Media Realism

A Return to Media Normalcy?

2012-01-24T13:15:00.000-08:00

Way back in 1920, the U.S. economy was in shambles. Unemployment was over 10% and inflation in some parts of the country was running at 20%. That year, the Republicans nominated Warren G. Harding, an Ohio Senator for president. Easily the handsomest man ever to run for the White House prior to Ronald Reagan and Mitt Romney, Harding had been a strong supporter of giving women the right to vote. That August, when women received the franchise, was only 10 weeks prior to the election. He and his running mate, Massachusetts’s governor Calvin Coolidge campaigned on the theme of a “A Return to Normalcy.” The idea was to correct things at home and stop being the savior of the world. Their predecessor, Woodrow Wilson, had tried to be just that when he entered World War I saying that he “was keeping the world safe for democracy. The return to normalcy was putting America back to pre-World War I conditions.

Harding and Coolidge won in a landslide. The handsome Senator garnered a huge majority of both the male and female vote. Immediately on being inaugurated, he cut taxes, played ball with business interests, and inflation fell sharply and unemployment dropped to 3.5% (most economists define full employment as 4.0%). A few years later Harding died in office with a scandal overhanging him. His Secretary of the Interior had awarded oil leases to friends in exchange for $400,000, an enormous sum in 1923. But the economy rolled on and the “Roaring 20’s” were quite a decade.

Today, many media executives, especially on the sales side, tell me that they just want things to return to normal. Who can blame them for the desire of a “2012 return to normalcy”? From my vantage point, it is simply not going to happen.

Several people tell me that the next couple of years will be won or lost depending on auto sales. There is stunningly good news here. Last week, the automobile research company R.L. Polk released data indicating that the average age of the U.S. car/light truck fleet is 10.8 years. This is the highest level in history. True, cars are made to last longer today than in the past but during 2008-2010 many kept their older cars as they were afraid to take out a loan on a new one. This past year, 2011, saw a 10% uptick in car sales. Given the slightly improving economy plus the age of the fleet requiring significant replacement, 2012 should be another solid year of advancement in car sales in the U.S.

But hanging the year solely on the automobile statistic is way too simplistic. As I look at both the economy and the media market, I don’t really know what normal is anymore. For the last two decades, American consumers went on a buying binge and the national savings rate went to zero. When bad times hit, the savings rate jumped to about 6% by spring 2009. Now, it appears that short-term enthusiasms have grabbed the national psyche once again and people are spending. Or, is it simply because the unemployment rate is high and millions of others are under-employed that people are tapping into savings to maintain a middle class lifestyle? Somehow we need to find a balance between buy now versus save and buy later with cash.

In the media world, something seems to be brewing and I have few allies when I talk or write about it. We are in the 5th year of weak media billing. It varies by medium and by market, of course. But, most media executives would love to see a return to the business they wrote and particularly, the ease of getting it, that they had in 2007. Some have literally referred to that period as the “good old days.”

Here is why I do not see a return to 2007. Is the economy improving? It appears to be moving steadily upward but at a very slow pace. If we grow 2% in 2012, we are on a track that will double the size of our economy in 36 years. Singapore is doubling every six and China every 8 years at current growth rates.

But more importantly, the media landscape has changed significantly since 2008 when people first saw advertisers begin to pull in their horns. Let us say that things are back on track by late 2013 or early 2014. That would be great and we all have to hope for it with so many Americans suffering and millions of others nervous about their prospects.

Let us assume that things are back to “normal” in the 1st quarter of 2014. Will any advertiser worth his salt execute the kind of plan that they would have in 2008? Of course not! Social media was but a gleam in the eye of cutting edge media planners then. Commercial avoidance via DVR’s existed but was half of what it was is now, and Hulu.com, instant Netflix and other alternatives to live commercial TV were just getting started.

Yes, my friends, the U.S. economy will get better. When, is not certain. It is certain, however, that the media mix, for that happy day, will be demonstrably different than what it was in the sunny days of 2007.

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

We First, A Review

2012-01-16T06:08:00.000-08:00

There is a new book out about social media that appears to be getting some buzz. Three readers on two continents have written to me in the last 10 days asking my opinion. The book is WE FIRST by Simon Mainwaring (Palgrave Macmillan, 2011).

It is an interesting book that gives a passionate litany of examples of how social media is changing and will impact both the world of advertising and politics. His vigorous endorsement of social media sometimes borders on the breathless. At one point he writes, “Use social media to build communities, projects and create positive impact.” The title says that we must redefine goals both personal and corporate from “I first” to “We first”.

He later talks of a global brand initiative that will “associate corporate brands and competitors that willingly work together to advance corporate social responsibility and charitable donations”. This can cross corporate lines, Non-profits, and countries. Some examples that he envisions are Coke and Pepsi, Greenpeace and the World Wildlife Fund, and the United States with China. This seems to be a bit of a stretch especially the Coke and Pepsi collaboration.

Mainwaring also states that consumers will pay more if they see a brand selling based on an eye toward common prosperity. Social media, then, in his view, can actually transform capitalism. As an environmentalist he makes a nice case that we are consuming the earth’s resources faster than they can be regenerated.

His politics and idealism get in the way of things to me. Also, he strikes me as someone, who is an experienced marketer, but is getting detached from the real world. It was as if I were reading a liberal Mitt Romney.

Do people really pay more for a socially responsible brand? Mr. Wainwaring should do what I do. Twice a year, I monitor Wal-Mart prices vs. drug stores, grocery stores, and other mass merchants. I must stick out like a sore thumb with my heavily starched shirt and gold cufflinks as I move through the big box store with a clipboard (last time I heard two clerks whisper, “who is that old guy?” The other responded “look busy. He is probably from headquarters"). What I see on those trips are struggling people who buy the cheapest products and pounce on specials. They are fighting to survive and are not dwelling on corporate or brand social responsibility.

Or how about the 64 million who visit a McDonald’s every day? Would they pay more if they thought McDonald’s was working for social justice? I have visited a Ronald McDonald house during my days on the business and the charitable work they do there is both touching and important but I doubt if many customers dwell on it in the drive-thru lane.

Mr. Wainwaring seems to be talking to customers of Patagonia and Whole Foods. He mentions Patagonia in the text very positively and there is no question that much of their customer base loves the fact that they make sustainable products. But, visit a store, as I often have, and the customer base is upper-middle class and unusually well educated. They do not represent American as a whole.

When he sticks to how social media can make your brand look better and communicate more effectively and less expensively, the book sings. In the next breath, he says that he is not anti-capitalist but sometimes, his speech betrays him.

This is a good read but you may, as I, wrestle some of his proposals to the ground.

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

2012 Media Forecast

2012-01-04T14:08:00.001-08:00

As we begin 2012, a number of people have requested a forecast post on the U.S. media scene. I canvassed dozens of people and went to a large number of new sources beyond my normal panel to make sure the thinking was fresh and geographically balanced.

Overview

If you have read the trade press in recent weeks, some very similar forecasts have emerged. Globally, advertising will be up in the 4.7% range and would have been over 5% had worries over European debt and currency threatened a severe recession there. In the U.S. things will move up fairly well with billing growth in the 3-4% range but pre-recession levels of spending (from 2007) will not be matched across the board until maybe 2015-2016. I have no real issues with any of those prognostications. My point in this post is that if you dig a bit deeper things are significantly different market to market and medium to medium.

In no specific order, here goes:

Network TV—the king will remain king as large brands seeking awareness will continue to flock to it and bid up prices despite declining ratings and continued growth in commercial avoidance. The upfront marketplace will continue for another year for sure. Depending on the economy, a 5-6% gain seems likely.

Network Cable—growth will be nice here but more in line with network TV than the double-digit gains of recent years. As the medium has grown, it is coming off a larger base each year so jumps in billing and pricing will be smaller but still good in a flat-lined economy.

Spot TV—this one will require a lot of attention from media planners this year. Virtually every forecast out there says expect a 4% billing gain for 2012 with a 2.5% uptick if you take out the impact of political advertising. Next year will bring new meaning to the old statistical saw that “you can drown in a river with an average depth of six inches.”

Some markets have come back nicely from the 2008-2009 recession (economists claim that we pulled out of recession in 2009. Tell that to some of the broadcasters whom I interviewed!) . Other markets are really struggling and expect another poor year. One Midwestern TV G.M. told me, “We expect no political billing of note. This is not a battleground state for the presidency and we have no Senate race. I try to explain to headquarters that we have absolutely no pricing power. Good clients come in and want pricing from years ago and we have to give it to them. If not they will go to someone who will meet their demands or load up on radio and local cable. Will we ever return to normal?”
The epicenter of America’s boomtowns is now amazingly Williston, North Dakota. Hiring is so robust that fast food outlets are now paying $15 for counter help. As long as the oil and gas boom continues there, things will be fine. But, most Americans are not willing to spend a winter in Williston. And, if you have a mortgage that is underwater (like 24% of mortgage holders), you cannot leave even if you wish. Conversely, Cleveland and Youngstown, Ohio are bulldozing foreclosed or abandoned homes to provide green space in their cities and prop up sagging property values.

With both parties possibly having a billion dollar war chest for advertising next year one would think the networks would get the brunt of it. Not so. Both sides will run on both network TV and national cable but much of the money will be spent in 10-12 battleground states. Topping the list will be Florida and Ohio (natch), along with Pennsylvania, Iowa, Wisconsin, Nevada, Colorado, and Virginia. This list will change a bit as we move through fall 2012.

With the GOP a few seats away from recapturing the Senate, look for huge spending in local races in the following states—Massachusetts, Montana, Nevada, New Mexico, Wisconsin, Missouri, and Virginia.

Candidly, next October will be a bad time to turn on the TV set in either Ohio or Wisconsin. Being battlegrounds for both the presidential race plus hot and well-funded Senate contests, it might be a good time to stick to PBS, C-Span, or HBO.

Auto and truck sales were up a solid 10% from 2010 to 2011 and that clearly helped some spot markets and will likely do it again in 2012. Please remember that when unemployment is over 10% and housing still tanking, some markets will not sell many cars nor see much local vehicle advertising.

The whole political situation raises a core question that a few people were willing to discuss with me. The parent company wants dollars. As a rule, they do not care where they come from client wise. Twenty-five years ago, stations hated political advertising. They had to charge a low fixed rate, could not pre-empt the politicians and they had to offer good inventory to all candidates. Now, they look forward to it. Across many markets, it has become the mother’s milk of local TV advertising. Without political money, many stations would be down in billing for 2012 and some fairly significantly. This is not a good long-term trend for the medium.

Local Cable—with the ability to sell zones or portions of a cable interconnect, this medium with some hustling has been able to bring many small local retailers on to TV over the last few years. Also, they can handle congressional districts or state senate races with far less waste than over the air TV. Growth here will vary depending on the strength of the local economy and the heat of political races. They should do better than local TV stations in most cases.

Radio—most see gains of approximately 2% but, again, it will vary by market. In mid-sized and smaller markets, I am told that collection problems are still a big issue as more and more small retailers are struggling or closing their doors in economically challenged metros. This has always been a problem with local radio but seems to not be improving much even as the economy is inching up.
Certain formats lend themselves well to political advertising. Sports formats continue to do well even in some areas where the economy is not particularly strong. A big development in the last year has been that local radio has been developing digital products for advertisers. They are even elbowing their way in on the daily deal business in certain larger markets.

Outdoor—a 4-5% gain seems likely. Digital boards remain popular and they will benefit from political spending as well. Keep in mind that outdoor remains the last mass medium.

Newspaper—the downward spiral will continue. An optimistic outlook would say that they would be down 9% after strong double digit declines of recent years. Most papers have not been able to convert many readers to their digital product and the under 40’s continue to avoid it. When I travel, it stuns me how weak the products are and how much wire service copy that they all use. Sad, but this is the reality of the 2012 world.

Magazines—they get thinner and thinner except for a few trendy titles and some beauty books. Some well known titles will die this year. It is a shame but most do not fit in to today’s lifestyle all that well. Pricing is often wide open—negotiations should be fun again this year.

On-Line—double digit year over year gains will be found here. And, there is room for growth! They may get 15% of billing next year but we spend 36% of our media time online. As print falters, more players of all sizes will shift money here.

Daily Deals—this business usually means Groupon or Living Social to most people. Actually, there are hundreds of entrants in the category and broadcasters, especially smart radio operators, are getting in to the act via their websites. Groupon timed their Initial Public Offering (IPO) perfectly. To me, their business model seems way too labor intensive and retailers complain that people who use Groupon coupons do not “stick” and return again and again. This could be an area with a shakeout as many daily deal players, especially the under-capitalized, fall to the wayside.

Social Media—this one had the entire buzz last year but may generate more in 2012. Facebook will have 1 billion users this year and should become a public company by year-end. What will they do with all that capital? Acquisitions would make sense but I think that they will use new technology to really heat up social commerce. So will others in the space. There is talk of an Apple TV set that will blend on-line with more conventional TV properties with opportunities for sales.

Major companies have piled in to social media and they are getting a decent handle on it and integrating it with varying degrees of success in to their marketing communications programs. But, small retailers seem to hate it or are afraid of it. Why? They do not devote enough time to it nor do they have the staff on hand to maximize its usefulness. There is still a bit of hocus-pocus here but the big players are getting more accountable and the big spenders are getting more imaginative and are hedging their bets more shrewdly with it.

The Wild Card—Oil Prices. As an economy grows, demand for petroleum-based products, particularly gasoline, goes up. So, as we write, oil is approximately $100 a barrel. The economy can handle that easily and even more if the economy improves modestly throughout 2012. If we get to $130+ a barrel, that would translate to about $4 per gallon at the gasoline pump. At that point, the economy begins to tank. If people are spending $80 twice a week to fill their gas-guzzlers, they have to cut back on other purchases, as they still have to drive to and from work. “Demand destruction” will kick in and people will find a way to drive less and consolidate errands when they do. Gasoline prices will then come back to earth. A geo-political event such as military action by or against Iran could send prices sky high for a brief period and hurt the economy and devastate advertising. Over time, keep in mind that oil prices will likely rise, as overseas demand will continue to grow.

That is how we see 2012. It will likely be a year of incremental growth for many media types but much will be determined by specifically where you live.

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

No Advertising; Not Much Media

2011-12-15T14:10:00.000-08:00

Very recently, I was in a library doing some research. On the table in front of me I had several books out with topics including branding, growth of media, social media, and advertising history. A young man perhaps in his early thirties walked by, stopped for a minute and said, “Are you some type of ad guy.”

I smiled, stood up, offered my hand and said, “Guilty.” We shook hands but he then asked me “don’t you feel guilty about it.” If you were expecting me to get upset, forget it. No one can spend decades in advertising without at some time being referred to either directly or subtly as a huckster, immoral/amoral, snake oil salesman, exploiter, and other names not fit to print. Even David Ogilvy said that Queen Elizabeth was not excited at his knighthood ceremony when she found out his occupation. So I simply let the young fellow fire a few verbal bullets.

But then he said something that did annoy me. He stated, “What I hate about advertising the most is that it has ruined the media”. Well, that was a bit much even for me. As he walked away, my mind began racing at the breathtaking ignorance of his statement.

Simply put, without advertising, there would be very little media as we know it in existence. Woodward and Bernstein were able to bring down the Nixon White House because Katharine Graham’s Washington Post was an enormous advertising cash cow and she could therefore afford to pay a few young reporters to track down a story over many months and pay travel expenses for the young team as well. Without advertising revenue, most media, as we know it, would go kaput pretty fast.

About 40 years ago, as a student, I came across an amazing book by David Potter. Written in 1954, it was out of print when I found it in a used bookstore. There is a passage which sums up my feelings beautifully. In PEOPLE AND PLENTY: ECONOMIC ABUNDANCE AND THE AMERICAN CHARACTER he writes: “Students of the radio and the mass circulation magazines frequently condemn advertising for its conspicuous role, as if it were a mere interloper in a separate, pre-existing, self-contained aesthetic world of actors, musicians, authors, and script-writers; they hardly recognize that advertising CREATED modern American radio and television, TRANSFORMED the modern newspaper, EVOKED the modern slick periodical, and remains the VITAL ESSENCE of each of them at the present time.”

Amazing! He published those words in 1954! Just the year before, 1953, we crossed the threshold where 50% of American households had television sets. Yet, in many ways, I could argue that no one has articulated the role of advertising in the media world better than Potter did in the 57 years since then. He understood the symbiotic relationship between advertising and virtually all forms of mass communication very clearly.

Think about today. Everyone talks (rightly) about Google being the game-changer in the communications world. But how can it afford to continually innovate or buy existing companies? It is pretty simple. Much of their projected $40 billion in revenue comes from advertising. Without advertising dollars, Google could never have been Google. And virtually every little website in existence is looking for ways to monetize via some form of advertising revenue.

So if you are ever accosted as I was this past week, let the naïve ill-informed bozo talk but do not let him raise your blood pressure. Without advertising, the media choices that we have in abundance here in the US and on the Web would simply not exist.

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

The Mirage of the Global Middle Class

2011-12-09T10:57:00.000-08:00

On October 31st, the United Nations announced that the global population was projected to be at seven billion people. Right after that, many of us began to see and hear financial prognosticators talk about how, due to economic growth, some 850 million people were now middle class. So, in other words, 12.1% of the world in late 2011 could be described as middle class.

A recently released book puts these and other relative wealth factoids in sharp perspective. It is entitled THE HAVES AND THE HAVE NOTS with the subtitle “a brief and idiosyncratic history of global inequality” (Basic Books, 2011). The author is Branko Milanovic who is the lead economist at the World Bank’s research division. He also does double duty as a professor at the University of Maryland.

Milanovic breathes life into global demographics, which, if not handled adroitly, can be a breathtakingly boring subject. In the book’s best chapter, he questions the concept of a global middle class. Oh yes, it exists but not necessarily in terms that a U.S. marketer or private investor would see it.

The problem is that middle class is a term that tends to be defined LOCALLY. Most nations use it as plus or minus 25% of the countries median income (to refresh the memory of some of you 40 years away from a statistics course, the median is the 50th percentile; approximately half of the population is above that statistic and half below).

So, India has a median income which is somewhere between one 15th and one 17th of the United States. Middle class in India, thus, would translate to dire poverty in the U.S. Adding more fuel to the demographic fire is that the cost of living, especially housing, varies widely across the globe.

Milanovic makes a marvelous point about many in the financial world who use superficial analyses to measure a middle class lifestyle. He rails against those who look at cell phone penetration as the silver bullet to determine entry into a middle class existence. I am told that in parts of West Africa, for example, many have cell phones. But, their villages have no electricity. So, when the phone runs down, they have to travel to a city to re-charge it. They do not have the $100 to buy a solar phone charger. They are hardly middle class.

So, what does this mean to you? If you are brand manager and your boss wants you to go hell bent for leather in Latin America, be careful where you place your media dollars. If the product has broad appeal such as Tide, you may do fine. But, if you are selling dishwasher detergent, the odds are good that a Brazil or Chile, for example, will generate per household sales five to seven times most other countries on the continent. Should you be a private investor, just be careful period. Yes, the middle class is growing and certainly faster than in the United States these days. Just keep in mind that there is no way that one eighth of the world is what we consider to be middle class yet. Caveat emptor!

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

Are Companies More Powerful Than Countries?

2011-12-02T08:12:00.000-08:00

Lately, many of us are seeing and hearing people comment on how big multi-national companies are simply too powerful. Some are said to have bigger revenues than the Gross Domestic Product (GDP) of some fairly large countries. Recently, I have seen that McDonald’s $24 + billion in sales is larger than the Latvian economy. Exxon Mobil with over $35 billion in revenue is larger than Thailand’s GDP and would be the 30th country in the world were it a sovereign economy. Finally, Wal-Mart with over $42 billion in sales is larger than oil rich Norway and would be the 25th largest economy in the world were it a free standing nation.

Does it really matter? Some say yes; others no. Companies have influence but they do not carry weapons and, other than a handful of security guards, they do not have anything resembling a standing army. One difference is that of leadership—if people in a free society do not like a leader’s positions or policies they can vote him or her out of office. Most CEO’s tend not to be subject to a similar democratic mandate. Yes, they answer to their boards and shareholders but, if they keep earnings and a stream of dividends growing, most can have pretty long tenures on top.

Capital always has and I believe always will move to where it can earn the best return. That is why developing countries often work very hard to make themselves attractive to foreign investment. Money truly talks and many a non-democratic regime has been “told” to establish a more stable government, encourage rule of law and have accounting practices that are transparent and honest. In short, the country should be a place where international businesses can operate and are comfortable doing so.

So, why do big companies continue to get bigger? Is it because they are all sinister? I feel that the power often attributed to them is really not there. Today, we have a globally competitive economy and companies are constantly and ruthlessly pursuing efficiency. As they improve their performance they reward thousands with jobs and benefit stakeholders with higher dividends and eventually rising share prices. This focus on constantly striving for efficiency is significantly different than most governments around the world.

Governments, on the other hand, are often at the mercy of the tyranny of various special interest groups and to keep their political lives intact, many representatives vote the way the special interests want them to lean. Yet, big companies are often largely where they are due to the power of consumers—they got big by listening to customer needs and meeting their wants at a competitive price.

There is no question that corporations have had their way with Washington, DC in recent years. And, the rants of the Occupy Wall Street crowd make a wonderful criticism of “crony capitalism” and institutions that have become too big to fail. If they are too big to fail, then they are simply too big in an authentic free market model.

For a moment, let us look at two huge multi-national companies, not in energy or finance where influence can be outsized, and see how they have grown.

Henri Nestle was a pharmacist in tiny Vevey, Switzerland. In 1867, he came up with an infant formula. With steady even plodding growth it is now the largest food company in the world. After several decades of slow growth, they merged with the Anglo-Swiss Milk Company in 1905. During World War I, they provided canned and powdered milk to troops. After World War I, flush with cash (Switzerland had been neutral), they branched out into chocolate. World War II was rough on business but by then they had invented instant coffee that became wildly popular.

After World War II, they bought British company Crosse and Blackwell. They then added Libby’s, Carnation, Ovaltine, and Dreyer’s Ice Cream. Water became a hot item and they scooped up Perrier, San Pellegrino, Poland Springs and dozens of smaller players. They continue to buy up companies around the globe and now that the west has an aging population, they are looking at “wellness” as a big growth area.

Several years after Henri Nestle got started, Dr. John Pemberton, an Atlanta physician known for selling patent medicines began selling Coca-Cola (Coke) out of his drugstore. Sales were slow for a few decades and several people sold different versions under the same name. A local businessman, Asa Candler, saw big potential in the product and bought out all parties and consolidated all claims on the product, the name, and the now magic formula. Sales took off and they began a slow steady build across the U.S. For years, they fought back competitors who tried to ape the name. They won most of the suits but lost one against an upstart called Pepsi-Cola.

Today, Coke is sold in over 200 countries. Recently, I read an interview with a financial analyst who said that Coke even makes money in Zimbabwe, arguably the world’s greatest economic basket case. How do they do it? I am not sure but one reader of the blog tells me that they probably deliver to retailers in Zimbabwe who pay with an American Express card issued from a foreign country. They get their money instantly and the local retailer then takes responsibility for making money in a country with the highest inflation rate in the world.

I do not own shares in either of these global giants and have no plan to do so. My point is simply that private companies that are focused on growth and efficiency will likely continue to get larger no matter happens to the American or European economies. They are not as powerful as some alarmists say but many will likely get a lot bigger as many Asian countries and Latin America emerge as economic powerhouses.

As an old acquaintance one said to me, “Conservative investors, you will sleep well.”

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

Is PowerPoint the Enemy?

2011-11-19T13:28:00.000-08:00

I was at a meeting a few weeks ago and a lady was asked to address a group of about 25 of us. As she fired up her laptop, a mature gentlemen next to me whispered, “oh no, not a PowerPoint”. She only spoke for a few minutes and was excellent. It fact it took her as much time to get the PowerPoint started as it did for her to present. She really did not need it as she was really on top of her material. After the meeting broke up, the gentlemen and I had a lively exchange about PowerPoints as we went to our cars. I argued that it was merely a tool that is often used badly; he countered, “Power Point was the enemy.” This is a familiar theme from many these days and having sat through thousands of presentations and given many myself, I felt that it is time to weigh in on PowerPoints.

About a dozen years ago, PowerPoints were getting popular but still considered somewhat cutting edge. You could write a presentation at home on a Sunday afternoon, fan it out to staffers for comments and make changes right up until the presentation. When new, they were so novel that even the boss would read them before meetings. ☺

Now, they have become a worn out cliché at best in business, the military, government and academia. At their worst, PowerPoints are a crutch that does a poor job of providing cover for the lazy, the unprepared and the incompetent. Very often the person presenting the PowerPoint did not write it or research its contents. It may be an executive who saw it for the first time an hour before a meeting or a junior staffer who is given a part to play in a big meeting. This often ends badly.

A sales executive who has deep experience and is very shrewd told me that American business is suffering from “PowerPoint fatigue.” People often bore their audiences to tears with thirty plus slides that are very text heavy. I have seen PowerPoints that are 70-80 slides long with dense text that breath life into the wisecrack “death by PowerPoint.”

So, what is needed? A bit of common sense and a bit more work from some people. Some simple rules need to be observed and are often ignored:

1) Cut down on slides.
2) No more than six words per bullet
3) No more than 3-4 bullets per page
4) No more than six bullet slides in a row
5) Always remember that you cannot present complex analyses on bullet points

If you are a CEO, do not use a PowerPoint when addressing your troops or a big customer or client. The reason is that you will likely lose your aura of power. People tend to fixate on the screen and will not listen to you as much even if you ooze charisma. If you want to show a slide or two to illustrate sales or earnings or share price, do so. But, no slides with text, please. You are the star and you need to command everyone’s attention.

Strange things are happening with PowerPoints in academia. Last semester, a student approached me after a long lecture. He smiled, held his hand out, and I shook it. For weeks, he had been peppering me with questions before, after and during class plus sending me long e-mails with more questions or comments. He was the type of student that every professor dreams of teaching. After thanking me for the lecture, I asked if there was anything special about it. He said, “You don’t know how much I appreciate going to school here and to your class. I transferred from XXXXXXXXX University this semester. There, all my teachers used PowerPoints. I swear that there was one class that I could have taught myself. The instructor rarely looked up as she went through the material and almost never deviated from the PowerPoint. If I asked her a question, she would pause and refer back to a bullet point a few slides ago. Another professor handed out printouts of the PowerPoints for each chapter on day one. I rarely went to class, the tests were all multiple choice questions taken directly from the PowerPoint bullets, and I received an A but I learned nothing”.

Something is really wrong if such cases are widespread in our colleges and universities. I do note that every textbook that I have used has detailed PowerPoints for each chapter often with the dreaded text heavy slides.

People are so sick of PowerPoints that many avoid meetings where they will be used. Several years ago, I had regular dealings with a dreadful marketer. She would ask me and everyone she dealt with, “May I have a copy of your PowerPoint. I am really busy today.” Her rudeness inspired me. I trimmed down my PowerPoints to several slides and made them far more spare in prose. After the meeting, I politely but firmly refused to send the PowerPoint to anyone. Instead, I sent a tightly written memorandum, which was 3-4 pages long that not only covered my PowerPoint but what I actually said in the presentation. To date, no one has ever complained. And, when I lecture at a university, I limit PowerPoint usage to once each semester. A few have suggested that this is more work for me. Absolutely! But, it is several times more effective than leaving clients with a hollow PowerPoint that cannot stand on its own or ripping off students and their parents by not teaching an adequate class by hiding behind a PowerPoint.

The late actor, hoofer, and some time singer James Cagney had a great screen presence. He presented himself as perhaps no one else ever did on the Silver Screen. Near the end of his career, a young actress was intimidated when she worked with him and was stunned by his kindness on the set even though director Billy Wilder was giving her fits and sometimes even going after Cagney. As her comfort level with the great man grew, she asked him his secret for performing. He smiled and said, “It is pretty simple. Come in, plant your feet firmly, look the other fella in the eye and tell the truth.”

So take a tip from the great Jimmy Cagney. Cut down on your PowerPoints, and stand and deliver.

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

Would Keynes Still be a Keynesian?

2011-11-11T09:50:00.000-08:00

Recently, I made a discovery that may be pure coincidence but almost seemed to defy the laws of probability. I noticed that with one exception the individuals whom I considered to be the greatest economists of the 20th century all lead long or unusually long lives. Perhaps studying the nuances of the marketplace gives one a reason to keep going!

For example, the two giants of the Austrian (radical free market) School, Ludwig von Mises and Friedrich Hayek both lived to be 92. Milton Friedman, the elfin, ebullient leader of the Chicago School (Monetarists) died at 94. His ideological sparring partner, six feet nine inch Institutionalist John Kenneth Galbraith, hung on to be 97. Financial journalist and economist Henry Hazlitt passed on at 98 and Paul Samuelson, whose Keynesian oriented textbook introduced millions of college student to economics for two generations died at 94. Robert Heilbroner, author of the brilliant tome on history of economic thought, THE WORLDLY PHILOSPHERS, lived to be 85.

Depending on your politics, most people would rate Hayek, Friedman, and John Maynard Keynes as the greatest and most influential economists of the 20th century. Unlike the other luminaries Keynes died much younger at age 62. That simple fact has made me consider a number of what if scenarios.

John Maynard Keynes, later Baron Keynes of Tilton, was considered Britain’s foremost intellectual in the 1920’s. Even the arrogant and supremely self-confident philosopher Bertrand Russell, always said he came up short when trying to debate Keynes on any subject. Keynes was a brilliant mathematician and economist.

In the late 1920’s, the two leaders of the Austrian school, von Mises and Hayek began to warn of economic danger in the western world, as credit buildup was excessive. When the U.S. stock market crashed in October 1929 followed by a depression a year or so later, they were seen as seers. When asked what should be done, they essentially said “nothing.” The market would self correct as Adam Smith’s “invisible hand” (outlined in 1776 in his WEALTH OF NATIONS) would usher in a return to a normal environment. In brief, the invisible hand is a theory that states that collectively if all individuals in a society act in his or her self-interest, they would produce all the goods or services that are required by society. The invisible hand did not need government guidance of any kind. This pure laizzez faire approach would produce the greatest good and eventually generate economic growth.

By 1933, much of the Western world was out of patience. In the U.S., unemployment was at 25%. New York Governor Franklin Delano Roosevelt was elected president and was sworn in as our chief executive on March 4, 1933. Although he had run on a platform featuring a balanced budget, Roosevelt ran away from conventional economics shortly after taking office. He abandoned the gold standard, confiscated the gold of private citizens, and engaged in a wide array of government stimuli under the umbrella of “The New Deal.” Among these were the Works Progress Administration (WPA), which gave construction jobs to thousands of unemployed young men, and the Social Security system that was an attempt to supplement the income of older Americans.

While purists howled, Roosevelt pushed on with his experiments. Keynes, observing similar suffering in the United Kingdom, penned his THE GENERAL THEORY OF EMPLOYMENT, INTEREST AND MONEY (it is a world class boring read, believe me, and is probably the most influential book that has been so rarely read by its supporters) in 1936. With a heavyweight like Keynes endorsing the Roosevelt approach and wrapping some discipline around it, Keynesianism became a mainstream approach and remains so to this day in much of the civilized world. It is amusing to see the GOP presidential hopefuls debate these days. Only the unelectable Ron Paul of Texas is a true free market advocate; he is an Austrian through and through. The others all exhibit varying degrees of Keynesian in their thinking but would deny it vehemently if challenged.

Because so few have read Keynes’ General Theory they feel free to interpret it to suit their needs. Keynes was indeed a champion of government intervention when the market went haywire. He wanted public works projects to kick-start the economy and get people working, spending, and creating demand for products. But he also was in favor of things that politicians choose to forget. After the crisis was averted, Keynes believed that governmental budgets should be balanced over time. What!!! Keynes said deficit spending was fine during the dark days of depression and during World War I and II, but year in and year out you balanced your budgets! So, what would Lord Keynes think of the U.S. with their 47 years of deficits over the last 50. Not much, I would think.

He would certainly have agreed to the TARP bailout of 2008 but what would be have thought of the decades of reckless spending leading up to it?

Like all serious thinkers, he was intellectually honest enough to question his theories. In April 1946 he attended a luncheon at the Bank of England. Everyone else was saying that the US and Europe may fall in to a depression as returning servicemen needed to find jobs at home. Keynes was very upbeat and accurate about the U.S. prospects and felt that it would take more time in Britain, which had serious war damage in major cities. Then he said something fascinating—“I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.”

A few days later Keynes was dead. Had he lived 30 years longer as many of his fellow economic giants did, I am certain that what we call Keynesianism would look very, very different today.

Also, right-wingers often dismiss Keynes as a socialist. This is utter nonsense. The Labor party always wanted Lord Keynes to join their ranks. He stayed with the Liberals, a centrist party, and was very upset when Clement Attlee, a Labor (Socialist) party M.P. became Prime Minister besting Winston Churchill, the Conservative, and Archie Sinclair, the Liberal leader. He was also a fabulously successful speculator who was worth perhaps $40 million dollars just before World War II. His beloved Kings College at Cambridge let him manage their funds and their endowment exploded upward under his guidance. Were he 35 today, he might well be a hedge fund manager. Some socialist!

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

Do You Feel A Little Pinched?

2011-11-06T09:22:00.000-08:00

There is an interesting new book out by Don Peck simply called PINCHED. Peck is a features editor at THE ATLANTIC.

I read business and economics books omnivorously but I found this one to be unusually strong. There was little in the book that was new to me but I have never seen all of these issues covered and done so well all in a slim volume of 188 pages.

Peck’s main thesis is that the Great Recession that hit us late in 2008 is no ordinary downturn. Unlike past V-shaped downturns that were rough but short in tenure, this one lingers on. Some 80% of us still believe the economy is in recession even though the Federal Reserve and other august economic sources tell us that we are well on our way to solid though admittedly sluggish growth.

The two things overhanging the economy that Peck keys on are nagging unemployment levels listed at 9% but likely much higher when underemployment is put into the mix plus a real estate market that in some states has yet to touch bottom.

Both of these issues have smashed the American dream in many ways. Virtually all of us have always looked forward to a future in which our children live better or at least the same as we have lived. With unemployment and underemployment among recent college grads at high levels plus many burdened with huge college loans, many seem in a hole with little chance of fast escape. Owing a home has become a fantasy to some 20-somethings despite record low interest rates. No one will give them a mortgage and, a smart banker should not do so.

Peck also raises an issue that has been covered a great deal in the major media in recent weeks but he was on to it months ago when this book went to press. There are pockets of America where there are labor shortages. North and South Dakota, Nebraska and Wyoming top the list. But with 24% of people underwater on their mortgages (the mortgage is higher than the value of the home), many people are stuck in their communities with no hope of moving unless they declare bankruptcy (we touched on this a bit in the Media Realism series, “Mid-Sized Malaise” in October, 2010). Also, many people would not find the cold weather in these states appealing and culturally an unemployed New Yorker might not find people with a similar sense of life in North Dakota.

He touches on the income inequality that everyone is harping on these days but surprisingly, and to his credit, does not offer a simplistic “soak the rich” solution to the issue. He instead is honest and recommends “strong budget discipline and a reduction in the growth of Medicare costs, and somewhat higher taxes for most Americans.” Peck also asks for increased spending on infrastructure and innovation. Whether you agree with this prescription or not, he does not take the unrealistic route of saying that we can easily grow our way out of it or tax our way out of it.

This book is a cool headed assessment of the miserable mess that we are in. If a politician talked this way, he or she would get virtually no traction.

PINCHED will make you think. I highly recommend it.

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

Seven Billion and Counting

2011-10-26T12:59:00.000-07:00

When I was in 5th grade, I remember reading a story during class in My Weekly Reader that stated there were now three billion people on earth. It was passed over quickly as it was just about time for recess. The concept of a billion kept gnawing at me. As recess was ending, I approached a nun who taught at the school and asked her to explain what a billion was. She struggled and could not do it. I said that I did not understand, and she called me impudent and told me to rejoin my class, which was lining up to re-enter the school. She then told my homeroom teacher how disrespectful I was and the rest of the school day was quite unpleasant for me.

When I got home that afternoon, I kept thinking about a billion. As dinner was ending, I asked my parents. The reception that I received was a lot different than that at school. Both parents pulled out a pad and pencil (no calculators in those days!) and patiently took me through the math until I knew it cold. I remember asking them if there were anyone with a billion dollars and my dad thought there was an American oilman living in England who was definitely worth that much. My oldest sibling ran upstairs and returned with a copy of TIME magazine containing a story about J. Paul Getty.

This past week, the memories of the mean spirited and ignorant nun and the kindness and patience of my family came flooding back to me. The United Nations is projecting that by Halloween (October 31st) the world population will pass seven billion. It was only 11 years ago that we hit six billion. Almost all futurists agree that 14 years from now we will add an additional billion to the world’s population. Beyond that things get a little fuzzy. In past years the U.N. and some think tanks felt that with the growth of family planning the world’s population would level off at somewhere around nine billion. Now virtually every organization forecasting population size has revised that calculation and says that by 2100 we will be at least 10 billion. With a huge base of seven billion a modest change in birth rates can have a dramatic increase in population estimates. For example, were the average woman to have simply a half a child more, the population will be at least 16 billion by 2100. Most of us would agree that the planet’s resources would be strained to the breaking point were that to occur.

Let us look at the next fourteen years as we march toward eight billion. Some obvious things are going to occur:

1) India will pass China as the most populous place on earth (remember the Chinese one child policy in many locales).
2) On a relative basis, Africa will increase and Europe will decrease.
3) Most of Western Europe as well as China and Japan are below Zero Population Growth (ZPG) meaning they will not be able to replace the current indigenous populations.
4) Much of the population growth will come from poorer countries where most of the newborns will live on less than $2 per day.

What does this mean to us? All gloom and doom? No, there is some obvious growth out there. Right now, approximately half of the people hospitalized around the world are there as a result of drinking impure water. So, a huge growth industry will be developing systems to get water to arid areas and purifying it everywhere. Right now, there is a huge effort going on in China to purify water that gets very little attention.

We also have to find a way to feed all these new people. Agriculture should boom as should companies providing fertilizers although some argue that our dependence on phosphorus rich fertilizers could deplete reserves and cause a bigger squeeze than possible energy shortfalls in the years ahead. Machinery used in agriculture should also see a nice run.

For agriculture you need a lot of water and the lack of that most precious commodity is already a big problem around the world. Also, if you are like me and think that there is something to global warming, rising temperatures in recent years have depressed global corn, soybean, and wheat production. That is great for American agriculture that will profit mightily from global production shortages but we still will have a billion more mouths to feed.

As marketers, do not despair. In Asian and Latin America some 50-60 million people per year will be entering the middle class and will buy high levels of package goods, appliances and automobiles. This bodes well for multi-national marketers, ad agency holding companies and selected media. Consider ESPN. If you watch them closely, they are constantly expanding their international footprint. Sports mania should continue to expand and an increasing global middle class should only fuel their continued growth.

Lack of water and especially clean water, pressure on energy and food production, and the global warming threat are all huge problems. But, think of the growth when we solve some of them. As we move toward eight billion people over the next decade and a half, stay positive. Technology will continue to move forward. The world will look different and economic power will do some shifting. If you are prepared and see what is coming, you may actually improve your situation.

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

A Fresh Look At You Tube

2011-10-19T06:00:00.000-07:00

Just over five years ago (October 9, 2006), Google announced that it had agreed to purchase You Tube for $1.65 billion in stock. Patiently, many of us waited to see if this would lead to Google making big inroads into television advertising budgets. But, actually, to date, little has happened. As best as I can determine approximately 40% of total U.S. advertising budgets remain on some form of television (network and spot, network and local cable) and barely 1% on online video. Recent developments indicate that the lopsided ratio of TV to online video advertising revenues may finally begin to shift.

My interest really picked up recently when Google hired Lucas Watson. He had been Procter & Gamble's director of digital business strategy. Now, he is V.P. of Online Video Global Sales at You Tube. When a packaged goods pro is recruited by You Tube it looks as if they want to make a serious run at pulling significant funds from the TV advertising arena.

Interestingly, some media friends of mine at agencies say that they have tried to pull the rest of their shops into You Tube tests but they are meeting stiff resistance, especially from creative chiefs. In a long e-mail thread with an old friend and creative whom I really admire, I found the same answer my media buddies are experiencing. My friend wrote and I quote with his permission, "to sum it all up, I don't want my team's beautiful work running next to some horrible video that a 15 year old boy might have captured on his cell phone".

My friend has a point but I encouraged him to give You Tube another look and meet with a sales rep along with his shop's media team. Not many people have deep experience in an emerging medium such as online video. Things are changing quite quickly and a notion held a year ago might not hold water today.

To date, music, technology and some entertainment advertisers dominate You Tube placement. Other categories should give it a shot. Also, there is a huge local ad window open to them as You Tube serves their videos to one person at a time. Local retailers could benefit if you targeted certain types of videos viewed in specific locales. This window of opportunity is open now but we all know that Comcast and Time Warner have products in development that will be able to send customized commercials to several homes on the same street. Agencies and advertisers comfortable with local cable will go there without blinking if You Tube does not pick some of them off first and develop a track record of success.

Take a hard look at the quality of You Tube videos. Yes, it is largely homespun material. And, some are in questionable taste. But professional videos are growing and you can confidently place commercials around them.

Importantly, You Tube, by definition, allows an advertiser to ask people to become part of the message. Yes, you lose some control with mash-ups of your spots but it really can easily become a new kind of promotional platform if done right. Also, there are some nice promotional opportunities as well.

If you are a major player with multi-national support, do remember that Google has the deepest pockets in media history. If they produce original programming (Google Tube?), it would have a GLOBAL audience overnight. They now attract almost 800 million unique viewers per month. Even 81 year old Warren Buffett admits to watching You Tube for 90 minutes at a stretch to relax. What if you saw a brief promo for their new programming or series when you went to You Tube? The audience could grow as fast as some of their popular viral videos. And Google can fund it forever if it does not turn a profit initially.

An investment newsletter that I recently read says that You Tube is perhaps marginally profitable now and may add close to a billion dollars a year to Google's outsized revenues. So, the upside for You Tube is huge if Google monetizes it properly. Consider You Tube as a small hedge in your 2012-2013 video allocation. Two years from now you may thank me.

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

Mises, Galbraith and Bottled Water

2011-10-11T13:18:00.000-07:00

For the better part of 50 years a lively debate has taken place in some advertising and marketing circles. Essentially, the battle lines are drawn between Austrian theorist Ludwig von Mises and his concept of Consumer Sovereignty and John Kenneth Galbraith’s The Affluent Society, which tried to refute it very strongly.

In brief, Mises postulated that, in a free market economy, the consumer was king. The consumer made poor men rich and rich men poor. If the public found a product that was comparable and less expensive or of better quality they would vote with their cash and move to the new product. Galbraith took the tact that many of us who could be described as marketers were very manipulative. Due to marketing tactics, particularly advertising, consumers were often persuaded to buy things that they neither wanted nor needed (for a detailed explanation see Media Realism, 9/15/2009).

Over the years given my free market leanings, I have tended to side fairly strongly with Mises. Having worked on several new products that failed in the marketplace (as has any long term ad executive), I always questioned the concept that marketers were so smart and manipulative. Were advertising and marketing tactics so powerful why do most new products continue to fail?

In recent times, one category has sort of made me review my position. The category is that of bottled water. Most of us who are a bit mature in years remember Perrier as the first bottle water of any substance. It basically invaded the U.S. in the early 1970’s. Since then, bottled water has exploded and is often associated with social status and healthy living.

What most people do not realize is that approximately 40% of bottled water sold in the U.S. is really tap water that has been put through an extra filter or perhaps fortified with a mineral or two. The profit to the purveyors is enormous as tap water is very inexpensive. Often when you buy bottled water you are paying up to 1900 times what you pay for tap water. And, is it purer? Well, the bottled water from tap is usually more than okay. But for those claiming that they are selling spring water or mineral water, there is less regulation and supervision than there is for municipal tap water. In the western world, there are few places of size where the water is not safe. In developing countries, caution is a good idea and drinking a brand name bottled water makes great good sense in remote areas.

Interestingly, major beverage companies control bottled water sales in the United States. Coca-Cola owns Dasani and Pepsico sells Aquafina. Global food giant Nestle owns a fistful of brands including: Arrowhead, Deer Park, Ice Mountain, Ozarka, Poland Springs, and Zephyrhills. So these players have hedged their bets beautifully. If government cracks down on sales or raises taxes on sugared sodas, they will pick up much of the resulting shift to water products. Nestle waters website had a compelling argument that if one gave up a cola habit and switched to water you could save 50,000 calories per year. In a country worried about obesity, it is not an empty comparison.

The marketers have succeeded in creating more than an aura of health when you drink bottled water. There is a certain cache to it—have you ever noticed young people carrying a bottle everywhere? It has almost become a fashion accessory to some and is ubiquitous as a mobile device. In some upscale areas and at very fashionable universities, the branded drink has given way to a refillable bottle presumably filled with clean healthy tap water.

Given my strong free market bias, I clearly still believe in Mises concept of Consumer Sovereignty. The case of bottled water, however, has made me think that the Galbraithian notion of consumer manipulation is not always bankrupt.

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

Sizzling Singapore

2011-09-30T12:39:00.000-07:00

If you follow world business at all, you are hearing and reading a great deal more about Singapore. This tiny city-state on the southern tip of the Malay Peninsula has been growing rapidly for decades. It covers a scant 253 square miles but packs an increasing financial wallop around the world.

There a 5 million people in Singapore with the great majority being of Chinese, Malay, or Indian descent. English is an official language but the majority also speak a Chinese dialect. It is something of a dream for entrepreneurs and businesses. There is no place in Asia where there is such ease of business registration, governmental support, plus all important favorable tax rates and incentives. And, perennially, the World Bank usually ranks Singapore as the easiest place in the world to do business.

Often referred to as the Switzerland of Asia, it is a pulsating financial center that holds it own with Tokyo and the increasingly powerful Shanghai. The savings rate is among the highest in the world so there has been extraordinary capital formation. After independence from Britain, lead governmental minister Lee Kuan Yew arranged for compulsory contributions in the 25% of income range to government controlled pension funds. While unappealing to American spending tendencies it was a big contributor in making the tiny nation rich.

With a shift away from the U.S. and U.K. in terms of media billing, I believe that in a decade or so Singapore may well become the world’s advertising hub.

Consider these facts—

Singapore is centrally located in Asia and as global billing tilts toward the east, they will literally be perfectly positioned.

Westerners are more comfortable in Singapore than anywhere else in Asia. Part of it is the ubiquity of English but also the appearance counts. The place is crammed with people but immaculate. It took Wrigley decades to get the government to allow them to sell chewing gum there! Senior management of holding companies would be comfortable here as the adjustment to Asia would be far easier than other choices.

Unlike other Asian powerhouses such as China or Korea there are no exchange controls. You may easily move capital in and out of Singapore or repatriate profits.

Advertising has made strides in Singapore. Arguably it is the Asian leader in outdoor, mobile and digital advertising. As the world moves to digital, the existing talent pool can help.

Many Singaporeans are of Chinese descent. As China grows, it might be easier for Singaporeans to deal with China than those from other nations.

So, we forecast confidently that Singaporean agencies will not remain as branch offices for the mega-shops much longer. By 2020-2025 they will be in the epicenter of global advertising and a few of the world’s top 10 holding companies will be headquartered there.

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

Promotion Smothers Advertising

2011-09-23T10:36:00.000-07:00

Over the years, there has been a quiet revolution going on in communications. It probably started in the 1980’s, but in recent years, with a weak U.S. economy, it has really increased dramatically. It is simply the growth of consumer sales promotion. From a total of about $56 billion in 1991 it could be as high as approximately $400 billion for calendar 2011. On top of that eye-popping amount, US marketers will also spend an additional $175 billion on promotional activity targeted at retailers and wholesalers. When you think of promotions, you generally think of activity by packaged goods companies. Look at it a bit closer and you see health care, consumer electronics, computer companies and even some service firms leaning on it.

The high water mark for conventional media advertising occurred somewhere in the 1980’s. After a lot of number crunching, that is as precise as I can get to it. Since then, many if not most consumer products companies have changed the way in which they market their products. Amazingly, for those of who have lived and breathed conventional advertising, approximately 50% of packaged-goods support in 2011 among my admittedly small sample of publicly traded companies is for trade promotion, a little more than a quarter for consumer promotion, and slightly under a quarter to what we would define as media advertising. Additionally, a fair amount of the media advertising is focused on promotional messages regarding rebate offers, contests, sweepstakes or games.

Why is it happening? Why is it a surprise to many of us in the advertising world? Will the pendulum ever swing back?

What are sales promotion activities? The list of types of consumer promotions would include: coupons, premiums, refunds, bonus packs, price-offs, loyalty programs, sampling, and event marketing. Trade-oriented promotions are co-op advertising, trade shows, point-of-purchase displays, trade allowances and dealer incentives and contests.

For years, those of us in the ad game believed that brands were built and maintained with media advertising. Promotion was an afterthought. Junior art people would grind out coupons. Sometimes the client had an internal group that handled promotions. Firms that only did promotions made inroads but many people were asleep at the switch and did not realize that ad budgets were not increasing due to the growth of promotions as a percentage of the total marketing budget.

Structurally, several things have occurred in recent years that are making promotional activity more prominent:

1) Retailers have muscle today—40 years ago, the manufacturers such as the major soaps, P&G, Colgate-Palmolive, and Unilever, had the influence. The retailers were almost treated as distributors. The brands received heavy media support and the occasional promotion. On their own, the retailers were not into sales analysis. The scanner at checkout changed all that. At their fingertips, retailers now knew what was selling and how quickly each product turned over. Wal-Mart and Target got bigger and bigger and power shifted to the giant retailers. If a manufacturer would not provide trade support for their brand, they might get their shelf facings reduced or, in a few cases, dropped. Today Wal-Mart alone is 25% of the sales of some brands. A manufacturer has to meet their needs or they jeopardize their brand’s franchise.
2) Brand Loyalty is sagging—with a weak economy, people are looking at price and value more than ever. Some of us have certain brands that we will buy regardless of price or competitive promotion. But, with money tight, many now will buy brands that are close to parity at a nice discount.
3) Time Crunch—virtually all Americans say that they live under a time crunch. Working Moms and especially single Moms top the list. Some 70% of purchase decisions are said to occur in the store. Buying what is on special cuts decision time and usually saves money.
4) Promotional activity is accountable—for years, we have told people that advertising does not guarantee success. We know that it contributes to sales growth but it takes time and there are other factors (state of the economy, competitive action, etc.) that are part of the mix. Results from sales promotion activity are almost always easier to measure than those from conventional media advertising. Ad campaigns may hit their stride after a few months; a few well-placed coupons give you instantaneous sales boosts. Retailers monitor their scanner data and put pressure on underperforming brands to run more promotions. Results are often tracked daily.

Should the advertising industry be concerned about this move toward promotion? The loss of potential billing is and has been significant.

There are broader issues out there, which some agencies do not address adequately. If you wish to charge a premium price for your product you need to differentiate from the competition. Advertising helps greatly in maintaining a strong franchise by honing your image, maintaining brand loyalty, and talking up your brand’s benefits.

Yet, the world of 2011 is a short-term world. The average marketing director at a US company lasts under two years. I do not have a precise figure for brand managers but it is not much longer for sure. So, promotion is tempting for a short-term fix for the hired guns in the world of marketing. Also, and importantly, the compensation of many brand managers is based on quarterly sales data. So, dropping some coupons or doing price-offs or bonus packs can be irresistible for many. How many 28 year olds care about the long-term value of their brand’s equity when they can get their first nice bonus with a few successful promotions? Top management needs to work on this as promotions almost become like a drug to some staffers.

Increasingly, there is an analysis paralysis setting in. If you can look at daily promotional data, you lose sight of the long-term value that advertising can provide. And, Wall Street does not help as when quarterly sales are down a few pennies due to increased advertising investment, the stock gets hammered and you have disgruntled shareholders and maybe an unhappy board of directors who should know better.

Can advertising fight back and get a larger share of advertising dollars? With some firms it certainly will and, when the economy gets strong again (someday☺) it should claw its way back a bit.

But remember, technology might not help. Social media options like Groupon and Living Social are making coupon users out of young adults. In the mobile arena, the Cellfire’s and other fellow travelers are delivering promotions (largely coupons) to the 20 somethings and often highly successfully.

The power of brands has to be diminished under this scenario, as there appears to be very little residual advertising value to promotional activity. And, many of your loyal buyers love them as they get a discount when they cheerfully would have paid full price. This is impossible to measure accurately but hurts your bottom line.

A friend whom I interviewed for this piece is a very talented creative director. He e-mailed me back after seeing an outline of this post “do you mean to say that my team will have to do more crappy coupons and POP displays than we do now.” Well, yes in most cases. These days you have to find revenue where you can and if you stick only to conventional advertising, there will be no shortage of people who will siphon off the promotional projects and hurt your income.

For the moment promotional activity will keep growing in the U.S. Established brands might want to shift their advertising emphasis overseas where brands, especially American ones, have cache and growing power.

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

Procter & Gamble and the Hourglass

2011-09-18T07:14:00.000-07:00

On January 21, 2010 I posted a Media Realism piece entitled “The Gini Coefficient and The Future.” The Gini Coefficient is a means of measuring inequality in income or wealth in a country. I raised a mild alarm that American income distribution was beginning to look like the array one would see in a repressive regime or a developing country. The post generated a great deal of mail. A few people accused me of being a socialist (!) while left wing friends loved it. Well, this past week we received an unofficial update on the current Gini distribution.

The New York Times provided a very nice analysis of Census Bureau data that was released on Tuesday, September 12, 2011. Some 46. 2 million people or 15.1% of Americans were living below the poverty line. This is the highest number in the 52 years that the Census Bureau has been calculating it. Even more tragic is that some 22% of American children are living below the poverty line. Here are few factoids from the Times coverage and the Census Bureau itself:

--The top 1% of Americans control just under 25% of the country’s income. This is the highest figure since 1928.
--The U.S. ranks #3 among all advanced economies in the amount of income inequality.
--The top 5% of Americans by income account for 37% of all consumer purchases.
--Median annual income adjusted for inflation is at 1973 levels.

An economist friend e-mailed me that the census data is unfair, as it does not include noncash assistance such as food stamps or the earned-income tax credit. So, in his opinion, poverty rates are overstated. He may be literally correct but the poverty line for a family of four is $21,340. Does it make sense to quibble over another $8,000 in food stamps being added to income? If a family of four is making less than $30,000 per year, they are struggling in ways that most of us cannot fully imagine.

While millions are struggling, top end retailers who cater to the elite portion of America are doing just fine. Tiffany’s and Nieman Marcus seem to be thriving. Internationally, the company with the unwieldy name of LVMH Moet Hennessy is doing great with their remarkable stable of luxury brands. Known as LVMH, this French purveyor of the world’s best owns Louis Vuitton bags and luggage, Tag Heur watches, Dom Perignon champagne, Emilio Pucci, Donna Karan and Hennessey cognac. The last quarter Hennessey sales jumped 24% in Asia (excluding Japan) as a large moneyed class is emerging on that continent.

At the other end of the scale, the "dollar stores" are gaining in volume and share while even Wal-Mart is seeing sales declines in the U.S.

Meanwhile, this past year nearly 3 million more Americans fell out of the middle class. The day before these data were released one of America’s premier marketers, Procter & Gamble, announced a marked change in their United States promotion efforts. The Wall Street Journal stated, “The world’s largest maker of consumer products is now betting that the squeeze on Middle America will be long lasting.” Today, P&G, as it is known, has at least one product in 98% of U.S. households, which equals the penetration of TV! P&G chief Bob McDonald is now adopting an “hourglass strategy” with products and marketing support clustered at high and low end consumers but not as much in the middle. This fundamental change recognizes that the middle class is struggling and that emphasis needs to be placed on the “dollar store” downscale market that is growing and the upper end of their market that is stronger than ever. Now, please be let me be clear. The upper end of the P&G market is not nearly as wealthy as the LMVH audience. Yet, it is still growing for P&G. The stagnant area for P&G appears to be that broad group in the middle that has always been the company’s bread and butter market in the United States (P&G is doing well overseas, particularly in Asia and Latin America).

It will be interesting to study the P&G media mix for 2012. Will there be a different mix of cable networks in their buys and what programming will they change? Will they cut back on online action for the low-end brands and beef it up for their more upscale products?

My main takeaway from this is simple. P&G is shifting marketing gears because they do not see a middle class rebound in the United States for the foreseeable future. When arguably the world’s most sophisticated marketer feels this way and acts on it, we should all take notice.

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

Globalization and Advertising

2011-09-09T11:23:00.000-07:00

Back in March 2005, I was sitting in my office one nice morning grinding out a letter to a difficult client. I stopped to take a phone call and then noticed an update on my on-line news. WPP Holdings of London had purchased Grey Advertising. While publicly traded, Grey was largely considered to be the last of the great independent players. Financial analysts would often joke that their shares traded by appointment only as senior management controlled a huge amount of the stock’s float. The sale to WPP struck me as a watershed moment. Now, four holding companies, Omnicom, WPP, Interpublic and Publicas appeared to control the advertising world. Sure enough, the next time the data was published, those four mega-shops or holding companies controlled more than have of global advertising billing. Today, it hovers around 57-60%. Globalization has now hit our industry and there is no turning back.

To read the business press, you would think that Globalization is a new process. Yet some economic historians place its origins in 1492 when Columbus landed in the Western Hemisphere. Others argue that there was international trade between Europe and the Far East hundreds of years before that (re-read "The Adventures of Marco Polo" and you will see that they are correct).

Today, however, Globalization is beginning to gallop. Just what is it? Essentially, it is driven by two factors:

1) Comparative advantage
2) Economic specialization

Comparative advantage is the simple concept that some countries or effective elements within that country can do something faster, better or more cost effectively than those in any other place.

Specialization usually means that you are so good at something that you are a leader in that field. Computer programmers are expensive in the U.S. Go to India and there are thousands who speak English and work for a fraction of the cost of their U.S. counterparts. Much of Asia has an abundance of skilled and unskilled manufacturing labor. Taiwan has great heavy industrial foundries and first-rate semiconductor manufacturing facilities. So, those places keep growing.

Globalization, in brief, takes advantage of whoever can do something the best. Capital has always moved where the returns are the largest. Globalization has saved businesses and consumers trillions Vis a Vis the old model where technology and trade were largely restricted within a single nation.

At the same time, increased Globalization has caused problems. Certain industries in the U.S. face chronic unemployment and several million workers have been displaced.

Why has Globalization grown in recent decades? We have identified five reasons:

1) The growth of free trade—over the last 25 years, countries across the globe have lowered many barriers and/or tariffs on imports or exports. The most famous and far reaching was China, which continues to move away from its communistic model. China and some of its Asian neighbors have flooded the world with cheap goods due to their low wage for local labor.
2) Outsourcing—many UK and US firms have saved billions by shifting production facilities to Mexico, China, or Malaysia, Indonesia, and increasingly, Vietnam. Service companies have tended to migrate to India. If you have a problem with an appliance, the odds are good that a peppy and very well educated service rep based in Bangalore province in India will try to help you. Both manufacturing and service workers in the developing countries accept lower wages than American or British workers. The controversy beyond lost jobs at home is that many say working conditions are poor especially in the industrial sector.
3) Containerization—I bet that you did not think of this one! Most goods are now transported across the globe in standard sized containers. This has tended to speed up delivery times; eases customs issues, and, of course, cuts costs.
4) The Internet—as things blew up in the dot.com boom in early 2000, many start-ups went bust. However, the billions spent on international fiber-optic networks were not all wasted. The networks remained in place and brought inexpensive connections to a few billion people. Some small and savvy marketers took advantage of this. Many business units exist now in a very narrow niche space. The Internet allows them to advertise GLOBALLY to the several thousand people who are prospects for the service. With the old model, you could never afford to advertise because even if you could come close to identifying your prospects you could never pay the freight to reach the majority of them. Not so any longer!
5) Legal Agreements—increasingly, but not always, more countries are recognizing patents from other nations. The same is true of intellectual property. This can stimulate trade significantly.

So, there have been big gains for people across the globe. The BRIC (Brazil, Russia, India, China) countries have seen exports boom although Russia’s are largely tied to energy and other natural resources.

Does Globalization have any critics? You bet! I greatly admire Nobel Laureate Joseph Stiglitz. His analysis of the 2008 financial crisis is the best and most lucid that I have seen. He, a bit surprisingly, is not a big fan of Globalization. Reading some of his work and tracking down interviews on the topic, he has three big issues with Globalization:

1) Culture—in past posts, we have identified that American Pop Culture travels well. Stiglitz agrees but argues cogently that as Western brands become more dominant, indigenous cultures lose some of their identity. Is this a bad thing or simply progress? We remain on the fence on that one.
2) Inequality—yes, Globalism is creating wealth but it is not shared evenly. Across the world, inequality levels are getting higher (see Media Realism, The Gini Coefficient and the Future, January, 2010). Also, many of the poor remain desperately so in 3rd world countries even as their countries expand. There will always be inequality in a free market environment. His point is that it appears to be getting more extreme as Globalization expands.
3) Human Rights—most glaringly in apparel but it other industries as well, it seems that big multi-nationals use sweatshops staffed with young people (and some children) who work for peanuts in horrible and unsafe conditions.

Others argue that, while it is imperfect, many are better off. Each year, some 30 million Asians join the middle class; 20 million in China alone. Tom Friedman in his book THE WORLD IS FLAT argued that no two countries with a McDonald’s have ever been to war. His thesis is that if you build up economic links, hostilities will not break out very easily (Russia did invade former satellite Georgia in 2008 but I give Tom a pass on that one).

So where does this leave us in advertising? The dynamic global growth over the next few decades will come from Asia, Latin America, and perhaps a few nations in the Middle East. The big Mega-Agencies are beautifully positioned no matter which countries come out on top. Long term, I feel that China will face big problems due to weak demography. Other Pacific Rim nations are very young in terms of average age and have robust futures.

Increasingly, U.S. brands will focus their advertising dollars on their overseas growth and stay in maintenance mode in the US and Europe. This will harm the middle-sized ad agencies in the US but really help the major holding companies.

Undoubtedly, some nationalistic pride will raise its head and there will be more major local agencies emerging in the BRIC countries and other explosive growth areas. Nevertheless, the mega-shops are in a good spot with their financial resources, management depth and decades of experience. And, they will find a way to buy some of the stronger local shops.

A few people have expressed concern about working at one of the giants. I stressed resources and the great experience that you can obtain by a stint with one of them. But, as one young friend asked, “where do I go?” To put it in perspective, when I started at Ayer in the early 1970’s, Marshalk and Marsteller, both fair sized shops, were in the same building. People could sneak to an interview simply by taking a different elevator bank. Now, if you work for a major, can you shift easily within the agency family? Some one can look up your precise compensation and, if you do not get the new job, will your supervisor be notified or will your shop’s HR department? You may be stuck somewhere for a while but people will know that you are disgruntled. This may not be a major issue but more than one person has asked me about it.

On balance, I see Globalization as a positive despite some imbalances that will occur that are part of the fabric of any evolving market situation. British financial writer Edmund Conway describes Globalization as “the adrenaline of capitalism.” A great definition!

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

Why Aren't Companies Spending?

2011-09-03T10:40:00.000-07:00

In recent weeks, if you follow the business news at all, you have been pummeled with the statistic that for the first time in history U.S. corporations are sitting on over $1 trillion dollars in cash. Several of my friends at both advertising agencies and in media sales have asked me why companies are not investing some of that record cash hoard into conventional advertising.

Well, instead of looking at it from the perspective of an ad agency or media executive who would benefit directly from a spike in media spending let us take a look at it from the view of a CEO of a fairly large corporation.

The recession that began in 2008 was deeper and scarier than any since World War II. Generally, in our lifetimes, recessions have been V-shaped, meaning there was a sharp downturn with a quick and equally sharp recovery. This time it truly is different. We continue to bump along with a recovery so tepid that some observers say that we really never pulled out of the recession of a few years ago. This past week, revised figures for 2nd quarter say that GDP grew by a paltry one percent. So, there is a very real risk that we could slip into a double dip recession.

All this makes even the most successful CEO nervous and cautious. Historically, management often is guilty of fighting the last war when it comes to recessions. But, as this malaise drags on month after month, it is easy for me to see why many remain in the “bunker mentality” of 2009. Then, many were worried about survival. Now, some question if there will ever be a return to normalcy.

Where did this cash hoard come from? When things got tough in 2008 and tougher in 2009, companies engaged in layoffs, downsizing, and when possible, leaving marginal businesses. Productivity rose as frightened workers put in longer hours with no raises and often no complaints. So, companies began to operate more efficiently than ever. On top of that even loosely managed companies got into fanatical expense reduction and suddenly the balance sheets started sporting fabulous cash hoards.

This may be controversial but I feel that Ben Bernanke’s monetary policy is at fault as well. With interest rates at or only a tad over a corporation’s cost of capital borrowing makes more sense than drawing down your cash. So you often move to expand via these cheap external funds that were never available before.

As this goes on month after month, management faces several choices:

1) Keep building up cash in the event a 2008 calamity hits again. This is not prevalent but off the record some seem to admit it.
2) Increase dividends. This keeps shareholders happy and rewards them for sticking with you. This year, according to my rough and unofficial tabulations, over 240 companies have raised dividends while only three have cut them.
3) Buy back shares. This automatically lifts earnings per share as the number of shares shrinks. If you think that your shares are seriously undervalued and cannot find any other good opportunities, this can be a fine allocation of cash.
4) Wait for a market pullback and then pounce on opportunistic acquisitions or craft a merger. We are seeing much of this recently and likely will have more over the next year if things do not pick up.
5) Hire more people. Many say not yet. Workers are more productive than ever by some measures so few new hires and no raises only helps your financial position. At some point, many firms will reach a breaking point and have to add staff. But, no one thought that it would be this long.
6) Invest in advertising to build your brand(s). Historically, this was how Kellogg became the leading cereal manufacturer and Crest, for decades, the #1 toothpaste. There does not seem to be that type of boldness prevalent among marketers especially with consumer confidence levels weak.

Another reason that the conventional media are not seeing it is that many firms are shifting some funds to social media and other alternatives. Some are hard to track so it is not always clear what is going on. Also, promotion has eclipsed advertising expenditures for many firms and while it has a weak record on brand building it does provide fast sales which Wall Street wants to see at the end of each quarter.

Pulling it all together, we will likely not see advertising come roaring back until after we are in a strong recovery and we have no idea when that will be (the sooner, the better). You can bet that share buybacks will continue especially when share prices dip, dividends will rise nicely, and acquisitions may break records in terms of number and size. But the “bunker mentality” is hard to shake off and will remain in place for many for the immediate future. Remember, debt-encumbered nations with traditionally high incomes like the US and Western Europe all have economies that are very fragile. And, investors and advertisers appear to have next to no confidence in the ability of policymakers and politicians to resolve the challenges that these nations face. With that backdrop, why invest heavily in your brand?

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

Google + vs. Facebook

2011-08-24T13:30:00.000-07:00

There has been quite a buzz over the last several weeks about Google’s entry into the social media space. Their new product is dubbed simply as Google +. Pundits all over plus many in private conversations are trying to determine if Google + can do to Facebook what Facebook did to MySpace.

There is no question that Google is a formidable contender. Globally, they have over a billion users compared to 700 million for Facebook. In the U.S., the distance is narrower with Google tipping in at 155 million users and Facebook 140 million. On the revenue side, Google is way ahead with close to $30 billion ($25 billion in ad revenue) while Facebook weighs in at $1.8 billion. Given its smaller base, Facebook is growing much faster than Google.

Views on the competition tend to be polarized. A few digital media specialists have told me that Google will pull the plug on Google + by Christmas. Others say that it will be a battle and Google will eventually come out on top.

Talking to users of Google + is interesting. Most really like it. All refer to the “Google Circle” which allows you to put together groups of friends that you can organize by topic. There is a “drag and drop” feature that makes it easy to manage different groups. So, if you have a wide circle of contacts or varied interests it makes it easier than Facebook to manage different groups. You can also exclude individual people from getting updates, which may give you more privacy or perceived privacy.

Others tell me that they like Google + as it does not accept advertising. I have to smile. You can bet that when Google + hits what they consider to be critical mass that can be packaged as a media vehicle, advertising will appear!

Reading between the lines a bit, Google + appears to be greatly assisted by the parent company’s credibility. The whole Google mantra of “Don’t be evil” resonates with many people. And clearly, Mark Zuckerberg, while admired, has far less credibility than Eric Schmidt and Company. Google knows a lot more about you—Facebook only knows what you tell them. Yet, as we all know, perception carries a big stick.

We will watch Google + carefully and you should too. A friend wrote to me today saying “Facebook. That is so 2009. I am a Google + man these days.” Google hopes that millions join him and fast.

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

Clinton's Balanced Budgets--A Look Back

2011-08-05T08:37:00.000-07:00

Today, I am asking you to indulge me a bit. I am going to vent in this post.

The other day, I was walking through a very large building on the way to an appointment. I passed a large meeting room with an open door. At the front on a podium was a fellow complaining about how the debt ceiling negotiations were a circus and how disgusted he was with both sides in Washington. Being a few minutes early for my meeting, I hung out in the hall to listen for a few moments.

Then he said, “What we need is the return of Bill Clinton. He balanced the budget a few times in the late ‘90’s and did it basically on his own. That is the kind of leadership America needs now.” Several people applauded. I imagine that my blood pressure shot up a bit as I walked toward my session one floor up.

Obviously, I do not agree with the analysis that I eavesdropped on that day. Here is my take on how it happened and why even the sainted Bill Clinton would find today’s problems very difficult or impossible to surmount.

Full disclosure—I never voted for Bill Clinton but I admit that he was a very effective politician.

How was the budget balanced on Clinton’s watch? Here are several events that I think came together to make it happen:

1) In 1993, the newly inaugurated Clinton with his party controlling both houses of congress passed an increase in taxes on the upscale without a single GOP vote in support. Despite the protestations of some of my libertarian buddies to the contrary, it really did raise some revenue.
2) Clinton dubbed himself “a new kind of Democrat” in the 1992 elections. This proved true to a certain degree. He did end welfare, as we know it, and was enough of a policy wonk to understand that spending could not go wild long term.
3) In 1985, Congress passed the Graham-Rudman-Hollings act that put in automatic spending cuts if the White House and Congress could not reach established spending targets. The bill was ruled unconstitutional so in 1990 a new version was passed that focused on spending control.
4) In fall, 1994, the GOP took back the House of Representatives with their “Contract for America” that talked loudly about a balanced budget. Clinton was now boxed in. He wanted to get re-elected in 1996 but he now had a bunch of deficit hawks on the other side of the aisle. Speaker Newt Gingrich took and received a lot of the credit. In reality, others did much of the heavy lifting. Congressman John Kasich of Ohio and some other young GOP congressman who pushed for serious cuts and a lot less pork (Kasich left Congress and is now governor of Ohio) carried the day. Clinton could negotiate but he had to play ball.
5) To Clinton’s great credit, he did not get involved in any long-term foreign entanglements. There were not that many American boots on the ground overseas in harm’s way. Of course, he was lucky in that he did not have to deal with a 9/11-style event.
6) During the late 1990’s, the tech bubble was in full swing. It triggered the greatest bull market in history. Billions poured in to the Treasury in the form of capital gains taxes. Note that capital gains taxes averaged 28% then and 15% now.
7) Demographics—as usual they played a role. Demographers will tell you that most people’s prime earning years (discounting inflation and some specific expenses) usually fall around the ages of 46-48. Well, in the late 90’s, more people were 47 years old that at any other time in history as baby boomers hit their best earnings. If you make a lot of money, you pay a lot in taxes so the Treasury benefited significantly.

So Clinton did some good things like keeping us out of war and he worked with the GOP Congress because he had to. Importantly, he was a bit lucky with demographic trends at his back swelling the Treasury coffers and the greatest bull market in US history stoked by the tech revolution. They all came together to balance the budget for the U.S.

Could Clinton do the same thing today? Well, he may have been more successful than the current management but he would face some demographic headwinds that did not exist in 1998. Now, some 5,000 baby boomers turn 65 EVERY day. Social Security has been stunned at how many boomers are taking payments at age 62. They urge people to wait a few years for a higher benefit but many need the money now and cannot wait. So the entitlement bomb of Medicare and Social Security is about to drop on us unless some meaningful changes are made within a few years or some means testing is put in place.

So, yes, Clinton balanced a couple of budgets. It was done by a combination of luck, pluck, and co-operation that is not in place in Washington these days. Don’t believe in luck? Read “Outliers” by Malcolm Gladwell. He illustrates clearly and succinctly about how where and when we are born is a key determinant in our lives.

Thanks for listening—I just felt compelled to try to set the record straight.

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

The Pulse of the Local Broadcast Economy

2011-07-30T15:14:00.000-07:00

Over the last two weeks, I have canvassed a wide variety of media professionals on the state of the local broadcast marketplace. My sample consisted of TV and Radio station sales executives or general managers, local cable players, regional spots mavens, advertising agency media teams, buying services and a few independent media consultants.

The results were interesting but not overly surprising. The only thing that took me by surprise was the wide differences in broadcast and cable performance by region of the country. But, it made sense. There was a direct relationship between unemployment rates in a state and the vibrancy of the media markets within.

In capsule form, the questions asked were:

1) How is your market performing?
2) Why are advertisers holding back if things are soft?
3) Is corporate understanding if things are below budget?
4) Where do you think things will be in your market in six months?

On the broadcast and cable side, the overwhelming majority said that billing is below quota and that the marketplace is fairly to very soft. About 60% said that advertiser business was below expectations so they were not spending. Several stated that automotive was down sharply and attributed some of that to the Japanese Tsunami. Toyota and Honda, major players, have held back, but many felt that before the end of the year billing will pick up smartly. One executive reported that many Mercedes and BMW parts come from Japan and the slowdown there had a ripple effect on the availability of the premier German brands. Hence, less spending for blue chip vehicles.

American companies are doing well right now. As we write, they have a record two trillion dollars on their balance sheets. They continue to not hire aggressively if at all, raises are few and far between, and, other than their commitments to network TV and network cable, they are VERY cautious about advertising commitments.

This held true with my sample. One executive sent me an e-mail stating, “A month to month marketing mentality is taking place locally.” Another a thousand miles away echoed that sentiment by saying “buys are coming in at the last minute. We have scads of inventory so the money is most welcome. But, we cannot plan ahead at all and it is difficult to explain to the bean-counters in New York”. A third said, “Local retailers are scared. We cannot push many for a quarterly commitment. They go month to month.”

National business is very weak. The broadcasters and cable people almost all are below budget with their national projections. An east coast broadcaster with his feet on the ground says his corporate focus is to develop new business locally to offset disappointing national sales.

Radio is suffering pretty much everywhere. Also, scrappy sales teams are bringing in new clients by knocking on lots of doors but the new players tend to be very small players so the labor intensity of making sales goals is very high. A few markets reported sports formats are their bright spot in their radio station group.

How is headquarters reacting? This is a family oriented blog so I will not give verbatims on comments. ☺ Some say that corporate listens politely but then repeats the magic number that they want for the year. A friend told me that she has joined an organization in the last year known for pressuring their sales management. “I had been around for a while and thought how bad can it be? Well, now I know. When I missed 1st quarter, they began sending a jerk in from corporate to observe things. He looks at every expense item and I swear he counts paper clips”. Another told me that if he misses his numbers for the year, “I will be selling shoes by February.” Sales managers say that their local general managers get it but corporate does not. They still prattle on about debt service and shut them down when they try to discuss their local economies.

Regional differences are extraordinary. Right now, North Dakota has the lowest unemployment in the country at 3.2%. My few contacts there reported that things are fine. Local retailers are confident and investing in TV and radio. Citizens do not fret about losing their jobs so they buy new cars, go out to eat, and splurge on new clothes. A similar pattern comes from Nebraska and Oklahoma although not so strongly. An old friend in California who always saw the glass as half full is now a sourpuss. “Business is awful. I am way below budget and know that things will not turn around here soon.”

In Texas, which has been the strongest of the very large states, things are humming along nicely. Most Texans say things will be about the same six months from now but two see chinks in the armor and think the year will finish weaker.

Agency and buying service teams say that they are getting good deals. Most express surprise that the economy has not improved more by now since the 2008-2009 debacle. A few admitted that they are taking savings from a weak broadcast market and doing more in social media and mobile.

How does the future look? Some say it has to get better or work will be intolerable along with corporate pressure. A good friend says, “I have never worked harder. Things look a little better for the next few months but we are running hard to stay even.” The majority says things will be about the same by the end of the year with a few saying that it “will get worse before it gets better”.

Economic indicators continue to be weak. While each market is unique, it appears that most will not see any uptick until the record breaking political spending hits next year. In the battleground states for the Presidency and those with big Senate races, things may be pretty good even if there is no real business recovery. Right now the president’s re-election team is projecting a billion dollars for 2012 for Obama alone.

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

Make Your Children Wealthy

2011-07-25T13:46:00.000-07:00

Urban legend has it that financier Bernard Baruch was playing some form of 1920’s “Trivial Pursuit” in a posh Manhattan apartment. A question was posed to him—“What are the seven wonders of the modern world?” He answered, “I have no idea but I can tell you the 8th—compound interest.” A few years later, Albert Einstein was quoted as saying, “the most powerful force in the universe is compound interest.”

Today, we provide a rather offbeat post aimed at parents and grandparents. It is a ridiculously simple way of transferring substantial assets to your children and grandchildren without setting up elaborate trusts, convoluted wills, or other means that only make the lawyers money.

What I am talking about is giving your children a Roth IRA. A Roth, named after the late Delaware Senator William Roth, is an Individual Retirement Account (IRA) with a twist. If you earn less than $109,000 as a single person or $169,000 for a couple and are under 50, you can put $5,000 into a Roth IRA each year (over 50? You can ramp up to $6,000). The benefit of the Roth is that when you withdraw money from a Roth after age 59 and a half, there is no income tax due.

As a result, many parents of young adults are gifting Roth IRA’s to their children each year. They are doing their children a tremendous favor. Today, most young adults, even of affluent families, fear that they will not be as prosperous as their parents. This is the first time that this has happened in U.S. history. If a young person puts $5,000 away each year in a Roth starting at age 22, works steadily until age 65 and gets an average appreciation of 8% per year, he or she will have $1.29 million accrued. And, they can withdraw it tax-free!

Of course, not many 24 year olds have an extra five grand lying around and some lack the discipline. So many affluent, caring and imaginative parents are doing the job for them by gifting them a Roth each year. Many people of modest means do it as well. Some open an account for $1,000-1,500 and then add whatever they can afford each year. They will not give their children millions but can they help them big-time. Bernard Baruch called compound interest the 8th wonder of the modern world. I would posit that TAX-FREE COMPOUND INTEREST via a Roth IRA is even more powerful.

Some people are real visionaries about Roth’s. A man I know of but do not know personally is a retailer who puts his three-year-old granddaughter in his print ads and commercials. He pays her a salary as an actress. With real income, the apple of his eye is eligible for a Roth each year. He makes the maximum contribution each year and she will have a burgeoning next egg by the time she hits adulthood. By the time she is 60, grandpa will be long gone, but his gifts will sustain her forever.

Even some extremists are into it. One fellow wrote to me “the dollar is toast. If we keep spending recklessly, our money will be worthless in a generation. So, I buy my son a Roth each year and put it in an emerging markets mutual fund. If the US stumbles, my son will be okay.” Another gloom and doomer says, “We have to stop printing money. Each month I add to my daughter’s Roth. I keep the money in a gold share fund.” Now, I am skeptical of people who are not well diversified. But, the point is that no matter what you think about the current economic climate, you can find a way to help those whom you love with this neat trick.

You may never be a multi-millionaire yourself, but you can get your children a lot closer than you might think.

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

The Great Wealth Shift

2011-07-17T10:37:00.000-07:00

These days we hear and read a great bit about the possibility of a shift in wealth away from the United States. The pundits all say that we need to get our financial house in order soon or we will be in deep trouble. I agree about the urgent need to get our house in order but I do not see the problem as new as many seem to be saying.

Let us go back a few decades. In 1967, one of my brothers and I spent virtually an entire summer in Europe. We mowed lawns, shoveled snow and did other odd jobs to pay for the trip. People laughed at our audacity but everyone wished us well when we boarded the flight to Paris. The trip clearly changed my life. I realized that there was a world beyond my New England roots; there were people vastly different from me who also had dreams but had a completely different sense of life than I. Today, I attribute my willingness to pursue investment opportunities globally and to see other nations points of view on political issues to what I learned on that amazing trip.

The country that impressed me the most was Switzerland. It was stunningly beautiful, squeaky clean, and everything seemed to work efficiently which was not what I experienced in other European countries. The other striking thing about the country was how inexpensive things were. Their currency, the Swiss Franc, was worth 22 U.S. cents. When I returned to Zurich in late 1973, the Franc was worth 30 cents and Switzerland was no longer such a bargain. Today, the Swiss Franc is worth approximately $1.20. That is a five and a half fold increase in the Swiss Franc relative to the US dollar in 44 years. Admittedly, in recent weeks, with Greek, Portuguese, Spanish, Irish, and Italian money woes making the news, Europeans have bid up the value of the mighty Swiss Franc as a safe haven for their cash reserves. But setting that aside, the appreciation of the Swiss Franc has been five fold relative to the dollar.

How does this tiny landlocked country with virtually zero natural resources do it? Well, they are famous for their work ethic and thrift. Internationally, they mind their own business. In fact, they have not been involved in a war since Napoleon marched through a portion of their turf early in the 19th century. Taxes are fairly low but it is hardly a tax haven. They have many thousands of foreign workers but no illegal immigration. After your term of a few years is up, you go home. Citizenship is not an option except for the occasional film star or wildly successful businessperson. The federal government is pretty weak and does not spend much. Balanced budgets happen far more often than not. People are affluent and the schools are first rate with very high standards.

Some countries have emulated many of these features. Take the four Asian Tigers—Korea, Hong Kong, Taiwan, and Singapore. All have shown spectacular growth in recent years. A vibrant middle class is emerging across Asia and portions of Latin America. China and India add 20 million new middle class consumers each year but proportionately these smaller players along with Malaysia, Indonesia, and Vietnam may be doing equally as well.

In the United States, it seems, our middle class is dwindling, with a huge group of maybe 15 million households hanging on to a middle class lifestyle by their fingernails. One more dip in housing prices could drop several more million out of the middle class over the next 18 months.

So, yes, the problems that we face are daunting. But, remember, that they did not happen overnight. Just, as the Swiss Franc has appreciated steadily vis a vis the dollar with some ups and downs, the same thing can be said for our world economic dominance. It has slipped away gradually and not in a straight line but it has been relentless.

Right now, the news media and politicians are obsessed with our Federal debt limit and raising it by August 2nd. To me, this is a distraction from the real issues (yes, it should be raised to calm already jittery international markets). But the core issue is making us competitive again and that is no easy chore. Singapore, increasingly referred to as the Switzerland of the East, is basically a city-state. Policies can be enacted quickly. They and others are highly maneuverable. In China, freedom is lacking. If the government promulgates a change (i.e., a massive shift to wind generated power), it gets done. Part of the charm and strength of our democratic system is that everyone has a say so things happen more slowly than in smaller countries or autocratic ones.

Here are some ideas, all mine, but hardly original, that we might undertake to change things:

1) Start making things again—most of you who read this make or made your living as I did in some form of marketing endeavor. We are the best in the world at it. But, we need an industrial policy again in America. It will be hard to implement but all of us cannot be cable sales people, media directors, writers, day traders or gigolos.
2) Stop playing adventure around the world—virtually all of us applauded when George W. Bush invaded Afghanistan. We had been attacked and we were going after the people who did it. Well, 10 years later, we seem to be “nation-building” on paper but really supporting a corrupt regime to the tune of $2-3 billion per week. And, some American kids are still dying. From now on, we should never put a boot on the ground unless it is absolutely imperative to our domestic security. Trade with more nations, talk with everyone, make unlikely friends but be very spare with formal military intervention.
3) Education needs a facelift—every president in recent memory has talked about how he was going to “be the education president.” What nonsense. The states and counties control their schools-- not Washington. Here are two ideas sure to annoy a lot of people but also to me the ONLY way to make the American educational system competitive again:
a. Lengthen the school year—I dare you to take a look at all the countries around the globe that have better math, science, geography, history and reading scores than the U.S. Without exception, they have longer school years. Our school year is approximately 180 days per year (some schools may go to a four day school week next year due to lack of funding!). The better performing school systems abroad tend to be open 210-230 days per year. It makes sense. If you are in school longer, you can cover more material and get a stronger understanding of it. Some say that we must have 9-10 weeks off in the summer. Absurd. That was put in during the 19th century when our country was largely agrarian and there was no air conditioning. Today, less than 3% of Americans live and work on farms. So, the kids do not have to be home to help with planting and harvesting.
b. Pay teachers a lot more money—Did you ever notice how some of the best teachers are now near retirement age? Well, they have nearly 40 years of experience, which is a big plus. But, also when they entered teaching it was considered a profession and relatively speaking, the pay was okay. If you want to get the most talented, imaginative, and dedicated young people to go in to teaching, then jack up their pay big time. Is your child’s teacher as important to society as your tax accountant? I would say yes so pay him or her accordingly. Right now, many naturally gifted teachers are doing something else simply due to financial imperatives.

Can these suggestions be implemented? With many states and counties facing bankruptcy, it will be tough. But, the kids are our future and they need better than what they are getting now in many cases.

4) Energy Independence—since 1973 when Dick Nixon called for energy independence, every president has embraced the concept. No one has done anything. In Europe, renewables are up to 22% of total electricity production and Sweden claims that they will be not importing a drop of oil after 2020. We have done very little—the corn based ethanol effort of recent years was nothing more than an agricultural subsidy. Yet, we could do a lot more in wind, solar and nuclear, as well as sugar based ethanol plus use our vast domestic natural gas holdings to cut back on importing oil from countries who do not like us and share our values. If we spent our energy dollars here, it would create hundreds of thousands of jobs and improve our dismal balance of payments.
5) Close loopholes in the tax code—get this straight, kids. Closing a loophole is not an increase in taxes. It is usually just enforcing or tightening up the existing code. Some big corporations are paying little or no taxes. Hedge fund managers hold a position for under a minute and get to claim the profit as a tax favored capital gain rather than a short-term fully taxable gain. This can raise some money and not hurt economic growth. Emotionally, people will like the fairness of it.
6) Cut back on entitlements—this is political dynamite and I applaud President Obama and Speaker Boehner for trying to address it. Social Security could be fixed in an afternoon if several of us sat at a table and ran a few what if scenarios on a laptop. Raise the retirement age gradually over the next forty years, means test it so those with a high net worth get most of it taxed away, and soften the cost of living adjustments. Also, you could gradually raise the income ceiling on Social Security contributions. Presto! The system is saved. Most people under 30 will tell you that they will never get Social Security anyway. So, why the big stink when people want to raise the benefit to begin at age 68 forty years from now?
How about Medicare? Congressman Paul Ryan of Wisconsin wrote a bold plan that would attempt to balance the U.S. Federal budget over the next two decades. It was trashed as many people thought his treatment of Medicare was too draconian. I have only read snippets of it so I cannot in fairness say much. One thing he did shine the light on took great political courage. He said that the average American would pay out about $150,000 in Medicare payments in their working life but receive about $450,000 in benefits. That is not sustainable over the long term but most Americans blithely ignore the arithmetic. There is another sacred cow that almost no one brings up. Let us say that Granny is 92 years old and terminally ill. In the last six weeks of her life, perhaps $1-1.5 million will be spent to prolong her life. Were she in Norway, Denmark, Sweden, or Great Britain where socialized medicine has existed for generations, she would be made comfortable but extraordinary means would not be employed to keep her alive. This will be a huge issue in the U.S. in a few years. Right now we spend 17.3% of GDP on health care and many are not covered. In the Netherlands, they spend 8.2% and everyone is covered. If we are to contain health care costs, some terribly hard decisions will have to be made. When to pull the plug will be the biggest one.

7) Immigration—this topic generates a lot of hysteria. We are keeping out engineers, doctors, computer experts, and entrepreneurs because we lump all immigrants as people working in the underground economy. America should never turn away the talented and the eager. Why did our ancestors come here? A rational policy is needed.

Will we implement some or all of these changes? I just don’t know. But if we ignore them all, I can assure you in 10 years, the Swiss Franc will be $2.00, the Singaporean dollar will double, and our middle class will be a lot smaller.

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

Selling Across the Generations

2011-07-09T09:04:00.000-07:00

Like many of my contemporaries, whenever I enter a room for a lecture, meeting, or presentation to a group who does not know me, it gives me pause. The reason is very simple—I am getting old. It is not unusual for me to be twice as old as anyone else in the room. What I have learned and many of my mature friends have as well is that you have to shift gears to present to an audience much younger than yourself and also demonstrate some neat balancing tricks if your audience covers a wide age span.

Basically, as I often write, it seems to come down to demographics. Most analysts would put our population in five core categories:

1) MATURES—Age 66+
2) BABY BOOMERS—Age 47-65
3) Generation X—Age 32 to 46
4) Millennials—under 31
5) Post Millennials—born after 2000 (not an issue here)

The first rule of many presentation gurus is to tell people to always “Be yourself.” In general that makes sense but unless you are pitching to members of your own generation that can be deadly. These days you must market yourself with great care. I have talked to many people about this issue, had some significant personal experience and read a number of studies on the topic. Here is where I come out on it.

First, here are some generalizations about each demographic group:

1) MATURES (66+)—you will not be selling to many matures these days but if you do, they likely are owners of a privately held business. They like face time with you. Experience is everything to them; they want someone who has worked in the trenches as they have. These are team players that put their company first and want you to do the same. They want service from a consultant or a salesperson or agency. Your reputation may be checked out thoroughly. Ask them what you can do for them. Never send them a text message. Got it? Never!
2) BABY BOOMERS (47-65)—you may find some workaholics here. They have a competitive streak but are ultimately team players. LISTEN to them very carefully. Let them know that you are eager to be on their team. Also, be very cautious about discussing technology. If you hammer away at technology being the silver bullet to solve their problem(s), they may withdraw. Many are insecure about their positions and, to some, technology means layoffs with their name on it. They like carefully written e-mails.
3) GEN X (32-46)—this is a very skeptical group. You must PROVE your worth to them. They love data—don’t ever talk about gut plays with them. If you make a definitive statement in a meeting or presentation, be sure that you can back it up. I have noticed a quirk with this group since caller ID has come to almost every company. If you call them, they will often not pick up the phone. They will listen to you message, perhaps a few times, and then call you back. As a rule, they are getting into texting but the message should be really spare like “may I call you after 4?” These folks like defined roles and are not “company men and women.” They crave balance in their lives and are not keen on being contacted nights or on weekends from outsiders.
4) Millennials (31 and under)—this group is a bit spoiled. They never lost a game as children or failed at anything. They have no sense of history, corporate or otherwise, so never tell old war stories to them or go to precedent that is more than a few years old. They have huge goals and big dreams but do not seem to have any idea how to execute them into reality. Focus is often not their strong suit. They crave compliments about their work and everything else. This according to some psychologists in affluent societies is due to an upbringing that fostered a delayed entry into adulthood. It has been referred to a bit unkindly as “Adultolescence.” If you can reinforce to them that you see their uniqueness, you can come out way ahead. They love texting—feel free to communicate that way. If you are in a meeting with them and all of them are texting at one time or another, they are NOT showing contempt for you or rudeness. It is simply part of their corporate culture. If the boss is a MATURE, I bet that no one texts in meetings. ☺ They know, love, and embrace technology.

So, if you want to succeed, you have a big leg up if you know the demographic makeup of your audience BEFORE you meet. You can tailor your style accordingly. No matter who the group is, be brief and respectful of their time.

Importantly, always remember that people like to do business with people whom they perceive as like them. That is why sales teams are often taught, “mirroring”. If the prospect is super casual, you can often leave your tie and jacket in the car. If they want to talk NFL football, you get on line before the meeting or watch Sportcenter the night before and are able to talk with them. A few years ago I had a meeting with a man who was less than half my age. He was a client and he appeared to dismiss everything I said. As I was leaving, I had to pick up a report in his office. I noticed a lot of lacrosse pictures on the wall and some memorabilia as well. Without missing a beat, I mentioned that my daughter played on her high school team and that my dad had been the lacrosse coach at Brown University. He exploded with delight and went on a 15-minute rant about Ivy League lacrosse (I did NOT mention that my father had been coach in the 1930’s, long before I was born!). From then on, I was his business partner and he frequently gave me a heads up when he thought his company might be doing something that could harm my agency’s business. We were as different as night and day but I had succeeded in mirroring him and it worked like a charm.

If you are a consultant, the generational divide is very tough. For those of us who are a bit older, young people get very defensive when you walk into a room. Some will think that you want their job (no thanks—been there, done that!). Others think that the CEO has brought you in to build a case to get them fired. You need to tread carefully and stress that you are there to help. The CEO needs to position your presence carefully but few do it well.

Each group views the world differently. Let’s face it. All of us are products of our environment. Thus, our generational perspective will have a GREAT deal to do with how we view things. Whether you are a sales maven, a consultant, or an agency rainmaker or service person, may I suggest that you develop sensitivity to selling across generations?

In closing, yesterday I had lunch with a broadcast executive whom I view as one of the best salesman in America. He raised the issue of what do you do when pitching a room who ages span from 25-70. His answer was the pitch the middle—the older Gen Xers and the young Baby Boomers. Sound advice.

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

Mobile as a Social Media Platform

2011-06-27T08:25:00.000-07:00

Recently, my wife and I were in New York City and took in a Broadway play on a Saturday afternoon. As we left the theater it was raining. Immediately it seemed that several hundred people around us pulled out their Smartphones and began texting. My initial impulse was to think that they were calling cabs. Then it hit me. They were simply plugging back in to their social networks. What had they been missing the last two and a half hours?

Many were simply checking for text messages and voicemails. At the same time, a significant group was using social media platforms such as Facebook and Twitter. A smaller subset of them, were using a location-based service (LBS) that allows friends and some business associates to track each other. In other words, you let these friends know where you are at any point in time.

Let me confess that this has been a hard concept to wrap my head around and it is definitely a generation gap issue. Were my wife and I to meet someone after the matinee broke up, we would text them or call them to let them know that the play was over. But with LBS, you let a designated list of friends know exactly where you are.

LBS offers marketers some new and interesting ways to reach the Smartphone user who is increasingly referred to as the “untethered’ consumer. The most prominent LBS company right now is Foursquare although several others are getting traction in the category as well.

The basic principal behind LBS is that friends can see where their friends are (all participants agree to this). Early on very large cities such as New York, Los Angeles, San Francisco, Atlanta, and Chicago were where Foursquare thrived. How do marketers benefit from it? If you have a brick and mortar location, you can offer your current customers and importantly, future customers some nice incentives. Should someone introduce friends to a location, they can be rewarded. Or, all friends of Tom can be notified that, as his friend, you will receive an introductory discount. This type of approach, sometimes called “social mobile” is not to be confused with location-based marketing. In a social mobile situation, the conversation is between mobile friends based on location. The company gets in to that conversation via the friend.

If you check in to a location often, services often provide rewards such as a badge or elite status a la an airline frequent flyer plan. If a person checks in at a location more than any one else over a week or a month then he or she becomes the “Mayor” of that location. You get nice discounts for being the Mayor as you are raising awareness of the location.

If this is going to work, EVERY employee at a retail location has to be thoroughly familiar with the Foursquare or other LBS promotion. Apparently, in a famous case study, a well known chain ran a promotion where any Mayor of a unit would automatically be given a dollar off on drinks. At checkout, someone would announce that they were Mayor and show their phone and the counter person would say something to the effect of “so what.” Things often go awry during tests, but LBS execution has to be tighter than normal to work.

There are many services out there besides Foursquare. Do you know about Facebook Places, Loopt, Whrll, SCVNGR, Gilroy, Gowalla and Brightkite? If not, check them out. One of them may offer you something that could be inexpensive and effective and hit an upwardly mobile young demographic quite well. You can test in a location or two or an entire market before a big rollout.

A long time associate raised an issue about this. He said, “My days of bar-hopping are long over. So, if I join Foursquare, I would let people know that my wife and I are having a drink at the bar at Angelo’s while we wait for our table.” In a word, yes!

To many of us who are a bit long in the tooth, this is a product that will not likely be part of our lifestyles soon as is e-mailing, texting, blogging, and tweeting. But, if we want to reach people half our age effectively, we have to consider it and test it.

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

The Student Loan Bomb

2011-06-20T13:35:00.000-07:00

Today, the headlines scream about the $14 trillion and growing national debt. Something much smaller but also scary has caught my attention in recent months. It seems that credit card debt has kept falling due to our continued economic uncertainty. It now rests at about $850 billion dollars. But, in the last year, it has been passed by student loan debt. Several independent projections place student loans to be at approximately $1 trillion dollars by year-end 2011.

Why the huge increase? Well, tuition costs have been outpacing inflation very strongly for the last 20 years. And, since 2008, the drop in home values has made it more difficult or even impossible for many parents to cover costs by taking out a home equity loan. As of now, the average student graduating from college has about $24,000 in loans and $2,100 in credit card debt. Some say that by next year, the average loan amount will exceed $30,000.

I went online and checked out a few private sources for student loans. If you have borrowed $30,000 you pay $350 a month for 10 years to pay it off. That will be a real strain for some young people starting out. They may need to buy a car, get an apartment, and maybe a bit of furniture. Will they have $350 a month left over to pay off the loan? Many will have to move back in with Dad and Mom at a time when they really would value some independence.

Some students at top schools or those who go on to graduate or professional schools easily borrow six figure sums. Unless they get a terrific job right out of school, they will be paying off loans forever. There will be people who will not be able to purchase a home until they are fifty and others may still be paying off their student loans when it is time for their own children to go to college. Or, they may work at a job that they hate for many years simply to pay off the debt.

The current group of millennials are in a box—they will have to wait far longer than previous generations to buy a home, start a family, take a chance on launching a business and, importantly, save for their own children’s college education.

The awful truth is that some will default on these loans. Debt will completely run their lives and one minor train wreck will derail their financial future. College loans from government programs cannot be discharged in bankruptcy but many will have difficulty meeting the payments unless the employment situation turns around very dramatically.

What is going on? To me, it is simply one more re-set in our economic reality. For the last few generations a college degree meant a guaranteed lifetime in the middle class or upper middle class. Not so any longer! Home prices could only go up and now we see the fallacy of that belief. Others felt salaries would always rise each year and we all know that is no longer true. And, consumers of all ages cannot continue to go deeper into debt. Taking on heavy debt for education does not seem like a great investment anymore either.

Some schools will have to adjust as well. An experienced educator has told me that she believes that small liberal arts colleges had better find some big seven figure donors and fast. If they don’t, parents will rebel at the school fees and lack of lucrative grant packages. Professors may be asked to teach an extra course each semester with no increase in pay. A few may simply close their doors in the next decade. Good state schools will become VERY hard to enter. Parents will see the outstanding value that they represent so the academic environment in them will likely get more rigorous as excellent students line up to enter.

Finally, some people will bypass college altogether which is fine for some but a disaster for many others. Politicians tell us that education is a vital part of our infrastructure much like highways and bridges. It is hard to disagree with that sentiment but if the present trend continues with high fees and large loans, something has to give.

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

Mobile Musings

2011-06-13T13:18:00.000-07:00

Mobile marketing is, in my opinion, set to take off. Up to now, it is somewhat akin to wind energy. It is ubiquitous, stronger in some locales and demographics than others, has many applications, and is very difficult to harness. But, the potential has always been huge.

The term most often applied to mobile is “the third screen.” Simply, put the first screen was TV. Marketers for 60 years have been able to reach millions of prospects in developed countries with exhaustively tested messages that they controlled completely. This one-way form of communication put the marketer in an enviable position. In the 1950’s, soap operas emerged as the three giants—Procter & Gamble, Colgate-Palmolive, and Unilever provided all the advertising for specific programs. The automotive companies did it in the evening as well. Millions of families watched the message at the same time.

Since then TV has fragmented and American homes of even modest affluence have a TV set per person and laptops are another form of TV as well. Television remains the most potent form of advertising in the world FOR THE MOMENT.

The second screen, the personal computer, allowed for what some have dubbed as “participatory marketing.” Many times on-line advertisers literally asked for feedback from customers. In the on-line world, you could provide vast amounts of information about your service or product that could never come across clearly in a 30-120 second TV commercial. People have liked communicating with brands they use and like and the second screen has been a great success and still has much growth to come.

The third screen, better known as the “Smartphone”, has the real time benefit of the personal computer, but also moves with you completely from location to location. Think about when you left the house today. The last three things you did were likely to be check for your car keys, you wallet or purse, and your mobile device.

I doubt if many of you think that I am going out a limb when I forecast that the revolutionary aspects of the third screen will have a more profound effect on global marketing than screens one and two combined.

The key is in the complete mobility that mobile offers plus the consumer behavior upheaval caused by what is increasingly dubbed the “untethered consumer.” Most people see mobile as a great way to pay bills without benefit of a laptop; what they miss is that it is turning the entire consumer buying process upside down. You can research a product on site and compare pricing at nearby competitive locations all with the Smartphone held in your hand. In TV, the viewer is increasing in control with many choices and DVR’s that allow for commercial avoidance. Now the Smartphone puts the consumer in control and marketers will have to serve his/her needs or face extinction in many categories.

Consider some simple math. At last count, some five billion people across the world have cell phones. One company, China Mobile, is said to have 1 billion customers across Asia. Put this in perspective by considering that there are approximately a billion personal computers, and two and a half billion TV sets. So, twice as many people have cell phones as TV’s. Impossible? Visit a third world village. Solar powered chargers bring phones to billions in villages that may never have wired TV or cable and perhaps a few decades before electricity finds a way to them.

Here at home in the US, 94% of us have cell phones and each year millions, especially the young, drop their landlines. By the end of this year, it is projected that half of US citizens will have Smartphones. This is a giant opportunity for nimble marketers and a potential nightmare for the Rip van Winkles among us.

What makes mobile unique? It is truly personal. Yes, TV and computer are largely personal these days but not always. Mobile is personal and goes absolutely EVERYWHERE with you. We use the device for personal communications with friends and family and also for social network connections. Companies need to be invited in to this world but, if they are, there is authentic potential for personal marketing at a new plateau.

Location comes to the forefront on the third screen. Smartphones have location-based technology built in so marketers can customize remarkably specific messages and offers based on where you are and what time it is. This is a game changer that many overlook at present.

Mobile is well, mobile. Obvious, yes, but think of the tremendous implications. All other media except sound are consumed when you are either standing still or sitting. What is more boring than waiting in line for your plane to board or for other passengers to be seated? Mobile allows you to check e-mail, send or check text messages, or make a purchase. You are untethered and can communicate or shop wherever you are.

There has been little in the way of ramp up speed for mobile. They can tap into Internet networks easily, which also increases the confidence of new users who are familiar with the on-line world.

We are not in the lead here in some areas. For several years, for example, Koreans have been watching TV for free on their mobiles and many foreigners use the many available applications far more than their American counterparts. Over the next few years as young people master the many dormant applications, mobile should become an even more potent marketing tool especially when they teach their cash rich parents how to use them.

Soon, I have plans to put together a post on mobile and social media. But, here is a great example of search via mobile using 2D codes. It comes from Chuck Martin’s interesting book, “The Third Screen”, (Brealey, 2011, pages 161-162.) “Heineken printed EZcodes on its six-packs of beer as part of its Know the Signs campaign. Once the code was scanned and the age of the buyer verified, an app called Breathalyzer could be instantly downloaded. The app works like this: a person notices a friend over-consuming alcohol; the phone’s owner preselects from a list of characters (The Sleeper, the Groper, the Flirt, etc.) her friend most resembles when tipsy, then hands the phone to the friend. The friend blows into the phone microphone, the “breathalyzer,” which shows that the person has had too much to drink (it does not truly function, of course); a humorous video showing the selected character in action launches. The EZ-code also links to another app called Taxi Magic that uses the Smartphone location to show a list of taxi companies nearby. Select the taxi company and the call is automatically placed.”

Pretty amazing, huh? A beer company makes a nice statement about responsible drinking without offending anyone and does it where the person is and can do some good! Some of these types of programs can be tested locally and then rolled out to wider geography.

For several years, people have been using TV to drive people to company web sites. TV sales teams need to partner to use TV commercials to drive people to Smartphones. Remember, even when people are sedentary and watching TV, the Smartphone is not far away!

My advice is simply this. If you have a client with a customer base largely under 40, start testing mobile NOW! You may have a false start or two but the train will be leaving the station soon. If you audience is mostly over 60, you have a bit of time. Don’t be like our politicians who refuse to honestly face our financial future, and “kick the can down the road.” The politicians may get away with it. If you are a marketer and completely ignore mobile, the world will be passing you by very soon.

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

Reckless Endangerment

2011-06-06T04:41:00.000-07:00

Gretchen Morgenson has long been my favorite financial journalist. For a number of years her New York Times columns have shed a lot of light on the weaknesses in our financial system. Also, she, like me, is a bit of a Neanderthal and still believes that 2+2=4. Early on she warned us of the dangers of derivatives and other sophisticated financial products.

Very recently, along with Joshua Rosner, a housing finance expert, she has written a new book called “Reckless Endangerment” (Henry Holt & Company, 2011). It covers some familiar ground focusing on how the 2008 meltdown of America’s financial system enriched a few at the expense of the rest of us. But, what makes this book different is that the two give the crisis some perspective.

Like some of you, I devoured the first wave of books that came out covering the crisis. Most of them, while riveting, covered the personalities and gave you hour by hour accounts of the last days of Bear Stearns and Lehman Brothers. Reckless Endangerment focuses on the housing meltdown and digs deeply to give us the reasons for it. They go all the way back to the Clinton administration in the 1990’s and their desire to expand the U.S homeownership base. Mortgage giant Fannie Mae goes under the microscope and does not fare well. The authors accuse the quasi-government agency of using money and political influence to escape regulation.

They are not afraid to name names. Even casual business observers know of Angelo Mozilo, Chairman of Countrywide Mortgage who was indicted and convicted in extensive legal proceedings. But dozens of others doctored loans to make people appear creditworthy and they have simply walked away with no repercussions. Three members of the United States Senate were named for getting under market interest rates on their loans: Chris Dodd of Connecticut who was Chairman of the Finance Committee and architect of the financial reform bill (sic), liberal icon Barbara Boxer of California, and Kent Conrad of North Dakota. Conrad’s involvement stunned me. For years, he had been my favorite Democrat in congress. Balanced and measured, he fought to put a halt to increases in federal spending.

The book outlines a number of crimes committed across the board in banking and in regulatory agencies that helped contribute to the financial meltdown. Yet, to date, little has been done to punish them.
The authors put it well—“A system where perpetrators of such a crime are allowed to slip quietly from the scene is just plain wrong.”

What struck me personally was the total disregard of ethical values of so many players in government and in business.

Can another crisis happen again and soon? The authors mention that it may not take the same form but as long as the “too big to fail” mantra exists some large institutions will likely get in to more monetary mischief at taxpayer expense.

This may not be light beach reading but it does read like a thriller at times. I highly recommend it for your summer reading list.

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

The Triumph of American Pop Culture

2011-05-31T07:41:00.000-07:00

Over the years, I have spent a lot of time monitoring and studying Consumer Behavior. Often described as the psychology of marketing it really is the convergence of nine different disciplines: Marketing, Advertising, New Product Development, Anthropology, Sociology, Branding, Economics, Psychology and American Pop Culture.

The last element, American Pop Culture, is very powerful but does not always get the attention and analysis that it deserves. This may be because it is a difficult concept to articulate but it absolutely permeates much of the Consumer Behavior in the US and also around the world.

Some define American Pop Culture as America “dumb-downed” or everything that is left after high culture (literature, the arts) is taken away. Others deem it to be everything that is superficial or consumerist in nature.

For me, it is more commercial culture meaning things mass-produced for mass consumption. Pop Culture ideas typically appeal to a broad mass of the population.

Over the last 50 years, American Pop Culture has traveled very well—foreigners in developed countries may complain about American influences but they love blue jeans, Coca-Cola and Pepsi, Hollywood movies, our musical tastes, Disney, our love affair with the automobile and increasingly, fast food.

As a young child, I remember people laughing at those who wore blue jeans. Only farmers did that. Then came the 60’s and the lifestyle revolution and now it seems that the whole world is bathed in denim. In emerging markets, American Pop Culture seems almost aspirational for many people.

In recent years, Americans have definitely lost their taste for Kentucky Fried Chicken (KFC). Sales have been flat at best in their 5000 US stores. But in China, they continue to roll up double-digit same store gains each year. A new KFC is said to open every day in Mainland China. Their mascot “Chicky’ is even better known that Ronald McDonald although the golden arches is now opening a new location every 3-4 days in China.

Coke and Pepsi have paper-thin margins in the US but their profit growth is explosive in Asia, Latin America, and Eastern Europe. One of the most successful Initial Public Offerings this year has been Arcos Dorados (ARCO), which is the South American franchise stores of McDonalds (Arcos Dorados means “Golden Arches”). Other Pop Culture icons are catching on as well in the developing world. Those new to the middle class want the logos and the American identification that they signify be it the Nike Swoosh, the Polo Pony even the Marlboro man.

Critics say that Americans needs to start rebuilding their industrial base and fast. They certainly have a point. But American Pop Culture, though no longer potent in Western Europe and Japan, continues to tear up the track in emerging markets. We may look down on it but those brands are repatriating billions to our shores and will likely do so for a few more decades to come.

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

Brands in 2031

2011-05-21T07:04:00.000-07:00

Twenty years from now, the world will be a different place. Media, as we know it, will largely be gone and the ability to garner information and the gadgetry involved will almost seem like a science fiction scenario compared to what we can do today.

Some say that brands will be diminished tremendously as the world struggles with climate change, oil shortages, a lack of clean water, overpopulation, and less arable land.

My take is sufficiently different than most and a few readers have asked me to share it with you. Here goes:

Historically, if you want development in a nation you need four things---steel, oil, cement, and an abundant water supply. Americans are approximately 4.5% of the world’s population yet we consume 25% of the energy. Commentators say that we are addicted to oil; the reality is that we are addicted to CHEAP oil. I have followed alternative energy, particularly wind, for over thirty years. My conclusion is that alternatives can play an important bridge for us over the next three decades or more as fossil fuels become more expensive. Fossil fuels, however, will still be the dominant player as time goes on. Developing nations want to live as well as Americans do now. The US consumption of 25% of the world’s energy cannot continue much longer as others want the same resources and are willing to pay more, perhaps a lot more, for it. We will need to learn to conserve, go to alternatives, and use more nuclear power despite the current scare from Japan. Our massive domestic natural gas reserves could help a lot. As energy prices rise due to international demand, more local agriculture will pop up. It is becoming chic to be a locovore meaning you consume largely locally grown products and avoid transportation costs.

Water is something that we do not dwell on in the United States except for low rainfall areas such as Arizona. Around the world, it is different story. Some may see clean and abundant water as a basic human right, but more than half of the people currently hospitalized around the world are there because of having ingested bad water. Great strides are being made in water purification but the price for water will go up dramatically in many parts of the world. A water pipeline from Canada to Arizona sounds farfetched today but such a solution will happen somewhere in the world.

Over the next 20 years, we will have an additional two billion people on the planet. As a result, plus the energy, climate and water issues, there are people forecasting massive famines around the world. There may be situations where certain countries will be hurt badly for a brief period but I take the optimistic view that technology will trump geology and weather issues.

Think about this for a minute. Two billion more people actually will translate in to two billion new consumers. Will all of these new people be middle class? Of course not! But right now, some 20 million people in China alone join the middle class each year. Throughout Asia, India and Latin America a similar trend is going on. Imagine a young man from rural China who moves to Shanghai to work in an office. Or consider a young woman from a remote island moves to Manila. Finally, a young fellow from the mountains of Peru settles in Lima. These young people go from being virtual peasants to a modest middle class lifestyle. They purchase soaps, laundry detergent, dishwashing liquid, razor blades used almost daily, shampoo, ties, and business suits. In their leisure hours, they may visit a McDonald’s, knock back the occasional Budweiser, and sadly, smoke a Marlboro. If things go well, they may even buy a Toyota someday.

Two billion new consumers all eager to have some stake in the lifestyle that we take for granted. This translates to explosive growth for brands that are wise enough to build a presence far outside the United States or their home markets. The big multi-nationals have been doing this for decades.

New York may be the hub of the advertising world but for how long? Right now, some 80% of advertising dollars are spent in North America, Western Europe and Japan. That ratio will shift downward and quickly over the next decade.

The future for brands, marketing, promotion and advertising has never been brighter. Just make sure that you make the world your oyster rather than your provincial back yard.

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

The Two Americas and The Future of Media

2011-05-14T08:45:00.000-07:00

Everywhere you turn and at every conference you attend, a few very smart people are willing to make their unhedged forecasts about the future of media. They focus around new platforms, new gadgetry, the speed of transactions and the impact this will have on the future of advertising and marketing.

Virtually all of them are well thought out and quite plausible. But, to me, they all miss something. What they lack is the acknowledgement that all Americans are not as cutting edge as they are. One thing that I have learned over the last four decades is that consumers lag technology. Just because a new platform exists or a new application is available does not mean that most people will embrace it immediately.

A few days ago, I was leaving a meeting and two people who should have known better remarked, “Well, everyone now has Netflix.” I checked and found that in the U.S and Canada combined they are now at about 18% penetration including me, a very satisfied customer. But, that means that 82% do not have the service. Hardly everyone. Way too many pundits look to peers and friends as the benchmark of acceptance instead of the facts.

In his ill fated runs for the presidency disgraced former Senator John Edwards did make a very inspiring stump speech often referred to as “The Two Americas.” He complained that present day America had two tiers of healthcare, education and opportunity. I thought his solution to the dilemma was completely wrong but, if you had a conscience, the speech itself was moving.

Well, in marketing we face the same thing. Virtually all of you reading this will embrace the new technologies and your use of media options will expand and likely become more pleasant. But, just because you, your friends, co-workers, and clients have hopped onto the bandwagon does not mean that everyone has or will.

Did you know that approximately 17% of American adults are functionally illiterate, 25% have no credit card, and 18% are unbanked? They still buy beer, groceries, fast food, and pick-up trucks but they are not comparison shopping with a digital device or ordering stocks on line for a $7 commission.

And, how about the graying of America? People now in their sixties may live 30 more years. I hope to be one of them. ☺ Will we continue to upgrade our technological choices or will be still be paying a cable bill 25 years from now? Many of us will have the money but will we embrace all of the new offerings that will come at us with increasing frequency?

My purpose here is to plea for balance among marketers. Lots of things such as TV, couponing, some radio, and definitely newspaper do not pack the wallop that they once had. But the underclass and the mature, both upscale or not, will definitely not keep up with the changes. This will give conventional media a longer life that some futurists currently think.

So what do I think will happen? A few quick forecasts would be:

1) The data explosion will continue in all forms.
2) New gadgetry will amaze us all and become obsolete relative to newcomers every couple of years.
3) Mobile will boom either via phones, i-pads or new inventions. It will eventually largely replace promotional activities such as printed coupon vehicles and let you negotiate at retail by showing competitive offerings to a salesperson.
4) More and more media will become subscription based and some TV as we know it will go to a paid format and be available on a dozen or more devices.
5) Some video will be global in scope. Google has sat on YouTube for a few years. At some point, they or a competitor will start a network or two that is 100% digital and knows no borders. Actors will love the instant global exposure and marketers can advertise worldwide cost efficiently. The English language may spread faster as a result as well. Sorry, Mandarin.
6) Measurement of the emerging media will get much better but media executives will still struggle to optimize the media mix.
7) Direct response in all forms will grow. Some of that will come from product placement in programming where you can stop a program and order the sofa seen in the sitcom or set up a test drive for the car the star is driving.

I remain very excited about the future of media. Not a day goes by where I do not wish that I could start my career all over again as I ponder the amazing opportunities to come. But, remember, consumers lag technology and there remains a strong minority of Americans who have yet to enter the on-ramp of the information superhighway. Some never will.

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

Political Talk Radio

2011-05-07T08:00:00.000-07:00

This past week with the elimination of Osama Bin Laden talk radio probably had a nice audience spike. Virtually all of us were relieved after nearly ten years and were justifiably proud of our military specialists, our intelligence community and our president.

The whole area surrounding political talk radio is very interesting to me. It is not new at all. Radio historians tell me that evangelist and huckster Aimee Semple McPherson had a talk radio show way back in 1924 and eventually bought a station. Detroit clergyman, Father Charles Coughlin, had a program that reached millions in the 1930’s. During the 1932 presidential campaign Coughlin endorsed Governor Roosevelt over President Hoover by proclaiming “Roosevelt or ruin”. A little while later he turned against Roosevelt and the New Deal and became increasingly strident. His superiors silenced him and he was banned from broadcast for life.

Political talk radio, as we know it became to get traction in the 1980’s and 1990’s. Many of us who are media analysts feel that it saved AM radio during that time period. Music was no longer viable on the AM dial when people could get the high fidelity sound of FM.

Other than sports talk which we covered recently (Media Realism, February 4, 2011) talk radio tends to focus on conservative talk, hot talk and liberal talk. Hot talk tends to be targeted at Men 18-49 and is devoted to pop culture although it sometimes veers into politics.

When most of us think of talk radio, conservative talk comes to mind first. The leading personalities in that arena tend to be Rush Limbaugh, Sean Hannity, Glenn Beck, Mark Levin, and Michael Savage. Limbaugh is an interesting character to me. When I first heard him around 1990, he was different, even refreshing. Whatever your politics were you had to admit that he was one heck of a broadcaster. What impressed me at the time was how he played things straight. He was conservative for sure but not in a knee jerk fashion. And, for a guy who had been a sportscaster a few years earlier and had struggled a lot, he appeared to have a philosophical base to his comments. I remember vividly him giving a young caller a primer on what books to read if one were interested in the conservative viewpoint. The list off the top of my head included “The Conservative Mind” by Russell Kirk, “Capitalism and Freedom” by Milton Friedman, and the very heavy “Human Action” by Ludwig von Mises. It was stunning to hear that on talk radio. He fired bullets at both parties and was tough on Republicans who appeared inconsistent.

Then something happened. As his audience grew, he became more strident and his comments were not as fact based as they had been. George H.W. Bush invited him to stay at the White House and after a night in the Lincoln bedroom, he suddenly seemed to become a complete apologist for the Bush 41’s administration. Soon he was a leading spokesperson for the Republican Party whether the leadership liked it or not.

Many other conservative talk show hosts came on the scene and did quite well. The audience tends to be male, middle aged plus, and very conservative. Why has it worked? Well, many people say that they have an ability to tap into the anger of many of their listeners. Some view them as an outlet for those who are bitter or angry or scared.

There are some talk radio players on the liberal side of the ledger as well. Air America was launched a number of years ago as a counterpoint to conservative talk. It has not fared nearly as well. One of the stronger players, comedian Al Franken, left his talk show seat and won a seat in the U.S. Senate from Minnesota. But, generally, liberal talk has not caught on. Why? A brilliant young political analyst and a real progressive says that she feels liberals want to solve problems. They offer up complicated solutions and are policy wonks. That does not play well on talk radio where sound bites and clever interactions with callers reign.

One could also argue that liberals see government as the solution while conservatives see government as the problem. Whatever the reason, there is not a liberal talk show host on radio with a huge national constituency.

To me, the long haul picture for political talk radio is not very bright. In many markets stations simulcast on AM and FM and some have gone to FM alone. As a radio expert put it “many people under 40 have never listened to AM so they have to move to FM.” Structurally, there is a strong media problem. Simply put, the older you are, the more TV you tend to watch. As the talk audience gets older and retires or works part time, they are going to find outlets on TV that can give them what they want. On the left, MSNBC has many programs that are great substitutes for talk radio and Bill O’Reilly and Sean Hannity on Fox News fulfill many of the right’s needs. It is not clear but it is likely that part of the decline in political radio talk has been due to cable news/talk offerings and the trend should only accelerate.

In a free society, freedom of expression is important. Political talk all but bailed out AM radio. Its future is strong but it may take on other forms via cable or Internet options going forward.

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

Social Media and John Wanamaker

2011-04-27T06:57:00.000-07:00

Back in October, I posted an extensive series on mid-sized ad agencies under the heading “Mid-Sized Malaise.” Dozens of people help me put the report together by giving me valuable interviews and insights into what was happening in their troubled space.

In recent weeks, I have gone back to a few of the agency CEO’s who participated in the reports and asked for an update on Social Media, a hot topic today.

Two people’s comments stand out and I post these comments with their permission. One agency chief said the following, “last fall as we were preparing plans for 2011, I was in a client meeting and they kept pressing me to do more than the modest tests that we had done up to then with social media. My young staffers wanted to cut back conventional media (Spot TV and radio) sharply and go with a big Facebook presence and other Social Media approaches. I felt railroaded by the client and my team. Actually, to be honest, I felt like the king in the Hans Christian Andersen tale of “The Emperor’s New Clothes.” (To those of you whose memories are fading or had peculiarly warped childhoods, the story goes like this—Some swindlers posing as weavers got in front of an insecure emperor who cared mostly about his personal appearance. They promised a magnificent set of clothes for him but cautioned him that to a fool or one unfit for his office, the clothes would be invisible. The king’s lackeys not wanting to appear to be fools either said nothing as the swindlers pretended to weave the garments. On the day of an important procession, the “weavers” mimed putting the garments on the emperor and then left town. The king marched out in the procession and people marveled at the new clothes until a four-year-old boy shouted, “look, the emperor is not wearing clothes.”)

My friend did not want to appear foolish or not up to the job so he caved in on the Social Media demands of his client and his staff. A few months’ later sales had dipped and now the client does not want to hear the term Social Media.

Another agency head wrote that he had some modest success with early work in the Social Media arena. Then, one of his staffers had a cousin visit his Middle American town and introduced him to the CEO. The cousin was a digital media expert at a large media service. He agreed to spend a few hours the next day reviewing what the agency was doing.

The digital maven made some suggestions as to new platforms to try, gave some direction on rates without being indiscreet, and suggested that certain areas be killed. My friend's digital media planner was very defensive but had no choice but to go along with it. Now, several months later, response is up 30% according to their admittedly subjective yardsticks and costs are down 20%. The client is delighted and they will continue to ratchet up Internet advertising with a growing dollop of Social Media each year. The young agency planner is now sent to every industry conference on emerging media and speaks with the big city expert each month.

All this leads me back to the great John Wanamaker. He was an early retailing giant with a department store carrying his name in Philadelphia. A brilliant merchant he is said to have invented the price tag and was the first to use full page newspapers ads effectively. He also had a full time copywriter on staff in the 1870’s. Somewhere in that decade, he made the now famous statement—“Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.”

Many of us, if we are honest, know that his 135 year old statement still has some truth in it. Even if you simply use conventional media, what is the interaction of TV and magazine or radio and outdoor? They may work together well but how much of each contributes to results and in what proportion? I wrestle with that issue almost daily and have for the last 37 years.

The same has to be true of Internet advertising and Social Media at the moment. Things are happening quickly and new options pop up weekly. Yes, the measurement metrics today are better than in Wanamaker’s day or even 25 years ago. But there is still a lot of wasted energy and client money.

My one friend made a mistake by diving in to Social Media and savaging his conventional budget in the process. Social Media does not always work overnight. As everyone involved with it will tell you, you are not talking to or at your customers anymore. If done right, you are having a dialogue with them and creating a relationship. We all know that relationships take time and effort.

The agency chief who shifted gears with help from the digital media director took the right tact. He knows that even with the improvements, his execution is not without wasted message units. But, with a disciplined approach he can keep one foot in conventional and the other in some combination of Internet marketing/Social Media. Over time, he and his team will get better at it and measurement of Internet and Social Media results will get sharper.

An old friend and keen observer of the marketplace sees the coming transition this way: “We need to revise the old TV and Direct Mail (DM) formula to one of TV and Social Media that morphs into Digital DM.” Well put.

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

Time Warner and The iPad

2011-04-18T14:35:00.000-07:00

Over the last few weeks a low level media brawl erupted when Time Warner cable released an iPad app with a nice lineup of 32 channels. Time Warner said it was within their rights to beam the channels to Apple, Inc. without asking permission. Viacom countered that contractually Time Warner had violated the spirit of the contract.

The issues are complicated and many are below the surface. Will cable companies be able to charge more for new distribution rights such as the iPad tablet? How does this affect the advertising billing? Nielsen, always behind the curve, is now really struggling. It is one thing to try and monitor Hulu.com and Netflix.com TV, but new apps are mushrooming and it could be several years before they can monitor any of them adequately.

By March 31st, Time Warner took a dozen channels off the app but then News Corp. weighed in and wanted theirs removed as well.

A lawsuit has been filed which may sort things out depending on how the judge rules.

All this is great but it ignores the key issue that we as advertisers or agencies need to keep in mind. Things keep changing and they keep changing fast. To my mind, no one at Time Warner was trying to pull a fast one. They wrote a contract in good faith and the channels approved it. No one at the time considered the deal with Apple. All of us know it is exhausting to keep up with the rate of change and the emerging technologies in our business.

Should Time Warner have asked permission? Perhaps. But was the iPad app even considered as a possibility when the deal was cut?

To us in marketing or advertising, this is one more warning bell that fragmentation continues to march. There is no doubt that people will be watching more TV on tablets in the future. And, our jobs will get only more complicated going forward as more new technologies emerge. Don’t forget Apple TV and Google TV. Those two shoes will one day drop.

So, let the networks fight with the cable companies. Keep your eye on the ball. How do we reach people as the fragmentation exceeds our wildest dreams of even a few years ago?

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

Commodities, Inflation, and Media Spending

2011-04-09T11:17:00.000-07:00

Virtually every Saturday morning I visit a local farmers market. It is a wonderful experience. The food is plentiful and inexpensive and often the person selling you the fresh produce or baked goods is the individual who grew it or made it. Much of the food is authentically organic and if you stop and chat for a moment they often will suggest how to prepare it for maximum taste appeal and enjoyment. The crowd is fascinating as well. You see an amazing cross section of Americans from investment bankers, U.S. congressmen, teachers, left wing activists, and urban poor. Every so often a fellow a few years older than I stops me and wants to know if I am interested in reading some literature from the Socialist Workers Alliance. My wife tells me that I need to shave and stop wearing a sweatshirt before going to the market! The fellow acts as if it is still 1970 and I must say that I admire his persistence, purity and total refusal to abandon his 22 year old convictions. Yet, perhaps Disraeli was correct when he said, "If you are 20 years old and a conservative you have no heart, but if you are 60 years old and a liberal you have no brains."

This morning we visited the market and, as usual, we picked up some great bargains relative to grocery store prices. At the same time, monitoring the scene from a consumer behavior stand point it is clear that prices are beginning to move up smartly. Fresh organic eggs had been $3.00 a dozen recently and now weigh in at $3.50. That is a 16.6% increase almost overnight. Our Federal reserve Chairman Ben Bernanke says that inflation is not a real issue in the U.S. today. I would like him to accompany me to a farmers market or a supermarket one day and then do it again a month later.

The Fed does not include food or energy prices in their inflation calculations. Yet they are two areas where all Americans spend money. If they rise at all, the bulk of Americans feel it; some very significantly if they are struggling.

Back in the 1970's, when we last had serious inflation, most producers and food processors could simply pass on their increased costs to consumers. Now, with the economy far more fragile, marketers are getting far more cautious. Some simply cut the amount of product in each package (see Media Realism, "Skippy and Media Prices, June 11, 2010). Others have had to ratchet up prices and if oil stays high, their transportation costs will rise as well forcing them to increase charges at checkout. Wheat, corn and cotton prices are soaring in particular.

I feel and I may be in a tiny minority, that this could hurt media markets, particularly network broadcast. CEO's who see earnings struggling may decide that they can cut marketing expenses for a year or so. This almost always hurts branding long term but props up earnings for 3-9 months as sales stay fairly stable in most categories. So watch this carefully. If you operate in a local marketplace as a broadcaster or cable interconnect, things may continue to improve. But national package goods brands may do some marketing belt tightening. We could have a bit of a softer network marketplace than many expect even if the overall economy continues to expand.

Ignore the soothing comments of the Federal Reserve. If energy and commodity prices keep ramping up, something has to give in the marketing world.

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

Malthus, Demographics, and China's Future

2011-03-27T10:31:00.000-07:00

Last week, I had some furious e-mail exchanges with a Media Realism reader. I have never met the gentlemen in person but there is a lot of mutual respect between us and we both really enjoy the lively back and forth that our correspondence generates.

With his permission I am going to cover portions of our e-mail trail from a week ago.

He basically led off with the premise that the United States was finished. Our debt and overhanging entitlement avalanche would eventually destroy the country. China, in his view, would rule the world in 20 years. We might hang on as a military power for a while but our days as a serious economic player are rapidly coming to an end.

I agreed that we certainly face serious challenges and that politicians need to take corrective action soon to avoid a disaster. But, I warned him that as impressive as China’s growth has been in recent years, they appear to be headed for a train wreck that will be harder to avoid and correct than our entitlement and debt problem. It all comes down, like many things in marketing and business, to simple demographics. To explain, let us go back about 200 years.

Thomas Malthus (1766-1834) was a very gloomy economist at a time when the rest of the educated world was getting excited about the ideas of Jean Baptiste Say, Adam Smith, and David Ricardo. One of his most famous arguments was that the western world would have severe trouble feeding itself. Basically, he said that population, when left unchecked, increases in a geometric ratio. At the same time, the ability to produce food increases only at an arithmetic ratio. So, eventually, many nations have to face starvation. Famine and epidemics would help (sic) ease the problem as would the occasional war and plague. Without those sad events, Malthus felt that the only acceptable alternative was very late marriage and abstinence by the population. As a clergyman he was opposed to all forms of birth control (like many economists, Malthus was a fun guy).

Chinese leader Mao Zedong was strongly influenced by Malthus and watched with alarm as the Chinese population grew sharply during his tenure. His “Marxist miracle” was often under criticism by all sides of the political spectrum as he had a hard time feeding his billion Chinese citizens.

After Mao’s death, the next generation of Chinese leaders had the same concerns about Chinese population growth. In 1979, they became authentic neo-Malthusians and instituted the “one child per couple” policy in many provinces that is still intact today.

The Chinese economic growth story has been amazing. Cities have mushroomed seemingly out of nowhere in recent years that now have more than a million people. The average Chinese saves more than 20% of his income which fuels rapid building, investment, and manufacturing. Chinese schools are now turning out more scientists and engineers than anywhere on earth and the universities are gaining ground globally in academic rankings.

So, China is definitely booming but they are heading for perhaps the worst demographic disaster in measured history. Simply put, their strict one child per couple policy will lead to a shortage of workers. And, a labor shortage normally translates to higher wages, which will hurt the comparative advantage they now hold in manufacturing. By 2025, China is projected to have one fifth of the world’s people but one quarter of the 65+ population. Already, other cracks are appearing. For 2500 years, Chinese sons always took care of their parents. Now, with the single child policy a couple is now expected to care for both sets of parents. As Nicholas Eberstadt of the American Enterprise Institute put it “a de facto national pension system has been the family but that social safety net is now unraveling badly.” Columnist Ted Fishman asks ‘will China grow old before it grows rich?”

Another really freaky and ghoulish demographic anomaly is rearing its head in China. Due to the reverence that Chinese families give sons, many infant girls are put up for adoption and taken to foreign countries. Abortions are often undertaken if it is determined that the newborn will be a girl. So, soon China will have a population where there are 123 young men for every 100 young women. Young women will likely move to the cities where they will be highly prized by young men and only the more successful men will tend to find partners.

For a few decades in the old American West, we had gender imbalances such as this. Alaska might face this in certain regions as well. But for a country of a billion people, this is unprecedented and has to cause huge social problems including crime.

We have all heard the problems about demographics in Western Europe with Spain and Italy getting special attention. Mark Steyn refers to the present as “Europe’s Gelded Age.” The Chinese threat appears much greater. The Chinese economic growth over the last few decades has been nothing short of remarkable. They are big polluters but are taking steps to clean things up. Life is getting better for many millions of Chinese as they enter the middle class each year. But demographics are a tidal wave that no one can hold back and they are going to hit China very hard. All of us have to be impressed with what China has accomplished the past 20 years against stiff odds but taking on demographics is virtually always a losing battle.

Are demographics really that important? Well, when asked that question I always conjure up the old quote from mid-20th century writer and raconteur Damon Runyon: “The race does not always go to the swift nor the battle to the strong, but that’s the way to bet.”

May I suggest that you do not bet your life savings on China, but instead, bet on demographics?

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

Behavioral Economics and The Future of Advertising

2011-03-22T10:43:00.000-07:00

A few weeks ago I visited a retail store. As I was entering I noticed a fellow about 40 years old standing out front. He was short and easily weighed 300 pounds. To my surprise, he was inhaling deeply on a cigarette. Moving through the store to pick up a few items, my thoughts kept coming back to the guy out front. He was a walking heart attack for sure and a prime candidate for a stroke as well. As I left the store, he had another surprise for me. He lighted a new cigarette with the butt of his dying one. I shook my head sadly and moved on.

Since 1776 and Adam Smith’s “invisible hand” theory, free market economics has always made the assumption that people act in a rational manner. Smith’s invisible hand said essentially that when selfish but rational actions take place across a society, we would be more prosperous overall. Well. The chubby fellow whom I encountered in front of the store was not acting rationally. He was killing himself and not slowly. Were he rational he would go on a diet right away and go cold turkey on the cigarette habit.

The real truth is that as humans we all tend to lean toward emotion. Most of us experience love, jealousy, grief and excitement at times and that clouds our behavior and purchasing.

This concept has been captured in a field known as Behavioral Economics. Back in the 1970’s two psychologists, Amos Tversky and Daniel Kahneman, began to adapt theories on how our brains process information and then contrasted that with the economic models that featured the rational man often dubbed “Homo economicus” (Kahneman won the 2002 Nobel Prize in Economics).

So, there are reasons why 20% of Americans are morbidly obese and some smoke at the same time but they are not being rational. Behavioral Economics is a marriage of Psychology and Economics and will become an increasingly important field for marketers and ad agencies in the years to come. Here are a few core principles of Behavioral Economics that can apply to our life in advertising:

1) Despite when classical and now neo-classical economists may have said, people are moved by value judgments and, sometimes, moral judgments. Many of us every day do what is right rather than what gets the maximum profit to us short term.
2) Economists usually do not distinguish between social and market contexts. An example would be a couple’s 25th wedding anniversary. If a man gives his wife a very nice piece of jewelry she is often touched by it. Were the same fellow to give her a card with a $1000 bill in it, there is an excellent chance that the marriage would not endure for another 25 years. Some economists would argue the economic impact was the same in both cases--$1000 was spent. Behavioral Economics is more nuanced.
3) In financial markets, many of us too often are irrational investors. We buy near the top and sell when the market is bottoming out. People put way too much weight on recent events and do not often think long term, which is rational.
4) Old habits die really hard. Some 20% of Americans are morbidly obese and their girth will derail any hope of cutting future health care expenses. All too few of us examine whether our behavior is optimal.
5) Monkey see, monkey do. We observe others doing things and do not always make decisions based on our own judgment.

Historically, advertising has often made a strong appeal to emotions and we all know that emotion can be a powerful selling tool. So, ad agencies should be comfortable with Behavioral Economics and plug it in to their client service options. Today, at smaller and mid-size shops, people are all too often-dubbed Account Planners, Strategy Officers, or Marketing Directors and they basically rehash syndicated data from Simmons or Mediamark Research, Inc. (MRI). Real pros, if they have not already, should embrace Behavioral Economics. It could really sharpen their marketing effectiveness. If you dig in and understand it, you are able to weigh in on almost all brand interactions. Today, many agencies limit themselves simply to messaging.

For a non-technical primer on Behavioral Economics may I recommend, “Nudge” by Dick Thaler and Cass Sunstein? The authors serve up a host of practical suggestions to nudge people to do the right thing without being perfectly rational. It is easy reading but will make you think clearly about when economics and psychology meet.

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

How the West Was Lost

2011-03-15T09:28:00.000-07:00

Dambisa Moyo is a brilliant young woman. A P.H.D. in Economics from Oxford and having a master’s degree from the JFK School of Government at Harvard are only the beginning of her impressive credentials. A few years ago, the young Zambian lady shocked the world with a book entitled DEAD AID, which boldly suggested that foreign aid is not working and that there is a better way to help Africa.

Now her next blockbuster is racing up the business best-seller lists. It is entitled HOW THE WEST WAS LOST (Farrar, Strauss and Giroux, 2011) and urges the U.S. and Europe to take corrective action quickly or face financial disaster.

In a very tightly written 195 pages, she makes some very well reasoned arguments. She boils our Gordian knot of difficulties down to three key areas:
1) The capital crisis—too much money diverted into homes rather than building up our infrastructure
2) The huge amount of debt that has created a financial house of cards
3) The labor crisis both in terms of quality and quantity

Her language has a brutal directness that you do not hear anywhere else. Consider this passage on pensions: “Forget Bernie Madoff, forget Alan Stanford, the biggest Ponzi scheme has got to be the looming car crash that is Western pension funds. And like any well-run Ponzi game, its results will be devastating. It will all end in tears.” She goes on say that her generation will face “double taxation” of having to foot the bill for current retirees and somehow save for their own.

Her coverage of the housing crisis and how the West got there is similar to others that I have seen but she raises issues that others do not. In Canada or the United Kingdom if you walk away from your home, you are still liable for the remaining mortgage. In many U.S. states, she points out, a walk-away is the bank’s problems and ultimately that of society.

The book concludes with a withering finale of tough love. She has a section entitled “all is not lost.” Her four possible scenarios are all scary but certainly possible and likely if we continue on our current path. In brief, they are:

1) The Status Quo—we continue to spend, neglect education, and remain the pre-eminent military power. If this continues the US (along with much of the West) will be second tier economies as the debt overwhelms over.
2) China Falters—somehow the Chinese cannot keep growth going and they do not overtake us. She says it is possible but not likely.
3) America Fights Back—we go on a fiscal diet, get real in all areas, and return to the bright days. She asks if we have the will to do this plus will we or can we give up our role as the world’s policeman? Also, other countries will have to virtually always play fair on trade and other issues if we are to solve our problems. Is that realistic?
4) America’s Nuclear Options?—These are tough choices. She suggests that we become less open and more protectionist as we get our house in order. Also, she tells us that the US has benefited the least from being open to global development. Then comes the bombshell. To get out of the mess, America may have to default on its debt. This would hurt the Chinese but she thinks that the world might forgive us faster than we think. Or, we can do a de-facto default by inflating our way out of the mess (this seems to be happening now to a certain degree). If we do not do one of these things she suggests that “many fear America will remain in a stranglehold of debt and dependence from which it will be very difficult to credibly escape.”

Someone wrote to me and suggested that a young Zambian is not the person to dissect our problems. My answer was one a wise man once told me—“Understanding requires distance. We cannot read a book by rubbing it against our eyes.”

Ms. Moyo has given us a shrill wake-up call. Will we respond to it?

Should you be unwilling or unable to read the book, check out Ms. Moyo on YouTube. There are several great interviews with her there.

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

Is Consumerism Dead?

2011-03-11T11:18:00.000-08:00

Lately, as we the economy slowly claws its way back to some semblance of growth, we are hearing an interesting mix of marketers, political pundits, psychologists, financial counselors and columnists all saying the Great Recession has changed Americans permanently.

The idea is that the wild consumption binge that many Americans have been on for the last few decades has come to an end. This morning we hear that the savings rate is now at 5.8 % which is way above pre-recession levels of zero-1.5%. Many say that hard work and thrift are making a comeback as we return to old values and rely on collaboration to solve problems and now clearly see the failings of the old status symbols.

I am not so sure that is what is happening. If a few years from now the economy is booming will people revert to their old spendthrift ways? It is not clear to me where we will go.

For a moment, let us look at the facts of the Great Recession. Unemployment doubled and is now at 8.9% but almost everyone admits that the real rate is much higher as millions of discouraged citizens have given up looking for work. From late 2007 through 2009 an amazing 13 trillion dollars of wealth evaporated in the U.S. Besides unemployment soaring, 401k plans shrunk, roughly a third of the equity in homes disappeared and, amazingly, some one quarter of all mortgaged homes were under water (meaning current value of home was less than existing mortgage balance).

The spending that went on was amazing. Take housing. In 1950, the average U.S. home being built was 983 square feet. By the end of 2006, it was at approximately 2,350 square feet. Buy a house, everyone seemed to be saying to young people. It can only keep going up in value. And, by 2007, mortgage equity withdrawal, where people refinanced with a cash out option on their equity line of credit, actually was 9% of the U.S. disposable income! Looking at it another way, in 1982, a recession year, household debt was equal to 44% of Gross Domestic Product while by the end of 2007 it was actually over 100%. You did not have to be financial genius to see that this was not sustainable but if you talked about the dangers of it you were dismissed as a Cassandra.

Now, it is clear that many people are not going back to their old spending habits. If you are permanently unemployed or under-employed, you have to had to make painful lifestyle shifts. Your days of using your home as a veritable ATM machine or super credit card are over. But for those who still have decent jobs how long will this new austerity last? When will greed overcome fear?

Clearly, people are still nervous. Yet, I remember when gas briefly touched $4.00 a gallon in summer 2008 when oil topped $146 a barrel. You could not give an SUV away. But several months later when oil cratered to $33 per barrel, the SUV’s flew off the dealer lots with an abandon again. Now, as gas at the pump moves up due to Middle Eastern political tensions, the pattern seems to be repeating itself.

Unless you are in advanced old age, the Great Recession is easily the worst financial calamity that you have witnessed in your lifetime. The Great Depression of the 1930’s psychically scarred our parents or grandparents. They became more frugal and, for the rest of their lives, were net savers and cautious investors. Was the Great Recession a similar event for ALL of us?

Are we truly moving from a credit to debit society? Is the old cliché about the Indestructible American Spirit that is infinitely resilient and able to turn any hardship into opportunity still valid?

I remain on the fence. Long term we need to address our entitlements that will take the entire economy down in several years unless we have reform in the Social Security, Medicaid and Medicare plans. But with stocks up 80% from the March 2009 lows, is the “wealth effect” kicking back in among the affluent? So far, the ostentatious displays of wealth that began in the 1980’s and lasted nearly 25 years have been muted.

Our business, however, seems to be ignoring the trend to austerity if it really has legs. TV programming still goes toward the glitzy and the idealized lifestyle is one great material comfort. Do you see a resurgence of programming like “The Waltons” or “Little House on the Prairie” that epitomize the return to honesty, fairness, and authenticity that many say are reappearing in American life these days as a result of the recession?

All of us want a return to vibrant prosperity. Will it be built on our newfound savings and realism about entitlements or will it be a return to the house of cards that we built with plastic in recent decades?

I only know this for sure. Markets always go to extremes and they are full of endless volatility. As consumers get more in charge in our digital age, they are also harder to predict. But, human nature does not change. Much of me hopes that the new thrift is permanent. Recovery will be slower but it has a chance to be longer lasting than that of the era of consumerism.

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

Another Look at Market by Market Media Planning

2011-02-24T11:43:00.001-08:00

Someone recently was e-mailing me back and forth about various aspects of media planning. At one point, he wrote “I guess you will now bring up the topic of Market by Market Planning. After all, you basically made a career of it.” He probably did not mean it kindly. I was not offended, however. In fact, I am proud to plead guilty.

Market by Market Media Planning recognizes a few truths in the U.S. marketplace. The first is that there are 210 Nielsen DMA’s in the U.S. No two are alike. TV viewing levels, Radio usage, cable and satellite penetration and usage vary significantly from place to place as do internet usage and even sagging newspaper readership. If you really want to execute a proper media plan, you must know the markets that you are operating in and you get a fairly tight handle on what the national media that you buy are delivering in each key marketplace.

This may seem counter-intuitive, but the most sensitive market by market analysis tends to be done outside of the major agency hubs. How is that possible? Well, if you are plotting media strategy for a client that advertises in 15 markets in America’s heartland, you face a few challenges. You don’t have national media and its great efficiencies and your client’s pockets are not all that deep. But, if you do the proper digging you can level the playing field significantly for your greatly outspent client.

The really good practitioners of market by market planning are intense and real wonks. They know their markets cold. As a result, they do not deliver a media plan. They deliver plans. A very difficult man whom I once worked with paid me the most meaningful compliment of my career in a client meeting. He said, “Don, will deliver you as many media plans as you have markets.” He was not being a salesman. He knew me.

A good market by market approach often starts with a BDI/CDI analysis. It is pretty straight forward although many young people are not taught it anymore. BDI stands for Brand Development Index which is local sales in a market indexed to overall brand sales (so if Market X is 1% of the US and you have 1.5% of your total sales there, your BDI is 150). Similarly, CDI is Category Development Index is local sales for the category relative to total category sales. Sometimes, smaller players cannot get their hands on such category data.

As a general rule, you tend to add more weight to markets that have high brand potential and high category potential (the old fish where the fish are thesis). Also, you may want to add to markets with high brand potential but low category potential. Individual analysis is always required.

Then, the next step that many of us used was to provide relative costs across markets. A great case came up in the go-go 1980’s. At that time, Cleveland, the rust belt queen, was approximately the same size in terms of TV households as Houston, a Southwestern boom town. But TV in Houston cost twice as much per household reached as Cleveland. Our client let us add weight in Cleveland and he claimed that we squeezed significantly more cases of out that market over the year. More importantly, the money we saved by not spending more in Houston allowed us to prop up several mid-sized opportunity markets with decent radio schedules. Such opportunities and cost imbalances still exist in 2011 but how many dig to ferret them out?

Market by market focused planners use radio better than most. They look at distribution in each market and the relative costs of each medium in each market. Often, metro radio is a better play if money is tight or distribution not strong across the much larger DMA. When they use TV, they customize a day-part mix for each DMA. Outdoor often plays a larger role or is the sole medium in some markets.

If you execute well in each market, good things usually happen. I know that many of us who embraced authentic market by market activity saved clients millions over the years. How much did we increase sales? Impossible to say but it had to be stronger than a cookie cutter plan that is virtually the same everywhere.

National advertisers should key on market by market considerations as well but few do it well. Many people feel that the network TV or national magazine efficiencies even things out. But, in reality, they do not. Few, if any, products with national distribution have flat sales across the country. Everyone has strongholds and almost every product underachieves somewhere. Also, media delivery is not consistent either. If you buy a 1000 rating points on network TV, you may deliver 1300 in Montgomery, Alabama but only 730 in San Francisco. Many players add weight in the top 10 or top 20 markets. That helps in some cases but they would generally be better served if they did an extensive BDI/CDI analysis, did a relative cost index for favored media, and added the right medium to local markets where it had the best chance of doing some good.

Importantly, with on-line media, a great deal of work needs to be done to reflect market by market projections and their blending with conventional media.

Why doesn’t everyone do market by market right? Well, it takes time. And, today, time is money. Understaffed teams with untrained personnel get people on the air and many negotiate terrific rates. But great costs only take you so far if the messages are not landing sufficiently in the optimal roster of markets.

Has market by market planning disappeared? No, but most people do not go far enough in their analyses. And, the best practitioners, as mentioned above, are often off the beaten path. People in places such as Burlington, Akron, Omaha, Salt Lake and Portland, Oregon are often doing great work for moderate sized clients. Each market gets a truly customized media effort and they have made their client more competitive in a tough environment. Ask your agency about market to market considerations and probe a bit. You may be pleasantly surprised or you may be justifiably annoyed.

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

Ad Agency Media Teams--The View from Salespeople

2011-02-17T14:24:00.000-08:00

A few weeks ago I received a long and detailed e-mail from someone whom I have known for over 30 years. He was an excellent sales executive who eventually morphed into a really good broadcaster. And, he is still active in the business. His e-mail at times was something of a rant but, despite the passion, it made a lot of sense. He finished with the following: “There is too much lazy marketing going on at agencies. They continue to do what they have always done. Yes, they are playing with social media but they have no clue about it. What they need to do is more Branding.”

I canvassed a host of other people who were in media sales and the frustration level was amazing. So this post will give you a view of agency media teams from a sales executive perspective. Everyone in my sample is successful and has been in the business a minimum of 15 years. They are from all over the country—good balance from each region. All are people whom I know and have always considered to be smart and fair. I interviewed or exchanged e-mails with 25 people and what follows is a representative sampling of their opinions.

First, let us hear from a man with whom I have done business for over 20 years. He is easily the most gentlemanly person with whom I have ever worked. His product is now a multi-platform offering that can work for many substantial advertisers. Here is how he weighs in on media teams in 2011: “My biggest complaint is the lack of sincere contact. Nearly everything is done through e-mail, voice mail and very easy for the 20 somethings to ignore or delete. Even an old geezer such as I knows that in this computer oriented world things are going to change and just keep getting faster and less personal. For companies with a complicated product offering like ours that requires some explanation, this presents a problem even if we can be of real benefit to their clients. Also, today there is a lack of simple courtesy….people often do not return phone calls or even e-mails. Lastly, the young people do not understand that if you agree to take a meeting you need to actually do it. My sales team makes the effort to make contact, travels to a distant city at our expense, and often gets stood up when they arrive. It is maddening.”

Another long time friend who sets the standard for high ethics said the following:
“I think one of the biggest problems with agencies is that they are not set up to effectively evaluate over-all marketing opportunities. In today’s world, the hugely different opportunities that are brought to agencies often scream for a unique evaluation for each one. So many different elements are brought together (TV, Internet, Print, Activation) but the agencies usually stick it all into a cookie cutter evaluation and potentially risk not recommending things that can deliver a ‘grass roots’ activation model that will really help the client as a whole. Instead they go to a traditional media buy with very little imagination included……there are far too few people out there who can really evaluate a multi-faceted package.”

A gregarious and deeply experienced exec shares this sentiment: “You have struck a nerve, my friend. There is no incoming and teachable entry level talent who are being taught how to interpret proposals and ask questions. There is a moat of experience between veteran media people who think out of the box and the one dimensional “my cost per point is X and that is all I care about" attitude of the new comers. "Training, you ask? What training"?

A vivacious and lively TV exec who sells coast to coast is more sympathetic—“First and foremost, EVERY MEDIA TEAM seems to be undermanned…too much to do…too few workers and this appears to be by design. This is a common theme from NYC to LA. I think everyone gets the “we have got to do more with less” concept but at some point (soon) clients will see clearly that the model is broken. And today the client is suffering because the agency is trying to keep costs at the lowest levels.” This is undeniably true. She raises another vital point—“Because they are undermanned, media departments do not encourage salespeople to come in and educate all on new innovations available to them. Interestingly, some of these new opportunities might dovetail with the client’s needs and by incorporating them into the plan/buy, the agency could look like a winner.”

Sales people who do not work for major properties simply cannot get appointments. One agency media chief says that he will only see people from Google, ESPN and Sports Illustrated. He loves their swag and the whole team sits in. That is great for those three outstanding properties but the agency does regional business at best and there are local people who could help him with his clients if he would give them a hearing.

Some sales people close to retirement are resigned to what is going on. A West Coast sales maven says “The golden years are gone. I cannot develop a relationship with the newcomers. Media is now a commodity in their eyes and something is lost forever when that attitude took hold”.

Another adds “The game is almost over. The technology will soon be in place where a lot more will be done electronically. I am a dinosaur, and know it but it has been one hell of a ride since 1970. No one under 40 that I call on can really sort out value. They have no intuitive feel for things. Others lack the math skills to unravel a multi-platform deal.”

Finally, a mid-west sales star says “when I started in the business 35 years ago, I was in awe of the agency media teams. Now, the superstars are not going into advertising. I do not see that turning around in an economy that is over 40% financially oriented.

What do I think? Well, lots of things are moving toward commodity status and media is one of them. It is sad but in the defense of the agency people that I still speak with and like and admire, many are really overworked. The client suffers as one of my panel members pointed out. But with agencies suffering strong financial pressure, there does not seem to be an easy way out.

Courtesy needs to make a comeback. If someone made an appointment with me, I kept it. There were nights that I had to stay a couple of hours late as a result, but no out of towner was ever greeted by a receptionist saying that Don was not available. Also, as I always say, you can learn a lot by listening. Sales reps are always on the move, talks to hundreds of people, and work for firms that have some cutting edge products developed at headquarters. Media teams need to make time for them. Our world is changing and buying solely on cost per points is gone with the wind. Yet, sadly, it still goes on.

Sales people need to be concise and respectful of the media team’s time. But if they cannot get in to see the agency team, something is very wrong.

Will things turn around? I believe that the glass is half full, but it is hard to believe that the pendulum will swing back any time soon.

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

The Medium is STILL the message

2011-02-11T12:29:00.000-08:00

A few weeks ago, like many of you, I attended a screening of the film, “The King’s Speech.” Marvelously produced and acted by a great ensemble cast, it shows how Prince Albert, the Duke of York overcame a terrible stammer and was able to function giving speeches and radio addresses as King George VI of the United Kingdom. As a media person, one scene stuck me hard that most in the audience did not fully appreciate. His difficult father, King George V told his son that he must learn to speak better and master radio addresses as that was now part of what it was to be king in 1936. Being a good man, fair and decent, was not enough. You had to master the new medium to be a successful monarch (for a great biography of George VI, consider The Reluctant King by Sarah Bradford, St. Martins Press, 1989).

A few months from now we will mark the 100th anniversary of the birth of Marshall McLuhan. He was a Canadian communications theorist who was famous for two turns of phrase—1) the global village and 2) The Medium is the Message.

As a student, I vividly remember struggling with McLuhan. He was deep and not easy to digest. It is fair to say that he has been misinterpreted by more people than anyone else in the communications field. What I see him as is clearly the greatest media futurist ever.

Consider this statement way back in 1961: “print culture would be brought to an end by electronic interdependence. Electronic media would replace visual culture. Human kind will move toward individualism and fragmentation and our collective identity with a tribal base. The new group could be called a global village.”

The following year he wrote: “the next medium, whatever it is…..it may be the extension of consciousness, will include television as its content, not as its environment, and will transform television into an art form. A computer as a research and communications instrument could enhance retrieval; mass brick & mortar library organizations could be made obsolete, retrieve the individual’s encyclopedic function and flip in to a private line to speedily tailored data of a salable kind”.

Wow! Move over Nostradomus! McLuhan forecasts many aspects of the digital world, Google and Facebook and he doesn’t use obtuse rhyming couplets to do it.

In 1964, his use of the term “The Medium is the Message” first surfaced. Here is my take on it. McLuhan felt that the media are extensions of our human senses, bodies and minds. Media, then, is the message in that the force of media embeds itself in the content, creating a “symbiotic relationship by which the medium influences how the message is perceived”. He also said that the"content should not be studied as much as the media that caused it.” McLuhan always hammered away at the point that we do not often realize the social implications of a medium until “our values, norms, and way of doing things have been altered by the technology.” An example he often used was that when you turned a TV on in a crowded room everyone would get silent. Now with cell phones, e-mail, texting and twitter we communicate but do not talk nearly as much as we once did.

“The Medium is the Message” hit me hard at an early age but I did not realize it until 10 years later. One night in October, 1960 my father and I were driving alone somewhere. He put on the radio and the first Kennedy-Nixon debate was underway. We rode in silence for a few miles and my dad said “sounds like Nixon is getting the better of him”. When we arrived home my oldest sibling greeted us with “wasn’t Jack great. He had lots of facts and figures. He won the debate easily.” I was just a kid and did not want to argue with my college bound brother who devoured TIME magazine cover to cover each week and was very well informed.

About 10 years later, I saw Howard K. Smith of ABC News being interviewed. He said he was the moderator that night and by positioning could hear the candidates but not really see them. It was as if he were listening to the debate on the radio. His scoring was that Nixon had won easily on points. But the TV audience and the press the next day heralded it as triumph for the young Senator from Massachusetts.

Kennedy was better looking than Nixon which helped in a visual medium. Nixon had been ill and was running a fever prior to the telecast. He did not have an expert makeup man and Kennedy did. The medium of TV was the message not the content of the debate to some degree.

A short time later, I saw Marshall McLuhan on with Dick Cavett. When asked to explain how “the medium is the message” he used the Kennedy-Nixon debate as an example. He challenged the audience to objectively listen to a tape of the show and decide who won. I recently did it and he was right. (Full disclosure—I didn’t like Dick Nixon. He took too long to unwind the Vietnam War; he tried to cover up Watergate and thus almost destroyed our two party system. On August 15, 1971,he instituted wage & price controls and severed all ties to the dollar and gold which will haunt us eventually. Also, he did the shameful and un-American thing of having a White House “enemies list” while in office. But if you LISTEN to the debate, Nixon won it!)

McLuhan said that we focus on the obvious way too much. The obvious is the content but what about the subtle changes that occur due to the medium being used?

So George V told the future George VI to overcome his stammer and embrace the radio. In the 1930-1950’s that medium was the message in many cases. As we moved in to the TV age, it overshadowed content. How much have the media contributed this week to the overthrow of an Egyptian dictator? Perhaps more than the real content which is the valid complaints of an oppressed people. Now, we have a whole new array of digital entrants. The internet, You Tube, Facebook, Twitter and the next generation that may only be 24-36 months away. (Does anyone remember MySpace?)

In July of this year, had he been long lived, McLuhan would have turned 100. Well,the medium is STILL the message.

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

Sports Talk Radio--An Appraisal

2011-02-04T07:44:00.000-08:00

Whenever I mention sports talk as a radio format to people, I almost always get one of two reactions:

1) “I love it personally, it is a great way to reach guys, and it works” or
2) A soft chuckle followed by “you mean, long time listener, first time caller.”

The format, simply put, is devoted entirely to the discussion and sometimes broadcasting of sporting events. It is known for often boisterous on air talk by both the hosts and listeners who call in to the program. You may be surprised to know that this form of American Pop Culture is spreading globally. Besides the U.S., Sports Talk has popped up in Canada, Australia, New Zealand, the United Kingdom, and most recently, Nigeria!

Despite the dismissive nature some media planners have toward it, the medium has grown smartly in its roughly 20 year history. An old friend, who is a veritable walking encyclopedia on all aspects of radio, put it this way “Sports radio is one of the very few new formats that have caught on during the last 15 years. As a matter of fact, the only other new format I can think of that’s made it is Hip-Hop on FM. Sports radio saved, at least temporarily, a number of AM stations. And as AM’s share further erodes, the format has been moving to FM, including ……some very large markets.”

Another interesting thing about Sports Radio is how vibrant it is locally. Sports giant ESPN has their entries in both English and Spanish and have growing appeal. Fox Sports, Sporting News, and some syndicated and satellite programming is also active. But to many, the local stations with hometown announcers discussing the trials and tribulations of the local franchise are the place to be in many markets. A long time cable and radio sales rep put it nicely—“I think Sports Radio strength is a city by city thing. In a Boston, Philly, or Chicago Sports Radio is a good reach and frequency media vehicle. These are what I call passion towns (I would add Pittsburgh to the list). Local strength of Sports Talk allows for things like effective in-game advertising even inside a stadium and great merchandising with clients (tickets, food sampling).”

He admitted that he listened to ESPN rather the local guys most of the time. The reason? He is a transplant. Markets like Dallas and Atlanta are famous for this. As he put it “more fans show up for their home team than the Atlanta (or Dallas) teams. It is sad. Some towns are not passion towns.” I enjoyed going to hockey games several times a year in both Dallas and Atlanta during my years in both cities. By coincidence, I often saw Canadian teams visiting. Invariably, as they sang the two national anthems before the game, thousands of uber-polite Canadian transplants would rise and sing “Oh, Canada” with great gusto before, let us say, the Stars and Maple Leafs faced off.

In small markets, the stations have issues that they do not have in the major metros. One broadcaster told me that his initial audience was so small that he always had his wife and brother ready to call if the phones were quiet. “They would lob me a pre-arranged question that was open-ended and I could do a fifteen minute rant until someone else called in. Most of the time, it worked.” Another problem they had was that a few gadflies would call each show throughout the day. Some were a nuisance, some were fans, some were practically auditioning but it showed advertisers how truly small our audience was. In recent years with the advent of fantasy leagues getting a lot of play, some serious and well informed statistics freaks would call in. A broadcaster told me that he met a few of them and now has them on as special guests. In their Podunk towns, they have become minor celebrities.

The national and syndicated services are big players in the smaller and mid-sized markets. My radio guru friend put it succinctly as follows: “As far as ESPN, sports stations in major markets are pretty much live and local on weekends and ESPN (or Fox Sports Radio or Sporting News Radio) in evenings and weekends. Small market stations and very small AM’s in big markets tend to rely on the networks close to full-time, and that I think that will continue.”

When do you listen locally vs. nationally if you have a choice? A seasoned and smart TV broadcaster, who paid his dues in radio, explained it this way: “When my home team made the NFL playoffs, I wanted local coverage. After they were knocked out, I wanted national coverage up to the Super Bowl. So for stations in markets with strong pro/college teams, I think locally based stations will have their place in the market. It is a lot tougher for a local station in a market like West Palm Beach that has no pro/college teams and few people grew up there. Older markets with long sports histories are better for local.” This ties back to the “passion towns” discussed above.

He also weighed in on a business reason why national services will not destroy local origination of Sports Talk. “As far as cost goes, there are many people trying to break into the sports business so finding decent producers and broadcasters is neither a challenge nor a budget buster. The new digital media is impacting play by play for radio, but good story tellers will still survive.”

Of course, the big question is does Sports Talk work as a medium? The answer is a qualified yes. One problem that I have seen is that those who love it sometimes put a bit too much of the budget in it for emotional reasons. They listen to it, want to be part of it, attend all local events with announcers, and love the promotional possibilities. In many markets the audience was not all that large although Arbitron’s move from a diary base to PPM measurement has helped many Sports Talk stations substantially. But the reach potential of a single station in a fair sized market is not very large in 2011. Sports Talk should be an integral part of a campaign for many advertisers, but media planners and advertisers should not get too wrapped up in their own hype with it.

The radio guru weighs in on the financial side with these insights: “One great thing about Sports Radio is that it often out bills what is should based on its ratings. The reason is that Sports Radio’s audience is “pure”, meaning sports stations are perfect for categories such as beer, cars and other male oriented products. The ratings don’t matter as much although some sports stations have done well in demos like Men 35-64. The other reason sports stations can make a lot of money is that the format is conducive to sponsorships, such as the hourly scoreboard, and promotions such as spring training. Lots of off-air elements such as signage and on-line can be included.”

Many people echoed this sentiment. A former radio star now in cable said “Although Sports Radio has some challenges, there are people being successful in it by understanding how to tap in to the targeted reach, audience loyalty and work promotional integrations.”

A buying service owner also adds “still another reason for Sports Radio’s is success is that a lot of clients (Men 35-64 who own businesses) listen to Sports Radio themselves and want their business to be on it.” Not the best reason to use a medium but his point is very well made.

Another adds “One of the biggest advantages of sports talk is the endorsement opportunities, contests, and associations for advertisers…….From an efficiency standpoint, these kinds of programs are usually not that great, but they create a lot of emotion for the advertiser and can be sold for a premium. I think that Sports Radio has a brighter future than music based radio.” Emotion and loyalty are still big with us humans. Sports radio can deliver the goods.

What about content? Some of the local independents get a bit raunchy at times and sometimes veer into politics or social commentary on slow news days although ESPN has made slow new sports days increasingly rare over the last 30 years. A Sports Sales maven who is a great friend voiced an intriguing theory that I have never heard before—“Local Sports Radio guys usually tell me that bad things happening with the local team can help ratings more than good things. It seems to be more about therapy than anything else. It is also a way to connect more with the fans emotionally than regular radio.” We could debate that one for a long time but it does make you think.

From a content standpoint, I want to quote another friend who captures the spirit of Sports Radio and the hold it has on many men’s live better than any that I have ever seen or heard. “To me, the best sports radio is local but unfortunately, local sports radio isn’t always the best. Listen-ability varies greatly from not just one station to the next, but even from one local host to the next as our sports interests are now as varied as the options on the FM radio. For those times when I’m forced elsewhere I have an ever increasing array of national offerings (thank you XM) which themselves inevitably wear me down with their own banal bantering, self importance, regional leanings and other proclivities which soon drive me back to my local options as the cycle completes. Lather. Rinse. Repeat. As I grow older, I find my sports radio needs to have an increasing dose of news, pop culture, politics and whatever else is going on. This somehow helps me justify my fixation over the left tackle who whiffed on his pancake block, thereby obliterating my quarterback.”

He continues—“20 years ago we yearned for any discussion of sports, but today we get it how we want it or we tune away. An unintended side affect perhaps from that fateful day in 1979 when ESPN “happened” and our sporting options multiplied exponentially. Sports Radio extends the game and season to where our favorites play all year long. The World Series used to be followed by four months of waiting. Now when the last pitch is thrown we move directly to the Winter Meetings, the start of free agency, off-season trades, Hall of Fame announcements and before you know…pitchers and catchers report anew. Whether these events are as big as sports radio makes them seem doesn’t matter to us so much as the fact that we demand they be all explored in exhaustible detail. Details over which I parse endlessly, yelling at the indefensible comments being uttered and the stupidity of the know-nothing that put them out there. And, I always tune in again tomorrow”.

Being older than almost all of you, here is my vision of where it fits into our lives. Just over 50 years ago, I was growing up in a quaint and lovely seaside village in then rural Rhode Island. Just before Christmas 1960, my older brother Bob and I walked to a village barbershop for haircuts so we would look spiffy for any holiday pictures. The place was packed. The two barbers were great guys but they gave everybody the same too short haircut at 90 cents a head! Everybody was talking. The great Ted Williams had just retired and there was a debate going on about whether he was a better ballplayer than Joe DiMaggio. This was New England, 60 miles south of Boston, so Ted won by a 14 to 1 vote. Then someone mentioned the young rookie who would take Ted’s place in left field at Fenway Park in April, 1961. His name was Carl Yastrzemski and none of the Swamp Yankees in the shop could come close to pronouncing his name. One fellow said he thought Carl might be greater than Ted. An older man leaped out of the barber chair and shouted “Enoch, you are a chowder-head. No one will ever be better than Ted.” The whole place erupted with laughter and the talk continued. After my haircut, Bob got his. But when he was done, I did not want to leave the shop. It was too much fun. People from 10-80 years old were there, everyone commented, and the needling was something to experience.

When I listen to local Radio Sports, I get that same feeling that I had 50 years ago. The barbershop had a sense of community that few of us have in our busy lives in 2011. Well, for a few minutes in the car, Radio Sports gives it back to me.

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

Wal*Mart is WalSmart

2011-01-30T13:04:00.001-08:00

Last year, I wrote a post entitled “The Wal-Mart Conundrum”. It attempted to provide a balanced view of the world’s largest retailer (see Media Realism, May 26, 2010). The post generated a great deal of mail both pro and con. I promised to continue to monitor the retail powerhouse and that is what I will be reporting on in this entry.

A few years ago, William Marquard, a very solid business consultant, wrote a book entitled “Wal-Smart, What it Really Takes to Profit in a Wal*Mart World” (McGraw-Hill, 2007). It is an excellent book and I highly recommend it. He does cover some of the issues that Wal*Mart faces today and he does not duck the criticisms they often receive. What he does is paint the clearest picture that I have seen as to why they have been successful. He goes on to add that we now live in a Wal*Mart world and the secret to success for many companies is not to take Wal*Mart head on but rather to use their techniques to survive.

Boiling it down, he says it all comes down to what he calls “The Productivity Loop.” He describes it as follows: “The loop is an endless cycle—reduce costs, invest savings in lower prices, use lower prices to boost sales and generate higher profits to invest in reducing costs further”. When the loop is finished, Wal*Mart starts it all over again and he gives many good examples of the loop in action.

Wal*Mart staffers are relentless and continue to cut costs for shipping, communication, warehousing, handling, distribution, stocking, merchandising, labor schedules, and serving their customers. Their cutting edge work in RFID (Radio Frequency Identification) has slashed out of stocks and replacement costs.

Also, their corporate mantra is first to work out what NOT to do. Then they decide what to do and they try to solve problems one store at a time.

A big driver in their business is Everyday Low Pricing often called EDLP. Research has shown that it is the prime reason that people shop super-centers for groceries. EDLP allows them to run fewer ads (boo!), spend less on labor to change prices on shelves, less time on stock outs, and a great deal less time entering prices on company computers. This is especially important when you have 100,000 different products in a super-center.

Despite this, some consumers find EDLP boring so Wal*Mart still offers “rollbacks”. This helps blunt the “Hi-Lo Retailing” tactics that K-Mart, Albertson’s, Target (to a degree) and J.C. Penney use. These are simply gimmicks to generate store traffic such as big promotions, great sales, and lots of printed coupons.

By constantly going back to the productivity loop, Wal*Mart has changed the rules of the global economy. They have combined a new level of convenience, discount pricing, and above all, efficiency.

As we finally come out of this Great Recession (although terrific challenges lie ahead), we can learn a great deal from the Wal*Mart approach. Management at many firms still look to save almost exclusively by cutting people when times are tough and then are late to hire as things improve. I have never worked anywhere where waste was not dramatic in expenses, supplies, travel, or personal perks for senior staffers. Put the hammer down on expenses and you get the benefits normally associated with a nice spike in business. And, you can control it which is something that you cannot do with your customers!

Wal*Mart has its flaws to be sure. But, if we all acted Wal*Smart, our productivity would soar.

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

Groupon, Google, and The Future

2011-01-21T12:28:00.000-08:00

In early December, I was surprised that on-line and media giant Google had made a $6 billion bid for Groupon. The daily deal site, Groupon, struck a lot of us as an excellent coupon site but not something that was or could be transformational such as Google itself, Netflix, You Tube, or Facebook.

A few days after the big bid, Groupon turned it down. The chatter was widely scattered—1) they should have taken the money and run, 2) they will soon be making $1 billion per year so why sell out for six times earnings?, 3)Google was crazy to offer way too much for it, to 4) this is nothing but an on-line version of Valpak and is not worth much.

In recent days, Goldman Sachs has announced that they would like to handle an Initial Public Offering (IPO) for Groupon.

Facts are fragmentary as Groupon is private but let us look at this as dispassionately as possible.

The companies like Google and Facebook really changed things in our lives. They are revolutionary. Their technologies are unique and not easy to replicate although many will try. Also, they grew almost on their own after the initial set up. Interestingly, it is the users who now do the heavy lifting for Google and Facebook. For example, a few thousand of you will read this blog this week. Google gave us the framework and you and I do the rest.

Don’t get me wrong. Groupon is every inch a real company. Their localized daily deals are tapping into the more than $130 billion per year in LOCAL advertising which has been a bit of an Achilles heel for Google to crack among others. Groupon, however, is very labor intensive. Today, Facebook has a half billion users and just under two thousand employees at last count. Now that is incredible scale! Groupon, with over 40 million subscribers has some three thousand employees. And, if they want to keep growing, they will have to add many more. To me, what separates them from other coupon options is that they have professional copywriters putting together their offers. They will need far more if they want to maintain high quality and add many more markets with DAILY offers. So, as they grow, they will have to add a lot more people, get bureaucratic and margins could stay flat.

Competitive threats abound. Living Social is an on-line alternative to Groupon that is getting some traction and more are starting or waiting in the wings. Because Groupon is not unique, they have no “moat around the franchise” as Warren Buffett likes to describe his favorite businesses.

To me, Groupon is also different. Thousands of on-line businesses were started a dozen years ago, and most failed quickly and miserably. Others like Google, EBay, Facebook have been huge successes. Groupon is somewhere in the middle. They use the new technology to deliver a homely and old service but they do it very, very well. They can be solidly profitable for sure but they do not strike me as being the next Google, Amazon, or Facebook.

One thing nags at me. Is this a mini-bubble all over again? In late 1999 and early 2000, dozens of internet companies had IPO’s and were pursued recklessly by many retail investors. The high water mark came in the 2000 Super Bowl where several new companies without any sales (!) advertised on the top rated broadcast at over $2 million for 30 seconds. Many were out of business within the year. With Goldman Sachs helping Facebook with a private placement and now Groupon possibly doing their own IPO, things may be getting a bit frothy again. Maybe we have a social media bubble developing.

Groupon is a solid operation but will face serious competition in the future. They are not the silver bullet that Google wants or needs to put a new spike in their growth beyond search. And, they will not be a transformational company that changes our lives in a big way.

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

TV--An Adult Conversation

2011-01-12T07:13:00.000-08:00

These days we hear a lot from Washington about the need for adult conversations. Sometimes, the topic is Social Security, Medicaid/Medicare, the budget deficit, or the ongoing wars in Iraq and Afghanistan. To date, with few exceptions, I have yet to see much in the way of what I would categorize as an “adult conversation.”

Today, Media Realism is going to attempt to have such a discussion on the current state and future of television as an advertising medium in this country. The issue is multi-faceted and complex. Lots of people discuss one part of it but few try to look at it as a whole. Hence this post.

Basically, I see the following as key issues interwoven into the discussion:

1) Commercial avoidance
2) Free TV vs. Paid TV
3) Copy Lengths
4) The Future of TV in a digital world

1) Commercial Avoidance—this is the big one that does not get nearly as much attention as it truly merits. In December, we “crossed the Rubicon” where it now appears that 40% of American households have a DVR (time shifting device). This is a bombshell issue that I referred to as “The Elephant is All Our Offices” (see Media Realism, January 6, 2009). If people are taping shows, the odds are overwhelming that they are zipping through commercial breaks when they re-play them. Some studies indicate that the majority of DVR owners dutifully watch the whole two minute commercial break during playback. C’mon, get real.

Nielsen now provides primetime numbers based on live telecast plus three days and live telecast plus seven days. And, many top rated shows are heavily taped and re-played later. For a few decades, top rated shows have always been premium priced relative to lower rated fare on a cost per rating point basis. Now, with 40% of homes owning a DVR, I would be careful not to chase programming that is taped heavily. The premium that you pay may be much higher than you realize. Also, as the average rating of all programs have declined, is it worth it to pay a 200% premium for a show on a cost per eyeball basis? When programs delivered a 20-30 rating, absolutely. Today, however, the top rated shows do not deliver the unduplicated reach that they once did. On top of that, maybe 70% or more of the audience is deleting your commercials when they play it back.

I have monitored this closely for years. It is not just the DVR that has increased commercial avoidance. While remotes have been around since the late 1950’s, people became grazers across the landscape during commercial breaks when they had 100 plus cable channels or satellite options. Now, people hit a dozen channels or more during a break. During football and basketball season, millions watch two or three games at once as they surf for action during breaks. What I have noticed and can quantify is a direct correlation between DVR penetration and TV performance. Ten years ago, a four week TV buy for an established brand with 1100 rating points behind it could deliver a fairly predictable bump in sales. With each passing year, using the same daypart mix, you needed more weight to trigger sales to move up. Now, in many categories, that 1100 point buy of 2000 needs 1500 points in the brave new world of the 2010- 2011 season. Yes, there are other factors such as competition and a weak economy but target persons simply not seeing your commercials is a large part of it. And, it will only get worse with each passing year as DVR penetration rises and TV options grow.

2) Free TV vs. Paid TV—the press still harps on those people who “ditch the dish” or “cut the cable cord.” They brag about how they get by with rabbit ears or an antenna. Others often have no TV but rather rely on some combination of Netflix, Hulu, You Tube, a Roku Box, Apple, Amazon, or Crackle. After spending a lot of time researching this, most of these people tend to be young, very well educated types who lead hyper active lives. They are technically quite sophisticated and have no problem searching for 2-3 minutes to find something to watch. In an earlier post, I have mentioned that cable had an ace in the whole with sports. If you love sports, you need cable to get your weekly fix. Well, a few young readers angrily notified me that with P2P streams, they get all the sports that they want for free (do you know what P2P is? Better check it out).

My best estimate is that the number of domiciles giving up cable or satellite totally is about 70,000 households per month. If the trend grows to let’s say 200,000 per month, watch for some swift action by cable and satellite providers.

All of this raises an issue that I still have trouble understanding. Every day I continue to be amazed at how much is available online. Weeks can go by when all my series viewing is done via Netflix or Hulu.com. With Hulu, I may see 40% of the commercial load that I would see if I watched a program live. When will the networks and cable players, who are the content kings, start to block their programming to certain on line entities? I noticed with great interest that the major networks are not allowing Google TV to carry much of their programming. Clearly, Google could buy anyone out with their free cash flow. So, they fear Google. Yet, a danger does exist with these smaller players that continue to chip away at the advertiser supported audience. Every person who watches something on Netflix or something smaller and more exotic, hurts commercial TV and cable. As we look back years from now, part of TV’s decline may be death by a thousand small cuts.

By 2013, SNL Kagan projects that 46.3% of U.S. households will have at least one TV with a broadband connection and some 7% will depend on the web instead of some form of pay TV. That is only two years away!

3) Copy lengths—TV spots are getting shorter. Today, some 34% of the commercial load is 15 second commercials. With DVR activity plus the inevitable itchy trigger figure on the remote, fewer commercials are getting seen. I know of three professionals, whom I do not think know each other, who are running lots of five second commercials. The issue is simple for one—“if I run more spots, period, I have a better chance of being seen. And, if people are channel hopping, they may see my entire message.” Another pro says that, to him, TV spots are video billboards so five second announcements work really well. They all use TV successfully but they seem to be adapting more imaginatively than most to the developing trend of commercial avoidance. Interestingly, one is about 30, the second 50, and the third around 70 years old. Being smart spans all generations! Also, this trend would tend to really favor established brands and retailers where TV advertising can be used as a reminder. A new player needs longer copy to establish who they are to consumers.
4) TV Potential—20 years ago, everyone was buzzing about the potential of interactive TV. You would watch a political debate and phone in your preference or buy a product on-line immediately. More of this is coming and it will make TV far more dynamic medium that it is now. For example, sports fans will be able to connect with fellow zealots in real time across the country. This could be a great tie-in with mobile advertising and far more interesting than Twitter. Cable has lots of new products in the pipeline and Google TV should be able to provide some remarkably granular data on audience attentiveness that will be invaluable to advertisers going forward.

Does TV still work as ad medium? Of course it does! Not as well as it once did given fragmentation and new technology but it is still, for the moment, king. The average household now has access to 130 channels. No one watches them all but most Americans like TV and they REALLY like their current viewing habits. With an aging population, many will never “cut the cord” or “ditch the dish.” They are content with the status quo.

TV is still very much viable. Dismiss as nonsense those who say that they are going 100% digital in a year or two. Unless they have a boutique product, sales will tank and they will be jobless. At the same time, realize what is going on with television advertising and more importantly, the speed of it all. We are not in “revolution now” mode. The evolution, however, is steady and relentless and each of us needs to shift gears each year as the new reality unfolds.

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

2011 Media Forecasts

2011-01-02T18:26:00.000-08:00

Happy 2011! This promises to be an interesting, even watershed year in several media types so I decided to publish an annual forecast. Here goes:

The Economy

American consumers appear to be making a sincere effort to clean up their personal balance sheets. Christmas sales were surprisingly good but interestingly credit card balances did not soar. Few people seemed to be spending what they did not have. So it appears that our tepid and very fragile economic recovery will continue. Autos and finance seem to be recovering some which will help advertising. Housing remains quite sick and six major markets hit new lows Vis a Vis the 2006 high water mark for home values. Foreclosures continue to rise and may continue throughout the year.

What can go wrong? Inflation! Insanely, the U.S. government Consumer Price Index no longer includes food and fuel as components. With oil at $91 as we write $100+ plus per barrel is definitely in sight for 2011. If gas at the pump jumps to $4 per gallon, the economy could tank quickly. Grain and beef prices are rising as well. So, if food and fuel rise, other parts of the economy will suffer. We won’t stop going to work if gasoline is $4 per gallon and Americans surely will not stop eating. Every dollar that goes to those two items will be diverted from much retail activity and, sadly, much of the gasoline money will go overseas. So, while it looks positive, the 2011 economy may not grow as much as we hope.

Network TV

Each year, some pundit or two says that “this will be the last year of the obsolete network TV upfront marketplace.” And, each year, the upfront sets a new record (the upfront is when major advertisers buy up to 80-85% of the available network TV inventory in spring for the season that begins in September). Last year, I believe it was about $8.3 billion. Well, 2011 will be no exception. Expect a 5-6% increase even though the audiences are getting smaller, commercial avoidance is growing, and new alternatives abound. Why? The big players need it as a security blanket. They honestly do not know where to deploy the funds. Importantly, for all the attacks that it gets, network TV still raises awareness and pulls through sales better than anything else for many advertisers.

Cable TV

Should do even better than network TV! The choices are huge and a clever media team can put together a package of cable channels that can deliver excellent reach and minimize target waste. The promotional aspects of cable remain strong as well.

Spot TV

This local medium should have their best showing in several years even with virtually no political advertising. Auto and financials will lead the way in many markets. In 2008, many people postponed buying a new car due to job loss or fear of job loss. Now, the old clunker just has to be replaced. Local TV stations will benefit mightily here. Do not be surprised if billing is up 6% nationally.

The up trend will not be consistent, however. Some states and many municipalities are broke. Politicians are out of smoke and mirrors in some areas. They will have to fire government workers. California will be the place to watch. Once again, the inimitable Jerry Brown is governor of our most populous state. He was governor way back in 1975-83. Despite his quirky reputation in the press, he was an authentic fiscal hawk. When he left office California had a $5 billion surplus. Today, he inherits a mess. At 72, Brown knows this is his last hurrah. I think that he will do the right thing. To right the ship, he is going to have to cut the size of government in California significantly and, to do that, he will have to lay off thousands of state employees and have some kind of serious pension reform (translation=lowering benefits). The Sacramento TV market could suffer while a San Diego may not be affected much under this scenario. Watch the states, carefully. New York, Illinois, Rhode Island, and Arizona face similar challenges but I bet that Brown will be the most candid and act the fastest.

Local Cable

This medium has even better prospects than spot TV. Selling by zone, new networks, plus nice promotional support add up to a fine year as long as gasoline prices does not upset the applecart and hurt local retailer spending.

Spot Radio

This aging medium will have a decent year (+4%). Some markets will do better than others due to the local economy and aggressiveness of the sales teams. I must say that I admire the many local stations that have brought in many new advertisers to radio over the last two and a half years. They knew they had to scramble and many did.

Outdoor

The last mass medium should have a banner year. We would not be surprised if advertisers bid up the price 7-8% here nationally. Many traditional players who cut back some on TV may move to outdoor this year rather than on line options.

Magazines

This will be another year of challenge for many titles. Ad revenue will likely not increase for many so they will have to raise subscription prices some or go to non traditional sources of income with new applications. Some will succeed; many will not.

Newspaper

The last two years have been horrible for this industry. Double digit billing declines and sharp circulation losses were in evidence for many papers. Incredibly, in 1999, ad revenues for the industry were over $46 billion. Now they are roughly half that if 2011 projections hold.

All eyes are on the New York Times. Sometime early this year, they will launch their “metered pay wall” where they will charge on line readers for their product. That is not where my attention will be. The Times is an iconic institution and many readers (some in my own household!) will cheerfully pay something for it. What I will be hovering over are the dozens of other papers across the country that are also going to be experimenting with pay walls in 2011. Can pay walls work in Dayton or Missoula? To me, that will be the test. Also, can micro-payments be worked out from those who want to only read a columnist or two? Monetization of online readership may take many forms.

Others say the future of newspapers lie with the Kindle, IPad or other devices. Time will tell. This year we will learn a great deal. Also, can they ever get young adults back? Few that I survey have any interest in newspapers.

Mobile

This area should have the most explosive growth but it is starting from a very low base. Mobile advertising is much bigger in Europe and Asia than it is here in the U.S. Applications are growing and are increasingly sophisticated. There will be lots of testing here but percents of budgets will likely remain under 2% for most advertisers. This is a great long term play. Agencies need to learn all they can about mobile now.

Internet

Continued solid double digit growth here is a slam dunk. Google will keep expanding and search dollars should grow nicely.

Social Media

This area has all the sizzle and some of it is deserved. Facebook had a stunning 151 million unique visitors in October. And, nearly one in four page views took place on Facebook.com. This was nearly 4 times what You Tube delivered over the same period. So, Facebook is primed for another explosive year of growth.

This may be only a straw in the wind but I see a possible shakeout coming across social media that could hit this year. My reasons are pretty straightforward:

1) A lot of people are there only because they think it is the thing to do. Mid-sized agencies are often on Facebook because they want to appear sophisticated to their clients and the clients, not wanting to appear out of it, invariably go along.
2) In many cases, the wrong people are doing it. All too many set up a Facebook account for a client and then ignore it. This is deadly. Set it and forget it cannot work in social media. Experienced hands need to monitor activity, answer complaints, and keep the material fresh. It stuns me how many obsolete coupons are still up on sites. Or weeks go by with no commentary on consumer actions.
3) Facebook is almost in a bubble. It reminds me of the dot.com craze in the stock market in late 1999 and early 2000. Expectations are so juiced up that it almost has to end badly for some people. I have heard more than one alleged professional say “forget TV and database management. Facebook will bail you out.” We are heading for a train wreck which is sad as social media has a brilliant future for brands and also in B to B action. Lots of people are going to get burned here. Make sure that you are in experienced hands and that you work the social media of all types very aggressively. If you are not going to be hands on, don’t do it!
4) Some candid friends at agencies have told me that they cannot prove that social media is working at all for their clients. Others say that they have no idea how much it contributes to sales. The whole concept of creating a relationship rather than direct selling is confusing to mature marketers. Some may pull the plug unless a direct link between their social media activity and sales can be determined.

Ad Agencies

For the first time in several years, agencies should have a decent year if the economy holds together reasonably well. The big international holding companies should have a nice year as global billing should be up at least 6%. And, if autos and finance rebound domestically the mid-sized players and small fry should see some daylight as well. Raising fees will still be dicey and if you work at an agency, don’t expect much of a raise (again). One bright spot is that some larger companies are unbundling projects and new media to smaller specialty firms rather than getting the slow service and high costs of their major agencies. If you TRULY have a specialty here, you may do well.

On balance, 2011 will be a pretty good year if the economy keeps creeping along.

I wish all of you a prosperous 2011.

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

Go East, Young People!

2010-12-21T13:37:00.000-08:00

In 1841, a minister named J.B.L. Soule allegedly drafted an editorial in the Terre Haute Express that included the term “Go West, Young Man and Grow Up with The Country”. Urban legend has it that 14 years later, Horace Greeley of The New York Tribune stole that line which served as a rallying cry for the emergence of the American West.

As we approach 2011, perhaps the line for the genuinely ambitious and adventurous would be “Go East, Young People.” In about three years, the Asia Pacific region will be billing more in advertising than North America (U.S., Canada, and Mexico). And, looking forward given demographic and business trends, the Asia Pacific area will soon become the new global advertising hub by 2020.

What is the Asia Pacific region? Most demographers, financial analysts, and political theorists define it as the following 12 countries: China, Indonesia, Hong Kong, India, Australia, South Korea, Philippines, Thailand, Malaysia, New Zealand, Singapore and Taiwan. Some day soon Vietnam and New Guinea will be part of the list.

As we write, the annualized advertising expenditures are tracking at about $37.1 billion for 2010. Newspaper advertising has declined for the first time but TV, magazine, outdoor, internet and especially mobile are off the charts in terms of growth.

More telling is from a recent Nielsen release on consumer confidence. Looking at the whole world the leading 10 nations in terms of an upbeat outlook are from the Asia Pacific cadre with the only exceptions being Saudi Arabia and little Denmark. In tune with confidence, people in the Asia Pacific are future oriented. When asked what they would do with spare cash, Nielsen reports that 37% in the Asia Pacific countries would invest in stocks or mutual funds. The rest of the world lags way behind at 21% (perhaps they would pay down debt?).

Over the last year, media billings in some of the countries were very high compared to the previous 12 months. Nielsen tracks it at Indonesia +15%, Hong Kong +16%, India +15%, and Taiwan an eye-popping 19%. No nation in the group delivered less than +6% year to year.

The other thing about the region is that it is not monolithic in media usage. This is particularly true of internet activity. The Japanese and Koreans spend a lot of time blogging (can’t be all bad!), while, in Vietnam, mobile is the preferred method of internet access. The Australians and Chinese tend to use standard internet portals for their on line action.

These days many of my students and young people ask me what is the one thing that they can do to help their careers get off to a fast start. I answer with a straight face, “Leave the United States.” After they get over the shock, I tell them that I would like splendid young people like them to remain Americans forever. But, spending a few years overseas will pay very rich dividends over the next few decades in their careers. People who live overseas for a time come back with a perspective that their home bound colleagues lack. They may not be fluent in Mandarin but they can greet Chinese businessmen in their native tongue forever and understand better where their visitors are coming from in negotiations. If you live abroad for a while, you see America as it is and usually appreciate our freedoms more when you come home. Not all traveling businesspeople eventually get into the corner office. They do, however, have a certain self confidence and assurance that most of us do not have. They have seen more and experienced more. In a global economy, they can be invaluable to many firms and are simply more interesting people to be around.

I wish you and your families a very Merry Christmas.

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

Not Your Grandfather's Economy

2010-12-17T11:06:00.001-08:00

This year, in the opening statement to his annual report to shareholders, J.P. Morgan Chase bank chief Jamie Dimon wrote “this is not your grandfather’s economy.” Whether you like big bank executives or not, Dimon’s statement was right on the money. I admit a grudging respect for him compared to all other money moguls.

The theme is an important one as we look at today’s economy and the mood of the people. For perhaps the first time in our long history, the majority of Americans do not look to the future with optimism. In a way when you look at the statistics, you can see why people are discouraged.

As we write:

1) Nearly one in five Americans is out of work or underemployed. Sure, the official unemployment rate is 9.8% but just as many work part time or in lesser jobs than they are capable of doing.
2) One in nine cannot make a minimum payment on their credit card balance
3) One in eight is in default or foreclosure on their home
4) One in eight is on food stamps
5) And, most damning of all, real average hourly wages now stand at 1974 levels!

No wonder people are discouraged. My favorite European commentator, the late Italian Luigi Barzini, once wrote of us—“America is alarmingly optimistic, compassionate and incredibly generous. It is a spiritual wind that drove Americans irresistibly ahead from the beginning.” Today, the American dream seems like a nightmare. Some 29 million households live on under $27,000 per year. Exactly one half of women 70 years old live only on Social Security payments.

To me, the American Dream never meant two cars in the garage and a college education for all. I was brought up to see it as each generation doing better than the previous one. For my children those hopes are still very much alive. Sadly, they are in a real minority. For over 100 years, America had greater upward mobility than any other nation of size. Now, there is far more upward mobility in Canada and all of Scandinavia than the U.S. Data is not available for Asia, but one would think, given their explosive economic growth, some nations there have surpassed us smartly.

Some say we need another leader. Many hark back to the sunny optimism of Ronald Reagan as the prescription for our current ills. He was a wonderful speaker, came off as a real leader, and made us feel good about being Americans. But, the problems now are more structural than in our heads.

Right after his inauguration, President Obama commented that we needed to maintain a vibrant middle class as they were “the class that made the twentieth century the American century.” It is hard to argue with that no matter what your politics are.

What is going on? To me, we have lost our economic mojo. We had it good, maybe too good for way too long. Those of us in advertising, publishing and broadcasting let the good times roll. As long as people were borrowing and spending, people advertised and we had one hell of a ride. In 2008, reality set in and we may not all feel the pain but we definitely see it.

Everyone has heard the boring statistics that in 1950, some 30% of non-farm employment was in manufacturing. By 2009, it had dropped to 10%. So, our industrial base has eroded. To me, the middle class erosion is totally tied in to this. The INDUSTRIAL middle class is shrinking. Some data from the labor department released recently made the point chillingly.

From 1999-2009, some 45,000 factories or plants have closed in the U.S. Think about that for a moment, please. Another way to look at it is 84 per week or a dozen a day! The average plant employed about 200 workers. This is horrible but think of the collateral damage of small businesses servicing the workers of such enterprises that were also sharply affected.

So, if we are going to get out of this mess, we need to rebuild our industrial base. Everyone cannot work in Silicon Valley or financial services. The president’s proposal of transferring industrial workers to green jobs is well intentioned but will take decades and not make a huge dent in unemployment.

Here is the root problem to me and it is not a pretty one to talk about. Imagine if you were an executive of a foreign firm or an entrepreneur from outside the U.S. considering locating a plant in the U.S. Would you really want to come here? The Federal Corporate Tax Rate is 35% which is higher than any other major country except Japan. We will hit newcomers with terrible regulation and a workforce not as skilled or eager as it once was. Also, we are the most litigious society on earth. When traveling abroad you learn that they get by with far fewer lawyers and lawsuits. In Paris, lawyers are rare, almost exotic. The Japanese always tell U.S. attorneys who land on their fair shores that they would like “less lawyering and more conscience” from them. Interestingly, Japan has both one twentieth of the lawyers and crime of America. Hmm.

We need to start making things again. And, using what we have. Arguably, we have the world’s biggest reserves of natural gas in the world. Yet, the government order hundreds of thousands of gasoline fired vehicles each year. And, billions leave our shores each week to pay for oil bolstering up the regimes of countries that despise the American way of life. We can get out of this mess if we made America attractive to capital again. Especially global capital, regardless of its passport.

Winston Churchill once said that “Americans can be counted on to do the right thing after they have exhausted all other possibilities.” Most of us see what is unfolding. Let us hope the New Year brings a desire to do something about it.

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

Netflix, Cable plus ESPN

2010-12-12T12:52:00.000-08:00

Netflix is a great American success story. Almost every day the trade press mentions their latest surge in subscriptions and what a threat that they are to other media entities. Netflix stock has quadrupled in the last year which is vastly better performance compared to all other media or tech companies. And, it is given much of the credit for taking down the Blockbuster franchise.

Lately, a lot of buzz has been made of the Netflix/Epix deal where Netflix will carry their movies and really juice up the Epix subscriber base. As a result, Netflix increasingly will be viewed as far stronger competitor to premium cable channels that are movie oriented. In a recent interview, Ted Sarankos, the chief content officer of Netflix, said “our product is more complimentary to cable than specifically competitive to any channel”. Perhaps he is being a bit disingenuous. Lots of us see Netflix as a modest but growing competitor to cable.

Anyone who has an internet enabled TV or is anywhere where they have access to an internet connection may watch films or many of their favorite shows on Netflix. Couple that with Hulu.com and a little help from You Tube and many young people are beginning to question the need for cable or satellite. Young adults strapped for funds question spending $100 a month for TV is a major expense. On line options have great appeal to some, particularly the upscale and well educated light viewers. The idea of 100,000 films plus many TV properties when you want and, on an unlimited basis, generate lots of appeal. Netflix also appeals to both the high tech and the no tech. Many people in their seventies cheerfully subscribe and get a new film every several days via their mailbox. The young exploit the streaming video options that Netflix offers.

Cable has an ace in the hole, however. Sports. If you like ESPN, NFL Channel, Fox Sports, or the Big Ten Network, there is no substitute for cable or satellite. But even there, a chink may appear in cable’s armor.

In the middle of researching this post, I sent out questions to many readers, friends, and some Media Realism panel members about Netflix. Something very interesting happened. Several readers under 30 wrote and told me that if ESPN would put all of their channels on streaming video, they would cancel cable and get by with Netflix, Hulu.com, You Tube and their ESPN subscription. When I wrote back, they basically said that approximately $100 a month was a lot to pay for cable and that they would be happy to shell out $15 to receive ESPN on a streaming subscription.

This is heady stuff. While it is clearly not going to happen, it makes you think about what an incredible job that ESPN has done in branding themselves. More than one young reader basically told me that, to them, ESPN WAS cable. The cable industry will always have challenges with churn. They have done a marvelous job in improving viewer options and providing a wide range of services to subscribers. But ESPN stands apart and alone from all other players. They will not likely offer a non-cable option to viewers as they could jeopardize their amazingly successful cable presence and their lucrative advertising revenues.

Leading cable players are aware of all that Netflix is doing. Several are launching Vutopia, which is a souped up movie service with far more choices than current offerings. Several other ideas are in the works. And, perhaps they will re-structure their tiers a bit as time goes on. But, Netflix is not the last challenge that they will face in the years to come. I think that cable is up to the challenge but things will get harder not easier for them over the intermediate term.

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

Bought and Paid For

2010-11-26T18:19:00.000-08:00

Charlie Gasparino is a tough guy. He is easily the most pugnacious financial journalist that I have ever seen or read. Yet he is also the most unpretentious, dogged in pursuit of a story and ever loyal to his blue collar roots. As he has risen from the New York Post to Newsweek to the Wall Street Journal to CNBC and now Fox Business Network and the Huffington Post, he never seems to have been sucked in to the lifestyle of the major league success that he is. He has lost none of his outspokenness or sense of fair play.

Mr. Gasparino has a strong new book out entitled, “Bought and Paid For” (Sentinel, 2010). The subtitle is “the unholy alliance between Barrack Obama and Wall Street”. The book turns a lot of conventional wisdom completely upside down. Most people view Wall Street as full of Republicans who lobby hard for lower taxes and deregulation of the financial industry. At the same time, Democrats are the main street little guys who detest the financial leaders and all that they do. Slowly and convincingly, Gasparino builds the case that such assumptions are way off base.

The book starts off simply a listing of financial contributions by Wall Street executives to political campaigns since 2008. Surprise! They gave $20.1 million to Democrats and just under $14 million to Republicans.

The major thesis of the volume is that the Wall Street boys benefit from an increasingly larger government. When Bill Clinton set a goal for 70% home ownership, Wall Street obliged with new mortgage products that made it easier to bundle and re-package mortgages. They made a tidy sum in the process. And now, with the economy still moribund, and the middle class struggling just to hold steady, Wall Street is on a tear again. But, the average taxpayer will pay for Wall Street’s mortgage mistakes for decades. And, as we pile on more debt and still more debt, Wall Street gets a cut of that as well. So, Wall Street is not too adverse to a Democratic president despite the folklore.

There is also a fascinating portrait of Senator John McCain as presidential candidate McCain in 2008. He never was able to muster much support on Wall Street while the leading commercial bankers and investment bankers saw Obama as a moderate who would support them. McCain, a former POW who was tortured by the North Vietnamese “couldn’t stand being in the same room with guys who compared trading bonds for a living with warfare. As a man who had survived the brutality of war in the most literal sense, he found their talk unbearable.” Being from Arizona did not help either. Financial services were not an industry that he had to cater to in his House and Senate races over the years.

Now, Gasparino indicates that the tide may be turning. Wall Streeters are seeing that the president is not really oriented towards business at all. He stops just short of saying what some people suspect and it is this—no matter who gets elected Wall Street really runs things. Jim Carville, Bill Clinton’s enormously entertaining and engaging former aide, said back in the ‘90’s, that “when I grow up, I want to be the bond market” as they can stop anything. It appears that in the battle between Main Street and Wall Street, Wall Street has won and won easily.

I highly recommend “Bought and Paid For”. You may, like I, agree with parts of it. But Charlie Gasparino does not mince words and gives you a refreshing viewpoint that you are unlikely to see anywhere else. And, importantly, he, like most of us, is an ardent believer in free markets. He just wants to see the game played fairly.

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

Aging (Media) Brands

2010-11-21T08:25:00.000-08:00

It is quite clear that times change, our culture in is in constant flux, and above all consumer interests change. Often I discuss with people how their brand or more often media brand is no longer in tune with the times. Some agree, while others disagree with great vehemence. Here are some of the questions I ask of all players. It may come in handy for you some day.

1) Has you market changed? Do you face new or stronger competition? How well does your experience stand up to the people with whom you are competing?
2) Have new market solutions (like the internet) or customer preferences caused consumers to lose interest in your brand? Does your brand promise still hold water?
3) How is your brand identity? Do your logos or taglines seem out of step with cultural trends or current design looks?
4) What of your brand message? Is it in sync with current consumer tastes?

What I often suggest is that people do a brand audit. If one is unusually honest, this process can be done internally. Nine times out of ten, however, you need an outsider to smoke out the current strengths and weaknesses of your brand.

Is your USP (Unique Selling Proposition) or the distinguishing characteristics of your brand of increasing or lessening interest to the consuming public? Does your brand attract the people you aspire to reach or is it business as usual?

Sometimes entities such as cable channels can erase previously established value and start all over and actually grow stronger. To have such a transformation you need to have energy, total commitment and be very focused. Few do it well.

In a world where we all have to change or be left behind there are several caveats that sadly most still ignore. They would include:

1) Listen to your customers. Most don’t so you will have a tremendous leg up if you do.
2) Change and adapt as your customers need change. This is subtle and hard but pays incredibly rich dividends.
3) Many brands fail due to death by a thousand tiny cuts. By the time they realize that things are bad, they are too weak to change. Small mistakes add up. Protect your brand image jealously. Watch the details relentlessly.

If all this sounds like basic fundamentals, so be it. I was talking to a broadcaster the other day that was very enthusiastic about these ideas. He called 48 hours later to say that he was starting all over. The solution was that he was hiring a new weatherman!

Well. I wish him all the best but he seems to have missed the point. The real issue is whether he should still be doing news, period. His market is not large and he is in fourth place in a daypart that attracts an increasingly old and downscale audience. The addition of a new meteorologist does not strike me as the silver bullet that the station needs to turn things around.

Do you need a brand audit? Will your brand be better off in ten years? Will it still be around? As the Coast Guard’s motto says, you need to be “semper paratus” (always ready).

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

Fado, Fatima, and Futbol

2010-11-14T17:25:00.000-08:00

Antonio Oliveira Salazar is usually described as Portugal’s dictator from 1932-1968. Often considered to be a clone of his neighbor in Spain, Francisco Franco, Salazar was quite different. He was an economics professor at the ancient University of Coimbra. When asked in 1926 to help the military junta in sorting out the economy, Salazar stayed in Lisbon, the capital, and studied the situation. After a few weeks, he said he would only work for the government if given complete control of revenue and expenditures. The generals said no so Salazar calmly retreated to his economics chair at Coimbra.

By 1928, with the economy facing bankruptcy, the military gave Salazar the power that he wanted. Things turned around fast under his leadership and in 1932 he was named prime minister. During his entire term, the country lived as a military dictatorship with Professor Salazar the civil administrator. He was not your dictator from central casting. A lifelong bachelor, he was a quiet introvert and a serious scholar. The main similarity with Franco was that he shamefully encouraged the police to use informers and he censored the press.

Many observers said that Salazar kept on top with a cynical credo distracting the masses known as the three F’s: “Fado, Fatima, and Futbol”.
1) Fado is the oldest urban folk music in the world. It is often described as the soul music of Portugal. Salazar did not like it but it became a national craze and he went along with it.
2) Fatima is a religious shrine in central Portugal where in 1917 the Virgin Mary is said to have appeared to three peasant children. While widely followed in Portugal, Fatima is what is known in Catholicism as a private revelation. No one is required to believe it or take it seriously. Most popes since Pius XI have been devoted to Fatima but many priests dismiss it and I have never seen a poll among the Catholic populace on how many accept it. Salazar’s “regime” played it to the hilt, however, with some officials claiming that the Virgin Mary kept Portugal out of World War II.
3) Futbol—this is simply soccer. The Portuguese love the game beyond all bounds and the regime encouraged clubs and participation everywhere. The press was said to be encouraged to extend futbol coverage even though they needed little. At the same time, Salazar, a brilliant and serious scholar himself did nothing to improve education. By some measures, literacy rates fell during his era.

Long before 20th century Portugal, regimes had their own distractions. In ancient Rome, the poet Juvenal wrote that the way that emperors retained power and control of the people was to get them involved in self indulgence and trivialities. As the empire tottered toward collapse the people seemed to hope for two things—free bread and circuses. Things reached a low point when there were nearly 100 holidays per year.

Sometimes, lately, as we face a difficult future, I wonder if we in America are getting so involved with the trivial that we lose sight of what is going on. Sports are a great pastime but for many they are now bordering on obsession. It is not unusual for an adult American male to watch 8-12 hours of football (not futbol) on a fall weekend. People have a right to do what they want during their free time but it is almost as if many live vicariously through what others do in a stadium on a weekend afternoon. Their happiness is not with what they have personally accomplished. We in the media have only encouraged this by pouring larger and large amounts of advertising dollars into sports programming.

We had what many feel was an important election on Tuesday, November 2nd. Many Americans did not bother to vote. In many European countries they vote on Sunday so that more people can get to the polls. Can you imagine U.S. turnout if we held elections on November Sundays? I think many lazy boys would curl up on their La-Z-Boys, pop open still another beer, and vote for football.

Actually, the day after the election something happened that struck me as vastly more important than the mid-term voting results. The Federal Reserve introduced QE2 which injected $600 billion more dollars into the economy. QE stands for Quantitative Easing which is employed when all other avenues are exhausted in an economy (QE1 occurred during the financial crisis when over $1 trillion was created to prop up the economy). Usually the Fed lowers overnight interest rates to stimulate economic activity but it cannot do that any longer as the rates are nearly at zero. Financial writer David Dittman put it this way: “It does not involve the printing of money. The central bank (the Fed) will, with the simple stroke of a computer key, increase the credit in its own bank account. This newly formed money will buy whatever the Fed pleases—government bonds, equities, houses or corporate bonds from banks.”

Well, I agree that there is no printing press in the basement of the Federal Reserve building where a few fellows are stamping out $600 billion in new currency. But the effect is the same. And, immediately the dollar tanked giving us a backdoor devaluation of our currency.

I was upset about the QE2 event and spoke and e-mailed with a number of people about it. The next day a friend e-mailed me that, according to Google tabulations, the number of people who Googled QE2 or the Federal Reserve on November 3rd were only a small fraction of those who checked to see the availability of the McRib at their local McDonalds restaurants. Are we maybe getting just a bit wrapped up in the trivial?

Better hurry, folks. The McRib promotion will be gone in most McDonalds by December 5th. QE2? Not to worry. If it does not work as I think it won’t, Fed chairman Ben Bernanke is sure to give us QE3, QE4, and QE5.

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

Women on the Rise

2010-11-07T08:27:00.000-08:00

Across the western world, women are getting better educated, having more economic clout, and are far more prominent in top management in business and politics. Over the long term it is increasingly clear that the 21st century economy is a place where women will often be holding the cards.

This does not appear to be a short term trend to me. Demographically, things are in place in the United States for women to increasingly gain more economic power going forward. The first and most telling place to look is in our colleges and universities.

Figures vary slightly but it appears that women are approximately 58% of the enrollment in U.S. colleges and universities. And, women have significantly higher graduation rates than men. Some 60% of students in masters degree programs are women, and law schools and medical schools currently have an even split between the genders. MBA programs are 40% women today. In 2010, we had a first where there were 28,962 newly minted women PhD’s in America and 28,468 males with new doctoral degrees.

Why is this happening? Some sociologists claim that schools are more geared toward women these days and they value the self control and focus along with verbal skills that seem to come earlier to girls rather than boys. Maturity certainly plays a role as well. Virtually all educators agree that women seem better at time management than men of the same age. Culturally, there have been shifts as well. Today’s women are taking advantage of opportunities that earlier generations did not have. They work harder at an earlier age as many still believe that to succeed they have to be more focused and more productive than their male counterparts.

Men, on the other hand, seem kind of stuck. Jobs that used to attract high school educated men here in the states and provide lifetime employment are but a memory. Increasingly, boys are dropping out of high schools and colleges. Forty years ago, 34% of men went into industrial jobs; now it is 11% and dropping. Men are not adjusting to the knowledge based economy while women, on a relative basis, are thriving. Young men seem to be the last casualities of the end of the era of US manufacturing. There are declining male voting rates in the U.S. No one seems to be encouraging, motivating, or prepare men for their now inescapable future. As more boys fall to the wayside, what can be done?

Colleges are very sensitive about gender imbalance. Few administrators or admissions officers want to talk on the record. While the truly great schools will likely have gender parity as they can pick the best of the best, lesser schools have a real issue. If they move toward parity, are they really engaging in “affirmative action” toward men? Off the record, administrators sometimes confirm that they fear academic standards will be lowered if each new class is approximately 50% male.

Now, let us fast forward about 10 years. In 2010, 51% of people in the US with managerial titles are now women. That number has to be higher in 2020 given the emerging education gap between men and women.

On a social basis, the education gap will cause some discomfort as well. Traditionally, most of us date and eventually marry people who have approximately the same level of education or intellectual curiosity. The common statement from young adults generally is “I want to meet someone on my level.” If, in a few years, 10%+ more women will be vastly better educated than men of their age, how will many women find a soul mate? Today, many successful women say that it is often hard for them to find men who are not threatened by their intellect, impressive jobs, or lofty income. What happens when there are millions more of these women and the available men of the same age seem way behind?

Demographically, people are marrying later than they did 40 years ago and fewer are marrying period. It would seem that fewer professional women will marry as time goes on in the U.S. And, those who do may face some unique problems. Can fragile male egos deal with a wife who earns two or three times what they do? Right now, in two earner households, the wife usually stays home when a child gets sick. That will not happen going forward if the wife is the member of the couple with the high powered job. Big earners will have husbands who will work part time or not at all in some cases.

Interestingly, in countries such as Denmark and Norway where the state provides extensive day care as well as maternity and paternity leave, men seem to help out a lot more in the household. And, they are having larger families than countries like Italy where men do little household chores after work. So, something will have to give in lots of households in the U.S. It is very unlikely given our financial stress and center right political tendencies in the U.S. that America will move toward a Northern European style provider state. Men, then, will have to get more involved in the homely aspects of family life if things are to run smoothly.

Have you thought about these changes that are in motion and cannot be turned around for at least a generation? Can young men become academically competitive with women? Importantly, how this will affect the advertising business? Messaging will have to be different. Right now, a great deal of advertising is aimed at housewives even though relatively few still exist. If men start doing the laundry far more often than now, will Tide start advertising on ESPN aggressively and maybe during the day as millions more men may be at home? Financial advertising will shift as they will aim more at women. If she is earning the money, she will want a huge say in where it should be deployed. It is likely that auto advertising will likely change significantly as well.

Demographics are destiny so these changes are set in motion and will occur. Be ready for them and if you have a son, give him a little extra encouragement and preparation.

If you would like to read more about the topic, there are two recent sources that you might find interesting:

1) “The End of Men”, from Atlantic Magazine, July/August, 2010
2) Influence by Maddy Dychtwald, Voice Publishing, 2010

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

Mid-Sized Malaise--Part Four

2010-10-26T05:57:00.000-07:00

This is the final post in a series about the current issues facing mid-sized Advertising Agencies.

Bucking the Trend

So far, we have focused on the problems that struggling mid-sized Agencies have been facing. In my sample, two executives at mid-sized firms told me that they were doing very well, thank you, but they were sensitive to the challenges that others were facing. I know both of these gentlemen quite well. One I knew as young man. He was extremely well organized, interested in every aspect of the business, and highly ethical. The other is a creative dynamo who works well across all media types and digital platforms. We correspond regularly.

Why are they and their firms doing so well? Both firms have not forgotten that excellent creative has to be the very soul of any advertising agency. High standards are maintained. My creative director friend does not segregate digital from the rest of his creative team. They work in squads with a conventional writer and art director paired with a digital player. This cuts turf issues and they can play off one another in development of the message. Also, he makes an important point to those who speak somewhat breathlessly about Facebook. “Most people do not want to be marketed to, especially in social media. We do Facebook and other digital work as part of a campaign for visibility. Games are developed with pretty good participation but no hard selling. The goal is for creative buzz, not to sell. We make this clear to clients upfront.” The leaky barrel due to marketing director turnover could affect them at some point but in the last year they have picked up significant new business.

My other upbeat contributor says his company was fortunate to have entered the digital arena years ago due to key client acquisition. They developed the necessary skills early on and, in my opinion, probably before some of the mega-shops. Social media is still a challenge as it is for everyone but they are working on it.

I also had wonderful sessions with two old friends who have downsized their companies in recent years and are thriving and happy. Their modesty was refreshing as well.

One ran a fairly good sized shop some years back but now has a very well thought of boutique in a large U.S. city. He says that “our market has been backsliding as an advertising center for years. Right now, we are viewed as a big player in town and we are nothing”. How many chiefs would say that? “Management has shifted frequently at some of our clients but so far we have been able to hang on to the business. Our approach is starkly different than others out there. We have no huge overhead. When we have a project, we gather in senior people that we trust. They only work when we have an assignment. There is “no twelve people to screw in a light bulb” nonsense that you see even at mid-sized shops. Every time you put a layer of people on a job it costs you money. We never do that.”

Another friend downsized before the 2008 crunch and is based in a small Northeast city. Now he works mostly on a project basis. His approach is similar to my old colleague a few thousand miles away. “I have people that I can go to for TV or radio production on a short fuse. We have worked together for years.” Also, he says that the turnover is great with some clients. “Sometimes, I feel as if I am doing a new business pitch for every assignment that we want.”

I told them both that their approach is analogous to what Clint Eastwood has done at Warner Brothers for decades. He has a “boutique” studio within Warners and for film after film he pulls in the same cameramen, lighting specialists, set designers, and often actors among other disciplines. The result is films shot both on time and under budget. It has been described as a family that is very functional. Both loved being compared to the great Eastwood but said the analogy is dead on. One added “I try to explain this concept to prospects. Sometimes I am halfway through it and if I see their eyes glaze, I know that my team is toast and the prospect wants to go the conventional route.” He also is a big believer that larger shops could do well if they approached certain smaller clients with this boutique approach. The issue would be whether the team in the mid-sized or large shop could turn on a dime as he does.

My friend in the Northeast says he never worries about getting assignments. “If you are smart, good and are willing to work very hard, you can always find work even in a tough environment such as this”.

These are two great people who never whine and can teach us all something.

Conclusions

Are mid-sized shops finished or will they come roaring back when the economy someday rebounds smartly? I would say neither. There are always going to be agencies such as the two mid-sized profiled above who keep turning out first class work and keep their teams fresh and motivated. Someone will break out and become the next Crispin Porter, I am certain. But the success stories will be less frequent.

Everyone admits that we are going through a revolution as we move to the digital world. Yet some exhibit remarkable selectivity about how it will affect their firm or their jobs. To me, what is going on at mid-sized shops in simply one more case of Creative Destruction. This is a concept popularized by Joseph Schumpeter of Harvard back in the 1940’s. (For a more detailed explanation see “Schumpeter Lives in 2009 Media, Media Realism, January 30, 2009.)

Creative Destruction in a nutshell states that a new idea enters the marketplace and makes existing capital relatively worthless. The new idea tends to be innovative and radically so. Radical innovators (read digital and media fragmentation) cause some real hardship to those involved with the existing status quo companies. Layoffs rise in the obsolete companies and many suffer in the short term. Others suffer long term as they are unable or unwilling to be retrained in the new emerging world.

The mid-sized players with no niche but promised service are not long for this world. Those who have embraced the change and developed skills consistent with the new reality may outlive us all. I wish them the very best.

Finally, I wish to thank the dozens of people who gave me countless hours of often precious time to put this series together. Your honesty and passion for your business is inspiring.

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

Mid-Sized Malaise--Part Three

2010-10-24T08:43:00.000-07:00

This is the third installment of a series that I am writing about the current state of mid-sized advertising agencies.

Marketing Research, Strategic Planning, and Account Planning

I lump these three disciplines together because in both good times and in bad this tends to be the Achilles heel of a mid-sized agency. Most do not have the resources to buy or conduct top quality research. And the people in those positions at mid-sized shops are usually not formally trained. Their knowledge of statistics is sketchy at best in many cases. Some want to look bigger so they take an account supervisor and dub him or her a strategic or account planner. It often ends badly.

Generally, the CEO, Account Service Chief, or the Creative Director drives the bus on strategy. I have met a number who have a very good intuitive feel for what will work or not. Some get to the point where they tell the “researcher” or “planner” to write the research report to back up the creative executions that they want to present. Don’t tell me it doesn’t go on—if you are honest and kept your eyes open, you have seen it too. Maybe you still do.

Often researchers or strategists at a mid-sized shop are strapped for cash. So, they have someone in media do reams of MRI or Simmons cross-tabulations. They built a massive power-point with it, highlighted by way too many bullet points on each page. Some people have a knack for building a logic flow out of it that sounds convincing (I used to be rather good at it myself).

A friend of mine has sold research services for 30 years. He says “agencies today want research that is quick and cheap. If it is very vital new business pitch, they pay just enough to get a few bullet points for the main presentation. A few very large shops do custom work but most of it comes from big companies”. Even the media giants do surprisingly little. The two exceptions are MTV and ESPN. He described ESPN as a gem that knows the profile of everyone using each of their burgeoning platforms and cross-usage of them as well. Perhaps that is why they keep growing and get a huge premium over the competition for all aspects of their sales inventory.

Account Planning is another area that is often an absurd fiction at mid-sized shops. In my long years in the game, I have met two authentic account planners (See Media Realism, 10/13/09 "Is It Really Account Planning" for a detailed discussion of account planning).

Putting people in jobs and dubbing then strategists or planners leads to some funny situations. Not long ago, I was at a meeting where the Sr.VP, Account Planning kept scrunching her face when I spoke of Brand Development Index (BDI) and Category Development Index (CDI). Finally, she blurted out “Don, what is this BDI stuff.” For once in my life I was speechless. The CEO put his palms up in resignation and told me to explain it. The client was not amused and collared me afterwards. It was a very uncomfortable conversation to put it mildly.

So, marketing research and strategic planning are areas where the mid-sized shops fall way short in most cases. They can use smoke and mirrors plus good instincts and common sense with small or mid-level advertisers. They are, however, naked in front of major corporations who have in house teams that would not consider hiring the strategic planner of the agency.

There are a few exceptions to this out there in the mid-sized world. And I mean FEW.

Media

This is where I spent much of my career so you might expect me to obey the 11th commandment and not speak ill of my media brethren. I actually will not attack them but there are some structural issues that put them at a real disadvantage in many cases.

The biggest thing that I notice from media people these days across the U.S. is very simple—fear. Here are some comments from sales executives widely scattered across the country that I have known for years and respect deeply:

“The operative term is scared to death. I can see the fear in their eyes at many mid-sized shops. The smallest are more often morphing into specialty/niche outfits as they are more successful focusing on the best burger in town, instead of banging out an entire menu…..It’s the mid-sizers who are not big enough to truly be all things to all people, and that grew too large, too fast that are indeed suffering. They swallowed hard and down-sized themselves over the last two years (like everyone else) but are now trying to super-serve clients with a skeleton staff. One by one the shingles are disappearing from above the office doors and good people are calling weekly asking “do you know anybody who needs an experienced media planner.””

When I asked a sales director in a major market if people are frightened, the response was “my observation is that many in media in mid-sized agencies are still fearful of the potential SECOND WAVE which could result in yet another downsizing at the agency level. People are guarded, cautious; playing everything close to the vest. Many in media have experienced the unthinkable—the larger than life Media Maven (boss) let go due to downsizing….the slash and burn of some entire media departments which has put many experienced media people on the street. No one wants to go out of his/her way and take chances on anything out of the norm. It is all SO MUCH about the post—now more than ever. I also get the feeling that no one wants to ask the boss to hire on new workers—even if there has been a big pick up with new account work. The attitude out there is that I have got to do more to keep my job.

A charismatic media researcher salesman whom I often find hilarious in private soberly weighs in: “What I am hearing at mid-sized shops is that larger agencies have cut fees or commissions and it is harder for medium sized shops to hold accounts or even stay in business. So to be competitive for less revenue means less money to pay top quality employees, less perks, less of everything. So the medium sized shops which once had a warmer feel to them and were attractive to the seasoned executive are now becoming places to avoid because the pay and resources are becoming too scarce….I don’t believe that the medium sized shop will evaporate all together but you will see consolidation and unfortunately some will go away. It is just a fact of contracting markets.”

Another media researcher sales maven says that the media teams are nervous but keep plugging along. They are overworked and not paid enough but seem happy to have jobs. He did add grimly that “there are no stars left in media departments. These people do not teach me anything I don’t know.”

A very thoughtful cable executive tells me:" I believe that the media buying community at all levels is scared to death for their jobs. A friend who is a buyer started looking for a job when she did not post on one of 13 markets last quarter. This is symptomatic of being overworked; she needs to understand that she is a much needed commodity….NO ONE IS HAPPY OR OPTIMISTIC RIGHT NOW".

From the world of sports, a seasoned pro says that the overwork is affecting the back office. He told me of a game being cancelled by rain and he had to move 18 advertisers. Immediately his team sent out an e-mail telling people that their schedule had been re-allocated. Two got back to him and one took a credit as the new spots were out of flight. He asked “is anybody checking anything but matching dollars. Twenty years ago, I would have had a dozen calls arguing about the make goods. Admittedly, the ratings are smaller today, but I think good people may be cutting corners”. This man has the ethics of a St. Thomas More but what if he did not?

The big problem facing the mid-level media teams over the next year or two will be the integration of digital and traditional media. Some make them separate mini-departments which can cause a knife fight for budget dollars. It is better for one Solomon to digest both recommendations, allocate the funds, and let each group optimize. Working together as a team is even better! Many, as we have mentioned in an earlier post in this series, fake digital. They buy ad networks and claim to have worked out an integrated on line strategy that optimizes delivery. “The publishers hate ad networks as it diminishes their product”, says a leading media researcher but if you have a digital team of one 27 year old, you play the game.

There are still a few people out there who do as little new media as possible. Most admit that they are having a hard time with social media especially for brands with mature customers. This is okay as all thinking people are struggling with it these days. You know that you need it but in what proportion of total dollars? With each passing year digital will earn a larger place in media plans. To those dinosaurs that resist it, there is no way that they can survive the crunch.

Some media people are not being trained well at all due to overwork of the senior team. Young planners are not learning about marketing like they used to. Some are scrappy negotiators by instinct but do not know the mechanics of where the Nielsen/Arbitron and now digital research comes from. Media planning disciplines don’t come up much as no one has the time to instruct. The proportions of each medium in the overall mix is key issue that gets little attention these days. Youngsters appear to guess at it as they have never learned the benchmarks or quantitative guidelines for it. When the old people go, a lot will be lost.

This should be the most exciting time since 1953 to work in media? Why 1953? That was when over 50% of America had a TV and television became a truly viable national medium. Today, another revolution is going on and smart youngsters should be able to ride the wave into brilliant careers via digital. At mid-sized shops, the financial squeeze will make that difficult.

Finance

Several people harked back to the good old days of the 1980’s when interest rates where high and agencies made a bundle on the “float.” The client paid you and you deposited the money, and paid it out to the media later, pocketing a tidy sum of interest. Well, others disputed that saying that the mega-shops were real sharks with cash management but the mid-sized guys never really made a lot out of it or were that great at it. The question is getting moot today as many advertisers pay networks, stations, cable players and publications directly. Also, the clients are smarter. Why should they give their agency an interest free loan?

To be continued in about 48 hours.

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

Mid-Sized Malaise--Part Two

2010-10-22T08:18:00.000-07:00

This is the second installment of a series that I am writing on Mid-Sized Advertising Agencies.

Staffing and Compensation

Here is an area that may get less press than other agency issues but, to me, appears to be the biggest source of frustration.

A longtime agency CEO put it bluntly—“including me we have four senior people left and about 45 kids. There are a few old clerks in accounting but almost everyone else is under 30. Those of us who are senior are really stretched. The kids are eager and some have great potential. But one of us graybeards has to be at virtually every meeting. We are tired and too old for this stuff.”

The idea of having a handful of old pros and a large roster of rookies percolates through many conversations with agency chiefs. Advertising has always been a young person’s game but now many shops do not have the next generation of top managers waiting in the wings as they cannot afford to keep them on staff. A few admitted that there is not going to be a next generation unless things change and quickly.

With money tight, raises are getting really scarce except for those at the very bottom of the pyramid. One chief said “Raises? Forget about them. I haven’t had one in years and all senior people have been frozen for several years as well. This may sound cynical but where can they go? We are virtually the only game in town and our competition, if you want to call them that, is in worse shape than we are. I would like to give increases but we are barely breaking even these days”. A few others told me that they and their partners have all taken pay cuts but kept the employees salaries flat.

The feeling of being trapped is very real. A copywriter in his 30’s told me “my boss is a liar. He tells new employees, interviewees, and school groups that he has never cut anyone’s salary. That is not the whole story. Four years ago I had a $60,000 salary and a $15,000 bonus. He told me that I had a bright future. So, with pressure from my wife and in-laws, I bought a nice house. The next year my bonus was $5,000 and I have not had one since. There is no other place in town that I can work and get my current salary. I can’t move as I am under water by $100-120K on my mortgage. So he has me right where he wants me. I know he is not totally to blame but I feel as if I am in prison”.

The feeling of indentured servitude is surprisingly widespread. A radio rep with whom I am quite friendly may be the dean of all salespeople nationally. He told that when he started over 50 years ago in newspaper sales, there were dozens of agencies in his fairly large city with meaningful billing. Today, he says, there are only five left standing and only one media director who knows what she is doing. Others echoed similar comments particularly those from the Midwest. One cable executive called it “The Incredible Shrinking Agency Base.”

Hiring youngsters makes sense from another perspective. “We don’t pay re-location expenses anymore for anyone. Maybe I would for someone I hand picked to replace me”, said a CEO. “Taking on young kids is great. They fill their car full of stuff and maybe have a U-Haul attached. I pay for their gas. They get a small apartment and if they get a chance somewhere else, they leave. Or, if it doesn’t work out, they do not have to worry about a mortgage. Our local talent pool is pretty slim, but there is no shortage of people wanting that first break with us”. Many people echoed this sentiment.

Salaries are interesting. A few recruiters and CEO’s told me that some jobs are paying 65-70% of what they did several years ago. And, there is no shortage of applicants. The problem said one is that “you get a kid who is not ready for the job, someone with a family who is desperate but bitter about the low pay, or someone on the skids who cannot possibly work out.”

Another whom I have known for years told me that the quality of candidates is declining. “Too many young people have not fully embraced their discipline. They are bitter that they cannot move up the ladder and, along with their seniors, have adopted a hunker down mentality. They have lost any sense of vision that I saw in people years ago. If you want to staff an agency properly you need to get into peoples' hearts and heads. Today, many candidates know enough buzzwords to fool the H.R. person and sometimes the CEO. This is especially true in digital. Out of 100 people that I speak with, only 3-5 really know the nuances of new media”.

With several people I raised the issue that has bothered me for the last five years. Young people come for informational interviews or are my students at the two universities where I am an adjunct professor. They ask me about a future in advertising. It is a tricky issue. How do you answer an earnest young person honestly? They almost definitely cannot have the kind of career that many of us have had nor is it likely they will have anywhere near the fun that I and many of you have experienced. So, I have been guarded and say that starting in advertising will teach you a lot about sales, marketing, being able to handle pressure and to stand on your own two feet. But, I never talk of the long term.

I posed this issue during an interview with someone who I admire tremendously. He gave the best answer that I heard and an honest and practical one at that. “I would tell them to go to work for a mid-sized agency. If you are any good, they will get you in the mix fast and in front of the best clients they have. You will learn a great deal. After a few years, I would encourage them to go client side where things are really happening these days.”

A few people admitted that they could lose some great people if the economy bounces back and bigger shops will raid them and offer a great deal more money. But the consensus was “I don’t see that happening for several years.”

All of this is typical of America today. Teachers, police, fireman, civil servants, bankers, and scores of fields have seen wages stuck for the last few years. Advertising was always different. Talent and achievement were rewarded early and often. Not so any longer.

For those of us with a long term view, it is clear that the people in advertising have changed. During the Mad Men era, many of the best and brightest went in to the ad game. When I started in the early ‘70’s, management at many shops was full of Ivy Leaguers or those from the top NESCAC schools (Amherst, Williams, Colby, and Bowdoin). Copywriters were erudite and quietly working on novels on weekends. Advertising was very lucrative, sexy, fun, and considered important. Today, the cream of the crop goes into investment banking or law.

To be continued—look for the next installment in about 48 hours

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

Mid-Sized Malaise

2010-10-20T14:03:00.000-07:00

The agency world is changing faster than ever before. Some people are adapting to it beautifully and are thriving. Many are not. This begins a series of posts that will cover current issues with mid-sized ad agencies. We define mid-sized roughly as 40-120 employees and independently owned. Some of what we say will apply to companies that are smaller and somewhat larger.

Over the last several weeks, I have interviewed 43 professionals. They included agency CEO’s, creative directors, writers/art directors and media directors. On the sales side, I spoke with cable, TV and radio salespeople as well as several media research sales executives who call on mid-sized and mega agencies. Finally, I talked to executive recruiters, consultants, former CEO’s, and a few clients. The cooperation rate was over 90% and people tended to be VERY candid. I covered my tracks quite well and I doubt if you can figure out who said what. Here are my findings:

Overview

In broad terms, there are three types of advertising agencies:

1) Mega-shops (giant holding companies)
2) Mid-sized agencies
3) Boutiques

Almost everyone agrees that the mega-shops and the boutiques will always be with us. The giants are beautifully positioned for the future. If you agree with me that there will be a massive relative wealth shift from the West to the East over the next decade, the holding companies are in great shape. Most already have beachheads throughout Asia, and a major study released two weeks ago projects that Asian advertising spending will surpass that of North America by 2014.

Boutiques will always bubble up. Disgruntled writers and artists will hang out a shingle and form a firm and some people with entrepreneurial zeal just have to be their own bosses. Many small players are specialty shops that are helping greatly as we move in to a digital age. Others can grind out work quickly. It may be a bit down and dirty at times but they are experienced pros who are dependable and capable of turning out very workmanlike creative on a moment’s notice. For many small advertisers and for special projects by larger ones, these firms are essential.

Agencies in the middle are in a very different place. These shops, largely regional in nature, had several things going for them for a long time. They did not have the resources of the giants but they could give more hands on service. Clients got a lot of attention from the mid-sized players. The CEO was not someone with whom you played golf once a year, shook hands with at an agency visit, or dined with every holiday season after a new contract was signed. He or she was someone who was actively involved in your business, guided strategy, and showed up for all big meetings. If you were not a large advertiser, he might actually serve as your de facto marketing chief.

Their creative was often fresh and fit your needs. A good media team at a mid-sized shop would take the time to craft a plan that took into account your unique needs and geographic coverage.

In recent years and especially since the financial crisis, things have gone south for scores of mid-sized shops. This post and a few to follow will delve into these issues in great detail.

Let us start by looking at the situation analysis from some existing and former mid-sized agency CEO’s. Here are some remarkably candid verbatim comments from several people whom I know and respect:

“Guys in the middle with no niche in our new world have no way to stand out. They can no longer afford to hire really good people. Over the years I have learned that strong people do not like to work on crap business. If you bring someone in really good, he/she will not stay as he sees that little progress can be made. The result is that the agency business is in for a very hard time for many years to come.”

“I built this agency from nothing. For over 30 years, it has been my baby. Fifteen years ago, I dreamed of selling out to Omnicom by now, collecting big dividends and dabbling a bit here and there. Today, I am working harder than ever just to keep even. I cannot sell the place to a major shop and my staffers cannot afford to buy it. And these days, they can never get a loan from a bank to buy me out. If I let them take over and give me a note, I know that I will never get my money back. This may sound arrogant but I remain the glue that holds this place together. If I get out, the place will likely break into a few boutiques and some out of town shops will grab my two remaining big accounts. It breaks my heart.”

“I can last maybe four more years. Each year, I cut my compensation sometimes by deep five figures. A few staffers get nominal raises but most have been frozen for the last several years. I feel a bit guilty because some are trapped here. There really is no other place in this city where they can work. Several are getting past the age where relocation is a good idea. We pitch less new business of any meaningful size as the cost of pitching is getting way too high for us. And, our existing business is not growing much. We had a nice bank that was sold a few years back and our auto business has bounced back a little but is still weak. I have never been more discouraged, but I am comfortable financially. None of my staff is.”

“For years, package goods were the lifeblood of mid-sized shops. Now, most are sold to big household products companies or food processors who take the business to a New York giant. My attitude is to believe that our salvation is in maintaining great relationships with clients. That can keep you going along with never stop learning new things” (I mentioned the average marketing director lasts approximately 19-22 months and he sadly nodded. One has to re-pitch a lot of existing business and you are always struggling to build a relationship with a new player). He added that there is growing tension between digital and conventional media people. Neither knows the other's discipline so plans are often badly integrated.

“We are totally faking our digital capability. A young enthusiastic kid in media comes in to meetings and says a few buzzwords and we have a halfway decent designer whom we call our digital creative director. It is nonsense. Our clients are not all that sophisticated so, for the moment, we get away with it. We are hundreds of miles away from an advertising hub so our people do not talk with anyone. I know we need to address this soon. But say “Facebook” in a meeting and everyone smiles and nods.”

A consultant and very astute observer says: “all the mid-sized agencies say the same thing—we are media agnostic, have insights into social platforms, our team has specific skills in digital, and we do not sell. We create a conversation with the consumer”.

He goes on to say: “there was a time when agency people were the key to consumer insight. That is not true today. Insight rests almost completely with the client. The people entering advertising today are not as good as those we saw years ago. They have little business training; there is little understanding of financial structure and even operating income.” He conjured a great quote often attributed to Keith Reinhard of Needham—“At one time the agency was the architect, now they are the carpenters.”

Another chief says “Everyone thinks that they are a great negotiator. So they squeeze us on fees. Some young kid is a newly minted marketing director. He is worried for his own hide (average tenure of 19-22 months) so he puts the account into review. If we are to truly look at a fully integrated plan blending conventional and digital we need more money and more people. But someone that we are competing against drops his pants and offers to do the work for $250,000 less than we are willing to take. They get the business and the young hotshot tells his boss he saved him a quarter of a million. A year later the kid is gone and so is the new agency. We told the truth and still are out of a nice account. It is so unfair. We have tried incentive based compensation which worked well once. With private firms, they can fudge numbers and say that you did not quite hit the agreed upon guidelines for a bonus. It is hard to prove and we have been burned a few times.”

To be continued. Look for the next installment in about 48 hours.

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

Broke, USA--A Review and Some Comments

2010-10-03T13:27:00.000-07:00

Today, I just finished a new book by Gary Rivlin. It is called "Broke, USA, From Pawnshops to Poverty, Inc.: How the Working Poor Became Big Business" (Harper Business, 2010). The book is an interesting and at times rather disturbing read.

Rivlin gives a stark description of how the underclass is provided with financial service. Most of us in advertising, media sales, or marketing lead comfortable lives. Certainly we would like to earn more but we do not live a life of constant strain bordering on desperation that the players in Rivlin’s narrative do. Many of us study and work with demographics from a computer printout. This book humanizes that data and brings it to life. A lot of his examples take place in towns such as Toledo, Ohio and much of Michigan which were in Rust Belt decline for years and are now in a depression.

Using the umbrella term “Poverty, Inc.” as a catch all term, Rivlin takes us through an array of products such as sub-prime mortgages with huge hidden fees that are hidden in the fine print of the loan agreement. There are instant tax rebates that hit the cash strapped and very impatient for 30% of their actual tax return check, and payday loans that have interest rates as high as several hundred percent. There is not much new here except for two things:

1) Major financial companies are getting in to the act of serving the financial needs of the underclass and their rates are not lower that what we used to refer to as loan sharks.
2) The business is booming as millions struggle to hang on to being members of the middle class. Many are not succeeding.

Now, please do not misunderstand me. I am a capitalist and will very likely die one. People who are credit risks should pay a higher interest rate than those with a pristine track record. And, government should not protect people from themselves. Interest rates as high as 500% on a payday loan are excessive, however. Will the new financial reform bill featuring the Consumer Financial Protection Bureau put an end to such predatory practices? A noted journalist said that financial institutions are dealing with it “like mosquitoes adapting to a new bug spray.” And the longer unemployment remains stubbornly high and real estate values continue to buckle or bump along at the bottom, the more people will have to use these non-traditional banks.

What does this mean to us as marketers? Most of us live miles away from those dreary strip malls with pawn shops, consumer loan offices, or specialists in pay day loans. But we do have to sell to consumers in places like Rhode Island, Ohio, Michigan, Florida, Illinois, Nevada, Arizona, and California that will be suffering for some time to come. Advertising on a TV/Radio station or cable system will not work as well in these states as in the past as each month more and more people fall in to the underclass to whom conventional avenues of credit are no longer available.

So set realistic expectations and choose spot markets to support very carefully. There are structural difficulties in some Nielsen DMA’s that will remain in place for the forseeable future.

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

We Have the Best People

2010-09-30T07:40:00.000-07:00

In recent weeks, I have been working on a major project regarding the future of advertising agencies with the primary emphasis on mid-sized shops. I will be interviewing a large number of people via e-mail, on the phone and as many as possible in person. My plan is to distill the findings of the full report into two or three Media Realism posts. The really granular data will be kept proprietary and no one who participates will be identified.

One thing is quite striking as I talk to people all over the country. Not a single agency principal denies that their shop and peer group of mid-sized agencies faces major challenges ahead. But many dismiss the structural problems that they need to address with a comment such as: “we are going to be okay no matter what happens because we have the best people”.

Now, I think that it is important for leaders to be proud of their teams. But many strike me as completely unrealistic. The other day someone told me that his digital media supervisor was the best in the U.S. Gently, I probed, “do you mean the best here in Louisville?” (the market was NOT Louisville) He said no, simply the best anywhere.

The young fellow was wildly enthusiastic about what he was doing but he basically worked alone. His CEO had never sent him to any media conferences or symposiums on digital issues. He read everything that he could get his hands on and he even told me that my blog was interesting but would be obsolete in a few years as traditional media declined. I had to agree with that and thought he had strong potential. But it seems obvious that others in major markets who work with more peers will pass him by unless his efforts are absolutely Herculean.

In the digital space in New York, Dallas, Chicago, and Los Angeles people often get together and share ideas, e-mails, and blogs. When they stumble across new venues or ways to work with them, they talk across agency lines. When they get together, these kids are on fire. The enthusiasm is akin to fans going to a Star Trek convention. Many may come off as geeks but they are totally engaged and in love with their jobs. My new friend in “Louisville” will have little of that if he stays put.

Others tell me that they are going to be okay because the senior team has been together for years and they all get along. That is very helpful for new business presentations where people can finish each other’s sentences, help a colleague who is having a bad day presenting, or just illustrating that there is real chemistry among people who genuinely like each other. And, the workplace has less tension if no one is abrasive. But, I have worked at places where people were very effective and created great advertising who did not like each other at all. Also, friction sometimes helps a group change and get stronger. Every now and then a new injection or two into the management gene pool can shake things up and usually it is for the better.

For decades, we have all heard the old cliché that an agency’s assets go up and down on the elevator each day. Just because it is a cliché does not mean that it is not true. And, great work is being done especially in creative in places such as Lincoln, Nebraska, Milwaukee, Salt Lake City, and Portland, Or. The climate is changing fast and becoming more challenging for the mid-sized players. Regional accounts are drying up and every week it seems that some national business that a mid-sized shop has and cherishes goes away as a major multi-national firm buys their client. Another growing problem is that agencies in the hinterlands do not pay as well as they used to and the best minds often go elsewhere when choosing a career.

There are remarkable talents out there in the land of mid-sized shops. But can these outstanding young men and women morph into renaissance players in our industry if they stay in a 50-100 person shop with little outside contact?

Many people are kidding themselves. They do not have the best people. Not even close.

Much more to come on mid-sized shops.

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

Guidelines for Managers

2010-09-22T19:17:00.000-07:00

Several readers paid me a very meaningful compliment recently. They asked me to compose a post about what qualities a good manager needs to be effective. So, here is my list. None of the items are probably original in your eyes but you may not have seen this mix of attributes before. Here goes:

1) Provide constant encouragement—this to me has to be the number one attribute that a strong manager must exhibit every day. All of us need encouragement and most of us do not get anywhere near enough in our private lives or on the job. I once worked for and with a man who was wonderful with entry level people. He told them what bright futures both they and the industry had. But his senior team never received the slightest hint of encouragement. I asked him about it and his response was that if he was paying someone $100,000+ per year they did not need encouragement. Smiling, I countered with something like “aren’t the senior team people, too.” He truly did not get it. I made it a point to encourage him especially after new business losses (he had many as all of us do). He really seemed to appreciate my pep talks but could never seem to do it to many who needed it the most. Encourage everyone above and below you. We all crave it and need it.

2) Manage by walking around—I always did this well. For nearly 30 years, I made it a point to talk to every team member every day. I did not meddle but I tried to get the pulse of what was happening. After a while, people would come to me for help or suggestions. Too many managers hid behind e-mail and do not communicate well. E-mail is wonderful but face to face meetings especially informal, ad hoc ones are far more valuable. So, get off your butt, leave your comfortable office and talk to the team. You will learn a lot.

3) Hire people who read—Ask people whom you interview what they have been reading lately. Often the best hires are those who are well read and continue to stay current. They stay up to date on the fast moving trends in our business and will feed you articles and film clips that you need to see. It is like having a private research service down the hall. You also have people to talk to. It can get very lonely being a manager of people who merely do the letter of the job but have no real interest in what is going on outside their tiny corner of the world. Staffers who read a lot make for a more interesting workplace and you will get some great ideas from them. Be very wary of people who say that they are too busy to read material that you ask them to review. If it is a single mom with three kids, cut her some slack. She may be a living saint. Anybody else, not having time often means that they are watching too damn much television or addicted to Facebook.

4) Hang on to the best people—stand on your head to keep the key staffers. They make you look good and hold things together and give the whole firm a chance to grow. These days not many can hold you up for more dollars as they have few places to go but if you create a good environment they will want to stay.

5) Don’t ask people to do things that you will not—I had a few bad experiences as a youngster in the business. One jerk would come to my desk around 4pm with a pile of assignments. He would say “have this completed by 9:30 tomorrow morning” (that was when he showed up). Another would call me from a golf outing asking me why I had not put more money with the media vehicle that had taken him to Florida or simply given him a Wednesday off at posh country club. I vowed that I would never behave that way and never did.
If my team was busy, I was busy too. It cost me some late nights and too many Sundays at the office but I don’t think that anyone resented me for the amount of work that they did relative to me. Years ago, in Texas, I ran into our Chairman on Friday night as we were both leaving the office. He asked about my weekend plans. I told him that I was coming in with several media staffers to work on a plan that was due Tuesday. At noon Saturday, he showed up and talked to everyone and people were thrilled. He then took off and we continued to grind. An hour later he returned with a gourmet Chinese spread for all of us. He thanked everyone for giving up their weekend and stayed to help collate copies with the weary team later in the day. The man was a leader and a thoroughly decent human being. He could not write a media plan if his life depended on it but he won everyone’s respect that day and still has mine.

6) Listen—when a staff member is talking with you look up from your keyboard, put down the phone, look them straight in the eye and listen! People are trying to tell you something. Give them your attention. It will pay you rich dividends.

7) Praise in public; reprimand in private—sadly, I have seen too many senior executives humiliate someone in front of others. Save the dressing downs for a private session. They may deserve it but you do not have to undercut them in front of their peers.

8) Hire the best—keep interviewing people even if you have no openings. You will have people leave and you always need to upgrade if you are to grow stronger as an organization. If a new person will not make your organization stronger, why bother?

9) Be very nice to nerds—the odds are overwhelming that you will end up working for one some day!

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

America's Discount Culture and the Future of Brands

2010-09-16T13:38:00.000-07:00

We Americans love to shop and we love to buy things on the cheap. In recent years this has become an integral part of the fabric of life in the United States. Back in 1956, only about 6% of merchandise was purchased on sale. A lot has changed since then.

To look at our discount culture clearly, a good angle to view it from may be by taking a careful look at outlet malls. These out of the way entities are growing globally; you see them popping up in Europe, Japan, even Hong Kong. But, it is in the United States where the approximately 300 outlet malls are having the biggest impact.

You might be surprised to learn that they are not a fairly recent phenomenon. The earliest outlet location that I could find goes back to 1936 which was right in the middle of the Great Depression. In my home region of Southern New England, Anderson-Little, a mid-ranged purveyor of men’s suits opened the first outlet store. It was located a long distance from existing stores and they sold “seconds” which were items that were slightly defective in some way. Back in 1936, there were no interstate highways and not nearly as many people drove so there was little danger that their outlet location would cannibalize sales from their mainstream stores.

Today, outlet malls are a destination venue for 55 million + Americans each year. What they lack in convenience is a perceived big trade off in price. Most are bare bones in appearance and are full of serious shoppers. Conventional malls have issues with teenage “mall rats” who spend little money to speak of put roam around often in large groups on weekends. Seniors, too, haunt malls. It is not unusual to see them doing measured walks around malls in groups. This is especially prevalent in the South and Southwest. The outlet mall patrons, on the other hand, appear to be 100% shoppers.

Out west going to an outlet mall can be a major event. Busses often take a fair proportion of the citizens of small towns to an outlet mall 200-300 miles away. The group shops till they drop, meet for dinner in a large private room, stay in a local motel, shop the next morning and sleep on the long ride home. Most data that I have indicates that shoppers at outlet malls spend 80% more at a bare bones outlet mall than at a fully loaded regional mall.

Whenever one visits an outlet mall, you can get the vibes of a quasi Vegas mentality if you listen a bit to the shoppers. Invariably, somehow will say how she “beat the house” on a spectacular deal on some expensive brand name products. Well, you do not have to be particularly savvy to know that in Las Vegas the house always wins over time. I would say the same is true with outlet malls.

Originally, outlet stores were like the earliest example from 1936. The products were perfectly serviceable but slightly defective in some way. A great example was Coach. The owner sent his children out to Long Island to run their first outlet store. They had big problems early on as they almost always sold out 100% of the stock very quickly even though none of the outlet merchandise was perfect. As time went on they and many other players shifted gears on the nature of outlet store merchandise.

Today, many retailers sell merchandise at their outlet stores that is explicitly produced for exclusive sale at the outlet locations. The list includes Ann Taylor, Brooks Brothers, Coach, Donna Karan, The Gap, and many more. A very clever young shopper observed to me that if you look closely you can often tell the difference quickly. She commented that some items are from the actual retail store and of the highest quality but the goods are a few years out of style. Or, the colors are a bit different even zany. And, the sizes are either tiny or huge. The rest of the stuff that 85% of the people would want is of lower quality and specifically manufactured for the outlet store.

I have noticed different tags. Until recently, the outlet manufactured goods often had an “F” for factory outlet on them. Today, price tags are usually far more discreet.

Also, look out for “reference pricing”. That suit listed at $900 and now selling for $250 may have been produced exclusively for the outlet mall. It was never offered anywhere at $900 but your perception is that you are getting a world class bargain.

Even mainstream discounters are getting in to the act. Wal-Mart and Target often have electronic gear, lawnmowers, grills, etc. with brand names but a comment on the tag says made to “Wal-Mart” specifications. You are not getting a Webber you are getting a Wal-Mart grill. The brand name has really lost all meaning in cases like that.

So what is going on here? All of us have spent our careers either selling to or working with people who ferociously defend their brands against competitors. And, they bore you to tears talking about the integrity of their brands.

And, what of the customers who love going to the outlets and spend a lot there?

Here are my theories which are largely personal as it is hard to find a lot of data on this topic:

1) The outlet mall customers get a lot of pleasure from buying there. Going to the outlet mall is an event and a major event for many in the Rocky Mountain and Central time zones. Even the smartest shoppers feel that they are getting something close to major brands and the accompanying quality when they shop there.
2) The major players are not stupid and they have to study income data and demographic data as much as all of us in communications. The blue collar work force has not really received a raise in 30 years when you adjust incomes for inflation. The middle class, as we know it, is shrinking. Since 2007, it is safe to say that maybe 7-10 million have slipped out of the middle class. And poverty levels released today from the Census Bureau put us at the highest level in 40 years.

So are the retailers just facing facts? They merely sell the dream. The merchandise is not nearly as good as their conventional stores but people perceive that they are getting the original brand or something close to it. One retailer gets as much as 80% of their sales and I would assume most of its profits from its outlet store base.

Long term, this would seem to dilute the value of the brands significantly. But, if our wealth as a nation is slipping relative to the emerging eastern powers perhaps the outlet gambit is a clever way to keep the music going in people’s minds for a bit longer. If “most people truly lead lives of quiet desperation” as Thoreau put it, then the façade of gentility at outlet malls could have quite a long run.

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

Apple, Google, The Elite, and the Future of TV

2010-09-09T18:04:00.000-07:00

In the last week or so, both Apple and Google have introduced their new TV products. Briefly, they seem to be making the step we have all talked about for years—your TV and your computer will tend to merge. Both promise the ability to call up statistical data from your computer about a player or a team while you watch a football game on conventional TV, for example. There are hundreds of applications some of which are quite sophisticated. My only surprise is that Google has said that they currently have no plans to develop their own programming. Google TV is a new platform that appears to meld the Internet almost seamlessly with TV. You will be able to search by name for a specific movie or a TV show and you can watch it on cable or the web. You will be able to customize your own home screen for a specific web series, programs, or cable channel. Apple says that they will charge $99 for their version; Google has not gotten specific yet. It is hard to tell a clear difference between the two but early on it seems that Google has fewer restrictions and is more of an open source platform than Apple or other smaller players in that space.

Prior to these announcements, I was noticing a trend. Yes, fragmentation of audience was still continuing. Several writers talked about how young upscales often were not subscribing to cable or a satellite service. They got by with Hulu.com, streaming video online, and a heavily used Netflix subscription. I have pursued this and found that it is absolutely true but only for a VERY small number of people. They tend to be young urban dwellers who graduated from elite schools. They are very busy with their careers and social life and do not watch enough TV to justify a $100 monthly subscription fee. Last year, I joined them for a few months and found that 90% of my needs were covered with a similar approach. Students at the best schools are also often TV free but not video starved.

Within a larger group of young affluents, some of the young men said that ESPN (and Fox Sports) were the only thing that really kept them with cable or satellite. If they could buy select games a la carte, the subscription service would get the heave ho. Also, many say that they are buying plugs at Radio Shack that allow them to take Hulu and other on-line content and view it on their larger screen TV sets. A few people have approached me about a la carte purchases. They would gladly pay a few dollars an episode for a favorite show or a specific game but have zero interest in a subscription given their very low level of viewing.

My point here is that many of the young people writing these alternative viewing reports and those actually living that way are a VERY small group. Most people in their 20’s do not live in Manhattan or San Francisco, get very well paid, work long hours, and are socially hyperactive. Every person who chooses a virtual non-TV life hurts advertiser supported TV and cable but there are probably only a few hundred thousand of them at best. And, with the emergence of Apple and Google TV the press will focus on the dogfight between the two titans. What you need to keep your eye on how many people that Apple TV and Google TV pick off and how many cut their viewing of advertiser supported broadcast and cable sharply as a result.

As I said several weeks ago regarding the future of cable, there is a great deal of inertia out there among the mature. They want to kick back in their LA-Z-Boys with a cold beer and they want instant access. Young people are a lot more open. They will toggle back and forth from TV to computer and will wait a moment or two to call something up. To save a $100 a month they will do a lot more especially when they are not heavy users of TV as we know it.

The cable and broadcast people have to be careful. Newspaper people a generation ago said that young people would endorse their product once they owned a home. They would want the daily paper on the front porch just as their parents did. It did not happen. Then they said they would give away the paper for free online and once readers hit a certain age, they would want the hard copy delivered daily. That did not happen either and many newspapers are fighting for their lives.

So, here is how I see it playing out. Both Apple and Google TV will make inroads across the board but do especially well with the young and particularly among the well educated. Some of the elite will stay away as now but will likely flirt with the free aspects of the Google product for a while. And, if you have lived a life without TV, will you suddenly get cable or satellite when you turn 30 or get married? Become a parent? Maybe, but I am willing to bet that an annoying number will not which will make advertising media planning and advertising sales more difficult.

The fragmentation in TV viewing that started 30 years ago will continue relentlessly as we go forward. But it will not destroy the broadcast advertising model overnight. The Apple and Google entries will however, speed up the process. Going into fall, 2011 planning media strategists may need to shift more weight out of traditional TV options that they had planned even a few short months ago.

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

Hostile Brands

2010-08-29T11:37:00.000-07:00

From day one in courses in Marketing, Branding, New Product Development, Advertising, or Consumer Behavior students are always taught that a marketer must separate their product from the competition. Before launching a brand at a company, the old pros instruct the rookies that above all you must be able to differentiate yourself from other entries in your category. A new book, “Different”, subtitled “Escaping the Competitive Herd” (Crown Business, 2010) puts a whole new and important spin on that old marketing saw. The author, Professor Youngme Moon, teaches at the Harvard Business School.

Professor Moon’s thesis is that if you only make direct comparisons on features you may have the “perverse effect of making you just like everyone else”. It reminded me of John Hartford’s lyric from the late ‘60’s—“What’s the difference being different when it’s different now that looks alike”. Professor Moon suggests that we hop off the competitive treadmill and do something that is MEANINGFULLY different. Lots of people promise that with every campaign but the author gives a good roadmap for doing it.

The book cruises along pleasantly with simple logic and some nice examples. Then the reader encounters a chapter simply entitled “Hostility” which hit me like a freight train. Her argument is that some brands differentiate themselves meaningfully by admitting that they are not for everyone but rather for a small minority. Their advertising deliberately tries to polarize people as do their products. Some people love them but an equal or larger group hates them. She states that they do not lay out the welcome mat. “Hostile brands don’t market in the classic sense of the term; they anti-market.” She gives several great examples with my favorites being Marmite, Red Bull, and Mini Cooper.

Marmite is a sticky brown food paste that has been around the United Kingdom for a while. You either hate it or are a true aficionado. I vividly remember staying at a British B&B some years back and watched people in the dining room slathering it on their “bits of toast.” I had to try it although it reminded of me of oil that had been sitting in the crankcase way too long. The stuff was dreadful or as the Brits would say “bloody awful.” But others in the breakfast nook scarfed it up with abandon. Their theme line is “Love it or hate it” and a TV spot of recent vintage has a blob of Marmite terrorizing a British town. As a boy in New England, there was a soft drink called Moxie which triggered similar polarized reactions. The great Ted Williams endorsed it so whenever we went to Fenway Park to see the Red Sox, I always ordered one and could never finish it as it struck me as having an awful medicinal taste. Finally, at the ripe age of ten, my father stepped in and stopped me from getting one saying “how about coffee milk (a great Southern New England tradition) or a Pepsi, Don? You know you won’t finish the Moxie.” Later that day, Ted Williams hit one of his last home runs which was thrilling and, to my father’s joy; he did not have to finish my Moxie for me. Moxie would have been a perfect candidate for a hostile brand. Instead, they took the high road and used New England’s greatest hero as spokesman.

Red Bull is well known to all of us. But the story behind the story may not be. Austrian entrepreneur Dietrich Mateschitz did his due diligence prior to launch and tested Red Bull extensively. Research results stated that the products coloring, sticky mouth feel, and taste were “disgusting.” One researcher wrote that “no other product has failed this convincingly.” Mateschitz’s response was a simple “great.”

He was not one to pander and as Dr. Moon put it refused to “even consider the possibility of modifying the product to sand away the rough edges.” Somehow the product caught on in clubs and select bars and was nicknamed “liquid cocaine”, “speed in a can” and “liquid viagra.” This spawned a consumer boycott by some worried about its health effects. Red Bull did no counter advertising. Their tone was “if Red Bull makes you nervous, don’t drink it”. The product has succeeded and has a hard core of devotees. To date, they have never flinched.

The final example is kind of a soft ball relative to the previous two UNLESS you saw their initial advertising. The Mini Cooper is a cult favorite which appeal to a certain class of driver. Early on they were strident. Initial ads were “The SUV backlash starts here”. To people who were worried about the small dimensions of the car, they simply stressed it especially on billboards. They were blunt and brazen with a very direct message.

What excites me about this discussion of hostile brands is that there is a world of media options available these days to allow a hostile brand to obtain awareness even if your budget is modest by traditional launch standards. Imagine a rollout into a few test markets. You could put together a package of cable channels with your local interconnect that would be a nice fit to the in your face or irreverent message that you were using. On line, the possibilities are endless. There are thousands of sites with an audience who might be turned on to your product and would not be offended by a “take it or leave it” positioning. New video options abound and would be inexpensive but nicely targeted. It almost makes me want to be a 28 year old media planner again.

Some brands are obviously too vanilla to be hostile brands. But, there are many like the Moxie of my youth that would be excellent candidates. Dr. Moon has done us all a great favor. Going forward her message of meaningful differentiation is sound but her defining the hostile brand and its applications is inspired.

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

A New Twist on Good To Great

2010-08-20T16:02:00.000-07:00

In 2001, Jim Collins wrote a great business best seller entitled “Good to Great: Why Some Companies Make the Leap…and Others Don’t.” In general he defines “great” largely on financial performance several times better than the market norm over a fairly long period of time. Some of the companies that he singled out who made the transition from good to great were: Abbott Labs, Kimberly –Clark, Nucor (steel and industrial conglomerate), Gillette (now a division of Procter & Gamble), Walgreen’s, and Wells Fargo.

He described several characteristics of these winning firms:

1) Humble leaders who do what is best for the long term.
2) First thing is to get the right people on your bus and then decide where to go.
3) Always confront the brutal facts regarding your industry but do not give up.
4) Be disciplined in all things at all times.
5) Remember that small initiatives are additive; they act on each other like the wonder of compound interest.

The book made a lot of us think. I remember vividly at the time if I had the right people on my bus. Last week, I was speaking at length with a general manager of a TV station in a mid-sized market. He told me that things were much better than last year but lamented—“this used to be a great business.” It certainly was. Many years his predecessor in the job had profit margins of 40-50%. The station changed ownership several times in the 70’s and 80’s as financiers felt that TV station ownership was a sure thing. Buy it and flip it several years later for a nice profit was the mantra.

Well, times have changed. In many markets, it is no longer a great business. But, as I stressed to my friend, it is still a VERY good business. And, with a manager such as he who trains his staff well and is fair with them, has close ties to the local community and hustles like hell, it should stay that way for some time to come.

All conventional media are going through this but the stage of downward evolution varies significantly medium to medium. Newspaper was a great business thirty years ago and a good one 15 years ago. Now, with few exceptions, it is a tough battle for survival unless some new technology can bail them out and bring in younger users. Magazines are a really mixed bag with a blend of successes and failures each year with new titles and they all struggle to monetize their online product. Radio could become very good or even great again in some cases if the corporate bean counters go away and local ownership comes back strongly. Outdoor, the last true mass media type, may have a big resurgence as TV continues to fragment and digital options for video multiply over the next several years.

But TV can still do well in the right hands. My friend is a very decent fellow and a hard headed realist. He laughs about his station site which gets into many advertising packages although he cheerfully admits that he feels many of the site visitors are nervous 60 year olds worried about traffic or snow for their evening drive home. Still, he soldiers on, makes a nice living, and does his best to provide value for those to whom he and his staff sell advertising. The days of dropping huge sacks of gold back at headquarters are over. But his station remains solidly profitable for his company which has owned the property for more than 20 years.

The great to good concept is sneaking into other traditionally solid businesses. Someone who fancies himself a securities analyst told me that Coca-Cola and Pepsico have gone from great to good in recent years. My attitude is that there is some truth in his thesis if he is referring to their US business for cola which is quite mature and where the margins are paper thin. But overseas they are just getting started. Indonesia, which some pundits say will be the next BRIC country (Brazil, Russia, India, China) of dynamic economic growth, has a per capita Coke consumption similar to the US in 1910. So, growth overseas for these beverage companies and McDonald’s, among others, should be quite robust as a middle class emerges in what were third world nations only yesterday. The US is only about 5% of the world and we need to keep that in mind.

Finally, I stressed to my broadcaster friend that there is nothing wrong with running and optimizing a good business. The easy money days are over for a lot of us but there is no need to be depressed. If TV truly is doomed a decade or more from now, I bet my plucky friend and his station will be one of the last to fall.

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

The Scary New Scenario of the Paradox of Thrift

2010-08-14T12:28:00.000-07:00

On June 15, 2009, I posted an article entitled “The Paradox of Thrift.” In brief, I talked about the economic concept developed by Lord Keynes in the 1930’s. The idea is that in a downturn when people get worried about the future, they tend to consume less and save more. So, recovery can be slow as consumer demand lags due to largely to consumer fear. In the world of 2010, it is even more serious with a U.S economy that is now 70% consumer driven as compared to the 1930’s when the industrial base was a larger share of the economy that that of consumer activity.

When I posted the report on the Paradox of Thrift some 14 months ago, the U.S. savings rate was at 4.7% (it had been zero a year earlier!) and the official unemployment rate was 8.9%. Last Tuesday, new figures were released and the savings rate was at 6.4% which is the highest level in decades. People who have jobs are still uneasy and are saving aggressively. Back to school sales to date are 17% below last year’s levels! And, government unemployment levels have crept up to 9.5% from 14 months ago.

Now, over the years I have learned to respect the difficulty of working with a mass of information. And, looking at only two data points—the savings rate and the unemployment rate do not make a definitive economic analysis.

But my innate optimism was shaken and shaken hard in recent days when I considered two more facts. Our growth rate appears to be dipping back to zero. I will let the professional economists and pundits waste time on whether we are heading into a “double dip” recession or not. The other datum is chilling and not many people want to talk about it. Most economists agree that due to demographics and new graduates entering the work force we will need 3.3% growth rate in Gross National Product (GNP) to lower current unemployment levels. When the economy is sailing along as in the past at 4% growth and a zero savings rate in our 70% consumer driven economy, job creation was almost automatic. But now, with anemic growth at best and a very high savings rate, vibrant job growth is going to be a long time in coming.

So, if you are a broadcaster, cable executive or advertising manager, be realistic when the boss or headquarters asks for double digit revenue increases for 2011. There are some pockets of prosperity in a country with a few hundred media markets but aggregate consumer demand across the US will likely be tame for a while. Your sales teams may go at it tooth and nail but the increased advertising dollars will be hard to find in many markets.

Who is to blame? Many people point the finger at George W. Bush who lowered taxes for the affluent, Wall Street’s greed or President Obama whom they label as a socialist. All three have not helped much but the American consumer is largely responsible for what has happened. We had it too good for too long. For two generations, we saved less and less and borrowed more and more. If it took 60 years to get us into this mess, we are not going to be out of the woods in another six months. Recovery is going to be slow in my opinion and, for many, painful.

Am I afraid? No way. Concerned? You bet. And you should be too.

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

The Old Metric Lives

2010-08-08T13:47:00.000-07:00

Since the early 1960’s (before my time) many people used a very simple calculation and still do to determine whether a retailer should advertise on spot television. Fast food is where it has received the most acceptance but I have seen it work against several categories over the years.

The metric is very simple. Divide the number of retail locations (points of distribution) that an advertiser has in a Nielsen DMA in to the total number of TV households in the DMA (Designated Market Area). If the number is under 30,000 Spot TV has an excellent chance of paying out. If it is in the 30-50k range per point of distribution it is an iffy proposition. Over 50k per retail location and TV is very hard pressed to pay out other than with a destination venue such as a luxury car dealer or huge big box retailer. Keeping this metric in mind saved me a lot of pain over the years and won me the love of some radio stations who thought I was simply helping them. The reality is that TV is wasteful for some retailers and a bonanza for many others.

In the last few weeks, I spent a lot of time in New England. I was not in Boston or Hartford but spent most of my time split across the other DMA’s in the region. Something amazing was going on. I sampled the 6pm local news in each mostly to get the weather report for the next day. In a few markets, there were small retailers buying the local news. I do not know what they paid but was stunned simply to see them there. Once restaurant with two locations advertised across a DMA with 619,610 TV households. So, TV households per unit were not in the vicinity of 30 thousand but were nearly 310 thousand per location! How could that possibly pay out for the advertiser? Another advertiser, a marine supply company with one location advertised in the news in the same DMA. As I moved across much of the six state area, I saw other questionable placements but none quite as bad as the two mentioned above.

Don’t get me wrong. I applaud local stations for the chutzpah to bring new advertisers on the air in a difficult environment. Yet, realistically, the odds of some of these people succeeding seem very remote. These advertisers belong on local cable not on over the air TV. Period!

How does it happen? Many young planners and buyers do not do their homework. There is no analysis. They have never heard of the 30,000 TV households per store rule because no one taught them such simple rules which cover a multitude of sins. Perhaps their clients were eager to get on TV and pushed them to it. An experienced media person would tell the client what a long shot such a buy has of ever paying out.

As I have said before here, we need a back-to–basics approach with media planning. In my home region of New England, they clearly need it more than most. The old 30k metric remains a decent yardstick. It should be the first screen a planner makes before considering local television.

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

Does Cable TV Have A Future?

2010-07-15T14:49:00.000-07:00

In recent months many articles, interviews, and blog posts from a wide variety of sources have seemed to accelerate the drumbeat for the demise of television as a viable advertising medium. It is impossible to argue that new avenues to view all forms of video are springing up and gaining some traction but the speed of some people’s forecasts for TV going down strikes me as way too fast. Some of the most strident comments that I have read or witnessed face to face and via e-mail are aimed at cable TV. People are increasingly dredging up the old cliché that the cable TV business model is broken.

Clearly, after such a set-up, I do not agree. My arguments are detailed and, for me, a bit complicated. Also, I polled my formal Media Realism panel plus some people of interest outside it. Here is what I have found along with what I think:

Many people say that cable is in trouble because of upcoming funding issues. Some argue that cable is sandwiched between ad supported TV and pay per view. As times goes on, it appears that many people will be willing to pay their content creator for certain programming so why is a middleman such as cable or satellite needed? Nielsen adds fuel to this fire each year by saying that roughly 13% of channels are viewed by subscribers in a given week. Economists weigh in by saying that efficiencies always win in the marketplace so packaging should be passé pretty soon.

It is hard to argue as none of us watch all of the few hundred options that we have. Yet, I feel we like having them. Some tests might emerge soon with some type of simple metering—you pay only for what you watch. If that were the case, I would imagine some HBO series, selected sports, and good dramas either cable produced or network produced could get pretty pricey. Also, some people might cut back viewing after getting sticker shock after receiving the first few itemized cable bills. This would hurt advertisers as viewing might really go down in these a la carte households. Fragmentation over the last 30 years has made it harder and harder to reach large portions of your target but an authentic drop in viewing especially among the more sophisticated would really hurt TV as an ad medium.

An a la carte approach would allow you to create your own personal TV network which TiVo does in a sense with its cloning feature now and other specialty services do as well. But the blue collar audience that watches heavily and sometimes indiscriminately will never go for it. They will stick to their flat fee.

As to the argument by economists that efficiencies always win in the long run, all I can say is that the long run is a long time. Have you ever bought a stock whose fundamentals and earning growth tell you it has to go up? You can go broke or die waiting sometimes. Not everyone embraces change as much as a smart 23 year old. Sometimes it takes a generation for the marketplace to reflect a rational price for something.

The same thing is true here because consumers lag technology. The trendy press tell us that many recent college graduates are not buying TV’s. I checked in to it and it is true to a point. The problem is that their sample is skewed. If you check out recent Ivy League and other elite school grads, many lean on Hulu, Netflix, Roku, Slingbox, and You Tube along with Yahoo and Google News for their video needs. They are also quite adept at stealing films and other video online. Speaking on several campuses last year and speaking to many more young adults, I saw a direct correlation between the quality of the school and the ability to scrounge up many sources of video content both legal and not. So, this group with no TV is prominent, articulate, and gets some press but they are not a large group in the total scheme of things. Long term, it hurts as they will become very affluent if not rich and many advertisers will have a hard time reaching them if they continue to avoid TV as we now know it.

There is something else that cable has going for it that few people appear to discuss or consider. I am talking about inertia. Take a look at a fictional couple, Bob and Mary Brown of Youngstown, Ohio. They are both 59 years old. Mary is retired (she never worked full time) and Bob has about two years to go if he can hang on before the axe falls. Their children are gone and they watch a great deal of TV. On fall weekends, Bob curls up in his La-Z-Boy with a six pack and may watch 12 hours of football over 36 hours. TV is not one entertainment option for them; it is their ONLY real entertainment option. They will likely grumble about cable subscription rates in the future but I bet that they will stay with cable for the remaining 25 years of their lives. Some stunning demographic data was released this past week which said that the bottom 40% (or lowest two quintiles) of wage earners in the US now collectively own less than 1% of the nation’s wealth. Currently, there are 39.68 million Americans on food stamps. The Department of Agriculture projects that 43 million will receive them by the end of 2011. There are millions of Bob and Mary’s across the country. Life was never easy but now it seems to be getting a bit tougher. They will not likely embrace the new digital solutions and so will provide a nice stream of income for cable players for a long time to come.

Cable providers have a poor reputation for service. As Verizon moves in to compete in areas with Comcast and Time Warner and smaller companies, there will surely be some jumping from one service to another. But the cable industry will still spin off some serious cash. Cable players seem unwilling to build a moat around their customers’ homes and keep them safely as subscribers. Right now, customer service is poor and millions leap to the alleged improvement of another cable provider or satellite. This excessive customer churn could be fixed but no one seems to be doing enough about it.

Talking to executives and panel members we find a wide range of comments. A cable sales executive says: “our practice of selling spots and dots is here to stay for many years. Many of our ancillary products are not to enhance the subscriber experience but improve the advertiser experience in a more robust fashion. Often they allow us to separate ourselves from conventional broadcasters……… whom we still compete against mightily.”

A deeply experienced media researcher picks up on that and says “Cable has so many revenue streams (and emerging ones) that it is unlikely that they will go away for a couple of decades. Besides subscriptions they have VOD, telephone, internet along with growing ad revenue. ….the fact is that a distribution outlet for TV is losing value in an age of technology. A stand alone TV station seems most vulnerable to new developments in technology. Great reach can still be delivered via network coverage on a cable system across multiple platforms. The guys with the most to lose are those with only one revenue stream (which is most TV stations).”

One cable executive on my panel says do not forget that over the next few years we will have to redefine “what is cable.” He is not totally objective but is genuinely excited about the new products and services that he will be selling in the years to come. Given his strong ethics, I do not feel that he is blowing smoke.

As many of you know, earlier this year, I cancelled cable and had no TV for a few months. With Hulu, Netflix, Netflix Instant, some Google and You Tube help plus free videos from my local library, I was able to satisfy some 85% of my viewing needs. Most 60 year olds are not so ambitious or patient enough to find things even if they are free but if more people did it there would be more leakage away from advertiser supported video.

Cable also has lots of sports led by the amazing ESPN channels. Yes, they are available to varying degrees online but many men will be hard pressed to give them up on cable. And, the big screen is a must for many with major sporting events. I have seen students check sports scores on their cell phones or other device before class, but for the big game they want a large screen. Live sporting events is content that many people will always be willing to buy. There may more money to be squeezed out of that arena with more pay per view opportunities.

So, is cable dying? I do not think so. But, it needs to keep improving its products and finding ways to enhance the advertiser experience. Customer service needs to improve dramatically in many locales as well. No matter what they do more and more people will move away from them as on line options grow. A handful will abandon TV and cable completely. And, when will Google really do something with You Tube? Then things could really get interesting and fast.

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

Fear

2010-07-13T18:30:00.000-07:00

Every few years, purveyors of public opinion publish lists of what Americans fear the most. Invariably, issues such as getting cancer or not being financially secure in old age would be somewhere on the list. The leading fear almost always was having to speak in front of a large group of people. But the most recent study that I have seen has a dominant theme in tune with the last two years—people’s biggest fear is losing their jobs and service oriented companies are afraid of losing existing or prospective business.

Today, we will focus on this fear issue from a business standpoint. Talk to almost anyone in the business world and no one feels secure about their clients anymore. Part of the reason is the weak economy, the nagging high unemployment and timidity about spending that most marketers are live today. Also, the life span of a marketing director at a U.S. company is now amazingly under two years. So, your clients are afraid for themselves and often point fingers at agencies, broadcasters, publishers and cable providers when anything goes wrong.

Management gurus usually suggest the following actions that are all common sense but are not novel:

1) Make yourself indispensable to your clients. Be there for them 24/7. Give them service until they say enough!
2) Do all the dirty work. Smooth things over with senior client management; pour the coffee, show up for weekend sessions. Generally hold their hands. If need be, take blame for things even if the marketing director was the villain of the piece or chief architect of a mishap.
3) Live and breathe the client. The client’s work is honored throughout your organization, and you become totally client focused to the point of being boring and obsessive.

Recently, I ran across a consultant who struck me as totally fearless so I thought I would report his approach which was different but seems to work very well.

My newfound friend entered a meeting and breezed through his credentials (which were extensive and impressive) in about 90 seconds. He provided no power-point, no beautifully embossed folders with a slick sales piece. He did almost no selling but within two minutes had already started consulting. What he did was to begin asking questions about our mutual prospect.

One thing stunned me. We both were given briefing books about 500 pages long. I devoured it over a weekend as is my habit and thought that I had found some core company problems on page 263 and another bombshell buried in a table on page 438. My ally clearly had a nodding acquaintance with it but told me that he had played 45 holes of golf the previous weekend.

What the consultant did was get the people talking. Most marketers love to talk about their business. Within a half hour he was making suggestions as his process of discovery began to flesh out. In my experience, most of us wait to get briefed or hired before we give our product away. He was pleasant and appeared competent but had no arrogance. At times, he asked questions that I thought were obvious as they were clearly answered in the briefing book. No one but I seemed offended. They answered in great detail and he kept throwing up suggestion after suggestion. The mix of dumb questions laced with some seemingly lame suggestions had me embarrassed for him now and then. He forged ahead and the particularly egregious recommendations were dismissed with a smile by the prospects and a “that will never work” but the clients were all on the edge of their seats to hear what else he had up his sleeve.

Finally after five hours, the client asked what the fee structure was. He smiled and said “why don’t we do another session really soon and we can work that out.” A day later he followed up with nice summary and a few more ideas. I called him and said what if they take your suggestions and mine and decide to do nothing or go elsewhere? “You worry too much, Don. The more we learn, the better our suggestions will be. And they have a lot more problems than they realize.”

He got the business, still works with them, and I hope to work with him again on other projects. Here are few comments on his approach:

1) Both he and I are not kids. Grey hair helps in that we can be more fearless than many. If we do not get hired, it will not affect what we eat for breakfast the next day. Our kids are out of college so we do not have to have the heart to heart chat that East Podunk State is your only option, son. Not having strong financial pressure, we never look desperate because we are not. Perhaps we are looser than the competition.
2) He got away with a few reckless questions because he had credibility in many other areas. One complaint that I have about the younger generation is that they often have no filter. Many times someone will blurt out “what’s that” or want a definition of a term that an account supervisor in a particular industry has to know. So, everyone cannot do what he does. But, he likely asks questions that a few others in the room would like to but are afraid to ask.
3) He has a generosity of spirit with prospects. I have been burned a few times by blog readers and others who ask my advice, take it, and then never follow up with a contract or a check. My friend says don’t worry—eventually the great majority of them will come to you with remunerated work even if you have to wait a couple of years.
4) Some 90% of his business comes from referrals. There was no slick leave behind because he does not have one. And, he consults almost from the beginning of the session. Over the years I have seen many agencies waste an hour of a two hour new business presentation telling of their case studies and showing a creative reel or two. People want you to talk about them and they want to talk about themselves and their problems. My friend gets this better than anyone I have ever met.
5) Sales people rarely ask me what my clients needs are. They tell you what they have to sell. Some active listening and a few questions could help them craft infinitely better recommendations than most of us see day to day.

Face it. Fear will be with many of us for a long time to come in our current economy. My friend’s approach may not work for everyone but I am sure that elements of it merit your serious consideration.

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

Bad Samaritans

2010-07-09T15:19:00.000-07:00

When I was nineteen years old, I became a confirmed believer in free trade (Yes, I was a wild young man!). The concept, in brief, is that our economy and our newly emerging global marketplace should produce the greatest good to the maximum number of people. If each nation on earth can do what it does most efficiently and sell it without restriction anywhere, then prices are lower and a large number of people benefit. Frederic Bastiat, a 19th century French economist, converted me with his withering attacks on tariffs between nations. He remains the wittiest economist that I have ever read. Admittedly, Bastiat was not in a very competitive race on economic humor. His main talent was firing some acidic ridicule at those putting up trade barriers.

In recent years I have developed the habit of reading extensively in areas that challenge my long held beliefs. It is a marvelous exercise as it makes you re-think all of your assumptions. Most of the time, I stick to my beliefs but such reading often raise some doubts or I find different shades of gray creeping into my thinking. This happened a few weeks ago, when I read “Bad Samaritans, The Myth of Free Trade and the Secret History of Capitalism.” It was authored by Ha-Joon Chang, a long time development economist at Cambridge University and native of Korea.

Chang brings many fascinating anecdotes into his story and, for the first time, provides hard historical data surrounding the success of countries and their position on free trade. As you might expect, the success does not all center around the presence of free trade. One example is Finland which had the distinction of keeping foreign ownership and trade at lower levels than any other western democracy. There was a Finnish “conglomerate” that was struggling with particular weakness in its electronics division. The government propped it up and, over time, the electronics division turned around. That company is now Nokia and most of us, according to Chang, would place it in a globalization Hall of Fame.

A second example requires extensive quoting from the book itself: “The leading car maker of a developing company exported its first passenger cars to the U.S. Up to that day, the company had only made shoddy products—poor copies of quality products made by richer countries. The car was nothing too sophisticated—just a cheap subcompact. But it was a big moment for the country and its exporters felt proud.”

“Unfortunately, the product failed. The car had to be withdrawn from the US market. This disaster led to a major debate among the country’s citizens. …..If the company could not make good cars after 25 years of trying, they should go back to their original business of making simple textile machinery. The government had ensured profits for them by high tariffs and draconian controls on foreign investment in their car industry.”

“Others disagreed…. And argued that no country had got anywhere without developing “serious” industries like automobile production. The year was 1958 and the country was Japan. The company was Toyota.”

Chang’s point is that in developing countries emerging companies are a bit like children. They need to be nurtured, encouraged, and protected before they can stand on their own in a global marketplace. Both Nokia and Toyota would have been shut down early had their governments had a Darwinian “survival of the fittest” mentality along with a pure free trade approach.

He posits that free trade often helps rich countries and brings poor ones along very slowly with low paid and underage workers making products for wealthy (Western) consumption. One could argue that for many factory jobs are a way to survive but, to most of you, child labor is quite odious. Also, only Holland has had pure free trade over the last two hundred years. The United States really was not into it in a big way until the Eisenhower era in the 1950’s and then embracing NAFTA in the mid-1990’s.

Also, Chang raises some fascinating ideas about graft. He cites how two countries in the 1960’s, Indonesia and Zaire (now the Democratic Republic of the Congo) were arguably the most corrupt places on earth. Thirty years later, the Suharto family in Indonesia had stolen between $15-35 billion from the people. Over that time, living standards rose by 300%. In Zaire, strongman Mobuto stole approximately $5 billion. When he was tossed out in 1997, per capita income was one third of what it was when he seized power. So, corruption is not always a fair indicator of holding back economic success.

He gives no credit to linking the work ethic of a people and success which I find troubling. There is no mention of two amazing success stories—Switzerland and Hong Kong. The Swiss have no natural resources to speak of; not even a coal mine. Yet they have one of the highest standards of living on the globe due to a stable government that steers clear of foreign entanglements, hard working people who are very well educated and devoted to free enterprise and who today, have vast technical knowledge in a wide variety of fields.

Hong Kong may be more amazing. A tiny enclave of only 33 square miles, it has over 6 million people and even has to import all of its water. Today, only Japan has a higher per capita income in Asia than Hong Kong. How did they do it? Most observers would agree that it is the entrepreneurial spirit of its citizens and its ability to trade goods and services freely across the entire world.

“Bad Samaritans” will make you think. It is the kind of book that you wrestle with as you work you way through. I do not agree with all of it but it well worth you time.

The moral of all of this is to sometimes step out of your comfort zone. If you challenge long held beliefs, you may become a better marketer and a more understanding professional.

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

The Need for Detachment

2010-07-06T08:31:00.000-07:00

Detachment has been defined as an inner state of calmness and being uninvolved in the emotional aspects of an issue. In recent history, detachment has something of a bad rap. Most of us think of monks or other contemplatives as people who are detached and it is not for those of us in the world of business. Others consider detachment to mean indifference. In my experience that is not the case at all. Many people can be actively involved in an issue and be caring but, due to detachment, can accept calmly whatever happens.

A number of years ago I put together an early power-point on this topic and dubbed it “The Importance of Being Lukewarm.” The presentation fell flat on its face. Today, I want to re-open the issue because I feel a sense of detachment is crucial in today’s environment for good media execution.

Way back in the 1970’s, a concept came into vogue called “Zero Based Media Planning.” The idea was that just because a specific mix of media worked well last year does not mean that a renewal of that plan would be good for the current year. Each year your market situation changes, your competition rarely stays static, and the media is constantly evolving. Sounds logical, right? So, you need to start fresh and look at each media vehicle with a fresh eye and a bit of detachment.

Here we are 35 years later and the need for a zero based approach is more crucial than ever. The media is changing far faster with new opportunities emerging each year. Yet most people serve up plans that may be tweaked a little year to year but most of those are driven by client budgets or media costs rather than a complete review of the prior year’s media mix.

A good example is sports packages. Some advertisers have been sponsors of a team for a generation or more. Rates go up and they keep paying the freight. I love a good TV sports package and in an age where too many viewers have an itchy trigger finger on their remote button, sports offer better attentiveness and viewer interest than many other options. But, a lot has changed. Broadcasters and cable entities can provide campaign extensions, appearances, promotions, contests, special features and a host of other opportunities that were not available even several years ago. Yet some people keep doing the same thing year after year with no real measurement as to what good it does them.

Ask media planners about this and 90% immediately get defensive. Those who do not are very impressive as they track you through their new plan, show the changes and options that they rejected and give a cogent rationale for a plan similar to the prior year. Sadly, most do not and cannot.

Part of detachment is my old idea of being lukewarm. Do not fall in love with a particular vehicle that is all new nor one that you have used for years. Work a bit harder and start off with a blank sheet of paper. Just because we have used a medium or specific vehicle for 15 years does not mean you need to commit the same amount of weight to it in the coming year. We all talk about change but how many of us truly recognize it when drafting a recommendation. Also, we need to be careful not to go too far the other way. I remember in the late 1980’s fighting off a client who wanted to go 100% cable and kill all conventional TV. Well, his business was not ready for that back then and still is not.

We are all human. Over time one can get friendly with sales reps from specific media. It is good to have cordial relationships with everyone but if renewal means your planner or negotiator gets a station trip or too many fancy dinners, something is way out of whack. By needing to defend each medium every year, you can avoid some of the cronyism.

Some people believe that it should all be linear. Cut back TV 5% per year and re-allocate that to new digital opportunities is an approach that I have seen. Well, change does not come in a straight line. When our markets touched bottom in the 1st quarter of 2009, media values were often better than they were in a generation. A zero based approach would have taken these marketplace pricing factors into consideration and shifted dollars to better effect for many advertisers than a rigid formula.

What I am suggesting is not original, nor is it hard but it does take a bit more work. If you are detached from the past and look at the new year as just that, new, and are not wedded to any particular medium or vehicle, you will do a better job for your clients. And, your satisfaction on the job may actually increase.

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

The Zombies Among Us

2010-06-30T09:55:00.000-07:00

I have never been a fan of horror movies. Some aficionados say that they hit their zenith in my formative years in the 1950’s but I generally avoided them. The real fans often say the best movies were the “Zombie films” and I must say the 1943 classic “I Walked with a Zombie” was memorable and scary. A zombie was a dead creature that was somehow reanimated via voodoo or other intervention.

Over the last 20 years, the term zombie has been used in much business writing. It first surfaced talking about Japanese banks that were overextended. Currently, in the US, it has found some popularity as our financial crisis refuses to go away. Financial writer John Lancaster describes a zombie as “a bank which is dead—insolvent—but has a horrible sort of pseudo-life because it is being allowed to keep trading by an overindulgent government.” As we hear stories of banks not contacting some people a year or more behind on their mortgages we know that there are zombie banks among us. Somebody is clearing hiding something under that scenario.

But what about our industry? Are there zombies in evidence in communications? I would say yes but in a slightly different way. There is no benevolent federal government propping them up to save face or avert a panic, but if you look closely, you can see the lumbering zombies.

A few weeks ago, I traveled north and checked out several small town city newspapers that were dailies. In the past, I never had huge admiration for their editorial product but they did work hard to cover the nation superficially and give solid local coverage. Today, they are mere shells. The national and state news was 100% wire service copy and the local news was scant. The editorial page was vapid and had syndicated columnists to fill in the blank space. One of the papers was only 16 pages. It was sad as it has been around for 140 years but the paper is really a zombie.

There have been zombie radio stations for years and now, with syndicated music, many have but a handful of employees. But the agency world is where there are many zombies in evidence. There are organizations that bill themselves as full service advertising agencies. They have 4-7 full time employees. Creative, conventional media, digital activity and marketing research are all outsourced but in many cases they do not tell their clients. They are in essence consulting firms. There is nothing wrong with being a consultant but when you speak to some of them they all say they will soon claw their way back to full agency status.

Strange charades are played. For new business pitches, the different disciplines are represented by freelancers and comical things often happen when “team” members stumble over each others names or who does what. They also cannot guide their new business prospects to the men’s room! In some cases, the handful of actual agency staffers present all the work, the strategies and the media and the freelancers are never seen.

Please do not misunderstand. There is nothing wrong with consulting firms. Some provide marvelous service and the motley crew of seasoned pros who make up their small roster of players could never work for a conventional agency again. But, many do not sell themselves as such. They would prefer to be zombie agencies rather than tell prospects what they really are. Some candor would help. Yes, they would lose out on some pitches for new business. But, if they told the truth, they could spin their appeal by saying that their small team of battle scarred veterans could pick the best players from each discipline that fit a prospect’s specific needs. Sadly, it rarely happens.

Finally, may I give a nod of admiration to some very small firms that do excellent work for their client base? When a project gets too big or the needs are too specialized they do not hesitate to go outside their walls for help but tell the clients what they are up to from day one. And, I know of two cases were companies with fewer than 10 people still do amazing work across all disciplines. Their real appeal is strong hands on service from agency principals and, no matter their age, they still are eager to learn and respond to change.

So, be careful when screening new agencies. They could be small packages of marvelous dynamite or they could be the zombies among us.

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