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Jennifer Aniston is 40!

Those of you who know me or have become frequent readers of Media Realism might be more than a little surprised by my People Magazine style ...

Wednesday, April 29, 2009

Schopenhauer and Your Sandbox

A well known German philosopher was Arthur Schopenhauer. He lived from 1788-1860. Reading him is difficult as I found some of his theories loopy or impossible to penetrate. He was also deep into pessimism which flies in the face of my natural upbeat sense of life. Today, he is probably best known for contributions to psychology and even the arts rather than for his philosophical ramblings.

I can best describe my feelings toward him by stealing William F. Buckley's description of someone else--he was "a huge collection of valuable stones, irregularly set, perhaps; eccentrically cut, yes; but giving out shafts of brilliant light."

The most brilliant quotation from Schopenhauer in my mind is as follows:

"All truth passes through three stages:

First, it is ridiculed.
Second, it is vehemently denied.
Third, it is accepted as being self-evident"

Does the above remind you of something?

Nothing so succinctly sums up what is happening in the communications business today as Schopenhauer's quotation. The majority of people whom I speak with and correspond with regularly are still largely in denial about what is very definitely taking place.

Not long ago, I spoke to a TV station sales team about the impact that Local People Meters (LPM) would have in their market when they came on stream in the intermediate future. The group was attentive, the questions were really good, and I felt a real sense of accomplishment. As I closed, the sales manager stood up and said (I paraphrase) : "We appreciate Don's insights on the future impact of LPM. But, remember, we are a unique station and while others in the market will be affected, our news will be stronger than ever and we will continue to be #1 across the board." This brought some smiles, a few claps, and visible relief especially among some of the younger sales people. The general manager, who sat in, thanked me and then asked if he could drive me to the airport. I was flattered and immediately said yes.

Once we were alone in the car, the G.M. exploded. "Bob is a terrific sales guy but he thinks it is 1980. I brought you in to wake the team up and you did a fine job. But, he refuses to leave his carefully guarded sandbox and accept the inevitable."

We all know lots of people like Bob (not his real name). They find it impossible to admit what is going on. I fully realize that it necessary to sell your product with enthusiasm and act as if nothing else can compare to it. But, increasingly, self delusion seems to be gaining ground in the communications community.

The simple truth is that the advertising model and advertising agency model is broken. And, our Humpty Dumpty world will not be pieced together again after this terrible economic climate clears. Yes, money continues to pour into national network television. Why? People do not know where else to put it. But, that cannot last much longer unless if can be proven to pay for itself. The consumer is moving toward total control and they are never, repeat never going back to passive viewing or invasive entry of conventional advertising. The smart players are forming all kinds of alliances and are trying to find new ways to reach people and to be compensated fairly for it. Many will succeed and survive and prosper. Many others, sadly, will not.

The worst thing one can do is to draw the wagons in a circle at a time such as this. I fully realize that it is human nature. But, this time it really is different. I repeat what I said in the first post for Media Realism back in early January. The only people who seem to recognize and accept what is going on are the 58-62 year olds, mostly well heeled, who will speak candidly about the changes and not fear them. Yes, their economic security insulates them from fear. But, generally, in most dynamic change, it is the old folks who wish to maintain the status quo. That is not at all the case these days.

My advice if you are young is simply stay current and keep an open mind. I have learned in life that when a door closes, several others open. It is normal to be uncomfortable with rapid change, but do not let it paralyze you. Work in your sandbox, and sell your product or service with gusto. But do not ever for a second think that the clock will roll back five or more years. It is not going to happen.

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

Thursday, April 23, 2009

Jennifer Aniston is 40!

Those of you who know me or have become frequent readers of Media Realism might be more than a little surprised by my People Magazine style title for today's post. Well, today's topic is demographics and the working title for this post was initially "Demographics are Destiny." When not even my panel members responded in their usual 90% mode, I knew I might lose a thousand readers or more before they even began the article.

So bear with me for a couple of minutes. The lovely Ms. Aniston is germane to our topic today.

The issue at hand is that the Western world plus Japan is getting older; in some cases, significantly older and quite rapidly. The average age of the Germans, Japanese, and Italians is well into the '40's. Late in 2009, the British, French and Canadians will join them. In fact, the median age of Western Europeans is rising two days per week according to UN estimates. Today, in Western Europe, there are 3.8 people working for every pensioner. In 20 years, it will 2.4 workers who will support every greybeard.

The US remains relatively young at 36.4 largely due to the consistent influx of young immigrants from Mexico.

Okay, just a few more statistics. Birthrates are plummeting. According to population experts you need 2.1 children per family to sustain ZPG (Zero Population Growth). In the West, even ZPG is becoming a memory. Italy, Greece, and Spain are at about 1.3, Germany 1.4, and Scandanavia 1.7 to 1.85 depending on country. Taiwan is down to 1.13 and Hong Kong 1.0.

Does this matter to marketers? It should. Investment analyst Harry Dent who uses demographics to track investment trends put it this way: " Declining population is disastrous for a country, as innovation declines well before economic trends--and you just can't have an economy where most people are in a nursing home! Yet aging trends are difficult to reverse, as an aging population tends to be more adverse to change and is increasingly less able to have children."

Right now, the U.S. is right on the bubble with a birthrate of 2.1. This is due to our culture which in recent decades supports working women. Also, the high immigration of persons from Mexico and South America includes people who tend to have far higher birthrates on average than of couples born in the U.S.

So, for the short term, our population will grow modestly. But looking ahead a bit, things could get difficult in many ways.

We need to keep an eye on this aging trend for marketing, societal, even political reasons. The place that I will monitor closely in the years to come is Italy. Many of us know or grew up around large boisterous Italian families that added much laughter and love to our lives. Well, in Italy, they are no more. The average Italian male marries in his 30's and has one child. Social theorists say they stop at one because they marry late, want a better life economically, and Italian men (like Americans) tend not to help out much around the house. As a result,the women do not want other kids. In contast, in Norway where 75% of the women work, men help out a great deal and they have the highest birthrates in Europe!

Also, some 31% of Italy's budget goes to their form of Social Security. As fewer people contribute to the old age pool, something has to give. Either benefits will get cut or taxes will soar. We will likely face that same issue around 2016-2018 given our current spending deficits when some hard choices will be made regardless of which party is in power. Taxes for the affluent will almost surely rise. It is a demographic certainty. Long term, it may be a good thing to keep Social Security and Medicare solvent but the debate will be loud and ugly.

Harry Dent, the demographically driven financial analyst defends his service by saying the "we can forecast the general direction and magnitude of major economic moves by tracking highly predictable demographic and consumer spending habits."

So, where does that leave all of us in advertising and marketing or media sales?

We see a couple of trends emerging. Despite the inevitable aging of the US population and other Western nations, media changes will continue to accelerate. I cannot tell you how many friends and acquaintances in their 50's and 60's brag to me that they rarely see or hear commercials now that they have a DVR or satellite radio. And, we over 45 types tend to be the ones with the serious money that many marketers want to reach. (Sorry, kids)

As baby boomers (born 1946-64) retire in big numbers, they will likely put even more stress on securities and real estate markets as they cash in savings to live on in their golden years.

This would appear to set the stage for a trend that we have mentioned recently in Media Realism. Established brands will do very well relative to MOST upstarts. It will be very hard to reach these oldsters with their wads of cash as their children will have taught them how to control their media environment quite well and avoid most commercial interruptions.

Line extensions of the firmly entrenched will likely be the big hits in food, cleaning products, and over the counter medicines. Luxury items may suffer given increased tax rates and I would not want to own a McMansion 7-10 years from now. Even when real estate bounces back, they could be white elephants given the demographic tidal wave headed our way.

Perhaps someone can make a breakthrough with social media among the mature that could provide new ways of reaching them and introducing them to a vast array of new products. Right now, however, that looks like a very tricky problem for even the most resourceful new media innovators.

So, be nice to young adults. Going forward, they will be paying for part of your retirement and a large part of your health care. If you are a nice old man or woman maybe they will not resent their higher taxes as much as you might think.

By the way, Jennifer Aniston is not the only hot babe to turn 40 this year. She is joined by such luminaries as Catherine Zeta-Jones, Jennifer Lopez, and Renee Zellwegger.

Forty really is the new 30!

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

Friday, April 17, 2009

God is on whose side?

There is an interesting story from European history that may or may not be true. In the 18th century, Frederick the Great had 25,000 of his elite Prussian troops lined up and ready to do battle. Just before the festivities were about to begin, a gilded carriage pulled up. Out of the carriage came the local archbishop. Frederick approached him and said "Excellency, what are you doing here." The cleric responded "Emperor, I am here to bless the troops. Surely, you want God on your side."

In a blend of amusement and disgust Frederick responded "Go home, excellency. God is on the side of the big batallions."

Did this happen? It does not matter. But I feel there is a lesson here that applies to both 2009 media and marketing. These are tough and turbulent times for brands, ad agencies, and broadcasters. Who will come out on top whenever the smoke clears?

Think about the last year. There were then only a handful of AAA credited rated US companies. One was AIG, now in shambles, an embarrassment that is being bailed by US taxpayers. GE, the last of the original companies in the Dow Jones Industrial Average and arguably the best run conglomerate in the world according to many, saw its stock dive from 40 to 6 and its AAA rating is now a memory also. These were among the biggest batallions of them all and yet they suffered.

Things are tough and will continue to be for a while. Are there players who can hunker down and use the shakeout to build market share? A story from the Great Depression may be instructive. At the bottom of the depression in 1933, the leading cereal maker in the US was C.W. Post (later General Foods). A competitor of his was a Michigan company owned largely by one W.K. Kellogg. He was approached, as the story goes, by his ad agency about the upcoming year's budget. Kellogg doubled his network radio budget for the following year and kept the pressure on all through the rest of the depression and World War II. By the end of the war, Kellogg was the #1 player in the world, a position that it still holds.

Can brands do the same thing today? It is certainly possible but it takes guts and deep pockets.

Legacy thinking is dangerous. Here is a real life example that happened a few weeks ago. An old acquaintance was stumped regarding a media recommendation and asked me to take a look at the situation. He was completely open and gave me sales by DMA for his client's brand as well as Brand Development (BDI) and Category Development (CDI) indices.

After digging through the data for a while, I spotted something. The Category Development Index (CDI) was high in many but not all markets where the brand was weak. Coincidentally, many of these same Designated Market Areas (DMA) were Nielsen markets where TV pricing was really soft as a result of the recession.

I mentioned this to my friend who began a series of other analyses that took into account factors beyond simple media costs. He was pleased and recommended a special spot TV and local cable effort in several DMA's that simply would not have been affordable a year ago.

A strange thing happened. His president wanted to know why he was increasing the transaction count on the business during a profit squeeze. The client wanted to know if his fee would go up. Neither seemed to care about good marketing or trying to squeeze some extra cases of sales in markets that had traditionally been less than optimal. So, the plan stays exactly as it was last year and sales are down modestly.

Would my suggestion that my friend took, ran with, tested and expanded have made a huge difference? We will never know. What is frightening is that his CEO and his client had no concern for solid marketing or taking into account the current market environment. They, like most today, are nervous and very defensive.

We have said previously in this space that the emerging media world will be good to the firmly entrenched companies (the big battalions if you will). They have awareness, great distribution, strong market share, loyal users, and we would hope marketing savvy.

Also, there should be fewer new products being introduced by smaller companies. Where can someone with an idea, no matter how good, get venture capital money in this environment? It will be really hard. Look for more line extensions among the big players who can trade off the strength of their existing brands.

Those with strong balance sheets can almost buy share in the current environment if they stay the course and keep the advertising pressure on. Are there any W.K. Kellogg's out there in the 21st century? Which marketers will make a defiant bet against pessimism and come out of this malaise much stronger? Time will tell.

An interesting spin is that late in life Voltaire, the French political philosopher refined Frederick the Great's statement. He said "God is NOT on the side of the big batallions but on the side of those who shoot best."

It seems Voltaire may be triggering a future post on how a flanker or guerrilla marketer can survive in the years to come. :)

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

Tuesday, April 7, 2009

Local Cable's Glowing Twilight

"All the forces in the world are not so powerful as an idea whose time has come."--Victor Hugo

It seems hard to believe but nearly 20 years ago I used the above quotation from my favorite novelist to finish an article that I wrote urging advertisers and their agencies to embrace local cable.

Today, for vastly different reasons, I once again give an endorsement of the medium. Stay with me for a minute or two as my reasoning may not be mainstream.

Upfront, the annual statistic that everyone should look at tells the tale. The most recent Nielsen data says that over the last year, the basic cable share of primetime viewing is 58.6%. Unless you are a media primitive, local market buys (with no national cable overlay) have to have local cable as an integral part of the media mix.

Qualitatively, the story only gets better as time passes. With more channels open for local commerical insertion, local cable can give you a selectivity of interest and demographic that broadcast cannot hope to match. Promotions are another area whether local cable has a leg up over broadcasters. The local inter-connects (clusters of contiguous counties or cable systems) can tap into promotions developed by the cable networks. A local cable promotion on ESPN featuring a giveaway to a major sports venue is something that local broadcasters cannot begin to match in production quality and usually in value of the promotional trip. The extra weight you can get via "taggables" which are usually 10 second mentions after a cable network's promotional spot are something that are virtually extinct in broadcast TV.

The recession has also made local cable more attractive than ever. Local cable's roots, prior to inter-conncects was in selling zones which were all cable households in a township or a county or a zip code cluster. Politicians with sophisticated media teams have used them to great effect running different issue copy in different zones. George W. Bush's victories in pivotal Ohio in 2000 and 2004 were sometimes credited to his media maven Karl Rove using local cable to maximum effect. In a weak economy such as today, a multi-unit retailer can used zoned advertising to prop up weak stores or even support the rare new location these days.

And, with local cable there are bonus spots. Called autofill by most MSO's (Multi-system operators) and Time Bank by Comcast, these no charge units can really help advertisers who are struggling in today's moribund economy. The amount of free time that you will receive will vary widely by region of the country, the whim of the cable sales chief, the skill of your negotiators, and the insertion equipment that the system has. But, it is an opportunity to really pile on the points against key prospects that the occasional no charge unit on broadcast cannot hope to replicate. This situation will not last forever but, as we write, the local television economy has not bottomed out in many markets.

Incredibly, there are still local and regional advertisers out there who have yet to use local cable. I met with someone last month who told me that she "might try local cable soon." I am not easily shocked at my age but this one really amazed me.

Why do people not use it? A cable sales director told me that people sometimes tell her that "it is too complicated." I suppose if you bought a wild patchwork quilt of zoned buys or lived in one of those rare markets without a good interconnect, there could be some truth to that. But, what of your client's needs?

An argument that I have heard is that local cable should be avoided as you do not get your message into satellite homes in the local DMA. This is absolutely true but misses a bigger issue. Let us say that a market has only 50% cable penetration. If you do not use local cable and, let us say 60% of that DMA's viewing is to basic cable in primetime you are missing a lot of reach potential. How much? Well 60% of the 50% local penetration means that, at any point in time, possibly up to 30% of the market has no chance of seeing your commercial during primetime. Yes, you do not reach everyone as viewers of cable channels in satellites homes will not get the local cable message. But, the opportunity loss of not reaching those viewing in cable homes is immense.

Others say that local cable numbers are too small. Duh! Ever take a look at broadcast numbers these days in a local people meter (LPM) market? A carefully selected package of cable channels bought locally can deliver very well when blended with broadcast stations. Broadcast stations alone cannot deliver the market on their own at satisfactory levels in almost all cases in 2009.

In this space, in recent months, I have been very candid about how advertiser supported TV of all kinds faces huge challenges ahead. But local cable will have some interesting new offerings in the months to come that will increase their useful life somewhat and bring in new users.

Make sure that you give local cable a fair shake in your current plans. Now may be the best time ever to use it aggressively. Dive headfirst through this window of opportunity. As DVR, TiVo, and Hulu et al grow, the window will surely narrow and then someday shut.

If your would like to contact Don Cole directly, you can e-mail him at doncolemedia@gmail.com