Does AM/FM Radio Have a Future?

I talk and correspond with hundreds of young adults. Many are students, some read this blog, and a few I meet through consulting. I always make it a point to ask them about their radio listening habits. As a general rule, people under 35 (the infamous 18-34 demographic) tell me that they are abandoning AM/FM and switching to Pandora or some other streaming service. Yet when one looks at top line Arbitron data, it appears that approximately 93% of us are using AM/FM radio each week.

There is no question that streaming is affecting radio listening levels. Recently, NDP Consumer Research stated that 23% of average weekly listening time among Persons 13-35 is transmitted via some form of streaming. Clearly, the Smartphone is driving consumers to the net either at home, work, and in the car.

All this leads me to a larger question--what is the future of AM/FM radio? I have spoken with dozens of people in recent weeks, sent e-mails out to panel members and have contacted a number of radio salespeople, general managers, and a few station owners and station owner wannabes. A limited number of ad agency personnel who are active in radio rounded out the sample.

My findings are a bit surprising and I will share them at length with you.


Background

Radio used to be a great business. Profit margins were lush, the business wasn’t complicated, and management and sales teams could make a very good living. Not so any longer! Three things popped out from virtually everyone that I contacted:

1) Morale at radio stations stinks! Only one person, a buying service operator, said he knew of a market where people seemed happy. All said that radio used to be a great place for young people in their 20’s to make a good income and accumulate some capital. A great and deeply experienced radio salesman described the current environment to me as follows: “Every year, we bring in a bunch of young kids, offer them a few days training, and then essentially toss them out in the street. They make a very low draw and are given a tough lists of directs to contact. Many quit very quickly. Perhaps one or two make it past the first year. It is close to immoral to me.”
2) There is no pricing power anymore. Many stations and radio metros are only getting the same rates that they did years ago. A strong plurality do not even get rates equal to what they had in 2007 just prior to the economic meltdown. Some are selling inventory at rates that were common 15 years ago if they are in a depressed market.
3) New York, aka corporate, has to meet their huge debt service payments and care about little else. If the local economy is down the toilet, they don’t cut you any slack. You have to find the money!

In-Car Listening

One area that most people who weighed in on the subject agreed was a continued strength for conventional radio in-car listening. A long time radio sales executive put it nicely,-- “I believe that as long as people drive to work in vehicles with radios, and traffic continually worsens, radio will have a future.  The March, 2013 PPM data from Arbitron shows nearly 30 stations with listening in my metro area.  That is a lot of choices.  There also are other choices for listening beyond broadcast radio.  Stations with good content I believe will continue to survive, especially if they are programmed with local news, information, or content of interest that is not available through other means. were. The bottom line is, if you can attract and maintain a good audience, and sell access at a reasonable cost, you are in a much better position to stay in business”.


Debt Problems of Larger Groups

This was an issue that generated some strong opinions. Some general managers have said that Clear Channel and Cumulus will have a hard time rolling over their multi-billion dollar debt in a few years. They will have to sell off stations and three told me that they just might step up and buy them on their own.

I was surprised as these comments came from people thousands of miles apart and they were not with the same group.

The first said that he has lined up friends and relatives plus his own funds and when, the station group falters, he will make a low ball bid and buy the station outright. I asked him if he truly thinks that he could go it alone locally. His response was interesting and he is letting me quote him--“With no debt, you can operate very efficiently.  Some years will be better than others but there will be no bean counter breathing down my neck each month. Remember, that time 20 years ago when we had lunch and talked about what solid businesses water utilities are? Well, this will be the same thing--slow and steady with limited growth.”  I responded that a water utility had a Public Service Commission that generally granted rate increases every year. And, you may cut back on the frequency of washing your car or watering your lawn, but you still had to wash clothes, cook, do dishes, and shower. People do not have to buy advertising time on your station. He saw my point but said that I was becoming a grumpy old man. Maybe so.

The second wants to go to a sports format in his mid-sized town. He says the nation is full of talented kids who all want to be on ESPN. That is not going to happen. For a modest sum, he can pay them and their passion for all sports, particularly local sports, will work in his market. If one really catches on he will give him a hug and let him move up to a bigger market and there will be no shortage of people waiting in the wings. I warned him that with no major league franchise in his metro, it could be tough sledding.

The third says he really dislikes his current owners and will make a low ball bid and buy the station on the cheap when they need the money. He may have modest financing but not much. With great candor he has said that he had confided his game plan to his pastor who told him his strategy was scavenger economics.  He laughed and said he told the sincere clergyman that it was simply economics in a free market. Inefficient producers had to be weeded out of the landscape. He said the big companies borrowed to put the chain together on the assumption that they could raise rates faster than inflation forever. As the media world has changed they are now holding the bag and must pay the price for bad judgement.

A reasonable old pro had this thought about the big guys. “The larger radio groups that purchased many stations and have huge debt service are probably in a very difficult situation, as the economy and increased competition since 2008 have reduced the rates that were commonplace before 2008”.

Another radio maven had this comment   “It’s hard to say what will happen with Clear Channel and potentially Cumulus when the big debt comes due in a few years.  Some are predicting that Clear Channel will be broken up, which I would love to happen.  I would think though that the big market stations are never going to be within the reach of anyone but very large companies or very wealthy top management/top shareholders who could start a group.

Right now, the big companies are cutting as many people as they can because of the debt.  However, technology that makes possible running a station with hardly any local people is here to stay.  In small markets, subscribing to a satellite service is a lot less expensive that hiring air talent with the possible exception of mornings.  I know firsthand that making money in a small market with just 1 station is very difficult”.


Audience

Media Researchers stubbornly told me to forget any anecdotal evidence and go back to Arbitron and crunch the numbers. Consistently, they all said that Pandora and fellow travelers had made gains but over 90% of us still listened to radio each week.

A final salvo from a long time radio hand was--“Radio, however, still has far more audience than Pandora or anything else, even in the youngest demos.  Pandora is the #1 station in a number of markets according to Triton, but its overall share is small compared to over-the-air radio.  And I believe that 25 years from now, FM stations in large and medium markets will still be doing well.  The reason is the transmission system.  All you have to do is turn it on, and it’s loud and clear”.

Ad Agencies and Radio

A senior sales executive on the West Coast raised a few disturbing issues regarding ad agencies and the future of radio. He said that an account executive asked him to meet a buying director of a key agency. At the meeting he and his sales person made a few innocuous comments about one of the stations that they represent and, a junior buyer attending the session, asked whether the listeners were loyal. “With a big smile, I said loyal? Look at our time spent listening!” The buying director asked what that meant. I was stunned but took the two of them through the time honored formula. She responded “this is really interesting.” How had she gotten her position and how did she oversee several million dollars of radio advertising each year?”

Another problem that he found with agencies is that a number of young people said that they do not listen much. So, if media planners are putting together a media mix, they may use radio less if they do not like it or use it much. He then went on a long and funny rant about how overpriced ESPN was because planners love it and want to be on it. His conclusion was that he would have no interest in buying a station going forward as the ad community will not be supporting the medium as much in the future.

Conclusion

Radio is here to stay. However, as is true of all media types, it is going through a big transition. If the big companies do shed a number of stations in a few years, local radio may indeed become a viable locally owned and operated business in many localities. N.B.-- turning a buck will not be a day at the beach as it was 25 years ago.

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

Do You Trust Your Customers?

Last year, I had the privilege of spending some time on some beautiful islands off the coast of the state of Washington. As I passed a local farm, I noticed a fruit and vegetable stand that by the side of the road. No one appeared to be there but a customer.  A few months later, I “googled” the islands and read a story about the farm stand and how payment has been made on the honor system for generations. At the end of the day, the farmer goes to the stand, collects the money and any unsold produce. I had to smile as I read it, wondering how many locales in the United States one could take such an approach and succeed. The farmer showed complete trust in his island neighbors and visitors.

Reading the article sent my mind racing. How many businesses are built on complete trust and do they succeed? As a New England native, it did not take me long to think of a great example.

Sometime before the beginning of World War I, Leon Leonwood Bean , a passionate Maine hunter, had an idea. He wanted to develop a hunting shoe that would keep his feet warm as he trekked across the frigid Maine woods. A shoe store manager, he approached the town cobbler to help him develop the perfect shoe for hunting. Jointly, they came up with a new shoe with strong leather uppers and waterproof rubber bottoms. By 1912, he tried to market it via a direct mail campaign to out of state hunters.
The prominent line in the direct mail effort was “We guarantee them to give perfect satisfaction in every way.”

Shortly after the mailing, things looked rosy. Over 100 pairs of The Maine Hunting Shoe were sold. Not long after, disaster struck. The new shoes fell apart after very little use and 90 of the original pairs were returned. At this point, most people would have quietly closed up shop. Not Leon, who soon was to become known as L.L. Bean. He borrowed money and promptly returned payment for the shoes to each customer.

Undaunted, Mr. Bean did perfect the shoe, branched out in to other areas, and today L.L. Bean of Freeport, Maine is a household name. And, importantly, the company still maintains its 100 percent guarantee. Virtually every year in my adult life, I have purchased either a pair of top-siders or moccasins from Bean. As they age, I change their use and the oldest pair is used when I am (rarely) doing yard work. I know that despite their age I could return any worn pair for a full refund, but I never do. Why? L.L. Bean has trusted me to behave honestly and I plan to do so.

Is this unique? Well, several retail players have aped the Bean approach but others have not. It has been rumored that Home Depot, Barnes and Noble and Wal-Mart have sophisticated software that tracks consumers who make frequent returns. Some stores allow managers to refuse returns to these customers using their own judgement.

Bean does get ripped off now and then. But, I would bet that the number who return worn out items if very small. Somewhere in the cobwebs of my memory is a quote from a Roosevelt cabinet officer who said, “The only way to make a man trustworthy is to trust him.”

As online retailing has grown, marketers have to make many quick decisions around the holidays. People call and say that their order has not arrived yet. Do you send another knowing that, at some point, the customer will have two orders?

 When you insist on credit card or certified check or money order and granny sends you a personal check do you ship the order before her check clears because that is the only way she will get the item before Christmas Day? Most retailers seem to say it depends on the size of the order.

Each year a few research outfits track who gives the best customer service in the U.S. Recent leaders have been Zappos, Overstock.com, Amazon, and Land’s End. But as far back as I can track it, the gold medal often goes to, you guessed it, L.L. Bean.

It appears that trusting customers and communicating that fact well is a big brand builder. Do you truly trust your customers? Think about it.

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

The Only Sure Fire Industry for the Next Two Decades?

In 1967, Mike Nichols directed a now famous film called “The Graduate.” Nominated for a fistful of Oscars, it told the story of a young man named Benjamin who had just graduated from college. He was a little bit uncertain about his future. Nichols won an  Oscar for Best Director that year and the film made Dustin Hoffman a star.

There are many famous scenes in the film but the one that is perhaps most frequently replayed takes place at a graduation party for young Benjamin (Hoffman).

It goes like this:

Mr. McGuire--“I just want to say one word to you. Just one word.”

Benjamin--“Yes, sir.”

Mr. McGuire--“Are you listening?”

Benjamin--“Yes, I am.”

Mr. McGuire--“Plastics.”

Well, these days I meet with and talk with many young people in different settings. Invariably, someone will ask me where the prospects are best for their upcoming careers. I suppose that they expect me to say get a job at Apple or Google or suggest that they take the ultra-safe route and go into nursing. Nope. I take a page from the fictional Mr. McGuire and say just one word to them. That word is agriculture.

The reaction is one of shock, sometimes humor and occasionally disgust. Few want to hear my reasons. Perhaps you will take a moment or two and read them.

On October 26, 2011 I published a Media Realism post entitled “Seven Billion and Counting.” According to United Nation projections, the global population was about to hit  seven billion people. By 2025, they forecast eight billion people. With 12 years to go, we seem to right on forecast with the eight billion people projection.

My question to you is simple--“How are we going to feed them?”  Well, there is no question that there will be better technology over the next decade in seed, irrigation, and pest control, and, at the same time, fertilizer and farming methods will improve. The big challenge is that approximately 700 million people have entered the middle class around the world in the last decade and that trend particularly in Asia, Latin America and Eastern Europe is likely to continue.

When people join the middle class, they eat more meat whether it be chicken, pork or beef. And, significant resources are used to grow such products. Some say that at times the growth in grain demand as one jumps from subsistence to middle class can be 10 to 1 as compared to their earlier, humbler lifestyle. Some 441 gallons of water are used to produce  a pound of beef. There are four pounds of soy and corn to produce a pound of pork. And, the newly arrived middle class around the world is not going to return to a meat free existence one they get used to the western diet.

So, it would appear logical that despite the gains in technology and farming methods that the price of grains would have to rise. Productive farmers such as those in America would have to be in a good spot.

Right now, the average age of the American farmer is 58. In Canada, I have seen estimates as high as 62. Young people need to get in to this industry if it is to meet its potential.

Someone wrote to me recently and suggested a good investment hedge for me would be to buy a farmette in Manitoba province in Canada. I could grow my own food on my five acre spread, live in an extremely safe location and occasionally make forays in to bustling Winnipeg. Well, at my age and personal lifestyle, that is probably not a good solution. Winter on the northern plains has little appeal to me. Farming, however, may be a viable and workable career choice for a great many young people.

You do not have to be a conventional farmer to get in on the action. Could a bright young man or woman sell equipment for John Deere and Caterpillar? Or, would a sales or marketing job at Potash, Agrium, Syngenta, or even controversial Monsanto make sense for young adults with marketing training? What about a job at Archer Daniels Midland, ConAgra or dozens of other companies across the globe that sell foodstuffs?

No matter what happens, people will have to eat and it appears that there will be a lot more people going forward. Agriculture seems nicely positioned given that many commodities still sell way under their all time highs. Sugar is a great example.

Some of these developments may not effect advertising but others will. Branded food companies will almost definitely have the wind at their backs as hundreds of millions join the middle class. Major food processors with global powerhouse brands will be in a very good place. They will spend billions in advertising and promotion, largely outside the U.S., to capture the new middle class. It will not happen overnight and commodity prices will fluctuate year to year but demographically it appears a certainty that smart farmers all over the world have a brighter future than they have had in many decades.

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

Are You Still Media Agnostic?

In the past few weeks the Roman Catholic Church elected a new pope. He is Cardinal Jorge Bergoglio of Argentina. As the first Latin American and first non-European pope in hundreds of years plus being the first Jesuit to be named Bishop of Rome he has generated tremendous interest. News accounts continue to track his every move and talk radio has not been out of the loop. A panel of “experts” discussed the new pope on a popular program last week and wondered how Catholics around the world would respond to Pope Francis as everything he says is infallible.

At the time I was driving on an interstate so I grabbed the steering wheel a bit harder than normal and tried to focus on my driving. A few minutes later a caller got through who sounded off on the ignorance of the panel. The host cut him off and that was that. Why were the caller and I so heated? The pope is only considered infallible when he speaks ex cathedra which means “from the chair.” Only eight times in the 2000 year history of Christianity has a pope spoken ex cathedra meaning that the statement is a formal belief of the church (the last time was 1950 and the doctrine of infallibility was not clearly defined until 1870 at the First Vatican Council). It is highly unlikely that Pope Francis will ever deliver a ruling that will be considered infallible. So while whatever the pope says should be weighed seriously no practicing Catholic is under any obligation to agree with his statements on a wide variety of subjects.

Why do I bring this up now? Well, with the gaffes about infallibility rampant, I thought that it was time to address a misrepresentation that has popped up repeatedly in media departments and by agency principals when pitching business over the last several years. When talking about their approach to media mix or communications strategy many people will say,“we are MEDIA AGNOSTIC.”

I see and hear people do this and it really grates on me. Do you know what an agnostic is? The term was coined as best as I can tell by British biologist Thomas Huxley in 1869. His basic premise was that the existence of a deity or god is unknown and cannot be proven. Others have refined it to say that we humans simply do not possess the knowledge to provide sufficient rational proof that a supreme being exists.

Back when I was a student at a New England Catholic college, we were required to take a semester of theology and one of philosophy each year. Some of it was interesting and it was a usually an easy A or B. I never will forget how near the end of the term a student told the priest that he resented the theology requirement as he was a nonbeliever. The priest asked “are you an atheist or an agnostic?”  “Agnostic”, replied the young man. The normally genial priest got very red in the face and said something along these lines--"If you are an atheist, I could respect you. It takes courage to face the end of your life and say this is the end. There is no afterlife. When you call yourself an agnostic, you are saying there may be a god and maybe there is an afterlife, but I am too damn lazy to think it through.”  That certainly grabbed our attention and the young lad was a lot quieter going forward.

So, do you really want to say that you or your firm is media agnostic? Using the classic definition, it connotes that you do not have sufficient knowledge to make a clearcut media recommendation. Using the angry Irish priest’s definition you are saying that you are too lazy to sort it out.

In conversations with people I often say that I try hard to be lukewarm about media selection going in to a project. That is impossible as we all have certain track records especially with traditional media and, once you have some years behind you, there are a bagful of tactics that tend to be proven winners as well. Also, only say lukewarm. If you write it, the term looks dreadful on the page and comes off as indifferent.

So what should you do? Try the time honored zero based planning approach. Start with the proverbial blank sheet of paper and don’t allocate 75% of your budget before you start. Get back to the target and see where they are spending their time. What should you call this? Some like “media impartial” or “channel neutral” and I have heard “target preferred media.” Use whatever you want or invent your own term. Remember, of course, that strategy comes first and then the media allocation.

Please, my friends, do one thing. Give the term “Media Agnostic” the death that it deserves.

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

Media Planners--Read and Read Some More

I have always been a big reader. Most of my reading hinges around how markets work, the business of marketing, the growth of international business and finally, lots of history. If we do not know where we came from, how can we forecast where we are going? Admittedly, that is definitely not an original thought but one that I have clung to my entire adult life.

Today, despite a lighter day to day schedule and hundreds of people at times e-mailing me articles and suggesting new books to digest, I find it very hard to keep up with changes in media, advertising and global business trends. Yet, I still find it fascinating and stick with it.

At the risk of sounding like an angry old man, it has been hard for me to get younger people in advertising and at universities to read with the same passion. Part of it may be due to the reality that today people want things in short sound bites. Someone who texts 40 times a day is not going to have the patience to curl up with the marketing/advertising/media version of WAR AND PEACE. At the same time, I don’t think asking someone to read a magazine article or commentary from the web all that onerous. Suggest to a classroom full of business students that they read THE WALL STREET JOURNAL or NEW YORK TIMES every day to prepare for their futures and the room erupts in laughter.

Over the years, I have always found that if you read the business and trade press religiously, useful observations will come your way that can make you and, more importantly, your company look insightful in client meetings. I once worked with a CEO who told each new account management person to read all the trade books in his/her client’s category cover to cover. At the end of a year, he promised that the young account person would be a budding expert in the category. It was that simple!  He sheepishly admitted that no one had ever taken his advice. No one.

I have often asked young people why they do not read about their industry. Most shrug, some they that they have a life and people such as I do not, while others say they will do it only if it is on company time. To some I have asked the big question which is “If you plan to spend 35-40 years in this business, why not learn all that you can about it.” Some say that they are not that interested. My response then is pure tough love. “If you interest level is not high, why not leave the business. Why spent decades at something you do not love?” As you might expect, this does not play very well. :) Moral to young people--read a great deal about your field--you competition likely will not.


Sometimes outside reading can also be a big help. A number of years ago, I started plowing my way through Dumas Malone’s six volume series on Thomas Jefferson. On a new business trip, I packed the last volume with me and read some on the plane out to the session. The prospect was an urbane middle European. One of our account people said, “I will get him talking about soccer and he will love us.” I countered gently that I hoped our sophisticated prospect did not want to discuss the nuances of Kierkegaard’s writings or we would all be out of luck.

At dinner, things were going poorly, when our winsome account guy played the soccer card. The client prospect responded, “I hate sports and especially football which you call soccer. Remember what your President Jefferson said about such sports?”  The table grew silent until I chimed in “are you referring to the letter he wrote to his nephew about time management?” Didn’t Jefferson say, “Games with the ball do violence to the body and do not build character?” He lighted up like a Christmas tree, talked Jefferson for the next half hour to most people’s boredom and the presentation went fairly well the next day. We did not get the business but in the early days of e-mail he would frequently write to me and ask my opinion about using cable TV, varying copy lengths in TV spots, and many other topics. We were never friends but I won his respect simply because he saw me as an ad guy who read.

An authentic eminence grise in media planning prompted this post when he wrote to me recently about how catching even small facts here or there while reading can make a huge difference in your success or that of your brand’s. He says:
“And as always, the first to move and catch the wave will be the one in the best position to hold on to or even grow their share of market.  This is one more reason why I always told the people who reported to me -- every morning go through the entire newspaper.  It's amazing the things you come across serendipitously that might have a huge impact on how you plan media for a particular account”.

Champion golfer Gary Player was reputedly the first person to say, “The more I practice, the luckier I get.” I think you could rephrase it and say, “The more I read, the luckier I get.”

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

Brand Integrity

Today, you hear and read a great deal about brands and branding. I read about it constantly and find the majority of it vague and sometimes way off center. My favorite brand guru is Bill McEwen, who spent many years at Gallup and some major ad agencies. Now a brand consultant, he gives this definition of what a brand is: “A great brand is simply a powerful promise. This promise creates a very personal, emotional connection with consumers. But it’s not enough to have a big idea and it’s not enough to make a big promise. The promise must be KEPT....not just once, but at each and every consumer encounter. A great brand is much like a great marriage. It takes work, time, mutual respect, and evidence of real commitment.”

A brand is a promise. Isn’t that wonderfully concise?  This concept hit me by accident in my 17th summer when I visited Paris. After sleeping off some of the effects of my first transatlantic flight, my brother and I began walking through the city. We stopped and bought Coca-Colas from a vendor in a public park. Before we took a sip, we knew exactly what we were getting--the sugary water and caffeine gave us a buzz even though we had jet lag and the iconic bottle and consistent taste were just what we needed in our first trip off the North American continent. Today, Coke may be the most valuable brand in the world and it can be purchased easily in even the most remote areas of over two hundred countries. Several hundred million times a day, Coke keeps it promise to consumers again and again. Like it or not, the brand has integrity. And, with their advertising and promotion they have communicated trustworthiness to a few billion people around the globe.

The issue of integrity is something that has been a particularly important issue in many industries but the US auto segment is a standout if you are looking for a case study. Back in late 1977, I was home in Rhode Island for the Christmas holidays. My father’s health was declining and he asked me to go with him to a local car dealership as his vehicle needed service. We waited in a big room with other customers and had a great talk. While we were there, another customer was told that his engine needed a valve job which would cost several hundred dollars. He exploded to the service manager and produced his service book showing that he had dutifully come in every 4,000 miles for oil changes, tire rotation and other routine maintainance . The service manager started laughing and said something like “You don’t believe that service manual from Detroit, do you? Your oil should be changed every 2,000 miles.” He then went in to a lengthy discourse on American automakers “planned obsolescence” that would require most customers to buy a new car shortly after they had paid off the loan on their existing one. The irate customer said that the car company was dishonest. The sales manager continued laughing and said “write a letter to Detroit if it will make you feel better.”

As a boy, I often heard the line “As General Motors goes, so goes the country.” It was the largest industrial company in the world and for a long time had the highest stock market capitalization. It was a fairly accurate bellwether of economic activity. Clearly, by the 1970’s, the company had lost its way. The products were not as good as they had once been. The brand had lost integrity.

Compare that to an upstart company from Japan, named Toyota. Launched in 1937 in Japan by Kiichrio Toyoda, the company grew very slowly and was certainly set back by World War II. Always, however, there was a focus on reliability and the customer. Just after the company rolled off its first vehicles, Toyota executive Shotaro Kamija was quoted in the Tokyo press as follows: “The priority in receiving benefits from automobile sales should be in the order of the customer, then the car dealer, and lastly, the maker. This attitude is the best approach in winning the trust of customers and dealers and ultimately brings growth to the manufacturer.”

It seems as if Toyota had brand integrity built into their corporate DNA!  As the 1970’s began, Toyota began to make inroads in to the American market. The cars were inexpensive, reliable, and energy efficient which had great appeal as we had the first gasoline shortage in 1973. Detroit did its bit by not producing the best cars.

Back in 2005, Detroit laughed at Toyota as they faced a major test. Toyota actually recalled more cars in 2005 than they sold in America. They cleaned up their act and recalls dropped 83% over the next two years. Then, a major problem hit in 2008. Certain Toyota Tacoma trucks manufactured between 1995 and 2000 had frames that were corroding from the inside out. Research showed that it was most acute in areas with large snowfalls and heavy salting of roads.

Toyota offered to buy back the cars from consumers at 1.5 times the Kelley Blue Book rate. The offer was made to 813,000 owners. Toyota behaved splendidly. Some of the vehicles were 13 years old and management could have hidden behind warranty agreements. They did not just do the legal minimum. They went the extra mile for sure. The result was that many people took their rebate checks and went to their nearby Toyota dealer and purchased a new car. A few years ago, Toyota received some bad press with a Prius recall (I have two and they handled everything to my cranky satisfaction!) but have seemingly put that behind them as well.

Toyota is now the largest automobile manufacturer in the world although a resurgent GM is nipping at their heels with their new improved products.

So, may I urge you to think about the brands you work for or represent? Many of the problems that the brand may be experiencing could be a lack of brand integrity.

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

Retail Closings and Advertising

By this time of year, business analysts are beginning to take stock of the consumer economy. Forecasts now abound for retail store closings for 2013. The December 2012 holiday selling season was somewhat underwhelming and GDP estimates for 2013 are muted at best.

Here is a composite of what many are forecasting for retail store closings in calendar 2013.  In no particular order, we find:

J.C. Penney--300-350 store closings

Best Buy--200+

Sears Holdings--KMart 200+
          Sears 100+

Office Depot--150
Office Max--150

(These two companies are merging so this number could go higher especially if a number of stores are in close proximity to one another)

Radio Shack--350


Right now, the consumer is approximately 70% of the U.S. economy. Some people talk about the coming renaissance of the US industrial base but, realistically, that is going to take years if it is going to happen. So, the consumer still drives the bus in the US economy.

With all these projected closings, does this mean our economic future is all gloom and doom? Well, what is really going on? In a free market economy, there is always an ebb and flow of relative corporate strength.  Harvard economist Schumpeter described it as “creative destruction” over 70 years ago. When it comes to retail, there is almost a fashion cycle in evidence. A few years back, some were saying that Sears would soon be back on track. Hedge fund manager and brilliant financial engineer, Eddie Lambert was taking over Sears Holdings which also included K-Mart. Many thought that he could unlock hidden value in the two chains and they would become big players again. Lambert, as brilliant as he is, had little hands on retail operating experience and things have yet to turn around. Yet, is it is his fault? When I sent a draft of this post out to several Media Realism panel members, a young media strategist fired back--"Sears? Radio Shack? Do those chains still exist? I thought that Target and Wal-Mart killed them both.”

Other chains seem to be having trouble with major e-commerce competitors such as Amazon.com.  More than one retail analyst has described Best Buy as now being little more than a showroom for their rivals online businesses. Best Buy will try to fight back by matching prices but it seems the consumer mindset is turning away from them.

What is succeeding in retail these days? There are always niche players and new concepts that capture the imagination of American consumers. As a group, though, it is the extreme value section that is really thriving. Family Dollar stores added some 475 locations last year and has 500 new openings slated for 2013. Dollar Tree has similar percentage gains in store count as well. They do a great job appealing to low income and financially stressed customers many of whom have no credit cards and are completely unbanked.

This should tell us something. Nobel laureate Joseph Stiglitz continues to hammer away in interviews and articles about how the American middle class is “being hollowed out.” Looking at these retail numbers he is definitely on to something when the most dynamic growth is coming in the extreme value sector.

Over the intermediate term, this trend in retail is not good for either media properties or advertising agencies. May I suggest that you run some tabulations on the extreme value sector? You will find that they are not lusty buyers of conventional media and use even less digital options as a strong plurality of their customer base may well be totally offline.

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