relevant to potential customers and that the positioning is clearly different from competitors’ identities. Furthermore, if there is a story or heritage behind the brand, it should either be true or be clearly communicated as a fictional myth.

American Kitchen Food is a good example of a company that failed to make itself relevant to its target customers (mothers) and target consumers (children). In the first place, the product itself was not attractive for them, but also the brand name repelled potential customers. The marketers underestimated children’s capability to figure out their marketing tricks.

BMW, Gap and Kodak failed to design distinctive brands having a proper identity and relevance to customers. BMW’s C1 and Gap did not particularly appeal to anybody, there was no defined target group (Gap) or the target group did not like to product (C1). By misunderstanding their customers, both BMW and Kodak lost sales. In BMW’s case it was the design that did not satisfy consumer needs. Kodak’s “Funtime” flopped because customers were unable to distinguish between the original and the fighter brand, as well as between Fujicolor’s “Super G” and “Funtime”. The company ignored that photo films are a low-involvement purchase and did not adapt their strategy accordingly.

Perrier’s branding failure consisted in creating a myth around its bottled water that was later revealed as a lie. They had always promoted their product as coming directly from the source. But after traces of benzene had been found in Perrier it became obvious that the water was not that special but had to be filtered before being sold. Customers then distrusted the brand and did not perceive the price premium to be justified. Eventually, Perrier recovered from this crisis, but it allowed competitors to take away market share.

American Apparel’s appeal is based on a specific way of doing business and a very liberal philosophy. Their mistake was to promise more doing good than they could deliver in a capitalistic market. Both brands, Perrier and American Apparel, made the mistake of overpromising. They foundered on customer expectations they had set themselves.

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Table 5: Branding flops - creation of a new brand

Once a brand has been set up, it has to be managed to maintain and foster the brand equity. Crucial situations in this continuous process include the acquisition of or merger with other brands, the active implementation of the brand’s core values throughout the company as well as keeping track of customers’ needs to accordingly brand additional products.

National Car Rental and Alamo Rent-A-Car especially well illustrate the problems arising due to mergers and acquisitions. The brands initially served different customer segments (leisure and business travelers) but once the companies united their operations clients were served by the same employees in the same manner. However, they tried to keep their different pricing strategies, leading to customer confusion and brand dilution. While the service quality actually improved, customers perceived it as being worse than before, and National Car Rental’s market share dropped from 15% to 10%.

Federated Department Stores almost made the same mistake of underestimating the effect of a distinct brand identity on customer satisfaction. They planned to rebrand their property as “Macy’s”, but encountered customer protests and decided to keep the brand’s core elements.

Another issue linked to mergers and acquisition is the lack of management attention for established brands. Borden acquired many companies in a short time and did not assess them properly before making the buying decision. By focusing on diversifying the portfolio, the company lost track of customer need development in their core business. They neglected their original brands and lacked innovation, leading to decreasing sales and less net income.

Concerning the management of a brand’s core values, Anheuser-Busch and Coca-Cola are tellingly illustrating what can happen in case a firm ignores what customers like most about their brand. Anheuser-Busch wanted to revolutionize its communication and emphasized the “drinkability” aspect of Bud Light. They tried to convince consumers with rational arguments instead of fostering the brand equity already created based on emotional aspects. Coca-Cola misunderstood the “Pepsi Challenge”: In blind tests, customers preferred Pepsi. Thus, Coca- Cola launched “New Coke” with a sweeter, more Pepsi-like taste. Customers rejected the drink and Coca-Cola was forced to relaunch “Classic Coke” with the original taste. The reason for the failure was not that consumers did not like the new taste, but that they were loyal to Coca-Cola for not being Pepsi. When Coca-Cola wanted to become more like Pepsi, the company betrayed itself and customers turned away.

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Table 6: Branding flops - rebranding and brand management

Even though naming a brand is a very important step of the creation of a new brand, this aspect of branding merits a separate category within the area of branding flops. Naming a new brand and naming a new product under an existing brand belong to the same category as the mistakes made are often similar. Cases belong to this category if the name does not fit the product type or the brand’s positioning. Also, many branding failures occur when companies attempt to internationalize their brands or to export their products, thus renaming their brands, translating brand names, or keeping the original name.

Clairol’s “Look of buttermilk shampoo” is a classic example of an inappropriate name for a certain product type. Most people associate buttermilk with a foul smell and a lumpy texture, nothing that one would like to use on the hair. Even though the product was a complete failure, Clairol later repeated the same mistake with a “Touch of yoghurt shampoo”.

But a name cannot only lack a fit with the product, but it can also be inappropriate for the respective target segment. Kraft Foods experienced this phenomenon when selecting “iSnack 2.0” in a contest for their new version of the spread “Vegemite”. Kraft Foods did not know its customers’ mind-set well enough to distinguish between a joke and a serious proposition. Customers punished the company with decreasing sales, and Kraft Foods finally decided to rename the product “Cheesybite”, a combination of the original’s name “Vegemite” and the new flavor, cheese.

Examples of companies who did not carefully check their brand or product names for meaningful translations before internationalizing are plentiful. It is remarkable that the lack of attention to the new market’s language is not a phenomenon limited to powerful conglomerates on the one side or small companies with scarce resources on the other side. It appears that ignorance towards names occurs in all company structures. Another commonality of the following cases is that the name’s meaning is either rude or sexual. It can be assumed that this is due to the media’s choice of preferably shocking and amusing incidents.

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Table 7: Branding flops - naming a new brand or a product under an existing brand

The last flop type in the branding area summarizes all mistakes that can be made when extending a brand to new product types. Those new offerings have to be consistent with the brand’s positioning, the values it stands for and the target segment’s needs. Changing the brand’s core to fit new products or services as well as overexposure lead to brand dilution and might drive away formerly loyal customers.

There are many examples of companies trying to apply their expertise to new fields and to extend their brand to additional product categories. According to Ahluwalia (2008) up to 82% of all new product introductions are brand extensions. This step has the potential to increase the sales volume and to foster customer loyalty, but it can also have a negative impact on the brand image. A brand that was damaged because of unfit extensions is Harley Davidson. The new products’ launch under the established brand repelled formerly loyal customers. They even threatened to boycott the brand in case the company would not stop marketing baby clothes and perfume. The reason for such reactions is that customers define themselves through the brands they like and purchase. If the brand is extended to a category that is not part of the customers’ lifestyle, they see their identity threatened.

Kellogg, BIC, Coca-Cola, Pepsi, McDonald’s and Warner-Lambert were not successful in extending their brands to new product categories, but their marketing mistakes did not have any damaging effect on the original line-up. Customers did not buy the new product but kept buying the usual items.

Two brands that experienced brand dilution due to overexposure are Tiffany and Burberry. Tiffany’s mistake was to launch a more affordable range of jewelry attracting teenage girls. The traditional Tiffany customers did not want to be perceived as related or similar to those girls and avoided the brand. Burberry’s problem was that its famous plaid appeared on more and more products over time. The brand’s symbol lost its scarcity and luxury, the demand was saturated. Both companies reacted by bethinking of their roots, investing in their brand image and reducing the products available. It is to mention that brand extensions among high-end and luxury brands more often cause brand dilution than they can be considered a success

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Table 8: Branding flops - brand extension

The most obvious reason for a branding failure is that the company did not properly research their target segment’s values and believes. This is only partially true. Even if a company knows about their customers’ habits and needs, blunders can still occur. The most important aspect in brand management is to understand what the customer sees in the brand, what he or she associates with it, what it means to him or her. Many companies make the mistake of focusing on what they would like the brand to be to the customer, they stick to their plan. But once a brand has been launched, it becomes the object of customers’ memories, associations and projections. The company has to work with what the brand becomes through its customers and not what it was planned to be.

Because a brand provides customers with a basis for their identity, it is always risky to change a brand’s values and positioning. Not only because loyal customers are often those who spend the most on the products, but also because the brand is diluted and brand equity destroyed.

[...]


1 Detailed descriptions of these cases can be found in the appendices 1 - 16.

2 “Product“ refers to tangible products as well as intangible services.

Excerpt out of 78 pages

Details

Title
Marketing flops: Typology and cases
College
Otto Beisheim School of Management Vallendar
Grade
1,3
Author
Year
2010
Pages
78
Catalog Number
V176303
ISBN (eBook)
9783640997619
ISBN (Book)
9783640997794
File size
1486 KB
Language
English
Tags
Marketing, Flop, Krise, Failure, Crisis, Fail, Case, Typology
Quote paper
Sarah Hündgen (Author), 2010, Marketing flops: Typology and cases, Munich, GRIN Verlag, https://www.grin.com/document/176303

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