Poverty, An Aging America, and Television Viewing

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Spanish Language TV and Hispanic Marketing

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

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

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

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

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

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

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

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

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

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

Tread carefully!

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

Luxury Brands and Demographics

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

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

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

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

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

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

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

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

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

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

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

A Tactical Suggestion for the 2012 Presidential Campaign

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

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

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

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

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

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

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

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

Baby Boomers and the Future of Media Planning

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

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

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

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

So what does all of this mean?

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

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

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

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

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

The Future of Flanker Products

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

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

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

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

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

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

A Passionate Case for Print

I have a friend whom I have known for some 38 years. Early in my career when I was struggling, he was always very kind and encouraging to me. He went on to become one of America’s foremost media strategists.  Over the last few years, he has been a Media Realism reader and frequently writes to me directly with some very trenchant observations. Recently, he sent me an e-mail suggesting that I consider writing a piece on media accountability and especially emphasizing how magazines still make sense in the world of 2012 media.

With his permission here are his comments:

“It seems to me that people in media are now facing a number of challenges.  A recording system that can wipe out commercials!  General Motors saying that Facebook and social media do not work.  We have all kinds of burgeoning media forms that buyers are being asked to support with no proof of anything including that stuff actually ran as ordered.  I frankly am surprised that advertisers are being so gullible as to accept somebody's so called great idea and give them money without any kind of proof of performance.  Is no one else concerned about this?”

“Meanwhile, we do have one medium whose feet keep being held to the fire -- print.  We have several services giving us their audience numbers.  We have an audit bureau that is checking that every single copy they claim to have sold is actually being sold.  Buyers are trying to squeeze every last penny out of them in negotiations.  We even have a way (through Starch) to tell how effective their advertising is.  And they are being treated like the orphan that was left on the doorstep on Xmas eve.  Yet, as far as I can see, it is the only medium out there that is actually telling us about the quality of their audience and can show us the ad actually ran and tell us something about its performance.  Perhaps we as media buyers should take another look at the world of print.  Maybe it should be the base buy for every campaign since we know whom it reaches and we know that it reaches.  No one else can make that offer to an advertiser.  By making print the very base of each media buy you now have a solid foundation.  It's not sexy and it's not high tech, but 2 x 4's on a concrete slab is not very sexy nor high tech either, but it provides a solid foundation upon which to build a house.  So perhaps an article can be written on rethinking the role of print on our media plan.  The foundation of a media plan.”

My friend raises some issues that are rarely addressed. Some colleagues from other media types weighed in with similar concerns. A long time radio hand e-mailed me the following: “Twenty years ago, the young planners at small and mid-sized shops did extensive rotation analyses of buys placed on our station. They kept us on our toes at all times. Today, if the number of spots and dollars match, we rarely hear from anyone. A dishonest broadcaster could rob people blind. I know that many media teams are understaffed but few are doing due diligence anymore.” A cable sports pro tells a similar tale. He writes, “When I started if I missed a spot in a game my phone rang off the hook. Now, I usually call the buyer to tell them of our problems. In zoned buys in big markets, I don’t believe that anyone is checking the patchwork quilt of spots and where they are running. I know that the dollar value is very low in many cases but some people are not doing their jobs.”

In the digital world, keeping track is getting better and pricing is more realistic. When it started, some things were way over priced while others way underpriced. If you pay on a cost per click or other metric, you have some protection. But, there has to be some real issues with ad networks that give you tons of exposure opportunities but are they the right people being reached?

Print has a business model that is problematic. A dozen years from now many titles will have gone 100% online to survive. The issue that my friend has raised about accountability is a profound one. Over the short and intermediate term, print may make a lot more sense than many see right now. What do you think?

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