Never Lukoil

Alekperov and Putin in 2006, working closely.

Five years ago, it dawned on me how I never buy gasoline at a Lukoil station. I sampled my Ukrainian friends and members of my family — all answered the question “do you ever buy gas at Lukoil?” the same way.  “Never!”

Why is that?  Probably because they’re Ukrainian and don’t appreciate remnants of the old Soviet Union, of which Lukoil is one. Nearly all my Ukrainian friends are refugees or children of refugees, who escaped from the Bolsheviks after The War. Of course we remember the Holodomor, the Stalin-ordered genocide of 7,000,000+ in 1931-33.  Add the forced Russification of Ukraine over the centuries and you’d have to agree with those who bypass Lukoil gas stations when given the choice.

But is this reason enough to cause so many Lukoil stations to be so quiet that you’d think they’re not open for business? The only ones who seem to get any business at all are the ones co-located with Dunkin Donuts. In Edison, a Lukoil station on Route 1 was so slow I was amazed at how long they held out before surrendering.

A decommissioned Lukoil gas station on U.S. Route 1 in Edison. It was once a busy Mobil station.

Are there that many Ukrainians (and other post-Soviet ethnics) in New Jersey to make that kind of difference? I don’t think so. I think it’s just poor marketing on the part of Lukoil.

A Mobil station was distinctive and consistent with the brand.

When Exxon settled with the U.S. Federal Trade Commission in 1999 to complete their acquisition of Mobil, they agreed to sell all the Mobil stations in New Jersey. Lukoil and Valero were among those who bought or rebranded many of those stations.

Lukoil came out with advertising around the slogan “We ♥ Cars,” with help from Arnold Worldwide of Boston. The agency’s goal was to make the brand “likeable.”  That didn’t last long and I personally did not see them “moving the needle” much as far as brand awareness is concerned. In a story on Lukoil’s sports sponsorships in Philly, a Wharton professor had the best quote…

“Lukoil’s done an excellent job introducing their brand here and deserves points just for getting that done in [Philadelphia-headquartered] Sunoco’s back yard,” said Scott Rosner, a lecturer at the University of Pennsylvania’s Wharton School of Business and associate director of the school’s Sports Business Initiative. “Gasoline purchase decisions are generally based on price and convenience, but when a driver’s away from home, brand-name recognition is a big factor.”

Really? The brand was introduced? Branding is much more than a logo and a slogan. What does it stand for? Who’s behind it? What makes customers feel good by doing business with these brands? Where’s the experience? I have a hunch the good people at Arnold had a limited budget with which to work — both for creative and media.

A former Mobil station, re-skinned as a Lukoil station. Looks the same, only red.

Valero took a different approach. They overhauled their stations with distinctive architectural detail, welcoming convenience stores and good lighting. As a result, their gas stations are always busy. Customers fill up and come inside the retail shop and spend more money. The resulting point-of-sale “experience” is favorable and helps build loyalty. They may not believe in the brand, but they do appreciate the experience.

Mobil had a great brand and their marketing was top-notch. It was my favorite gasoline brand — I’d go out of my way to buy Mobil. They had a unique selling propostion (USP) with “the detergent gasoline.” With Herb Schmertz, they had an opinion, including and an ad every Thursday on the op-ed page of The New York Times. Their advertising stood out. Imagine if Lukoil took a similar approach. How would their corporate “personality” be changed if they had come out with an ad like this?

It’s a shame that Lukoil, responsible for more than 2% of global oil production, would squander a chance to make their brand a leader in the U.S., where there are more Lukoil stations than any other country outside of Russia. Good distribution is critical to making a brand a complete success. In this case, it seems good distribution can’t get enough quality brand support.

Nestlé Makes The Very Best

Nice tie-in with Atari from 1983. Customers didn’t talk back in those days. At least not as they can today.

Here’s an interesting story about an all-out fight on Facebook.  A taste of what Unilever got last year.

The details, via All Facebook

The crisis earlier this year was prompted when a Greenpeace video highlighted Nestlé’s use of palm oil grown on former rainforest land in South-East Asia and linked the iconic Kit-Kat with the deaths of orangutans, which are an endangered species. Nestlé sought to ban the video and successfully removed it from YouTube, though not Vimeo. The Nestlé Facebook page was inundated with protests and criticism as a result.

The ad has already prompted a parody on the 28,491-strong “Can this orang-utan get more fans than Nestle?” page, with the word “bullshit” replacing “like” next to the thumbs-up symbol.

The Nestlé page has 109,502 fans but many of them seem to have joined in order to leave critical comments about issues such as palm oil or baby formula, such as the ones below. Nestlé is such a consumer-facing company that it’s probably right not to retreat from social media – but I can’t say I envy the poor PR flacks who have to run this page.

The View From West Houston

Cute, right? That’s the view from the top of the BP building in West Houston, Texas. What’s it like in there? Read this Reuters piece by Tom Bergin, “Special Report: Inside BP’s War Room.” I found it a compelling read…

The room they worked in measured about 30 feet by 30 feet and is normally used for training sessions. BP’s crisis unit had commandeered it and renamed it the “intervention room” soon after the leak began. Cables wrapped in yellow tape with the word “warning” written on it, snaked from the ceiling to the cheap, white laminated tables, which were crammed with laptops. Maps of the Gulf and diagrams of the equipment on the seabed covered the thin walls.
Next door, in an almost identical space called the “containment room”, a separate group of engineers worked on strategies to capture the oil that had already leaked.

The team in the intervention room pored over the results of tests to see if the well could take the pressure. The mood was “intense”, BP’s director for the Americas Bob Dudley told Reuters in the narrow, artificially-lit corridor outside the room during a break in deliberations. “It’s kind of like NASA and the Apollo 13 mission in there.”

The uber-calm Dudley isn’t normally given to hyperbole. He was formerly the head of TNK-BP, the British firm’s joint venture with a group of Russian oligarchs, until the billionaires turned hostile and Dudley was forced to flee the country. He talks about that experience with the emotion of an oil man discussing his wife’s choice of make-up. In Houston that afternoon, though, there was a flicker of tension in his eyes.

“It’s pretty dramatic,” he said.

BP CEO Tony Hayward (L) speaks with Reuters journalist Tom Bergin (R) aboard the Discover Enterprise drill ship in the Gulf of Mexico, 55 miles (89 km) south of Venice, Louisiana May 28, 2010. Credit: REUTERS/Sean Gardner

This story is a living, breathing “crisis communications” case study that will be a lesson for students and practioners for years to come, just as Love Canal did in the 1970’s.

Lots of players involved here, too. Even those on the periphery, such as The Nature Conservancy, which felt a need to communicate directly with its various publics about its relationship with BP. Good job.

Check em out!

Back in the 1970’s, I enjoyed watching Hawaii Five-0.  Steve was the boss and he’d routinely ask Danno and Chin to “check em out” — investigate the person, company or organization. They had their sources. Can you imagine what tools they’d use today? They go right for the smartphone and social networks, quickly solving crimes in many cases.

The same could be said for purchasing managers. Their jobs’ requirements haven’t changed much from the 1970’s, but their tools sure have. The whole process has gone electronic and more direct, for sure. But how do you “check em out?” Would you believe social media is making an remarkable change there, too?

You better believe it. According to a survey presented by DemandGen Report,  the impact is very real:

The survey also showed the growing influence social media, blogs and other Web 2.0 tools are having on the BtoB buying process. A majority of respondents said Twitter and LinkedIn influenced their decisions during the “Solution Analysis” and “Problem Identification” phases. Nearly 90% indicated that blogs impacted their research during the “Solution Analysis” phase and 3 in 4 respondents said social bookmarking sites such as Digg and Delicious were utilized during the early Analysis phases.

“The early survey results validate what we have been seeing in our own business as well as through the results of our customers,” said Scott Mersy, VP of Marketing at, the sponsors of the survey.  “There is a lot of research and conversations taking place outside of the traditional sales funnel and BtoB companies can realize greater revenue by reaching out and responding to these interested prospects.”

BtoB buyers are also increasingly interested in sharing their experiences after they have completed a purchase, with more than 60% of respondents indicating they shared the learnings from their research and buying process with others after the fact. One-on-one discussions were the most common platform for sharing insights, but blog postings and participating in discussion forums on LinkedIn and other social sites represented a growing area.

I believe it.

Let me give you an example. Say, for instance, you’re in Terre Haute, Indiana, and you’re asked to find a good source for truck parts. One of your colleagues suggests Andy at Illiana Truck Parts, so you “check em out” on the Internet. Google it and you get the usual, including the company’s site.  Oh, but the second link is to The Fastline Blog and a story on “The Cleanest Junkyard You’ve Ever Seen.”

Interesting post. Seems like a nice guy — somebody I’d buy from.

Andy Nickel, President of Illiana Truck Parts

Smithsonian: It’s Time.

In a historical world, way back in a time before mega-mediastars, the former editor of Life magazine, Ned Thompson, started up a new magazine with S. Dillon Ripley. At the time, Mr. Ripley was Secretary of the Smithsonian Institution. They called it Smithsonian. It would be sold to “members” of the Smithsonian and sell advertising. Their first salesman was Tom Black, also a former Time Inc. ace, son of Howard Black, Time’s first salesman…

Tom Black was Smithsonian magazine’s first Director of Advertising. He joined the magazine in September 1969 and retired in the spring of 1994. During his tenure, the magazine became one of the major success stories in publishing, mushrooming from an initial circulation of 164,000 to over 2 million, making it the leading magazine in the so-called quality field.

From the beginning, the magazine’s readership ranked high in such demographic factors as level of education and disposable income. Black and his sales force, however, had problems at first trying to sell a magazine which many advertisers associated with a musty, dusty museum complex in Washington, D.C. Just when sales were at their lowest ebb, in the slimmer of 1971, sales turned the corner and took off.

Black’s father, Howard Black, was Time magazine’s first ad salesman, and Tom grew up with Henry Luce, the father of modern magazine publishing, as a frequent guest in his parents’ home. After serving in World War II, Tom Black joined J. Walter Thompson, then the world’s leading advertising agency, as a trainee but soon decided that he was more interested in being a part of a new and growing enterprise. He joined the fledgling sales force of ABC Television and wrote the network’s first rate card. After a short stint with The March of Time newsreel operation, he found himself on the sales force of Life magazine, where he spent most of the 1950s, switching over to Time for much of the 1960s.

In 1969, at the age of 45, Black was looking for a new challenge when he was contacted by former Life editor Edward Thompson, who was starting a new magazine for the Smithsonian Institution. As Black modestly recalls it, Thompson probably remembered a favor Howard Black had done years before for Thompson and his son in making Tom Black Smithsonian’s first ad director.

As the magazine’s circulation rose rapidly, so did their ad revenue, peaking at over 1,000 pages in the early 90’s. They were successful in ad sales for many reasons. A quality editorial product attracted boatloads of devoted readers. Their national sales rep network was outstanding and the ad sales staff in New York included many former Time Inc. stars. With retirement benefits provided by TIAA-CREF, it was an attractive option for those who made a killing at Time in the 60’s and 70’s to join Smithsonian and rollover their nest eggs. In the ’60s, you only had to answer the phone at Time and you sold a few pages.

When I worked for Smithsonian, we’d joke about how former Time Inc. people we had, calling it a “Time Inc retiree halfway house.” The success, however, was no joke. Circulation rate base peaked at 2,100,000, and it was sold against both the luxury/high-brow titles (The New Yorker, Gourmet, Condé Nast Traveler) and the weeklies (Time, Newsweek, Business Week). It’s natural competitor was National Geographic, which was written for a 7th grade reading level.

The business side of Smithsonian got reorganized in 1997-8 (that’s why I’m here), and the ad sales equation never recovered. All the stars moved on. Ten years later, Smithsonian ad space is now being sold by Time Inc.

“We are pleased to join with Time Inc. in this endeavor, as both Smithsonian and Time publish truly iconic, legendary brands,” said Smithsonian Enterprises president Tom Ott in a statement. “I’m confident that advertisers will be receptive to this new opportunity.”

Folio: picked it up first. See if you can read into it like I can…

“The opportunity is strictly an advertising partnership,” Leslie Picard, president of Time Inc. corporate sales and marketing told FOLIO:. “We felt it was a great opportunity to develop multiple programs with Smithsonian as part of what Time Inc. can bring to the table. The brands marry up well for a number of our advertisers.”

The partnership is not meant to replace the Smithsonian sales operation, but the publisher will benefit from Time Inc.’s entre into the bigger corporate deals. Picard said the travel, pharmaceutical and technology categories are particularly well-suited for a Smithsonian-enhanced sale.

Smithsonian, which has a rate base of 2 million, dropped 26 percent in ad pages in 2009 versus 2008, per PIB.

Nevertheless, the brand’s reach was an attractive match, said Rosie Walker, associate publisher of marketing and sales development at Smithsonian. “On the flip side, we fill an important demographic for them, we have a readersihp of nearly seven million, which is a nice size to hit that baby boomer demographic,” she said.

Ad revenue is down across the board. I hope this deal helps ups the ad page count for a still-great magazine, Smithsonian.

Beanie Baby Bubble

Enjoyed reading Karen Blumenthal’s piece in the WSJ yesterday:

In this decade, we have had more than our share of big-time booms and busts: the tech bubble, the housing bubble and, this year, what Warren Buffett has called the Treasury bubble.

For some years now, I have been a student of these extreme financial cycles. In the 1980s, I witnessed firsthand the Texas real-estate bubble and covered companies crushed in the junk-bond bubble. I wrote a book about the crash of 1929. And to my terrific shame, at the top of an inflated market, I once paid $50 for a $5 Beanie Baby named Peace.

In studying what drives bubbles, I’ve come to believe that they follow fairly regular patterns. If we could learn to recognize these, we might be more astute in reacting and adjusting our own behavior. And even if we can’t see beyond the excitement they generate, there are underlying lessons for investors.

The lesson: sell when it’s on the way up.

Crazy About A Mercury

Riding around town on a bicycle, running errands the other day, and I came across an old, neglected car. Looked like a Mercury Montclair from 1964 — one of the cooler cars from my past (I think one of my uncles had a white one; probably Marian). One of the more distinctive roof lines, for sure. The “Mercury” song came to mind.

Do we still have musicians recording songs about cars? Alan Jackson had a hit with “Mercury Blues” in 1992 (originally written and recorded by KC Douglas in 1956 as “Mercury Boogie”). Ford Motor Co. bought the rights to the song, using it to sell Ford trucks afterward. I’ve always liked that song. Good for selling cars, too.

Proprietary songs/music/jingles are a fading art. Can you still sing the Schaefer Beer jingle? I can. Older folks, do you remember “see the U.S.A. in your Chevrolet?” By the way,  the Schaefer ads were :60 spots:

Other “car songs” inevitably come to mind, some more marketable than others. “Little G.T.O.” by Ronny and The Daytonas was translated into German and used by VW for their GTI (“Kleiner GTI”), which I thought was brilliant. The lyrics via Hemmings Auto Blogs (with translation):

Kleiner GTI / Little GTI
Du siehst prima aus / well, you look so fine
Ich liebe, dich zu fahren / How I love to drive you
Hol’ die leistrung ‘raus / Let the performance shine
Hör nur, wie er sich anlasst / Listen when I start it
Steck’ den schlussel ‘rein / Stick the key in the ignition
Er ist bereit zum start / And it’s ready to go
Wie er braust / How it zips
Wie er saust, GTI. / How it zooms, GTI.
Werde bargeld, sparen / I’ll save up some money
Kauf’ den GTI / Buy a GTI
er fahrt mit mir lassig / ’cause it drives so easy
An den andren vorbei, / past the other cars
Uberholt benzinfresser / Passes all the gas-hogs
Macht mir spass dabei / Makes me smile a while
Und jedermann sagt sich dann bloss, / And everyone thinks to themselves
“Kleiner wagen-du bist gross” / “Little car – you’re grand”
Er ist bereit zum start / It’s always ready to go
Wie er braust / How it zips
Wie er saust, GTI. / How it zooms, GTI.
Wah wah… wah wah wah wah wah….

The Dead Milkmen’s “Bitchin Camaro” was not used by Chevrolet in their marketing, for obvious reasons. Will they under Bob Lutz? You never know. He’s only 77, and he’s got an old Czech-built fighter jet he flies himself (or at he used to). He’s in charge of marketing at GM now and I think he’ll do a good job. I was reminded by an interview published in Business Week that he was running BMW marketing in Munich when they came up with “The Ultimate Driving Machine.” Not too shabby.

Here’s what he had to say about how marketing dollars were spent:

To spend $200 million on manufacturing, we have to get board approval, with top management involved from an early stage. Yet we spend billions on marketing and delegate that to too many people at the lowest levels. It’s insanity. Now, ideas on how to tell our story will be reviewed by me and often by Fritz [CEO Henderson]. We remade the global design process by going with our instincts, not consumer testing. This process will be analogous to that.

And I bet they had metrics, and lots of them. Focus on differentiating your brand, and the rest will fall into place. Use your experience. Jack Trout (who also picked up on the Lutz quote) wrote about it in Ad Age today:

Chief marketing officers have shorter tenures than NFL coaches. They rarely last two years before they are gone.

As BusinessWeek commented in an article on the subject, “the job is radioactive.” The article cited a well-known search company as stating that 70% of the companies don’t know what they’re looking for when they recruit a CMO.

In my estimation, Advertising Age had the answer to the short CMO tenure in an interesting piece of research on senior marketers. It was done by Anderson Analytics, which surveyed a group of 1,657 senior marketing executives (600 replied).

Anderson asked respondents to rank the marketing concepts they pay most attention to in their jobs. They spend the most time on customer satisfaction (88%), customer retention (86%), segmentation (83%), competitive intelligence (82%), brand loyalty (82%), search-engine optimization (81%), marketing ROI (80%), quality (79%), data mining (78%) and personalization (79%).

This is why CMOs are being fired left and right. On the list of things on which they are working, differentiation doesn’t even make the top 10. While they are worrying about customers or segmentation or ROI or search-engine optimization, their brands are sinking into a sea of commoditization.

If you think I’m overstating the problem of commoditization, let me give you some numbers. A research organization called Brand Keys has been tracking this problem via an analysis of 1,847 products and services in 75 categories. The results are frightening. On average, the study found that only 21% of all products and services examined had any points of differentiation that were meaningful to consumers. That’s nearly 10% less than in a benchmark study that was conducted in 2003.

To better understand this, take the automotive category. It has a reasonable percentage of differentiation, at 38%. That means you have a fair number of differentiated brands such as Toyota (reliability) or BMW (driving) or Volvo (safety) or Mercedes (prestige). It also means you have a large number of placeholders such as GM and Ford. The marketers at these companies are certainly not earning any respect.

Figuring out the right differentiating strategy is only the beginning. Marketing then has to convince the CEO and CFO that building or even maintaining a brand is a long-term process that requires patience and incremental change. You’ll have to avoid line extensions that undermine what the brand stands for in the mind. And Wall Street will be a problem you will have to get around, with its focus on quarterly and monthly results. With Mr. Lutz in charge, he is in a perfect position to do the convincing.

Bob Lutz is on the stick — with “a heightened state of awareness of the angle of attack at all times.”

Healthy Global Domination

Calling it an “initiative” is gentler than calling it a “campaign” — less warlike, too. Considering the state of GE’s stock, this really is a global campaign in GE’s battle with the markets’ perception.

GE launched Healthymagination this week and I expect it to genuinely improve the quality of healthcare everywhere.

Under healthymagination, by 2015 GE will:

  • Invest $3 billion in research and development to launch at least 100 innovations that lower cost, increase access and improve quality by 15 percent. GE will also apply its expertise in services and its suite of performance improvement tools for impact in these areas. These actions will strengthen GE Healthcare’s business model.
  • Work with partners to focus innovations on four critical needs to start: accelerating healthcare information technology; target high-tech products to more affordable price points; broaden access to the underserved; and support consumer-driven health.
  • Expand its employee health efforts by creating new wellness and healthy worksite programs while keeping cost increases below the rate of inflation.
  • Increase the “value gap” between its health spend and GE Healthcare’s earnings to drive new value for GE shareholders.
  • Engage and report on its progress. GE will engage experts and leaders on policy and programs and create a GE Health Advisory Board, which will include former U.S. senators Bill Frist and Tom Daschle and other global healthcare leaders.

Healthymagination will draw on capabilities from across GE, including GE Healthcare, GE Capital, GE Water, NBC Universal, the GE Global Research Center as well as the GE Foundation, the philanthropic arm of GE.

Now, if we can just rehab the surly nurses’ behavior a local doctors’ offices…

Paying Taxes

This five-story office building on South Church Street in the Caymans serves as the official address for 18,857 corporations? No way!

Way, according to a report on Bloomberg:

President Obama referred to Ugland House yesterday.

“On the campaign, I used to talk about the outrage of a building in the Cayman Islands that had over 12,000 businesses claim this building as their headquarters,” Obama said. “And I’ve said before, either this is the largest building in the world or the largest tax scam. And I think the American people know which it is: The kind of tax scam that we need to end.”

Maples and Calder, the law firm that occupies all of Ugland House in Grand Cayman, said Obama is mistaken.

“I’m sorry to disappoint anyone, but our office is neither the largest building in the world nor a center of financial misconduct,” said Charles Jennings, joint managing partner of Maples and Calder.

“Having a registered office address in the Cayman Islands is driven by commercial considerations, not by tax avoidance,” Jennings said. “It allows companies to raise capital and conduct global business.”

The firm, which provides services for the corporations that use its address, has incorporated more than 6,000 new companies over the past five years. Back in 2004, the building served as home to 12,748 companies using the same address in the Caymans, a British crown colony 150 miles south of Cuba.

Most businesses have tax strategies to help them reinvest more of their profits, but this borders on the extreme and will probably be dealt with differently, given the current economic conditions.

That reminds me: time to pay property taxes.

Portfolio P&L: $100 Million Loss

Condé Nast’s business-with-style magazine, Portofolio, is going away forever, via BtoB:

Condé Nast dropped a long-anticipated ax on Condé Nast Portfolio this morning, shutting down the expensive, ambitious effort to build a business magazine with a stylish presentation, according to a report by Advertising Age, a BtoB sibling publication.

The move affects more than 85 employees, already down from a peak of 140 after a retrenchment last November, including Editor in Chief Joanne Lipman and Publisher William Li, who are both leaving the company.

The last issue of Portfolio is on newsstands now.

Condée Nast is closing the Web site as well, although there are discussions inside the company about eventually reviving it in some way.

The news seemed to emerge first on Twitter, where All Things D blogger Peter Kafka posted word Monday morning.

David Carey, the group president and publishing director who launched Portfolio two years ago, called the decision to give up an agonizing one.

“I just left the staff meeting,” he said. “This is a business that we have liked being in. We are proud of the product, which is nominated for three Loeb awards.”

The economy’s collapse, however, cut both ways—ultimately for the worse. It heightened interest in the economy, but it also submerged five categories of advertising on which Portfolio depended: financial services, corporate branding, business travel, auto and luxury.

“Even if the economy starts to recover, it’s likely the advertising is going to lag it,” Carey said. “The gap between where we needed the business to be in 2010 and 2011 proved to be too large.”

Although Lipman in particular received regular criticism on blogs such as Gawker and in the pages of the New York Post, Carey said he admired the Portfolio team, which at one time included a raft of famous writers.

When this book was first introduced via a Sunday press release in June of 2006, I thought it was going to be near impossible to make room for another business magazine.  Business Week, Fortune and Forbes — those are the big three. Inc. and Fast Company come to mind as the “others.” But maybe they can make a go of it. Remember: Business Week started publishing just as the stock market crashed in 1929. Now they’re arguably the most successful business magazine around (disclosure: I’m a regular reader).

The observation from Tech Crunch is spot-on:

Portfolio saw itself in the same vein as the Fortune magazine of the 1930s, filled with lush photographs and long narratives. But that formula doesn’t work in an age where business is about speed, not leisure or luxury. It also doesn’t work in an age where monthly magazines in general are increasingly challenged by the wealth of instantaneous business news available on the Web. (And you thought the daily newspapers had it tough). Portfolio’s insistence on favoring its print over its Website content also helped to hasten its demise. If you are going to start a magazine these days, the Website has to come first. The magazine companies still don’t realize this simple fact.

How much longer will the other “glossy” magazines in the Condé Nast newsstand survive without any advertising growth?