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Wednesday, January 18, 2017

The Tyranny of Sunk Costs in Media

When I was an undergraduate a long time ago, I studied economics. One day my favorite professor talked briefly about what he called a gloomy and arcane subject--The Tyranny of Sunk Costs. Over the years I have found the concept to be anything but arcane; it is a frequent visitor to the business world and especially in marketing and media.

It essence the idea is that once you have sunk a large amount of costs into something it becomes harder to walk away from it when things are not going well. The “costs” are often monetary but not always. It can be time or sweat equity as well. These costs add up to quite a financial or emotional sum and they be tyrannical when you think it is finally time to walk away from the project, idea, or media platform.

We have all seen people who are not happy in their jobs. When you ask why they stay, a frequent answer might be along the lines of, “I have been here for 20 years. Can I just leave?” The answer, of course, is yes but it is not always a simple decision.  Have a stock that has declined? A real estate deal that has gone sour? Many of us will not take our medicine and get out with a loss. We stay with that job or investment in the hopes that things will change.

In recent years, I have seen the concept come to play with greater frequency as media habits shift. Not a month goes by when someone does not write or speak to me about their reluctance to pull the plug on a media vehicle or sponsorship that no longer seems to be effective. Comments such as we have been using this package for 14 years and have spent millions with it. Can we really abandon it? Usually, I tactfully try to suggest a strategic withdrawal from the weakening media asset coupled with testing new platforms with growth potential. Usually it works, but not always and not nearly as fast as it should. The same people who talk of the revolution in the media world hold fast to vehicles that have clearly outlived their usefulness. Sometimes it takes a new marketing person client side to get the change needed. He or she has no sunk costs of any kind and questions, rightly, why something is being done.

A funny thing happened when I sent this question out to selected panel members for possible comments. A lady wrote back that getting her thinking about this issue has inspired her to leave her lazy husband. “I have 12 years of sunk costs of all kinds and I am sick of it.”

Well, I hope she can work things out or simply get her husband off the couch. Separately, in the business world, we all need to be more honest about the tyranny of sunk costs.

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

Wednesday, January 11, 2017

Thank You For Being Late

A few years ago I was proctoring a final exam at a school where I was an adjunct instructor. One young man kept smiling as he wrote his exam and was the first to finish. He handed me the papers, shook my hand, and told me that he was graduating the next week. I congratulated him and he said, “I liked your course but I will never read another book again. I am through with learning.” Someone in the room said I remained stone-faced for moment, then managed a weak smile and wished him the best of luck. That young man is really going to need it if he is to have any semblance of a career.

I tell this story as a set up for a quick review of Tom Friedman’s new book, THANK YOU FOR BEING LATE (Farrar, Strauss, and Giroux, 2016). You may know Friedman from his NEW YORK TIMES columns or from previous books including THE LEXUS AND THE OLIVE TREE, THE WORLD IS FLAT and HOT, FLAT AND CROWDED. I do not always agree with his conclusions but I find him to be a graceful writer and a damn fine storyteller. Also, I admire that he works hard (as many of us do) to stay on top of changes in communications and the global business world as well.

The subtitle to the book is “an optimist’s guide to thriving in the age of accelerations.” He gives no quarter to those who want to remain fat, dumb and happy as my former student appeared to be. In one passage, he summed up the issue facing young people brilliantly. Here goes: “Average is officially over. When I graduated from college I got to find a job; my girls have to INVENT theirs. I attended college to learn skills for life, and lifelong learning for me afterward was a hobby. My girls went to college to learn the skills that could garner them their first job, and lifelong learning for them is a necessity for every job thereafter.”

I wonder what my former student would say in reaction to that? Friedman follows that strong statement with this: “Today’s American dream is more of a journey than a fixed destination--and one that increasingly feels like walking up a down escalator. You can do it. We all did it as kids--but you have to walk faster than the escalator, meaning that you need to work harder, regularly reinvent yourself, obtain at least some form of postsecondary education, make sure that you engage in lifelong learning, and play by the new rules while also reinventing some of them. THEN YOU CAN BE IN THE MIDDLE CLASS.”

Wow! Great stuff. He absolutely refuses to sugar coat what young adults are facing today. And we grey-beards need to shift gears as well if we are to continue to prosper. His book is not shrill. Friedman warns about robots but stresses that they will not take up every job out there. People will need to be sharpening their skills again and again, however.

He does a very nice job of talking about climate change with being alarmist. He and I agree but I think he needs to have a bit more faith in technology to solve our problems.

My only big disagreement with him is about solutions. As a libertarian leaning thinker, I find that his answer to almost everything goes back to new federal programs and regulations. There have to be market solutions to many of the problems that he identifies.

I strongly recommend THANK YOU FOR BEING LATE. There is not a single page in the text where Friedman did not make me think.

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

Thursday, January 5, 2017

Nielsen Out Of Home Measurement

Last October, the Nielsen Company announced that they were going to provide a national study of Out of Home Television viewing (OOH) by April, 2017. Soon my e-mail was loaded with excited messages from broadcasters all over the U.S.

The somewhat breathless comments included: “answer to our prayers,” followed by “Finally, our total audience will be measured” and “this new study when paired with Nielsen household data will make us much more competitive again.”

Well. There is no question that part of TV viewing is done outside the home. Nielsen’s Portable People Meter (PPM) will definitely pick up viewing in airports, hotels, doctors waiting rooms, gyms, and sports bars. Initially, a pilot test demonstrated that OOH might add 7-9% audience to the important 25-54 demographic. In sports, the uptick could be as high as 14% as many of us watch a game at friends homes or at a sports bar.

That is all fine and the exposure OPPORTUNITIES may indeed be there. My issue with OOH is that, when blended with conventional household viewing data, it may take an overstated audience projection and make it even more so.

For years now, we have all seen a rapid growth in advertising avoidance. More than half of us in the U.S. have a time shifting device which allows us to record a show and play it back jumping commercials. And, those of us who are watching live are often in the majority when we have another device going as we watch TV that gets special attention during commercial breaks.

So, OOH viewing has to be even more suspect. Have you ever watched a game at a sports bar? During commercials many of us tend to order up another round, discuss what is going on in the game with table mates, make a quick phone call or go to the bathroom. Whatever numbers Nielsen provides on audience size have to overstate attentiveness significantly. This is the age old issue that has been around since remotes first emerged in upscale households in the 1950’s.

For years, especially in the 1980’s, many of us tried to take attentiveness in to account by putting probability of exposure weights on each TV daypart. Many of us would set Primetime at 100 (admittedly an overstatement then and now) and mark down Late Night and Early Morning significantly. Clients often did not like it as daypart mixes tended to skew toward expensive mixes with a heavy weight toward those times of day when attentiveness was likely to be higher than others. It was not perfect but it was an honest attempt at trying to do the right thing.

So, in essence, I welcome OOH measurement. More research is a good thing. To clients, may I suggest that you ask your agencies how much they are discounting the audience of OOH for lack of attentiveness and to agency media people may I strongly recommend that you provide the new data but pre-empt client questions by weighting OOH data down in advance.

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

Wednesday, December 28, 2016

The Two-Speed Economy and 2017 US Media

Economists generally define a “two speed economy” as one in which different sectors are performing significantly differently at the same time. Generally, I have observed the two speed occurrence in markets where there has been significant natural resource activity. Venezuela, Nigeria, even Canada during oil or metal booms were great examples and Australian in 2012 was a recent entry when it seemed that their entire commodity, coal and base metal output was shipped to China. Those involved with the boom sector(s) were doing great while some miles away boarded up storefronts and unemployed citizens were the norm.

Today, we see the two-speed economy really hitting its stride in the United States consumer arena.  Online shopping continues to boom and brick and mortar retailing is to put it charitably, challenged. Look at our holiday season sales if you need verification.

Why bring this up in MR? Well, a number of people have asked me to provide a 2017 media forecast. I have politely responded to each with the comment that I have never in my life been more uncertain about the US or global economy or what our new political leadership will do next year. So, a forecast with any specificity seems impossible at this point.

What I am certain of is that a “two-speed media economy” will likely get even more pronounced relative to 2016. Conventional or legacy media will continue to garner a smaller share of the advertising pie with absolute declines likely in Local TV, newspaper and national magazines. Digital and social media should see solid gains with mobile being a big winner regardless of overall economic performance.

I wish all of you a happy, healthy and very prosperous 2017. This year I heard from readers in over 100 countries and appeared to have been read by professionals in 152 countries. I love to hear from you and thank you for your constant encouragement.

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

Wednesday, December 21, 2016

Mr. Market and The Media World

Sometimes people refer to markets as if they were actually people. If you watch CNBC and Bloomberg as I often do, a commentator or Wall Street type may something akin to “the market thinks that stocks are overextended” or that “the world is awash in oil.” Where did this come from? As best as I can tell, it came from Benjamin Graham’s 1949 book, THE INTELLIGENT INVESTOR. He was more famous for his early book SECURITY ANALYSIS and for being Warren Buffett’s teacher in the Columbia M.B.A. program and his first real employer (I reread the Intelligent Investor annually with emphasis on his discussion of Mr. Market and also “the Margin of Safety”).

Graham essentially says that Mr. Market is bi-polar. He toggles back and forth between crazy optimism and downright despair. Graham says that there are times when Mr. Market offers you ridiculously high prices for your shares (no matter how small a piece of a business) and others when his offer is obscenely low. The trick, according to Graham, is to give your shares to Mr. Market when they are high, and buy more when he offers you little for them provided the underlying business is sound.

Some years back, I tried to use this approach with advertisers. In the 1970’s and in to the early “80’s, media pricing in broadcast moved pretty much in lockstep. In good times, all 200+ markets were able to mark their prices up and in recessions, prices fell across the board in a fairly predictable pattern. Since then, prices have been less uniform. Boom towns experienced booms and rust belt and rural areas tended to have little pricing power.

So, when recession or booms times hit, I would sit with clients and sometimes tell them to avoid certain Nielsen Designated Market Areas (DMA’s) as they remained pricey on a per person basis but go stronger in to other areas where things were so soft that we could find no bottom in pricing or receive great RELATIVE value.

This did not go over well within my shop. Management reps would tell me that I was walking away from easy billing. My response was that we were tossing money down the toilet as the prices were way too high and there were many markets out there where we could do well with recession resistant products and sell more cases given how much more bang we received for our advertising buck.

I would also suggest that we shift to radio as sales often skewed toward metro areas rather than an entire TV market. My internal critics saw me as a troublemaker. I wanted to do more labor intensive market by market work and sometimes cut budgets back until there was a return to normalcy in media pricing in certain localities.  When attacked, I always said that I was thinking of the long term interests of the client(s). It generally did not play well.

In the early days of digital, a similar pattern occurred when players did not know how to price their on line properties. We witnessed some temporary spectacular bargains as well as ripoffs. Today, with more knowledge of delivery and huge players buying on exchanges, wild inequities are not so prevalent.

With conventional media, the Mr. Market approach still has some validity. A smart client may see you as a hero if you save them a seven figure sum and still increase case sales for their product. Just do not expect a warm welcome inside your shop unless management has a true long term horizon.

May I wish MR readers around the world, a very Merry Christmas.

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

Wednesday, December 14, 2016

Something Will Turn Up

A long time ago I went to a Christian Brothers Academy in Rhode Island. I did not like the brothers and they did not like me. Yet, the school had one redeeming feature. In each of my high school years several lay teachers exposed me to some good literature. I recall having to read three Charles Dickens novels--Great Expectations, A Tale of Two Cities, and David Copperfield.

My favorite Dickensian character was Wilkins Micawber who was in David Copperfield, published in 1850. He was always in financial straits and was said to be loosely based on the author's father, John Dickens, who once served time in debtor's prison.

A famous Micawber quote from Copperfield is "Annual income twenty pounds, annual expenditure nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pound nought and six, result misery."

Micawber could never live within his means. Yet, he was a buoyant optimist. I vividly remember the Cliff notes describing him as "living in hopeful expectation."

The struggling character, Micawber, when up against the financial wall, would often say--"Something will turn up."  This phrase or attitude strikes me as how companies and governments are reacting to the tech revolution both in terms of long term employment and effective marketing.

Let’s face it. We are in a period of creative destruction. (See Media Realism, “Schumpeter Lives in 2009 Media, 1/30/09). The problem is that the technology or digital boom is different from previous business cycles. What people do not seem to grasp is that tech does not move smoothly or predictably. Technology is not there to create jobs; it is growing as it allows innovators to cut costs and steal market share from old tech forms (i.e., conventional media or brick and mortar retail). The benefit of tech is that it allows you to do more with less, especially people. Government solutions are often more spending in existing systems that would not alleviate the problem.

So, many jobs lost as technology grows (robots in factories or in fast food joints, self drive cars and trucks, and in mining) will never be replaced. Can anyone turn this around? Some World War II style mobilization to move us from reliance on fossil fuels to  alternative energy would be a possibility but no clear program has seen the light of day and political resistance from pressure groups would be huge. A massive infrastructure build-out would create many blue collar jobs for a few years but, again, is it politically viable as it is sure to be a budget buster?

In the media world, I continue to talk with people who remain in denial about the last 15 years. Local broadcasters say that when the economy bounces back more strongly, so will they in a big way. Have they forgotten about commercial avoidance? Do Netflix, Hulu, Amazon Prime and DVR’s have any significance? How about viewing with another device in play as well?  Even the most slow witted broadcasters have to see this but the denial continues.

Clearly, old models no longer apply. The psychological foundation for a conventional media revival no longer exists. Our world has changed for good.

So, will something turn up for either displaced workers or conventional media? Sorry, Mr. Micawber. I just do not see it.

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

Monday, December 5, 2016

The Public Relations Renaissance?

Let me be candid upfront. Historically, advertising people did not always have the highest regard for those who practiced Public Relations (PR). The take was that the advertising and marketing people felt that they did the heavy lifting when it came to getting a brand recognition and acceptance while the PR people would get a blurb in a local newspaper and be strutting while sitting down about what they had accomplished. Some found them to be such lightweights that behind their backs they referred to PR staffers as “the flak.”

Well. Having said that, I am convinced that things will change somewhat over the next several years. Of the seven pillars of Integrated Marketing Communications (Advertising, Direct Marketing, Internet Marketing, Promotion, Public Relations, Publicity, and Personal Selling), Advertising is clearly on the decline. Commercial avoidance continues to get stronger with each measurement period as more of use our DVR, watch Netflix or Amazon Prime or simply have another device going when advertising appears. So, conventional advertising simply is not and cannot work as well as it once did even a decade ago. Something has to pick up the slack among the remaining Integrated Marketing Communications (IMC) pillars. While each brand or service will have a different mix of IMC components, I would bet that a surprise gainer in the emerging new reality will be PR.

Why PR? Studies in recent years have clearly illustrated that adults are increasingly getting cynical about advertising. This is especially true of millennials who rely heavily on social media, Amazon reviews, and the opinions of friends before making purchases. PR, executed properly, can help a company. Remember, PR is not a 30 second spot or a print ad. It is a PROCESS by which a company can assess where they stand with any number of their publics--consumers, employees, shareholders, government, the media and their local communities and then take action to repair perceptions. Essentially, it is a long game. A company in the 21st century needs to refine and rebuild its reputation continually. Running and hiding from the press only raises more issues than it solves. Meet with your opponents be they political, press or community groups. Today, we live in a 24/7 world of communication. If you let outside groups know who you are and what explicitly that you stand for, you will likely come out way ahead of what advertising (as we know it) could ever do for you.

Finally, a few words about “spin.” The late presidential speechwriter and wordsmith William Safire defined spin as a “deliberate shading of news perception; attempted control of political reaction.” PR people are often referred to as “spin-doctors” who can put a positive face on anything. Sometimes, they get away with it but it appears to be less so today. True PR pros put the best foot forward of their client but they should never spin. Remember when as a child you were told something to the effect that if you tell a lie you will eventually have to tell 10 more to cover it up? Well, in the business world that is oh so true when it comes to spin. As PR guru Fraser Seitel put it, “The crisis will hurt you, but the cover-up will kill you.” If you always tell the truth, even the painful truth, you never have to keep track of what you have said in the past. Spin is manipulation and people today, especially millennials, do not want to feel as if they are being toyed with or lied to in any way.

So, keep an eye on PR. Perhaps upgrade your PR staff or service provider. It may prove to be inexpensive and effective over the next decade.

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