Is Management Often Immoral?

Happy 2013!

Over the years, many large companies have been caught in actions that many of us would consider to be immoral. The big auto companies have often been singled out as not making small inexpensive changes in design that could have saved a significant number of lives on our highways. And, depending on your politics, Shell Oil, Dow Chemical, Monsanto or Nike may make your personal hit list of organizations that have not always acted in the public interest.

Whether these companies committed crimes or not is beyond the scope of this post. Yet, many have found their actions offensive at times. What has always intrigued me is that it is that the corporations seem to be doing the questionable acts rather than the management. I refuse to believe simply that unfeeling and amoral sociopaths run these corporations.  Canadian journalist Wade Rowland struck a responsive chord with me when he wrote that, in a sense, “the corporation manages it managers”.  When poorly made products cause damage or are made via exploitation, complaints are generally swept away under the banner of “progress”.  Air or water pollution issues, for example, are often cast aside, according to Rowland, as an “externality” as profits rise and jobs are created. It is a challenging thought.

Recently, a few readers have contacted me about a similar problem in our industry. One was a young media planner way out west. He explained that he had put together the best media plan of his life for a substantial client. It had a nice mix of digital and conventional components and he felt did a great job of hitting the majority of their target audience with a real chance of breaking through today’s substantial clutter. He presented it internally a few days before the client planning session and his CEO said it was a complete non-starter. The creative chief had a great idea for a TV campaign and that was where all the money would be spent. My young friend countered that the production expense on the spots would mean that the market support list would have to be cut substantially and not all that many people would see the spots. His CEO ended it by saying “it is important that this agency produce some quality TV executions this year”. My brave friend then said “but what about the client’s needs?”  “Screw the client, we need to do this”, replied the agency chief.

Distraught, he thought of quitting. But he tells me that he has a new baby, a fair sized mortgage and he does not exactly work in an advertising Mecca so he would have to move several hundred miles away for a similar position and would need to sell his house first. That may not be easy these days. So, he may be stuck in his situation for a few years. I informed him, in an attempt to be soothing, that I suffered similar issues a few decades ago when I recommended radio and we were forced to do TV in a small roster of markets due to production costs. He e-mailed back moments later that “20-25 years ago, TV worked better than it does now. So, you were forced to do something that was not optimal but still might have worked. With no digital and hardly any local cable allowed, this is doomed and I am part of it.” That shut me up pretty quickly.

Separately, I heard from a radio salesperson that I have known for about 15 years. He lives and breathes his medium, customizes some marvelous promotions, and is a man whose word is truly his bond.

At 52, he is going through a bit of a mid-life crisis. He says, “I know my station(s) do not work nearly as well as they used to even five years ago. Old clients who trust me are probably paying too much and come to me because of our long-term relationships. My college age kids belittle me by saying that no one listens to local radio anymore.  I suggest that radio has sent them to nice schools, bought them great clothes and sends them to sunny spring break destinations and they laugh in my face. My wife tells me to stop complaining, go to work, pay the tuitions and keep funding the 401k. I am in a tight spot. My general manager is a decent sort and he tells me that headquarters just wants the money every month. They lecture him about debt service and the need to increase revenue regardless of the local economy. What should I do?” I suggested that he consider going to a TV station with a manager who “gets it” or apply to a local cable interconnect.

Both of these men are thoroughly decent and are real pros. But, given the current climate and their personal situations, they simply cannot resign and find something better in a few weeks. Digging a bit deeper, are their managements immoral? Or, are they simply being manipulated by the corporate entity itself. Profits must rise, as must revenue and ad agencies need to produce good TV to attract new business. Are both managements simply so immersed in the now that they cannot step back and see the reality that my two friends do? There is no easy answer but as our world changes rapidly over the next few years, these issues will hit all thinking professionals.

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

Breakout Nations

Rucher Sharma is a big time money runner at Morgan Stanley. He has written a fascinating new book entitled, BREAKOUT NATIONS, In Pursuit of the Next Economic Miracles (W.W. Norton & Co, 2012).

He raises some great issues and explodes some time-honored myths. One point that he makes excellently is that “the factors driving growth in any given country at any given time are in constant flux. Economic regimes are like markets. When they are on a good run they tend to overshoot and create the conditions for their own demise.” You rarely see this kind of candor in financial writing. Markets go to extremes and people who should know better get caught up in the enthusiasm. Most “experts” on the international economy tend to have a few rules for growth, and, if a country follows those, their future is bright. Sharma explains quite cogently that you need to take each on a case-by-case basis.

What I enjoyed about the book was that unlike most foreign investment and development experts, he does not always go with the conventional wisdom. This comes in to focus the best when he dissects the BRIC countries (Brazil, Russia, India and China) that have led the globalization trends in recent years. His opinions are as follows:

Brazil—government has gone from 20% to 40% of the economy in recent years. This is not a positive (et tu, Washington?). The average adult only has a seventh grade education and their supply chain management is a mess. The ongoing oil boom will cover a multitude of sins in the years to come but things are not as bright as they appear on the surface.

Russia—Oil is virtually one half of GDP. What happens if we get our natural gas and domestic oil business humming in the US? Retail has not caught on, as there are only a few big cities so the big box retailers have not bothered with Russia. Also, there are few good rail links and infrastructure in general is weak with major cities often suffering from rolling blackouts.

India—suffers from a bloated bureaucracy and a heavy dose of crony capitalism. Has potential but will be weighed down.

China—the one child rule is speeding up the aging of their population (see Media Realism, “Malthus, Demographics and China’s Future, 3/27/11)

There were other surprises. A few years ago, Vietnam was on everyone’s list of a sure bet as an emerging economic success story. It was a mini-China in people’s eyes. What seems to be happening is that their command capitalistic system is ill equipped to handle the influx of foreign investment and local politicians are very corrupt. Docks are ancient and can only handle a fraction of the shipping containers per berth as compared to major international ports in other growing economies. So the big ships can’t get in and a major manufacturing plant could not get goods out of the country efficiently.  Most of the ports are owned by a state company and are under the influence of local politicians.

Mexico remains the poster child for an oligopoly where 8-10 families control 60-80% of economic activity. Turnover in billionaires according to Sharma is an interesting metric to look at for whether or not an economy is vibrant.

Sharma makes an excellent point that sustained economic success is a relatively rare phenomenon in economic history. But he ignores that developing nations are growing twice as fast as the US and are now cutting trade deals among themselves and, with every passing year are less dependent on the United States and other Western countries.

He is optimistic about the US reigniting its industrial base but does not mention at what wage level this will take place (I would assume lower). Germany is nicely positioned among other Western powers.

Where are the next breakout nations? In Europe he likes the Czech Republic and Poland.  Both have low levels of debt that put them in a strong position relative to their European neighbors. Poland’s economy actually grew 4% during the 2008-2009 economic debacle. Turkey, a European/Asian hybrid has promise and he really likes South Korea in Asia along with Indonesia. In Africa, he says Nigeria has a chance and touches on Nollywood, the nation film industry that is slightly bigger than Hollywood but remains far behind India’s Bollywood. We have all been aware of Bollywood for some time but did you know about Nollywood? Sri Lanka, in the Indian Ocean has improving prospects as a long civil war is over and the ensuing peace dividend should foster growth.

Marketers should always be on the lookout for where an emerging middle class is going to develop and then begin to do serious branding in those countries.  Purveyors of luxury goods have also taken note.  Roughly a third of Swiss watches are now sold in China!

This is a very thoughtful book. Whether you are an investor, a marketer, a political observer or an armchair dreamer, this book is a terrific read.

Merry Christmas to all!

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

Will the Second Screen Kill the Couch Potato?

Today, lots of media analysts are buzzing about the second screen and they have good reason for doing so. Definitions abound but usually describe a companion device or application that allows you to interact with the content of a TV show, movie, video game or music. Others include laptops or Smartphones where you may be doing something unrelated to the programming. For example, during summer baseball games, I often watch an inning or two of a game with a laptop close by and I either answer e-mail or surf the web on a wide variety of subjects.

Ten years ago, many pundits forecast that the Internet would kill TV. Well, the Nielsen people inform us that Americans are watching more TV than ever. It appears that the web, mobile and social media are all rapidly converging with television. Looking at research studies from across the world, you find wide variance in second screen usage but the trend is clearly that more and more of us are multi-tasking as we watch. Verizon, Google, Nielsen, Ericsson and a host of others are available—take your pick. All point to several trends going on both in America and other developed countries:

--25-40% at one time or another browse for products spotted while watching a TV show
---Some 20% are on Facebook or Twitter while viewing
--34% check sports scores of other contests during viewing of games
--60% on tablets read their e-mail
--At some point, 60% use their laptops, Smartphones, or tablets while viewing

All of the above leads to one clear conclusion—distraction to TV viewing is at an all time high and it is not going away!  The great Don Vito Corleone one said “Keep your friends close and your enemies closer.” If you are an advertiser, you need to embrace your enemy, this increased distraction, head on. You knew for a long time that not everyone was watching your expensively produced spots during commercial breaks. But now that number is in freefall especially among those under 35. So you need to integrate the second screen into your creative strategy. TV, as we knew it, will still work for some.  A small group that could be 10-15% of your viewers can enhance your commercial message as they browse the web to check out the product that you just advertised. The second screen then acts as a companion medium to the traditional TV message. Sometimes it will result in a cross-platform or cross-channel experience for your brand.

I hate to trot out a cliché but the second screen allows you to engage people with your brand and can be interactive if structured properly.  Technology will not stand still and you cannot afford to either. Start testing soon.

Twitter is playing a role that is increasingly rapidly in this space. Just under two years ago, I vividly remember being startled as Audi ran a spot in the 2011 Super Bowl. The hashtag #Progressls ran for only a few seconds at the end of the spot and, for a moment, I thought that I was imagining something.  Since then, a new form of social media, TV’s backchannel, has emerged.  It is real-time chat that is happening DURING the time a program is broadcast. At first, it was during award shows and other special events. Now, it is rampant. Thousands of member of the Twitter community often respond instantaneously when something happens. Networks look carefully at the tweets when a new program airs. The sample may be a bit biased but it is huge and will soon be a predictor of which shows will survive the Nielsen cut.

Commercials also get their fair share of reaction that provides valuable insights to advertisers and can actually get a buzz going about your company both positive and negative. Also, the power of the hashtag can strike in unlikely areas. Watching a GOP debate in January 2012, I found that I could monitor viewer comments on the Meet the Press Facebook page. Questions were sent in but I found  some of the tweets very absorbing reading.

So Social Media and TV now have some measurable co-usage. It is time for many advertisers to get on board. The backchannel will work for national advertisers and for some regional players but will likely have far less utility for smaller, local players.

For years, we worried that many young adults would be zombies watching an increasing amount of TV with each passing year. Now, it appears that the couch potato, thanks to social media, has a rendezvous with death.

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

Cut the Cable Cord?

These days you hear an increasing amount of noise regarding people “cutting the cord.” It refers to individuals who have chosen to cancel their cable service or satellite provider usually to save money in a tight economy.

We have written about this phenomenon in this space in the past but there is a chance that it is picking up a bit of steam and is worth a re-visit. In recent months various estimates say that 400,000 households have cut the cord and, over the last year, 1.5 million have ceased to carry the pay TV option for premium channels.

There appears to be two groups of people out there. The first is strapped for cash and fed up. Here is a composite statement from several people who have told me that they have cut the cord in recent months: “I waste hours waiting for the cable guy if there is a problem and each year my bills goes up giving me new channels that I did not want and will never watch.”  Or “I can’t afford to spend $100-150 per month anymore.” A large group of men over the last two years have told me directly that the only reason that they keep cable or satellite is live sports.

The second group tends to be young, a bit stretched financially but not always, and very tech savvy.  They tell me that they get by with a mix of online options with the most prevalent blend being Netflix, Hulu (or Hulu Plus), Roku, and You Tube. Other than live sports, this blend can do an exemplary job of covering the video needs of millions. Some have told me that you cannot always see a series episode on the day that it airs but waiting a day or two to catch up is worth the savings that can be $60-80 per month. Tellingly, they are teaching their parents to do the same.

A handful of people have gone to very low-tech options that work for them but not for many. In the last year I have met two people at my local library as I searched for DVD’s of old British series. Both were elderly and living almost exclusively on Social Security payments. Neither has a TV anymore but they watch the free DVD’s that the library provides and get their fill of video in that way. Interestingly, both said they no longer get a daily newspaper and they get their news from NPR!

Foreign exchange students cross my path daily and they have an interesting spin on Americans and TV viewing. One said and I quote “you Americans are foolish. You spend way too much money on satellite and cable. I know sites all over the world where I can get free movies and programs. My fellow students are amazed as they know nothing about them.”  Another foreign student sheepishly told me that by the end of the semester he had become hooked on American football and now pays a small amount (a six pack of beer?) to spend each Sunday at a friend’s apartment to watch the NFL.  But he stubbornly insists that he will never pay for a cable or satellite subscription himself even if he permanently resides in the U.S.

These piecemeal solutions are not for everyone. Some people do not have the patience to troll the web for programming but so many have Netflix and Hulu that much of their viewing may be done on laptops anyway.  This is an area that all media analysts need to follow closely. A lot of well-educated and busy young adults in our largest cities have no interest in paying for TV. They can get a huge majority of their viewing needs covered by cobbling together some combination of Netflix, Hulu, et al.  One young man e-mailed me that you would be stunned at how many movie classics are available on You Tube. Check it out. He is not exaggerating.

All of this leads to a conclusion. Back in the mid-1990’s Sumner Redstone of Viacom made the famous statement that “content is king.” Well, if you are honest about the issue, it still is. With every passing year new devices and platforms emerge. Yet, we all want content. The content providers seem to be the one sure thing in our emerging world no matter what device or company is delivering it to you. Two giants stand out—Disney and Discovery.

The Disney name has been the bellwether for entertainment for the last few generations. Most people think of theme parks but they are huge content provider. They own seven movie studios, ABC and the grand jewel these days—ESPN. Talk to young men. A surprising number will tell you that the ONLY reason they keep cable is ESPN.

Discovery does not get the respect that it deserves. It has nine content filled networks in the US including Discovery, TLC, Animal Planet and the Military Channel. What few realize is the breathtaking scope of their global reach.  They have 150 distribution feeds in 40 languages! Discovery is truly a prince of content.

And, finally, have you noticed what Comcast, the cable giant did? They purchased majority ownership in NBC Universal. So no matter what happens, they have a lot more than a toehold in content going forward.

A few people with whom I correspond basically tell me that these outliers who do not have cable or satellite need to enjoy their savings while they can. The big boys like Verizon and Comcast are not going to give you Internet access at a low price much longer after you have cut the cable cord. They want to sell content and you are getting a lot at a reduced price if you cut the cord and use their Internet service to get content at a fire sale rate. That is certainly possible if cord cutting picks up a lot more steam.

No matter where we go in the next decade in terms of devices, keep you eye on the ball. Content is and will remain king.

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

Obama, The Ground Game and The Future

With our presidential election a few weeks behind us, many people are doing a good bit of Monday morning quarterbacking. Neither the President nor Governor Romney ran a particularly distinguished campaign but most agree that the President out-organized the former Massachusetts governor. Typically, people refer to this practice as “the ground game”.

For most people, the ground game is campaign field operations where a candidate’s team identifies likely voters and makes a strong effort to get them to come to the polls. Campaigns are famous for driving the old and the infirm to the polling station. It is done county by county across the country and, in urban areas, block by block.

This time it was different, really different. The Obama campaign had a technological edge over the GOP as they employed e-mail, Facebook, micro-targeting, and other social media venues to reach prospects. They keyed on the women, young voters, Latinos, and African-Americans that the president carried in 2008 and nearly approached or matched delivery in every one of those key target groups this year.

Virtually all political observers would admit that the President ran a brilliant campaign in 2008. Well, they had captured a mind-boggling e-mail list of 13 million voters four years ago. They went back and reworked that list and profiled potential voters very carefully. Messages were customized to appeal to those voters once again.

They opened regional offices some 15 months before the election and staffed them with professionals. People were visited and contacted by the campaign many times prior to the election.

While all this was going on, Mitt Romney was fighting a bruising primary campaign to get the GOP nomination. Rick Santorum, a former Pennsylvania Senator with no chance of winning the general election held on through May and diverted Romney’s team from building a grassroots base in many key markets. Romney had some smart people, no doubt. But, the president’s regional efforts were 9-10 months ahead of them in getting started and that may have made the difference. Early voting also helped as the president’s team encouraged and helped many who might not have been able to vote on Election Day to get to the polls early.

I live in a non-battleground state. Twice, I showed up for early voting and left due to long lines. On my third try, I waited 50 minutes in a drizzle and cast my vote on Wednesday prior to the election. Something was clearly up. And the Romney group’s chief tool was Project Orca, a software program that’s purpose was to get out the vote on Election Day. It may have been good, it may have been poor, but in several states, the President had built up such a commanding lead that a GOP get out the vote effort  on Election Day almost had to fall short.

So, what does all this mean for the future? Some Obama loyalists are saying that their man inspired such enthusiasm from so many that their ground game in 2012 cannot be replicated in 2016. Perhaps there is a bit of truth there but you can be sure that the GOP will bring in their own team of data crunching geeks to sharpen performance going forward. And consider this scenario—what if Secretary of State, Hillary Rodham Clinton, announces for President early? She can build her organization and would likely be the presumptive nominee shortly after her announcement. The Republicans may have another group of gadflies getting in the way of a few serious candidates. So Secretary Clinton would have the organizational lead and in summer of 2016 the GOP nominee would face the same game of catch-up that Romney did this year.

(Why were the polls so wrong? Well, you can’t rely on old technology. Some 35% of us don’t have a landline, and those geezers who still do usually have caller ID and won’t pick up the phone when they see who is calling.)

In the future, advertising may pay a lesser role and TV stations and cable players in battleground states may not get the bonanza of cash that they received this year. Pin-point targeting will get better and better. Also, four years from now there is an excellent chance that a sophisticated campaign will reach and engage voters by somehow connecting TV advertising to mobile, the web, or social media in ways that no one has developed to date.

In ancient Rome, there was a saying that translates as follows—“He who has the gold, makes the rules.” Over the years, we bastardized that by substituting advertising dollars or marketing strength for gold. Going forward, may I suggest that in politics it will be—“The campaign with the better data that yields better messaging, wins.”

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

Globalization and Poverty

On 9/9/11 I wrote a post entitled “Globalization and Advertising.” Each day it still generates a few hits and a week does not go by when someone writes directly to me to discuss it. A few months ago, a reader in Chicago started a lengthy thread about Globalization.

His main point is that Globalization is bad for the United States because developing countries have a comparative advantage over us when it comes to wages. So, evil multinational corporations simply move plants and factories overseas and dislocate American workers. His argument is that nobody wins with Globalization.

My take is that the topic is very complicated and certainly far more nuanced than my Windy City acquaintance makes it. Now, let me be clear. Managers who truly have no sense of social justice run some companies.  And, there is simply not enough time or money to identify all the greedy bastards out there who may cut legal or taxation corners to feather their own nests or prop up the corporate bottom line.

People who are critics of free trade often talk about those seeking a better life in America but forget about the billions overseas who seek the same kind of betterment. Not my Chicago friend, but others have written to me saying that, as a member of a Christian faith, free trade is unconscionable as some Americans inevitably lose their jobs if it is implemented. When I counter with don’t struggling Thais, or Vietnamese or Sri Lankans have the right to succeed, they tell me that is a different issue. When I ask if God looks at the passport of those being lifted out of poverty, people usually get angry, silent or both.

I am not naïve. There are some abusive practices out there where American workers are being asked to compete against child labor and sometimes prison labor. Clearly, that is not right. But is it social justice when Americans want to deny the poor abroad the chance to rise in life with their competitive advantage of lower wages?

For twenty-five years, I have wrestled with this issue. To me, the ONLY way for workers in developing countries to get out of abject poverty is if production can take place anywhere. The much-maligned multi-nationals are the key here. Only business, and usually big business will push for open markets. Politicians won’t do it, as they are afraid to offend even a few thousand constituents who may be temporarily out of work or have to move.

Each year millions of people in developing markets join the global middle class. And, in doing so, buy American brands of all sorts. The multi-nationals are not all laden with saints. But open markets are the only way the lowest in the world can claw their way out of terrible poverty. So, as unlikely as it may seem to many of us, the multi-nationals are the globes poorest unlikely and, at times, only real champions.

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

A New Case for Spot TV & Local Cable

Over the last few years, I have received much e-mail saying that I am unfair to local broadcast (spot TV) on the pages of this blog. Obviously, I do not agree. What I tried to point out is that all forms of television have lost a few steps as an advertising medium as commercial avoidance has accelerated via time shifting devices, channel hopping with a remote in hand, and now using one’s Smartphone during commercial breaks or even programming itself.

All this is true and is now part of the fabric of using the television medium for advertising. In recent months, however, I have seen something else happen that may make the local versions of TV both in spot broadcast and local cable more attractive to large advertisers.

There are 210 Nielsen Designated Market Areas (DMA’s) in the United States. Market #1 is New York with nearly 7.4 million TV households and Market #210 is Glendive, Montana with just over 4,300 households. When an advertiser buys 1,000 rating points on national network TV, they average 1,000 point across the 210 markets. But delivery is not consistent. In smaller markets ratings can be significantly higher and in larger markets where there is more to do, ratings tend to be lower. For many years, marketers would take that in to account and supplement their network TV buys in the top 20 DMA’s across the country and in other areas of sales strength or potential.

On top of that, just as network TV delivery varies, so do product sales on an index basis across the 210 markets. Colgate toothpaste may be fairly flat but most brands have real pockets of strength and other DMA’s show significant sales weakness. Years ago, media planners were trained to do exhaustive breakdowns of sales data. If a DMA had low network delivery but positive sales potential, a spot TV buy would take place even in fairly small markets. The idea was to squeeze every possible case sale out of your distribution universe.

Now, when you talk to young media strategists, they laugh when you bring such a topic up. I have heard or received comments such as “network will take care of it or why should we chase down a few extra sales in Green Bay?”  In days gone by, network TV was always twice as efficient on a per eyeball basis as spot TV. Not so any longer, my friends! As network pricing marches upward almost every year, there are many DMA’s in the Midwest in particular that have not seen meaningful price increases in years. So, the efficiency advantage that network TV had is not nearly as great as it once was. And, sales still are like a rollercoaster in terms of DMA by DMA volume along with volatile local market media delivery.

That is why I remain convinced that some of the best conventional media execution takes place in smaller shops on the back roads of American advertising in places like Burlington, Louisville, Akron, or Salt Lake City. A young planner in a mid-sized mid-western shop writes to me often about how he tries to optimize his budget in the 12 DMA’s where his largest client advertises. His boss does not appreciate what he is doing but I always try to give him constant encouragement. He may have limited resources compared to his colleagues in larger cities but he is not afraid to work and get things right.

The same is true with local cable. When one makes a national cable buy, is delivery flat? Take a look at Birmingham, Alabama’s ESPN delivery and compare it to the ratings that premier network delivers in San Francisco. You will be surprised at the spread.

So, local cable also suffers in many DMA’s as it does not get supplementary weight to make up for a shortfall in national network buys or pockets of unusual sales strength.

Would this require more work by the national agency or buying service? You bet. But the rewards in stronger sales could be substantial.

If you are an agency person reading this, consider what I have said. If you are a client, see how closely your agency tries to match delivery to sales, sales potential, or maybe find pockets of very efficient buys in excellent markets for your brand. If you are network affiliate or local cable sales executive, you may be frustrated and rightly so. You are selling a product that may be underutilized by allegedly sophisticated marketers.

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