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Tuesday, January 16, 2018

From Mass Marketing to Segmentation to Micro-Marketing

Things in the marketing world are moving faster than ever. The changes of the last 10 years have caused significant shifts in companies marketing and especially advertising mix. Amazingly, to me, there are still a number of players who cling not simply to old terms but actually an old mindset that is way out of step for 2018.

Recently, someone told me that his firm remained very firmly a mass marketer. I started laughing and with usual Don Cole diplomacy told him that I did not know that his company sold toilet paper (one would hope that usage would cover all market segments!). He seemed wounded and the conversation ended pretty abruptly. I was surprised as mass marketing seemed to begin in earnest with the national reach of railroads and the Sears Roebuck catalog in the 19th century. Radio and then TV made mass marketing even more popular. Yet 10 years ago, at a conference, I heard a P&G executive talk only about segmentation even for flagship brand Tide. For 60 years, Tide has been America’s #1 detergent and now it is the global king. The shrewd P&G marketer did not consider Tide, Crest, or Gillette to be mass market brands. Every one of their 30+ billion dollars brands was carefully targeted. To him, mass marketing was dead.

Early in my career in New York, segmentation was the big buzzword. Yet it was not a new thing in 1974. I vividly recall in graduate school at Boston College putting together a brief paper about General Motors chief Alfred P. Sloan. In 1924, Sloan stated that “GM has a car for every purse and purpose.” Way back then, more than 90 years ago, Sloan was in to segmentation with his Cadillac, Oldsmobile, Buick, Pontiac and Chevrolet brands each reaching a different socio-economic group. Forty years after Sloan, Segmentation began to really get some meat on the bones, as theorist William Lazar added “lifestyles” to the marketing dynamic. The broad thesis started with demographics—gender, age, income, education, race, occupation and household size. Layered on to that was geography—urban, rural, climate and region and then psychographics—attitude, values, lifestyle and cultural opinions. Looking at prospects this way helped define whether a segment was worth the effort (I am convinced this is a major reason why most new businesses and products fail as people do not look at segments potential harshly enough). If a few segments pop and you can afford it, you speak to each segment in a different way.

Over the last 10 years as internet marketing has blossomed two other entries are changing the face of consumer sales—big data and some amazing algorithms. As we spend more online, be it with Amazon or individual retailers, more and more detailed and EMPIRICAL information is being gathered about us as individuals. Additionally, the big players do 21st century modeling which can forecast better than ever before about whom else among their customer base may like the product(s) that we just purchased. As invasive as this seems to us baby boomers, I assure you that most millennials could care. They want convenience—NOW! So, marketers know your sweet spot. Consider shoe leader, Zappos (owned by Amazon). They can smoke out the budding Imelda Marcos clones among us and offer them shoe “deals” almost daily. They can track your last purchases and know when you are due for a new pair of athletic shoes. All of this has to be rough on advertising. Why spent a lot with buckshot approach (mass market) or even to a segment when you know the volumetrics of your current base so well? As a friend said to me, “today’s marketers know more about me than the IRS, CIA, NSA, and my girlfriend combined.”

 A very wise economist I knew long ago told me that “bad ideas never really die in economics.” Try socialism or wage and price controls or protectionism. In a way, the same is true of marketing. Mass marketing is not dead yet although its utility is so limited that it cannot go it alone. Segmentation is still useful in many ways but that is being replaced with micro-marketing on a pinpoint basis.

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

Monday, January 8, 2018

The Savings Rate and The Two-Tiered Economy

In 1789, the US government, as we know it, was formed. George Washington became our first president and the Congress and Supreme Court had their initial sessions. That same year, government officials first began to collect financial data. Their methods had to be simplistic compared to today but it is fascinating to look at historical information from both governmental and private sources. One statistic that I also tend to zero in on is the savings rate in a nation. Historically, in the U.S., the rate tended to hover around 10% for the first 190 years of our our republic. According to economic historians, many people faced both employment and economic uncertainty so it was wise to always have something stashed away for a rainy day. If the figures were accurate, that might go a long way to explaining the great economic expansion that our nation had for several generations.

Starting in the mid-1960’s and into the 1970’s, the savings rate began to fall. People borrowed a lot more for homes and vehicles and the credit card became ubiquitous in many American households. With the exception of the 1974-1975 period when we faced inflation, recession and Nixon’s resignation, the savings rate never saw 10% again. By 2006-2007, some private estimates had the savings rate at zero! Think about that all of you who maximize your 401k’s each year. If your savings rate is 10-15%, a large number of people had to be maxing out their credit cards or lines of credit to get the average to come in around zero. When the Great Recession clobbered the economy in 2008-2009, the savings rate bounced back to 5-7%. Remember, this was when the unemployment rate jumped from 4.8-11.8% so many could not save at all.

As our slow expansion proceeded in recent years, new Federal Reserve figures peg the savings rate at 2.9%, the lowest official figure since 2007. At first blush, it sounds great in the sense that people are feeling confident, secure about their jobs and are spending more. Yet, other reports of late contradict that. Moody’s reports that 2.3% of automobiles are being repossessed. Also, some 3.6% of credit cards are past due without even a minimum payment. Most ominously, the Mortgage Bankers Association has reported that 9.4% of FHA loans are now in default which is a large jump from last quarter’s 7.94%. Bloomberg Business wrote that most of these defaulted home loans are NOT from Texas and Florida which suffered mightily from hurricane damage. When I first saw the FHA stats, I assumed the adverse weather was the culprit. Not so!

What is going on? As is often the case, to me it is simple demographics. Some 51% of US either own equities via 401K or other deferred compensation plan or have some form of private holdings. As the Dow Jones continues to break records, people feel wealthier and optimistic. At the same time, some 49% of Americans have no equity positions and are struggling to get by to a large degree. That is where the late payments, delinquencies and defaults are largely coming from these days.

Marketers need to be alert. Things may be great for you, your family and your friends. The rising tide has not lifted all boats. Depending on your business and target audience, things may not be nearly as stable as they appear.

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

Saturday, December 30, 2017

Bayesian Theory and Network TV

A number of MR readers have contacted me and asked me to comment on the demise of network TV as a powerful advertising medium. With what I hope is perceived as good humor, I refuse to do so as forecasting the end of something that is happening gradually is always a crapshoot. Also, two wrote back and said, essentially, okay, could you at least give a forecast on when the network television upfront market will cease to be? The answer that I gave to both was that I was as surprised as they are that it persists but I have no clear timetable for its demise.

No one accepted my answer to either question. I have thought about both questions for 17-18 years and think about them from a variety of angles. For years, I have told people that TV, particularly national network TV, continues to do fairly well is because marketers and advertisers are risk averse and do not no where else to put the bulk of their money. All who are remotely honest admit that the medium does not work nearly as well as it did years ago in terms of either awareness or moving the sales needle, but have yet to find the mix of platforms that can successfully replace it.

One way that I have looked at it and never shared with anyone until now is that concept of Bayesian Theory which I will oversimplify tremendously. Thomas Bayes (1702-1761) was a British mathematician and theologian (a unique combination!) who was an early expert on probability. Bayes’ interpretation of probability looked at the strengths of beliefs and hypotheses rather than simply looking at frequency of occurrences in the past. Today, most statisticians considered to be Bayesian often predict how people update their beliefs. So, forecasts about future events are often linked to the strength of prior beliefs coupled with the extent to which new information is different from those beliefs. Even a shock to the system such as declining audience levels and attentiveness to the TV medium has not automatically triggered a revaluation of the nearly 70 year old belief that TV is the way to go for many advertisers. Importantly, it is not simply enough for the existing idea to be discredited (i.e., TV does not deliver viewers or sales as it once did). To cause a strong shift in behavior there has to be an alternative that is viable to a cautious group of marketers who are spending billions and afraid to submarine their careers due to a misstep.

So, therein lies the key problem to me. There are many platforms emerging but whither does one flee from TV? Social media has certainly surprised many of us but can it carry a big delivery burden for advertisers other than young adults? Mobile has fabulous potential but is not there yet. Big data use by Amazon and other online marketers has to cut the need for advertising in general and their forecasting models are relentlessly getting better each year.

How long does TV have? I just do not know but I do know that advertisers of all sizes need to continue to experiment and hedge their media bets going forward. TV also may reinvent itself as a direct response medium in ways that seem like science fiction today.

I wish all of you a happy, healthy, prosperous and peaceful 2018.

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

Friday, December 22, 2017

Failure Is Definitely An Option

Over the years, either in reading about successful entrepreneurs, athletes, politicians, executives or talking with people, the term “failure is not an option” often comes up. I believe in the power of positive thinking more than the next guy but I think the term is the biggest pile of nonsense I ever heard. Most new businesses fail as do most new products. Only .4% of businesses last 40 or more years.  Some 70% of TV shows get cancelled in their first season and most motion pictures lose money.  If you are a baseball player who hits .300, you fail seven out of ten official at bats. Yet, if you can hit .300 for 10 straight years, you are a virtual lock for the Hall of Fame.

So, failure always has to be considered when starting any project, enterprise or investment. My hero, Teddy Roosevelt, as a newly elected governor of New York was speaking in Chicago on April 10, 1899. TR said in that speech, “It is hard to fail; but it is worse never to have tried to succeed.” Roosevelt was an advocate of what he called the “Strenuous Life”, which was an active existence that filled every moment with either intense physical or mental stimulation. He must have been exhausting to be around at times. The point to me of his comment was that striving or trying is the key. No one succeeds all the time.

Some years back, someone urged me to become involved in a partnership as an angel investor. He said, describing the fellow who was to be the managing partner,  “Don, this guy is a genius. EVERYTHING he touches turns to gold. He never loses.” I laughed and politely declined to get involved. At one time or another, everyone loses. Yes, Rocky Marciano retired undefeated as heavyweight champion with a 49-0 record. Herb Elliott, the great Australian 1500 meter man and Olympic gold medalist, never lost a race. Yet, in the business world, even the best lose from time to time. My mail and e-mail boxes are daily stuffed with solicitations for investment advisory services. The puff pieces claim that their pundit always delivers outsized gains to subscribers and has been doing so for a few decades. The first question that I always ask myself is how come Mr. X is not listed in the FORBES 400 of wealthiest people.

Warren Buffett is a leader on the  FORBES list and is often touted as the 4th wealthiest man in the world. Buffett makes mistakes. He has had down years and has made some poor investments. His track record is outstanding but he does not always win. Read his letter to shareholders in the Berkshire Hathaway annual report. He is candid about his mistakes each year, some real and some opportunity losses. Buffett is arguably the greatest investor in history yet he has made mistakes—many of them. On balance, of course, his record is outstanding. I remember someone telling me about Bernie Madoff a number of years ago. They told me that he never lost and, like clockwork, delivered 12% gains for clients year after year, and they were able to double their stakes every six years. I said that I did not believe it as no one could be that consistent—even the greatest a la Buffett had losing years when equity markets got hammered. When Madoof’s Ponzi scheme was uncovered all I could think of was the old saw about “if it seems too good to be true, it probably is not.”

So, be cautious when someone allegedly never fails. Some do not because they lead lives of breathtaking boredom. I knew a media buyer who only would buy time in established programming. This individual sometimes paid too much but never had a weak post buy analysis. At the same time, the buyer never had the equivalent of a 500 foot home run. If you do not drive, you can never get in a car accident. Others gloat when markets tank but then admit they keep virtually of their money in CD’s. Being cautious is a virtue but being 100% risk averse is crazy to me. We are about 5% of the global population yet millions of Americans refuse to invest outside the U.S. which is where the significant growth is and will likely continue to be. In advertising, I saw people want to bet the ranch on cable TV networks in the 80’s (too soon) while others waited until the train had left the station early in this century before they got involved. The same has been true of making a commitments to online and social media.

Look at the great companies today. They have had failures but they regroup, dust themselves off and keep going. Remember the Amazon phone? How about Google Chrome and how Facebook was toast? Or, Google Finance killing Yahoo Finance? No one is perfect but those who succeed keep stepping up to the plate, learning from their mistakes, and know that there will be future errors, some great and some small. The key is to take risk and move outside your comfort zone and as TR would recommend, keep striving.

Allow me a brief holiday aside. While researching this piece, I came across a Teddy Roosevelt quote that made me laugh out loud. In the 1970’s, I used to enjoy DJ Casey Kasem’s America’s Top 40, a radio program that did a countdown of the most popular songs in America. At his sign off  at the end of each show, Kasem would always conclude with, “Keep your feet on the ground but keep reaching for the stars.” He had a wonderful radio voice and I found it a bit inspiring plus I was impressed that he came up with such a great line.

Well, yesterday, I was looking over some Teddy Roosevelt speeches and saw that then President Roosevelt was addressing some students at the Groton School in Massachusetts on May 24, 1904. His conclusion to the young men was “ Keep your eyes on the stars, but remember to keep your feet on the ground.” :)

Merry Christmas to MR readers around the world!

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

Saturday, December 16, 2017

Is It Different This Time?

There is an old saying in the stock market that  shrewd players say should always be avoided. It is simply "this time it is different." Time and time again, market prognosticators have been proven wrong as they claim we are in a new paradigm and yes, this industry or specific stock will grow to the sky.

Well, when it comes to structural changes in the economy, I would say that this time things will truly be different.

My topic, of course, is mechanization joined by robotization. Changes are beginning to take shape that may well open up a unique labor situation in the developed world.

Prominent socialists led by Marx and Engels forecast that mechanization in the mid-19th century would lead to massive displacement of middle class labor. They projected that people would revolt and socialism would take the place of the free market. They were wrong. They did not foresee Carnegie's steel mills, Rockefeller's inexpensive oil, or Henry Ford's $280 roadster fueled by gasoline. Additionally, they did not see the emergence of millions of white collar and clerical jobs emerging and the growth of educated professionals as well.

What now? Here is where I think things could be different. This time around the while collar jobs will be eliminated. True, new technology does create new jobs to a certain degree and some small new sectors job-wise will emerge from our new wave of technology. * Yet, the losses inevitably appear to be greater than the new positions (for humans) created.

Joseph Schumpeter popularized the term "Creative Destruction." His thesis was that new improved technology and products wiped away the old and were major sources of profit. Can anyone argue that Microsoft, Apple, Amazon, Facebook and Alphabet (Google) have not been wildly profitable? Now, what gnaws at me almost daily is that the changes to come will be profitable for stakeholders but the number of new jobs will not replace the millions lost as old markets are destroyed.

Everyone understands that self drive trucks will eliminate maybe 350,000 jobs in the U.S. over the next 20 years. Yet, what about the office jobs lost with the new tech?

Ad agencies will need far fewer people. Some day (will not forecast when), the broadcast market will be replaced by online exchanges similar to what is happening with online advertising trading. Far fewer people are needed and the "bust your chops negotiators" from central casting may find themselves unemployable sooner than you think. Big Data analytics will take some or much of the fun out of advertising and marketing but why spend $375,000 to shoot a high quality commercial and $10 million to run it on programming where attentiveness is very low? As Big Data improves, Amazon and fellow travelers will help us reach the Holy Grail of marketing--reaching the right people, with the right message, at the right time for far less money than now.

I have another conclusion regarding the rise of robots et al that invariably generates a lot of flak from existing marketers, media salespeople and emerging entrepreneurs.

My thesis is that in addition to the elimination of millions of white collars jobs over the next two decades, existing global brands will be in an even more powerful position than they are right now. With so many platforms out there, young and questionably funded upstarts cannot build brand awareness or trial easily. Yes, a few upstarts will break through as they always seem to do. Those success stories will be even fewer than today.

Big players such as Nestle, General Mills, Coke, Pepsi, P&G, Colgate-Palmolive, Unilever and Kraft may simply resort to line extensions to expand their brand families.

Now, if million of white collar or middle class jobs are eliminated, how will our economy be affected given that some 72% of it is consumer driven?

Some people are saying that the robot revolution will take the entire economy down as far fewer people will be able to purchase many consumer products.

A solution of sorts has been floated in recent months by many people including Mark Zuckerberg of Facebook, Ray Dalio of Bridgewater Associates (large hedge fund) and Sir Richard Branson of the Virgin group of companies. It is Universal Basic Income. The concept is that everyone gets an income whether they work or not. These three billionaires are essentially saying that as Robotics and Artificial Intelligence grow, there will be huge and unprecedented dislocations in the labor market. Millions will be out of work with no hope for employment. So, a basic income must be provided.

I have issues with this. Some milennials have told me that a Universal Basic Income will be necessary. Yet, they are excited about it as young people will have a basic income and can pursue entrepreneurial or scholarly ideas. I agree that a guaranteed income could produce the next Hemingway or Fitzgerald or perhaps Steven Spielberg. At the same time, I think that many will become idle and drink too much, watch TV and not accomplish a lot in life. If you think we have an opiate crisis now, image if millions more, especially in economic depressed areas now,  are displaced with little hope for a leg up via a good job?  Also, what type of cycle of dependency would be created if people knew they had an income (very modest) for life? It would seem that income inequality would have to soar far beyond what it is today. Experiments are now going on in both Finland and Ontario, Canada with the Universal Basic Income.

Recently, I ran this idea by someone whom I admire very much but who is far more liberal politically than I (not hard). She surprised me by having the same concern about a long term cycle of dependency. Also, she stated that unless you are old or handicapped, you need to do something. She suggested a revival of something similar to the Works Progress Administration (WPA) from the Great Depression years as a link to Universal Basic Income. Yes, it might create still another bureaucracy but it might save the spirit of millions.

So, the next 20 years may truly be different. Businesses are going to squeeze costs out and answer to shareholders by increasing profits. Robots and Artificial Intelligence will likely not be stopped.

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

*this concept was best illustrated to me in the writings of Professor Randall Collins of the University of Pennsylvania

Monday, December 4, 2017


My favorite definition of superficiality is appearing to be true or real only until examined more closely. In the business world, and perhaps even more sadly, the personal one, I have found that superficiality rules.

Over time, I have heard people say that they had made a really "deep dive" into a particular topic. Dig a bit deeper into their "analysis" and it is clear that the analysis they provided was superficial at best. At the same time, if you try to examine a topic from many sides, people are annoyed. I once had a boss who would ask me a question and he would stop to interrupt me and tell me to give him "the bottom line." Sometimes it was okay, but often the issue and my recommendation or analysis was next to impossible to articulate in 30 seconds. I took to sending him a long memorandum as a follow-up. He must have had a reverence for the written word as he would devour it and pass it on to others in top management. I believe it really helped my career and also discovered that he was not a master of discretion. So, after a few years, I would hand him a memo and plead that it would be "for his eyes only." My Machiavellian tactic worked great as, within 24 hours, six or seven people would tell me they had read my confidential report and liked it. I did not do this often but it helped my career and gave me a reputation as being thoughtful.

So these days and for maybe the past two decades, I try to surround an issue. If I am exploring a new topic, I often read five-six books about it. Invariably, my initial thought is wrong. As a follow-up, I always look for articles or new books that refute the position that I have taken after taking the initial plunge in to the topic. I realize that this takes time and often, in business, you have to pull a lot of information together and make a fairly quick decision. All too often, however, people make their initial decision and never revisit or explore new data a year or 10 years later when the landscape has likely changed.  With things happening at warp speed in the new world of media, I am really surprised by what I hear, see and read from alleged media professionals these days. A few examples:

—someone whom I never worked with but have known for years, sent me a draft of a media plan for an important client of his. I read it and initially was impressed by what a carefully crafted analysis he had made. As I worked toward the end, my blood pressure surely must have been rising. He provided TV performance estimates (i.e., reach & frequency projections) that were sky high and would have been questionable 20 years ago. When I confronted him with my concern, he said that it did not matter as people wanted to believe the unrealistic projections. I went in to a long monologue about how today milennials (his target, by the way) rarely watch TV without another device going. So, all performance estimates have to be wildly overstated today as they do not and never have really captured commercial attentiveness which now has to be at an all time low. He left the numbers in and sold the plan.

—more than one person has said that they will not test mobile executions until it gets to a 10% share of advertising expenditures. It will not be too late but why wait and think of what you might learn about this emerging medium in the meantime?

—all too many people still spend a great deal of their budgets in the U.S. even though there are countries where they have solid growth and distribution that have economies expanding at a rate at least twice that of the United States. I never say stop spending at home but with the tremendous wealth shift from the West to the East, this seems very shortsighted.

—in general, many are using media cliches from 20-30 years that no longer apply in today’s world of commercial avoidance and many new platforms.

My friends and acquaintances need to work a bit harder and take an authentic “deep dive” in to a host of issues. One fellow told me that I am too intense and I should imitate him and “coast to retirement.” That is not I and it is not a good way to go out.

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

Wednesday, November 22, 2017

Media Deals and Scale

In recent weeks the business press and the three business oriented cable channels in the
U.S. have been buzzing about possible mega-media buyouts of famous names.

The most prominent has been 21st Century Fox selling part of its asset base to Disney. Why would they want to do that?

Well, their entertainment business is not overly profitable as most movie studios are not. They appear to want to keep their broadcast network, Fox Sports, and Fox News and Fox Business. Why would Disney want their movie studio, perhaps FX and a few other properties? Soon, Disney will launch their own exclusive streaming service. They could use the huge backlog of films that Fox has in their library. If Disney wishes to take on Netflix, they need lots and lots of content. Some things they cannot buy from Fox. Disney owns ABC so the Fox Network is off limits legally. Given that they own ESPN, Fox Sports is a non-starter as well.

The issue that many talk about regarding the the legacy media companies is that they lack “scale”.  In today’s world, bigger is invariably better (with very few exceptions) and “content is still king” proving that Sumner Redstone was right about 30 years ago when that term was attributed to him. Speaking of Redstone, how much longer is CBS viable as an independent entity? For decades, CBS was “The Tiffany Network” that dominated the Nielsens most years and made executives and shareholders a fortune. They still have an impressive lineup of assets including everything with a CBS in front of the name plus Showtime, CW, Smithsonian Channel, and Simon and Shuster among others. Yet, they are increasingly becoming a small player in the scheme of future media. Their market capitalization as I write is $22.6 billion. Impressive compared to thousands of publicly traded companies. Yet, according to both The Wall Street Journal and CNN, Apple has $262 billion in cash parked overseas. So, technically, they could purchase CBS whole without effecting their cash on hand much and with no debt.

We live in an unusual era where the greatest companies that have ever existed are literally busting with cash. In addition to Apple, Alphabet (Google), Amazon, and Facebook all in the position of buying out almost anyone. So, what does all of this mean? To me, Disney is doing the right thing to possibly buy portions of Fox simply to stay viable in our brave new world of media. CBS does not appear long for this world. In recent weeks, both Apple and Facebook have announced that they will be producing original video content. This has to make Netflix a bit nervous as these monsters may lose a few billion a year on their video ventures for a long time and never run out of funds. Also, Alphabet has never fully monetized You Tube although they appear to be making small steps in that direction.

One thing few people are talking about is that with more players such as Apple and Facebook getting in to creating content (likely without commercials), this has to be another body blow to advertiser supported TV. There are only so many hours in the day and Netflix, Amazon Prime Video as well as non-commercial stalwart HBO continue to grow. When viewers are given more options from Apple, Facebook and YouTube, TV, as we know it, has to suffer.

My forecast is not particularly prescient or brave—the ultra big will only get bigger and legacy media companies will likely have to sell out fairly soon to survive.

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