Mattress firms creating value (?) with financing deals…

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The mattress industry is a pretty crazy (check out “The Great Mattress Conspiracy: Why Are There So Many Mattress Stores?” on Endless Thread, podcast and story). You might check out the podcast for a fun example when you cover retailing. Or ethics. You might also check out one of our previous posts, “The Gray World of Online Reviews” (Teach the 4 Ps) — tags include ethics and online reviews.

Onto our story of the day and we are back in the retail mattress industry. With the emergence of new mattress products designed for easy shipping, online mattress stores (Casper, Leesa, Tuft & Needle), this market continues to be very competitive. Retail brick-and-mortar store Mattress Firm has closed 700 stores and is in Chapter 11 bankruptcy. Now they are competing on financing. In fact, Mattress Firm will give you six years of 0% interest on a mattress purchase of up to $3999. Financing is certainly one way to create value for customers — and the automobile industry has done it for years — but does it make sense for buyers of mattresses. We will see. Learn more reading “6-year, 0% loan for a mattress? Intense competition continues to grip mattress industry,” USA Today, October 25, 2019.

IHOP Publicity Stunt

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Over the summer one of the most talked about marketing campaigns was the IHOb campaign.  The International House of Pancakes announced they were changing from IHOP to IHOb and later announced that the “b” stood for “burgers”.  Shortly afterward they admitted it was all a publicity stunt to help build awareness of their line of burgers.  This campaign has potential for a couple of class discussions.  First, was it successful?  Clearly they succeeded in getting people talking about their company but whether it drove sales is more ambiguous.  This article from the USA Today suggests it did not drive a material increase in sales.  Another article from geomarketing.com indicates that there was an increase in male traffic but the net result was negative due to lower traffic by females.

Another angle to discuss is the ethicality of the campaign.  Is it ethical for a company to say “we’re changing our name” when they have no intention to do so?  Does this create a bad precedent or does it cause other companies to push the boundaries of deceptive marketing?  How far is too far when trying to gain publicity?

Promotion Through Influencers

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While many promotional strategies are ageless, to be most effective you need to know how to fine-tune your strategy for your target market.  If you’re targeting a particular age-group of individuals, you may be able to capitalize on generational trends.  Authenticity is becoming increasingly important to consumers, particularly to millennials and Gen Z.  This article, “‘This Is A Business Now’: YouTube Stars Influence Generation Z’s Fashion Tastes“, discusses how one woman, Rhea Park, took her interest in fashion and turned it into a business by posting videos of herself modeling and reviewing various outfits.  She has over 250K followers and those followers trust her reviews more than they would trust content found on the designer’s website because Rhea’s videos are perceived as unbiased and authentic.  In Chapter 16 we refer to this as Earned Media, promotional strategies not directly generated by the company or brand, but rather by third parties such as Rhea.

Improved ad targeting at the expense of privacy

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Advertising continues to shift away from traditional media and more to digital media.  In particular, mobile advertising is the hot platform these days due to it’s ability to not just target customers with a specific profile but also take advantage of location information.  The customization and filtering enabled by digital advertising is helping marketers be more effective and more efficient with their promotional strategies.  A restaurant no longer needs to offer a generic promotion to all customers, they can push a coupon for the item most frequently ordered by each specific individual.

However, according to this article from Wired.com, researchers at the University of Washington have found that this deep degree of ad personalization may carry a price consumers aren’t aware of.  The researchers found that for just $1000 anyone can track a target’s location, learn what applications they have on their phone, routes they take to/from school or work, etc. with significant accuracy.  The article goes on to say that consumers are generally unconcerned about individual companies having location information and other limited data because they trust those institutions, their motivations, or the legal system to protect them from abuses.  However, this shows that any individual can exploit information shared across multiple apps and websites to spy on a specific individual.

The trend toward personalized, location-based advertising is likely to continue.  Do companies have any ethical issues to consider?  Should companies that conduct this level of advertising be required to educate consumers more on the consequences of opting-in to these services?

The Gray World of Online Reviews

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The internet has given consumers incredible power when it comes to evaluating and purchasing products.  No longer do you have to visit multiple stores to compare different products.  Visiting websites of multiple manufacturers couldn’t be simpler but it’s not just access to manufacturer provided product information that has changed.  Consumers have always been skeptical of promotional messages from sellers, rightly assuming those messages are biased.  That skepticism has given rise to the popularity of “unbiased” consumer reviews.  Go to Amazon or most other online retailer and you can quickly find product information provided by the manufacturer along with consumer reviews and ratings.  This desire for consumer to consumer reviews has become the entire business model for companies such as Yelp.

Individuals have also capitalized on this trend by posting video reviews on sites like YouTube or creating their own review sites.  When these sites rise in popularity their product reviews can have a significant impact on product sales.  Unfortunately this “free advice” isn’t always altruistic.  Recognizing the impact these sites can have has led many companies to try to woo reviewers and incent them to push their products over their competitors.  Trying to determine if a reviewer has received any compensation or incentives from manufacturers is often a difficult process as many reviewers hide that information or outright fail to disclose it.

The Fast Company article, “The War to Sell You a Mattress is an Internet Nightmare“, provides an in-depth look at these practices within the world of mattresses.  The article details the practices of online reviewers as well as mattress manufacturers.  Some of those practices might trigger a few ethical concerns.  For instance, Casper CEO Phillip Krim wrote one review site saying, “Currently you actively endorse a competing product on our review page. What can we do not to have you endorse another product as superior to ours?”  Casper goes on to offer free products, travel, etc. to convince the reviewer to give their product a better rating than their competitor Leesa.  These incentives and kickbacks create a conflict of interest for these independent reviewers and can compromise the integrity of their reviews.

Which side is right and which is in the wrong?  There are many sides to this issue which can lead to some great in-class discussions (or a written position paper).  This is also an opportunity to highlight the significant role publicity can play in a marketing strategy.