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Wednesday, September 24, 2014

Median Income Woes

In the last week, two different government agencies released income data. The Census Bureau provided a report on “income and poverty data for 2013.” Many, if not most of the reports that I saw in the press trumpeted the datum that the poverty level had dropped from 14% to 13.5%. Some in the political arena stressed that this was one more indicator that our economy was on the mend.

Maybe so. At the same time, Don Cole, the crusty curmudgeon, is not so sure. When I dug into the data, I saw that median household income (the 50% percentile) is still where it was 15 years ago. It is stuck at $52,000.  That is not progress. I had a few allies. Annie Lowery of NEW YORK MAGAZINE wrote, “We peaked in the late 1990’s.”

One issue that I have harped on over recent years is that those of us who work in advertising, marketing, or communications tend to live very comfortable lives. The people that we work and socialize with tend to be very affluent. As we age, we get free of basic money worries and some of us get rich.

I heard a stranger say the same thing to me recently. Showing up at a golf course, my playing partners got confused and did not post for our tee time. The starter paired me up with another group and I was put in a golf car with a pleasant gentlemen from Oregon. When you spend four and a half hours with someone the talk often strays from golf.

He told me after a while that he was a low level millionaire who runs a small insurance office. Here is a close paraphrase of some of his comments: “I was at a dinner party recently and looked around the table. All of my friends were easily worth a lot more than I. One has to have a net worth of $25 million. We discussed our children, trips we would take, and a few mentioned how great things were now that the Dow Jones Industrial Average had cracked 17,000. I explained that a buoyant Dow was great for all of us but many people, including most of my customers, were not affected. I told them they would be shocked if they knew how many of my car insurance customers were on food stamps and how many adults had aging blue collar parents paying their premiums for them. Finally, I talked about a young man who visited me that week up to his ears in debt. He wanted to buy a big Dodge Ram pickup truck. I advised him to buy a used truck but he went ahead and got the new one. If gas prices go up he will not be able to fill his tank. And, I bet $1,000 that he will miss an insurance premium this year.”

This gentlemen, although affluent, is in touch with what is going on. The middle class is shrinking. The Pew Survey, a study that I really respect, has illustrated that two decades ago, some 60% of Americans fell in to that sweet spot of middle income. Now, it is down to 45%. Forget what the pundits on CNBC say, the middle class is getting squeezed and there is no relief in sight.

There is one key thing about median income that is rarely mentioned. Demographically, median income has to decline in the years ahead. It is a virtual demographic certainty. Each day, 10,000 Americans turn 65. As these baby boomers retire, their incomes will drop. Median income has to go down. Their purchasing power may not be affected all that much as they will spend less on clothes, lunches, dry cleaning and automobiles and 40% have no mortgage. Yet, the median income will decline.

Separately, the Federal Reserve, a quasi-independent government agency, released their Survey of Consumer Finances--2013, about 10 days ago. Sifting through the turgid prose, I found a statistic that made me feel very sad. Household income for those under 35 years old is at $35,509. Adjusted for inflation, this is the lowest report since 1989. That was 25 years ago!

All of this has to have a profound affect on marketing and advertising in the years to come. Most of you who read this are in the top 10% of American income. A handful are in the infamous 1%. Congratulations! Try to get in touch like my Oregonian acquaintance on the golf course.

Forget your circle of friends. How do you market to people who are struggling? For them, the American dream has become a nightmare.

If you would like to contact Don Cole directly you may reach him at doncolemedia@gmail.com or post a comment on the blog site.

Monday, September 15, 2014

Mobile, The New Out of Home Medium

These days mobile advertising is hot. The growth rate of mobile is a bit hard to track but it appears to be clobbering all other media types year to year. In spite of that, some advertisers and some small to mid-sized agencies are afraid to take the plunge. Others say that they tried it a few years ago, it did not work, so they have written it off as a consideration for 2015 media plans.

To me, part of the reason that people failed is that they did not know how to use mobile. Yet, they will need to and very soon. Facebook has reported that the average person uses their phone 100+ times per day (when I watch my students before and after class, it has to be higher for an under 30 demographic). This is where they are spending their time even when they are allegedly watching TV. No one leaves their home without their phone. They may forget ID or even a wallet but phones are now as ubiquitous as car keys. Missing people who are heavy mobile users is increasingly creating a big hole in any advertiser’s reach potential.

So mobile is now very clearly, to me, an out of home medium. We need to recognize it as such. Advertisers large and small are using it very successfully. For example, I was in a small local restaurant a few months ago and they had a five digit text code on tent cards on each table. You could review the service and the owner would get instant feed-back. If you participated, you were given a 20% coupon for a future meal. This was a great way for a  small player to get inexpensive research and promote at the same time. Others are adding mobile activation to menus or even small ads in suburban newspapers.

A friend in Texas sent me an e-mail recently that was fascinating. “I took my two sons to a Rangers game at the Ballpark at Arlington. The game plan was that it was going to be an expensive afternoon. I was prepared to buy a Rangers jersey for each of the boys favorite player. Well, we went up twice to get the jerseys and the line was long and the boys told me that they were missing the game. Then, as an ad guy, it hit me. They had my e-mail and phone number as I had bought the tickets on line. Why did they not have an app where they could reach me in the stadium and I could order the jerseys between innings without leaving our seats?” I found my friend’s comments interesting.

The next day I was reading Michael Dru Kelley’s new book, ALL THUMBS, Mobile Marketing That Works (Palgrave Macmillan, 2014).  He had a remarkably similar story about taking his son and friends to a concert and discussed how a two way exchange with concert goers would be great for the sponsor.

It would seem that mobile could be a great sales or marketing tool at many live venues. Been to a ball game lately? How many people are busy with their phones during a game? It is stunning to watch.

How about putting simple codes on old fashioned billboards? Or, with geo-targeting getting feedback on a great or poor retail experience. Those who participate get a  nice % off coupon and the few disgruntled customers get quick feedback which may turn a customer around a great deal.

For years, media planners have boasted that they craft strategies that reach people on the go. If mobile is not a real part of that mix, they have to be regarded as primitives today.

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

Thursday, September 4, 2014

Spot TV And The 2014 Elections

The past few months have not been kind to most forms of television advertising. Even the fabled “upfront” market in network TV was weaker this time around with some clients switching to more digital options with video online ads and others simply holding back money to allocate at the last moment.

The local TV market has been interesting. There are some parts of the country that are doing just fine. The energy boom in the plains states and stretching down to Texas has insulated them from the soft marketplace and a few pockets in the Southeast have done nicely as well. Many markets (Nielsen DMA’s) are down double digits from last year and station managers and sales executives scoff when they hear signs that the economy is recovering slowly but surely.

Well, some markets are about to get a much needed shot in the arm. Between now and election day on November 4th, some $2 billion dollars is about to be injected into local marketplaces for Senate and House of Representatives races alone. The problem with that is that the money will not be spread out evenly.

Only 35-40 of the House seats are really strongly competitive races so the impact of heavy spending will not be felt nationally. The U.S. Senate, which could conceivably return to the Republicans, are the races where the big bucks are being spent. Right now, the Democrats have a precarious hold on five seats that could go either way in two months. They are in Alaska, Colorado, Arkansas, Louisiana, and North Carolina. Should the GOP run the table on those five races, they would almost certainly take back the U.S. Senate. Even Mitch McConnell, minority leader from Kentucky, faces a stiff reelection bid in the Bluegrass State.

Here are a few verbatim comments that I received from broadcasters across the country:

-- “Business stinks right now. We do not even have a Senate seat up this year so our political billing will be modest. Station ownership is putting real pressure on me. There is little that I can do until confidence returns.”

-- “I am way down for the year but I do have a juicy battleground Senate race. That will bail me out for the fourth quarter. Years ago, we considered political advertising a royal pain. Now, I admit I pray for it every other year.”

-- “Okay, so I will finish the year fine due to a hot Senate race with record-breaking  spending and a reasonably tight Governor’s race. What do I do in the first quarter, 2015?”

-- “My station group told me to get political money. We are a one party state. I do not remember the last competitive race that we have had. The sure winners only spend token amounts and they are doing more on the internet this year.  Only a miracle will save me for this year.”

Looking ahead two years, campaign strategists with, by then, ever more improved targeting techniques will probably continue to cut back on TV usage. And fundamentally, more advertisers are pulling back on TV in general shifting to online options, which are often video, but not conventional or even local cable TV.

Things are changing. The biannual political bailout for local TV stations seems set for an irreversible decline.

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