For most of my adult life, I have read or heard people talk about positive thinking and how some people are just born winners. There is no question that positive thinking is a good thing but to me the greatest success often comes to people who have had some hard knocks, learned from it, and overcome the difficulty.
Like many New Englanders of my generation, my childhood hero was Red Sox great Ted Williams. Urban legend has it that in retirement, Ted one said that baseball “is the only field of endeavor where a man can succeed three times out of ten and be considered a good performer.” Ted was right about baseball. If a guy hits .300 consistently for 10-15 years, he is a virtual lock for the Baseball Hall of Fame at Cooperstown.
Actually, Ted was wrong that a .300 batting average would only make you a success in baseball. Ask any advertising agency executive about his or her new business batting average. Yes, many shops have hot streaks, but virtually no one bats .300 at new business over the long pull. If you are not talking about the three-four shops who make the cut for the creative or marketing shoot-out, then the average for everyone is much much lower than .300 as many do not make the cut at the RFP (Request for Proposal) stage.
How about the new rage in marketing--Targeting models employing Big Data?
Well, look at Groupon coupon redemptions. The number is something like six coupons out of 10,000 mailed out. Amazon does far better with their Zappos offers as they have a clear look at purchase history but still, despite the best targeting ever, the failure rate is staggering.
How about science? From the time I was able to read, I also was informed of the genius of Thomas Edison. Yet, Edison performed thousands and thousands of experiments before he had a breakthrough with electricity or movie cameras. He was quoted as saying that discovery was “1% inspiration and 99% perspiration.”
Know many investment millionaires? Most will tell you that most of their purchases lost money or were lackluster. A couple of 10 baggers (1,000% return) or one 100 bagger (10,000% return) put them on easy street.
How about those dealing with addiction? Most fail a few times before turning their lives around in re-hab. And, it is a verifiable fact that the majority of “overnight successes” in the entrepreneurial world may have struck gold on their third or fourth attempt.
Failure is so important in the business world. If you learn from your mistakes, you improve your chances significantly on your next effort. And, importantly, failure teaches you true humility which is the differentiating characteristic of many great leaders.
So, we all have failures and will continue to experience them. Analyze them and try and learn from them. Dust yourself off and get back in the game. Over the long pull, failure can be your friend.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Sunday, December 13, 2015
Tuesday, December 1, 2015
The Big Deal About Big Data
Over the last few years, unless you were in a very remote part of the marketing world, the term “Big Data” has become increasingly prominent. Just what is it? How important is it going forward in the discipline of Consumer Behavior and the world of Advertising and Marketing?
To me, Big Data is the legitimate heir to popular terms of the new century such as dot.com, social media, and wireless. It means a lot of data. No joke! That is it!
The issue to me is not that we have more data than ever before, a great deal more of it, but we have far more analyses. A tremendous amount more.
The driving force of this marketing or sales revolution is not the massive data itself. It is the AVAILABILITY of the information. To repeat, Big Data means more analyses, but, at the same time, it also means more bad analyses as well. In today’s world, there is no way to escape people crunching numbers (I have done it forever). And now, marketers and analysts have vastly more numbers to review.
Today, by employing Big Data, marketers, especially online players, know a great about their regular customers and they are constantly fine tuning their methods. A friend said that he is searching for the holy grail of communication--making the right offer to the right person at the right time.
How do they do it? To wildly oversimplify, they essentially get needed information two ways:
1) Loyalty cards--This is clearly the most direct way for a marketer to learn your shopping habits. Retailers “bribe you” in essence, by obtaining your personal data with rebates, gifts, or other benefits. The best example that I have ever found was a few years back when JPMorgan Chase issued an Amazon credit card. The carrot that they offered was that you received three reward points for every dollar purchased on Amazon with the Chase Amazon card. All other purchases received one point for each dollar spent with the card. With a powerful incentive in place, a large number of people put much of their expenditures on that one card and used Amazon more often. So, in crude terms, Amazon gets the platinum mine and you get the shaft. Only a few would think this. Most would say they get the benefits of a souped-up Amazon reward plan. A handful, generally very mature would worry about privacy. The younger demographic by a rate of 95% to 5% would opt for convenience over privacy. So, with the loyalty card Amazon has a rather clear view of your spending habits. They can customize offers to you and others like you to push you over the edge and grab a deal.
2) Loyal or Regular Customers--A retailer or company site will graze through your past shopping records and look for clues to your shopping behavior. If you come up without a clearcut profile, they will link you with customers who “look like” you in some way or share several demographic characteristics. This leap of faith is known as PROXY DATA and can include basics such as age, income, nine digit zip, education, subscriptions to selected magazines and even if you have a cat or a dog. The mountain of Proxy Data that is being built up almost defies description. Companies have massive databases that cover nearly 75% of all US Households. They peddle this information to many takers and slice it up in infinite variations. A few examples are:
1) The basics such as age, gender, education, income and ethnicity
2) Consumption data--What do this household spend on liquor, fine wine, even ice cream. Ice Cream? A quick story. On Saturday, my wife sent me to a toney grocery store to pick up two items. As I passed the ice cream section, the marketer in me stopped. They had a brand unfamiliar to me that was selling for $7.25 cents a pint. I laughed to myself and wondered who would be buying ice cream priced at over $50 a gallon. An instant later, a very beautifully dressed woman said, “Excuse me, sir, may I get in to the freezer.” As she put two pints of the designer ice cream into her shopping cart, she smiled and told me that her daughter was home for Thanksgiving break and just loved this ice cream. I very quickly drew a demographic profile of the lovely mom. Coincidentally, we checked out at almost the same time and left the store simultaneously. My hunch was correct. She hopped in to a new Land Rover and, as she drove away, I saw a sticker on the rear window for both Brown University and Williams College. With that, I could narrow her home to one of three zip codes. If I can do that by inspection, imagine what a marketer can do with a few dozen data points!
3) Lifestyle data--How often have you moved (average home stay is seven years in the US) and how long is your marriage and is it your first.
4) Neighborhood information--How long do people commute to work and how many own their dwellings
In 2008, when the economy appeared to be in shambles, the great Chris Anderson wrote a magazine article entitled “The End of Theory.” Anderson is the author of THE LONG TAIL (a book which I highly recommend) and is the former editor of WIRED Magazine. It was the first article that really brought the concept of Big Data into the mainstream. His thesis was that data would become so big and so complete that models to reach target prospects or even project sales forecasts would be obsolete.
To quote, the lead passage from his article we find: “This is a world where massive amounts of data and applied mathematics replace every other tool that might be brought to bear. Out of every theory of human behavior, from linguistics to sociology. Forget taxonomy, ontology, and psychology. Who knows why people do what they do? The point is that they do it and we can track and measure it with unprecedented fidelity. With enough data, the numbers speak for themselves.”
Now, that you have looked up the definitions of taxonomy and ontonology, let us continue.
If you study Consumer Behavior with any depth, you soon realize that the true causes for buying defy simple measurement. With so much data available, we may weigh various data points incorrectly and make unwarranted assumptions.
Big Data is wildly useful but it cannot tell you why fads occur or why all of us at one time or another make impulsive purchases. Statisticians refer to these as LATENT FACTORS as they cannot be seen or observed. Is Anderson totally right about the future of Big Data? I doubt it for one big reason. My favorite statistician, Kaiser Fung, put it beautifully when he wrote, “It is just hopeless to distill the kaleidoscope of human behavior in to a set of equations.”
What does this mean for the future of both Consumer Behavior as a marketing discipline and for the future of Integrated Marketing Communications? Plenty, but the impact of Big Data is not clearcut. One could make a safe bet that as logarithms improve marketers will depend more on online and mobile options to reach people. Traditional media has to struggle even more than they do today. Facebook may grow in stature as the word of mouth it provides re products and services will help while legacy media flounders.
Remember, that statistics are no substitute for judgement but unbiased analyses should be a great help to marketers going forward.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
To me, Big Data is the legitimate heir to popular terms of the new century such as dot.com, social media, and wireless. It means a lot of data. No joke! That is it!
The issue to me is not that we have more data than ever before, a great deal more of it, but we have far more analyses. A tremendous amount more.
The driving force of this marketing or sales revolution is not the massive data itself. It is the AVAILABILITY of the information. To repeat, Big Data means more analyses, but, at the same time, it also means more bad analyses as well. In today’s world, there is no way to escape people crunching numbers (I have done it forever). And now, marketers and analysts have vastly more numbers to review.
Today, by employing Big Data, marketers, especially online players, know a great about their regular customers and they are constantly fine tuning their methods. A friend said that he is searching for the holy grail of communication--making the right offer to the right person at the right time.
How do they do it? To wildly oversimplify, they essentially get needed information two ways:
1) Loyalty cards--This is clearly the most direct way for a marketer to learn your shopping habits. Retailers “bribe you” in essence, by obtaining your personal data with rebates, gifts, or other benefits. The best example that I have ever found was a few years back when JPMorgan Chase issued an Amazon credit card. The carrot that they offered was that you received three reward points for every dollar purchased on Amazon with the Chase Amazon card. All other purchases received one point for each dollar spent with the card. With a powerful incentive in place, a large number of people put much of their expenditures on that one card and used Amazon more often. So, in crude terms, Amazon gets the platinum mine and you get the shaft. Only a few would think this. Most would say they get the benefits of a souped-up Amazon reward plan. A handful, generally very mature would worry about privacy. The younger demographic by a rate of 95% to 5% would opt for convenience over privacy. So, with the loyalty card Amazon has a rather clear view of your spending habits. They can customize offers to you and others like you to push you over the edge and grab a deal.
2) Loyal or Regular Customers--A retailer or company site will graze through your past shopping records and look for clues to your shopping behavior. If you come up without a clearcut profile, they will link you with customers who “look like” you in some way or share several demographic characteristics. This leap of faith is known as PROXY DATA and can include basics such as age, income, nine digit zip, education, subscriptions to selected magazines and even if you have a cat or a dog. The mountain of Proxy Data that is being built up almost defies description. Companies have massive databases that cover nearly 75% of all US Households. They peddle this information to many takers and slice it up in infinite variations. A few examples are:
1) The basics such as age, gender, education, income and ethnicity
2) Consumption data--What do this household spend on liquor, fine wine, even ice cream. Ice Cream? A quick story. On Saturday, my wife sent me to a toney grocery store to pick up two items. As I passed the ice cream section, the marketer in me stopped. They had a brand unfamiliar to me that was selling for $7.25 cents a pint. I laughed to myself and wondered who would be buying ice cream priced at over $50 a gallon. An instant later, a very beautifully dressed woman said, “Excuse me, sir, may I get in to the freezer.” As she put two pints of the designer ice cream into her shopping cart, she smiled and told me that her daughter was home for Thanksgiving break and just loved this ice cream. I very quickly drew a demographic profile of the lovely mom. Coincidentally, we checked out at almost the same time and left the store simultaneously. My hunch was correct. She hopped in to a new Land Rover and, as she drove away, I saw a sticker on the rear window for both Brown University and Williams College. With that, I could narrow her home to one of three zip codes. If I can do that by inspection, imagine what a marketer can do with a few dozen data points!
3) Lifestyle data--How often have you moved (average home stay is seven years in the US) and how long is your marriage and is it your first.
4) Neighborhood information--How long do people commute to work and how many own their dwellings
In 2008, when the economy appeared to be in shambles, the great Chris Anderson wrote a magazine article entitled “The End of Theory.” Anderson is the author of THE LONG TAIL (a book which I highly recommend) and is the former editor of WIRED Magazine. It was the first article that really brought the concept of Big Data into the mainstream. His thesis was that data would become so big and so complete that models to reach target prospects or even project sales forecasts would be obsolete.
To quote, the lead passage from his article we find: “This is a world where massive amounts of data and applied mathematics replace every other tool that might be brought to bear. Out of every theory of human behavior, from linguistics to sociology. Forget taxonomy, ontology, and psychology. Who knows why people do what they do? The point is that they do it and we can track and measure it with unprecedented fidelity. With enough data, the numbers speak for themselves.”
Now, that you have looked up the definitions of taxonomy and ontonology, let us continue.
If you study Consumer Behavior with any depth, you soon realize that the true causes for buying defy simple measurement. With so much data available, we may weigh various data points incorrectly and make unwarranted assumptions.
Big Data is wildly useful but it cannot tell you why fads occur or why all of us at one time or another make impulsive purchases. Statisticians refer to these as LATENT FACTORS as they cannot be seen or observed. Is Anderson totally right about the future of Big Data? I doubt it for one big reason. My favorite statistician, Kaiser Fung, put it beautifully when he wrote, “It is just hopeless to distill the kaleidoscope of human behavior in to a set of equations.”
What does this mean for the future of both Consumer Behavior as a marketing discipline and for the future of Integrated Marketing Communications? Plenty, but the impact of Big Data is not clearcut. One could make a safe bet that as logarithms improve marketers will depend more on online and mobile options to reach people. Traditional media has to struggle even more than they do today. Facebook may grow in stature as the word of mouth it provides re products and services will help while legacy media flounders.
Remember, that statistics are no substitute for judgement but unbiased analyses should be a great help to marketers going forward.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Sunday, November 22, 2015
The Network TV Security Blanket
Earlier this year, tracking services indicated that television as an advertising medium had declined in real terms for one quarter. This sparked a few headlines and some gloom and doom comments. Yet looking at the last few years, as newspaper, magazines and, to a lesser degree radio have faltered, TV has held is own in terms of dollar share of total advertising expenditures as internet and mobile spending has increased smartly.
For nearly a decade many pundits have been talking about the death of TV as an advertising medium. It definitely has not happened. I have felt that it inevitably will decline but that the fall off will take a very long time. Recently, I surveyed a number of agency people across the country as well as a handful of advertisers and their comments only reinforced my belief.
Each year, several people ask me whether this coming year will be the final bow for the network TV upfront marketplace. I always say no but, when pressed, refuse to forecast when it will become obsolete. People who put precision around such events remind me of the economic Cassandras who pen books entitled with catchy titles such as HOW TO BEAT THE CRASH THAT IS SURELY COMING. Every generation someone gets the timing right but much of that has to be luck.
Is advertiser supported TV in trouble? Yes and no. It is definitely changing and no longer packs the communications wallop that it had not that long ago. Here is a motley mix of comments that I received from agency professionals, a few retired media executives, some active and very anonymous broadcast sales executives, a digital media director, and a local cable trailblazer.
--Retired Network Sales Executive--“Of course, we are in a steady and permanent decline. Hell, even I am a Netflix junkie these days. My former colleagues are a scrappy bunch and they will be standing longer than many realize. They are doing a nice job of bringing new advertisers on air. Some of the tech guys should know better as they do not need us all that much.”
--Agency Media Strategist--“You once asked me how things were going in my shop as we evolved in to digital. I was annoyed with you but there is a “knife fight” (your term) going on each year among the network buyers and the planning team. We keep pulling network TV back in our initial plans and adding more digital. Clearly, we are winning but the haves, the old line negotiators, are not rolling over. We spend too much in all forms of TV but directionally things are getting better.”
--Agency Media Chief--“My big problem is a few of our biggest clients. Network TV is a security blanket to them. Off the record, we still do too much. I am trying to have my team wean them away from it. Several years have gone by and we are making progress. To me, network TV is not going to dry up and blow away. It is getting downscale and a lot older. That argument seems to work with our more traditional clients.”
--Sales Manager, Local Market (Network Affiliate)--“it comes down to two things, Don. We are taking clients that we never would have considered 10 years ago and are proud to get them. Also, we are licking our chops about the upcoming political season. This would never have happened years ago. And, as you and I have discussed the last decade, TV does not work nearly as well anymore. Our local news is awful but is still a station cash cow. Go figure.”
--Digital Media Director--“I try to move people along into more digital options. We are always recommending tests. I have avoided wars with the broadcast players at my agency and traditional clients. The smart old ones see what is happening and are riding it out until retirement. A lot of money is being wasted but it used to be worse.”
--Local cable sales star--“We are doing more and more with zoned buys and strong promotions. The little retailers love it and we have made TV affordable for them. It is a lot more work but we will prolong the life of our version of TV longer than most are betting.”
--Local TV sales chief--“Whenever I have a bad day, I tell myself, it could be worse. You could be selling newspaper or radio (laughs). We have lost the under 30 crowd except for a few sporting events. Game over? No way. But, we cannot turn this ship around no matter what New York says.”
So, US TV is still a big force in advertising. Its influence is sagging and smart young people are going to work elsewhere according to my sources. Video usage will continue to grow but advertising avoidance should move in lockstep with it.
If you would like to contact Don Cole directly, you may reach him at doncolemedia @gmail.com
For nearly a decade many pundits have been talking about the death of TV as an advertising medium. It definitely has not happened. I have felt that it inevitably will decline but that the fall off will take a very long time. Recently, I surveyed a number of agency people across the country as well as a handful of advertisers and their comments only reinforced my belief.
Each year, several people ask me whether this coming year will be the final bow for the network TV upfront marketplace. I always say no but, when pressed, refuse to forecast when it will become obsolete. People who put precision around such events remind me of the economic Cassandras who pen books entitled with catchy titles such as HOW TO BEAT THE CRASH THAT IS SURELY COMING. Every generation someone gets the timing right but much of that has to be luck.
Is advertiser supported TV in trouble? Yes and no. It is definitely changing and no longer packs the communications wallop that it had not that long ago. Here is a motley mix of comments that I received from agency professionals, a few retired media executives, some active and very anonymous broadcast sales executives, a digital media director, and a local cable trailblazer.
--Retired Network Sales Executive--“Of course, we are in a steady and permanent decline. Hell, even I am a Netflix junkie these days. My former colleagues are a scrappy bunch and they will be standing longer than many realize. They are doing a nice job of bringing new advertisers on air. Some of the tech guys should know better as they do not need us all that much.”
--Agency Media Strategist--“You once asked me how things were going in my shop as we evolved in to digital. I was annoyed with you but there is a “knife fight” (your term) going on each year among the network buyers and the planning team. We keep pulling network TV back in our initial plans and adding more digital. Clearly, we are winning but the haves, the old line negotiators, are not rolling over. We spend too much in all forms of TV but directionally things are getting better.”
--Agency Media Chief--“My big problem is a few of our biggest clients. Network TV is a security blanket to them. Off the record, we still do too much. I am trying to have my team wean them away from it. Several years have gone by and we are making progress. To me, network TV is not going to dry up and blow away. It is getting downscale and a lot older. That argument seems to work with our more traditional clients.”
--Sales Manager, Local Market (Network Affiliate)--“it comes down to two things, Don. We are taking clients that we never would have considered 10 years ago and are proud to get them. Also, we are licking our chops about the upcoming political season. This would never have happened years ago. And, as you and I have discussed the last decade, TV does not work nearly as well anymore. Our local news is awful but is still a station cash cow. Go figure.”
--Digital Media Director--“I try to move people along into more digital options. We are always recommending tests. I have avoided wars with the broadcast players at my agency and traditional clients. The smart old ones see what is happening and are riding it out until retirement. A lot of money is being wasted but it used to be worse.”
--Local cable sales star--“We are doing more and more with zoned buys and strong promotions. The little retailers love it and we have made TV affordable for them. It is a lot more work but we will prolong the life of our version of TV longer than most are betting.”
--Local TV sales chief--“Whenever I have a bad day, I tell myself, it could be worse. You could be selling newspaper or radio (laughs). We have lost the under 30 crowd except for a few sporting events. Game over? No way. But, we cannot turn this ship around no matter what New York says.”
So, US TV is still a big force in advertising. Its influence is sagging and smart young people are going to work elsewhere according to my sources. Video usage will continue to grow but advertising avoidance should move in lockstep with it.
If you would like to contact Don Cole directly, you may reach him at doncolemedia @gmail.com
Thursday, November 12, 2015
The Disease of Short-Termism
In recent years, American business has increasingly ceased to look at the long term benefits of a strong and consistent approach to marketing and to advertising. When you ask people about it, most simply shrug. Those who talk to me about it are in one of two camps:
1) Things are changing so quickly with all the new platforms and media opportunities that people do not know what to do so they pull in their horns a bit too much.
2) The simple truth is that Wall Street runs America and not Main Street. Publicly traded companies will do anything to avoid missing Wall Street earnings estimates so many things suffer, particularly marketing and also, not insignificantly, honest accounting.
It might surprise many of you who know me that I tend to lean toward camp #2.
I have a long standing habit that amuses my wife but other people find to be more than mildly eccentric--I devour annual reports of companies from all over the globe. As I have gotten better at analyzing them, I notice that, increasingly, seemingly reputable companies are engaging in what I would categorize as accounting shenanigans. A CPA wrote to me recently, “I was up for a contract with a company somewhat larger than my usual client. The presentation went well and the prospect seem comfortable with my both me and my team. Then she asked, “How imaginative are you guys at managing earnings for your clients.” “I responded that we used every legitimate loophole to lower taxes but we never managed earnings. We were (politely) shown the door.”
A tax lawyer with international experience tells me that multi-nationals have a tough and bewildering job paying taxes in dozens of nations. He even added that the IRS often does not have the expertise to sort it all out. Given currency fluctuations and local taxes, the temptation is often great to move funds around or account for them in different years to avoid a “roller-coaster effect” of up and down earnings.
Years ago, I read an editorial from then Wall Street Journal editor Robert Bartley. One line will stay with me forever. He wrote, “True profits are represented by cash--a fact--rather than reported profit--an opinion.” One does not find such candor or clear thinking much these days.
Games are always being played. In recent years, more and more companies are doing huge buybacks of their stock. By decreasing the number of shares outstanding, earnings tend to rise. Even Warren Buffett admitted considering it for Berkshire Hathaway during the dark days of 2008-2009 but he found other ways to deploy his huge capital which he felt promised a better return. When your stock is clocked 50% yet earnings are holding up and the future looks solid, buying back shares in a great idea. Yet, CEO’s almost always believe that their shares are undervalued. I have seen a very prominent company continue to buy back its shares from a price of 110 down to 70. Surely, it may be a good buy at 70 but it definitely was not at 110. And, a few companies are even borrowing at today’s historically low interest rates to buy back some of their shares.
In 1974, I read a book by Robert Townsend, former president of Avis Rent A Car entitled UP THE ORGANIZATION (1970). It was a wonderful primer for someone just entering the business world. He had a mini-chapter in it where he talked about telling the press when you thought you stock was priced too high. I am a business news junkie. NEVER have I ever seen or heard or anyone acting on Townsend’s suggestion. Not once in over 40 years!
So businesses answer to Wall Street and are worried almost exclusively about the next 90 days rather than the long term health of their brands. I remember vividly owning Kellogg’s share in the early 1980’s. Earnings were stagnant one year and the CEO wrote to us saying that with many new product introductions marketing expenses would be unusually large for the coming year and would effect earnings. I see nothing like that today. Not even close.
Okay, what does this have to do with advertising and media? A lot.
An agency chief wrote to me to say that he provided a five year plan to his biggest client showing how they should increase spending across many platforms for the next 24 months and then ease up as two of their brands could become “cash cows” for the company. The client smiled and said no five year plans. They call up and want quick promotions or some carpet bombing couponing effort in print, online, and mobile but no one, client side, is in to the long term establishment of company brands. He put it nicely when he said, “These guys are all smiles and nod vigorously when we talk of brand-building but they never open their wallets when the time comes.”
A marketing director whom I respect says, “ You have to understand the reality. My CEO gets compensated for good stock performance. So, he buys back shares when he has excess cash. Sometimes his timing is good, sometimes not. And, he is manic about quarterly earnings. His long term is 90 days. He is not a bad guy or a crook. All he does is reflect the culture of the times which is dominated by Wall Street.”
If you think this is bad, talk to senior executives at media companies. A few comments from some old pros:
--“It is a cliche but still true. Many companies cut the ad budget when there is the first sign of trouble. They get away with it, FOR A WHILE. Earnings float along okay and then bam. They have to buy market share back. It is hard for us to plan.”
--“I have a very seasoned sales team. They warn me when clients are cutting back with no rational reason. My CEO does not care and give me the old chestnut about our debt service. We scramble like hell to get new clients on board. And, if people knew how inexpensive and effective lots of social media is, we would be finished.”
So, will things change? Will Wall Street loosen its grip? Will earnings be straightforward again? Will companies stop giving guidance to analysts and or will they refuse to turn somersaults to hit their numbers?
I would say that it is unlikely. A century ago, Upton Sinclair, the great journalist, put it well--“It is difficult to get a man to understand something when his salary depends on not understanding it.”
If you would like to contact Don Cole directly, you may post a comment on the blog or reach him at doncolemedia@gmail.com
1) Things are changing so quickly with all the new platforms and media opportunities that people do not know what to do so they pull in their horns a bit too much.
2) The simple truth is that Wall Street runs America and not Main Street. Publicly traded companies will do anything to avoid missing Wall Street earnings estimates so many things suffer, particularly marketing and also, not insignificantly, honest accounting.
It might surprise many of you who know me that I tend to lean toward camp #2.
I have a long standing habit that amuses my wife but other people find to be more than mildly eccentric--I devour annual reports of companies from all over the globe. As I have gotten better at analyzing them, I notice that, increasingly, seemingly reputable companies are engaging in what I would categorize as accounting shenanigans. A CPA wrote to me recently, “I was up for a contract with a company somewhat larger than my usual client. The presentation went well and the prospect seem comfortable with my both me and my team. Then she asked, “How imaginative are you guys at managing earnings for your clients.” “I responded that we used every legitimate loophole to lower taxes but we never managed earnings. We were (politely) shown the door.”
A tax lawyer with international experience tells me that multi-nationals have a tough and bewildering job paying taxes in dozens of nations. He even added that the IRS often does not have the expertise to sort it all out. Given currency fluctuations and local taxes, the temptation is often great to move funds around or account for them in different years to avoid a “roller-coaster effect” of up and down earnings.
Years ago, I read an editorial from then Wall Street Journal editor Robert Bartley. One line will stay with me forever. He wrote, “True profits are represented by cash--a fact--rather than reported profit--an opinion.” One does not find such candor or clear thinking much these days.
Games are always being played. In recent years, more and more companies are doing huge buybacks of their stock. By decreasing the number of shares outstanding, earnings tend to rise. Even Warren Buffett admitted considering it for Berkshire Hathaway during the dark days of 2008-2009 but he found other ways to deploy his huge capital which he felt promised a better return. When your stock is clocked 50% yet earnings are holding up and the future looks solid, buying back shares in a great idea. Yet, CEO’s almost always believe that their shares are undervalued. I have seen a very prominent company continue to buy back its shares from a price of 110 down to 70. Surely, it may be a good buy at 70 but it definitely was not at 110. And, a few companies are even borrowing at today’s historically low interest rates to buy back some of their shares.
In 1974, I read a book by Robert Townsend, former president of Avis Rent A Car entitled UP THE ORGANIZATION (1970). It was a wonderful primer for someone just entering the business world. He had a mini-chapter in it where he talked about telling the press when you thought you stock was priced too high. I am a business news junkie. NEVER have I ever seen or heard or anyone acting on Townsend’s suggestion. Not once in over 40 years!
So businesses answer to Wall Street and are worried almost exclusively about the next 90 days rather than the long term health of their brands. I remember vividly owning Kellogg’s share in the early 1980’s. Earnings were stagnant one year and the CEO wrote to us saying that with many new product introductions marketing expenses would be unusually large for the coming year and would effect earnings. I see nothing like that today. Not even close.
Okay, what does this have to do with advertising and media? A lot.
An agency chief wrote to me to say that he provided a five year plan to his biggest client showing how they should increase spending across many platforms for the next 24 months and then ease up as two of their brands could become “cash cows” for the company. The client smiled and said no five year plans. They call up and want quick promotions or some carpet bombing couponing effort in print, online, and mobile but no one, client side, is in to the long term establishment of company brands. He put it nicely when he said, “These guys are all smiles and nod vigorously when we talk of brand-building but they never open their wallets when the time comes.”
A marketing director whom I respect says, “ You have to understand the reality. My CEO gets compensated for good stock performance. So, he buys back shares when he has excess cash. Sometimes his timing is good, sometimes not. And, he is manic about quarterly earnings. His long term is 90 days. He is not a bad guy or a crook. All he does is reflect the culture of the times which is dominated by Wall Street.”
If you think this is bad, talk to senior executives at media companies. A few comments from some old pros:
--“It is a cliche but still true. Many companies cut the ad budget when there is the first sign of trouble. They get away with it, FOR A WHILE. Earnings float along okay and then bam. They have to buy market share back. It is hard for us to plan.”
--“I have a very seasoned sales team. They warn me when clients are cutting back with no rational reason. My CEO does not care and give me the old chestnut about our debt service. We scramble like hell to get new clients on board. And, if people knew how inexpensive and effective lots of social media is, we would be finished.”
So, will things change? Will Wall Street loosen its grip? Will earnings be straightforward again? Will companies stop giving guidance to analysts and or will they refuse to turn somersaults to hit their numbers?
I would say that it is unlikely. A century ago, Upton Sinclair, the great journalist, put it well--“It is difficult to get a man to understand something when his salary depends on not understanding it.”
If you would like to contact Don Cole directly, you may post a comment on the blog or reach him at doncolemedia@gmail.com
Tuesday, October 27, 2015
The Customer Equity-Mindset
About 17 years ago, I was meeting with a client. As we talked, he answered several questions from customers and very quickly sorted out problems that staffers brought to him on the fly. I complimented him on how he moved through his day as he asked me a barrage of media questions and I told him that I was especially impressed with the way he fielded questions and complaints from customers.
“Don, it is simple,” he said. “I have a Customer-Equity Mindset.” With that, I began to laugh and he did, too. “That is a pretty fancy term”, I said. “What is it exactly?” He answered--“Customer Equity is the present value of anticipated lifetime revenues that current and prospective customers generate, minus, of course, the costs to retain and acquire those customers.” Reduced to uncontrollable laughter but intrigued, I asked where he heard that. With a big smile he told me that it was from a HARVARD BUSINESS REVIEW article that he had read a year ago. He remains the only fast food maven that I have ever met who not only read but memorized segments of the HARVARD BUSINESS REVIEW. The conversation that we had regarding it has stuck with me vividly all these years.
What my client explained was that by adopting a Customer Equity Mindset his whole approach to business changed and his success soared. His interpretation went like this: “Customers are the source of my firm’s revenues. Also, they drive my expenses and investments in plant and equipment. So, every time I increase Customer Equity I increase the value of my company.”
How to do it? Simple stuff but always worth repeating: Keep your customers especially the good ones longer. Grow revenue from present customers, and work to acquire new customers who can ad value, improve customer retention procedures and LISTEN to everyone especially the complainers. If you do that you can improve products, services and goodwill.
He actually did training about a Customer-Equity Mindset. His 17 year olds behind the counter were drilled on the nuts and bolts of it. He told me that if one could make it permeate throughout the organization, sales had to go up and you would hang on to existing customers. He loved new customers but always made sure he did not lose many especially when a new competitor threatened. What he was fostering is what others have called “Loyalty Based Management.” There was great trust built with employees and with his customer base.
In the rush to get to this quarter’s or years profits, many ad agencies and broadcasters seem to neglect this issue. And the siren’s call of new business, while vital to any enterprise, should not overshadow your existing base.
My client was not a dreamer. He took a concept and made it his corporate mantra. Do you really have a Customer-Equity Mindset?
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
“Don, it is simple,” he said. “I have a Customer-Equity Mindset.” With that, I began to laugh and he did, too. “That is a pretty fancy term”, I said. “What is it exactly?” He answered--“Customer Equity is the present value of anticipated lifetime revenues that current and prospective customers generate, minus, of course, the costs to retain and acquire those customers.” Reduced to uncontrollable laughter but intrigued, I asked where he heard that. With a big smile he told me that it was from a HARVARD BUSINESS REVIEW article that he had read a year ago. He remains the only fast food maven that I have ever met who not only read but memorized segments of the HARVARD BUSINESS REVIEW. The conversation that we had regarding it has stuck with me vividly all these years.
What my client explained was that by adopting a Customer Equity Mindset his whole approach to business changed and his success soared. His interpretation went like this: “Customers are the source of my firm’s revenues. Also, they drive my expenses and investments in plant and equipment. So, every time I increase Customer Equity I increase the value of my company.”
How to do it? Simple stuff but always worth repeating: Keep your customers especially the good ones longer. Grow revenue from present customers, and work to acquire new customers who can ad value, improve customer retention procedures and LISTEN to everyone especially the complainers. If you do that you can improve products, services and goodwill.
He actually did training about a Customer-Equity Mindset. His 17 year olds behind the counter were drilled on the nuts and bolts of it. He told me that if one could make it permeate throughout the organization, sales had to go up and you would hang on to existing customers. He loved new customers but always made sure he did not lose many especially when a new competitor threatened. What he was fostering is what others have called “Loyalty Based Management.” There was great trust built with employees and with his customer base.
In the rush to get to this quarter’s or years profits, many ad agencies and broadcasters seem to neglect this issue. And the siren’s call of new business, while vital to any enterprise, should not overshadow your existing base.
My client was not a dreamer. He took a concept and made it his corporate mantra. Do you really have a Customer-Equity Mindset?
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Saturday, October 17, 2015
Sleepless Ad Agency Staffers
Several weeks ago, I sent an e-mail to both selected Media Realism readers and ad agency contacts asking them the age old question, “What keeps you up at night?” Some of the responses were light hearted and included: “My teenage sons, my nasty boss, and my idiot clients.” Interestingly, no one said, “Nothing” makes them sleep deprived. Surprisingly, one person sent me an e-mail that I found particularly poignant. With his permission, I will share parts of it with you.
“When you met me 25 years ago, I thought that I was going to be the next David Ogilvy (you probably thought I was obnoxious). I was going to write brilliant long copy with spectacular headlines and my spreads would appear in the best magazines. You warned me even then (bravo to you), that things were changing. Obviously, things did not turn out as I expected.”
“I am now in my early 50’s and will be facing two big college tuition bills very soon. To put it simply, I am frightened. I feel that I am slowly fading into irrelevance. Some of my colleagues are finished as they have shown an unwillingness to adapt. I am not one of them but I am a realist. When I read that by 2020, many advertisers will be putting the plurality of their advertising into mobile, it gives me pause. That may never happen but what if it does? What do you need an aging writer who earns six figures for when the mobile message is truncated and is there solely to elicit direct response? I have had a great run despite some disappointments but do I realistically have 10 more years?”
“Technology is great but is rapidly washing away our old processes, modes of work and even some markets. I do not feel that advertising is doomed but it will require an entire new skill set by practitioners and very soon. Tech may overtake creativity and Big Data will drive sales far more than conventional media.”
When I showed these edited comments to others, some say my friend is an alarmist. A few said that he articulated their sentiments quite precisely. These people came from media, creative, account management and agency ownership.
Perhaps, British writer Samuel Johnson (1719-1784) put it best with the acid comment: “Nothing concentrates one’s mind like a date with the hangman’s noose".
As always, I would love to hear your opinions on this topic.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a comment on the blog.
“When you met me 25 years ago, I thought that I was going to be the next David Ogilvy (you probably thought I was obnoxious). I was going to write brilliant long copy with spectacular headlines and my spreads would appear in the best magazines. You warned me even then (bravo to you), that things were changing. Obviously, things did not turn out as I expected.”
“I am now in my early 50’s and will be facing two big college tuition bills very soon. To put it simply, I am frightened. I feel that I am slowly fading into irrelevance. Some of my colleagues are finished as they have shown an unwillingness to adapt. I am not one of them but I am a realist. When I read that by 2020, many advertisers will be putting the plurality of their advertising into mobile, it gives me pause. That may never happen but what if it does? What do you need an aging writer who earns six figures for when the mobile message is truncated and is there solely to elicit direct response? I have had a great run despite some disappointments but do I realistically have 10 more years?”
“Technology is great but is rapidly washing away our old processes, modes of work and even some markets. I do not feel that advertising is doomed but it will require an entire new skill set by practitioners and very soon. Tech may overtake creativity and Big Data will drive sales far more than conventional media.”
When I showed these edited comments to others, some say my friend is an alarmist. A few said that he articulated their sentiments quite precisely. These people came from media, creative, account management and agency ownership.
Perhaps, British writer Samuel Johnson (1719-1784) put it best with the acid comment: “Nothing concentrates one’s mind like a date with the hangman’s noose".
As always, I would love to hear your opinions on this topic.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a comment on the blog.
Saturday, October 10, 2015
An Ad Man For All Seasons?
It is hard to believe but it has been approximately seven full years since America was hit with an economic downturn that we now refer to as “The Great Recession.” The downdraft tested many companies, people, and portfolios. Recently, I talked to a seasoned ad man about the recession and its affect on ad agencies.
He went through the usual delineation of issues that many struggled through but then said that he knew a number of agency chiefs who could survive easily through anything. As we talked, I had to disagree. Survive yes, but prosper and grow all the time was something that I am quite unfamiliar with in this business.
To me, business professor Don Hambrick of Penn State nailed it when he wrote, “An executive who is well suited to leading a firm during one period may be ill suited for the next period.” Many chiefs can look effective when the wind is at their backs. Can they adapt to more challenging circumstances?
Ambassador Joseph Kennedy is widely credited with coining the now proverb, “When the going gets tough, the tough get going.” I have witnessed agency leaders who seemed bored or a bit disengaged during good or middling times, yet rise to the occasion when their shop has its back to the wall. Suddenly, they make tough decisions, stay hands on and drum up significant new business in very trying environments.
Some analysts go even further and say that some firms grow at times because they seem to be near perfect fits to the current marketplace. Management and staff are not exceptional but rather are at the right place at the right time. Remember when the internet first started to gain real traction as an advertising medium? Some shops had big gains as they had keyed on the emerging platforms early on. A few years later some early mobile players had similar success. Were they that good or was it simply that in the valley of the blind men, the one eyed man is King and the competition was playing catch up?
Please do not misunderstand me. I am not saying that these people were mediocre. Sometimes success is due to many factors not the least of which is a bit of luck. Granted, there are some people who are excellent forecasters and seem to see what is happening a bit earlier than the rest of the pack. Some 90+%, however, see the trend after it is clearly in place.
Life, business, and the free market are all full of bumps in the road. Leaders react to them differently. Few, if any, perform well through all of them.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.
He went through the usual delineation of issues that many struggled through but then said that he knew a number of agency chiefs who could survive easily through anything. As we talked, I had to disagree. Survive yes, but prosper and grow all the time was something that I am quite unfamiliar with in this business.
To me, business professor Don Hambrick of Penn State nailed it when he wrote, “An executive who is well suited to leading a firm during one period may be ill suited for the next period.” Many chiefs can look effective when the wind is at their backs. Can they adapt to more challenging circumstances?
Ambassador Joseph Kennedy is widely credited with coining the now proverb, “When the going gets tough, the tough get going.” I have witnessed agency leaders who seemed bored or a bit disengaged during good or middling times, yet rise to the occasion when their shop has its back to the wall. Suddenly, they make tough decisions, stay hands on and drum up significant new business in very trying environments.
Some analysts go even further and say that some firms grow at times because they seem to be near perfect fits to the current marketplace. Management and staff are not exceptional but rather are at the right place at the right time. Remember when the internet first started to gain real traction as an advertising medium? Some shops had big gains as they had keyed on the emerging platforms early on. A few years later some early mobile players had similar success. Were they that good or was it simply that in the valley of the blind men, the one eyed man is King and the competition was playing catch up?
Please do not misunderstand me. I am not saying that these people were mediocre. Sometimes success is due to many factors not the least of which is a bit of luck. Granted, there are some people who are excellent forecasters and seem to see what is happening a bit earlier than the rest of the pack. Some 90+%, however, see the trend after it is clearly in place.
Life, business, and the free market are all full of bumps in the road. Leaders react to them differently. Few, if any, perform well through all of them.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.
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