Sunday, January 25, 2015

Roundtable: The Future of Spot Broadcast from Some Old Pros

The one question that I often get from readers is where I believe the conventional broadcast markets will be several (7-10) years from now. Naturally, that is an almost impossible question given the rapid rate of change in the media world today. While I knew that no one person is going to get it right, especially your correspondent, I decided to ask several people whom I valued as sharp observers of the media scene and clever practitioners of the art of negotiation. All have been in the business for at least 30 years. I never worked with any of them under the same roof and I did compete against two of them from time to time. Each is still in the business but, even the youngest, will likely be retired in 7-10 years. To protect them and their remarkable candor, that is all I will say about them.

While we did not really sit together around a table, I will report in a format that assumes that we were:

Don--How do you think negotiation will change in the years to come?

Buyer #1--“Whenever you read about rules of negotiation or take a seminar concerning it, two things usually stand out--
1) Try to create a win-win situation where the station or interconnect is pleased and you and your client is as well.”
2) “Always be willing to walk away. This second point is key. For decades, we could always walk away from a radio station and we could usually buy around a TV station in any market. Sometimes, if a TV station were really dominant, we would be forced to buy a lighter schedule than normal but we had to give them something. Soon, and I cannot tell you when, we may simply not buy the medium period in a market. Recently, a longstanding client and I made a market trip to a DMA ranked somewhere between 80-110. We had not done it in at least 7-8 years. People were surprised and pretty happy to see us as we have continued spending in this small market when many national accounts have dried up. At one station, which is still a leader but with diminished numbers as all broadcast and cable players are experiencing, a sales manager would not budge on rates or meet any of our requests for promotions or other special features. My client simply said, “Fine, we just will not use TV here this year”. The sales guy said you can’t do that. It will kill your business. I mentioned what we do in network TV and told him that digital could make up the slack nicely. We left and the general manager of the station came running out coatless on a frigid day waving frantically. He apologized and said his young hot shot did not understand how the world was changing. We thanked him and my client held firm.  The digital team did a few things locally but we bought no TV. We were down 2.5% nationally but flat in this Podunk town."

    “Years from now, this may be the norm. We will do media mix much heavier on a market by market basis. If we cannot get the conventional people to make realistic concessions, we will not buy them at all.”

Buyer #2--You sound like Don beating the drum for market by market planning as he has for the last 30 years. It is not going to happen. Maybe a few small but hardworking shops will try to do it or the occasional mid-sized will, but no buying service on earth is going to waste time on that type of labor intensive approach. Once TV is approved they will execute. Also, you need client buy in to let you change a plan in mid-stream.  Few are going to give you carte blanche authority to change the plan on the fly. The idea is sound and fits the new world we may see in a few years, but it is just not practical.  The future is already set in stone. We will have fewer people and more work to do. A broadcast exchange could be the answer but not this.”

Don-- “Any other ideas on the future marketplace?”

Buyer #3--“We have heard about this for years but TV will become a much stronger Direct Response medium. A network sitcom may have a couch or a car in it. You click on the couch and order it and go back to the show. Or, click on a car and you can set up a test drive at a dealer near you. Some of this may be available to local advertisers as well. This could provide much needed revenue to the station. If things do not change they are in real trouble. Many that I deal with already have an appointment with the dustbins of history.”

Buyer #4--“The stations need to face reality. They talk to me as if it were 20 years ago. I too went on a rare market trip in 2014. My last call was at a station who had me watch their evening news and then the sales and general managers took me to dinner. The sales guy kept saying how great the station was and I was getting annoyed. I should not  have had that third glass of wine but when he asked me again how great the station was I said, “Yes, you are the best looking horse at the glue factory.” The GM roared but the sales guy was insulted. I know you need to talk up your product but, face it, local news is often horrible in the mid-sized and smaller markets. The GM drove me back to the hotel and we had a good laugh. He “gets it” but his staff does not.”

Buyer#2--“At some point, the network affiliates will just fade away. Look at the demographics of local news. It is old and increasingly downscale in so many DMA’s. An on demand model will probably emerge from the ashes. Also, it will continue to erode gradually although Neflix, Hulu and Amazon are certainly speeding the process up.”

Buyer #1--“What about Google and Apple? Google has lots of potential with You Tube and both companies have billions lying around. Maybe one will buy Viacom or Disney."

Buyer #2--“Why would anyone want to buy Viacom?”

Buyer#1--“For content and programming expertise.”

Don--any trends that you watch closely?

Buyer #2--“I am all over what upscale millennials are doing. They will be the leaders of tomorrow. The young women are particularly interesting as some do not even have TV’s. How do you reach them? Well, you cannot with traditional media. They are the group that will kill radio and put the last nail in the newspaper coffin. Yet, they have big buying power.

Buyer#1--“I agree but do not follow them all that much or as much as I should. They are several years ahead of the pack so if they have abandoned TV others will see how they are getting video and follow suit.”

Buyer #4--I still look at shrinking ratings. Sales suffer these days if we put too much on TV. And with all the other devices in play while the set is on, even our best creative does not break through as it used to.”

Buyer #3--“The economy. The millennials are largely broke. Lots of low paying jobs and big college debt. I do not see an easy road ahead for these kids.”

Don--are stations preparing for their demise or new role in the media world?

Buyer #2--“Nope. I ask even the old goats whom I have known forever. The network owned and operated stations get it but they say little to me at least. The smaller group operators are often in denial. For them, there is no mid-course course correction option in the cards.” (editors note--quite a statement!)

Buyer #1--“You get vague comments from a few but 90% have not come to terms with what is going on and, more importantly, what is going to happen.”

Buyer #3--“The poor bastards are dealing with debt service. They have to send the money every month to headquarters regardless of the media landscape. In radio, it is the worst. No, they are not reflective. They have to hit their tabs or come close each quarter. It has to be a nightmare. The smart ones know that TV and radio do not work as well as they used to even a few years ago.”

Buyer #4--“Those over 50 say just let me get to retirement with my job and pay intact. It is hard to oversee a dying enterprise.”

Don--how about each of you? How are you treated within your own companies?

Buyer #4--“Hey, I know I am a dinosaur but the CEO and I are joined at the hip. The young digitals in media and creative think I am a jerk but they are afraid of me. I try to reach out to them and I do learn from them. My days are numbered and I know it. I am not rich but I will be comfortable. The business has been good to me.”

Buyer #1--“We, as a company, are way behind the times. I am the progressive one if you can believe it. A few years from now, I will be there to shut off the lights. It has been one hell of a ride.”

Buyer #3--“Absolutely no comment.”

Buyer #2--“My influence is declining and I understand why. A couple of the young digital creatives have told me that I am more respectful than veterans they worked with at previous shops. I will play it out until the ax falls. It still is fun but, obviously, not like the “80’s.”

Don--this was great fun. Any parting shots?

Buyer #2--“Let’s do this again in 10 years if Don is still lucid.”

Don--Very nice!

Buyer #1--”We need a drink.”

Buyer #3--”Too early for me in my time zone.”

Buyer #4--“You never were much fun.”

Please note that the language was cleaned up a bit and fractured syntax was corrected up to a point. Also, a good amount of material was edited and may be used in the future in very targeted posts.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or place a comment on the blog.

Monday, January 19, 2015

The Skyboxification of America

This past week a reader sent me an e-mail thanking me for several past posts discussing the rising economic inequality in the United States. He then asked, “Why don’t you write a post on the Skyboxification of America?”  I fired back, “What a great term. Did you coin it?” He said that he did not but could not remember where he first heard it.

Intrigued, I dutifully Googled it and was soon heading to a local library. As best as I can tell, the term came from Michael J. Sandel, a government professor at Harvard. He outlines the concept in a thought provoking book entitled, WHAT MONEY CAN’T BUY, The Moral Limits of Markets (Center Point Publishing, 2012).

I grew up going to more sporting events than most as my father worked in the field. My brothers and I went to many games and frequently sat on the bench with a team. Some of my favorite memories were when I was 8-10 years old and we would go to afternoon games at Fenway Park. Tickets started at 75 cents for a bleacher seat and may have gone up to a high of $4.50. For $3.25 you could get a seat beside third base (maybe 7-12 rows back). That is where we always sat. You felt almost as if you were on the field as Fenway had and still has the smallest area of foul territory in the game. I remember one game vividly on a hot August day. The Red Sox played the Cleveland Indians. Behind us, a surgeon and his daughter were in a lively discussion with my Dad about a player’s physical rehab program (my father was a former coach and an athletic therapist). Next to me was a man who worked at the Necco Wafer candy company in Cambridge, Massachusetts. Everyone was an enthusiastic fan and the discussion all around us was lively and fun. It was twi-night doubleheader and the man from Necco had to leave in the 2nd inning of game two to work the night shift at the Cambridge plant. He shook everyone’s hand and made a graceful exit. I told my Dad what a great job he had. Imagine working at a candy factory! My father smiled and said it might be fun for a summer job but, Don, you would not like it for a life’s work.

When I saw the term “Skyboxification” in print, that memory came flooding back to me. Going to a professional sporting event back then was almost a civic experience. All types of people went and interacted. They were all fans. Hope sprung eternal as we all rooted for the home team.

Over the years, times changed. Working in the media, I was privy to some incredible perks. Long line to enter Augusta National? Not for me. I had a VIP pass and even bought my swag in the member’s pro shop on occasion. Park blocks from a stadium? Nope. A special pass for a close in lot came with the complimentary tickets. It was amazing how quickly people got used to such perks. I took a young associate a few times to games and we sat in the Skybox courtesy of a regional sports channel. The next opening day I invited my whole team to a game. When I passed out the tickets, he said, “Boss, we sit in the stands?” Yes, we sat in the stands a few rows behind home plate. Somehow, he managed.

The Skybox first appeared, as far as I can determine, in the Houston Astrodome, in 1965. Then, America’s Team, The Dallas Cowboys, put some in Texas Stadium in 1970. Executives and key clients loved it and when many new stadia came on board in the 1990’s, Skyboxes were a key part of the design. When the new Yankee Stadium was built it was said that some 3,000 “normal” seats were eliminated to make room for the ultra-expensive Skyboxes. If one owned a team, you can hardly blame them. Skybox rental is very high and prices for food and drink within them are paralyzing. They have to be very lucrative for any franchise.

Sports, which was something that all kinds of Americans would gravitate to, are now demographically segregated perhaps more than any other form of entertainment. A Texas newspaper columnist some years back had the chutzpah to call Skyboxes “the sporting equivalent of gated communities.”

Each year we grow further and further apart from one another. A guy working at a candy plant can longer afford to go to major league sporting events let alone take his children with him. As inequality continues to soar in the United States regardless of the party in power, we find that the affluent live in different areas, their children go to different schools, and we work and shop in starkly different environments. Interaction with the shrinking middle class gets less and less and the affluent get more out of touch with the American mainstream.

Do read Professor Sandel’s book. I do not agree with all of that he says especially the limits that he would like to put on advertising. He did, however, make me think hard about certain issues in a unique way.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a comment on the blog.

Sunday, January 11, 2015

2015 Media Forecast

Forecasting is always a tricky business but is especially so this year with an uncertain economy coupled with the rapid changes in media going on especially in the United States. A number of people asked me to do a forecast and with help from my panel as well as TV and radio broadcasters, cable salespeople, agency media chiefs, broadcast negotiators, and a few agency CEO’s, I have put the following report together. Many spoke very candidly and I promised not to name any names.

Here goes:

The United States

A big issue regarding the media environment for 2015 in America is the price of oil. In the summer of 2014, a barrel of oil cost over $108. As we publish, it is now just under $50. Some say the oil decline will be V-shaped and snap back quickly as rigs shut down in the U.S. and when Saudi Arabia cuts back on production some time in the next few months. I have no idea and I doubt if any else has a clear handle on what will happen. When oil was over $100 a few Cassandras worried about the price dropping to $80 but I did not hear anyone say it would fall below $50. This is a market that I have followed somewhat closely for over 40 years and all I really know is that the industry is cyclical. When oil prices are low (as they are now) companies cut back on capital expenditures so exploration and production takes a back seat. As production slows and global demand continues upward, prices rise. When prices rise the companies earn big profits and there is a return to large capital expenditures as a result of big profits. Banks also lend more to smaller firms. So, the cycle repeats as high prices retard consumption. Too simplistic? You bet. Yet some variation of that cycle repeats each decade. This means that here in the U.S. the consumer has been handed the equivalent of a nifty temporary tax cut. Forecasters are saying that since July the average American family has $125 more to spend each month as a result of lower gasoline prices.

Both broadcast and cable sales people have said that automotive advertising is holding up very well. And,why not? Cheap gasoline is propelling vehicle sales coupled with an aging North American auto fleet. This could be a big year for General Motors, Ford, Chrysler and Toyota. Profits for SUV’s and full size pickups are big for the manufacturers relative to compacts. Some estimates are that 17 million vehicles will be sold in the U.S. in 2015 if gasoline prices stay low. That is good for Detroit manufacturers but great for all forms of TV and video advertising as well. Early signs are that Ford’s all new aluminum-bodied F-150 pickup will be a real success. Perhaps General Motors can overtake Toyota and reclaim its spot as the #1 car manufacturer in the world!

Medium by medium, we find:

Spot TV--a mixed bag. Right now, automotive as mentioned above, is propping some markets up significantly. With no political spending in most DMA’s and no Olympics this year, things are not great in some markets. Also, media people are shifting increasing amounts of their budgets in to digital in 2015. Local cable people are packaging up deals with an online component and more than one admitted to me that it is really helping them stay competitive. An experienced broadcast negotiator wrote, “I always had a great record for post buy analysis for 20 years. Now, nobody can post anymore. The Nielsen numbers are evaporating book to book. We may lose a key client who is all over each post and daypart delivery within each buy. Nielsen is just plain obsolete but they will not listen.” This sentiment was echoed by three salespeople 1,000 miles from each other.

Two salespeople said that there is clear shrinkage in sales across the board. One said his boss or bosses’ boss, claims victory at headquarters for being flat.

One area that is going to suffer is the oil patch. Over the last few years, Texas, Oklahoma, Wyoming and the Dakotas have had vibrant broadcast sales which bucked the trend. As rigs shut down, the markets will soften. Texas will do better than the others due to their more diversified economy but the glory days are over for a while. A cranky old coot in Houston wrote, “Son, just watch the rig count. Until that rises, places like Odessa-Midland and North Dakota will be weak.” I doubt if many media planners reading this will monitor the rig count, but he makes a good point.

So, on balance, automotive will help the spot marketplace but the shift is in place away from broadcast and that trend will continue. Expect -5% in the weak places and up to +5% in portions of the Southeast.

Local Cable

As was true last year, they will do better than broadcast as they have varied inventory, great promotional offerings, zoned sales, and several digital options that broadcast cannot usually match. So, a modest increase overall with lower declines and higher gains by market than their broadcast brethren.

Newspaper

Death by a thousand cuts continues. The rate of decline may be halted but they will still lose ground in 2015. National papers, The Wall Street Journal and USA Today, are exceptions, but the game is close to over for many papers. Some try offline and online packages but mid-sized markets are in real trouble and the product gets weaker and weaker as wire service copy predominates.

Magazines

Similar to newspaper although, given the selectivity of interest, some titles are thriving. The online product is getting more play but they may be several years too late.

Out of Home

Pretty good prospects! The last mass medium has lots of appeal for established brands with a reminder message. Also, electronic billboards of all sorts should do well.

Radio

This was interesting to look at given the reactions my questions provoked. To my surprise several agency people say that it still worked well for smaller, local retail clients.
Those spending money for major clients either ignored it or have cut back drastically. Talking to broadcasters was striking. Most said that sales would be down a bit although a few markets, particularly in the Southeast, were modestly bullish. The surprise came from those who were successful. All said they made money last year via non-traditional means and that was generally through their websites. Couponing was particularly successful. The only format which seems to be thriving is sports talk and that tends to be in markets where there is no or weak competition.

Mobile

The trade press, in my view, sometimes does this emerging medium a bit of a disservice. Admittedly, some people made somewhat breathless forecasts about how well mobile would advance in 2014. And, they did have a nice percentage gain in sales. They did not become a major player yet and some say it was a disappointment. My attitude is that they are doing just fine and will advance again in 2015. Maybe this year will be their breakthrough year; maybe not. Ignore this category at your peril.

Sports

An old hand tells me that other than the Super Bowl and ESPN, most sports sales are soft. There does appear to be some excessive saturation out there. Also, people are increasingly wondering if the premium for sports is worth it if “two fisted viewers” have a few screens going during commercial breaks.  Sling Media’s inclusion of ESPN in their stripped down TV product is interesting and it will see if ESPN can lure millennials who have never bought cable into paying for some form of TV.

On Line--continued growth here at double digit levels. The big growth spurt comes from on line video which takes many forms and is an especially good way to reach young adults. Increasingly, advertisers are wisely hedging their bets here.

Media Research Issue--Is Nielsen still viable? Our currency for TV measurement appears to be asked to do much in the world of 2015. Can they keep up with the lightning fast changes going on these days. It seems unlikely. Also, when is an impression an impression? Is a TV impression equal to an online video impression?

Conclusion for U.S.--modest growth (3-4%) overall IF the economy continues to crawl higher and oil prices do not spike back upward. Conventional media will struggle or lose ground while online and mobile grow nicely.


Global Growth

There are some 200 countries on earth (depending on how one is counting). Here is a top-line forecast for some in the news:


Briefly, Europe should not see much growth with real weakness in Spain and Italy. Russia is getting crushed with low oil prices so their overall economy will struggle mightily for a while. The Ukraine is obviously a marketing wasteland at the moment.

India, Turkey and Japan will be much helped by lower oil prices so Turkey and India may see advertising perk up for a while.

Southeast Asia will grow at 7%+ in ad revenue which is very good in today’s shaky global economy.

China--always a wild card. The consensus is that Chinese GDP will grow by 7-7.2% in 2015. Also, 25-30 million Chinese will vault in to the middle class. That, to me, translates to a good year for advertising. The press keeps harping on how China is no longer growing at 12%. So, clearly they are growing at a decreasing rate relative to recent years. Yet America is presumed to be growing at a consensus forecast of 3.1%. Wouldn’t we kill for a 7.1% growth rate? Is China cooking the books? Who knows? Advertising should fare quite well there in 2015--up 8%.

In Latin America, Venezuela is a basket case. They may be the most oil dependent country on earth and need a cost of $130-160 per barrel to balance their budget. So, do not look for much activity there. Brazil will be helped by lower oil prices.

That is how I see it.  Good luck to all of us in 2015.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Sunday, January 4, 2015

The Biggest Challenges That Marketers Face?

Happy 2015!

On Christmas Eve in the afternoon I received an e-mail from a reader. Like much of the messages that I receive it was from someone who corresponds fairly regularly with me but I have never met in person. He asked me simply, “What is the biggest challenge that marketers face going forward?”  Admittedly, I was pressed for time. I was about to leave for a church service where I sing Christmas songs with my enthusiastic but shaky tenor. So I wrote back simply, “To grow your brand and protect the business that you have at the same time.” I was out the door.

A few days passed. Even I do not check e-mail on Christmas Day. When I went to check  messages, there was a strongly worded reply from my reader. This being a family blog, I will not repeat his exact words but a sanitized version goes something like this: “Don, you idiot! How could you give such a knee jerk response to my serious question? Here is my answer: The biggest problem faced by both ad agencies and their clients going forward is how do you build a mass oriented brand in a media environment that has become personalized? As a media person, you should understand this. Narrow targeting opportunities are almost endless but how do you balance things? How much conventional media do you use and how much pin-point targeting goes on? Can you still afford to do it given the number of venues that you will need to hit? Will it be possible to calculate ROI on all of these platforms or are we back to 1875 with John Wanamaker’s theory that I know half of my advertising is waste, the problem is I do not know which half.”

My e-mail friend certainly had a point. I tossed out the question to several agency folks in my panel and they had two basic answers:

1) People--getting the best that we can afford and holding on to them
2) Keeping up with the rapid changes in the industry

If my reader is right and I think that he may be he makes a strong case for his POV, I believe that, once again, the gods of marketing will be on the side of the big battalions. Strongly entrenched brands with deep pockets and great research and access to Big Data will have an increasingly strong advantage over start-ups with high hopes and perhaps excellent products. Without hefty resources, social media can only take you so far. Also, media fragmentation is moving so fast that all models of performance of delivery (i.e., reach & frequency) are totally lacking.

What do you think? Care to weigh in? You may reach me at doncolemedia@gmail.com or add a comment on the blog.

Saturday, December 27, 2014

What Is Going On?

Last week, I put up a post entitled “It’s All So Fragile”, a decidedly downbeat commentary from two struggling ad agency principals. I did not expect much in the way of immediate readership or response as several holidays were upon us that are celebrated all over the world. When I went to check my e-mail, I was very surprised to see all kinds of comments from readers in several countries. A few scolded me for a less than optimistic report posted in the heart of their Christmas season. Some said it was true and a few said they knew who my anonymous agency people were (they were wrong). More telling were the comments of a number of readers who essentially said and I paraphrase--Okay, I see the same thing. What is going on?

I am often criticized for many things but one is that I often take a long view on many issues. So, when I look at the changes taking place in both advertising and conventional media, I do not get too upset. To me, what is going on is NORMAL.

Go back to the founding of our republic. When we broke from Britain and adopted our Constitution in 1789, George Washington became our first president. He presided over a nation that was preindustrial in nature--human muscle ably assisted by some animals was about as techie as we got. Some 90% of the people were involved in agriculture.

A few decades later, the Industrial Revolution began to raise its head. Steam engines started to pop up and then came the telegraph and railroads. Electricity and oil motors came on the scene and people had more mobility, warmth, and light. Finally, we emerged in to the third industrial era which I will call the computer age.

Every time the technological innovation came along in a big way, existing economic and social life became quite destabilized. That is simply what we are going through now. The pattern keeps repeating itself. Historically, each took 30-50 years to effect sweeping change. Remember that electricity was available in many American and European homes in the late 19th century but until the Tennessee Valley Authority (TVA) changed things, much of rural southern America did not have power at the flip of a switch.

So, is it different this time as many say? I would only say that it is different in the sense that the RATE OF CHANGE is much faster. Some 15 years ago, much of the world did not have access to a telephone. Today, mobile phones are found even in remote and primitive areas and not only provide calling but also access to video and the world wide web.

Sweeping changes in technology are disruptive. They do cause pain for people of a certain age who want to coast to retirement and to those whose jobs will become obsolete or marginalized in importance. Try to accentuate the positive. Think about the gains in communication and medicine and travel. Branding will not get easier given the enormous fragmentation of media but we will be able to see what works and what does not much more clearly than ever.
Today remains the most exciting time ever to work in advertising, marketing, or the media. You cannot turn back the clock. To a friend who recently described the digital world as the enemy, I can only conjure up the philosophy of the great Don Michael Corleone-- “Keep you friends close, but your enemies closer.”

To all who read the blog (123 countries represented this year) may I wish you all a happy, healthy and prosperous 2015!

If you would like to contact Don Cole directly you may reach him at doncolemedia@gmail.com or add a comment on the blog.

Saturday, December 20, 2014

It's All So Fragile

In recent weeks, I have had conversations and exchanged a ton of e-mails with two agency owners. One runs a small shop while the other’s agency straddles the space between small and mid-sized. Both gentlemen have been around for a long time and have thrived through several economic downturns. All I will say to identify them is that they operate businesses far from New York City.

The fellow with the smaller shop is gregarious and openly describes himself as a “shameless self promoter.” He loves to sell and has a wonderful enthusiasm for all that he does. So, I was surprised, when hearing from him after Thanksgiving, how discouraged that he seemed to be. Here are some verbatim comments or quotes from e-mails over the last few weeks:

--When I met you at a 4A’s Media Conference a dozen years ago, you really annoyed me. I told you that my two anchor accounts were local banks that covered all of our rent, utilities and even employee health insurance. You looked at me with an almost Mona Lisa smile and suggested that I diversify more. Then you muttered something about a bank getting swallowed up every day in the United States due to mergers or buyouts. I was annoyed but when I got home I checked it out and you were right. And, of course, we lost both banks to buyouts within a few years. It took me five years of great effort to crawl out of that hole.

--I had a few car dealers that have been great for years. We had a rough time in 2009 as they did but we all survived. Lately, even that is slipping away. The son of our biggest dealer decided to join the family business after a few years in the financial world. I warned our staff to be polite as he would eventually take over the dealership. Each month we placed a fairly strong radio schedule locally for them. One day, our account executive came back and reported that “Junior” had told him they were trying something new and their would be no paid media next month. I got Dad on the line but he backed his son up 100%.  What Junior did was simple--he sent an e-mail or direct mail piece if he had no e-mail to every customer who had bought a car from the dealership in the last  three to six years. The offer was very,very good--no dealer hype. My account guy told Junior that it could not work without the lift that it would get from conventional media.

It worked great! According to the old man, SUV’s just flew off the lot. Two of my team bought cars from him! Dad was excited and wanted to do it again. Junior said no and suggested doing it two to three times per year at most with a fresh offer each time. Sales were not great when our radio buy went on the next month. They are now doing all kinds of e-mail blasts and even using Twitter successfully. We look like cave men compared to this kid who is simply doing basic 21st century blocking and tackling. Also, Junior has a buddy who designed the mailer for a few hundred bucks. So, we will not get any work there anymore. Even the crumbs are disappearing.

--We are at a point where we cannot pitch business where the key client decision-makers are young. I know that I have to turn over my team over the next 18 months. We are dinosaurs and if we do not reinvent ourselves, we will become extinct!

The second player has a bigger team and is in a larger metro area and has a staff that has embraced digital options fairly well. He was a copywriter in his early days and still sees himself as a creative type rather than an executive. Some of this comments were:

--We work our team hard but we just cannot keep up with the industry changes. Last week, we were at a pitch and asked about mobile advertising. We said we did quite a bit of it and had more on board for 2015. A young prospect started firing questions at our media and creative guys. He used terms that none of us had heard of before. We looked like country bumpkins. I really embarrassed a friend at the prospect company who fought to get us into the consideration list for the business.

--The opposite happened at a session the month before the mobile debacle. Our creative head began to present a storyboard to the prospects. Three of the people around the table started laughing. He stopped dead in his tracks and one of the guys said, “You really think TV makes sense for us. Really?”  We crawled out of the meeting.

--The media talks about the mega-shops and how well they are doing with their online trading desks. I just do not see how we fit in to the new world much longer. Radio just does not work anymore and TV pays out very poorly if at all. The only people who say they see our TV work are over 60. We do some local cable and they provide some attractive promotions but that is not enough to carry the day for us. We do not have a clue about the needed media mix between conventional and digital.

--I just do not know how I can keep the game going. Everything is so fragile.

These are good people who have given their lives to the advertising industry. They cannot be alone in their struggles.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Friday, December 12, 2014

Consumer Update

In the wildly exciting life that I live, I do my level best to keep track of demographic and consumer trends. Not quite two weeks ago, the Federal Reserve released new figures on consumer debt levels in the U.S. and I have decided to share them with you plus add a few comments.

Top line results were as follows:

Average Household Credit Card Debt--$15,608
Average Mortgage Debt--$154,847
Average Student Loan Debt--$32,397

Let us take a quick look at each category:

Credit Card Debt--Actually, if you include ALL households in the credit card debt universe, the average balance is about $7,200. Many, such as you and I, pay off their credit card balances each month. So, the $15.6k is for those who are carrying installment debt with credit cards. Some 47% use credit cards almost daily but have no balance and pay zero interest on them. Minimum payments, then, for those who have credit card debt, are over $300 per month.

There is a statistic that is even scarier than those above. When the Great Recession hit in 2008-2009, people saw that average credit card balances were declining. My knee jerk reaction was that scared citizens were cleaning up their personal balance sheets and paying down debt. Undoubtedly, many were. The real truth as we look at it several years later is that the decline in indebtedness was due more to defaults rather than restraints on spending.

Average Mortgage Debt--not a great deal to say here except that those who were underwater (mortgage balance higher than their home’s value) have often worked their way in to the black. The government agencies Fannie Mae and Freddie Mac announced this past week that they are now writing 3% downpayment mortgages again. This time, they say that documentation must be much tighter than in 2006-2008. A shift in policy such as this makes me nervous. Why not stick to the Canadian ironclad rule of 20% down or the mortgage will not be written?

Student Loan Debt--this is the fastest growing area of US debt. The average graduate starting out in the world has $32,400 in debt. Alarmingly, despite repeated media warnings, this total is up 9.6% from the prior year. And, approximately 32% of those who have student loans are late or have defaulted on them. Bankruptcy? Forget about it! If you declare bankruptcy congress has passed laws insuring that you must pay back the loans. Some will be 50 before they pay their loans off. I do not feel that it is the role of government to protect people from themselves yet given the age of people signing long term agreements more explanation and discussion is needed in my opinion.

Also, many of the loans are taken out by youngsters who take out loans to go to a community college. They borrow $16,000 and then fail out or drop out. Next stop is a minimum wage job at a 7-Eleven or fellow traveler. The debt will likely never be paid off and a 20 year old will have a financial millstone around his or her neck for life. Total student debt now stands at over $1.1 trillion.

So, where does this leave us? Some 70% of the US economy is (sadly) consumer driven.  Were everyone to pull in their horns all at once, the economy would be headed toward another Great Recession. There is a big buzz lately as the cost of a barrel of oil has dropped from $107 to around $60, as I write. The average American has approximately $100 per month extra to spend as long as oil stays low. Yet, if you look at Detroit sales in the last few months, SUV sales are up smartly. When oil inevitably goes up, they will be in a tighter spot than now. So, will people use this oil windfall to pay down some debt and re-liquify? Too good to be true. Also, historically, a big drop in the price of oil usually indicates a weakening economy. So, is the low cost at the pump merely a prelude of a weakening global economy?

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com