HMV: If you don’t fix it, you’ll end up broke…

The name Margaret Anne Lake might not ring too many bells. But if you were in the UK towards the end of the twentieth century, you’ll be familiar with her alter-ego Mystic Meg.

Having made her name as an astrologer in The Sun, Meg was catapulted into the national consciousness when she was given a slot on the fledgling prime time National Lottery draw programme.

In an attempt to build excitement and pad out an event that took two minutes to complete, Meg was brought in to ‘predict’ the winners.

Her predictions were suitably vague.

The norm was something generally along the lines of “the winner would live in a house with a 3 in the number, in a town beginning with L or M and have bought their tickets from a woman.” with a sprinkling of astrological terminology for extra authenticity.

However it would seem that back in the mid-to-late 1990s Meg wasn’t the only one struggling to see what the future held. Far away from the glamour of TV, a number of well-paid businessmen were busy making decisions that would see their organisations squander their dominant positions.

And a couple of weeks ago, after struggling along for years, both HMV and Blockbuster UK, once leaders in their categories, hit the buffers and called in the administrators.

Bad Advice

The wisdom ‘If it ain’t broke, don’t fix it‘ is relatively modern – it dates from 1977 – and was attributed to businessman Bert Lance in the May issue of the magazine Nation’s Business.

The phrase caught on, partly because it made a point in a catchy way. But like many wisdoms, it doesn’t tell the whole story.

Just because something works now, doesn’t mean it always will. And those in position of responsibility have an obligation to future proof their organisation.

Back when Mystic Meg was in her pomp, the digital revolution that helped bring about the demise of both retailers was in its infancy. But signs of its potential were there, particularly for HMV.

The first was how people acquired their music.

Software that ripped files from physical storage, coupled with faster web connections, gave birth to peer-to-peer sharing. Programmes like Napster, Kazaa and Limewire removed the need for physical reproduction and distribution.

The whole entertainment industry never really came to terms with illegal downloads, opting to use legal threats and emotional blackmail, rather than adapting their businesses to meet the demand.

In reality, not all pirated content would ever  have been bought legally. Peer-to-peer applications offered users the freedom to sample new artists they would never have paid for and get digital versions of music they already owned physically, easily and without it costing them money.

One of the reasons people wanted their music digitally is the second reason the digital revolution helped bring about the demise of the likes of HMV – the way people consumed and stored music.

The emergence of the digital music player, culminating in the release of the iPod in 2001 meant that people also wanted their music in a new format. They could now store their entire collection on one machine.

When people had upgraded their vinyl to cassette, and then their cassettes to CDs, HMV had been in pole position and reaped the profits. However a digital format didn’t require physical stores and HMV didn’t react. Their model was suddenly ‘broke’, but they didn’t realise in time to fix it.

Avoiding failure

Can such demises be avoided? The future is notoriously hard to predict, but there are some guidelines that can help companies avoid suffering a similar fate to HMV.

1. Be alert to new and niche competitors

Back in the 1980s and 1990s, HMV may have considered their competition to be the likes of Tower Records, Virgin and Woolworths. When they all disappeared, it might have seemed that HMV had won the battle. In reality they were all killed by the same bullet. The game changed as companies diversified.

Back in 1981, following a dispute with Apple Corps, Apple Computing agreed not to enter the music business. Now, iTunes offers over 28,000,000 songs.

Just because someone isn’t a direct competitor now, doesn’t mean they never will be.

2. Keep an eye on the Path to Purchase

HMV didn’t suffer because people suddenly stopped wanting to buy new music or watch films. What changed was how people acquired their material.

Online downloads provided a new way to access digital music. For those who wanted physical media, Amazon et al provided an alternative way to buy CDs and DVDs. Now that nearly 80% of UK households have broadband connections, consumers can stream films at the press of a button or watch a dedicated Movies channel.

Sometimes people will still want physical media immediately, but just not often enough to sustain a business as big as HMV.

3. Understand the next generation

Many years ago, I worked in Woolworths. A large proportion of the music we sold was to youngsters spending their pocket money on their latest idol. While online might have been niche in the mid-to-late-90s, the youngsters of today have grown up with it. As a result, consumers under 35 won’t have had the opportunity to develop an engrained habit of buying their music in physical stores like HMV. Buying entertainment online is no longer an alternative, but the norm.

4. Play to your strengths

While online retailers can offer lower prices and a wider catalogue, physical retailers offer immediacy and have the opportunity to provide enhanced in-store engagement.

Shoppers want convenience, value and experience.

Browsing for and buying music, film and computer games ought to be a fun, pleasurable act. Online shopping will continue to grow across pretty much every category. Physical retailers need to understand their role in fulfilling shoppers’ needs. Sometimes it will be about delivering the product quickly and easily, but sometimes it will be making the act of shopping an enjoyable experience that merits a slight price premium.

5. Be prepared to change

Taking all of the above into account, it might be easier to spot how a business structure that is dominant now might not be so successful in the future. It is often said that defending a title is harder than winning it in the first place.

However, it can be done.

McDonalds have long dominated the fast food industry. Just over a decade ago, their restaurants were tacky red and yellow places with plastic seats.

Yet they saw that their competition was no longer just the likes of Burger King, but also other food outlets and increasingly the likes of Starbucks et al who offered a more pleasant in-store experience.

Now their outlets have all been refurbished with designer furniture and offer free wifi.

They also observed other trends that would impact them. From obesity to ethical sourcing of produce and packaging, they adapted their business to stay one step ahead.

Their menu still offers the old favourites, but also includes lighter options. Their burgers come from British and Irish farms and much of their packaging is made predominantly from recycled materials.

As a result, they are still thriving on the high street.

Could sponsors hold the key to stopping racism on the terraces?

So Lance Armstrong (under)stated recently that he’d had a ‘difficult couple of weeks’.

Just to recap. In the last fortnight or so (and despite his protestations of innocence), Armstrong has gone from being a much lauded athlete who overcame serious illness to dominate one of the world’s toughest sporting competitions to a discredited drugs cheat and stripped of all his titles.

A ‘difficult couple of weeks’ by anyone’s standards.

Since the evidence against him grew and former team-mates spoke out about his role in the doping culture in the US Postal team, the position of sponsors such as Nike has shifted. Where initially they stood by their man, they ultimately decided to cut the relationship, citing that he had “participated in doping and misled Nike for more than a decade“.

It’s one of the inherent dangers of sponsorship.

While your endorsee is sweeping all before them you are associated with success and glory. But as Tiger Woods sponsors found out a few years ago, if that star misbehaves your brand is associated with someone getting the headlines for all the wrong reasons.

The news that cycling has/had a doping problem is both unsurprising and depressing.

Unfortunately, the same can also be said for the experiences of the England U21 side in their recent play-off in Serbia.

Racism in football

Having been subjected to racist chants throughout the game, things came to a head at the final whistle when Danny Rose was sent off for kicking the ball into the abusing crowd and punches were thrown as players and coaching staff jostled their way towards the dressing rooms.

Racism is a blight on society. It exists in the UK and while it is not tolerated in public arenas, the economic downturn hasn’t helped our natural tendency to tribalism when things are tough.

For nations that haven’t experienced the levels of immigration of other ‘races’ that the UK has, attitudes to people with different colour skin are not as liberal. Let’s not forget that it wasn’t all plain sailing and painless for us to get to where we are.

Terminology that was common just a couple of generations ago is now taboo. TV shows of the 1970’s wouldn’t even be considered now. And footballers in the UK used to have to run the gauntlet due to their skin colour as recently as the 80’s and indeed, incidents are still being reported in 2012.

None of this excuses what happened in Kruševac and nor does it excuse the lenient approach footballing authorities have taken with racist incidents in the past. In a multi-billion pound industry, fines of tens of thousands of pounds have little impact.

FIFA and UEFA are keen to cite the power of football to change society when awarding tournaments to countries like Ukraine and Qatar but plead impotence when it comes to topics like racism.

The natural indignation in England has lead some to suggest that we should pull out of international tournaments to make a point. Such an action would most likely be met with champagne corks popping in Nyon and Zurich, and would only serve to further dilute our voice in the global game.

The Serbian FA could have offered UEFA a get out of jail card. A statement recognising the monkey chants, apologising to the FA and footballing family and a clear plan of action to ensure it never happens again would have enabled the games rulers to give them a slap on the wrist.

Yet the Serbian FA refuted clear evidence of racist chants and stated that any claims to the contrary were malicious.

‘FA of Serbia absolutely refuses and denies that there were any occurrences of racism before and during the match at the stadium in Kruševac. Making connection between the seen incident – a fight between members of the two teams – and racism has absolutely no ground and we consider it to be a total malevolence.‘

Had they sent a letter saying ‘Fuck you! We did nothing wrong and we’re not changing!’ their attitude couldn’t be any clearer.

And in doing so they batted the ball firmly into UEFA’s court making the question very clear.

Do UEFA believe there was racism at the game and if so, do they consider it acceptable?

Driving behaviour change

Behaviour change and persuasion are all about understanding what motivates of the people you are trying to influence. This means putting your own motives to one side for a moment.

In other words, if we want UEFA and FIFA to impose stronger penalties for incidents of racism we need to understand what influences them.

And let’s be honest, British indignation has never kept them awake at night.

Much higher on the list of priorities are the many sponsors who provide a huge chunk of the money that powers the multi-billion pound football industry.

Just like Nike and Lance Armstrong’s sponsors, FIFA and UEFA’s backers (which include brands like Coca-Cola, McDonalds and Adidas) have a rare opportunity to make their opinion on an unsavoury topic clear.

No brand wants to be associated with racism and upsetting the sponsors is something the footballing authorities do not tolerate. Just ask Niklas Bendtner who was fined £80,000 for showing his Paddy Power lucky pants during EURO2012.

Compared to the fines given to national associations for incidents of racism, it seems rather excessive.

Let’s face it, for all the anger,  griping and T-Shirt protests in England we simply don’t have the clout to demand action.

The sponsors are the ones with real power to influence, and maybe only a rebuke from the people who line their pockets will make finally FIFA and UEFA start taking racism in football seriously.

Louis Vuitton’s Brand Balancing Act

LV may have been around since 1854, but, as the saying goes, you’re only as good as your last picture. Just as many an actor has been condemned to Hollywood purgatory through making one poor choice, so it is with a brand. A brand’s equity is made or broken by its perception, i.e. what it’s done lately. Ogilvy’s own Louis Vuitton has been in the press a lot recently, for reasons both good and bad. Zeitgeist takes a look at Vuitton’s goings on, and what impact the machinations will have on it’s brand.

The last Friday of May heralded the reopening of London’s New Bond St. Louis Vuitton boutique, with the new moniker of ‘Maison’, presumably denoting it as a flagship store. Never one to miss a way to include Facebook, Vuitton recorded the event in a live stream over the social network, beaming around the world images of the oh-so tiring Alexa Chung as she hosted the broadcast. The brand has done this previously to great success for it’s Ready-to-wear collections from various shows, which inspire great community interaction. Concurrent with this was the launch of a brand presence on Foursquare, one of the first of any brand to have an account on the location-based social network. (Indeed, this democratisation of fashion could be an article in of itself; Ermenegildo Zegna are taking a leaf from Vuitton’s book with unprecedented access to what goes on in the runup to a runway show). Photos of designer Marc Jacobs, Gwyneth Paltrow et al. graced the front pages of several of the city’s dailies the next morning. Diagnosis: Very good

At the opening, in a separate story that appeared with very little fanfare on the Vogue website, a brief interview was conducted with Vuitton’s creative director Marc Jacobs, who said that when he began working on the brand, his initial thoughts might have taken it in a completely different direction, “When I arrived at Louis Vuitton 12 years ago, and I was figuring out how to create a new tier of Vuitton for a different customer, I thought it would be clever to hide that monogram, which was very stupid of me. That logo is part of what makes Vuitton so desirable. It allows people to become members of an aspirational club.” Zeitgeist has never heard Jacobs utter such an admission prior to this; it is surely an incredibly controversial thought. The problem is that the designer may have been quite right to have thought of removing the logo. Without it, they are almost certainly missing out on what he refers to as a “new tier”; the customer that loves the quality and craftmanship of Vuitton but does not need the validation of having “LV” emblazoned on every product, so instead chooses to shop at Bottega Veneta or somewhere similar. For how long can a brand remain aspirational when it begins to be seen everywhere, including in all the wrong types of places? Zeitgeist recently spotted two pieces of genuine Vuitton luggage sitting in the window of a McDonald’s. Diagnosis: Not good

Elsewhere in Vuitton’s world, the Advertising Standards Authority recently upheld three complaints on a series of advertisements that Ogilvy Paris had concocted, which had received positive press from the FT at its inception, and to which Zeitgeist has referred to previously. The ads, though beautifully photographed in an homage to that brilliant artist Vermeer, were withdrawn after complaints that the print ads gave the impression that the products were completely handmade from start to finish, and that at no point was machinery involved in the manufacturing process. In reality, this is not the case. Craftmanship by hand is indeed a significant part of the process, but the ASA deemed this insufficient. It is also unlikely that such young, beautiful people as depicted in the advertisements work in such immaculate clothing with only chiaroscuro lighting to work by, but there did not seem to be any complaints regarding these artistic licenses. Perhaps this is because such things should be taken with a pinch of salt, instead of at face value. Diagnosis: Not good

Louis Vuitton continues to contest in court in efforts to cut down on the re-selling of goods or the distribution of counterfeit products. The last victory came recently against eBay when the company was fined €200k in damages and €30k in legal costs made payable to Louis Vuitton. TelecomPaper reported “The court described as ‘parasitic’ eBay’s purchase of keywords such as ‘Wuittton’, ‘Viton’ and ‘Vitton’ so that online shoppers searching under these misspellings would be directed to links promoting eBay.” More recently, however, holding company LVMH lost it’s battle with Google over charges “that Google’s practice of selling keywords in advertising searches to the highest bidder damaged trademark law”, according to the BBC. Diagnosis: A tie

Lastly, having already made clear it’s association with a new part of the Journeys campaign – previously featuring such luminaries as Sean Connery, Keith Richards and Catherine Deneuve – that had Pelé, Zidane and Maradonna huddled around a table football game together, this week the company cemented the connection. Vogue recently reported that the World Cup would have an official home in a piece of luggage designed specifically for it by Vuitton. The luggage was revealed in Paris to great fanfare, by that [super]model of restraint, Naomi Campbell. Diagnosis: Very good

It’s been a period of mixed blessings for Louis Vuitton, some of which were completely out of their hands. It’s had some big wins with the new London store opening, as well as the excellent association it has created with the impending World Cup. Long-term, it will be fascinating to see if this is the beginning of a brand embracing to an increasing extent the entertainments and pastimes of the masses (prior to the World Cup, the only sport Vuitton had been involved in was the America’s Cup sailing race, crewed and supported by nought but multi-multi-millionaires), and how they will maintain an aspirational slant if they do so (presumably by continuing to charge £300+ for a shirt). Exciting times are ahead, no doubt…

Location, location, location

Foursquare is to the zeitgeist what Chatroulette was all those days ago. Location-based targeting has been gathering steam for some time, and the potential blossomed with the release of the iPhone 3GS last year. For the user, it allows them to ‘check in’ to a certain place, alerting those who follow them. If said user checks in to a certain place often enough, they become ‘mayor’ of that location. Moreover, with time a map builds up showing definitively where the user tends to go. It is this last point that is of particular interest to advertisers, who are always desperate for more facts and figures to make it appear that the industry they work in is one of cold, hard, calculable facts, with no irrational outliers in order to better know the consumer they are targeting.

An exhibition detailing the evolution of maps is currently on show at London’s British Library; today we seem to rely on maps ever more as they become – with GPS functionality – an important feature on most mobile devices. It was reported earlier today that the Foursquare service has now exceeded forty million check-ins. Not one to miss out on anything that involves the decay of personal privacy, Facebook shortly intends to release its own version where users can check-in through their site, with McDonald’s already on board.

eConsultancy has a list of ten select marketing examples using geo-location, however Zeitgeist are going to focus on two specifically. The first is that of the Financial Times and its walled garden. Borrowing a page from other brands of getting a user while they’re young, the FT may soon begin providing free access to those who check-in in certain areas. Those areas being “select coffee shops located by major financial centers and near business schools including Columbia, Harvard, the London School of Economics, London Business School and London’s Cass Business School”, in other words, superior centres of academia, that Zeitgeist may or may not call an alma mater. According to FT.com, “Only the ‘mayors’ will be granted a free pass, and only for a limited time”. It’s a nice incentive and it will be interesting to see how competitive the race for free content becomes among ostensibly cash-strapped students.

The other example Zeitgeist likes is that of the luxury shoemaker Jimmy Choo, who have decided to organise a shoe hunt. As one blog describes it, “The idea is pretty simple, a pair of Jimmy Choo’s new trainers will check into some of the most exclusive and fashionable places in London, if you can track them down and catch them while still checked in at a venue, then they are yours.” Sounds like a very fun idea and a fantastic excuse to run around town going to lots of great places. Let the games begin.

Does retirement beckon for Ronald McDonald?

Zeitgeist has always been somewhat midly peturbed by Ronald McDonald, not exclusively due to the fact that no matter which McDonald’s in the world Zeitgeist chooses to frequent, Ronald is unfailingly always at the very same one. That and the fact that he seems to enjoy sitting by himself on benches, smiling to himself.

For many however, Ronald is an enduring mascot, a brand ambassador like no other. The man has presided over McDonald’s profligate – but morally questionable and nutritionally unhealthy – past since 1963, as well as its more lean, green present form. It still commands massive clout as far as promotions are concerned, particularly for film and TV.

Now though, Corporate Accountability International  – whose previous targets include, Nestlé, GE and, fittingly, Target – has designed a website called Retire Ronald that states it is time for Mr. McDonald to join other brand mascots such as the Marlboro Man and Joe the Camel and stop recruiting children to unhealthy acts.

Comparing fast food to cigarettes might seem like a stretch, and Zeitgeist believes it is. To say that obesity rates have shot up in the US since the introduction of Mr. McDonald and directly connect the two in a latent manner – which the site does – is naiive and unrepresentative of fact. Creating a scapegoat will not solve the problem of overweight people in the US. It does also not account for the fact that people in that country are no longer getting fatter. “[S]cientific evidence continues to mount that McDonald’s marketing to kids is no less than commercial exploitation”; well, unfortunately, yes, marketing is exploitative. Zeitgeist would prefer to see as much effort put into policies and websites promoting healthy living, rather than focussing on the removal of an imaginary plenipotentiary, successful as it may be. AdAge currently features a poll on the matter.