PROPHET IDENTIFIES BRANDS TO WATCH IN 2004

Song and Ted, bids by Delta and United Airlines to stake out a piece of the low-cost travel market, rank at the top of Prophet's Brands to Watch in 2004, an annual review of some of the year's most influential brands attempting to drive change in their respective markets. Prophet is a management consultancy specializing in integrating business, brand and marketing strategies.

"The jury's out on the success of Song, launched in April 2003, and Ted, launching in February," said Michael Dunn, Chief Executive Officer of Prophet. "But both exemplify the kind of risk that management must take to build or rebuild strong organizations and brands. Each of our Brands to Watch reflects this, as well as the fact that success is rooted in its ability to address its customers' needs."

Among the brands Prophet is watching in 2004:

· Song and Ted. Song is shooting for hip with a touch of swank; Ted, for casual, laid-back, and fun. Amenities, from greater leg room to gourmet-like meals (at a price), and branded beers to customized video entertainment, are designed to put the fun back into flying - at discounted prices, no less. "Both ventures are risky, but necessary if Delta and United hope to take advantage of the growing discount side of the travel market," said Dunn. "In Song and Ted, they are attempting to do what they've failed to accomplish with their flagship brands - make them stand for something." At issue is whether these new entries actually deliver on their promises of a better travel experience at a bargain price, or whether they further dilute the brand equity of their flagship brethren.

· Yahoo. Having lost its position as top search engine to Google, Yahoo's aggressive strategies to reinvigorate its brand may pay off in 2004. Bolstering its technical capabilities through the acquisitions of Overture Services and Inktomi, it's aiming to get a leg up by offering customer-centric features that Google won't be able to easily match - primarily enhanced features to personalize searches and use of "paid inclusion." The latter, already used in Yahoo's shopping section, captures the most up-to-date information from merchants' sites, including them in search results. "Yahoo is doing what's necessary to re-establish and expand its relevance to its vast range of global customers," said Dunn. "Its recent partnership with Philips may help to make the brand available to consumers beyond their PCs. The jury's still out on how some of these strategies will fly, and whether Yahoo can continue to deliver on the personalization and customer-focused services that have been so core to its innovative and trustworthy brand."

· Atkins Nutritionals. The low-carbohydrate diet leader has never been more popular with consumers, but found itself under mounting pressures in 2003. The untimely death of founder Robert Atkins was compounded by increasing criticism of its low-carb/high saturated fat regimen and heightened competition from other diet plans that downplay the saturated fats. Will Atkins recent endorsement strategy with its "Atkins-Approved" menu at TGI Friday's, and Subway's "Atkins-Friendly" wraps help to allay consumers' concerns about the nutritional approach? "2004 appears to be a pivotal year for the Atkins brand as it must manage increasing concerns about its high saturated fat regimen, scrutiny about the safety of beef due to Mad Cow disease, and questions about longer-term success and whether the nation's low-carb focus is just another fad much like the low-fat focus of the 90s."

· Haier. This booming Chinese corporation is now ranked one of the largest manufacturers of household appliances and electronics; its growing reputation for innovation and quality has enabled it to become the world's second largest producer of refrigerators. Its successful global expansion - Haier was the first Chinese company to set up manufacturing in the U.S. and Europe- exemplifies the Chinese government's support and participation in pushing forward the growth of Chinese brands. "Haier may well represent one of China's best chances to meet its goal to have 50 Chinese firms on the Fortune 500 by 2010," said Dunn. "The risk to this brand is whether it can sustain progress and continue to deliver on innovation, breaking the common stereotype of the Chinese as producers of cheap goods."

· Innocent. The quirky UK smoothie company is set to be big in 2004. It has successfully fought off competition by rebuilding brand recognition through a series of innovative marketing ideas. These include the launch of 'The Innocent Little Book of Drinks'; a 'herd' of dancing cow vans touring the country; a free summer music festival: Fruitstock; and a national sampling campaign. "By targeting key points of interaction with their customers they deliver a consistent brand experience which builds customer loyalty," said Dunn. These marketing tactics have contributed to almost doubling Innocent's turnover from 3.6 million to 6.5 million pounds and an increase in marketshare from 14% to 30% in less than two years. Innocent is positioned as a grass roots health brand focusing on high quality products. It embodies a cool, irreverent brand personality that truly engages customers. It not only differentiates itself well, but also doesn't take itself too seriously -- recognizing that its customers are people and not numbers. They face two challenges as they move from a beverage to a food provider; firstly, to match the high quality of their smoothies in their food propositions. Equally important is to retain their quirky brand personality as they extend their brand across new product and customer segments.

· Ocado, the UK food delivery service supporting Waitrose supermarkets has created a brand that is synonymous with high quality customer service. In fact Ocado is so confident that it has lain down an open challenge to customers to "Be more demanding." Ocado uses a bold marketing strategy to differentiate itself from the competition and be highly relevant to customers. Memorable print and radio advertisements use children to reinforce the message with examples like: "I want my groceries in one-hour slots. And a hamster. Who'll eat my sprouts." The results are impressive, with many customers switching to Ocado to enjoy the quality service and convenience. "Taking such clear ownership of the 'service' positioning makes it extremely difficult for the competition to credibly communicate around this," says Dunn. As further testament, the brand benefits from higher customer evangelism and referrals. In order for Ocado to continue growing, they must continue to match peerless service levels, even when numbers of customers and volumes increase dramatically.

Prophet's Brands to Watch in 2003 included LeapFrog, Curves for Women, Jet Blue, the MINI, and U.K. based Majestic Wine, all of which continue to live up to, or exceed, expectations.

LeapFrog has jumped past Lego Systems to become third-largest toymaker in the U.S.; its LeapPad sales are almost equal to the early successes of the Palm Pilot. Curves, which doubled in number of locations in 2003 and now accounts for one quarter of US gyms, was ranked by Entrepreneur magazine as the nation's second most profitable franchise, after Subway. JetBlue continued to rack up such awards as Conde Nast Traveler's 'Best Domestic Airline,' and aggressively counter competitive pressures with route expansions and amenities, even though competition is hurting its profit margins. However, JetBlue learned last year that continually delivering against all aspects of a customer-driven brand is challenging, as exemplified by the PR issues following the release of passenger data in violation of its own privacy policy. The MINI continues to rack up kudos for value and design as well as owner satisfaction. And Majestic Wine, now the largest wine warehouse chain in Great Britain, continues to grow with new stores, new markets and expanded distribution capabilities, and was ranked as one of Britain's 100 best companies to work for by Times Online.

Prophet is a management consultancy that helps clients achieve competitive advantage by creating and implementing integrated business, brand and marketing strategies. Prophet works with companies from strategy to execution to develop, operationalize, grow, and protect one of their most valuable assets: their brand. Prophet has offices in Chicago, London, New York, San Francisco and Tokyo and is slated to open offices in Houston and Zurich in 2004.

2/03/04

Contact:
Sally Saville Hodge
Hodge Communications
312.666.6662