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Terrible marketing decisions that led to layoffs

Terrible marketing decisions that led to layoffs Michael Estrin
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In a perfect world, the word "layoff" wouldn't exist. But this isn't a perfect world -- far from it. In fact, as I sat down to write this, I found that there were more than 51,000 results for the term "layoff" in a Google News search from a single day. Sure, a lot of that volume can be attributed to the fact that digital media outlets pile onto the same story the way clowns cram into the same car. And, obviously, these are still difficult economic times. But it's no exaggeration to say layoffs -- or the threat of layoffs -- remain a very real part of business today.


Terrible marketing decisions that led to layoffs


Of course, layoffs happen for a variety of reasons. New technologies pave the way for new businesses that disrupt the old guard. Managers make poor planning decisions. And there's that turbulent economy that really hasn't recovered for most people. There are all sorts of reasons why we see layoffs. But sometimes those layoffs come from marketing department missteps. 


It could be a brilliant marketing idea that backfires or a CMO who's slow to see the future. But the fact is, sometimes bad marketing decisions have dire consequences that a company can't recover from. And while it's hard to draw a direct line from a specific marketing call to a pink slip, it is instructive to consider how marketing played a role in some recent high-profile layoffs. After all, if you can't learn from mistakes, you probably don't belong in the marketing business.

AOL/Patch


It's hard to pinpoint exactly where AOL went wrong with hyperlocal. On the one hand, you could say that AOL should have known that hyperlocal would never attract enough ad dollars or momentum to make the segment successful. After all, AOL wasn't the first, the second, or even the third company to take a crack at hyperlocal. On the other hand, you could argue that ever since AOL's 2000 merger with Time Warner (and subsequent 2009 spinoff), the company has been on something of a downward trajectory


Either way, a few years back, AOL made itself a big player in a hyperlocal space that was getting enough buzz for some to call it a "hyperlocal land grab."


But as it turned out, marketers probably overplayed the promise of matching hyperlocal content with national ad buys. At least AOL certainly overplayed that hand. Patch -- AOL's hyperlocal play -- isn't looking so hot these days. Earlier this year, AOL shut down about 400 of its Patch sites and announced hundreds of layoffs. That was bad news, but the bizarre news was that AOL boss Tim Armstrong actually fired someone during a company conference call. Armstrong later apologized for his behavior, but AOL did not hire the employee back.


So was hyper local a bad call? In retrospect, yes. Of course, hindsight is 20/20. And while there was evidence suggesting that hyper local wouldn't work, there's something attractive about a big company investing in something new.

Nokia


Remember your first mobile phone? Chances are good it was a Nokia. Up until last year, Nokia shipped more mobile phones than any other company in the world. But despite the fact that the company was an early pioneer in the mobile space, most consumers probably don't think of the brand when they go looking for a new phone.


Why is that?


Well, for one thing, iPhones and Droids have really captured the consumer imagination. Just ask the folks at RIM what happened to their Blackberry product. But at least RIM had a CMO.


That's right, when you think about bad marketing decisions, it's hard to top Nokia's call to go without a chief marketing officer until 2011. The company was founded in 1865, so it's hard to say the empty chair in what should have been the CMO's office was an oversight.


Finally, Nokia did join the twenty-first century. But the same year Nokia hired its first CMO, the company slashed 7,000 jobs. And yes, some did blame those layoffs on poor marketing decisions. Worse, the layoffs have continued at Nokia.


Still, the Nokia brand is far from worthless. In fact, after a recent deal, it looks like Microsoft could be getting some much-needed mobile mileage out of the famous Finnish company. But just think what Nokia could have done if one executive were solely responsible for marketing?

P&G


Agencies might love the idea of a client that spends money like a drunken sailor, but sooner or later that gravy train is going to stop at a destination we like to call ROI, and chances are it won't be pretty.


A few years ago, CBS called P&G's ad budget a "study in waste." With an ad spend of $10 billion a year, P&G spent more on advertising than any other company. That fact alone might have made the company an easy target, but what really did it in was the fact that it got less return on its advertising investment each year, even though it spent more. In fact, between 2009 and 2011, the company increased its ad spend by 24 percent, even though sales only increased by 6 percent.


But eventually, all of that bloat has to give way to a day of reckoning. And, in a sense, that day was last January, when P&G laid off 1,600 people, many of them in the marketing department. But it wasn't just poor results that lead to those layoffs -- it was the realization that digital media was more cost effective than traditional media.


Here's how Business Insider characterized the layoffs:


"Reality appears to have finally arrived at P&G, the world's largest marketer, whose $10 billion annual ad budget has hurt the company's margins. P&G said it would lay off 1,600 staffers, including marketers, as part of a cost-cutting exercise. More interestingly, CEO Robert McDonald finally seems to have woken up to the fact that he cannot keep increasing P&G's ad budget forever, regardless of what happens to its sales."

On the one hand, realizing that there are greater efficiencies in digital can be characterized as a good marketing decision, but only if you take that insight out of context. Any marketer who only just came to that conclusion in the last few years has clearly been asleep at the wheel for about a decade.

Hostess


Someone killed the Twinkie. And while the Hostess brand -- along with some of the popular treats -- is back after a widely publicized demise that cost more than 18,000 jobs, debate still rages about what exactly happened.


Some observers described the company's demise as a business battle that pitted management against labor. Others just came right out and said that management at the company had been a disaster. Meanwhile, reporters who follow Wall Street closely pointed a finger at, you guessed it, hedge funds.


But while there's a lot of truth to all of those theories, there's also the inescapable fact that consumer tastes changed and Hostess didn't.


"The fatal flaw is they continued to be mainly white bread when the whole category shifted to variety," a competitor told The New York Post.


Here's how former Coca-Cola marketing executive Hank Cardello put it in Forbes:


"Hostess' management should have reshaped the company into one that sold not only Twinkies and Ding-Dongs but also the healthier snacks people want now. Hostess' core market includes many who don't care about calories -- the Natural Marketing Institute calls them the "eat, drink and be merries" -- but the company ignored the one third of consumers who are jumping on the healthier food bandwagon. They are where the growth lies. The market for indulgent food is declining, and demand for healthier alternatives is growing. Hostess' management ignored this fact, and that is why 18,500 people are losing their jobs. It was as avoidable as filling your whole cart in the snack food aisle."

While it's easy to Monday-morning quarterback the problem, Cardello writes from a position of experience. He was at Coca-Cola when the company launched Diet Coke in 1983. At the time, diet drinks were an experiment (Tab, anyone?). Today, diet drinks and non-soda beverages like water are the products that have put Coca-Cola squarely on top and Diet Coke ahead of regular Pepsi in terms of market share.


But it's not just Coca-Cola. General Mills got the message, and so did a lot of other food brands, many which offer healthy alternatives. Or, at least, they offer alternatives that pay lip service to a healthy lifestyle. So what does that tell you? Well, for one thing, it says that Hostess wasn't listening to its consumers, which is one of the worst sins a marketer can commit. But the fact that a lot of companies in the food category saw the change and were able to pivot tells you that Hostess wasn't even keeping a close eye on its competitors. In either case, that's a catastrophic failure within the marketing department.

Netflix


These days, the news out of Netflix seems to be good -- really good. The company scored an Emmy win -- a first for a digital streaming service. Meanwhile, tech reporters are gushing over the science behind the company's entertainment coup, and some are saying Netflix is now a serious threat to cable operators.


But not too long ago, Netflix was on the ropes, and it was all because of a really bad marketing idea. In an attempt to spinoff the company's DVD business, CEO Reed Hastings came up with Qwikster, which Mashable called the worst product launch since New Coke. In fact, the move was so poorly thought out that Netflix couldn't even take ownership of the Qwikster Twitter handle because it was already taken.


And it's not like the Qwikster foray was harmless. Netflix stock plummeted. Worse, about 800,000 subscribers ran for the hills. And on the employee side, it was reported that Netflix had to layoff customer service employees because of the Qwikster mess.


Thankfully, it didn't take Hastings long to backtrack and kill Qwikster. And now that Netflix is back on top, Hastings can look back on the mistake that almost sent the company into a "death spiral" and see it for what it was -- a fundamental miscalculation between brand and consumer.


"I realized, if our business is about making people happy, which it is, then I had made a mistake," Hastings told The New York Times. "The hardest part was my own sense of guilt. I love the company. I worked really hard to make it successful, and I screwed up. The public shame didn't bother me. It was the private shame of having made a big mistake and hurt people's real love for Netflix that felt awful."


Michael Estrin is a freelance writer.


On Twitter? Follow Estrin at @mestrin. Follow iMedia Connection at @iMediaTweet.


"Businessman holding cardboard" image via Shutterstock.

Michael Estrin is freelance writer. He contributes regularly to iMedia, Bankrate.com, and California Lawyer Magazine. But you can also find his byline across the Web (and sometimes in print) at Digiday, Fast...

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Commenter: Sneaky Advertising Tricks

2013, November 17

every time a company forget to their real boss is, the people who buy their products, employees suffer