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Friday, January 29, 2010

Brand Musings

There is a tremendous amount of literature out today about brands. You read about passionate brands, brands with integrity, and brands with active belief. Sometimes it is more than a bit difficult to cut through the fog and discern what is real and what is ridiculous exaggeration.

I have studied this for some time and discussed it at length with colleagues and friends. Here are a few points that we all agreed on that differentiate certain brands from the mundane:

1) They have something significant to say about contemporary life.
2) Focus group findings from last week do not determine their DNA; rather they have beliefs that took time to develop.
3) They are effective at something that is positive for people and they stay the course. (Chapstick might be a modest example. It is effective, has no good imitators, and I cannot remember when I did not have one in my pocket)
4) Their image is one of integrity be it service, fair pricing, good value, and durability.
5) Solid brands may do simple things but they are not dull.

Google fits the bill with their oft quoted mantra of “Make it easy. Make it fast. Make it work. And attack everything that gets in the way of perfection.” Management has described themselves as “relaxed zealots.” This is a deep passion tempered by humility given the breathtaking scope of what they are trying to do and generally succeeding at.

In recent weeks, I looked at a number of lists that people have tabulated of winning brands that arouse zealotry in consumers. Below are some winners listed in multiple places plus a few that made it through my quirky screens. Although hardly a comprehensive list, it is interesting if you think about them. We find:

Absolut Vodka
Ben & Jerry’s
Fidelity Investments
Harley Davidson
New Balance
Singapore Airlines
Trader Joe’s
Whole Foods

What do these stars have in common? While different in product offerings, there is a common thread if you snorkel under the surface a little. Here is what I found with some help from a few friends and panel members:

1) They seem to have better customer relationships than most brands and this over time builds deeper loyalty.
2) The staffs who work for them seem more motivated. (Not true of Starbucks lately and they could cause them to start disappearing from lists!)
3) They adapt to our rapidly changing world faster than their competitors.
4) Because of their competence, they appear more confident and flexible.
5) They seem to be able to grow market share in any environment.
6) Pricing is not a problem. They command a premium and we consumers do not seem to mind.
7) They tend to lead consumers rather than be consumer led but recognize consumer sovereignty and anticipate trends well.
8) If brand magnetism is a real thing, they have it.

Finally, in world that is often hostile to big business, they seem insulated from protesters most of the time as they exude integrity across the board. It reminds of that line in the documentary “Super Size Me” where the PR consultant said “The ultimate answer is for companies to clean up their acts.”

As a huge middle class develops in South America, Asia, and India, great brands will grow even bigger and stronger much helped by upwardly mobile people embracing the standouts of Western pop culture.

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

Thursday, January 21, 2010

The Gini Coefficient and The Future

Way back in 1912, Italian statistician Corrado Gini published a research paper called “Variability and Mutability.” From it came a method of measuring inequality in income or wealth that is today known as the Gini Coefficient.

The math behind the Coefficient is not for the faint of heart but I will admit that I worked my way through it. Very simply put, it is a ratio that has ranges between 0 and 1. So, a Gini Coefficient of 0 means everyone has the same income and a score of 1 means that one individual has all the income and everyone else has none.

The United Nations Habitat and Monitoring Division calls a Gini Coefficient of .40 or higher an “international alert line.” Historically, they claim that a prolonged score over .40 could eventually lead to protests and riots.

Well, I am not the biggest fan of the United Nations. But, honest statistics, and these appear to be, are a wake up call to me as I plan my future.

A separate study from the Organization for Economic Co-operation and Development (OECD) told a similar tale using the Gini Coefficient. The OECD analysis showed that with the exception of Mexico and Turkey, the U.S. had the highest Gini score in the developed world. If you looked at per capita Gross Domestic Product we were close to Switzerland and Sweden but on the Gini scale we played tag with Sri Lanka, Mali, and Russia.

Here is a quick snapshot of the U.S. Gini Coefficient since they have tracked it:

2006—47.6 The European Union was 31.0 at this time

What does all this mean? Very simply, it tells us that the middle class in the U.S. is shrinking. Why did it happen? Some blame George W. Bush. Look at the data. The Gini Coefficient grew more under Bill Clinton (1993-2001) than it did under Bush 43. No, there are likely several reasons—unions got weaker since the late 1960’s, U.S. manufacturers were inept and a lot of jobs gravitated overseas where cheap labor helped them a lot. Also, consumerism really took hold and excessive borrowing masked the impact of the eroding middle class and the rising Gini Coefficient. Even when times got a bit tough, people just borrowed more and more to sustain their lifestyle even as housing, healthcare, and education costs skyrocketed. From several sources, I have found that a stunning 78% of U.S. households are ill prepared to muddle through our current woes. Even if these households cut spending by 25%, they would not be able to be jobless for more than three months. As unemployment remains stubbornly high, Americans continue to live paycheck to paycheck. Yes, savings have gone from zero to about 5% and many people are paying down debt some. But, defaults on credit cards are at record highs and a quarter of homeowners with mortgages are underwater (mortgage greater than home value).

To those of you who know me well this does not mean that libertarian leaning, passionate free trader and free market lover Don Cole has become a collectivist. No way! Nor do I see a European style provider society as a solution to our ills.

But, clearly things are out of whack. When bankers at institutions deemed “too big to fail” get huge seven figure bonuses when their speculations succeed and are bailed out by taxpayers when they fail, there will be growing resentment by the struggling and dwindling middle class.

The great financier J.P. Morgan had a rule when he ran his investment bank in the 1880-1914 period. He never took out of the bank in a given year more than 25 times what his lowest mailroom employee made (certainly, he had other wealth and income from passive investments not affiliated with the bank). Today, CEO’s make hundreds of times what their lower level employees do and stooges on corporate boards (often doing the same thing at their own companies) approve even greater compensation sometimes in poor years. Morgan was an autocrat and aristocrat but he had a sense of proportion that people lack today.

Income gains continue to go to the Americans who are the highest earners. Many of them deserve to be rewarded but some do not and not by so much. In the past 30 years, median income has only increased 13 percent in the U.S. while the top 1 percent has seen a 90 % increase in median income. Get set for more middle class anger and we may see it as early as the fall 2010 elections.

For the media business, this has several implications. If you sell to McDonald’s, Wal-Mart, Target, or Dollar Stores things may be good. The shrinking middle class will still use these stores or maybe even increase frequency of purchase as they trade down from other options. Tiffany may still advertise aggressively in your glossy magazine and appeal to the top 5%. But people will be buying fewer cars (except used), taking fewer trips, even going to the movies less often. It took us a long time to get in to this mess and there will be no slow route out of it.

I offer no solutions today. But, democracies need a vibrant middle class to succeed and sustain themselves. Those of us who have done well in recent decades need to remember that point. I grew up in rural Rhode Island in the 1950’s. Over the years, I had a few breaks, worked very hard, had no huge bad habits, was disciplined about saving, and most importantly, I married the right woman. Today, I know that I am living the American Dream. Will the next generation be as lucky or have the opportunity?

When he called for tax cuts in 1962, Jack Kennedy said it would stimulate the economy and that “a rising tide lifts all boats.” Since then, if you are honest, you realize that what has happened is that a rising tide has lifted all yachts.

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

Wednesday, January 13, 2010

Set Top Box Data

Talk with any media researcher today and inevitably the conversation will come around to a general agreement that current TV measurement via Nielsen is antiquated. Some people despise Nielsen for their quasi-monopoly status; others such as I look at the daunting task they face in the world of 2010 and wish they would move faster to come closer to capturing our rapidly changing viewing patterns.

Also, in the same conversation there will be a mention of Set Top Box Data. People have a wide variety of opinions about what is going on and everyone has an idea of what they would like to see.

What is a Set Top Box? Strip away the jargon and STBs, as they are called, are really nothing more than computerized devices that process digital signals. There are several out there sponsored by different companies such as cable operators, satellite providers, and TiVo. And, it being 2010, Google is entering the fray as well. What do they do differently than a Nielsen meter? Plenty. It can be summed up in the new worn-out cliché that we hear with the mention on any STB—granular data.

Want minute by minute ratings? Would you like to have near perfect targeting by knowing how many of your audience buys a certain type of product? Would you like to know commercial viewing by second vs. programming data by quarter hour? Various versions of set top box data should be able to give you this. This has caused some to enthusiastically say that Nielsen is finished and will soon be swept away. Not so fast, my friends, some major hurdles remain.

Like many things that have taken place in the last decade with the digital revolution, there is a wild west aspect to what is going on. There are several types of STB out there and they are providing vast and fascinating data to clients and the media but there is no uniformity. Right now, from a consistency perspective, it is almost a Tower of Babel situation.

There are five providers of data—Rentrak, TiVo, TRA, TNS Media Intelligence, and Nielsen. A group called the Coalition for Innovative Media Measurement (CIMM) has a desire to come up with a single source measurement system to analyze TV and video consumption across all media platforms. CIMM, whose members include the major networks, four largest buying entities, and mega marketers Procter & Gamble, AT&T, and Unilever, seems to be a stronger group than the toothless tigers that we have seen in media research over the years. Perhaps they can get some collegial action from the five players although when the smoke clears in a few years, there should only be one player standing. And, like it or not, it could be a vastly changed Nielsen.

What is to like about Set Top Box (STB) data? Compared to the present, the sample sizes can be huge compared to what Nielsen provides today. This can seriously reduce sampling error and help smaller cable channels in particular which struggle especially in local DMA's where there may only be 330-400 meters even in a Local People Meter (LPM) market.

A seasoned media researcher put his finger on the biggest current problem with STB data: “At this point, set top box data can tell you what channel the HH was tuned to but does not have the ability to tell you who in the household was watching. This is a key obstacle that will need to be resolved before the “set top box” players will have the ability to seriously compete with Nielsen as the currency for the TV business.” He goes on to say that “the set top box data does not account for the ever increasing alternative screens such as PC and hand held device viewing which Nielsen is feverishly attempting to address today”.

From a practical standpoint, I received a few interesting comments. One old friend and still an active media researcher had reservations about the next few years when no one player emerges. “It will lead to time consuming analytics just like our online team spends their time cranking out. …….It is going to lead to a lot of extra time for our buyers. Still, I wish CIMM well. Nielsen needs a competitor.”

A thoughtful sales executive says, “All I know is that the mere mention of the more saleable aspects this technology has promised, is like nip to the sales-cats around here. It starts with the request for information possibilities that we will soon have as well as the myriad telescoping attributes to come. …We are all in love with the concept, if only because we recognize the need to move away from fossilized spot sales.”

Also, agencies and the media are squeezed. Look at how layoffs continue and most look at 2011 as a realistic comeback year. Data released in the Wall Street Journal this week indicates that in the last two years radio and TV broadcasting has lost 29,000 jobs which translate to 12.2% of their workforce. Advertising agencies were hit even harder with 27,400 or 14.2% of positions eliminated. Can people afford two services? Nielsen remains the currency and you have to stick with it for the next few years. I remember in 1986 when AGB came out of Europe and tried to take NTI on. Only CBS bought it as I recall, and a year later they went home. This will not happen here as people will demand significant improvement and the relentless march of technology will keep Nielsen off balance. And, Google is flirting with launching their own branded TV. One theory is that their web-enabled product may bypass broadcast and cable altogether. Unlikely, but intriguing! And, their set top box data would be fascinating and state of the art. (Separately, Google TV has been testing an auction market TV sales scheme with Dish Network and a few smaller players)

A few quick points about STB:

1) Do not confuse a huge sample with census data. Nielsen tries to draw a sample that truly reflects the population. For example, 10% of us still do not have cable or satellite. STB will not do this and by definition cannot.
2) STB homes have more TV’s, watch more, and have more money. This is great for certain products but it is not a microcosm of society.
3) We, as yet, do not know who is watching but this is one issue that CIMM will likely work with all players to overcome.
4) Five players in STB are too many. Agencies are stretched now, some severely, but if big clients demand more analysis, they will have to do some of it. A shakeout is inevitable with a merger or two a possibility.

A few issues that few are talking about—

1) STB gets at attentiveness. Imagine second by second ratings within a commercial. I have seen some of the early data and it is amazing stuff.
2) Pricing of TV will still be ruled by the law of supply and demand. STB data will not cause an overnight revolution. If the data works, money will pour in to certain properties. Habits of 60 years will not evaporate but will evolve sometimes swiftly; sometimes not.
3) The privacy factor—we are not talking extreme ACLU’s positions here. Your provider will know more about you than ever. How will an individual’s privacy be safeguarded in our new world?

Can Nielsen just pre-empt everyone and stay on top? It is possible and it is tough to bet against them. But, the stakes are bigger now and the changes much swifter than in the past.

This will be the most interesting change in media over the next five years.

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

Monday, January 4, 2010

Media Realism at One

A year ago today, I launched Media Realism. What started as a way to stay in touch with a group of friends and former colleagues has mushroomed in to something much larger and more gratifying.

Here are some highlights and observations:

1) Everyone talks of the web as being global but when it hits you personally the concept really comes alive. Over the last 12 months, I have heard from readers in Canada, Ireland, Britain, France, Turkey, Singapore, Korea, India, Argentina, and New Zealand. Their comments are very insightful and give me a fresh look at things that I take for granted.
2) 99% of you prefer to write to me directly rather than post on the site which I fully understand in the nervous world of 2010. Everyone knows the comments stop with me and your positive remarks encourage me and your criticisms make me more careful and the posts better.
3) How big is the readership? It floats from 1200-3600 depending on the topic and how many of you pass it on.
4) To my panel, thank you. Your willingness to be a sounding board on dozens of issues is a great help. And, your candor is very refreshing.
5) We will branch out some in 2010. I will tackle Social Media across the year with a little help from a variety of friends. Also, we may creep into economics and politics a bit more as they are very intertwined with certain communications issues and have to be included in a balanced portfolio of posts.
6) Imitation has been said to be the greatest form of flattery. I continue to get reports that people quote Media Realism more and more and some clients mysteriously see passages from posts popping up in media plans without a citation. Not a good idea. And, a big Bronx cheer to the handful of creeps out there who sometimes copy a post and e-mail it to many others implying that it is their work. Media Realism will always be free and believe me--I do not want your job(s). So, send it everywhere but be decent enough to give Media Realism a byline.
7) I am always open to ideas on topics for posts and have used them from several of you. Just remember, that I will always call it as I see it.

Thanks again for your support and good humor. Let’s make it a great year.

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

Sunday, January 3, 2010

Beyond Our Means Revisited

Alfred Malabre, Jr. was economics editor for the Wall Street Journal. He wrote a book called Beyond Our Means which was subtitled “How America’s Long Years of Debt, Deficits, and reckless borrowing now threaten to overwhelm us”. Sound familiar? Well, here is the surprise. Malabre wrote it in 1987. It received a lot of play as it was published just prior to the October, 1987 stock market crash. His position was that a credit crisis would engulf us before Ronald Reagan left office in January, 1989.

I stumbled across the book as I was cleaning out some things with the start of the New Year. Beautifully written, it made a cogent argument for how things were going to be bad given the huge deficits built up in the Reagan years. Well, he was wrong. But, what stopped me in my tracks was looking at the federal debt numbers that Malabre said would do us in during the late 1980’s. Compared to today, they were miniscule and consumers were in far better shape in those days than now.

So even a born optimist such as me now is alarmed. We seem to be heading for some icebergs over the next few years that dwarf even the credit crisis of last year. If you really want to get scared read former Commerce Secretary Pete Peterson’s Running on Empty which details the coming shortfalls in Social Security and Medicare. These are not guesses; demographic trends make them a certainty. Another problem that I rarely see or hear discussed is the artificially low interest rates we now have. They mask a huge issue to me. As interest rates go back to a more normal level such as 5-6%, the interest on our newfound federal debt will be staggering. How do you pay for it? Well, the politicians will need to do some combination of aggressive cuts in spending and a simultaneous big increase in taxes. Looking at the current crop of political hacks in both major parties I do not see many with the moral will to do both or perhaps even either. Also, at some point in our new decade they will have to cut Medicare and Social Security benefits or really ramp taxes up. Will they do so? It will be necessary long term but does Washington regardless of who is in power have the guts and integrity to do it?

The pundits are lauding the return to saving in the economy (now at 4-5% of income) vs. the zero rate of 2007. Long term that is excellent as savings turn in to investment and that builds capital. But, the American Enterprise Institute recently released data saying that for every percentage point gain in the national saving rate in a 70% consumer driven economy such as ours, the GDP drops about .4%. So, if the American people were sufficiently frightened by the Great Recession and continue to save, it will be hard for us to have a robust recovery for several years as the shift to savings from consumer spending will keep a short term damper on things. So don’t be surprised if we have years with measly 2% growth for a while as long as the consumer is continuing to save.

The last piece of the mosaic is the US dollar. Financial columnist Peter Goodman put it this way in his new book, Past Due: “As US households sank deeper into debt and the trade balance widened; trading partners might have grown reluctant to keep accepting green pieces of paper in exchange for demonstrably useful things such as oil, sneakers, and electronics. But the reverse happened. Not only did foreigners, particularly China, keep on sending goods to American ports and taking dollars as payment, they went one better: they took the dollars they received for their goods and used them to finance the American debt, ensuring that Americans could keep spending. And, at the same time the U.S. lowered interest rates”.

Why do they do it? Well, we are their largest trading partner and the dollar, shaky as it is, remains the world’s reserve currency. What is scary to me is that the economic fortunes of many Americans are somewhat dependent on the continued willingness of China, Japan, and several other countries to invest in the US. Do we understand China, this immense and complicated country? They have big issues, too. I suspect most of us are clueless and the State department sadly superficial.

Finally, have you ever wrapped your head around what a trillion is? Our budget deficit including the bailout topped $1.2 trillion this past year. To me, the best way to visualize a trillion is to realize that a trillion seconds ago, no one on this planet was literate. Ancient dynasties such as those in China or the Roman Empire had not been formed. Religious founders of Islam, Christianity, and Judaism had not been born. We are talking about a total government debt of over $11 trillion plus off the books liabilities such as Social Security, Medicare, and soon some form of governmental healthcare. The debt load is beyond description and servicing it will put a damper on growth as far as the eye can see.

Okay, what does this have to do with media? More than you might think. After the nadir hit in March, 2009, we should see an up tick in local media spending this year but a real recovery cannot come until 2011. At some point, the government injections will have to stop and then we will get a clear picture of where things stand. (If they keep flooding the market with greenbacks we risk a huge inflation problem. They may do it anyway!)

Going forward, the caution we see now will continue. Forget about three year deals for sports sponsorships; timidity will reign and can you blame people? Investment spending via advertising will shrink and people will try to maintain Share of Voice (SOV) but only the intrepid will attempt to grow it in the hopes of building market share long term.

Technology will march on and the pin-point targeting of the new media will strike a responsive chord with those who are truly being held accountable for every dollar spent. New measurement techniques such as the set top box will supply advertisers with commercial viewing data and attentiveness measures never seen with the current Nielsen information. There will be positives and negatives that will come out of that for both broadcasters and cable players. Social media will blossom and there will be winners and losers there for brands as well.

Government largesse will hurt all of us in the communications field. If people do not have the money to spend, advertising will go down. Our debt service will hamper any hope of a boom unless the government decides to inflate its way out of paying off debts to sovereign nations. Double digit inflation would give us the short term illusion of increased billings and newfound prosperity but it would kill the lifestyle of our aging population. The government is clearly between a rock and a hard place. Some tough choices will have to be made that will affect our business profoundly.

Malabre was right but just way ahead of his time. We are living beyond our means and the financial diet we will have to go on in a few years will be very uncomfortable.

A historian once said “Bad ages to live through are good ages to learn from.” Will we learn? Stay tuned.

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