21st Century Economics--The Fusion Approach

George Washington, the 1st president of the United States of America, died in 1799. Some reports say that doctors applied leeches to the father of our country as he suffered in his final days. Today, doctors don’t use medical “wisdom” from the 18th century to help their patients.

Lately, I have been hearing the same argument regarding economics. Scotsman Adam Smith published THE WEALTH OF NATIONS IN 1776 which most students of history of economic thought would say contains the first outline and spirited defense of the capitalistic system. Why do, many ask, economists and a few politicians hark back to early thinking developed in the 18th century or the industrial revolution of the 19th century? They get angry when anyone argues that government may be the problem and rarely the solution.  I agree with that up to a point. Yet, to me, certain economic truths have more to do with human nature than theory. Greed, envy, competition, technology and progress were with us in 1776 and remain with us today. They dominate human action, which is how noted Austrian economist Ludwig von Mises described economics.

For most of the 20th century, the Keynesians slugged it out with the Austrians and the Monetarists. John Maynard Keynes of Britain argued for government deficit spending during weak economic times. The Austrians approved of a laizzez faire approach and letting the economy heal itself by getting rid of malinvestment. The Monetarists said proper control of the money supply would control inflation. During the great depression all the way up to the Reagan Revolution of 1980, the Keynesians dominated.  Then the Monetarists and the Austrians, both ardent defenders of the free market began to take center stage. After the onset of The Great Recession, a Keynesian approach of massive government stimulus came roaring back in to our lives. Now countries across the world are printing vast quantities of money at different levels.  This is unprecedented in measured economic history. All I can say is that once you start printing it is very, very hard to stop


Through it all, no matter which school of thought dominated, all basically spun their theories on the concept that consumers acted rationally. Yet, by even cursory observation, we see people daily who are not making rational decisions. Some 20% of Americans are morbidly obese and studies of recent vintage indicate that such a sorry statistic could double over the next 20 years. Is putting your health in harm’s way a rational act?

Behavioral economics (see Media Realism, 3/22/11) is a new discipline that is a marriage between psychology and economics. It studies how people often use rules of thumb from their own experience or copy the behavior of others rather be the classic “economic man” and act rationally. Increasingly economists are saying that when people are irrational the government should intervene.

All this seems to be leading to what a few people have dubbed as “fusion economics.” There will be a pick and mix approach among the schools of economics. If people won’t act rationally, a series of paternalistic regulations will take hold to help people make decisions that are truly in the public’s long-term interest.  (For example, the risky mortgages that many took out in the first decade of this century would be prohibited. People would not lose homes in the future as a result of irrational decisions)

For two centuries, economists of nearly all stripes had boundless faith in the ability of markets to determine outcomes. Now, many of us are questioning whether markets always come up with the preferred outcome. Sounds great but who determines what THE preferred outcome is? The current crop of bureaucrats, perhaps? Fusion economics will not have a core philosophy. Taking one policy from the Keynesians, the next from the Monetarists and sprinkling in a bit of Austrian freedom seems like an odd mix to me although I do find Behavioral Economics fascinating.

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

The End of Men--A Review

On 11/7/2010, I put up a post that was entitled “Women on the Rise.” It discussed demographic trends in the US and some Western economies. With more women graduating from college than men, getting advanced degrees and entering law and medical schools it was inevitable that 15 years from now women would be leaders in law, medicine, business and academia. At the end of the piece I referred to an article in the Atlantic by Hanna Rosin called “The End of Men.”

Very recently, Ms. Rosin has expanded that article into a book of the same name (Riverhead Books, 2012). It is a fascinating read and her treatment of a very complicated and, at times, delicate subject, is very well done.

Why do things seem to be shifting in women’s favor? Ms. Rosin’s thesis seems to be that as the world has changed, women are more flexible than men. Importantly, as we have moved in to the information age, the service oriented economy is far more welcoming to women than the industrially dominated economy ever was. It is an interesting thought and, as you drill down in the details and demographics, the case is very well made.

She also talks of 60% of college graduates now being women. That, by definition, means that many good positions have to go to women in the future. She does not explain why young women seem more organized than young men and plan their careers with care while millions of young American males just seem to drift. Over the next decade this will cause an imbalance in society that we have never seen before. Women will be dominating in many fields with key senior positions. She guesses that high finance may be the last of the “old boy network” bastions to fall. More women may not ever marry as they are both very career driven but also will discover a distinct shortage of men who are similarly educated and sophisticated.

The top-line statistics regarding men are indeed a bit scary. In 1950, five percent of men in their prime earning years were not working—today, it is 20%
which is indeed ominous. In 1970, women contributed 6% of the family income while today it is 42.2%. That last statistic to me is a reflection of economic necessity not  just the advance of women. Almost all two income households have two incomes simply because it is necessary economically.

Critics have said that Ms. Rosin overstates things. Why are only 3% of Fortune 500 companies headed by women? Why are only 20 of the 180 global heads of state women? Sadly, they miss the obvious—demographics. Today, the pipeline is being filled with women college graduates and those with professional degrees. Fast forward a decade or two and women will be far more dominant. Demographics, as I have said in this space before, are destiny. This tidal wave would take a generation or two to reverse and, to do so, young men would need to get far more motivated than many are now.
Others say that this is just a blip. The real gloom and doomers have said that the men have been fired first in our long running economic malaise and the women will be next. Again, they miss the demographic certainty that is firmly in place. If three women for every two men graduate from college each year, then more women will be tapped for senior positions than men in the future.

Ms. Rosin has a somewhat rosy view of globalism and states again, with women being more flexible than men, they should do relatively better as certain industries shift overseas.  I am not at all sure about that hypothesis. Globalization is terrific for the consumer but some people always get hurt in the transition and women may be equally affected as men.

Overall, this book is modestly upbeat unless you are a 23 year old man who dropped out of college. If you want to get depressed, read “The Decline of Men” by Guy Garcia.  Written about four years ago, he says that millions of young adult men are spending way too much living in their parent’s basements playing video games, analyzing fantasy football leagues, watching lots of ESPN and some pornography as well. At the same time, an increasing number of young women are planning their futures with care.  His solution appears to be that men should get in touch with their feminine side and be more sensitive and communicate better. My advice to these young fellows is to get off the couch!

Ms. Rosin’s book is timely and well done. It reminds me how marketers have to start shifting gears with their advertising messages. As more women earn six figures they will not be only the primary breadwinner in many households but also the decision-maker as  well in any number of categories. Sales people will have to adjust as  these successful women will be very pressed for time. Mobile advertising will likely play a very prominent role with these high achievers. The die is cast demographically. There is no turning back on this trend over the next few decades. The odds will get stronger each year that your doctor, your  lawyer, your financial advisor, and your best customers will be women. Now we will need appropriate ad copy and media placement to reach them.

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

Don't Drink the Kool-Aid

Last year, I ran in to a former student. He was waxing poetically about his job and I was happy for him and proud to have played a small part in his success. As time went on, he spoke with increasing excitement about his company and what it was doing. Then, he asked me for advice. I told him that things were apparently going great for both him and his employer but I reminded him to try and keep some perspective on things. My exact line was “Remember, don’t drink the company Kool-Aid.”

The line is used frequently in North America these days. It refers to a horrible scene in Guyana in 1978 when Rev. Jim Jones along with many followers drank Flavor-Aid laced with cyanide and took their lives. Since then, it has morphed in to “Don’t drink the Kool-Aid” meaning that you should never have unquestioning belief in any company or movement. Some degree of critical examination is always required.

As I think back, I can honestly say that I was never a Kool-Aid drinker. Every place that I worked had strengths and each had shortcomings. But I never ignored the flaws of management or the weaknesses of some personnel or departments within each organization. Some of it I shared with superiors, some I discussed with trusted associates, and much I will simply carry to the grave.

I am not suggesting that you be a malcontent or a cynic. No organization is perfect and none of us are  perfect employees. But, if you can stay a bit detached you usually work better. Disappointments are few as you expect less than the true believers. You can simply do your absolute best and not worry about it. If another opportunity comes along, you are more likely to give it balanced consideration, as you are not in awe of your current management.  You realize that the grass may be greener or just different somewhere else.

People are forever telling me that their team or company or organization is the “best in the business.” I just smile. Some are indeed awfully good but everyone cannot be the best. And, it is important to have a certain pride in the organization that you belong to and the people with whom you work. But, if you drink the corporate Kool-Aid, you will likely begin to rationalize things sooner or later. Statements like “we are not overcharging, we are worth it” start popping up. Or “that client is an idiot and we know better” meets only with nods of approval. At that point, you need a reality check. Is this place ethical? Are we turning out a shoddy or dangerous product or possibly bending the truth more than a little but rationalizing it as we all drink from the company fountain?

In today’s world, you cannot just leave in a huff. There are mortgage payments, college bills, healthcare expenses, and not a great many really terrific available positions. If you try to stay detached and objective, your career decisions will be better, you can live with yourself and most likely will not be bitter in old age.
Being loyal to your employer is a very positive. Being blind to obvious shortcomings is not.

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

Global Marketing Monitors

Over the last few years as Media Realism has grown we have reached a point where, in many weeks, more than half the readers are from outside North America. Geographical readership tends to very topic sensitive but the European and Asian growth in particular has been steady.

Recently, some readers from emerging nations have written to me asking which countries that I look at to monitor marketing opportunities and a growing media presence.

The knee jerk reaction for most people would be the BRIC nations—Brazil, Russia, India, and China. Russia, to me, is mostly driven by natural resource wealth so I do not follow it terribly closely. China has a long-term demographic problem and India a demographic upside but they are both so huge that I do not spend nearly as much time on them as I once did.

My choices may be sharply different from yours.  They are Brazil, Turkey, and Vietnam.  While they are wildly different in geographic location, to me they have some common threads that merit my close observation.

Brazil, after decades of being an economic basket case, is now the eighth largest economy in the world. They are easily the largest consumer market in Latin America and their middle class now numbers over 100 million people. They are energy self sufficient with sugar based ethanol and five years ago, some huge offshore oil discoveries have sent major energy companies south vying for a piece of the action.

More importantly, Brazil has a wide array of trading partners. For most of the 20th century, the US was the dominant foreign player in Brazilian trade. Now, they are very well diversified and China is currently Brazil’s largest trade partner. They seem to have a portfolio of trade partners and unlike past history, are not overly reliant on any one nation. So, no matter how things may develop in world economic power over the next decade or so, they are in a nice spot with friendly relations with many entrenched and emerging players around the globe.  Also, they will not waste money on war. There are no plans for a Brazilian nuclear weapons program. There is still corruption and some organized crime but it is not the tinderbox of tension that you see elsewhere around the globe.

My second choice, Turkey, also has many trading partners. They badly want to join the European Union but only a small percentage of the country is geographically in Europe. The real impediment is that other E.U. member states appear not to want a new member state that borders such sensitive areas such as Syria, Iraq, and Iran.  Turkey has a fairly solid economy that, surprisingly, is four times the size of Egypt. They also have a good historical trading partnership with Israel which is unique in the Muslim world. Also, they have NATO membership that makes them something of a player with the US and most of Europe.

Over the last few years, I have observed a few Turkish package goods companies being bought out by global behemoths. The indigenous Turkish brands were competing quite effectively so a buyout was a workable solution for large international players to get a foothold.

Geographically, Turkey is in a unique spot at the crossroads of the old Soviet Union, the Middle East, Europe and Asia. Per capita income is almost twice that of China and four times India so an emerging middle class will have significant buying power going forward.

Vietnam may seem like the outlier on my list. For someone of my generation who spent a few anxious months wondering whether I would be sent there in 1971-1972, it is strange to be discussing it as an emerging economic powerhouse. Many people see Vietnam as simply a captive of China. As wage rates have increased in many parts of China, Vietnam has benefited as manufacturing has moved towards their eager and efficient work force. If China has difficulties long term, does this mean that Vietnam is toast? No, not at all if they can work with and trade with far flung neighbors as Brazil and Turkey have. Media wise, the Vietnam press and broadcast entities are still government controlled and laced with Marxist-Leninist rhetoric but that seems to have little effect on production or the emerging middle class.

Each of you probably has your own list that you personally monitor. I would assume Indonesia, with the world’s 4th largest population, would be near the top for many of you. My point today is merely to give you my spin on an issue that any international marketer or investor needs to work on regularly.

Which nations are on your list? I would love to hear from you.

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

Is Being Connected Hampering Media Effectiveness?

There is an epidemic spreading across the world.  People are increasingly fanatical about staying in touch and appear to have a mobile device in close proximity at all times.

Here are two recent personal examples that stunned me:

1) Last spring, I was proctoring an exam for university students. I had 31 exams and counted out the same number of students. So far, so good! Just prior to passing out the exams, I scanned the room. One student was looking out the window, apparently gathering her thoughts. Near her, a fellow was furiously going over his study notes one last time. The other 29 students were texting! Why? What could they be saying at that moment? Were they asking a friend when the old boy was going to pass out the exams?  Did they have to wait until exam time to send a message?
2) This past Friday evening my plane touched down after a business trip. Mine had been short but it was clear that there were some weary road warriors on board. As the first row of first class left the plane a strange thing happened. Three of the four people in the second row stood in the aisle and were texting. None of us could get through. Thirty seconds passed, then forty-five. I glanced around and a fellow diagonally across from me rolled his eyes but no one said a word. After a full minute passed, two of the people sent their text messages and left the plane allowing me and 100+ other people to leave. No one said a word. My thought was that the people blocking the aisles were rude and they should have waited thirty seconds to walk in to the terminal before starting their text messages.  Was I in a distinct minority?

This obsession with staying in touch makes me wonder about the effectiveness of our 2012 media world. Two separate studies that I have read this year have projected that 60-61% of viewers have a mobile device in hand while watching TV. A separate Pew Research study indicates that 38% keep the mobile handy “to occupy themselves during commercials.” Some 20% go to the web to verify something that they heard or saw on TV.  On the other hand, I suppose there must be some who use the Smartphone or other device to shop for something or purchase an item that they saw while viewing.

Very recently, a bright young professional suggested to me that people who have taped a show via their DVR may not jump commercials as much as they did a few years ago because they are using their mobile to do something else. Hard to prove but it certainly makes sense.

People in their 20s often use several media types at once—TV, Smartphone, E-mail, texting, etc. Geezers such as I are lucky if we can read a magazine while stealing glances at the TV in front of us.  Is anything really sinking in? How much of this wonderful technology, right at your fingertips, is destroying the effectiveness of your carefully crafted and often expensive advertising campaigns?

We have all fought advertising clutter for a few generations. Now the issue is media clutter, which may be seriously hampering all messages.

Right now, a few books are being published which address the effect of connectedness on us as people and how we relate to others. More scientific and thoughtful studies will emerge in a few years along with some scholarly articles. In the meantime, look beyond rating points and reach & frequency metrics. Is your message really getting through to the connected?

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



    

Is Marketing Dead?

Back when I was in high school, the Christian world was rocked for a brief moment by a movement dubbed “Is God Dead?”  It was probably started by a theologian name William Hamilton who horrified by the evil and suffering in the world wrote, “We needed to redefine Christianity as a possibility without the presence of God.” Others said that Christian principles were great but as our society was growing more secular the concept of an active God was not necessary.

It never got big but on April 8, 1966 Time Magazine put “Is God Dead” on the cover instead of its usual portrait of a leading political, entertainment or business figure. Such publicity caused the subject to be debated all over the country and gave TIME more notoriety than the newsweekly likely wanted. After a few months, the issue quietly dropped from the scene.

Why do I bring this up? Well, this past week I received an unusual e-mail from a young reader.  With his permission, I quote—“I really do enjoy your blog but don’t your realize that traditional marketing is dead. I don’t care if you are talking advertising as you often do, or public relations or branding or even corporate communications, they are all dead. Buyers today don’t pay attention to marketing efforts—we use the Internet, examine reviews by users, and depend heavily on word of mouth by friends. You raise good points sometimes but Don you are really showing your age.”

Well.

My young friend went on to quote some statistics from a Fournaise Marketing Group whose survey of hundreds of CEO’s essentially said that they are hopping mad. Some 73% say that their Chief Marketing Officers (CMO’s) lack business credibility and cannot grow their business significantly. Over 70% resent being asked to spend money without explaining how it will actually increase sales or profits. Also, close to 80% don’t want to hear about the certainty of enhanced brand equity without some financial metric being tied to a marketing program.

Is this new? For my whole career, clients have asked for accountability. We never guaranteed sales increases but could show metrics of increased awareness. CMO’s are short lived these days (usually under two years) so they may be gun shy and timid about forecasts and promises. The questions he raises from Fournaise are identical to those most of us greybeards have heard over the last 40 years.

Is marketing dead? I say no but I do agree that it is much harder to execute plans today. TV does not work as well as it did a decade ago but, all things being equal, it still works better than anything else most of the time. Commercial avoidance will only grow stronger. Mobile, in my opinion, is the next big thing, but players as illustrious as Facebook are having a hard time monetizing it. Can we find a way for creative to work well on mobile? Newspapers will go digital as will many magazine titles if they are to survive. Radio can still be a viable player locally in the right hands. Cable will have cross platform possibilities soon that would have been unheard of a decade ago. And, your “mobile wallet” will change shopping forever.

So, is marketing dead? No, but it is evolving and the pace of the evolution is much greater than we have ever seen to date. I do not agree with my young friend that conventional marketing avenues are all dead but I love his passion and his interest.

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

Poverty, An Aging America, and Television Viewing

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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