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Thursday, May 23, 2013

Go Where TV is Still A Growth Market


A little over 20 years ago, I began to travel a great deal on business. Soon I was receiving automatic first class upgrades and people seemed a bit more talkative in the front of the plane.  I began to meet some interesting people and a few fascinating ones. Perhaps the one who made the biggest impression on me was a fellow who described himself as a “money runner.” He said that he had been investing money for years for people but was running out of ideas in the U.S and was thinking of relocating to Singapore or Hong Kong. “What about Silicon Valley?”, I asked. He started laughing and said, “Do you think I am a genius or something. No, I don’t understand tech and while some people are going to do great, a lot will lose their shirts. I want something closer to a sure thing.”

He went on to say that the Asia in the early 90’s was in the position of pre-Industrial revolution England. “That is something that I can sort out well. I don’t trust some of the accounting outside of Singapore but I know the basics. They are building roads, airports, and even putting up telephone wires for the first time in many areas. So, I can buy cement stocks, copper, and phone companies and I bet that I can do fine for me and my clients. You see, son, I have seen this movie before."

A year or two later, I saw him interviewed on the Financial News Network (later merged in to CNBC) and he had indeed relocated to Asia. An international marketer e-mailed me the other day with a problem and my conversation with the loquacious and prescient  “money runner” came back to me.

The marketer is someone whom I have known for many years and I consider him a friend. His problem was as follows: Domestic business has been fine but his real growth is coming from outside the US with particularly robust sales growth in Latin America. His agency is fairly large but is not affiliated with one of the mega-shops or large advertising holding companies that have offices across the world. The media plan submitted by the agency did not call for any TV in Latin America. He questioned them and they said that his online presence could stimulate Latin American sales as he freely admits that he does a lively mail order business across the globe. Social media is about 12% of his budget and will likely grow steadily over the next several years.

Stubbornly, he kept pushing for a TV campaign in three Latin American countries where sales had been explosive. The agency media people were resistant and said it would not work. He is a pleasant guy but a bit of a terrier and he kept probing. It seemed that the agency had never done any business in any of his targeted countries and the digital people at his shop did not want to lose part of “their” budget to conventional TV even if it were in an unconventional location. He went somewhere else for production and placement of the media in the three countries and things worked out very well.

The story is a sad one but it keeps happening at agencies that cannot or will not take a global view. It is obvious that when a middle class develops in a country they adopt American style habits. Recently, Directv reported that they had added 658,000 new subscribers in Latin America with particular gains in Mexico, Brazil, and Argentina. By 2021, they are projecting 56 million customers in Latin America.

So, my chance meeting with the money manager has a media moral. As nations grow, they do what those of us in the developing nations did a number of years ago. Why do you think the major soap companies and food processors are placing so much emphasis on Asia, Latin America, and Eastern Europe? Because, the growth potential there is explosive. I will even go out on a limb and say that in my lifetime North Korea will open up and will become a happy hunting group for marketers once a middle class develops and for manufacturers early on in the game looking for reasonably priced labor.

There are over 200 countries across the world. Each has its own unique culture and position in economic development. Ad agencies need to take note or even more of the business will go to the major advertising holding companies.

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

Thursday, May 16, 2013

Does Zero TV Signal The Winds of Change for US Television?


For decades, some 2% of American households somehow managed to live without television. When people would ask who they were most of us in agency media departments would say the very poor, young people who had just moved in to a major city or perhaps a college professor who never saw the need for it. I vividly remember reading about a few TV-less families who checked in to hotels or motels back in 1969 to see Neil Armstrong and Buzz Aldrin walk on the moon! Finally, something important enough had occurred for them to want to watch TV.

Until 2007, the number stayed steady at about two million households or just under 2% of the U.S. household base. Well, things are changing. Nielsen, not some futuristic group, is now reporting that some five million U.S. households have no TV. This is quite a jump in six years as Smartphone sales have soared and online shopping continues to explode.

What is going on? It appears to be happening within a few distinct groups of people although thorough research has yet to be published. I have observed the following and confirmed it with a few other media observers:

1) Young professionals in major markets such as New York, Boston, Washington, DC and San Francisco. These people tended to graduate from elite schools and can afford anything. They have no interest in having a cable or satellite subscription. Most say that they get by with Hulu and Netflix streaming to cover their video needs. A few mentioned having Amazon.com as well. They lead very active lives and are the exact opposite of couch potatoes. Interestingly, billionaire investor and Revlon chief Ronald Perelman was on Squawk Box on CNBC recently. He talked of how Revlon has moved some of their TV and magazine dollars out onto digital platforms. Then he went on to say that a few of his eight children do not have television. They are fully engaged and in touch with pop culture but TV is not part of their very affluent lives.
2) Cheapskates, the frugal, and concerned adults. To some it comes down to dollars and cents. If you are spending $130-150 a month for cable/satellite, you are effectively spending $1500-$1800 a year for TV. Admittedly, internet, phone, and sometimes burglar alarms are often bundled with the TV bill. I have read and spoken to many people who say that with Hulu+, Netflix and an Amazon.com subscription plus the occasional film on You Tube, they save a bundle and their needs are covered. Many watch DVD’s, videos, and Internet video on their otherwise unused TV sets. Included in this group are a handful who feel that they watch too much TV and canceling their service is the right thing to do. They catch up with HBO shows a year later when Netflix has them and say that the savings are worth the wait.
3) The final group is older and struggling big time financially. With social security the bulk of their income, cable/satellite has become prohibitively expensive. I ran in to more than one such person at my local library fishing for vintage British videos that even Netflix did not have. One lady told me she uses the library’s free videos, and uses her grandson’s laptop to cover other viewing needs. She watches Masterpiece Theatre a day late on line and has yet to miss an episode of her beloved “Downton Abbey.” The Weather Channel online is also “more accurate than those local guys I used to watch.”

So, something is happening out there. This past month Comcast reported that 70,000 households had cut the cable cord with them in the last quarter but that was more than made up for revenue wise by people adding phone service or internet. They also are now serious content providers with NBC/Universal. Time Warner talked of making their product available away from home on a variety of devices and ABC Network announced a plan going in a similar direction. This is especially wise for ABC with conventional networks having an average audience age in primetime over 50 years old.

Another straw in the wind is with Netflix. There seems to be more buzz about Netflix bringing back “Arrested Development” on May 26th than there is about the networks fall lineups that are being announced.

It makes me wonder what will happen if this trend snowballs. Many have asked for a la carte billing of cable channels but, without packaging, many smaller networks would go under. ESPN would thrive as many people say sports is why they continue to keep cable or satellite.

Also, the Netflix and Hulu strength has to bother broadcasters and cable providers. Will that relationship have to change if Zero TV households take off soon? Clearly, most people will not give up TV unless their finances get desperate. Yet, the group to watch are the young upscales. If they hit 30 years old and are getting by just fine thank you with no TV, there could be a huge problem ahead. Newspapers could not get enough yuppies and hold them 20 years back and are now suffering the consequences.

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

Monday, May 13, 2013

The Slow Death of Advertising


In recent years, there have been a number of articles on the general topic of the “Death of Advertising” or “Is Advertising Dead.”  Many were shrill, some were measured but all seemed to travel along the following lines--“Advertising is not dead, it is reborn!”, or “Advertising: Game Over”, and “The End of Advertising as We Know It.”

I do not agree with any of the above statements. Perhaps I am just too much of a literalist but let us walk back to a definition of advertising. Looking through all too many textbooks and industry glossaries, a composite definition is as follows: “Advertising is any paid form of non-personal communication about an organization, product or service.  Non-personal means that mass media tends to be involved. The advertiser, with help from its agency, controls when the message is seen and, to a certain degree, by whom.”

If you look at the above definition, then advertising is definitely in decline in so many ways. A key to me is the issue of CONTROL. As social media have soared over the last few years, control has gone out the window. You can monitor what people are saying about you, but you cannot control what is said, who is saying it, and who is seeing their comments. Also, it is user centered rather than product centered in most cases.  Social media is fascinating and is certainly part of a brand’s communication effort. It is not, however, advertising from my perspective.

At the same time, database marketing has moved to a new and much heightened level of control. Companies have a handle on how often you visit their sites, what you buy and in what volumes. They now often customize offers to lure you in to an additional purchase or two. Personalized media delivery such as this has great power. This is very advantageous but, again, I hesitate to call it advertising.

Commercial avoidance in conventional media such as TV, cable and radio continues to rise. This is especially acute with 45% of households now having a time shifting device and the rapid increase in second screen usage while viewing. Hulu and Netlfix also continue to stir the pot. TV is steadily losing its long term luster.

Magazine titles are struggling and the decline in that medium continues.

So where does that leave us? Well, to me, things will continue to evolve but conventional advertising will surely decline.

Many of the new areas of interest are not a rebirth of advertising. What they are is new marketing tools that will sharpen performance. The whole concept of “communal marketing” where brands ask customers to help develop advertising messaging, is really communal branding by real aficionados of the product.  And, it has to give ad agency people with a bit of foresight nervous stomach as brands go straight to consumers for ideas instead of the time honored geniuses at your long standing agency.

So, marketing will evolve, flourish and likely get a lot more precise. Advertising will not disappear but its role in Integrated Marketing Communications has to diminish and at a faster pace than in recent years.

In ancient Greece, the inimitable Heraclitus said "nothing endures but change." He felt that change was so swift that "it is not possible to step twice in to the same river." Those words were supposedly said in the 6th century B.C. Nothing last forever and, it appears advertising will trend downward until we call it something else.

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

Saturday, May 4, 2013

Database Marketing--Big Brother on Steroids?


With each passing year, database marketing is getting increasingly sophisticated. Clever marketers are getting better every day and are reaping larger returns with lower expenditures. Our current era is unique as the low cost internet married with declining costs in computing power are coupled with vast arrays of digital information allowing marketers to aggregate and analyze enormous quantities of data.

If you say this out loud people nod and smile but do not really seem to grasp what is going on in database marketing. The best illustration that I have ever found was a remarkable article in the February 16, 2012 issue of “The New York Times Magazine”. In a piece entitled “How Companies Learn Your Secrets”, Charles Duhigg focused mostly on the giant retailer, Target.

Using a team of bright statisticians, Target engages in what is known as “predictive analytics.” Simply put, they examine sales data and combine it with other information to figure out who buys what and why.

The now famous story from this NYT Magazine article is that the statisticians discovered that pregnancy is a vital time for a woman to develop some lifetime shopping patterns. So, Target likes to find pregnant women and get them into their locations with increasing frequency.

The first screen Target looked at was breathtakingly simple.  They simply looked at their baby shower registry. Since they already told Target that they were pregnant, the analysts could do a deep dive on their buying habits.

Then, the last puzzle part fell in to place. Target soon realized that many other women who had the same shopping habits as those in the bridal registry were probably pregnant as well.

Pregnant women, for example, started to buy vitamin supplements, and switched to unscented lotions. Many bought large bags of cotton balls for the first time. With this knowledge Target began to send both groups pregnancy related coupons in the hope of making them customers for life.

The article then told an amazing story. In their hometown of Minneapolis a very angry gentlemen stormed in to a Target store wanting to see the manager. He told the manager that his daughter was getting many pregnancy related coupons from Target. “She is still in high school and you’re sending her coupons for baby clothes and cribs. Are you trying to encourage her to get pregnant?”

The manager did his diplomatic best to smooth things over with the irate Dad. A few days later he called the gentlemen to apologize again. The father stunned him by saying, “It turns out there’s been some activities in my house I haven’t been completely aware of”, said the father. “She’s due in August.”

It is a great story but the point is that the Target statistical team had figured out that the young lady was pregnant before her family did.

Think about this for a moment. A savvy marketer knows a great deal about you. Every time you get a special online deal, do you think millions are getting the same offer? Or, have they been tracking your multiple visits to their site in recent weeks and want to push you over the edge with an irresistible offer?

On the benign side, watch what Netflix does. I am a serious old film buff. Over the last several years I have rated over 3200 films for Netflix. They know what I like and don’t like. When Neflix recommends a film to me, I invariably watch it. With such a mega-deep profile of my tastes, they now have an unerring touch on what films of recent vintage that I will like.

Long term, this will have a profound effect on conventional advertising in some categories. By tracking our purchases and online visits, sophisticated marketers can put together highly effective models to forecast future purchases and dollar volumes as well.

This is far more cost effective than advertising where you do not get a pure play demographically most of the time. Clearly, this is one more nail in the coffin of conventional advertising. By shifting more emphasis on database management and marketing, companies will be in a good position to save money and simultaneously increase sales.

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