Wednesday, November 21, 2012

Hostess Twinkies. Distribution costs are out of whack. And the Union rules, too.

It's all over the news. We all have read and heard a lot about Twinkies and Hostess this month.  Plus Wonder Bread, Devil Dogs and more.

Some interesting points:

  • Hostess's production costs were not outrageous but the distributions costs were between $80 million and $130 million annually and this is according to the judge.
  • Part of Promotion: There's been a ton of free publicity, but no advertising in a decade, according to the Wall Street Journal.
  • Hostess has spent eight of the past 11 years in bankruptcy with some "odd" Union rules. The real story are the unions, AFL-CIO and the Teamsters, and their costs, which hurt the bottom line.
  • One of the nine P's, Place: Wonder Bread and Twinkies could not ride on the same truck. More Union rules. 
  • Hostess could not enter dollar stores, vending machines and movie theatres; there would have been more sales and revenue with the additional distribution channels and outlets. Unfortunately they needed separate agreements, which were restricted. 
  • The Unions imposed work rules, which stopped the drivers from helping load the trucks. How heavy could the Hostess products be? 
Hostess and Twinkies will come back, but should the strange, odd union rules come with them. 

Thursday, November 15, 2012

Advertising pricing for Super Bowl XLVII is hot in 2012 and for 2013.

The ads and advertising in the Super Bowl is a hot, interesting topic, especially when I teach or present Marketing and Advertising. Especially right now through February.

I’m asked:
  • How much did a 30-second TV commercial or spot cost in Super Bowl XLVI, February 5, 2012?
  • What about next February 2013? 
Good news for CBS is that in 2012, a single Super Bowl XLVI spot topped $4 million. This year the majority of Super Bowl spots are sold for the February game in 2013, at a high of $3.9 and averaging $3.8 million, per spot.

With ads ranging between $3.5 million and $4 million, Super Bowl prices were up 13% to 29% in 2012, from a year ago. The big premium is usually for a typical 30-second spot in the first quarter of the game, which averaged around $100K extra. I explain that this premium is due to the larger audience and better chances that consumers will recall the ads early in the game. Let’s say that the viewers are usually in a better state of mind. I have a west coast bias here.

For 2013, with a reported average :30 cost of $3.8 million, CBS could achieve approximately a 9% premium on the previous year’s rate, or as much as $225 million in revenue.

Prices, for this advertising time only, can typically cost millions of dollars; the 30-second spot during the 2012 telecast cost an average of $3.5 million.

FOX in 2011 reported that Super Bowl XLV sold out, fetching between $2.8 million and $3 million per :30. This amount excluded production costs and fees for actors, sets, equipment, advertising agencies, directors, crew and other personnel. Here’s more:

In 2009-2010, the cost of a 30-second spot ranged from $2.5 million to $2.9 million.

During the broadcast advertising time has also grown from 40 minutes, 15 seconds in 2001 — or 82 messages — to 45:10, or 84 messages in 2009. There was a big rise in 2010, to 47:50 and 104 commercials.

Which product is advertised the most on the Super Bowl? Not beers, movies or cars. It’s the network’s own programming promotion. In a typical Super Bowl, 15% to 20% of all commercial time is a plug by the network for its own programming and shows.

Sales and the pace of sales in 2010-2012 were fueled by the heavy competition among car makers. There was a record of eleven different car brands which announced Super Bowl deals, including nine different auto brands. This year we have Mercedes coming back into the fold at the Mercedes-Benz Superdome in New Orleans in 2013.

The Super Bowl is our country’s highest-profile advertising showcase, with households staying glued to their screens and not using TiVo-type products and services during the ads. Marketers get a huge audience, but they also face high expectations especially when the audience can judge and be a critic with the click of a mouse. With the high price tag, it’s a lot to spend if the creative is poor or dumb, lacks strategic marketing direction, or just plain awful. The cost of a Super Bowl spot every year has been an annual contest of brinkmanship for the networks, in setting its price.

Positions in first half sell first. Anheuser-Busch delivered four-and-a-half minutes during Super Bowl XLVI, the company’s 24th consecutive season as the exclusive malt beverage category advertiser.

Super Bowl XXXVIII, broadcasted on 2/1/2004 from Houston, Texas on the CBS network, was noted for a controversial halftime show in which Janet Jackson’s bare breast was exposed by Justin Timberlake in what was referred to as a "wardrobe malfunction". A record $550,000 fine was levied by the FCC, as well as an increase of FCC fines per indecency violation from $27,500 to $325,000.

While the Super Bowl still commands the highest-priced commercial unit — around $3.8 million — other major sports events and the Oscars can pull in total dollars, too.

Tuesday, November 13, 2012

New insights on recent business activities. Some interesting examples of the Nine P’s in business and in the news.

I have been collecting a few recent business stories in the news, and applying them to the Nine P’s. Here are a few interesting examples of the Nine P’s (Planning, People/Segmentation, Product, Price, Promotion, Place/Distribution, Partner, Presentation, Passion), which break down business problems into possible solutions and into objectives, strategies and tactics to solve your business, marketing issues.


Price Less Foods sells groceries at cost. From a recent Supermarket News, markets in Virginia and Tennessee are selling their groceries at cost, and these grocers are adding on a charge of 10% fee per basket. In marketing, “Price” includes all aspects regarding pricing. The amount of money a consumer is willing to pay to obtain the product or service.

Target market and/or segmentation consists of a set of buyers who share common needs or characteristics that the company decides to serve. Market targeting can be carried out at several different levels. 
With Obama’s win last week it will assist/increase the ratings for Fox News. The re-election of President Barack Obama and the GOP's loss is going to strengthen the network's role as "the voice” of the opposition. With more viewers, the station will generate more revenue. 

Advertising is one component of the Marketing Mix and the Nine P’s. Remember the rock ‘n’ roll, “super,” spectacular outdoor boards on Sunset Blvd. in Los Angeles. 

I read recently that there is a book of photography of these famous boards; it’s called Rock ‘n’ Roll Billboards of the Sunset Strip (Angel City Press). Sometimes the audience was only the artists or band such as The Doors, Elton John, Beatles and Donna Summer, among others.    

Doesn’t this seem late, from Yahoo?
It’s reported that Yahoo will relaunch its Yahoo email product. It’s the second time in six years, with last year being the first time in five.  Yahoo is trying to compete with G-mail. Seems too late to me. Most people are happy with Gmail and I know of few who are happy with AOL. 

One more example: Media firms want to be paid for more ad views. It includes “time-shifted” viewing, which could increase measures of program viewership by 30% to 40% during a week.

The networks currently get to monetize some of that time-shifting viewing. What is called “C3 ratings” -- the average commercial ratings plus three day of time-shifted viewing – it’s the way media is measured and the currency through which the TV networks get paid from the advertisers, agencies and media buying services. 

This media metric started in early 2007. There's still other viewing that goes “un-paid” -- in days four, five, six and seven after a program's initial airing. Research has shown live plus seven days accounts for 90% of all viewing. One fix for programmers is inserting "fresher" spots known as “dynamic ad insertion.” 

I developed and own a copyright for the concept, the Nine P’s/9 P's ©2007, which augments the Marketing Mix and 4P’s by the American Marketing Association, Neil Borden and Jerome McCarthy). 

For more on the Nine P’s and other marketing resources, go to