Archive for February 18th, 2008

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Posted by 18 February, 2008 Comments Off on Hostgator – Host Unlimited Websites Just for $7.95/Month

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Categories : Internet Tags :

 

Expanding the E*Trade Brand

Posted by 18 February, 2008 Comments Off on Expanding the E*Trade Brand

E*Trade was founded in 1991 and partnered with America Online and CompuServe in 1992 to offer trading to users of those portals. In 1996, E*Trade established its own Internet site. That year, E*Trade spent $25 million on its first national advertising television campaign, which attempted to convince viewers: “Someday, we’ll all invest this way” and aired on popular network programming. Accompanying the television spots were two-page newspaper ads and Internet banners provocative lead-ins such as “Spank a Yuppie” and “Low Commissions. Leave your kids more to fight over.”E*Trade hired Goodby, Silverstein & Partners in 1999 to develop more national advertising. Goodby’s first campaign, titled “It’s time for E*Trade,” helped the company become one of the top four most recognized Internet brands in 1999 as ranked by Opinion Research Corp. According to agency co-founder Rich Silverstein, “In four months, we built the brand.” CEO Christos Cotsakos maintained that, “brand building was always first and foremost” among the company’s priorities.

The company launched a major ad blitz for the 2000 Super Bowl by buying two spots during the pre-game show, another two spots during the game, and sponsoring the halftime show. E*Trade “dominated the commercial showcase,” according to Brandweek. The memorable “Monkey” ad was named as the fourth-best Super Bowl ad of all time by an online consumer vote. As a result of its Super Bowl ad blitz, E*Trade enjoyed a 600 percent increase in new accounts in the quarter following the Super Bowl compared with the same period the previous year. E*Trade maintained a consistent ad push following the Super Bowl, spending $522 million – or 38 percent of revenues – on marketing.

In 1999, E*Trade diversified beyond online trading with its $1.8 billion purchase of online banking firm Telebank, which it renamed E*Trade Bank. E*Trade hopes to add other services to its site and become “a one-stop financial services supermarket.” Additionally, E*Trade sought to expand beyond the Internet and establish a brick-and-mortar presence that would allow it to compete with traditional brokerage firms. In August 2000, E*Trade opened the first of its brick-and-mortar locations, called “E*Trade Zones,” inside a SuperTarget store. The E*Trade Zones feature customer service representatives and a full complement of services from trading to bank transactions.

E*Trade also planned a network of 18,000 automated-teller machines in gas stations, drugstores, and supermarkets throughout 48 states, which the company upgraded to provide customers with access to brokerage accounts as well as bank accounts. To add to its list of services, in 2000 E*Trade partnered with Ernst & Young to offer both on- and offline investment advice to clients.

In 2000, E*Trade processed 150,000 transactions daily from its customer base of more than 3.6 million. In 2001, E*Trade was the third largest online broker in terms of number of accounts.

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[1] “Bank on It.” Brandweek, December 11, 2000; Louise Lee. “Not Just Clicks Anymore.” Business Week, August 28, 2000; Terry Lefton. “Jerry Gramaglia: Trading Up.” Marketers of the Year, Brandweek, October 11, 1999; Deborah Lohse. “E*Trade Campaign Asks Investors To Skip Brokers for On-line Service.” Wall Street Journal, September 5, 1997, p. B5

Categories : Marketing Tags :

 

Pricing Showdown in the Cereal Market

Posted by 18 February, 2008 Comments Off on Pricing Showdown in the Cereal Market

The cereal category experienced interesting price competition in the late 1980s and early 1990s. During this time, the cereal industry as a whole aggressively raised prices on items as much as 5 to 6 percent every eight months. In order to disguise the higher prices, cereal makers attempted to offset them with a host of coupons, trade promotions, and other deals (such as two-for-the-price-of-one and buy-one-get-one-free or “bogo” offers) – a strategy dubbed “price-up, deal back.”

On April 4, 1994 (“Cheerios Monday”), General Mills, the number two player in the $8.7 billion cereal market with a 29 percent share, announced that it would lower prices between 30 cents and 70 cents a box (or 11 percent on average) on its eight most popular ready-to-eat cereals (Cheerios, Honey Nut Cheerios, Multi Grain Cheerios, Wheaties, Whole Grain Total, Golden Grahams, Lucky Charms, and Trix). General Mills also announced that it was cutting coupon and other promotional expenditures by $175 million.

General Mills was motivated by a number of factors. With prices as much as 25 percent lower, private label cereals had begun to make some significant inroads on sales, increasing their share of the market to 5.2 percent. Because of pervasive sales promotions, more than 60 percent of all cereal purchases were being made with some kind of coupon or discount. As Steve Sanger, president of General Mills, stated:

“The practice of pricing up and discounting back has become more and more and more inefficient for manufacturers and retailers and burdensome for consumers. There’s tremendous cost associated with printing, distributing, handling, and redeeming coupons. Because of this inefficiency, the 50 cents that the consumer saves by clipping a coupon can cost manufacturers as much as 75 cents. It just doesn’t make sense.”

Kellogg, the market leader with a 36 percent share, followed quickly with an announcement that it would stop offering the buy-one-get-one-free offers and attempted to hold firm on price increases by cutting costs. Recognizing a competitive opportunity, marketers of the number three and four cereal suppliers, Post and Quaker Oats, initially decided to continue to offer $1-plus coupons. Eventually, however, Post enacted a 20 percent across-the-board price cut and began to issue a new, all-purpose coupon that would apply to all sizes of all its cereals. Kellogg soon thereafter reduced prices an average of 19 percent on nearly two-thirds of its line.

The cycle of price cuts perpetuated by the bitter price war was bad for the bottom line. Kellogg, as the leader, suffered significantly as a result of the price wars. Kellogg’s profit margin shrunk, sales declined, and its market share plummeted. In 1998, Kellogg raised cereal prices an average of 2.7 percent, its first increase since 1994. This move signaled the end of the cereal price wars, but it did not solve Kellogg’s problems. In 1999, General Mills grabbed the domestic market share lead from Kellogg’s.

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[1] Richard Gibson, “General Mills to Slash Prices of Some Cereals,” Wall Street Journal, April 5, 1994, p. A-4; John McManus, “Sanity’s at Stake in Steve Sanger’s Cereal Showdown,” Brandweek, April 25, 1994, p.16; Betsy Spethman, “Kellogg Counters Big G Price Cuts: ‘Bogo’ a No Go June 1;” Brandweek, April 25, 1994, p.3, Julie Liesse and Kate Fitzgerald, “General Mills Price Cuts Fail to Stem Couponing,” Advertising Age, August 1, 1994, p.26. “Kellogg Raises the Prices of Some Cereals.” Orange County Register, December 15, 1998; Betsy Spethmann. “Breakfast in Battle Creek.” Promo, May 30, 2000

Categories : Marketing Tags :

 

The Challenges Of Launching a New Brand

Posted by 18 February, 2008 (1) Comment

In 1996, Seagram Co. executives noticed a change in the vodka market. The popular Absolut brand of vodka, which Seagram distributed, was being replaced on the top shelf of trendy restaurants and nightspots by upstart “superpremium” vodkas like Grey Goose, Ketel One, and Belvedere. These superpremium vodkas came in tall, elegant cut-glass bottles and typically cost up to four dollars per glass more than Absolut. Research indicated that some of Absolut’s core customers had switched to the premium brands. Seagram sought to counter this trend by developing a high-end vodka in partnership with Absolut named Sundsvall after the Swedish town where it was distilled.

Sundsvall was positioned as a “super-Absolut, whose pedigree would make up for its late arrival and obliterate the rival upstarts.” Bottles of Sundsvall cost $30, twice as much as Absolut and more than four dollars more than Belvedere. While the other bottles in the category were made from either cut or frosted glass, the Sundsvall bottle was designed with clear glass and an orange shrink-wrap top in order “to stand out from the crowd.” In 1998, Absolut and Seagram launched the brand with a modest $2 million advertising budget. The companies devised what they called a “discovery” strategy, where Sundsvall was initially marketed only in eight metropolitan test markets in order to build buzz. In these markets, Sundsvall sponsored or hosted special events, such as invitation-only dinners at expensive restaurants where the brand was served exclusively.

When Sundsvall launched nationally, it garnered a lukewarm reception. One problem: premium brands like Belvedere had already been on the market for three years. Another problem was the packaging. Bartenders agreed that the product was high quality, but one bartender claimed the bottle “was too discreet for where it was competing.” Compared with the competition, Sundsvall sold at a plodding pace. For example, one Boston restaurant typically poured through two bottles a day of a competing brand, while a single bottle of Sundsvall might last three months there. In 1999, Sundsvall sold 1,000 cases of product, compared with sales of more than 100,000 cases each for Belvedere and Grey Goose.

A little more than a year after the launch, Absolut stopped production of Sundsvall and ceased all marketing activities. For a company that achieved incredible success marketing its flagship product over the last two decades, the disappointing Sundsvall brand was considered a major failure.

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[1] Shelly Branch. “Vodka on the Rocks: This High-End Brand Was an Absolut Flop.” Wall Street Journal, December 21, 2000.

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