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Tuesday, March 30, 2010

The Absurd Fiction of Objectives

I teach a class at a local university in Integrated Marketing Communications (IMC). Most of the students are pretty good kids and I had a real problem the other night. My topic for much of the evening was to discuss objectives and how they fit in to the IMC process. The textbook, a fine one, gave a long and even impassioned explanation about how vital the objectives process was in advertising and marketing and why great pains should be taken to hammer out tight objectives across every discipline.

After a bit of soul searching, I conjured up the famous quote from Mark Twain—“When in doubt, tell the truth.”

Objectives should help you clarify what you hope to accomplish in your marketing communications program. They are goals that you set for the coming year but there is no certainty going in that you will meet them. Ideally, they should be brief and clear-cut. For example, in your personal life your doctor tells you to lose 10 lbs. by Christmas. That is a clear and measurable goal. Allegedly, our marketing objectives should be similar. Sadly, in my experience, they are not even close.

Over the last several decades, I can count on one hand the times where I was locked in a conference room with a client and we actually hammered out real objectives in a four or five hour session. There was no puffery. We sat and argued and set realistic goals but always knew that we might not reach the objectives no matter how well we performed.

The reality is that almost always, they are not real. In most cases, people set objectives that they are sure that they can meet. Then they go to management and show how they have blown away the straw men and hit their objectives with ease. It has become a game rather than a way to measure performance and be a reminder of what you are aiming at each day.

There are four basis types of objectives that most of us have come across in our careers:

Media—these are easily the most absurd. Mostly, agencies provide vapid objectives that are all slam dunks. Two of the most prevalent are:

1) Chose media that are a good match to creative executions.
2) Schedule media in line with seasonal sales trends.

Duh! Wouldn’t anyone do these anyway?

Marketing—these are probably the most successful when people stick to distribution goals, pricing strategies, and promotional ideas. If they veer off too far, they bump up against other types of objectives.

Communications—these to me, are the trickiest of them all. Can a goal of 5% increase in sales be translated into specific communications objectives? It is a machine with lots of moving parts. Most start with some level of advertising delivery (usually the increasingly obsolete Reach & Frequency metric), then awareness, then Share of Advertising Voice (SOV), and finally move on to consumer preference and trial. It is a very slippery slope but when done well can be illuminating and set a real target.

Sales—one would think that this is an area that is definable. “We want a 6% increase in unit volume for 2011” seems concrete. They are hard to meet sometimes because the economy was weak (think 2008-2009), or the competition outspends you, lowers pricing or builds a better product. Also, advertising often has a carryover effect. An increase in expenditure does not always translate to an immediate increase in sales.

Sometimes, people even set phony sales objectives. Impossible, you might think? Not at all, my friends! Over the years, I have heard many executives say that they give their employees an exaggerated sales goal in the hopes of “laying down a challenge for my team.” If people come close, they are pleased and the CEO meets private profit goals.

In broadcast, it often takes unusual forms. Years ago, I knew a Midwestern radio broadcaster quite well. Each year, he would up sales quotas, sometimes dramatically higher regardless of the economy. One star player always exceeded the lofty goals and it endlessly annoyed the owner. I told him to relax but his retort was “that sales guy made more money than I did last year.” Well, he owned the stations so he could have given himself a raise or been thrilled that his #1 salesman enhanced the value of the properties so much. Finally, in exasperation, he raised the bar to an 18% increase in a moribund economy. The tireless salesman delivered 22%. The next year he cut the sales pro’s account list substantially and raised goals even higher. The sales star brought two big local TV advertisers in to radio for the first time in 20 years and also made the exaggerated quota. The owner asked me what he should do and I suggested that he give the sales guy 5% of the stations which would keep the superstar motivated and help him build equity and perhaps stay for life. My friend could not allow himself to do that and soon the star moved to another market where he thrived. Moral—don’t be jealous of people who are making you rich.

The whole concept of objectives is something of a sham. I see no easy way out but with a little bit of healthy cynicism most of us can learn to deal with them pretty well. In a perfect world, they would be real. Our world is nowhere near that.

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

Sunday, March 21, 2010

A Personal Dose of Media Realism

Last week, the phone rang. Someone who reads this blog at the encouragement of his boss and a client, asked me to do the network TV buying (around $7 million) for a large client of his. I thought for a moment and refused.

He was stunned. To paraphrase, he wanted to know how I could walk away from an easy commission. I told him that while I am deeply experienced and actually began network activity way back in 1975, I had been away from it for a few years and the game has changed dramatically. He still did not believe me and we talked a bit and I asked him to send me over some distribution and sales data for the brand. After promising confidentiality he e-mailed me the data. I did some fast calculations and knew that I was right to turn down the assignments for two reasons.

The first is media pricing. Twenty years ago, I was one scrappy negotiator who took very limited dollars from my clients and stretched them with imaginative use of regional network TV in high distribution areas, opportunistic buying in 1st and 3rd quarters often buying primetime for 30 cents on the dollar, and using cable networks more aggressively than most and getting some outstanding deals on niche networks.

Today, that world is (sadly) largely gone with the wind. Five or six players dominate network TV negotiation and if a consultant such as I competed against them it would be like a cub scout with a cap pistol going up against an armored tank division spending $700 million in the medium vs. my $7 million. A big player would have a price advantage of at least 20% over whatever I could work out and, at certain places in the business cycle; the advantage would be much, much higher.

My prospect admitted to some of this but said he did not feel that he would be treated well by the buying behemoths and the client would love my personalized service and quick response time on issues. I agreed that my service and interest level would be excellent but they could not nullify the likely price disadvantage that I would deliver relative to a giant.

The second reason that I did not take it was when I looked at sales and distribution. They were not homogenized across the country. Some large markets in the top 20 had virtually no distribution and sales skewed heavily to two regions of the U.S. totally about 60% of the population. A basic sin is to advertise to empty shelves as national advertising will only cost you money. It will not force much incremental distribution. When I e-mailed back, he did not think that I was crazy anymore. My calculations indicate that in two years, his client may well be ready for national network TV. Until then, pound away at certain markets with more weight and grow his distribution steadily.

So, I lost a nice payday but won a few friends and, in a few years, maybe I can police a large buying service, work toward a strong mix of cable channels and broadcast programming, and help put these fine people on the map.
I write this as a cautionary note to a lot of people. When I talk to young media types, they often cannot do the “crossover analysis” where you learn at what point it is more economical to jump to national media vs. local. When you ask about distribution, their eyes glaze and often respond with “its pretty good in many areas.” Also, some people are buying network time that should not. About three years ago, I spoke with an agency principal who confessed to me that he considered it a perk for his media director to negotiate the time for their one network account. “She just loves to go the network premiere parties each year”, he told me. Hey, I loved going them to them as well but do you waste a couple of millions dollars of client funds so your media chief gets a few days in New York? It still goes on, believe me.

So, yes, I could lay out a fine network plan with a carefully crafted roster of cable channels that would fit the needs of almost any product or service. But, my feet are firmly planted on the ground when it comes to pricing. I cannot compete effectively anymore and most people cannot either.

My prospect knows that I am writing this and supports my stance. Know thyself!

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

Saturday, March 13, 2010

Gloom and More Gloom--A Few New Books

Today, to fulfill reader requests, we review a couple of fairly new non-fiction books. Both are tough topics but are worthwhile and thought provoking.

The first is a magnificently ambitious effort by Martin Jacques. It is entitled When China Rules the World (The Penquin Press, 2009). The title in a sense tells the entire story. Mr. Jacques builds a compelling case that given its 20% + savings rate, an incredibly motivated population and workforce, and a government that will move quickly when it needs to, China will be the dominant world economic power in a few decades. Copiously footnoted, it is hard to argue with his logic flow. The flaw to me seems to be that progress will be straight line with no setbacks. He does not seem to understand that, for the time being, China needs to sell to us in the decadent West to keep their boom alive.

Politically, he makes some fascinating arguments that I have never seen before. Forget about China flexing its military might for another 50 years or so, he writes. They have never really even had a Navy which is necessary for any empire. Any territorial expansion that China has made has been in contiguous countries such as Mongolia and Tibet. China moves slowly in ways that we do not understand. He made the point incredibly well with a story about Dick Nixon’s famous visit to China in 1972. Chinese Premiere Zhou Enlai was chatting with Secretary of State Kissinger about the French Revolution. When Kissinger began talking of the consequences of the French upheaval, Zhou Enlai said “It is too early to say.” Can you imagine any Westerner thinking that 180 years was not long enough to gain perspective?

Near the end of the book, Jacques rails about the coming collapse of the US dollar and the rise of China as THE global powerhouse. In one passage, he hits it hard: “The West is habituated to the idea that the world is its world, the international community its community, the international institutions its institutions, the world currency—its currency, and the world’s language—namely English—its language. The assumption has been that the adjective “Western” naturally belongs in front of every important noun. That will no longer be the case. The West will progressively discover, to its acute discomfort, that the world is no longer Western.”

Directionally, he is correct. China will be a major power or maybe THE major power. But there will be bumps in the road along the way that he does not seem willing to recognize. America is down right now but not down for the count yet.

The second book is written by a real gloom and doomer—David M. Walker. It is called Comeback America, (Random House, 2009) Your may see him on CNBC or other business news programming giving ominous, and I hate to say it, accurate warnings about our federal deficits and the financial time bombs that will eventually go off with Social Security and Medicare. Walker was formerly comptroller general of the US and is presently CEO of the Peter G. Peterson Foundation which warns us daily of the unsustainability of our government entitlement programs.

The book was actually a pleasant surprise. While dour and humorless and a bit shrill on TV, he is actually a very engaging writer who makes his case clearly and with a bit of humor. His recommendations are not original but he builds the case for draconian measures to turn America around with more clarity and courage than anyone else that I have read or heard.

The suggested solutions are tough but not wildly extreme. They include: Raise the age for when one can tap into social security, cut Cost of Living Adjustments (COLA) in half for a few years, take Social Security taxes on the first few hundred thousand in income, slash spending in many government programs and cut benefits on Medicare and raise income taxes for just about everyone! It is a bold plan by a bold man. But it is not remotely politically viable.

My opinion is that we will need to get to a crisis a la the current debacle in Greece before politicians on both sides of the aisle get religion and do something meaningful to right the ship. And, sadly, the crisis in Greece and maybe Ireland, Portugal, and Spain to come in the next year or so will make the dollar strengthen as nervous people across the world go to the reserve currency for protection. As a result, we may lose a valuable year or two that we could have spent attacking the looming crisis.

While I clearly do not agree 100% with either book, they are both incredibly thoughtful and thought provoking. China will gain at our expense and the U.S. debt and entitlement bomb will someday detonate. Being aware of these issues can help you personally protect yourself and your family with proper diversification.

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

Tuesday, March 2, 2010

Do We Need More Neanderthals?

Not long ago, I attended a three day marketing conference. While they can be tiring, I always enjoy running into old friends and acquaintances and seeing what others are doing in media, advertising, promotion, and marketing support.

This one was no exception. After the second morning of big presentations with virtually all attendees present, they had an afternoon slated with smaller breakout sessions on an individual topic. One was concerning local marketing efforts for stores in multi-unit retail. I have been doing that for more than 30 years, but thought I might pick up something new by attending.

Only about 50 people showed up in a room that could hold maybe 125. The moderator said it might work better that way as we could have more interaction than with a larger group. She opened with a wonderfully succinct little speech about how times are changing and local marketers need to embrace some of it to continue to grow in this challenging economy. Sadly, as it turned out, she gave way to a couple of young Turks who were going to show us all how to make the cash register ring.

I knew we were in trouble when the early slides on the power-point were so loaded with verbiage that all rules of presentation effectiveness were abandoned. A fellow next to me, very alert and a bit older than I, began to squirm uncomfortably.

They then began a litany of things to do that were as boring as the IRS tax code. When they concluded to no applause, they asked for questions. None. I tried to think of one but in a rare moment of restraint, shut up. Any comments? The gentlemen next to me raised this hand and said, “Some of this stuff is fine. But in retail what you really need to do locally is clean up your stores and train you staff better than the competition.” Neither of the presenters commented and the session ended.

I shook the man’s hand and asked him what business that he was in. It turned out that he owned several units of two fast food concepts, plus a few franchised car repair shops. We talked for a few minutes until the moderator, who recognized me, came over to say hello. As the two young presenters were packing up, I overhead one say “Can you believe that Neanderthal? Clean up your stores and invest in training? He is clueless.”

The next day at breakfast I ran in to him and we got talking. Eventually, we walked the perimeter of the golf course at the resort (we did not play unfortunately) and talked for what turned out to be four hours. It was engrossing to say the least.

He peppered me with questions about media and advertising and I talked to him a lot about retail in a terrible business environment. He did not always know the proper marketing terms but his instincts were terrific. For 35 years, he had met payrolls and never missed a debt payment. Nowadays, he said it was a great time for him as he was buying more stores with cash at distressed prices. He said that he had never seen such bargains in a lifetime. His opportunistic buys were summed up with “When you pay cash as I do today, your worries are limited. I can thumb my nose at both deflation and inflation.”

His point from the session came up again and again. Recently, he had purchased a few units of a food chain from a bankrupt franchisee. On the first day at the worst store, he noticed a kid behind the counter. The young lad refused to accept a coupon from a woman easily in her 80’s. He stopped her before she left and gave her a free lunch and a few new coupons. When he questioned the young man, the kid said “but the coupon expired two days ago.”

He closed the store that Sunday and his two sons grudgingly painted the place. He and his daughter conducted training for all employees who were paid that day at time and a half. “I told everyone that we are not McDonald’s. We cannot turn anyone away. If they have a coupon for Tide, accept it. But no one leaves the store without a purchase.”

Two months later despite a weak economy, the newly painted store with a more motivated staff was showing a profit.

He was open to new ideas and had just concluded a mobile test with a coupon company. Volume was lower than he had hoped but it paid out for him and brought younger customers in to his locations.

My point is not to trash the young presenters with their endless list of tactics. Some were terrific ideas badly presented. But, what my new found friend alerted me to once again is that to win the game you have to concentrate on the basic blocking and tackling that are required to execute well. Have a clean place that people want to come to and a sales/wait staff that is welcoming.

If my friend is a Neanderthal, American business needs more of them.

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