Friday February 13, 2015

How Weather Affects Marketing

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This week, we explore how the weather affects marketing.

With 75 years of climate data cross-referenced with reams of shopping research, marketers can now use the weather to predict sales. Sears Automotive knows that 5-year old car batteries die after three consecutive days of sub-zero temperatures, so they advertise on day four. The busiest day of the week at Harley-Davidson dealerships is exactly 22°C and sunny. When spring temperatures hit 21°C, hair removal products surge 1400%, and BBQ sales jump 200%. And did you know that when the temperature drops just one degree in the Fall - just one degree - mousetrap sales surge 25%? Marketers do.

And while they can't manage weather, marketers can certainly now manage the financial implications of weather.

It's a whole new day.
Back in 1792, a man named Robert B. Thomas decided to publish an annual reference book.

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The man who created The Farmer's Almanac.
Source: wbhistory.org

He called it the "Old Farmer's Almanac" because he thought his publication would be particularly helpful to those on farms.

His mission statement for the Almanac was to be "Useful with a pleasant degree of humour."

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The very first edition of the Farmer's Almanac circa 1792.
Source: almanac.com

The content would cover topics like planting charts, recipes, gardening, sports, astronomy, tide tables, and especially, weather forecasts.

Over the years, the Almanac's ability to predict the weather was uncannily accurate. Starting in the 1970s, it hired a NASA weather specialist to create a formula that combined solar science, climatology and meteorology.

Only a few people have ever seen the Old Farmer's Almanac weather formula - and it is kept locked in a black tin box at the head office in Dublin, New Hampshire.

Many claim the Old Farmer's Almanac to be 80% accurate in its weather forecasts.

But that accuracy was severely tested back in 1815.

That year, the Almanac was published and distributed as usual, but publisher Robert B. Thomas suddenly noticed that the printed weather forecast for July and August called for snow!

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The year the Almanac forecasted snow in July. And was right!
Source: photobucket.com

He realized that the July and August forecasts had been mistakenly transposed with January and February forecasts.

He tried to destroy all the copies, but they had already been sent out, so he couldn't recall them all.

Thomas became a laughing stock among farmers, as they snickered about "snow in July."

But then something strange happened.

That very year, a massive volcano erupted in the Dutch West Indies, now Indonesia. The dust from that eruption circled the globe for the next six months, lowering worldwide temperatures 3 to 5 degrees.

Then guess what happened. It snowed in July and August.

That "summer of no summer" solidified the Old Farmer's Almanac as the go-to publication for weather forecasting, and it is now the oldest continuously published periodical in North America.

But back in 1942, the Old Farmer's Almanac almost missed a year of publication for the first time.

American forces captured a German spy at Long Island, presumably dropped off by a German u-Boat. The spy had a copy of the Old Farmer's Almanac in his pocket. At that point, the War Department wondered if it was dangerous for the Farmer's Almanac to continue publishing, lest its accurate weather forecasting be used against them by the enemy.

But the Editor of the Almanac managed to convince the War Department to keep the publication going by changing the name of the "Weather Forecasts" to become "Weather Indications."

That small change saved the Almanac.

To this day, the cover still shows the four seasons, it still retains the hole in the top left corner so readers can hang it from a string in homes and barns.

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The Almanac hangs around all year.
Source: toledoblade.com

And millions still refer to it to predict the weather.

Predicting the weather plays an enormous role in the world of advertising and marketing, too. Weather determines what products sell and which don't, and it influences our moods when it comes to spending money. Even a one-degree shift in the temperature has dramatic effects on the sales of dozens of products.

And that's why predicting the weather has become a huge business on Madison Avenue...

Weather happens to everyone.

Its massive fluctuations are one of the consistencies in our lives. And predicting the weather has always been fraught with problems, inaccuracies and expensive mistakes.

Twenty years ago, a five-day forecast was a complete pipe dream. Moving from a 5-day forecast to a 7-day one only began in the year 2000.

As recently as six years ago, the National Hurricane Centre didn't issue four-day forecasts of hurricane tracks. Whereas today, we are given multi-day warnings of when a hurricane will reach land. And up until fairly recently, all weather forecasting was handled by government agencies.

The atmosphere is a complicated place. But the huge advances in computing technology, algorithms and the ability to crunch data has made predicting the weather much more precise.

In the world of marketing, retailers have always had a fundamental knowledge of weather because they had to navigate conditions to transport products from manufacturing plants to retail locations.

They also had a good grasp of rudimentary seasonal strategies - lawn seed sells well in early spring, sun products in mid summer, outerwear in the fall, snow shovels in the winter.

But because of climate change, traditional 4-seasonal strategies are no longer predictable sales indicators.

And it's been estimated that weather affects around $3 trillion worth of business in the private sector alone.

While you can't manage weather, you can manage the financial implications of weather.

It's a matter of looking for patterns.

Sears spotted a pattern in their auto parts department. They realized that car batteries more than five years old tend to die after three consecutive nights of sub-zero temperatures - so they began to place ads on the day after the third freeze.

Battery sales sky-rocketed.

Campbell's Soup began monitoring weather in 30 markets, and created a "misery index."

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The Campbell's Soup plans marketing based on the Misery Index.
Source: adage.com

Whenever the weather turned cold, wet or snowy, causing the misery index to rise 5%, Campbell's would ramp up chicken soup radio advertising in those locations.

When that proved to be very successful, Advertising Age magazine reported that Campbell's added a "flu-tracking" system, monitoring the movement of the flu across the nation, while implementing comfort-food advertising accordingly.

Harley-Davidson dealerships realized that sunny and 72F, or 22C, was always their busiest day of the week.

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If it's sunny and 72 degrees F, it's Harley time.
Source: hooniverse.com

It was becoming clear that consumers engage in different consumption patterns based on weather.

And much of that thinking began with something called... the Weather Channel.

The Weather Channel was founded by the weatherman from ABC's Good Morning America. His name was John Coleman, and he was frustrated. Good Morning America host, David Hartman, never left him much time for his forecasts.

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John Coleman, founder of The Weather Channel.
Source: wikimedia.org

Coleman had worked his entire career to get to the big leagues, and here he was - not getting any meaningful airtime.

In a famous meeting, Coleman requested more time so he could give a more in-depth weather report. Hartman said absolutely not, and added that if more time were to be given to the weather forecasts, then Good Morning America could find itself another host.

That's when John Coleman decided to leave ABC and start an all-weather channel.

From that moment in 1977, John Coleman was laughed at by all the TV networks and financial backers he approached. No one could imagine a cable channel dedicated to weather, or even imagine - for one second - that anybody would want to watch it.

But Coleman persevered, and brought together a team of weather experts and TV graphic specialists, found a backer, and launched the Weather Channel in 1982.


The dawn of The Weather Channel.
Source: YouTube

Ten years later, it was seen in 50 million homes. And today, it boasts the second-most popular mobile app, and is watched in over 100 million homes - making it the most-distributed cable network in the U.S.

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The Weather Channel is one of the most popular apps on mobile phones.
Source: examiner.com

Yes, you could say John Coleman was on to something.

The Weather Channel has come a long way since 1982, and recently re-branded itself as the Weather Company, to reflect its growing digital data business.

A big part of which is helping marketers monetize the weather.

By crunching data and sales results from hundreds of categories, the Weather Channel has the ability to spot patterns.

For example, it learned that bug repellent sells well in Dallas during the spring when there was a below-average dew point (the temperature at which dew begins to form) - but in Boston bug repellent only sells when the dew-point is above average.

The Weather Channel discovered that the first day of above-average heat in Chicago results in a surge of air-conditioner sales. But in Atlanta, people will sweat it out for two days before making the same run to the appliance store.

The Weather Channel realized it could provide timely and lucrative information to marketers by harnessing the technology to monitor the weather in over 4,000 postal codes. And by cross-checking those forecasts with 75 years of climate data and past shopping behaviour, it could predict sales.

That allowed the channel to "sell weather" to marketers.

Pantene hair products "bought" humidity, for example. So when women checked the Weather Channel app on their smartphones and saw a humidity warning, they would also see an ad for a frizzy-hair taming product.

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On humid days, Pantene advertises a product to tame frizzy hair.
Source: wsj.net

Conversely, in a low-humidity location, where hair might go flat, Pantene would advertise a hair volumizing product on the app. Pantene also provided coupon codes and addresses of nearby drugstores using location data - giving women a timely product, a money-saving voucher and directions to the nearest store.

Using this same predictive technology, the Weather Channel helped increase revenues for Michaels arts and crafts stores. Michaels traditionally increased their advertising during rainy days, as many people stay indoors and look for things to do.

But the Weather Channel convinced Michaels not to advertise ON rainy days, but rather three days ahead of a rainy forecast.

Sales spiked.

Prior to the Weather Channel, the paradigm of business and weather was to cope and avoid. But now marketers could anticipate and capitalize.

So could insurance companies. The Weather Channel has a division dedicated solely to the insurance business. For example, it can alert an insurance company 30 minutes before a hail storm hits. The insurer could then send out text messages to its clients saying "Shelter your cars, you are about to be hit with a hail storm."

In a medium-sized hailstorm, that message can save insurance companies between $1M and $5M.

That's why industries like insurance, airlines and retailers spend enormous amounts of money understanding how weather can affect their business.

While the Weather Channel was the pioneer, today there are over 350 companies who sell "commercial weather." It is a $3B industry.

One of those companies is called Planalytics, which helps businesses plan inventory based on weather.

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Planalytics is a company that specializes in helping marketers harness the weather.
Source: cpgcatnet.com

It helped Duracell allocate more batteries to parts of the country that were expected to be hit with hurricanes - giving companies like Duracell twice the accuracy than if they were just left to guess using seasonal averages.

Planalytics helps golf courses predict the number of rounds that will be played in various regions, and can predict when spring golf weather will start.

The company also predicted the cold winter of 2014. That information helped home improvement chain Lowe's start planning for the winter back in July, allowing it to be ready for strong demand in ice melt, pipe insulation, space heaters and generators.

Planalytics also convinced their retail clothing clients who sell outerwear, fleece and cold weather accessories to scrap plans to mark these items down in February, and keep them on the shelves at full price - for a longer period of time.

That advice resulted in a windfall of profit.

Bad weather has its benefits for marketers, too.

Rain and cold snaps persuade people to stay indoors, and activates the use of holiday gift cards for ordering online.

Negative moods caused by bad weather can make consumers respond better to negative messaging. On dark, gloomy days, a dental floss manufacturer tells customers to floss or they might get gingivitis. It ignited more sales than messages telling people flossing would give them brighter smiles.

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People are more receptive to negative marketing on bad weather days.
Source: wordpress.com

The Spin Neapolitan Pizza Chain came up with the idea of offering their customers, "crummy weather vouchers." They could only be used on bad weather days. Not only did it drive sales on rainy days, but the increased traffic spilled over onto good weather days.

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Crummy weather coupons for crummy weather days.
Source: restaurantmagazine.com

And even though rainy summers kill BBQ sales, lawn mowers and grass trimmer sales go up - because the grass grows faster in wet weather.

In the UK, supermarket chain Sainsbury's conducts strategic weather forecast meetings every day, which lets them plan at least 8 to 10 days ahead. They know the first signs of frost kick up demand for bird seed, milk, and cauliflower... used for soup.

When the temperature is forecasted to increase just a few degrees in early spring, Sainsbury's knows sales of two disparate products will shoot up:

First, hair removal items surge by 1400% - as women decide to bare their legs. And BBQ sales rise 200%.

In Scotland, a temperature of 20C or 68F will prompt BBQ sales to triple. But in London, the temperature has to be exactly 24C or 75F to see the same result.

Interestingly, supermarkets in the UK sell more ice cream on a sunny, cool day than a cloudy, warm day. When the temperature reaches 25C or 77F, ice cream sales plummet. The reason: Shoppers worry it will melt before they can get it home.

All of this information helps merchants streamline their inventory and maximize profits. From small companies to big ones.

Coca Cola, for example, sells over 4,000 products in almost 200 countries. 22% of those markets generate 80% of Coke's revenues.

Can you guess what Coca Cola's most profitable product is worldwide?

Answer:

Canned coffee. Yes, Coca Cola makes canned coffee, and it is the most profitable Coca Cola product on the planet.

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Liquid coffee in cans is one of Coca Cola's most important products worldwide. Who knew?
Source: mikesblender.com

Coke uses a analytical program called "Wind" - which stands for Weather Information, News and Data. It carefully tracks weather in all its countries and regions. For example, canned coffee is sold hot and cold in vending machines, depending on the temperature and the region.

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Around the world, Coke vending machines are programmed to keep products cold and hot.
Source: photobucket.com

So Coke needs to monitor weather patterns to know when to heat up the coffee, and when to cool it.

How important is this monitoring? Coke loses about $1 billion in out-of-stock lost opportunities every year. And they are one of the most astute marketers in the world.

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Coke constantly monitors its vending machines to make sure they are not suffering from lost opportunities.
Source: jroo.me

As the age-old maxim says, "Failing to prepare is preparing to fail."

Coca Cola's juice brand Minute Maid set up vending machines at amusement and water parks across Spain that automatically lowered the price of their Limon&Nada cans of lemonade as the temperature outside rose.

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CAPTION
Source: coca-colacompany.com

Weather Trends International is another company that helps marketers profit by weather. They publish a fascinating list called, "The Profit of One Degree."

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The fascinating "Profit of One Degree" list.
Source: wxtrends.com

It's a list of how the change of just one degree in temperature can affect sales.

So - when the temperature drops one degree colder - soup sales go up 2%.
When the temp goes up one degree - beer and soft drink sales go up 1.2%.
One degree colder in the fall equals a 4% increase in children's apparel sales.
Just one degree hotter in summer translates to a 10% increase in sun care products.
Just one degree colder in the fall means a 25% increase in mousetrap sales.
And just one degree hotter in summer - just one degree - results in a 24% increase for air conditioners.

Meanwhile, here in Canada, Planalytics has this to say about 2014 weather:

After a tough winter this March, Torontonians will welcome Spring showers - so rainwear sales will be up by 10%.

By June there will be a heat wave in Ottawa, so kids shorts and tee-shirts will be up by 16%.

Warmer July temps in Vancouver will result in a modest 5% drop in lawn tool sales.

Dry conditions in August in Montreal will push demand for lawn-watering equipment up by 15%.

Winter will come early to Winnipeg in September, causing sales of outerwear to jump by 9%.

And a chilly October in Edmonton will mean sweater sales will be up by 6%.

Canada - you have been forecasted and forewarned.

This year, the Super Bowl was played in an outdoor stadium in East Rutherford, New Jersey.

It was the first Super Bowl played outdoors in a cold weather city in NFL history.

Average temperature historically in East Rutherford for February 2nd was 29F, or minus 1C.

The Weather Channel dubbed it the "Weather Bowl."

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The 2014 Super Bowl was marketed as "The Weather Bowl."
Source: weather.com

Fox broadcasted the game, and invited viewers to be part of "The Biggest, Boldest and Coldest Event in Television History."

Needless to say, weather became a big part of Super Bowl marketing.

GM's GMC brand became the title sponsor of "Super Bowl Boulevard" - which was a closed 14-block section of Times Square that featured outdoor attractions and exhibits, including a toboggan run.

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GMC's "Super Bowl Boulevard" in Times Square even featured a toboggan run - in keeping with the "Weather Bowl" theme.
Source: nydailynews.com

Campbell's Soup planned to be on the ground on game day providing hot, chunky soup to chilled fans.

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Football fans were offered hot soup on game day - unfortunately game day turned out to be a mild day.
Source: campbellsoupcompany.com

A free welcome package was provided by the NFL that included:

Hand warmers courtesy of cell provider Verizon.

Scarves and warming stations were provided by SAP software.
And Puff Tissues were included from Proctor & Gamble.
Lots of participating brands were praying for snow.

Under Armour, the NFL's official supplier of gloves and footwear, advertised their latest ColdGear technology that uses infrared coating to recycle body heat.

Nike offered a collection of winter wear, including a goose down game jacket with a titanium coating.

Even Tommy Bahama -usually associated with warm weather wear - featured new NFL team jackets and pullovers.

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Anticipating cold weather, Tommy Bahama offered warm game-day team jackets.
Source: milled.com

Fans brought their own winter gear - including ski pants, long johns, boots and blankets.

Then... came game day.

Temperature at kickoff... 49F, or 9C. During the game, the temperature climbed to 52F. As a matter of fact, the temperature was just nine degrees off the record high. It was just one degree colder than Super Bowl VIII in Houston, Texas.

Fans peeled off their hats, their gloves, their coats and their scarves, and watched the game comfortably in shirts and jerseys.

The Old Farmer's Almanac had predicted a stormy Super Bowl 48.

But the Biggest, Boldest Coldest event in television history ended up being big, bold... and mild.

Proving it's still hard to second guess Mother Nature.

In conclusion, weather happens to everyone.

It could be rain, snow, frigid temperatures, heat, humidity, lack of humidity, winds, clouds, sunshine or a combination thereof.

And those various conditions have an enormous affect on how we shop.

Weather has the single, biggest impact on sales - second only to the general state of the economy.

It's the reason forecasting has become a $3B industry.

In the 20th century, marketing looked at weather simply as four seasons, and made decisions accordingly.

But with the arrival of massive computing power, algorithms and data crunching capabilities, combined with over 75 years of climate history, marketers can now make selling decisions based on humidity, cloud cover, or even the shift of one single degree.

But the atmosphere is a complicated place, and weather is getting more extreme.

Nine of the hottest 10 years on record have occurred since the year 2000.

All of which is to say that those who can gain revenue from a force of nature they can't control have an enormous competitive advantage.

So if the temperature dips one degree today, it could explain why the forecast might be sunny with a chance of mousetraps...

...when you're under the influence.

I'm Terry O'Reilly.