Breakout Nations

Rucher Sharma is a big time money runner at Morgan Stanley. He has written a fascinating new book entitled, BREAKOUT NATIONS, In Pursuit of the Next Economic Miracles (W.W. Norton & Co, 2012).

He raises some great issues and explodes some time-honored myths. One point that he makes excellently is that “the factors driving growth in any given country at any given time are in constant flux. Economic regimes are like markets. When they are on a good run they tend to overshoot and create the conditions for their own demise.” You rarely see this kind of candor in financial writing. Markets go to extremes and people who should know better get caught up in the enthusiasm. Most “experts” on the international economy tend to have a few rules for growth, and, if a country follows those, their future is bright. Sharma explains quite cogently that you need to take each on a case-by-case basis.

What I enjoyed about the book was that unlike most foreign investment and development experts, he does not always go with the conventional wisdom. This comes in to focus the best when he dissects the BRIC countries (Brazil, Russia, India and China) that have led the globalization trends in recent years. His opinions are as follows:

Brazil—government has gone from 20% to 40% of the economy in recent years. This is not a positive (et tu, Washington?). The average adult only has a seventh grade education and their supply chain management is a mess. The ongoing oil boom will cover a multitude of sins in the years to come but things are not as bright as they appear on the surface.

Russia—Oil is virtually one half of GDP. What happens if we get our natural gas and domestic oil business humming in the US? Retail has not caught on, as there are only a few big cities so the big box retailers have not bothered with Russia. Also, there are few good rail links and infrastructure in general is weak with major cities often suffering from rolling blackouts.

India—suffers from a bloated bureaucracy and a heavy dose of crony capitalism. Has potential but will be weighed down.

China—the one child rule is speeding up the aging of their population (see Media Realism, “Malthus, Demographics and China’s Future, 3/27/11)

There were other surprises. A few years ago, Vietnam was on everyone’s list of a sure bet as an emerging economic success story. It was a mini-China in people’s eyes. What seems to be happening is that their command capitalistic system is ill equipped to handle the influx of foreign investment and local politicians are very corrupt. Docks are ancient and can only handle a fraction of the shipping containers per berth as compared to major international ports in other growing economies. So the big ships can’t get in and a major manufacturing plant could not get goods out of the country efficiently.  Most of the ports are owned by a state company and are under the influence of local politicians.

Mexico remains the poster child for an oligopoly where 8-10 families control 60-80% of economic activity. Turnover in billionaires according to Sharma is an interesting metric to look at for whether or not an economy is vibrant.

Sharma makes an excellent point that sustained economic success is a relatively rare phenomenon in economic history. But he ignores that developing nations are growing twice as fast as the US and are now cutting trade deals among themselves and, with every passing year are less dependent on the United States and other Western countries.

He is optimistic about the US reigniting its industrial base but does not mention at what wage level this will take place (I would assume lower). Germany is nicely positioned among other Western powers.

Where are the next breakout nations? In Europe he likes the Czech Republic and Poland.  Both have low levels of debt that put them in a strong position relative to their European neighbors. Poland’s economy actually grew 4% during the 2008-2009 economic debacle. Turkey, a European/Asian hybrid has promise and he really likes South Korea in Asia along with Indonesia. In Africa, he says Nigeria has a chance and touches on Nollywood, the nation film industry that is slightly bigger than Hollywood but remains far behind India’s Bollywood. We have all been aware of Bollywood for some time but did you know about Nollywood? Sri Lanka, in the Indian Ocean has improving prospects as a long civil war is over and the ensuing peace dividend should foster growth.

Marketers should always be on the lookout for where an emerging middle class is going to develop and then begin to do serious branding in those countries.  Purveyors of luxury goods have also taken note.  Roughly a third of Swiss watches are now sold in China!

This is a very thoughtful book. Whether you are an investor, a marketer, a political observer or an armchair dreamer, this book is a terrific read.

Merry Christmas to all!

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

Will the Second Screen Kill the Couch Potato?

Today, lots of media analysts are buzzing about the second screen and they have good reason for doing so. Definitions abound but usually describe a companion device or application that allows you to interact with the content of a TV show, movie, video game or music. Others include laptops or Smartphones where you may be doing something unrelated to the programming. For example, during summer baseball games, I often watch an inning or two of a game with a laptop close by and I either answer e-mail or surf the web on a wide variety of subjects.

Ten years ago, many pundits forecast that the Internet would kill TV. Well, the Nielsen people inform us that Americans are watching more TV than ever. It appears that the web, mobile and social media are all rapidly converging with television. Looking at research studies from across the world, you find wide variance in second screen usage but the trend is clearly that more and more of us are multi-tasking as we watch. Verizon, Google, Nielsen, Ericsson and a host of others are available—take your pick. All point to several trends going on both in America and other developed countries:

--25-40% at one time or another browse for products spotted while watching a TV show
---Some 20% are on Facebook or Twitter while viewing
--34% check sports scores of other contests during viewing of games
--60% on tablets read their e-mail
--At some point, 60% use their laptops, Smartphones, or tablets while viewing

All of the above leads to one clear conclusion—distraction to TV viewing is at an all time high and it is not going away!  The great Don Vito Corleone one said “Keep your friends close and your enemies closer.” If you are an advertiser, you need to embrace your enemy, this increased distraction, head on. You knew for a long time that not everyone was watching your expensively produced spots during commercial breaks. But now that number is in freefall especially among those under 35. So you need to integrate the second screen into your creative strategy. TV, as we knew it, will still work for some.  A small group that could be 10-15% of your viewers can enhance your commercial message as they browse the web to check out the product that you just advertised. The second screen then acts as a companion medium to the traditional TV message. Sometimes it will result in a cross-platform or cross-channel experience for your brand.

I hate to trot out a cliché but the second screen allows you to engage people with your brand and can be interactive if structured properly.  Technology will not stand still and you cannot afford to either. Start testing soon.

Twitter is playing a role that is increasingly rapidly in this space. Just under two years ago, I vividly remember being startled as Audi ran a spot in the 2011 Super Bowl. The hashtag #Progressls ran for only a few seconds at the end of the spot and, for a moment, I thought that I was imagining something.  Since then, a new form of social media, TV’s backchannel, has emerged.  It is real-time chat that is happening DURING the time a program is broadcast. At first, it was during award shows and other special events. Now, it is rampant. Thousands of member of the Twitter community often respond instantaneously when something happens. Networks look carefully at the tweets when a new program airs. The sample may be a bit biased but it is huge and will soon be a predictor of which shows will survive the Nielsen cut.

Commercials also get their fair share of reaction that provides valuable insights to advertisers and can actually get a buzz going about your company both positive and negative. Also, the power of the hashtag can strike in unlikely areas. Watching a GOP debate in January 2012, I found that I could monitor viewer comments on the Meet the Press Facebook page. Questions were sent in but I found  some of the tweets very absorbing reading.

So Social Media and TV now have some measurable co-usage. It is time for many advertisers to get on board. The backchannel will work for national advertisers and for some regional players but will likely have far less utility for smaller, local players.

For years, we worried that many young adults would be zombies watching an increasing amount of TV with each passing year. Now, it appears that the couch potato, thanks to social media, has a rendezvous with death.

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

Cut the Cable Cord?

These days you hear an increasing amount of noise regarding people “cutting the cord.” It refers to individuals who have chosen to cancel their cable service or satellite provider usually to save money in a tight economy.

We have written about this phenomenon in this space in the past but there is a chance that it is picking up a bit of steam and is worth a re-visit. In recent months various estimates say that 400,000 households have cut the cord and, over the last year, 1.5 million have ceased to carry the pay TV option for premium channels.

There appears to be two groups of people out there. The first is strapped for cash and fed up. Here is a composite statement from several people who have told me that they have cut the cord in recent months: “I waste hours waiting for the cable guy if there is a problem and each year my bills goes up giving me new channels that I did not want and will never watch.”  Or “I can’t afford to spend $100-150 per month anymore.” A large group of men over the last two years have told me directly that the only reason that they keep cable or satellite is live sports.

The second group tends to be young, a bit stretched financially but not always, and very tech savvy.  They tell me that they get by with a mix of online options with the most prevalent blend being Netflix, Hulu (or Hulu Plus), Roku, and You Tube. Other than live sports, this blend can do an exemplary job of covering the video needs of millions. Some have told me that you cannot always see a series episode on the day that it airs but waiting a day or two to catch up is worth the savings that can be $60-80 per month. Tellingly, they are teaching their parents to do the same.

A handful of people have gone to very low-tech options that work for them but not for many. In the last year I have met two people at my local library as I searched for DVD’s of old British series. Both were elderly and living almost exclusively on Social Security payments. Neither has a TV anymore but they watch the free DVD’s that the library provides and get their fill of video in that way. Interestingly, both said they no longer get a daily newspaper and they get their news from NPR!

Foreign exchange students cross my path daily and they have an interesting spin on Americans and TV viewing. One said and I quote “you Americans are foolish. You spend way too much money on satellite and cable. I know sites all over the world where I can get free movies and programs. My fellow students are amazed as they know nothing about them.”  Another foreign student sheepishly told me that by the end of the semester he had become hooked on American football and now pays a small amount (a six pack of beer?) to spend each Sunday at a friend’s apartment to watch the NFL.  But he stubbornly insists that he will never pay for a cable or satellite subscription himself even if he permanently resides in the U.S.

These piecemeal solutions are not for everyone. Some people do not have the patience to troll the web for programming but so many have Netflix and Hulu that much of their viewing may be done on laptops anyway.  This is an area that all media analysts need to follow closely. A lot of well-educated and busy young adults in our largest cities have no interest in paying for TV. They can get a huge majority of their viewing needs covered by cobbling together some combination of Netflix, Hulu, et al.  One young man e-mailed me that you would be stunned at how many movie classics are available on You Tube. Check it out. He is not exaggerating.

All of this leads to a conclusion. Back in the mid-1990’s Sumner Redstone of Viacom made the famous statement that “content is king.” Well, if you are honest about the issue, it still is. With every passing year new devices and platforms emerge. Yet, we all want content. The content providers seem to be the one sure thing in our emerging world no matter what device or company is delivering it to you. Two giants stand out—Disney and Discovery.

The Disney name has been the bellwether for entertainment for the last few generations. Most people think of theme parks but they are huge content provider. They own seven movie studios, ABC and the grand jewel these days—ESPN. Talk to young men. A surprising number will tell you that the ONLY reason they keep cable is ESPN.

Discovery does not get the respect that it deserves. It has nine content filled networks in the US including Discovery, TLC, Animal Planet and the Military Channel. What few realize is the breathtaking scope of their global reach.  They have 150 distribution feeds in 40 languages! Discovery is truly a prince of content.

And, finally, have you noticed what Comcast, the cable giant did? They purchased majority ownership in NBC Universal. So no matter what happens, they have a lot more than a toehold in content going forward.

A few people with whom I correspond basically tell me that these outliers who do not have cable or satellite need to enjoy their savings while they can. The big boys like Verizon and Comcast are not going to give you Internet access at a low price much longer after you have cut the cable cord. They want to sell content and you are getting a lot at a reduced price if you cut the cord and use their Internet service to get content at a fire sale rate. That is certainly possible if cord cutting picks up a lot more steam.

No matter where we go in the next decade in terms of devices, keep you eye on the ball. Content is and will remain king.

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

Obama, The Ground Game and The Future

With our presidential election a few weeks behind us, many people are doing a good bit of Monday morning quarterbacking. Neither the President nor Governor Romney ran a particularly distinguished campaign but most agree that the President out-organized the former Massachusetts governor. Typically, people refer to this practice as “the ground game”.

For most people, the ground game is campaign field operations where a candidate’s team identifies likely voters and makes a strong effort to get them to come to the polls. Campaigns are famous for driving the old and the infirm to the polling station. It is done county by county across the country and, in urban areas, block by block.

This time it was different, really different. The Obama campaign had a technological edge over the GOP as they employed e-mail, Facebook, micro-targeting, and other social media venues to reach prospects. They keyed on the women, young voters, Latinos, and African-Americans that the president carried in 2008 and nearly approached or matched delivery in every one of those key target groups this year.

Virtually all political observers would admit that the President ran a brilliant campaign in 2008. Well, they had captured a mind-boggling e-mail list of 13 million voters four years ago. They went back and reworked that list and profiled potential voters very carefully. Messages were customized to appeal to those voters once again.

They opened regional offices some 15 months before the election and staffed them with professionals. People were visited and contacted by the campaign many times prior to the election.

While all this was going on, Mitt Romney was fighting a bruising primary campaign to get the GOP nomination. Rick Santorum, a former Pennsylvania Senator with no chance of winning the general election held on through May and diverted Romney’s team from building a grassroots base in many key markets. Romney had some smart people, no doubt. But, the president’s regional efforts were 9-10 months ahead of them in getting started and that may have made the difference. Early voting also helped as the president’s team encouraged and helped many who might not have been able to vote on Election Day to get to the polls early.

I live in a non-battleground state. Twice, I showed up for early voting and left due to long lines. On my third try, I waited 50 minutes in a drizzle and cast my vote on Wednesday prior to the election. Something was clearly up. And the Romney group’s chief tool was Project Orca, a software program that’s purpose was to get out the vote on Election Day. It may have been good, it may have been poor, but in several states, the President had built up such a commanding lead that a GOP get out the vote effort  on Election Day almost had to fall short.

So, what does all this mean for the future? Some Obama loyalists are saying that their man inspired such enthusiasm from so many that their ground game in 2012 cannot be replicated in 2016. Perhaps there is a bit of truth there but you can be sure that the GOP will bring in their own team of data crunching geeks to sharpen performance going forward. And consider this scenario—what if Secretary of State, Hillary Rodham Clinton, announces for President early? She can build her organization and would likely be the presumptive nominee shortly after her announcement. The Republicans may have another group of gadflies getting in the way of a few serious candidates. So Secretary Clinton would have the organizational lead and in summer of 2016 the GOP nominee would face the same game of catch-up that Romney did this year.

(Why were the polls so wrong? Well, you can’t rely on old technology. Some 35% of us don’t have a landline, and those geezers who still do usually have caller ID and won’t pick up the phone when they see who is calling.)

In the future, advertising may pay a lesser role and TV stations and cable players in battleground states may not get the bonanza of cash that they received this year. Pin-point targeting will get better and better. Also, four years from now there is an excellent chance that a sophisticated campaign will reach and engage voters by somehow connecting TV advertising to mobile, the web, or social media in ways that no one has developed to date.

In ancient Rome, there was a saying that translates as follows—“He who has the gold, makes the rules.” Over the years, we bastardized that by substituting advertising dollars or marketing strength for gold. Going forward, may I suggest that in politics it will be—“The campaign with the better data that yields better messaging, wins.”

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

Globalization and Poverty

On 9/9/11 I wrote a post entitled “Globalization and Advertising.” Each day it still generates a few hits and a week does not go by when someone writes directly to me to discuss it. A few months ago, a reader in Chicago started a lengthy thread about Globalization.

His main point is that Globalization is bad for the United States because developing countries have a comparative advantage over us when it comes to wages. So, evil multinational corporations simply move plants and factories overseas and dislocate American workers. His argument is that nobody wins with Globalization.

My take is that the topic is very complicated and certainly far more nuanced than my Windy City acquaintance makes it. Now, let me be clear. Managers who truly have no sense of social justice run some companies.  And, there is simply not enough time or money to identify all the greedy bastards out there who may cut legal or taxation corners to feather their own nests or prop up the corporate bottom line.

People who are critics of free trade often talk about those seeking a better life in America but forget about the billions overseas who seek the same kind of betterment. Not my Chicago friend, but others have written to me saying that, as a member of a Christian faith, free trade is unconscionable as some Americans inevitably lose their jobs if it is implemented. When I counter with don’t struggling Thais, or Vietnamese or Sri Lankans have the right to succeed, they tell me that is a different issue. When I ask if God looks at the passport of those being lifted out of poverty, people usually get angry, silent or both.

I am not naïve. There are some abusive practices out there where American workers are being asked to compete against child labor and sometimes prison labor. Clearly, that is not right. But is it social justice when Americans want to deny the poor abroad the chance to rise in life with their competitive advantage of lower wages?

For twenty-five years, I have wrestled with this issue. To me, the ONLY way for workers in developing countries to get out of abject poverty is if production can take place anywhere. The much-maligned multi-nationals are the key here. Only business, and usually big business will push for open markets. Politicians won’t do it, as they are afraid to offend even a few thousand constituents who may be temporarily out of work or have to move.

Each year millions of people in developing markets join the global middle class. And, in doing so, buy American brands of all sorts. The multi-nationals are not all laden with saints. But open markets are the only way the lowest in the world can claw their way out of terrible poverty. So, as unlikely as it may seem to many of us, the multi-nationals are the globes poorest unlikely and, at times, only real champions.

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

A New Case for Spot TV & Local Cable

Over the last few years, I have received much e-mail saying that I am unfair to local broadcast (spot TV) on the pages of this blog. Obviously, I do not agree. What I tried to point out is that all forms of television have lost a few steps as an advertising medium as commercial avoidance has accelerated via time shifting devices, channel hopping with a remote in hand, and now using one’s Smartphone during commercial breaks or even programming itself.

All this is true and is now part of the fabric of using the television medium for advertising. In recent months, however, I have seen something else happen that may make the local versions of TV both in spot broadcast and local cable more attractive to large advertisers.

There are 210 Nielsen Designated Market Areas (DMA’s) in the United States. Market #1 is New York with nearly 7.4 million TV households and Market #210 is Glendive, Montana with just over 4,300 households. When an advertiser buys 1,000 rating points on national network TV, they average 1,000 point across the 210 markets. But delivery is not consistent. In smaller markets ratings can be significantly higher and in larger markets where there is more to do, ratings tend to be lower. For many years, marketers would take that in to account and supplement their network TV buys in the top 20 DMA’s across the country and in other areas of sales strength or potential.

On top of that, just as network TV delivery varies, so do product sales on an index basis across the 210 markets. Colgate toothpaste may be fairly flat but most brands have real pockets of strength and other DMA’s show significant sales weakness. Years ago, media planners were trained to do exhaustive breakdowns of sales data. If a DMA had low network delivery but positive sales potential, a spot TV buy would take place even in fairly small markets. The idea was to squeeze every possible case sale out of your distribution universe.

Now, when you talk to young media strategists, they laugh when you bring such a topic up. I have heard or received comments such as “network will take care of it or why should we chase down a few extra sales in Green Bay?”  In days gone by, network TV was always twice as efficient on a per eyeball basis as spot TV. Not so any longer, my friends! As network pricing marches upward almost every year, there are many DMA’s in the Midwest in particular that have not seen meaningful price increases in years. So, the efficiency advantage that network TV had is not nearly as great as it once was. And, sales still are like a rollercoaster in terms of DMA by DMA volume along with volatile local market media delivery.

That is why I remain convinced that some of the best conventional media execution takes place in smaller shops on the back roads of American advertising in places like Burlington, Louisville, Akron, or Salt Lake City. A young planner in a mid-sized mid-western shop writes to me often about how he tries to optimize his budget in the 12 DMA’s where his largest client advertises. His boss does not appreciate what he is doing but I always try to give him constant encouragement. He may have limited resources compared to his colleagues in larger cities but he is not afraid to work and get things right.

The same is true with local cable. When one makes a national cable buy, is delivery flat? Take a look at Birmingham, Alabama’s ESPN delivery and compare it to the ratings that premier network delivers in San Francisco. You will be surprised at the spread.

So, local cable also suffers in many DMA’s as it does not get supplementary weight to make up for a shortfall in national network buys or pockets of unusual sales strength.

Would this require more work by the national agency or buying service? You bet. But the rewards in stronger sales could be substantial.

If you are an agency person reading this, consider what I have said. If you are a client, see how closely your agency tries to match delivery to sales, sales potential, or maybe find pockets of very efficient buys in excellent markets for your brand. If you are network affiliate or local cable sales executive, you may be frustrated and rightly so. You are selling a product that may be underutilized by allegedly sophisticated marketers.

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

Network TV Defies Economic Logic

With the new TV season about four weeks old, the media is putting together reports about trends. In brief, against the key 18-49 demographic NBC is leading with CBS and ABC down and Fox down sharply. The NBC gain comes off a terrible fall 2011 for the network that should be pleasing to their new majority owner, Comcast. Some say that the Fox commitment to the baseball playoffs dragged them down a bit.

Every year at this time, I always seem to get several e-mails or phone calls from people asking is this going to be the last year of a network TV upfront marketplace (the “upfront” is when larger network TV advertisers join a veritable cavalry charge of fellow big time marketers and place perhaps 85% of network TV dollars)?  If you asked me 5-7 years ago when the upfront would dissolve, I am quite sure that I would have say by now. Today, I make no forecast as the upfront and network billing stubbornly hangs on.

What is interesting is that for many years network advertisers bid up the price of network inventory despite a decline in average audience and sometimes absolute audience as well. This seems to defy economic logic. We do not usually in our business or personal lives pay more to get less. In economic theory, there is an arcane concept called a giffen-good where you buy more of something when the price goes up. Economists are hard pressed to come up with many examples of a giffen-good.  And the Nielsen numbers do not even begin to take into account the loss of attentiveness due to the steady growth of commercial avoidance.

Why does network TV keep rolling along despite cable alternatives, Netflix, Hulu, and thousands of digital and social media alternatives? It is impossible to quantify but it seems that people do not seem to know where else to put the money. The big players appear to use network TV as a security blanket. They often trot out the horror story of Pepsi a few years back, which dramatically shifted monies from conventional advertising to digital and saw their sales get clobbered.  Very quickly, they righted the ship with a normal dollop of conventional media.

Most players tweak their media mix each year but, even then, network TV’s share of ad dollars sometimes increases. When will a few major players blink and not spend as much? It is hard to say. Package goods have made wholesales moves in to promotion for the last decade. Yet, the networks have done a superb job of bringing new categories in to the mix, which has propped up revenues. But the outstanding value that network TV once represented is no longer there. With DVR penetration in the 40+ percent range and people hitting the remote during breaks, even sports attentiveness is suspect.

The forecasters all say that the network TV model is broken and not long for this world. Every year their case gets stronger on paper and every year, the networks watch as advertisers bid up the price of their inventory despite weakening delivery.  Over time, pricing becomes rational in almost any market. This one seems a bit overdue.

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

The War Within Ad Agencies

Over the last few years a war has erupted within U.S. advertising agencies. It does not get a lot of press but I have observed it personally and, in recent weeks, have been warned about it by media salespeople, a few clients, and media and creative staffers at agencies.

The issue that caused the friction is the role of digital in annual planning. For decades, deciding on a proper media mix has always been something of an art although analytic tools made it a lot easier until about 10 years ago. Then, we moved in to the Internet age and now even the most moribund brands are entering the digital era.

The problem that I have seen and hear about weekly these days is that the conventional teams in both media and creative can not get along with the digital teams in both disciplines. Part of this is due to a generation gap. At many shops, an old-line media director may be 55-60 years old and the digital media maven may be 29. The old boy or lady is used to summoning the staff and giving direction and playing the key arbiter on all media mix decisions.  Now, the digital people are fighting back and, increasingly, there is bad blood between them.

Sales people who sell properties with many platforms go to a shop and are surprised when only the conventional team shows up. After the meeting, they ask the media chief if they should try and go see the digital media manager or director. Time and again they are told something like “why bother.” If they push things a bit and say that their company’s offerings can straddle both disciplines, they may be dismissed or shown the door quickly. When they do get to see the digital players who tend to be much younger, a snarky comment about the old fossils down the hall is often part of the session. This is sad and really destructive. There is a childish turf battle going on and the client is not always getting the best plan of the combined brainpower that is often considerable.

Friday, an agency CEO called me to talk about the issue. His is not a big shop so the people work on top of one another and he only has a few digital media folks and a slightly larger creative team. At a recent new business pitch, the media director folded his/her arms (I have promised not to give out any clues about identity) and looked away while the young digital manager confidently walked through his presentation. When he concluded the client prospect turned to the media director and said something like “you don’t like him too much, do you.” The media veteran denied it but the client prospect told my friend that it sealed the deal against his shop. He also added that he and his marketing team have been struggling to work out how much of their budget should go to digital platforms and needed a new agency to help them. He finished, and I paraphrase, “if your people cannot even be comfortable sitting in the same room with each other, how can they hammer out a solid plan for us with lots of give and take?”  Needless to say the moderate sized marketer went elsewhere. My friend says that he will decide for 2013 how much of each client’s budget will go to legacy media and how much to digital. He is worried that he is not qualified to play Solomon. He will play it straight and do what he sincerely thinks is right for his clients. My idea is maybe that he needs to make a personnel change or two.

Similar knife fights go on among creative teams unless a strong creative chief can keep everyone in check. It is not so bad at small shops where the director calls the shots and does a lot of the work. But once you get to midsized, there can be a lot of backbiting. Again, the client suffers (it reminds me of the two major political parties not compromising and making hard decisions on our budget deficits and entitlement problems. The good of the country always seem to take a back seat).

Forever, people have always said that the assets of an advertising agency go up and down on the elevator each day. So, you need to hire people who are crossbred, are not set in their ways, and are willing to work together even if their pet discipline gets a smaller part of the pie than it did last year. Hybrid media and creative pros need to emerge and fast.

This leads us to another issue. Agency structures were designed for a world that is gone. All of us wrap our arms around technology or at least pay lip service to it. But, many agencies need to be reorganized if they are to bring in new talent. Ever wonder why people go to smaller digital only shops for certain projects? A lot of great emerging talent is there and they give fast and cost efficient service.  And, they are not going to thrive in a traditional setting where a mossback of a media or creative chief thinks that they are trendy if they put 4% of the budget in mobile.

The other day someone wrote to me that he needs someone to translate his print ads for mobile. I laughed out loud when I read it. He totally misses the point. There are no walls to content. Something has to be developed that is uniquely designed for the mobile medium. He stubbornly wants to put a square peg in a round hole.

Look, we all know that we are in a transition period. But, the old guard need to take the “learn digital or die” warning seriously. The next few years will be choppy for both the economy and the agency business. If you are to survive or your shop is, you need to come up with some hybrid type model that takes us to the next great upheaval.

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

The Inequality Puzzle in the U.S.

We are in the middle of a heated political season. Candidates are talking about the top 2% of wage earners quite a bit and how they may have to shoulder the burden of tax increases if we are ever to balance the Federal budget. It is all nonsense. There are simply not enough of them to cover the enormous expenditures no matter how confiscatory a tax rate you gave them via new legislation. Tax reform? Absolutely! Cut expenses and reform entitlements? You bet! A blend of the two seems imminent despite the political ravings of both major parties.

Most dub the top 2% as households earning in the range of $250,000-275,000+. That is indeed a nice income but, of course, it depends. If you live in Manhattan and are sending two children to private school and paying local taxes, you may find money tight and live in a cramped apartment. In a small Texas town you would be a leading citizen and living the good life at that salary level. As a statistical wonk of sorts, I decided to do a deep demographic drilldown on the people whom you don’t hear about as much—the top 1%. The results are eye opening and surprised me and I should know better having spent my entire life analyzing demographics.

Here are few factoids that set the tone for what is going on:

--The top 1% has an AFTERTAX INCOME OF approximately $1.3 million while the bottom 20% gets $17,800. Nobel Laureate Joseph Stiglitz expressed in a recent CNBC interview that the top 1% makes more in a week than the bottom 20% does in a year.

--The top 1% of US households has 225 times the wealth of the average US household. This is roughly double where we were in 1983.

--If you look at the INCREASE in capital from 1979 to the present, 88% has gone to the top 1%. The bottom 95%, which includes some upper middle class on down to poverty level folks, has garnered just under 3% of this capital increase. So, the top five percent has 97% of the increase.

In discussions with a few friends, we used this analogy to explain what is going on with the dispersion in the increase in capital. This is hardly original but makes the point:

Suppose there is a room full of 100 hungry people. A few men wheel in the world’s largest pizza cut into 100 perfectly equal slices. One fellow signals to them and he is given 88 of the slices and leaves. Four others step forward and they take nine slices as a group and depart as well. The remaining 95 people split the last three slices with some getting a bite or a few crumbs and most nothing .

Now, let me be clear. In a market economy, there will always be an unequal distribution of wealth. Some people work harder, some are smarter, some are more talented, and, let’s face it, some are just luckier than others. But going back to 1979, things seem to be getting more and more polarized in the US and the middle class is getting hollowed out.  It does not seem to matter if a Democrat or Republican is in the White House or which party controls Congress.  Inequality gets wider and the movement is relentless (see Media Realism, “The Gini Coefficient and the Future”, 1/21/10).

Since I wrote about the Gini Coefficient (level of inequality) 22 months ago, the US inequality had grown wider than in previous decades. If we keep up at this pace, I would forecast that our level of inequality would soon rival that of Iran, Uganda, and Jamaica. I would not want the US to join that foursome!

So, is America still the land of opportunity that lured our ancestors to these rocky shores?  For many of you reading this post, it certainly has been. But what, we might ask, of our children, our neighbors, and the generations to come?

Here are a few observations from my perspective:

--The politicians are fighting the last war. They keep harping on re-establishing the industrial base in the US. It can improve but millions of good paying blue-collar jobs are gone forever.

--Mining firms are now experimenting with robots to do underground digging for various minerals. This is great, as it will lower costs and put far fewer human lives in peril. When this technology is fully viable, thousands of good paying jobs are gone for good.  This is only one minor example. Technology of all kinds, not just robotics, is eliminating all kinds of positions. Think of the communications industry that has supported many of us. Remember paste up men, secretaries, and travel agents? Technology will not stand still so millions more jobs will be eliminated in the next few decades. Can we replace them?

--Our tax code is like a Swiss cheese. A 1% family can hire a top-flight team of lawyers and accountants to minimize IRS exposure. Nothing illegal here but perhaps some form of AMT, Alternative Minimum Tax, for those in the top 1% would require that they pay a flat 25% regardless of their deductions or exotic investments. This would not do much for the deficit at all but would instill a sense of fairness.

--Middle class people have most of their wealth tied up in their homes. As home prices have cratered, their net worth plummeted and some actually went to negative net worth as their money owed exceeded the current value of the house. Conversely, those in the top 1% often have relatively little of their wealth tied up in personal real estate.  Someone worth $100 million could have two $5 million homes but not feel it when the value of each dropped $1.5 million. They make more than that in tax favored annual dividends. So, the real estate bubble and crash of the last decade may have exaggerated things a bit in terms of inequality.

--The Federal Reserve is keeping the big banks afloat and, as a sidebar, is subsidizing the top 1%. High wealth individuals can borrow millions at 1.3% or so, buy high yield stocks, whose dividends can largely pay off the loan, and deduct the interest. The rich generally always live within their means and are the investor class. But, the artificially low interest rates from the Fed almost guarantee that they will get richer as they have access to ridiculously inexpensive money. Compare that to the millions struggling to make minimum payments on their credit cards at 18% interest. No one forced the struggling to use the credit card but the disparity seems out of whack to me.

--Why do you hear so little about inequality? Most people are not doing great but they seem numb to it. Are they too busy having a few beers and watching football? Occupy Wall Street had a brief blip going after investment banks but that died pretty quickly and did not get broad traction with most citizens (See Media Realism “Fado, Fatima and Futbol, 11/14/10).

--The American Dream may have become a nightmare to some but it still lives in the spirit of most people. Unless life has truly broken someone, most still feel that things will be better for them at some point and for their children. This spirit is vital and uniquely American.

If you want to keep on top of this issue and not have to wade through the weeds as I do constantly, you might want to consider occasional visits to Emmanuel Saez’s website—“Striking It Richer: The Evolution of Top Incomes in The United States.”

Over the decade to come, this polarization of wealth and income will affect marketing and communications in a big way. That, my friends, is a topic for another post.

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

The Emerging Market Middle Class & The Leaky Barrel

A few days ago I received a surprise phone call from a sports salesman. It had been many years since I had spoken with him. He was quite agitated and said he needed my help. Apparently, a long standing client and his largest was cutting back on his sponsorship package in a very high profile sporting event. The client was essentially cutting his commitment in half for the next three years. The advertiser’s CEO was moving funds outside of the US into some emerging markets.

My old acquaintance was livid. I understood his annoyance at losing significant billing but I had to tell him that this kind of thing was going to happen more and more to people selling to mature brands in the U.S. Local and regional media will likely be hit harder than national network media, I added, which really made his day.

Here is what I think is slowly beginning to happen. Many mature brands in the U.S. are treading water. They are firmly entrenched and work on paper-thin margins. Volumes may be high but there is not great pricing power. So, because capital always tends to move where it can get the greatest return, many marketers are spending advertising and promotional dollars overseas.

 Both consulting firm McKinsey & Company and the United Nations have produced reports saying that private consumption in emerging markets is at about $12 trillion per year. By 2025, that projection will top $30 trillion. So put yourself in the place of a CEO or global marketing officer of a consumer brands outfit. You would be foolish not to market your brands aggressively in Bangkok or Jakarta or Sao Paulo rather than maintain your share of voice in Pittsburgh.

China and India combined are together adding 70 million members of the middle class every year. We, sadly, appear to be losing several million middle class citizens each year due to a struggling economy. There will be ups and downs for sure over the next 20 years in emerging markets but the net result has to be a tidal wave of consumption across all types of goods be they luxury, disposable, digital or mechanical.

Also, a mere six countries—China, India, Indonesia, Brazil, Mexico, and Russia have just over half of the world’s population. And, other than China, which will soon have an aging population, the others all skew younger than the U.S. and most of the West and Japan.  Also, keep in mind that the really explosive growth percentage wise will come from smaller countries in Asia and Latin America.

People focus a lot on tech and look at companies such as Apple or Samsung or Google. But, a rising middle class brings other categories explosive growth. How about something mundane like soap companies? They are growing like wildfire in Latin America and Asia. It is very simple—as you become middle class, you use more personal care products.

Imagine a young lad growing up on a small subsistence farm on an Indonesian island. He has an aptitude for math and after finishing the local school eventually finds his way to Jakarta and works as a clerk in an insurance office. At night, he takes accounting classes at a business college. He now shaves daily (a gain for Gillette, a P&G brand), uses whitening toothpaste twice a day (Colgate) and showers each morning with Dove (Unilever). These companies are beautifully positioned as millions more enter a middle class lifestyle each year. Why does KFC open a store in China daily and McDonald’s 2-3 per week there as well? Because, simply, the sales potential is enormous. Coke is now in all but three countries on earth (Burma, Cuba, and North Korea) and growth is interesting as per capita consumption levels are 80-100 years behind the U.S. in most emerging markets.

Years ago, I worked every now and then with a real character. He was undisciplined but a very dynamic presenter. New business was his forte. He pitched like crazy because he said clients were like a leaky barrel. You poured some new ones on top regularly but always lost some from the bottom each year.

My many friends in the media business are about to become acquainted with the leaky barrel. But, in this case, ad dollars are going to be leaving the North American continent forever. They are going to have to be very resourceful to find replacement revenue for some of the old stalwarts who are finding emerging markets to be a happy hunting ground for profitable sales growth.

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

21st Century Economics--The Fusion Approach

George Washington, the 1st president of the United States of America, died in 1799. Some reports say that doctors applied leeches to the father of our country as he suffered in his final days. Today, doctors don’t use medical “wisdom” from the 18th century to help their patients.

Lately, I have been hearing the same argument regarding economics. Scotsman Adam Smith published THE WEALTH OF NATIONS IN 1776 which most students of history of economic thought would say contains the first outline and spirited defense of the capitalistic system. Why do, many ask, economists and a few politicians hark back to early thinking developed in the 18th century or the industrial revolution of the 19th century? They get angry when anyone argues that government may be the problem and rarely the solution.  I agree with that up to a point. Yet, to me, certain economic truths have more to do with human nature than theory. Greed, envy, competition, technology and progress were with us in 1776 and remain with us today. They dominate human action, which is how noted Austrian economist Ludwig von Mises described economics.

For most of the 20th century, the Keynesians slugged it out with the Austrians and the Monetarists. John Maynard Keynes of Britain argued for government deficit spending during weak economic times. The Austrians approved of a laizzez faire approach and letting the economy heal itself by getting rid of malinvestment. The Monetarists said proper control of the money supply would control inflation. During the great depression all the way up to the Reagan Revolution of 1980, the Keynesians dominated.  Then the Monetarists and the Austrians, both ardent defenders of the free market began to take center stage. After the onset of The Great Recession, a Keynesian approach of massive government stimulus came roaring back in to our lives. Now countries across the world are printing vast quantities of money at different levels.  This is unprecedented in measured economic history. All I can say is that once you start printing it is very, very hard to stop


Through it all, no matter which school of thought dominated, all basically spun their theories on the concept that consumers acted rationally. Yet, by even cursory observation, we see people daily who are not making rational decisions. Some 20% of Americans are morbidly obese and studies of recent vintage indicate that such a sorry statistic could double over the next 20 years. Is putting your health in harm’s way a rational act?

Behavioral economics (see Media Realism, 3/22/11) is a new discipline that is a marriage between psychology and economics. It studies how people often use rules of thumb from their own experience or copy the behavior of others rather be the classic “economic man” and act rationally. Increasingly economists are saying that when people are irrational the government should intervene.

All this seems to be leading to what a few people have dubbed as “fusion economics.” There will be a pick and mix approach among the schools of economics. If people won’t act rationally, a series of paternalistic regulations will take hold to help people make decisions that are truly in the public’s long-term interest.  (For example, the risky mortgages that many took out in the first decade of this century would be prohibited. People would not lose homes in the future as a result of irrational decisions)

For two centuries, economists of nearly all stripes had boundless faith in the ability of markets to determine outcomes. Now, many of us are questioning whether markets always come up with the preferred outcome. Sounds great but who determines what THE preferred outcome is? The current crop of bureaucrats, perhaps? Fusion economics will not have a core philosophy. Taking one policy from the Keynesians, the next from the Monetarists and sprinkling in a bit of Austrian freedom seems like an odd mix to me although I do find Behavioral Economics fascinating.

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

The End of Men--A Review

On 11/7/2010, I put up a post that was entitled “Women on the Rise.” It discussed demographic trends in the US and some Western economies. With more women graduating from college than men, getting advanced degrees and entering law and medical schools it was inevitable that 15 years from now women would be leaders in law, medicine, business and academia. At the end of the piece I referred to an article in the Atlantic by Hanna Rosin called “The End of Men.”

Very recently, Ms. Rosin has expanded that article into a book of the same name (Riverhead Books, 2012). It is a fascinating read and her treatment of a very complicated and, at times, delicate subject, is very well done.

Why do things seem to be shifting in women’s favor? Ms. Rosin’s thesis seems to be that as the world has changed, women are more flexible than men. Importantly, as we have moved in to the information age, the service oriented economy is far more welcoming to women than the industrially dominated economy ever was. It is an interesting thought and, as you drill down in the details and demographics, the case is very well made.

She also talks of 60% of college graduates now being women. That, by definition, means that many good positions have to go to women in the future. She does not explain why young women seem more organized than young men and plan their careers with care while millions of young American males just seem to drift. Over the next decade this will cause an imbalance in society that we have never seen before. Women will be dominating in many fields with key senior positions. She guesses that high finance may be the last of the “old boy network” bastions to fall. More women may not ever marry as they are both very career driven but also will discover a distinct shortage of men who are similarly educated and sophisticated.

The top-line statistics regarding men are indeed a bit scary. In 1950, five percent of men in their prime earning years were not working—today, it is 20%
which is indeed ominous. In 1970, women contributed 6% of the family income while today it is 42.2%. That last statistic to me is a reflection of economic necessity not  just the advance of women. Almost all two income households have two incomes simply because it is necessary economically.

Critics have said that Ms. Rosin overstates things. Why are only 3% of Fortune 500 companies headed by women? Why are only 20 of the 180 global heads of state women? Sadly, they miss the obvious—demographics. Today, the pipeline is being filled with women college graduates and those with professional degrees. Fast forward a decade or two and women will be far more dominant. Demographics, as I have said in this space before, are destiny. This tidal wave would take a generation or two to reverse and, to do so, young men would need to get far more motivated than many are now.
Others say that this is just a blip. The real gloom and doomers have said that the men have been fired first in our long running economic malaise and the women will be next. Again, they miss the demographic certainty that is firmly in place. If three women for every two men graduate from college each year, then more women will be tapped for senior positions than men in the future.

Ms. Rosin has a somewhat rosy view of globalism and states again, with women being more flexible than men, they should do relatively better as certain industries shift overseas.  I am not at all sure about that hypothesis. Globalization is terrific for the consumer but some people always get hurt in the transition and women may be equally affected as men.

Overall, this book is modestly upbeat unless you are a 23 year old man who dropped out of college. If you want to get depressed, read “The Decline of Men” by Guy Garcia.  Written about four years ago, he says that millions of young adult men are spending way too much living in their parent’s basements playing video games, analyzing fantasy football leagues, watching lots of ESPN and some pornography as well. At the same time, an increasing number of young women are planning their futures with care.  His solution appears to be that men should get in touch with their feminine side and be more sensitive and communicate better. My advice to these young fellows is to get off the couch!

Ms. Rosin’s book is timely and well done. It reminds me how marketers have to start shifting gears with their advertising messages. As more women earn six figures they will not be only the primary breadwinner in many households but also the decision-maker as  well in any number of categories. Sales people will have to adjust as  these successful women will be very pressed for time. Mobile advertising will likely play a very prominent role with these high achievers. The die is cast demographically. There is no turning back on this trend over the next few decades. The odds will get stronger each year that your doctor, your  lawyer, your financial advisor, and your best customers will be women. Now we will need appropriate ad copy and media placement to reach them.

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

Don't Drink the Kool-Aid

Last year, I ran in to a former student. He was waxing poetically about his job and I was happy for him and proud to have played a small part in his success. As time went on, he spoke with increasing excitement about his company and what it was doing. Then, he asked me for advice. I told him that things were apparently going great for both him and his employer but I reminded him to try and keep some perspective on things. My exact line was “Remember, don’t drink the company Kool-Aid.”

The line is used frequently in North America these days. It refers to a horrible scene in Guyana in 1978 when Rev. Jim Jones along with many followers drank Flavor-Aid laced with cyanide and took their lives. Since then, it has morphed in to “Don’t drink the Kool-Aid” meaning that you should never have unquestioning belief in any company or movement. Some degree of critical examination is always required.

As I think back, I can honestly say that I was never a Kool-Aid drinker. Every place that I worked had strengths and each had shortcomings. But I never ignored the flaws of management or the weaknesses of some personnel or departments within each organization. Some of it I shared with superiors, some I discussed with trusted associates, and much I will simply carry to the grave.

I am not suggesting that you be a malcontent or a cynic. No organization is perfect and none of us are  perfect employees. But, if you can stay a bit detached you usually work better. Disappointments are few as you expect less than the true believers. You can simply do your absolute best and not worry about it. If another opportunity comes along, you are more likely to give it balanced consideration, as you are not in awe of your current management.  You realize that the grass may be greener or just different somewhere else.

People are forever telling me that their team or company or organization is the “best in the business.” I just smile. Some are indeed awfully good but everyone cannot be the best. And, it is important to have a certain pride in the organization that you belong to and the people with whom you work. But, if you drink the corporate Kool-Aid, you will likely begin to rationalize things sooner or later. Statements like “we are not overcharging, we are worth it” start popping up. Or “that client is an idiot and we know better” meets only with nods of approval. At that point, you need a reality check. Is this place ethical? Are we turning out a shoddy or dangerous product or possibly bending the truth more than a little but rationalizing it as we all drink from the company fountain?

In today’s world, you cannot just leave in a huff. There are mortgage payments, college bills, healthcare expenses, and not a great many really terrific available positions. If you try to stay detached and objective, your career decisions will be better, you can live with yourself and most likely will not be bitter in old age.
Being loyal to your employer is a very positive. Being blind to obvious shortcomings is not.

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

Global Marketing Monitors

Over the last few years as Media Realism has grown we have reached a point where, in many weeks, more than half the readers are from outside North America. Geographical readership tends to very topic sensitive but the European and Asian growth in particular has been steady.

Recently, some readers from emerging nations have written to me asking which countries that I look at to monitor marketing opportunities and a growing media presence.

The knee jerk reaction for most people would be the BRIC nations—Brazil, Russia, India, and China. Russia, to me, is mostly driven by natural resource wealth so I do not follow it terribly closely. China has a long-term demographic problem and India a demographic upside but they are both so huge that I do not spend nearly as much time on them as I once did.

My choices may be sharply different from yours.  They are Brazil, Turkey, and Vietnam.  While they are wildly different in geographic location, to me they have some common threads that merit my close observation.

Brazil, after decades of being an economic basket case, is now the eighth largest economy in the world. They are easily the largest consumer market in Latin America and their middle class now numbers over 100 million people. They are energy self sufficient with sugar based ethanol and five years ago, some huge offshore oil discoveries have sent major energy companies south vying for a piece of the action.

More importantly, Brazil has a wide array of trading partners. For most of the 20th century, the US was the dominant foreign player in Brazilian trade. Now, they are very well diversified and China is currently Brazil’s largest trade partner. They seem to have a portfolio of trade partners and unlike past history, are not overly reliant on any one nation. So, no matter how things may develop in world economic power over the next decade or so, they are in a nice spot with friendly relations with many entrenched and emerging players around the globe.  Also, they will not waste money on war. There are no plans for a Brazilian nuclear weapons program. There is still corruption and some organized crime but it is not the tinderbox of tension that you see elsewhere around the globe.

My second choice, Turkey, also has many trading partners. They badly want to join the European Union but only a small percentage of the country is geographically in Europe. The real impediment is that other E.U. member states appear not to want a new member state that borders such sensitive areas such as Syria, Iraq, and Iran.  Turkey has a fairly solid economy that, surprisingly, is four times the size of Egypt. They also have a good historical trading partnership with Israel which is unique in the Muslim world. Also, they have NATO membership that makes them something of a player with the US and most of Europe.

Over the last few years, I have observed a few Turkish package goods companies being bought out by global behemoths. The indigenous Turkish brands were competing quite effectively so a buyout was a workable solution for large international players to get a foothold.

Geographically, Turkey is in a unique spot at the crossroads of the old Soviet Union, the Middle East, Europe and Asia. Per capita income is almost twice that of China and four times India so an emerging middle class will have significant buying power going forward.

Vietnam may seem like the outlier on my list. For someone of my generation who spent a few anxious months wondering whether I would be sent there in 1971-1972, it is strange to be discussing it as an emerging economic powerhouse. Many people see Vietnam as simply a captive of China. As wage rates have increased in many parts of China, Vietnam has benefited as manufacturing has moved towards their eager and efficient work force. If China has difficulties long term, does this mean that Vietnam is toast? No, not at all if they can work with and trade with far flung neighbors as Brazil and Turkey have. Media wise, the Vietnam press and broadcast entities are still government controlled and laced with Marxist-Leninist rhetoric but that seems to have little effect on production or the emerging middle class.

Each of you probably has your own list that you personally monitor. I would assume Indonesia, with the world’s 4th largest population, would be near the top for many of you. My point today is merely to give you my spin on an issue that any international marketer or investor needs to work on regularly.

Which nations are on your list? I would love to hear from you.

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

Is Being Connected Hampering Media Effectiveness?

There is an epidemic spreading across the world.  People are increasingly fanatical about staying in touch and appear to have a mobile device in close proximity at all times.

Here are two recent personal examples that stunned me:

1) Last spring, I was proctoring an exam for university students. I had 31 exams and counted out the same number of students. So far, so good! Just prior to passing out the exams, I scanned the room. One student was looking out the window, apparently gathering her thoughts. Near her, a fellow was furiously going over his study notes one last time. The other 29 students were texting! Why? What could they be saying at that moment? Were they asking a friend when the old boy was going to pass out the exams?  Did they have to wait until exam time to send a message?
2) This past Friday evening my plane touched down after a business trip. Mine had been short but it was clear that there were some weary road warriors on board. As the first row of first class left the plane a strange thing happened. Three of the four people in the second row stood in the aisle and were texting. None of us could get through. Thirty seconds passed, then forty-five. I glanced around and a fellow diagonally across from me rolled his eyes but no one said a word. After a full minute passed, two of the people sent their text messages and left the plane allowing me and 100+ other people to leave. No one said a word. My thought was that the people blocking the aisles were rude and they should have waited thirty seconds to walk in to the terminal before starting their text messages.  Was I in a distinct minority?

This obsession with staying in touch makes me wonder about the effectiveness of our 2012 media world. Two separate studies that I have read this year have projected that 60-61% of viewers have a mobile device in hand while watching TV. A separate Pew Research study indicates that 38% keep the mobile handy “to occupy themselves during commercials.” Some 20% go to the web to verify something that they heard or saw on TV.  On the other hand, I suppose there must be some who use the Smartphone or other device to shop for something or purchase an item that they saw while viewing.

Very recently, a bright young professional suggested to me that people who have taped a show via their DVR may not jump commercials as much as they did a few years ago because they are using their mobile to do something else. Hard to prove but it certainly makes sense.

People in their 20s often use several media types at once—TV, Smartphone, E-mail, texting, etc. Geezers such as I are lucky if we can read a magazine while stealing glances at the TV in front of us.  Is anything really sinking in? How much of this wonderful technology, right at your fingertips, is destroying the effectiveness of your carefully crafted and often expensive advertising campaigns?

We have all fought advertising clutter for a few generations. Now the issue is media clutter, which may be seriously hampering all messages.

Right now, a few books are being published which address the effect of connectedness on us as people and how we relate to others. More scientific and thoughtful studies will emerge in a few years along with some scholarly articles. In the meantime, look beyond rating points and reach & frequency metrics. Is your message really getting through to the connected?

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



    

Is Marketing Dead?

Back when I was in high school, the Christian world was rocked for a brief moment by a movement dubbed “Is God Dead?”  It was probably started by a theologian name William Hamilton who horrified by the evil and suffering in the world wrote, “We needed to redefine Christianity as a possibility without the presence of God.” Others said that Christian principles were great but as our society was growing more secular the concept of an active God was not necessary.

It never got big but on April 8, 1966 Time Magazine put “Is God Dead” on the cover instead of its usual portrait of a leading political, entertainment or business figure. Such publicity caused the subject to be debated all over the country and gave TIME more notoriety than the newsweekly likely wanted. After a few months, the issue quietly dropped from the scene.

Why do I bring this up? Well, this past week I received an unusual e-mail from a young reader.  With his permission, I quote—“I really do enjoy your blog but don’t your realize that traditional marketing is dead. I don’t care if you are talking advertising as you often do, or public relations or branding or even corporate communications, they are all dead. Buyers today don’t pay attention to marketing efforts—we use the Internet, examine reviews by users, and depend heavily on word of mouth by friends. You raise good points sometimes but Don you are really showing your age.”

Well.

My young friend went on to quote some statistics from a Fournaise Marketing Group whose survey of hundreds of CEO’s essentially said that they are hopping mad. Some 73% say that their Chief Marketing Officers (CMO’s) lack business credibility and cannot grow their business significantly. Over 70% resent being asked to spend money without explaining how it will actually increase sales or profits. Also, close to 80% don’t want to hear about the certainty of enhanced brand equity without some financial metric being tied to a marketing program.

Is this new? For my whole career, clients have asked for accountability. We never guaranteed sales increases but could show metrics of increased awareness. CMO’s are short lived these days (usually under two years) so they may be gun shy and timid about forecasts and promises. The questions he raises from Fournaise are identical to those most of us greybeards have heard over the last 40 years.

Is marketing dead? I say no but I do agree that it is much harder to execute plans today. TV does not work as well as it did a decade ago but, all things being equal, it still works better than anything else most of the time. Commercial avoidance will only grow stronger. Mobile, in my opinion, is the next big thing, but players as illustrious as Facebook are having a hard time monetizing it. Can we find a way for creative to work well on mobile? Newspapers will go digital as will many magazine titles if they are to survive. Radio can still be a viable player locally in the right hands. Cable will have cross platform possibilities soon that would have been unheard of a decade ago. And, your “mobile wallet” will change shopping forever.

So, is marketing dead? No, but it is evolving and the pace of the evolution is much greater than we have ever seen to date. I do not agree with my young friend that conventional marketing avenues are all dead but I love his passion and his interest.

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

Poverty, An Aging America, and Television Viewing

Recently, the federal government released their poverty guidelines for 2012. The new standard in the contiguous 48 states for a family of four is $23,050. If your household income is below that, you are considered to be living in poverty.

In the last few weeks, the Associated Press polled a sample of economists, think tanks and academics and asked them to project a poverty rate for the US for this year. The consensus was 15.7% of the population living in poverty, which, if accurate, would be an increase from the 15.1% official figure for 2010 and a new record in modern times.  At the same time 46 million Americans are on food stamps and 6 million Americans currently have no other income but food stamps, which puts them at around one third of the poverty line. The lowest poverty level using the current measurement standards was in 1973 when Dick Nixon presided over a rate of 11.1%.  In 1964 President Lyndon Johnson declared a “War on Poverty” and by 1965 had Medicare and Medicaid in place. Poverty levels declined in Johnson’s term and during the Nixon years that followed but since then, in good times and bad, have tended to inch up.

Part of the problem is that many of the jobs created in recent years have been low paying positions in the service sector. Half of the jobs in the nation pay less than $34,000 according to the Economic Policy Institute. Unless we have more jobs that pay good wages, it may be hard to lower the poverty rate significantly no matter who is elected president or which party wins Congress this November.

Another issue that has come up recently is that Social Security is keeping many millions of elderly from poverty. This is absolutely true despite the heavy attacks of those who attack a system that very much needs reform. But consider this: The “average” woman 65 years old drawing Social Security receives about $950 per month while the average male of the same age gets a monthly check of approximately $1100 (this changes constantly so may be different by the time that you read this post). Also, most do not have defined benefit pensions, large 401k balances or IRA rollovers or private investments spinning off substantial cash. They may not formally be in poverty but most are not living La Dolce Vita either.

Thanks for your patience. Here is how this all ties in to TV. Increasingly, for most Americans TV is their dominant form of entertainment as it is the only one that they can afford. And there are two axioms that you always need to keep in mind when buying television:

1) The less money that you have, the more TV you tend to watch

2) The older you are, the more TV that you tend to watch

So almost by definition, TV has to be becoming more downscale as poverty levels grow and more baby boomers turn 65 (10,000 per day).

Talk to any media planner or media director or media strategist and they will invariably mention the tight targeting that is implicit in any media recommendation that comes from his/her hands or that of the agency team. But, when the buy is executed, is that really true?

Most broadcast negotiators today continue to buy simply on Nielsen’s gender and age statistics. The planner may do analyses from Simmons or MRI and suggest certain programming. That is why for years there has been a two-tiered pricing structure with primetime network TV shows. Negotiators rush in and bid up the cost of programming that delivers a blue chip demographic. As upscale people and particularly upscale younger people view less, advertisers will pay a lot to reach them when they can.

But, in spot broadcast across 200+ markets, a lot of that breaks down. Take local news, for example. Thirty years ago, it may have been marginally upscale in some markets. Now, if you earn six figures plus, you are still at work at 6pm or maybe, if you are lucky, fighting traffic. You are definitely not tuning in to the local news in large numbers at that hour.  If you are buying Adults 18-49, however, those in that age cell watching the news could be moderate to low income and many could be living in poverty. This is not true in every market but definitely the case in many. Ask you local affiliate to do a special tabulation with Nielsen breaking out the income skew of their news or access programming. Even if you are a substantial advertiser, I bet few will be willing to do it. Your salesperson may not even know the real story but I bet the general manager and sales managers do.

Many other programs across the day are increasingly getting more and more downscale. This is a wonderful opportunity for local cable systems to increase market share. Thirty years ago, when cable was beginning to make its mark as a national advertising force, sales people often referred to the new advertising medium as a form of “video publishing.” What they were saying was that with proper channel selection, cable gave you the selectivity of interest that magazines do.  It was a nice positioning and helped the news channels, business channels, Discovery, History Channel, and, of course, ESPN, to gain a nice foothold among viewers.

If cable systems pushed their upscale channels more vigorously, they might see some nice growth. Most advertisers say that they want $50k+ households at a minimum. Well, do the syndicated judge shows give you that? I doubt it across the board. But BBC America, to use an extreme example, does along with dozens of others (As an aside, I tried to find out how many people living in poverty have cable or satellite. I came up empty, as it does not appear to be published anywhere).

As long as buyers use Nielsen for age and gender only, a lot of money will be wasted. A planner may suggest certain programs but how much of that goes out the window when the buy itself is executed? People are busy today, many seriously overworked, and the care and attention to detail that is needed often is not taken. Someone may get a perceived “deal” but the deal means little if the viewers to the programs purchased largely cannot afford or have no interest in your product.  Reaching the downscale and old in many cases does little for your brand.

We all hope for a return to the prosperity of years past. It may be a while or sadly perhaps a long while. In the meantime, the time honored method of buying TV is causing perhaps a billion dollars to be spent in the wrong places.

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

Spanish Language TV and Hispanic Marketing

Article I, Section 2 of the United States Constitution requires that a census or enumeration of the population of our country be taken every 10 years. Congress uses the census figures to apportion seats in the House of Representatives, which then affects the makeup of our electoral college.

In most of my lifetime, the biggest interest coming out of the census is watching New York, Pennsylvania and Ohio lose House seats and Florida, Texas, and California pick them up. A shift to the Sunbelt has been evident over the last few census tabulations and states such as Utah will also likely pick up more House seats in the decades to come.

Marketers would often look at the Statistical Abstract that comes from the U.S. Census and study trends plus sometimes put together amusing little factoids such as number of flush toilets per primary residence in America.  But after the 2010 census data was released, more action seemed to come out of it than ever before.

Over the last few months, if you have been paying attention, the marketing and media world seems to have something of a California gold rush mentality toward the growing Hispanic population in the United States. For more than 20 years, demographers and futurists have reported on the growth of the US Hispanic population but not a great deal was done about it. Some of the soft drinks and McDonald’s, in particular, got in early and were rewarded for their foresight. But, many marketers and media conglomerates held back.  Some marketers that I know well basically said that yes the market was growing but Spanish language TV and radio did not work. A couple even mentioned measurement problems, which I always found a bit specious especially in Nielsen metered TV markets. Others said that young Hispanics watched Anglo TV so they could be reached as well in English language settings.

Now, things are changing and fast. The current Hispanic population in the U.S. is close to 52 million. By the time we hit 2050, it will be 133 million at current projections. Marketing wise, the average age of Hispanics in the US is 27 while it is 42 for non-ethnics. That has a boatload of appeal for lots of categories. Most important, purchasing power is about $1 trillion dollars, which would place the US Hispanic market in the top 12 of global national GDP’s. One source even said that it would soar to $1.5 trillion by 2015. That seems a bit high to me if the current level is at $1 trillion. But, let us not quibble. The spending is huge, growing, and very real.

The media business is taking notice and moving very fast. For the last three decades, Univision has dominated Spanish language TV in the U.S.  It has the stunning capability of reaching 97% of all US Hispanics. In the last year, they have added three new channels to their stable and remain the big player in Spanish language viewing. Working with Disney (ABC) they will roll out a 24-hour Spanish language cable news network in 2013.

Comcast, a huge media player, has big plans as well. When they purchased 51% of NBC Universal, they became parents of Telemundo, long the #2 player in Spanish language programming. Telemundo will now have many more hours of originally produced programming going forward. Comcast is also going to launch a unique niche player—Baby First America that will focus on that burgeoning demographic, the Latin Baby. It will be targeted at very young children and their parents and try to help the youngsters develop verbal, mental and motor skills.

Rupert Murdoch is not standing around watching either. Mundo Fox is ramping up which will consist of 60 local stations in the US that will cover three quarters of Hispanic households. People laughed when Murdoch took on the “Big Three” in 1986 and launched Fox. The Fox people have a proven track record of reaching young adults.

To me, overhanging all of this is a unique situation for young Hispanic adults in the US. If you are bilingual, as many are, you have MORE viewing options than other Americans. With several new Spanish language networks coming on board your choices will only grow. So, will these key emerging consumers gravitate toward more Spanish language fare? Or, will they follow the rule that “content is king” and watch the best programming available to them regardless of language?  To me, this has always been why advertising to the Hispanic market has been so tricky. The younger and better-educated Hispanics shift comfortably from English to Spanish language TV and back again. How much emphasis do you put on each has never been easy. And, will the flood of new Spanish language entries not increase Spanish language viewing much at all but merely lower shares for the entrenched top rated players?

The market is too big to ignore for sizable brands and will only get significantly larger. As more players in the brand world and media world pile in to this gold rush, there will likely be some big winners and some sour losers.

Tread carefully!

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

Luxury Brands and Demographics

In the financial industry, there is a very attractive client group known as HNWI, which stands for High Net Worth Individuals.  There is no hard and fast rule about the definition but most would say that the category starts at $1 million dollars or more in liquid assets. There are all sorts of groups as you climb the ladder of affluence into real wealth with many management firms describing those with $50 million or more in liquid or investable assets as “ultra HNWI.”

It should come as no surprise that emerging markets, particularly the Asia-Pacific region, have the fastest growing number of HNWI.  For the moment the U.S. remains on top with about 30% of that fortunate group but the Asian contingent has passed Europe and could pass the US eventually.

Over the years I have always been amused at how people market luxury brands. Very few US agencies seem to “get” what needs to be said. Young copywriters often use the same tact for a fine champagne or apparel line as they do trying to sell a  package good to middle America. Increasingly, the big international agencies are dominating luxury brand assignments as they have staffers who can appeal to those with sophisticated tastes.

The scope of luxury brands is amazing if you dig a bit. Let us look at publicly traded LVMH Group (Louis Vuitton Moet Hennessey). Despite an extremely uncertain economic climate in the US, a very poor one in Europe, and signs of a possible China slowdown, LVMH is chugging along nicely. Sales were up 16% last year despite clear economic headwinds. The company has a stable of brands that reeks of luxury: in wines and spirits they own Moet & Chandon, Dom Perignon, Veuve Clicquot, and Krug Champagne plus Cloudy Bay and Cape Mentelle wines. Hennessey is a big player in the spirits category and a relative of mine visiting Scotland a few weeks ago was surprised to find that Glenmorangie scotch is now owned by LVMH as well. In fashion, leather goods, perfumes, and watches entries include Louis Vuitton,  Berluti, Givenchy, Pucci, Donna Karan, Dior, Loewe, Tag Heuer, Bulgari, and DeBeers. In retail they even own Le Bon Marche Rive Gauche and DFS.

Louis Vuitton has approximately 180 stores in China and they are very astute marketers. In more than one article I have read that some Chinese are getting weary of seeing their trademark monogram pattern on products. One Chinese shopper was quoted as saying “everyone has a Louis Vuitton bag, I am looking elsewhere these days.” Well. Everyone, I assure you, does not carry Vuitton but they are now floating many new designs in Asia to respond to customer comments and pre-empt other brands from making serious inroads in their most explosive growth market.

The art world has taken notice. Toney auction houses Sotheby’s and Christie’s now are drawing nearly a fifth of their business from their Hong Kong offices and I have tracked auctions for both in Hong Kong, Macau, Taiwan and mainland China.

Interestingly, Tiffany’s, the epitome of luxury in the US for decades, seems stalled. Some of their business seems to be tied to Wall Street bonuses and European visitors, neither of whom may be spending as much these days as in the past.

Most luxury brands have a strong online presence, which is essential. The affluent and HNWI use the web as their #1 source about luxury goods along with word of mouth. An area that needs to be developed is mobile. The potential is huge and when mobile can zero in on these people as online and magazines can, the payout could be tremendous. This is particularly true in key Asian markets and in Latin America.

The future of luxury brands is interesting. The rich will always be with us but they may be found in many new places over the next two decades. Looking at demographics, it appears to me that China is the place for the next several years along with smaller Asian countries as well as Brazil, Chile and Uruguay (yes Uruguay!) in Latin America. Longer term, the demographics seem to favor India. The population is huge but, unlike China, it will remain young. There will be plenty of workers supporting the old folks , which will not be true in China down the line.  Do not be surprised if the LVMHs of the world start opening shops for their premiere brands in India a few years from now.

Disparate cultures deal with newfound wealth in different ways. The message may need to be different in India vs. what has worked in Hong Kong recently or New York a decade ago. The successful in emerging markets love luxury Western brands. No matter what happens in the global economy in the next several years, you can bet that many of the high quality products will find new customers in large numbers.

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

A Tactical Suggestion for the 2012 Presidential Campaign

A young media planner based in the American Midwest contacted me yesterday. He had a few questions about the 2012 Presidential race and its effect on TV pricing in spot markets. The core issue is that he has a lot of spot market TV buys coming up for a key client this fall. Many, by sheer luck or bad luck, happen to fall in what the media pundits are calling the “battleground states.”

I have to be careful to disguise this fine young man’s identity. Let us say, for example, that he will be planning strategy for his important client in Ohio, Wisconsin, Virginia and North Carolina (other battleground states at this writing would include Florida (natch), New Hampshire, Iowa, Colorado, Nevada and perhaps Pennsylvania). As the campaign wears on, the list of authentic battleground states will shift a bit as polls get more definitive.

After we e-mailed back and forth a bit, I got in touch with a few people in the states where he would be executing plans. Candidly, they were licking their chops. One stated that pricing would be up 40-50% by September and October for some pretty indifferent inventory. Another stated that he was having scheduling difficulties NOW as Political Action Committee (PAC) money came in backing both candidates with eye-popping budgets.

I got back to my new friend and advised the following:  Don’t buy spot TV in the heavy battleground markets this fall. My logic is pretty simple. If the pressure on key inventory is such that prices rise by 50% over normal rates, you are asking your TV advertising to work awfully hard. Additionally, this young man is making a name for himself by putting together some very nicely wrought media plans. The buys to execute these plans will likely never see the light of day as pre-emptions by either the campaigns or PACS will totally disrupt the carefully designed weekly media weights baked in to the original plans (Federal law states that political advertising must always clear if the advertiser provides upfront money. Previously scheduled commercial advertising is often “pre-empted” by the political dollars).

This is a hard thing to tell clients. You may have to put them in media that does not have a good track record for them. Or, you may miss supporting a key sales period for some advertisers. But, your odds of successfully executing a spot TV campaign are really low this year in many battleground markets. On top of this, the agency you work for may lose income if you defer spending to 2013.

So, you need to look at each market separately. Maybe you can use radio plus a digital option in some Designated Market Areas (DMA’s). Or, local cable plus radio although sophisticated campaigns such as these are using specific cable channels to great effect given the narrow demographic appeals of some channels. Regional sports is also an area which often dodges the political bullet but it is hard to build a total campaign on regional sports working largely on its own for a brand.

This fall will be interesting and I am glad that I do not live in a battleground state or where there will be a hotly contested US Senate seat as well. In that case, I might stick to Netflix, Hulu, PBS, and Turner Classic Movies until after the election.

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

Baby Boomers and the Future of Media Planning

On January 1, 2011, we hit a demographic milestone. The first Baby Boomer hit 65 years old. Baby Boomers are defined by most as Americans born between 1946 and 1964.  The Baby Boomers comprise our largest generation to date. There are 76 million of us.

The aging of Baby Boomers has profound implications for our economy, product development, our government programs for the mature, and, of course, media usage. Keep one fact in mind at all times going forward if you are marketing a brand or selling media. It is simply this--every day for the next 17 years some 10,000 Americans will be celebrating their 65th birthdays. When we hit 2030, approximately one is five Americans will be 65 years or older. As I write, only one in eight is 65+.

Most writers who talk of the greying of America dwell on the strains that an aging population will put on programs such as Social Security, Medicare and Medicaid. Those are all huge and serious problems but today we will focus on how an aging population base will affect the media and advertising.

Fifteen years ago, as the Internet began to hit its stride, people saw it as a youth oriented means of communication. Now, no one blinks if a 75 year old says "I will e-mail you about that." Many retirees spend hours a day on Facebook or trolling the web.  Hulu and Netflix have made huge strides in terms of usage among the older Baby Boomers in the last 18 months.

So what does all of this mean?

For advertisers, despite warnings by futurists for the past generation, more emphasis needs to be placed on the mature in advertising copy and product development. Why? To me, it is pretty simple. We have a lot of the money. :)  Older Baby Boomers lead virtually every affluent category be it millionaires, people with disposable income, financial security and flexiblitity of purchase decisions and travel options.  Yet, amazingly, many brands allow their agencies to buy against an Adult 18-49 demographic or 25-54 demographic. A few counter that the older you are, the more television that you tend to watch. True, but 15 years ago, that worked beautifully when the major networks still dominated viewing. So, if you bought a 1000 rating points against Adults 18-49, you might deliver 1250 points against Adults 50+ given their tendency to watch so much television. Now, with viewing fragmented, the heavy viewing segment has their own list of favorite programming, often on cable, that are far more pure plays in terms of age than in the past. A 35 year old woman and a 64 woman did not intersect a great deal in their viewing habits. You no longer get the mature as a "free ride" as you once did.

The purchasing power issue has also not been examined carefully enough by most marketers. Many older Baby Boomers do not earn as much as they did in their prime earning years so they do not get much advertising attention. Yet, many do not have a mortgage and their college bills are long behind them. Think of the liquidity this gives them if they are not feeding the mortgage meter each month or paying out a huge check every September and January.  Income has always been overrated in evaluating lifestyle--the key is purchasing power!

A few friends tell me that the aging Baby Boomers will save local TV news. I am not so sure. They have not saved newspapers as many thought they would. Anecdotally, a lot of them appear to be watching ESPN Sportscenter or Baseball Tonight when knee jerk thinking would place them with affiliate news at 10 or 11 pm.

Remember, as well, that what began last year is not a demographic blip. Some 10,000 Americans per day will turn 65 for the next 17 years! They will live longer than any previous generation as well. If you run an agency, does a 27 year old copywriter or media planner know how to connect with these people whom they see as "geezers"?  Think about it.

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

The Future of Flanker Products

The English language is an amazing thing. It is always evolving. Even marketing terms take on new meaning over time. Some 30 years ago I often would get in to discussions with friends and colleagues about “Flanker” products. At that time, a flanker generally referred to a brand that was perhaps number three in its category. In order to stand out and prosper, it usually had to move in to an uncontested area. The element of surprise was important so often very little test marketing was done. Examples used by many but often attributed to the talented Trout & Ries of Atlanta were National Rent A Car, Heineken, and Wendy’s.  National could not take Hertz and Avis head on, so they staked their claim to being the low cost provider in car rentals. Heineken let Budweiser and Schlitz duke it out in round one of the beer wars and became the number one imported beer in the U.S. appealing to a select audience and hitting them with lots of marketing support. Wendy’s let McDonald’s and Burger King go after the kids and they focused on an adult message.

As the years have passed, you do not hear the term “flanker” used in that context. Nowadays, the definition of a flanker in marketing and advertising texts and glossaries is “a new product introduced by a company in addition to its existing brand in a particular market category.” To me that is what we always called a line extension or brand extension.

My belief is that we are going to see a lot more flanker products or line extensions in our future. The main reason up to now is that it allows a major player to protect itself against small upstarts and changing consumer tastes. So Coca-Cola brings out Vanilla Coke and Cherry Coke and then caffeine free Cherry Coke. Such entries probably do not hurt the flagship Classic Coke very much but they do build up their own small base of aficionados, get instant trial and acceptance with the Coke name on the product, and they beat back smaller players trying to get a foothold in the category.

Another reason for the likely growth of flankers is media. As media fragmentation continues to grow, the cost of entry in to the world of brands gets higher and higher for a fledgling producer. A major package goods player can get the distribution easily and piggyback on its high existing awareness and strong advertising campaigns. If all else fails, they can buy out a small player who seems to be making inroads. This is happening all over the developing world and makes sense for global brands.

One recurring theme in media realism over the last couple of years has been that big players will get bigger and it will be increasingly hard for someone with a great idea and a great product to break through the consumer consciousness and succeed. As savvy global players keep grinding out new flanker products and trading on their enormous goodwill and name recognition plus their muscular advertising and promotion budgets, this trend should only accelerate.

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