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Strategic Smarts Pay Off

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SAN DIEGO Executives from XS Energy Drinks and Method cleaners discussed how companies can apply more strategic thinking to be successful. They shared their insights here yesterday at the American Association of Advertising Agencies' Account Planning Conference.

David Vanderveen, the strategic development director at XS Energy Drinks, dismissed the role of traditional market research companies and credited his firm's impressive turnaround on teen outreach and the use of nontraditional distribution channels.

Eric Ryan, co-founder of eco-friendly home-cleaning products provider Method and a former agency planning executive, speaking at a separate session, preached creative market segmentation as a strategy for success.

Both execs agreed that tired thinking and staid approaches could hinder a company's ability to get the most out of a modest marketing budget.

Traditional researchers often ask questions based on faulty assumptions and turn "sacred cows into hamburger," Vanderveen said.

Laguna Beach, Calif.-based XS went from near bankruptcy a few years ago to 2007 sales of $150 million despite a tiny marketing budget because it bucked the traditional beverage marketplace by distributing through Amway/Quixtar and "focusing on mom—or the person buying for the home" while activating extreme-sports-oriented teens.

"We focused on sampling and selling to cover the cost of promotions," Vanderveen said. "We couldn't get in an air war, because the company was going down." Instead, XS sponsored Unsalted, which followed surfing on the Great Lakes, and launched Krakoosh, a lifestyle magazine for distributors to make independent business owners brand ambassadors.

XS achieved "innovative growth through strategic disruption" by focusing on the product's taste, not function; stressing the nutrition of a sugar-free, carb-free formula; and selling by the case to what became a larger 35- to 45-year-old demographic, rather than individual cans to young males at convenience stores, the typical scenario for market leaders such as Red Bull, he said.

Ryan had only a $3 million marketing budget to work with at Method. Even so, the
former Fallon planner got the most for his money, focusing on the "high-emotion, high-interest" potential of the "home" rather than the "price-driven, low-emotion" appeal of cleaning.

"We stopped thinking about [cleaning] as a bad experience and started making it fun," Ryan said. For example, making the Method containers beautiful meant they could be left out and become more emotionally appealing, he said. Also, Method had to segment by product. "We're not going after the masses," he said. "We're targeting the most valuable groups, not the biggest."