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Friday, December 20, 2013

The Abdication of Advertising Agencies?

Like many of you, I spend a fair amount of time reading marketing case studies and company success stories. Recently, I began to notice one trend in the summaries. It is quite simply the relatively narrow role that advertising is playing in most of the marketing triumphs. How can this be? Here is my theory:

When I started in the business back in the early 1970’s, advertising and marketing were often used interchangeably. That was wrong, of course, but advertising was such a dominant part of the entire marketing mix that it is understandable how it happened. Many of the senior people in advertising in that era were the best of the best. A surprising number were from Ivy League or NESCAC schools and they were bright, well read and well connected.

As the 80’s came along and Wall Street surged, the bright young men and women from the best schools stopped going in to advertising. A number went into finance and made staggering amounts of money very quickly. I dare you to look at recent graduates of the top schools in America. Find out how many have gone into advertising. The number approaches zero these days. Along with this brain drain came the end of the 15% commission in advertising. It seems with every passing year that clients increasingly turn the screws on their agency. With the agency’s dominant asset being talent, how do you recruit young talent when Wall Street beckons with huge salaries? The crowd that provided strategic talent for a few generations on Madison Avenue are now on Wall Street or tucked away in Silicon Valley.

So, a great deal of the marketing know-how, if you will, is now client side and not at agencies. An old friend who is currently on the corporate side told me an illustrative story recently. His boss, an erudite marketing pro from far overseas, was visiting my friend in the states. When his agency found out about the global chieftain’s visit, they begged for a meeting under the pretext of a “really big idea.” The big idea turned out to be a storyboard for a TV spot. The international marketer was polite and attentive when they showed the proposed commercial but started to lose it when they called the session without a clue about a business strategy that backed up the spot. My friend kept his job but will keep this agency and perhaps his future agency far away from the global marketing director.

Another wrote to me saying that his company has moved to more promotion in their mix and are finding it extremely profitable and, to their great joy, far more predictable than advertising. He was so thrilled with the performance that he wanted to throw a dinner for the graphic artists who put together the promotional packages and coupons plus the two young agency analysts who tracked redemption and helped pick support markets. To his shock, their agency chief said, “Why do you want to spend time with those guys? They are not talented.” He did it anyway and said sales continue to go up and his TV advertising continues to decline as a percentage of his total spending.

Agencies always tell clients that they want to be “a partner and not a vendor.” Well, vendors present spots and ads and partners lay out a strategy. Yet the Catch-22 is how do you provide strategic leadership when you cannot afford to hire authentic counselors?

There is no likely solution in the immediate future. Big players will likely work with a team of marketing communications companies covering internet, mobile and conventional advertising and have some staffers on board who can orchestrate harmony among the parties. Yet the important functions of keeping tabs on trends and staying close to popular culture will likely come from the research team on the client side. These days clients tend to think of the marketing arena as their platform for creating connections. Agencies, especially those that are mid-sized, still want to sell ad campaigns.

So, many say that advertising agencies have abdicated their role. I disagree. To me, the game has changed and advertising is playing less and less of a role in integrated marketing communications. Many agencies have chosen not to or cannot afford to keep up with the changing times.

Over the last few months Media Realism is now delivering 55% of its audience from outside the United States. I wish all of you across the world a very Merry Christmas and a great 2014.

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

Friday, December 13, 2013

Admitting Your Mistakes Publicly

A few days ago, I was not feeling at all well and needed to take my mind off my discomfort. I picked up a compendium of Warren Buffett’s annual letters to Berkshire Hathaway shareholders and found some of his comments so riveting that I soon forgot about my pain.

The one issue that hit me hard was not his folksy wisdom and common sense. It is his total willingness to explain, IN GREAT DETAIL, the major mistakes that he has made managing his shareholders money. As clearly one of the greatest investors in history, it is amazing to see the stunning humility that Buffett continues to show year after year.

Here are a few examples:

In his 2007 letter to the Berkshire faithful, he conjured up a story that many of us in communications can relate to easily. He discussed at length how 35 years earlier he passed on buying the NBC TV affiliate in Dallas-Ft. Worth (his board member, Tom Murphy of Capital Cities Communications had to divest the station to meet FCC regulations). Buffett talked about how, at the time, TV stations used to “shower cash on their owners.” He went on to say that since he did not pursue the deal the station has spun off approximately $1 billion dollars in profits and was likely worth $800 million. He also said that he could have grabbed it for $35 million back in 1972. Buffett closed by saying, “The only explanation is that my brain had gone on vacation and forgotten to notify me.”
Looking at the 2009 letter we find-- “During 2008, I did some dumb things in investments.......Without urging from Charlie (Charles Munger, his long time business partner and Berkshire Vice Chairman), I bought a large amount of Conoco Phillips stock when oil and gas prices were near their peak....the terrible timing of my purchase has cost Berkshire several billion dollars”.

You simply do not see that kind of candor anywhere else on the business scene. In other letters he went after himself for his USAir involvement and his purchase of Dexter Shoe among others. Today, companies and financial analysts constantly talk and write about transparency. Buffett lets his shareholders know what he has done wrong and also that he has learned from his mistakes. Both the quantity and quality of his admissions are both amazing and refreshing. And, he is truly transparent. If you wish to plow through some dense numbers, he lays out the figures for every Berkshire Hathaway operating company.

As I look back on my career, few people ever admitted mistakes. When an ad campaign did not work, it would be blamed on a bad economy (sometimes true), poor media (true when we did not have sufficient funds), poor distribution, or competitive tactics. How about ineffective creative? No one ever admitted to that!

Over the years, I was often called in to rationalize what went wrong to clients and senior people said that I had become an excellent spin doctor. Hindsight has shown me that these were not my proudest moments but I suppose we all rationalize things to protect our corporate franchise.

One of the problems now is that marketing directors have a rather short tenure; some studies say that it tends to average around two years. So, if you are candid and say, “Sorry, we blew it this time”, you will likely get fired as the marketing director knows that his or her job is tenuous as well.

A few people have told me that Buffett can afford to be honest as his success overshadows the occasional stumble that proves he is human. There is some truth in that but in both my heart and my head, I know that his course is best. I salute him!

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

Friday, December 6, 2013

The Top 1%

These days many of you hear and read a lot about the top 1% in income in the United States. Some research coming very recently from the University of California at Berkeley hit us with some eye-popping statistics including:

--Last year the top 1% or earners in the U.S. collected 19.3% of the nation’s total household income which is an all time high

--Incomes of the top 1% have grown by 31.4% over the last four years while the remaining 99% have experienced a gain of 0.4% (not a typo, my friends--less than one half of 1%).

--The top 10% of earners took home just over 50% of the nation’s total income last year.

--The top 1% earn just over $500,000 per year and if you go to the elite .1% if soars in to multi-millions topped off by a few hedge fund managers who make over a billion dollars per year. The top .1% have nearly 11% of total earnings.

--Separately, the New York Times has reported that the top 10% have 90% of the stock market wealth (not a big surprise!).

Long run, if you are fair minded, it is hard to determine what kind of divisions this is causing or will cause in society but it is safe to say that it will eventually put a strain on social safety nets both on a state basis as well as nationally.

Are you bothered by the 1%? Most of us do not give them more than a passing thought. When I talk with people they either say that they are not as smart as the 1% and others tell me that they are not willing to work as hard as the elite do. Interestingly, I have not heard the term “the idle rich” in a few decades. And, it makes sense. Nearly 100 years ago, in 1916, the top 1% received only 20% of their income from paid work. They “clipped coupons” and lived off the interest on their bond portfolios. Today, it is closer to 70% of the wealthy living on their earnings, not passive bond and dividend income. Most of the elite in the U.S. have not inherited their money--they earn it every day and put it long, even savage hours in many cases.

Surprisingly, the group that seems most resentful of the super elite (.1%) tend to be the folks at the lower end of the 1%! They may be lawyers, accountants, doctors who see the vast wealth of members of the super elite as they are service providers to the posh and the riches of the few seems to annoy many of them. While compared to most of us these professionals appear to be living the American dream, they are jealous of the super elite. I have personally heard snarky comments from those who are lower echelon members of the 1% say, “He has just been lucky” or “I am far more intelligent than he is--why does he have so much money.” So envy surfaces at all strata of society although one might think that anyone in the top 1% would be happy or at least thankful for what they have in today’s uneasy economy.

A few years ago, I talked about the issue of income inequality in “The Gini Coefficent and the Future.” (see Media Realism, January 21, 2010). What surprises me is that the gulf between the wealthy and the rest of us has grown far wider in just a few years. Part of it has to be due to a buoyant stock market in the US. Also, when real estate bottomed out a few years ago in many areas of the country, the top 1% had ready cash and could scoop up some great bargains when foreclosures were soaring. Yet, even a cursory look at the income and wealth spread shows that American is now resembling a developing country rather than a vibrant democracy. Historically, in an economic recovery, the income growth was spread across the entire population. Not so any longer! Allegedly, we are in the fifth year of an economic turnaround, and the asset growth continues to go almost exclusively to the flush and especially the super-flush.

To be clear, in a relatively free market such as ours, there will always be income inequality. Always. The talented, the hard working and yes, the lucky, will rise and do better than most of us. What is alarming is that the middle class is getting hollowed out and the majority of Americans are, at best, simply running in place or losing ground.

What to do? Soak the rich? There are not really all that many of them. Tax reform might be a start. During the 2012 presidential campaign, I along with many who are data junkies, were more than bit annoyed when we saw that Mitt Romney was paying out only 13% of his income in Federal Income taxes while many of us with far more modest incomes were writing checks to the US Treasury as a percentage of our incomes that were two or even three times as much as he did. Now, do not get the wrong impression. Former Governor Romney did not break any laws. He was wealthy enough to structure his affairs in such a way as to minimize his tax bite.

This leads to some saying that the concept of fairness has to be set aside because the super wealthy or even the affluent are “job creators.” I have a problem with that logic, even though people tell me that a private investor such as I is often a “job creator”. If someone takes a flyer on an IPO (Initial Public Offering), he or she is definitely a job creator. Such individuals take a risk and the capital that they provide helps new companies expand and help grow the economy.  Most investors do not buy IPO’s. The overwhelming majority of their investments are stocks bought in the secondary market. Consider this example--let us say that tomorrow one of you buys 1,000 shares of a famous global blue chip company. You hold it for five years and watch with delight as they raise the dividend each year 8-10% giving you a growing stream of income. After five years, the price of the blue chip has doubled and you sell for a nifty profit. How many jobs have you created? The company treats you as a bookkeeping entry with your thousand shares now being owned by someone else. Yet, our tax system gives you preferred capital gains tax treatment. You have created zero jobs.

Here is a modest proposal that makes sense to me. Jobs do not come from “job creators” such as I but rather from businesses. So, slash or eliminate the corporate income tax and tax all capital gains (except IPO’s) and dividends as regular income. Eliminate the “carry trade” which treats some short term trades as capital gains (sorry, Mitt). Perhaps this can right the ship a bit with some job creation and bring some fairness back to the tax code. And, finally, reform the Social Security and Medicare systems with a means test. The top 1% and especially the super elite top .1% may have to fend for themselves. I am confident that they can do it.  :):):)

Why are most people complacent about our growing inequality? I am not sure and often find it hard to get people to speak about it. One thing is certain--this trend cannot continue much longer or we will face significant social unrest at some point down the road.

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

Friday, November 22, 2013

Can Your Ad Agency Survive The Two Revolutions?

Recently, I read THE INNOVATOR’S DILEMMA by Clayton Christensen of the Harvard Business School. Many analysts consider it THE book to read on disruptive change in the business world. One point that Christensen makes clearly and often is that well established firms generally fail when their industry is confronted with new markets and technologies. The logical extension of this is that this cannot bode well for the smaller and mid-sized players in the advertising industry if his thesis is correct.

Christensen is not brutal in his comments. He does not say that managers of struggling firms are lazy, corrupt or intellectually limited. The point he makes is “there is something about the way decisions get made in successful organizations that sows the seeds of eventual failure.” People are very wedded to the axiom that, “if the machine ain’t broke, don’t fit it.” Well, that is fine for normal times but, in a revolution, it no longer works.

My take is that in an era as we have now in communications a leadership team at an agency has to be able to spot paradigm shifts and adapt to them quickly. What concerns me is that all but a few agencies below the major advertising holding companies are equipped to do it or have the financial resources to buy companies and people who can.

What are the two shifts? To me, it is not simply the erosion of TV as an ad medium that many people point to as THE key issue. Rather it is the twin paradigm shifts taking place--the emergence of Big Data and the emerging (sic) middle class in emerging markets.

We discussed Big Data at some length in an earlier post “The New World of Ad Agency Mergers” (Media Realism, 10/28/13).  The major holding companies have set up exchanges that can purchase on line impressions at a depth and cost that cannot be replicated by smaller shops. The second shift is what is going on in emerging markets. Every marketer in recent years nods vigorously when the abbreviation BRIC is mentioned and can proudly list Brazil, Russia, India and China as the countries making up the term.  Yet, the BRIC companies are not where the real action is these days. Less obvious choices such as Indonesia, Malaysia, and Vietnam in Asia, much of Latin America outside of Brazil and selected countries in Eastern Europe are showing stellar growth. As their middle classes grow, the need for advertising is soaring. The giants are ready to take advantage of this trend but the mid-sized and smaller shops generally have to watch it from afar.

In the United States, package goods companies increasingly are putting more money in to promotion and many advertisers are beefing up Public Relations and Interactive and Internet Marketing. Again, this puts the non-giants in an awkward position. They may be able to do solid Public Relations for smaller clients but they will increasingly be outgunned when it comes to Internet Marketing.

So, clearly there is a revolution going on in advertising both with the advent of Big Data and the shift away from North America, Western Europe and Japan in terms of dynamic advertising billing and simply economic growth.

When I try to talk or e-mail people about this, they often claim that they have the right people and will be fine no matter what happens. While this is a bloodless revolution, who survives and prospers in revolutions? Almost always, if you look at history, it is people who are wired differently than most of us. And, they do not always take the traditional straight path that to success. Both Bill Gates and Steve Jobs were college dropouts--no MBA’s for them. Billionaire investor George Soros claims that his father’s wise decision to leave Nazi-occupied Budapest steeled him for his later life. They abandoned an upper middle class lifestyle for a new life on a new continent. People who succeed in upheaval just see things differently than most people in existing successful companies. They are smart and focused and think outside the box as they have little or no vested interest in the status quo. Look at all the 20 somethings in Silicon Valley. They may be irreverent but they embrace the change and often make it more rapid. Virtually all started as outsiders.

One fellow wrote to me recently and said that he has a young digital designer who could be a young Steve Jobs incarnate. My answer was that if that were true the young genius would be bored at his shop and quit. He laughed but told me that my point was very well made.

So, as you hire going forward, look for the unusual. Perhaps she is a stat freak who sees things that you do not in consumer data. Or, perhaps she can link data from different sources together into a coherent strategy in a way the rest of your team has never considered.  Maybe he is a better forecaster than your researchers as he has no baggage from the past to muddle his thinking.

If you have a team that has been together for a while it is probably a good idea to get some new injections in to your agency gene pool. The crazy or two that you bring on board may not be so crazy and could lengthen your corporate life.

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

Thursday, November 14, 2013

Message to Marketers--Listen!

People often ask me to look back over my long career and tell them what the single most important quality is for one to become a good or even great marketer. I always smile and answer immediately. To me, it is so very simple--you need sharp listening skills.

Spending much of my career at ad agencies, it always stunned me how often my colleagues dismissed our clients as morons. One fellow told me that we knew what was best for them and we simply had to lead them. At times, I must admit, after an awful client session or new business pitch, I joined in the chorus of people laughing at clients or prospects. Day to day, however, it was a different story for me.

Some years back, a very large client was often the butt of cruel jokes by many of my associates. At one session on a Thursday afternoon, he asked for an analysis that had everyone rolling their eyes. I asked him an innocuous question or two and the agency’s management representative later thanked me for not laughing in his face. The next day, I told the young account executive on the business that he had not mentioned the client’s inquiry in his call report. The twenty something fellow replied, “Mr. X is an idiot. We do not have to respond to his stupid ideas.” I told him that there was a meeting with the same client on Monday and his boss would be there as well. His response was a shrug and he left my office.

That afternoon, I made a few calls to some media executives in New York. On Sunday, I camped out in my office and put together a simple power-point that shot down the client’s idea but eased the pain by stressing (truthfully) that his idea was a few years ahead of its time.

On Monday, the meeting progressed fairly well. Then, near the end, Mr. X’s boss said,“I gave Tom (not his real name) a media idea last week. Could I have a report on that now?”  The account team froze with the classic “deer in the headlights” look. I jumped up, said, “of course”, and fired up the power-point. I dissected the big man’s idea as tactfully as I could and he shook his head in agreement.

As we were leaving, Mr. X asked to see me in his office. I was prepared for the worst. Instead, he thanked me profusely. “I cannot tell you how much I appreciate what you did today. Your company does good work but you are the only one over there who listens to me.” His comment remains the most meaningful professional compliment that I have ever received. A few weeks later we were fired. Mr. X and I stayed in touch and I considered him a friend until his death.

I did not do anything special--what I did was my job in a service organization. My colleagues thought that they were smarter than Mr. X. Perhaps they were; perhaps not. To me, Mr. X was a decent guy who was helping in a big way to pay my childrens college tuitions.  He was important to me.

The first rule of listening is to be be present and ACTIVELY listening when you clients or customers want to talk. I was always stunned when Chief Marketing Officers would say  that they rarely visited their stores or talked to their customers. They occasionally watched a tape of a focus group or read an executive summary of a research report. The best marketers are involved. They talk to a fair sample of customers at every touch point in the relationship--when someone sees the advertising, buys their product, uses it, and perhaps most importantly, when something goes wrong.

Sam Walton to his dying day was out in his stores talking to his blue collar customers and listening to them. There he was, an early billionaire, but he knew who his customers were, respected them, and responded to their needs. Indra Nooyi, the CEO of Pepsi, often spends her weekends in supermarkets talking with shoppers and sales clerks. She tries very hard to stay in touch with her base of snack food junkies.

Sadly, given the lack of vocabulary in America today, there are over 20,000 sites with the suffix “sucks.com”. The clever marketers do not let the angry comments gather dust. They make a spirited attempt to link people to their proprietary customer service sites. This lets people vent but also they can gather some valuable information. If someone bothers to write to a site, they are angry and may have good reasons. If you can turn some of these people around, you can do your brand a big favor.

Sharp marketers make it easier to reach their company with good and bad feed-back and suggestions. Also, and very importantly, when they respond they make certain that there is a caring human being at the other end. By building a dialogue, they can understand their customers needs much better.

Today, everyone preaches that you do not talk to customers. You need to engage them and create a relationship. Well, too many marketers are committing the error that
 dooms many relationships and even marriages. They simply do not listen.

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

Tuesday, November 5, 2013

Growing U.S. Poverty and Advertising

I do not watch a great deal of television. However, I do watch CNBC and Bloomberg Business every morning plus I read the business press quite aggressively. Invariably, one hears or reads comments these days from commentators or columnists saying “the United States is now sustaining moderate economic growth.” Is it true? Perhaps. The one word you almost never hear from anyone these days is poverty.

Last fall, I watched the televised debates for many Senatorial and House races, and, of course, the presidency. Only Congressman Paul Ryan brought up the issue of poverty in his debate with Vice President Joe Biden. No one else mentioned it anywhere and I am, by some measures, a political junkie. Had it happened, I would have seen and heard it.

You rarely see it in newspapers or TV reports either. I would forecast confidently that less than 1% of today’s news coverage is devoted to the subject of poverty.

Yet, it is an epidemic that shows little indication of receding even though we are allegedly several years out of The Great Recession of 2008-2009. I have put together a number of factoids from various sources that I would like to share with you:

--52 million Americans are on food stamps. Most of you who read this blog lead fairly comfortable lives with jobs in media, advertising, or communications. Do you even know someone personally who is on food stamps?

--Some 1.2 million public school students are homeless. This is a national disgrace.  Again, do you know anyone who is homeless?

--The U.S. Census Bureau states that one out of six Americans is living in poverty. This level is back where it was when Lyndon Johnson began his administration’s “War on Poverty” in the mid-60s. Define the poverty line? It is currently pegged at $23,492 for a family of four.

--Half of all American children before they reach 18 will live in a household where food stamps are used at some point.

--Some demographers say that 150 million Americans can now be described as “poor” or “low income.”

--The number of working poor is soaring. One out of four part time workers is living below the poverty line according to an Associated Press survey. And, 25% of American workers have jobs that pay less than $10 an hour.

--As I write, the Dow Jones Industrial Average keeps chugging along and flirting with record highs almost daily but median household income in the U.S. has declined for five consecutive years.

--Food pantries and soup kitchens now serve some 37 million people per year. Many use these charitable groups to supplement their food stamp allowance. Charities are bracing for an avalanche of demand if the federal government cuts the food stamp payments.

--The median salary in the U.S. for a full time worker is $34,000.

I tell you all this not to attack the major political parties or to offer some simplistic solution to this mess. Rather, I pose a question to all marketers that you need to consider--have you adjusted your product mix, pricing, and advertising messages to reflect the new reality of significant poverty in America?

Why are the Dollar stores doing so well in terms of growth relative to the giants such as Wal-Mart and Target? It seems clear to me that many people are failing out of the middle class despite the apparent economic recovery and go to the Dollar stores out of necessity.

Also, the government tells us that the unemployment rate is drifting down to a current 7.1%. Analysts admit that this is helped by many discouraged workers dropping out of the workforce and are thus removed from the unemployment calculation. Others talk of underemployment and say that authentic unemployment could be double the published figure.

There is another group that no one talks about. Some five to six years ago, hundreds of thousands of people lost jobs paying $100-130k. They were far too young to retire and eventually virtually all of them found new jobs. Talk to them and you find that many took jobs at $60-80k per year. They had no choice. A few have told me to my face that they will never again earn what they did in 2008. So, the government lists them as employed and demographers label them as middle class but they have underdone a huge adjustment in lifestyle and their hopes and dreams have been shattered.

If you look at the commercials and print ads today, they are still largely messages aimed at those of us living the good life. It is not for the top 1-2% that gets all the press but many of the messages do reflect the lifestyle of the top 10%. Perhaps the ad community needs to rethink things a bit. How does one craft a message for a mainstream product when the society appears to be downwardly mobile?

The business news smothers us with coverage of the Twitter Initial Public Offering and when Apple launches a new phone and we see crowds lined up to buy it, we are lulled in to not seeing what is really going on in our country. Things are going just fine for most of us in advertising and marketing.  Much of the rest of the country is struggling and we do not even see it.

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

Monday, October 28, 2013

The New World of Ad Agency Mergers?

On July 28th, the advertising and media world was surprised with the announcement that two giant holding companies--Omnicom and Publicis were merging. The new entity would be the largest advertising company in the world. Some 250+ agencies were involved in the merger covering including creative, media, digital, design, production, branding and public relations (I am sure that I am missing something).

The pundits got busy and people started the “welcome to our conglomerate, you’re fired” talk. Many talked about the creative clashes that would be inevitable and how when people talked “synergies” they were really saying that fewer people would be doing more work than ever to keep profits high. There is some truth in all that but if you look at what the principals said both at the announcement and since then, the merger strikes me as having little to do with advertising as we know it.

We have entered a new era that some have dubbed “Big Data.”  There is a record amount of personal information on customers that is in the hands of many giants including Google, IBM, Adobe and Oracle among others. Down the line agencies will be in a tight spot as the firms holding the massive databases can approach large marketers directly and bypass even the most sophisticated agencies. The major agency holding companies are keenly aware of this and see how vulnerable they will be or already are.

An old friend told me that the behemoths now have automated exchanges set up for tracking and placing digital media that have the look, feel and excitement of the trading rooms at Goldman Sachs and J.P.Morgan. So, with this merger, the new Omnicom-Publicis can now approach the Googles of the world with enormous orders for their new historically large client base.

So, the giants are finding a way to survive and get bigger in a rapidly changing environment. Yet what of the medium sized and smaller shops that this blog tends focus its attention? Clearly, the small fry will never have a trading room. And, their young digital media team, no matter how eager and talented they are, can never compete with the breadth of services or the terrific digital pricing that the giants can provide their clients.

Yet, mergers and acquisitions will still go forward. The result will likely be quite similar to what we have seen the last 50 years in advertising. Many, if not most, will be failures. You have seen this movie before but people who build modest sized agencies up from nothing are proud of their achievements (and rightly so) but are not used to taking orders or compromising much. So attempts to combine two different cultures almost never work. When merged mid-sized shops talk of “synergies” they are talking cost cutting which invariably means layoffs. A skilled broadcast negotiator handling $40 million in spot billing can easily handle $60 million especially if much of the new billing is in the same markets that he or she was previously buying. Staff, then, can easily be cut. The same is true is accounting, not to mention the creative teams.

To a certain degree, mergers today are often just buying time. A fellow wrote to me recently about how his money losing shop will probably merge with a slightly larger shop that is also losing money. The theory is that they can cut enough staff from both teams to make a profitable go of it as a larger company. The odds are not good but even if they do turn a profit after a huge cutting of staff, the chances are that the profit will be short lived. They need an infusion of new business or some organic growth from current clients. Without some injection of new revenue, the one time saving from the merger will dissipate quickly.

And now the big question. As digital grows, will Google et al call on the mid-sized shops clients directly? How can the little guys compete? They will not be giving Google and fellow Big Data travelers billions in revenue. Surely, there will always be boutiques who can do a splendid job of knocking out good quality work in legacy media especially in markets below the top 25. The mid-sized players, with or without mergers, will be between a rock and a hard place as digital growth accelerates.

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

Saturday, October 19, 2013

Core Competency and Ad Agencies

As I often am these days, I was at a driving range yesterday. It was a bit chilly so I had an old windbreaker on with a logo from a media property.  The gentlemen next to me kept staring at me and finally said, “Are you in advertising?” I shook hands, introduced myself, and gave him the brief “elevator speech” about my background. He told me that he was in town for a wedding and was going to take three of the groomsman out for a round of golf to pass time before the rehearsal dinner that night. And, he told me that he ran a small ad agency a long way from Baltimore.

Between swings, he asked me my thoughts about the future of media and I was quite willing to oblige. I asked him a few innocuous questions about his shop and then asked, “What would you say that your core competency is?”

He smiled and said, “Why just one? We have so many I don’t know where to start?” I cracked up but realized immediately that he was not trying to be funny and was not happy with my good natured reaction.

Let’s back up for a minute. Today, many people use the term “core competency” or more frequently “core competencies.”  The term first surfaced in a “Harvard Business Review” article back in 1990. Gary Hamel and C.K. Prahalad said that core competencies were the true source of competitive advantage in the business world. The authors made a lively case for companies to stop thinking about their many standalone businesses but rather to position and think of themselves as having a portfolio of competencies.

Hamel and Prahalad said that a core competency is something that you do better than anyone else. They said that to be authentic, a core competency had to leap three hurdles:

1) It is very difficult for a competitor to imitate
2) It provides access to a wide variety of markets
3) It adds mightily to the perceived customer benefits of the final product

The two professors stated that even the best organizations had no more than five basic competencies. If someone rattles off 20, then they do not know the meaning of the core competency concept. Or, I might add they are not telling the truth. :)

Some famous examples in the corporate world included Honda. They made arguably the best engines and power trains in the 1980’s. As a result, they had a big advantage in manufacturing and then selling generators, motorcycles, tractors, and, of course, cars. 3M (MMM) was known being experts with adhesives. Any number of innovative products came out of the Minneapolis based firm as customers recognized their competency in that arena.

The authors stressed that a well diversified corporation is similar to a big tree with its trunks and limbs as its core products. The tree’s root system was vital as it nourished the core competence. So, if one looks at the leaves, you only see the finished product of the tree (corporation). You do not see the underlying strength which is its core competence.

So, my new found friend at the driving range with the horrible duck hook may not be being honest with himself. The advertising world is going through a quick transition. More and more people and companies are getting left behind as digital grows and legacy media is at best stalled and, in most cases, shrinking in influence. Mid sized and smaller agencies may have to find their core competency or perhaps competencies and do so quickly. The days of trying to pretend to be all things to all people, even those who spend less than a few million dollars, are rapidly ending. Why do the mega-shops keep buying up specialty firms in mobile and design? Because they realize that, in some areas, they are weak and need to build up their strength or “competence” in that arena. The small fry can still provide great service, imagination and quick turnaround. They do need to narrow their focus and get really good at a few things if they are going to survive the next several years.

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

Sunday, October 13, 2013

Disintegrating Demographics

These days in Washington, DC both major American political parties are at odds over short term spending and debt issues. I follow it but think that it really avoids the real issue that faces both the U.S. and most other western nations. That issue is one of disintegrating demographics.

Populations in the West are getting older as better nutrition and medical care have increased life spans. Back in 1980, the median American was approximately 30 years of age which rose to nearly 36.5 in 2009 and is projected to be 42 by 2050 (the most dramatic change is in China where there one child policy has vaulted average age from 22 in 1980 to a possible 45 by the year 2050).

Fertility rates have also declined. There is a direct link between prosperity and declining birth rates. Also, as women continue to go to college (and finish) in record numbers, later marriage tends to translate to fewer children. In Europe, the number of children per woman has declined from 2.58 some 50 years ago to 1.30 today. This is well below the 2.1 “replacement rate” or zero population growth (ZPG) that demographers are always calculating. In the U.S, we are better off with the birth rate dropping from 3.31 to 2.04. The U.S. figure benefits from a steady entry of immigrants to our shores.

So people are living longer and having few children. This demographic shift has to have strong and negative consequences for economic growth. Historically, growth came from an increase in the workforce and in improvement in worker output better known as productivity. If our workforce shrinks due to more elderly and fewer young people, then productivity has carry the ball for growth 100% of the time.

Another factor that few people talk about is that aging populations consume increasing amounts of nursing care. Good care generally translates to more time spent per patient. That can only hinder the needed productivity growth that we discussed above.

Who is going to support the elderly? Thanks to government promises on healthcare and social security (entitlements), like it or not retirees will become an ever increasing burden on the state. Back in 1970, there were 5.3 workers per retiree in the U.S. That has dropped to 4.6 in 2010 and will be down to 2.6 in 2050 according to current projections. Other nations have it far worse. In 2050, Italy will 1.5 workers per retiree, France 1.9, and amazingly, Japan will have but 1.2. When I mentioned these stats to someone recently, they responded “what are you worried about? We are in much better shaped than those other countries.” I countered that his logic was like a person 150 pounds overweight saying that he was in better shape than someone 250 pounds overweight. One may have the coronary sooner but both were walking or waddling time-bombs. Yes, we can watch western Europe and Japan and see when the cracks appear and when crisis sets in. By then, it may be too late to right our ship.

Changes in government retirement age may be slow in coming. Everyone in the U.S. government knows that the Social Security eligibility age must be raised (the current 66 to perhaps 70 years old?). It appears that they are afraid to touch it. In 2010, former French president Nicholas Sarkozy tried to raise the retirement age from 60 to 62 and protests erupted all over the country. Note that he is now the former president.

In the U.S., the Simpson-Bowles proposals were the most responsible initiatives regarding public spending that I have seen in my lifetime. They called for raising the age for entitlements, raising certain taxes on the very upscale, and means testing both Social Security and Medicare. While not firing silver bullets, the proposals went a long way toward the long term righting of the American ship. You do not hear much about them these days but they address the most serious economic issues of our time. Some analysts whom I respect say that the liability for both Social Security and Medicare combined tops $220 trillion which really dwarfs our current topic of debate which is a $17 trillion long term debt.

Is there a silver lining to these weakening demographics for marketers? I can think of one. Legacy media like broadcast TV and radio may have a longer life. Technological change will progress but an aging population may keep some properties afloat and more profitable than some futurists can envision. Yes, we all know an 85 year old who sends lively e-mails or is a Netflix addict. Yet, many older people will stick to what they know.

Creatively, most of the messaging remains aimed at the 18-49 year olds with a big emphasis on the 25-34 demographic. This will likely shift as we graying baby boomers (born 1946-1964) drop out of the workplace for good.

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

Friday, October 4, 2013

The Importance of Discipline

Many young people ask me about what they should do for a career. Like many, I always used to say spend your 20’s testing a few things and when you find something that you love, stick with it. If you love what you are doing, it will not seem like work much of the time. Poet Robert Frost put is beautifully when he wrote, “my goal is to link my avocation with my vocation.”

As time as passed, I have realized that you need more than just love of your field. What you also need is discipline, sometimes great discipline. Many of the people who have impressed me the most over the years were not the flashy types. They were people who came in and quietly and doggedly pursued their jobs every day. Complaining was rare and they simply kept going and kept learning. Over time, they tended to get the recognition that they deserved.

This past year a student asked me at the end of a class for suggestions to get ready for a business career. I recommended that she read The Wall Street Journal every day. Some of it would be confusing at first but over time a lot would sink in. Soon you would be the best informed person in your office and become the “go to” person on many issues. She nodded and agreed to give it a try. As I looked around the room students were smiling at each other and some laughing. I asked “why pursue a business career and ignore the bible of American business.” No one replied and I received a few nervous stares. As the class broke up, I was gathering my lecture notes and erasing the blackboard (yes, I still write things on the board). I overheard two guys talking in a stage whisper. A direct quote is “Cole is an idiot. Why should anyone read The Wall Street Journal?”

Well. Perhaps I am an idiot. I am willing to bet serious money, however, that neither of two young vulgarians will ever reach the corner office. In a competitive marketplace and, an increasingly global one, the informed and well read executive is going to stand out from the crowd. So, if you have the discipline to keep working away at your knowledge of the marketplace in general and your field in particular you should do quite well especially when many of your co-workers will not.

Many young students today work out regularly. They look great. Some cut classes on occasion rather than miss their daily regimen at the gym. What they are forgetting is that their mind needs to be developed as well. Those who have the discipline to pursue their career day in and day out will be rewarded, big time.

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

Thursday, September 26, 2013

The Tipping Point and Media Planning

It seems hard to believe that Malcolm Gladwell’s THE TIPPING POINT--How Little Things Can Make a Big Difference was published back in 2000, over thirteen years ago. The term has invaded our vocabulary in a big way ever since.

Gladwell did not invent the term--its roots go back to the 1950’s and was coined by Morton Grodzins, an American political scientist. Gladwell called it “the moment of critical mass, the threshold, the boiling point.” I always saw it as “the straw that broke the camel’s back.”

Webster defined it as “the point at which a series of small changes or incidents became significant enough to cause a larger, more important change.”

Many high brow people do not like Gladwell as they say he, a marvelous storyteller, tries to explain things a bit too glibly when scientific or statistical data is needed to back up some of his conclusions. I have found that he makes you think which is a very good thing.

Thoughts of The TIPPING POINT came rushing back to me this week. There are a number of young media planners across the country who read this blog. Several write to me regularly and I make sure that I offer them constant encouragement.

A young man more than a 1000 miles from New York labors in a small to medium sized ad agency. He is absolutely on fire about media. Part of a tiny department he writes most of the plans in his shop and sometimes negotiates TV, radio, and local cable in adjoining markets. He gets little praise from the shop’s owner who, he claims, does not understand media well and tries to ignore many of the changes going on today. So, he labors alone although his clients seem to like him.

Recently, he sent me a draft of a media plan for a multi-market retailer that he handles. As I read it, I made some quick notes on a piece of scrap paper and was getting ready to send him an e-mail with a few comments. At the end of the plan, he outlined a list of tactics by market which he was going to handle personally. I was stunned. It was, quite simply, pretty damned wonderful. He had taken a perfectly acceptable media plan and made it really good. The “tipping point” in the plan was the inclusion of customized tactics that he had worked out across six Nielsen DMA’s. As Malcolm Gladwell has told us, “Little things can make a big difference.”

His client is being well served. Had a mega-shop or media buying service been executing the media strategy they never would have had his attention to detail or spent the time to create a unique effort in each DMA. They might have negotiated a slightly lower rate here or there (none of the markets were large) but they would have set it and forgotten it and moved on to the next group of buys.

I asked my young friend if he would like to work in New York, Chicago, Dallas, or Austin where he could learn a lot from peers and meet many like minded people. He said that even though he arrives first in his shop and usually stays an hour late each day he only lives five minutes from the office. He has lived in his small city for several years and has a nice social network and a great girlfriend. Life is good despite being lonely at the office.

How many other young people are out their like this outstanding young man? He needs more stimulation and exposure to new ideas and colleagues as the digital train has long left the station and is changing everything. For the moment, he is doing a remarkable job. Yet, when the “tipping point” hits and means the end of conventional media as we know it, this marvelous young talent may be left behind.

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

Thursday, September 19, 2013

TV and The Product Lifecycle

We all know that most new products and new businesses fail. Once a product or brand survives the early days it invariably has a lifecycle. A friend and I talked about this recently and followed up with some lively e-mails for quite a while. Essentially, he said that TV was in the “decline” phase according to classic marketing measures and its days as an ad medium were definitely numbered. I saw his point but thought that TV’s life as an ad medium was longer than he predicted.

Let’s back up for a moment and define lifecycle phases. Remember that many products or services have their own unique, idiosyncratic lifecycles but, in general, they shape up as follows:

The Launch--here is where most products fail. To marketers, consumer acceptance is far more important than profit. So, money is spent and lost short term on advertising and promotion to build awareness. If the market is very competitive, you may come in low with penetration pricing to encourage consumer trial. Distribution is often spotty at this point.
Growth--as demand for your product increases, you can maintain pricing integrity. Also, distribution gets filled in and you spend more on promotion of all kinds to cover a wider audience than you did during the launch phase.
Maturity--you competition has sharpened their teeth or you have new entries in your space forcing you to often engage in a price war.
Decline--the whole category starts to decline because of technological innovation or changing tastes of the consumer. There are additional price cuts and advertising is often slashed to reduce costs. Sooner or later, the brand is sold or even discontinued.

I can see why my friend would say that TV is now in Stage #4--Decline. Average ratings for TV have been declining for years as the space is becoming more crowded with new choices be it cable channels, Netflix, Hulu, You Tube and all sorts of new alternatives on the horizon. And, increasingly, with people using their phones, laptops, or tablets to view,  video usage is increasing as TV viewing is declining.

TV, however, is not dead yet. While virtually all of you reading this in the US have Netlfix and most have HBO, most people do not. The landscape has certainly changed  and when it comes to brand building, TV can no longer carry most of the burden alone. Yet, TV still delivers a mass audience faster than anything else. And, let’s face it, the medium still has the ability to move product in most categories.

Perhaps most of all, TV still has a lot of the content! There is no question that it is not the advertising powerhouse that it once was. As I have said before in this blog, it was a great business and now it is a good business. May I suggest that you be careful when someone says that TV is ready to dry up and blow away? It may indeed be in Stage #4, Decline, but that decline is likely to be slower than many pundits forecast.

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

Saturday, September 14, 2013

The Secret Sauce of Social Media

A long time ago in Southern New England, when I was four years old, we were hit by a ferocious snowstorm. When the snow finally stopped, all school and work was halted. I remember my much older siblings helping me in to a snowsuit and I went out and played for what seemed like hours.

The next morning I woke with a terrible case of chapped lips. I tried to finish my cocoa at breakfast but I was very uncomfortable. My father, being treated to a day off, said, “come with me, little man.” I vividly remember him carrying me out to his car, a huge Oldsmobile 98. The snow was way too high for me to navigate around the car so he gently tossed me into the passenger seat (no seatbelts in 1954! ). Driving carefully through the snow encrusted roads, we made it to the little village with its battery of shops. We walked in to the drugstore and he asked Mr. Erickson, the druggist, for a Chapstick. I think it cost 15 cents!

Once back in the car, he opened it and applied it to my lips. “You will be just fine in a few minutes. Keep this Don and don’t lose it.” Belying my years, I put the Chapstick in my coat’s inner pocket and pulled the zipper. Instantly, I became a believer in the brand and nearly 60 years later I have rarely been without a Chapstick for more than a day. So, I am a loyal customer but my loyalty has been passive and unknown to the world unless you are a member of my immediate family.

The value of loyal customers is significant for any brand. Auto companies love them--if they can get someone in their early 20’s and hold them, that may be worth a million to a million and a half dollars over the course of his or her lifetime. Also detergents, fast food, liquor brands, even Chapstick find loyal customers to be of great value over a customer’s lifetime.

All of us in advertising and marketing have pushed the concept of the lifetime value of a loyal customer hard--you don’t have to spend much to keep them and they instantly go to you even if new brands come along that may be a better value. I used to explain the loyalty phenomenon as a ladder--on the bottom rung was awareness and that is what initial advertising exposures could do for you. Then you moved on to consideration if the advertising was effective and you were in the market or friends or relatives were happy with the brand. After you tried it, the next rung up the ladder was preference. Finally, after a pleasant and successful history with the brand, you hit the top of the ladder and got to loyalty.

Until now, millions of us, as I have been with Chapstick, are quiet loyalists. As a teenager, I used it often but in private as I did not want classmates riding me. So, my loyalty to the humble brand was solid but it was completely passive.

In recent years, social media has invaded the advertising scene in a big way. I struggled with it as people were giving somewhat breathless reports of how wonderful that it could be for all brands. Early on measurement was not the greatest and people probably wasted way too much money on it.

Now, I am seeing, how, if done right it can be wonderful and cost efficient form of exposure. What it centers around is that people are active advocates for a brand when they do things such as go to a company’s Facebook page. Because people are active or engaged, an interaction on Facebook is increasingly worth more than an exposure opportunity (ad impression) in TV or other conventional media where commercial avoidance continues to grow at an alarming rate. These social media interactions pack a powerful authenticity punch that a passive TV impression just cannot match.

This is how social media works. Remember a “liker” on Facebook has truly sought your brand out directly. That enthusiasm or positivity is what, in my opinion, makes social media click.

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

Sunday, September 8, 2013

No Logo Revisited

Back in 2000, I purchased and read a then hot book entitled NO LOGO written by Canadian journalist and activist Naomi Klein. I tried to get a few friends and colleagues to read it but no one took me up on it. They all asked why I would read a bestseller that attacked advertising and marketing so vehemently.

Well, I have always found it instructive to read views strongly opposite to my own. Sometimes they manage to soften my position on certain issues and, in other cases,  they only reinforce what I felt initially. So, this past week, 13 years later, I decided to re-read NO LOGO and see how I reacted to it. I got 10 times more than I bargained for in the revisit.

The book, even though, called NO LOGO, struck me as a clarion call against globalization. Ms. Klein posited that the way that the new world was emerging was one in which companies, via their strong brands, were more powerful than many countries and the brands were becoming even stronger due to liberalized trade, outsourcing of work (particularly manufacturing in low cost countries with sweatshop labor) and deregulation across the globe.

Ms. Klein stated that businesses were cocooning consumers into a “Brandscape.” She acidly commented that companies were marketing aspirations to consumers and creating a “Barbie world for adults.”

Obviously, advertising came under a lot of heat in her rant. Yet, she made suggestions about marketing brands that were fascinating more than a decade after I first read them.
Number one, she constantly, talks about the need for brands to be authentic. Also, tactics such as guerilla marketing and culture jamming make sense. Well, do the brand gurus talk about today? I was laughing out loud when I reread some of her passages. Everyone talks about how the brand is everything and you must protect the brand at all costs. And, most importantly, you must be AUTHENTIC in all things that you do.

Couple that with a decline but not elimination of offshore plants with underage or underpaid workers, major US firms taking strong green initiatives and one could argue that Ms. Klein has won her battle. Seeing her most recent work and watching interviews on You Tube, she does not strike me as wanting reform as much as an overhaul of the entire financial system.

What had me laughing? It seems that some of the major brands have virtually used NO LOGO as part of their marketing playbook in recent years. They have beat the drum for authenticity and product integrity loudly and often. So despite the blip in 2000, it appears that behemoth brands have pre-empted much of Ms. Klein’s complaints. Even a casual observer of the marketing scene knows that brands, especially in apparel, are stronger than ever.

I saw Ms. Klein being interviewed about the Occupy Wall Street movement and felt sympathy with her and the protesters. She is also a gifted writer who is easy to read. But, while she may have won round one with the publication of NO LOGO the marketers have definitely won the battle as brands are more solidly entrenched in many categories than they were more than a decade ago.

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

Thursday, August 29, 2013

Umbrella Brands and The Future

Back in 1994, Anglo-Dutch consumer products giant Unilever was about to celebrate its 75th anniversary. Prior to that time, Unilever did not have a huge presence with consumers. Like Procter & Gamble, the giant of consumer goods companies, Unilever let their individual products do the talking.

By 1995, all of that had changed. A Unilever logo was stamped of every package that the company sold. Take a look today. If you have Ben & Jerry’s, Breyers, Dove Soap, Lipton, Skippy, Suave, Vaseline, or Hellman’s in the house, you will find the Unilever logo prominently displayed. One person told me it was a way to lure potential investors to their shares. To me, that, at best, is a minor reason. It may be a way to rally the troops across the giant company who work for assorted brands and have their loyalties there. Unilever also culled their product list from 1600 to 400 at the same time so nervous employees needed some encouragement.

This concept where many products either possess or are easily identified as having the same name is known as an Umbrella brand (a few still call it a family brand). Great examples are Johnson & Johnson in baby care products and Colgate in dental care. Food king Nestle is also using their name on a wide variety of packaging.

Why do it? Well, promotion becomes less expensive and easier for products that fall under the umbrella branding. Also, it helps to launch new products as much of the public has already readily accepted the brand image of other entries with the same name. The seven pillars of Integrated Marketing Communications (IMC) can work more smoothly which is the entire point of an IMC program (pillars are Advertising, Promotion, Public Relations, Personal Selling, Database Marketing, Direct Response Marketing, and Publicity). New products are easy to identify by customers. When traveling, this is very helpful as the packaging and umbrella name helps you make a fast decision regardless of the culture you are in. So, umbrella marketing is much easier for the target market to understand.

Is there a downside? Different brands vary in quality and negative publicity for one entry can pull the whole roster of brands down a bit. You are truly only as strong as the weakest link in a chain to trot out a true but old cliche.

For the most part, this sounds great. Great for companies, for sure, as marketing costs almost have to decline over time and the advertising efficiencies will be significant as well. Where does this leave ad agencies and the legacy media such as TV, Radio and magazines? They have to be hurt by it. Talk to an old hand in TV. Right now, some 50% of package goods money spent is on promotion. Their TV spending, especially in spot TV markets, is way down from 15 years ago in many, many categories. As umbrella brands grow, the situation may get tighter. And, agencies don’t make as much money grinding out coupons for a “family of brands” as they would for producing and placing TV spots.

From a business standpoint, it also means that the big players will likely get bigger. By leveraging their brand via the umbrella approach, they can introduce many new products at a very attractive cost. For an upstart with no name identification, the cost of entry may be too great and the new brand could never launch.

Interesting, as Unilever and others implemented the umbrella, the historical leader in brand building, Procter & Gamble (P&G) did not. They like the independence of their brands and have nearly two dozen with a billion dollars in sales each. How many consumers know that Tide, Gillette, Pampers, Dawn, and Ivory all come from the same Cincinnati based company? A few of us in advertising and marketing do as do their shareholders. Yet, virtually no one refers to P&G brands as they do with Colgate or Johnson & Johnson.

During the recent Olympics, P&G ran some beautiful two minute spots thanking Moms around the world for helping their sons and daughters become Olympians. Some said this was the opening salvo in a campaign to embrace the umbrella concept. Others complained that because the P&G name did not show up until the end of each execution, they failed at branding. Since then, I have seen no evidence that they are abandoning their long term approach of building strong independent brands.

Look for more umbrella branding in the years to come as line extensions among major players accelerate and companies get even more ruthless about cutting marketing expenses. Some, such as P&G, may remain apart from the trend and still thrive.

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

Wednesday, August 21, 2013

What Business Are You In?

Recently I was cleaning out some boxes in my attic. I stumbled across one that I had not opened in decades. It contained my notes, a few textbooks, and some articles that I had copied during my MBA program at Boston College some 40 years ago. When I saw one of the articles, I stopped dead in my tracks, laughed, and reread it immediately. The article was by Theodore Levitt, from The Harvard Business Review (HBR) in 1960 and was entitled “Marketing Myopia.”

Some of you may have heard of Levitt. He is widely credited with coining the term “globalization” in 1983.  Actually, if you dig a bit, the New York Times was using it in 1944 but a more accurate description may be that he popularized the term in an HBR piece entitled “Globalization of Markets.” Current writers on global business, such as Tom Friedman, owe a debt to him.

The other thing that he is famous for is the article “Marketing Myopia.” The basic thrust of the article was that businesses had a better chance of succeeding if they would zero in on meeting their customers needs rather than on selling products. Also, he felt that many told themselves that they were in a “growth” industry which lead to complacency.

The article according to some business historians marked a watershed moment. Many said that this was the beginning of the modern marketing movement. Most businesses, according to Levitt, did not really understand what business that they were really in. The paper had some wonderful examples of such confusion and others chimed in as a million copies of the article were distributed throughout the business world. Movies did not prepare and react properly to TV growth because they felt that they were in the motion picture business. No, they were in the entertainment business and should have embraced TV when it was in its infancy. Warner Brothers got it eventually and then other studios followed suit.

Oil companies morphed into energy companies as a result of Levitt’s trailblazing. He said profoundly,  "People do not actually buy gasoline. What they buy is the right to keep driving their cars.”

Railroads were a great example and I quote at length “the railroads did not stop growing because the need for passenger and freight transportation declined. That grew. The railroads are in trouble today (1960) not because that need was filled by others (cars, trucks, airplanes, and even telephones).......They let others take customers away from them because they assumed themselves to be in the railroad business rather than the transportation business.”

All these examples showed that they were product oriented rather than customer oriented. Did people get it? Some did and some did not. Think of the giants of recent years. No one is more laser focused on the customer than Jeff Bezos of Amazon. And, how about the late Steve Jobs. He did not design the laptop or the smartphone--he made them easy to use for the everyday person. The focus was 100% on the consumer.

This may seem obvious in 2013 but it was revolutionary stuff in 1960! Back then the emphasis was mass production of products and lowering unit costs. Levitt went on to make an important distinction that many ad agencies today still do not understand.

He stressed that selling is not marketing. “Selling concerns itself with the tricks and techniques of getting people to exchange their cash for your product. It is not concerned with the values that the exchange is all about. And, it does not, as marketing invariably does, view the entire business process as consisting of a tightly integrated effort to discover, create, arouse, and satisfy customer needs.”

Customer-creating satisfactions were his key to marketing success and it had to permeate an entire organization. The best marketers do this be it Amazon, L.L. Bean, Apple, Procter & Gamble, ESPN, or Harley Davidson.

Mid sized and small ad agencies like to produce good advertising. That is fine but long term the trend is away from it (see Media Realism, The Slow Death of Advertising, 5/13/13). WPP Chief Sir Martin Sorrell, said that a full third of their billing is digital rather than conventional and some clients are clamoring for a 50% allocation to digital. That leaves the mid-sized players in a tight spot unless they shift gears and relentlessly focus on the ultimate consumer. Levitt used the hackneyed example of buggy whip manufacturers to make this point. When the automobile came on stream, no amount of improved product development was going to save the industry. Had it considered itself a transportation firm, maybe they could have produced tires or fan belts as those industries emerged from the car explosion.

People who still talk nearly exclusively of making great TV and radio spots (and believe me, they still exist) need to get real. The pace of change is rapid and they need to adapt or go the way of the buggy whip manufacturers.

As Levitt put is so well in 1960, “The best way for a firm to be lucky is to make its own luck.”

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

Friday, August 16, 2013


Leadership is usually defined as organizing a group of people toward a common purpose. What qualities do you need to be a leader? Well, business is full of intangibles but after decades of observation, I would say that nothing is as intangible as leadership.

Back in the 1990’s some CEO’s had achieved almost rock start status. Today, perhaps only 83 year old Warren Buffett still maintains that status. It is interesting to observe that there has been clear progress in production techniques, marketing, strategy and usually finance in recent decades but leadership still appears no better than average in most companies.

There is no question that a motivating leader is very valuable but as times change and business conditions evolve, perhaps a different skill set is needed as well relative to what worked in the past. If you look at treatises on leadership, they invariably mention the following as necessary attributes: Technical competence, ability to absorb concepts, size up talent well, have a proven track record in their field, people skills, sound judgement and strong character. It is hard to argue with that list but going forward the last few may be the most important. These skills are what industrial psychologists often refer to as “soft skills.” Those who have soft skills can bring passion and significance to the work which helps to retain great employees who may be highly sought after by other companies.

 One thing that is prominent today in discussion of leadership really mystifies me. Today, leaders are said to really need to be “authentic.” If you want people to trust you and follow you, you need to be yourself. People should not have to worry about what you are thinking. Did you know that managers and executives can now go to weekend seminars on authenticity training? Forgive me, but how does one learn to be authentic in a weekend? No one has been able to isolate or distill charisma which allows a leader to get their team to follow them to hell and back.

There is no question that there are different styles of successful leadership. Canadian researcher, academic and management guru Patricia Pitcher boiled it down to three major types:

Artists--they are imaginative, visionary, inspiring, emotional and entrepreneurial
Craftsmen--steady, sensible, predictable and very trustworthy.
Technocrats--cerebral, detail oriented, uncompromising and hard-headed.

Each type of leader is ideal for certain situations. Looking at this it became very clear to me why most ad agency mergers or buyouts fail or have huge issues. The first type of leader, the artist, would be ideal for a boutique agency and help grow it. If the company survived he would have to at some point bring in a craftsman, to manage the growing enterprise. Should the artist sell to a technocrat who runs a holding company there is going to be an enormous clash of cultures.  The technocrat may be a low grade financier rather than a visionary so his bottom-line fixation can drive the imaginative artist nuts. Also, the artist has not taken orders from anyone in 25 years and will not like his or her expense report questioned.

At the same time, the Technocrat becomes the indispensable man during hard times. If a retrenching or downsizing has to occur, the Technocrat will do what has to be done and not look back.

So leadership is not simply charisma. If someone can refine some type of leadership theory it will easily be the key development in business operations of our new century.

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

Monday, August 12, 2013

Jeff Bezos and The Washington Post

Last week the media world was rocked by the sale of two major newspapers. John Henry, the principal owner of the Boston Red Sox bought the Boston Globe from the New York Times. And, a bigger surprise was when Jeff Bezos, the founder of Amazon, purchased The Washington Post for $250 million. Amazingly, in a city such as Washington where leaks are rampant, the deal was kept under wraps.

Many people have weighed in on the Post sale in the press and I have heard from friends and readers with wildly different point of view on the subject.

Here are some comments plus my spin on it:

“Bezos is a multi-billionaire and he thinks it would be fun to own the Washington Post.”--when I first saw this and then heard it all I could think of was a wonderful scene from Orson Welles film masterpiece, “Citizen Kane.” Young Charles Foster Kane bought the New York Inquirer and he sent a telegram to his narrow minded guardian ending with “I think it would be fun to run a newspaper.” Well, Jeff Bezos, in my opinion, did not purchase the Post just because it would be fun. Look at his impressive track record and he probably has some plan of where to take the paper. Also, keep in mind that Bezos PERSONALLY purchased the Post. It will not be a division of Amazon.
“Bezos bought the paper to have a platform for his own political views.” I doubt it. He has promised editorial independence and I believe him. Also, he appears to be libertarian leaning with a liberal approach to social issues and a conservative stance on fiscal issues. That does not jibe at all with the current Post editorial positions.
“Bezos will make the Post profitable quickly.” All major market newspapers are struggling financially but he cannot turn the ship around immediately. My best friend made a very perceptive comment about Bezos. She said, “look at what he has done over the last 20 years. Sometimes he lost money on certain Amazon ventures but he stuck to them and succeeded over the long pull. He may get results but not immediately.” Well said! He has been both a patient and brilliant retailer.
“Bezos will make the change to 100% digital immediately.” Maybe but maybe not. He will certainly improve the Post’s digital product which is not nearly as effective as The New York Times or Wall Street Journal’s online offerings.
“The Post is not relevant in Washington as it once was. Online entries such as Politico or The Huffington Post are where insiders go for news.” There is some truth here. Today, the Post, for all its past glory, seems like a legacy media entry. He may be able to bring them in to 2013 pretty quickly.

What do I think? Well, Jeff Bezos was one of the major “disruptors” of the last 20 years. He changed the way that we shopped and maybe stretching things a bit, he changed the way that we read with Kindle. I know of no one better suited to integrate news content with commerce. He will be willing to try new things that many publishers will not nor will they think of them. Also, he is buying a property that has an expertise at home delivery just as Amazon does.
Can Jeff Bezos save the newspaper industry? Not as we know it. Yet, he can take a venerable property such as the Washington Post and help it survive and maybe prosper in a digital world.

I wish him and The Washington Post all the best.

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

Thursday, August 1, 2013

Binge TV Viewing

The trade press is full of stories these days about “Binge TV Viewing.” Most media specialists define binge viewing as “shutting yourself from the outside world and watching an entire season of a TV series or mini-series in a short timeframe.” Some say that binge TV viewing is transforming the way Americans and now the British watch series TV.

A few years back when the term first became prominent the fragmentary research revealed an interesting bi-modal skew to the demographics of binge viewers. It tended to be college students and people over 60. I was personally first introduced to it by a college student, home for the holidays who was watching a few seasons of “The West Wing” over several days. Today, it appears the appeal of binge viewing goes across the entire demographic spectrum.

Netflix has added fuel to the binge TV fire by releasing some excellent original series such as “House of Cards” and “Lilyhammer”. What they did differently from other media properties was releasing all episodes on the same day which some feel almost encourages binge viewing. When you return to  Netflix after an episode or two, the next episode is right there ready to begin your next viewing marathon.

Many people have written to me about how they binge. Some say that when they are sick, they like to pass the unpleasant hours with an absorbing series. A few people get in to it while unemployed. One fellow told me he watched all the existing episodes of “Law & Order” during a two month siege waiting for a job offer. Others say they prefer to watch a series all the way through rather than once a week. Some watch old mini-series--a reader in the Southwest wrote to tell me that he does a “Lonesome Dove” weekend each year where a group of friends come over, eat some Tex-Mex food and watch and discuss the famous western.

Some psychologists say that binge viewing is dangerous as people seem to be dropping out of the mainstream. My students who binge tell me they often do it with a group of 8-10 people who discuss the series at length. For them, it is a fun social event. Popular choices to binge beyond the made for Netlfix entries include “Homeland”, “Boardwalk Empire”, "Treme”, “Breaking Bad” and “Lost”. My local librarian tells me that old Masterpiece theater series are popular with the Social Security set.

Critics say that binge viewing is terrible as it ruins cliffhangers. Well, many of Dickens’ novels were serialized chapter by chapter in British magazines and often a chapter would end on a cliffhanger. It did not seem to hurt readers who years later swallowed the whole novel far more quickly (although as students many of us felt it was a boring slog). Many people say that they enjoy binge viewing as they get to watch on their own schedule. Others claim that they understand better when they binge as they have no time to forget details as they do if they must wait a week for the next episode.

Nielsen is said to be tracking binge viewing and will publish results in the future. That is fine. Whispers are that much of it is done on mobile devices. I am not sure about that especially if the binge event is also a social event.

All the noise about binge viewing (and I am part of it) to me misses the point. The key takeaway is that if you are binge viewing you are largely excluded from advertiser supported TV for a few days to a week. If you binge several times a year, it is as if you took a commercial vacation for a month or two annually.

If binge viewing gets a lot bigger, and it could, this is one more significant attack on advertiser supported TV. If you do not have the opportunity to see commercials when you do a substantial amount of your viewing, TV has to suffer as an effective advertising medium.

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

Monday, July 29, 2013

The Knowledge Economy and Advertising

A long time ago, I began my career at an a very large ad agency in New York. On my second day on the job, my boss called me in and began to brief me on the industry. He was very methodical and kind. After an hour or so, he asked me if I had any questions. As a newly minted MBA, I asked about the firm’s assets. He smiled and said we really only have two. They were the company’s reputation (largely the creative product) and the people. He said,“Our major asset is our people and they go up and down on the elevator every day.” That was the first time I had heard that term which is still repeated to this day. What he was telling me, and at the time he did not know it, was that I had just joined the “knowledge economy”.

As best as I can tell, the term came from management guru Peter Drucker in his 1969 book, THE AGE OF DISCONTINUITY. Like many coined terms from Drucker, the idea took a while to catch on but, when it did, it gained a lot of traction in erudite business circles.

What does it mean? A formal definition offered by the British Work Foundation is “The Knowledge Economy is what you get when you bring together powerful computers and well-educated minds to meet an expanding demand for knowledge-based goods and services”.

How can we bring this down to the world of 2013? Well, when we all studied economics, we were invariably taught that labor and capital were the dominant factors of production. Today, many of us would say that knowledge is replacing labor as a major means of creating wealth both personally and for one’s company. When you use a non-depleting asset like knowledge you can actually enhance its value by sharing it. Today, in developed countries it is safe to say that some 50% of the GDP and also half of the jobs are in the knowledge economy.

Knowledge, true knowledge, really adds value to an organization. It makes for better decisions, encourages innovation and often can raise productivity. Many big companies have appointed Chief Knowledge Officers which sounds horribly pretentious but makes a very good point. A knowledge officer has to be able to distinguish between knowledge and information. A few consultants whom I have run across say that you have “explicit” knowledge and “tacit” knowledge. You can easily find explicit knowledge in company databases and the occasional old filing cabinet. Tacit knowledge exists in employees (your assets) heads and is largely intangible as it covers intuition, experience, and judgement. When IT leads company projects they often fail as they are chained to explicit data or information.

From my second day in the ad business, I learned that the assets of the agency left on the elevator each night. This is a crucial issue. Competitors can lure aways your most talented employees and some older staffers retire. Some companies received a rude awakening in 2008-2009 when they downsized too aggressively and fired a lot of 55-62 year olds to save on large salaries and especially health care costs. Suddenly, they found that the remaining teams did not know how to do certain things. Also, the older folks had a strong knowledge of customers, of products, relationships within the company and with clients. Also, many had what I like to call “organizational memory.” If they had been around longer than most senior executives, these graybeards knew what worked and did not in the past and, also what clients did not like. It has always stunned me that executives do not do a detailed debriefing with a long term employee the last year of their employment. Most spend an hour with a clueless HR person in some form of final meeting.

Fifty years ago, the name of the game in the industrial economy was efficiency. Even Hollywood movies made fun of efficiency experts. After a while, most people caught on to efficiency in production. So, today production advantages are not that great. We then moved on to business processes which blended resource planning and information technology. As those advantages narrowed, we have now turned to knowledge as the issue that can make our group have a sustained competitive advantage.

A key for the future will be seeing how well companies can differentiate themselves on tacit interactions that rely on judgement.

Also, you may find that your boss may not have any idea what the Knowledge Economy is yet he or she may live it every day. Brains matter more than anything. If you work in Advertising or the Media, keep it top of mind.

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

Wednesday, July 24, 2013

The Long Tail of Internet Media

Over the last year I have been writing back and forth with a young media planner who reads Media Realism. He has wondrous enthusiasm for all media issues and I love the dialogue that we have established together. About six months ago, he proudly sent me a list of 16 different sites that he had chosen to use for a client message. Results were some 22% better than what his predecessor’s online plan had delivered the prior year for the same money.

Now, let me start by saying that this young man works harder than just about anyone that I have ever seen. He took me through his thought process and the screens that he used to come up with the 16 winning sites he selected for client use. I had to admire his effort but could not give him the vote of confidence that he wanted.

I tried to gently use a literary example to make my point. Back in 1604, the great Spanish author Cervantes in DON QUIXOTE urged “ look not for a needle in a haystack.” My point was that looking for the 16 sites that he chose was incredibly labor intensive and he likely missed a great deal of opportunities. Sadly, like many of his generation, he could not relate to an analogy over 400 years old although he asked “Don, are you telling me that I am tilting at windmills.”

Next, I tried to continue the “needle in a haystack” theme by quoting John Bogle, the founder of the Vanguard funds. Bogle has made many ordinary investors millionaires by touting the virtues of index funds. You do not try to outsmart the market by buying a few select stocks, you simply buy the whole market and do not get eaten up by fees for money management. Over time, the trend is for stocks to go up. Did you take a haircut in 2008-2009? You bet! Now, you are doing fine again.

Bogle often uses the quote in seminars or speaking engagements that investors should “forget the needle and buy the haystack (index funds).” My young friend warmed to this a bit and then asked “do you want me to buy my client one of those crappy blind ad networks?” (a blind network is an ad network that does not let advertisers known where the ads will be displayed. Increasingly passe, they are often sold as remnant inventory at a low cost)

Finally, I shifted gears and got my point across. I asked if he knew of Chris Anderson who, when he was editor in chief of WIRED magazine wrote an article in 2004 called THE LONG TAIL and then followed it up with a book of the same name in 2006. My media planner said he loved reading WIRED. Anderson kicked off the book with a marvelous story of how a book on mountain climbing entitled TOUCHING THE VOID became a bestseller ten years after being published. What happened is that a slew of recommendations on Amazon.com popped up after a similar book was published.  Anderson stated this as “an example of an entirely new economic model for the media and entertainment industries, and one that is just beginning to show its power.”

Anderson says that if you plot sales (or musical downloads) against actual products you will find many sales against a relatively small number of products or choices. But there will be an extended “flattish” tail that may stretch to hundreds of thousands of sales year after year if someone chooses to stock the items online.

The above example illustrated two principles that Anderson made clear:

Make everything available
Help people find it

Anderson said that when Amazon analyzed book sales they found that a large share of sales came from books that were not readily available in book stores. Music illustrated a similar pattern. Go to Wal-Mart and you can find the most popular selections on any given day.  However, if you try and find some obscure CD from a local or regional band, you can forget it. So online you have what is known as the “long tail.” Most sell only one CD a quarter. A similar pattern exists for Netflix films. They have over 100,000 titles but most are rented in very low volumes.

Lego, the Danish toy manufacturer, was another case of the long tail. Most toy stores stock only 1-2 dozen Lego products. Yet their mail order business has 1,000 choices. And, today, only a handful of their top sellers can be found in stores. Many children around the world design their own Lego products and the company shrewdly posts them on the website and many others buy them.

The point of all this is that in online the niche market is very strong, even powerful. After some back and forth, my young friend asked a leading search engine to come in and, with their help, his next plan had an ad message on 1700 sites. Sales skyrocketed vis a vis his “sweet 16” choices in the quarter before. He had not “bought the haystack” but he was reaching hundreds of thousands more prospects with pinpoint targeting. Playing the Lone Ranger was heady for him but it was not generating maximum return for his client.

This has been going on for at least 5-6 years yet some media people out in the hinterlands have not been optimizing their online buys. The same is true with cable TV. Planners buy a couple of channels when a package of 6-8 could do them a world of good.

Anderson concluded his thesis of THE LONG TAIL when he said, “when you dramatically lower the costs of connecting supply and demand, it changes not just the numbers, but the entire nature of the market.

So do chose some sites that are perfect fits. Just remember that there are thousands of others that can add a fresh, new audience in small numbers that can work very well for your brand.

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

Thursday, July 18, 2013

The Media Legacy of the Great Recession

Today, the Dow Jones Industrial Average closed at an all time high of 15,548. This is an enormous gain since the low point of the Great Recession in spring 2009 when it bottomed out at 6,500. While we all know that the stock market can turn quickly in either direction, we are now for the first time in several years beginning to hear media pundits talk again about a possible return of the “wealth effect.” In brief, the theory behind the wealth effect is that when people feel wealthier as a result of unrealized profits in either equity markets or residential real estate they spend more as their net worth has become a psychological cushion.

All of us want prosperity but increasingly both gains in income and net worth are going to those at the top end of the ladder. Nearly all of the equity gains have been realized by the top 5% of Americans and the top 1% may have scooped up as much as half of the paper profits since spring, 2009. Yet, I hasten to add, in a free market, there is nothing wrong or illegal about that. We live in a meritocracy and those who produce more get a disproportionate share of the pie.

If you talk to people at the top of the heap (top 5%), things are pretty much back to normal and some of us feel better than ever about our finances. Recently released data indicates that the average 401k balance is just under $90,000. That is great if you are 30-35 years old but dangerously low if you are in your 50’s. What few mention is that the majority of workers in the US have no defined pension or no 401k or IRA or, if they do, the balance is very low. So, the fact that the Dow hit a new high today means nothing to most people.  If you look at recessions of the past 100 years, this one is truly different. In past downturns, everyone suffered. And, when things bounced back, the overwhelming majority returned to prosperity very quickly. Today, unemployment remains stubbornly high and “under-employment” approaches record levels. Economists and those who follow business cycles closely will tell you that the Great Recession ended in June, 2009, approximately 18 months after it began. Over the last four years, I would say that the majority of Americans do not feel much better off or more secure than they did when the recession was hitting us full force.

This may sound a bit flowery but it appears to me that the collective psyche of Americans has shifted. The sunny optimism of people has been replaced with an uneasiness which will take a very long time to shake. Many who have returned to the workforce after being laid off in the big downturn are now working for less and sometimes far less than they did back in 2007 when the economy, especially the consumer economy, was firing on all cylinders. Young people are finding it difficult to get on a career track and those with fragile egos now suffer from a stigma of underachievement. Those who suffered from foreclosure will be haunted for years and some will drop from the middle class permanently.

As marketers what does this mean to us? Plenty. If you work in marketing, advertising, or media you are likely to be in that top 5% who is doing just fine, thank you. However, you are often selling to a large group who is struggling. And, there are entire markets that have been savaged. Again, this is unusual as generally, in a recovery, the uptick pulled all markets up. Consider real estate. Owning a home has been the American dream for decades and government tax policies encouraged  it. From their peak in 2006 to the bottom in 2010, housing prices in Las Vegas fell 58%, Phoenix 55% and Tampa 45%. Speculators have moved in and bought up distressed properties but there remain millions of American homeowners who are delinquent on their mortgage or are underwater (their house was worth less than the principal on the mortgage). These people are nervous and unlikely to spend as they once did for a very long time.

So, what does this mean to marketers? For higher end products, media and market selection has to become more careful than ever. Some 25% of Seattle residents have graduate degrees while 2% is the norm for most markets. So, for expensive clothing, cars, vacations, expensive wine and liquor and a host of other products and services, Boston, Washington, DC, New York, San Francisco and Denver merit special consideration and overweighting. Pockets in Atlanta, Dallas-Ft. Worth, Houston and Chicago also deserve attention. Some markets should simply be avoided period as the purchasing power is simply not there. The large group of Americans with a high school education or less are falling further behind than ever as our industrial base has not been revitalized despite the claims of politicians. As always, the higher your education, the greater your income so the “brainbelt” markets are a place where many advertisers can expect a solid return relative to less educated areas.

Many broadcasters will nod and smile when I present this line of thinking but those in markets where things remain challenging do not seem to grasp that their struggles will continue for at least several more years. The economic world has changed and our culture is shifting as well. Talk to a few very well educated and eminently well paid young adults on the fast track. They have friends all over the world and they are a bit detached from what is going on in the Wal-Mart nation. They look to New York, London, Seattle, San Francisco, Washington, Singapore, Hong Kong and Beijing as the center of the universe. They do not see the uneasiness that many Americans feel or associate with many who are having a hard time right now.

So, publications, cable channels, and digital options that cater to the well heeled should do really well over the next several years. For other media types, the issue will be what share of the pie they can garner for products that have broad appeal or are necessities.

Long term, I remain optimistic about the future. Keep in mind, my friends, that the healing process from the Great Recession is barely underway and it will take a long time for things to return to “normal.”

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