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Greetings. This writing will offer the reader, in general terms, a summary of the activities and promotional operations conducted by North American Balloon Group, Incorporated on behalf of its client, the Kellogg Company.

Program Overview

In 2005, the Kellogg Ballooning promotion turned 25 years old making it far and away, the oldest continuous corporate based hot air program in the world.

2005 in general terms was an excellent year for our promotional program at Kellogg’s. For the first time in nearly five (5) years the program saw positive growth from it’s users.

2005 marked the return of unrestricted hot air operations for Kellogg’s. While still modest in the number of operations conducted, almost 35% more flights were conducted in 2005, than in the previous year. Our office has seen a marked increase in requests for the hot air balloon in client specific promotional applications as well as “festival” type operations.

For 2006, we have already experienced an increase in requests for information from within the Kellogg system on availability.

Media coverage has returned with participation in several festivals in the western United States which adds a tangible benefit to our operations. 

Two teams operated in the United States for Kellogg’s in 2005. Our “red” team, operated by pilot Jesse Satterlee was attached full time to the “Wal*Mart Sales Team” conducting “retailtainment” promotions at the store level.

The second team, our “blue” team, is operated by Scott & Laurie Spencer. They’re operations within the program have generally remained limited to the western United States where their Kellogg client base has remained steady. 

Interesting 2005 Operational Facts

In 2005 :

The two teams traveled nearly 75,000 miles conducting promotions on 159 event or location days across the country. No operations were conducted outside the United States in 2005.

States colored in green were transited by the teams one or more times.

Teams conducted a total of 288 Hours of Character ‘TONY’ visits.

Teams conducted 48 hot air inflations.

Teams inflated outdoor cold air balloons at 136 locations.

Teams spent a combined total of over 1,100 hours at retail locations.

Equipment Status

VEHICLES

In 2005, both teams removed the operational motor homes from active duty for the program. This year, in 75,000 miles of driving our only repair was the replacement of a fuel pump made to the red team van. Operational reliability is at 100%.

HOT AIR BALLOONS

Hot Air Balloons “N496GT” and “N120LT” were the only systems in service in 2005. Both systems remain in excellent condition and will provide many more years of service at current levels.

The remaining four (4) systems are stored in Boise, and have been serviced properly throughout the year to insure their lifespan. All remain in excellent condition.

COLD AIR BALLOONS

25’ Outdoor ‘TONY’ Shape Cold Air Balloons. (25’ CAT)

This model is the workhorse of the Wal*Mart Sales Promotion. In the last five years we estimate that each of these balloons have been inflated over 1,100 times.  They are a very useful tool to us as they are virtually used in all types of weather, including light rain and winds to 18 mph. In some cases, they are left inflated in the elements over periods in excess of five days. 

Three of these balloons remain in our possession. They have all seen extensive service over the last 7 years.  Two of these balloons have been in service prior to my relationship with Kellogg’s. One remains in good/excellent condition.

Challenges with seam failures have haunted us for the past two seasons. One balloon 
in particular has faded drastically and can not be considered representative of the programs equipment.

They have served our program with incredible reliability, outliving service life estimates by nearly threefold,  but they have reached the end of their service life and replacement should be considered.

12’ Indoor Pop Up ‘TONY’ Shape Cold Air Balloons.

Also a workhorse of the Wal*Mart promotion, this indoor version of the “Gr-r-reat Tony Balloon” is used every day.

As they are used indoors, out of the elements, they remain in good/excellent shape and should provide several more years of reliable service to the program.

12’ Indoor Pop Up Cereal Box Shape Cold Air Balloons.

In 2001 were required to send several balloons to SSG. That shipment included several
Standard art Frosted Flakes Cereal Box cold air balloons. We were left with two Frosted Flakes Boxes with “K-Sential” and “Supercharged” artwork.

These boxes need to be replaced or re-sleeved with a more ‘standard’ art package.

These box shaped balloons are a standard tool in the Wal*Mart promotion.

Customer Comments

Customer satisfaction remains high in 2005. Below is a small sample, typical of what we have heard this year :

From : Brad Bjorndahl, K-Rep assigned to Stater Brothers in Los Angeles :

Scott,

THANKS to you and Laurie.  ALWAYS professional, ALWAYS effective!

Have a good trip back to Boise. 
Again, my very best to all of you! 

Brad

Wal*Mart Co-Manager John Fitch offered the following comments: 

Our store had the Kellogg Balloon event today and the merchandising and enthusiasm of the presenters was outstanding.  I feel this was an excellent choice for our store. It drove sales and provided a real sense of  community.  Most of all, it was fun, for our associates and customers. 

Thank You - John Fitch, Co-Manager - Store #1955

Comments From Geneva Thomas regarding Wal*Mart # 2648 in San Leandro : 

This letter is being written to express my great satisfaction in the job done by Scott and Laurie as they handled our visit with Tony The Tiger. 

Not only did our sales increase due to the way they promoted the cereal, but the interaction between them and our customers, young and old, was fantastic. I have never seen so many older adults waiting to get anything, let alone a sticker of Tony. 

The professional manner in which they handled themselves and our customers was, in a word, exemplary. We would love to host the event again and would really love to have Scott and Laurie conduct the visit. 

Again, I can’t put in to words the worry free process this event was, produced under their direction. Please let us know when this event will be in our area again. 

Sincerely, 

Geneva Thomas 
District Personnel Manager

A Note From Anthony Zito said :

Jesse, 

Thank you and Chad for all your hard work with the Balloon event.  The Wednesday event was slow but later in the week the customer traffic was better and we were able to sell some product.  We were in front of action alley in four out of five stores and the one store let us in the middle of action alley.  Jessie and Chad were able to use all the cold air balloons in every store and that was a customer attraction.  Tony the Tiger making an appearance at each promotion was a great addition.   One store asked you to come back next year and that is a great testament to the exposure this brings to the account.  Again, Thanks for your commitment and I look forward to working with you next year. 

Great Flying, 

Anthony Zito 
RSR Birmingham, AL

Kellogg, Wal Mart Team North RSR Bethan Colby wrote :

I just wanted to thank you for organizing the balloon event in my area. I was very worried at first, especially with the situation at the Tappahannock Wal Mart, but after the success of the event today I would be more than happy to host it again in my area.  Both Jesse and Jonathon were great! Very energetic and upbeat throughout the day.  They did a wonderful job orchestrating the event, and as I said I look forward to doing the event again.

Positive’s in the 2005 Promotion

* We learned that multiple days at a specific store (instead of the usual one day)  was an effective way to increase sales at a specific location. The stores involved doubled their buy-in order and the team duplicated the promotion.

* Replacing the motor-homes with traditional truck and trailer and van.

* Adding Character ‘TONY’ to the promotion with our own character actor has  solved virtually all our character visit challenges. We eliminated issues that  included, cleaning, health and maintenance on suits as well as the “who wants to  be TONY today” issue that plagued us at every location.

* Our ‘red” team has truly come into their own from a sales standpoint. When  visiting a busy location, their in-store sales continue to be outstanding. Their  operations are professional and workmanlike.

* Kellogg use of our on-line reporting system has nearly tripled over 2004.

* We have worked hard to make this program as simple as possible for the
 field sales force to use. We have honestly become a “one call” promotion.

* The hot air balloons were utilized more in 2005.

Negative’s in the 2005 Promotion
* Pre-Event communication between the ‘red’ team and RSR’s in the field needs to  improve in 2006. 

* Failure to place a hot air balloon in the field with the ‘red’ team this past fall as  we had originally planned/promised to do.

Promotion Needs in 2006
* We are ready to return a hot air balloon to the south, southeast and eastern areas  of the country. All the equipment required is here and ready to go, we will need  some support and direction with regard to graphics and paint for the trailer & tow  vehicle.

* We would urge replacement of at least one (1) 25’ Cold Air Balloon.

* We would appreciate support and direction with regard to the Cereal Box shaped 
 cold air balloons. We should either replace or re-sleeve the existing artwork.

Closing Thoughts

2005 has been a good, effective, trouble free year for this promotion. We managed to make it through the entire year without any operational or team member complaints.

Our operations have run so well this year that I would be remiss in not mentioning by name, those that have worked with us at Kellogg to insure that the program remains
strong.

For his financial support and faith in our product and ability, Kevin Smith and Ed Bauman, whom without, there would be no program. For Tony Hubbard, who without much credit or thanks, insures that our paper and financial needs are met keeping us on the road. Thank you all very much.

For the continued support of the Wal*Mart Sales Team leaders, I appreciate your support and your willingness to let us represent you. Thank you very much as well.

On the Wal*Mart side, we believe we are a proven, cost effective, sales tool for the Wal*Mart Sales Team that satisfies Wal*Marts desire for effective, fun “retailtainment” events at their stores. The promotion provides presence for Kellogg’s while building brand equity and brand loyalty with the consumers we come in contact with as well as strengthening the relationship the Kellogg Sales Team maintains with Wal*Mart on a store level. Everything about this promotion is a positive ‘win/win’ for Kellogg and Wal*Mart at a very effective daily rate.

We are honored that you allow us to represent you as your ‘Aerial Ambassadors’ and look forward to servicing your needs with your clients in to the future.

Thank You all for a fun and effective 2005 !

Sincerely –


          Scott Spencer
          Chief Pilot

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