Hits & Misses

Company bets that paid off and those that bombed.

David Jacobson, Business 2.0 Magazine

(Business 2.0 Magazine) -- [HIT] Have it our way. It is, without doubt, the marketer's holy grail: getting people to spend hours engaged with your brand--and pay for the privilege. Well, Burger King has reached the elusive chalice: It managed to get its customers to shell out $3.99 apiece for video-games featuring its King, Subservient Chicken, and Whopper Jr. characters. The games, developed with Microsoft's Xbox division and featuring the BK icons riding bumper cars, racing pocket bikes, and sneaking up on people to give them hamburgers, sold more than 2 million copies in four weeks, making them the best-selling collection of Xbox games released during the holiday season and placing them up with the top 10 best-selling videogames of 2006. The company cited the games as a key driver of sales in a quarter that saw revenue leap by 9 percent.

[HIT] Eating their own dog food, now in high-def. Are you one of the many who cling to the old adage "Those who can't do, consult"? Then you won't like the tale of Vizio, which has quickly become the No. 1 U.S. seller of 42-inch LCD TVs. A former consultant to PC-to-TV wannabes like Gateway, Vizio launched its own brand in 2003 with a plan focused on undercutting the big guys. A largely virtual company with just 55 full-time employees, Vizio also takes advantage of lower-margin sales channels like Costco and Sam's Club and saves on customer service with poster-size quick-start guides. The result? Well-reviewed products with eye-popping prices, leading to $700 million in annual sales after just three years on the market.

[MISS] No accounting for taste. In the midst of today's viral-marketing epidemic, it's worth noting that funny videos don't always circle back around to the bottom line. That's a lesson Miller Brewing learned the hard way with the "beer cannon" campaign it produced for its Milwaukee's Best brand. Though the videos--featuring cans turned into projectiles and blowing away unmanly items like stacked teacups and ceramic kitty cats--have been viewed more than 4 million times on YouTube, they haven't had much impact at retail. In fact, despite the direct hit with its target audience, Milwaukee's Best sales fell 11 percent from the previous year.

[HIT] Race to the bottom. As the big-name carriers fight over well-heeled users and their pricey data plans, Leap Wireless has become a Wall Street darling by grabbing the other end of the market. Targeting low-income consumers with a prepaid, no-credit-check service called Cricket, Leap has shored up its financials despite a customer churn rate more than four times that of Verizon. How? By holding customer-acquisition costs to about half those of the national carriers, which it manages by not discounting hand-sets and by limiting its advertising to local spots in selected markets. Though Leap's stock price has already shot up more than 50 percent in the past year, analysts still see plenty of upside, with Goldman Sachs projecting 27 percent annual profit growth over the next three years.

[HIT] With enemies like that, who needs friends? Pressured by Wal-Mart at the low end and Whole Foods on the high end, supermarket chains have seen their profits squeezed. But Safeway has found a new path to growth: letting its competitors do the selling. That's the secret behind Safeway subsidiary Blackhawk Network, which distributes gift cards for chains like Home Depot and Starbucks through 63,000 retail stores, including rival grocers Publix and A&P. Blackhawk sold about $1.6 billion worth of gift cards last year, taking commissions of 3 to 6 percent and ringing up roughly $50 million in profit a figure expected to double in 2007. That's only 7 percent of Safeway's earnings, but the gift card market is booming, with overall sales rising by 50 percent this past holiday season. Morgan Stanley analysts see Blackhawk's contribution to Safeway's profit tripling by 2009, helping to push its growth rate into the double digits.  Top of page

To send a letter to the editor about this story, click here.