Archive for September, 2010

Client and Agency relationships

The ANA teamed up with the Advertising Week group to put on a great panel discussion about client and agency relationships.

One thing that struck me right away was how many times agency people kept using the word “partner” to describe the relationship.  It was almost never used by the CMOs on the panel. “Clients more and more are buying projects, not relationships” said one agency executive.  In response, one CMO said, “We are looking for relationships but we do date on the side.”

From the client side the word that stuck out was “team”.  The CMOs spoke of their agencies as vital members of the marketing team, with enormously valuable contributions.

Clients need agencies.  They need them for many reasons.  But the role that agencies need to play is changing faster than the mindset of many traditional agencies and holding companies.   The irony is that agencies are valued by clients as agents of change.  But the most difficult change for agencies is often internal.

Another thing that struck me were the very different perspectives.  At times I got the impression that the agencies were having one conversation and the clients were having another conversation altogether.  Yes, the agency executives pointed to the rapid turnover in CMOs as a core problem.  On the other side, Roger Adams observed that agencies don’t see enough of the whole marketing picture.  It is up to the CMO to watch the priorities and know who to bring to the table at the right time because marketing has become so complex.

Even so, most marketers still don’t have it figured out.

Many of the panelists held up P&G  as a model for how to successfully bring together everyone at one table as part of one team.  The difficulty of the challenge was evident when at least 2 people mentioned that P&G “forced” their agencies to work together.  And it also required P&G to reinvent marketing within their own company.  Susan Giannino said, “It wouldn’t have worked if P&G didn’t make organizational, process and methodological changes.”  Which really does get to the heart of the matter.  Marketing needs to be reinvented.

The traditional brand positioning approaches have broken down.  The advertiser/agency model has broken down.  The textbooks are out of date.  What people learned 10 years ago is about 11 years out of date.  The agencies don’t have the resources to solve the complexity of the problem.   Most Business Schools are overlooking the extent of the problem and not developing new models or theories (Professor Gerry Wind of Wharton raised the alarm about this a year ago in an editorial he co-authored).

As one panelist said, this is perhaps the greatest, the most exciting time to be in marketing!

My perspective — the companies who are doing it successfully are essentially reinventing marketing by themselves.  In addition to P&G, I would add McDonald’s, Samsung, Coca-Cola and BMW.

Judging by the size of the crowd, the ad business is in good shape

The lines to get into the Times stage went down one staircase and up another, wrapped around the room, nearly staggered out the front door.

The line at Advertising Week, part 1

The line at Advertising Week, part 1

The line at Advertising Week, part 2

The line at Advertising Week, part 2

Coca-Cola and BMW on reinventing marketing

Yesterday’s panel moderated by Stuart Elliott was particularly good.

If there is one thing to take away from that panel, if there is one priceless thing, it is the need for Client to take control of their branding and for them to orchestrate of all the agencies themselves.  That means the client needs to have an internal structure and resources.  They need to reinvent marketing.  They need to develop models of marketing unlike anything that ever existed before.

And it means that each agency must play well with the others.  They must collaborate and cooperate and be transparent.

As the communications landscape becomes more complex and new technologies mix up the world faster than anyone can strategically comprehend. No single agency can possibly serve the needs of an advertiser. They rely on 5,6 or 7 different agencies, buying a la carte. The CMO needs to know many disciplines since they now have to integrate the various silos.

Pio Schunkur, SVP of Integrated Marketing at Coca-Cola, made the following observations.  These are almost all direct quotes:

“Marketing today is non-linear.  How do we really begin to understand that and to structure around it?”  Clients have to knit it together themselves.

“No one agency can do it all for us.  So we have to create an infrastructure in-house, a center of expertise in-house to create and manage the expression of our brand.  We are not replacing agencies… We use agencies a la carte”

“The structure of the marketing group impacts the strategy.”

In response to a question from Stuart Elliott about how Coca-Cola deals with so many different processes from so many different agencies, Pio responded, “The agencies need to be controlled from our side.”

“Every good brand is about story telling.  The difference is that we are now telling the story in different places.”

The group responsible for began several years ago and one of their major challenges was to push the agencies to collaborate.

Patrick McKenna of BMW had many similar observations.

[Between CRM, PR, advertising, mobile] we have to work with 5 to 6 different agencies.  We want the agencies to work together and to integrate.  All parties need to work together.”

“Each car launch is a cross-collaborative process.  The agency partners put the ideas together.”  The agencies are expected to work together to develop and vet ideas before presenting to BMW.

“Sometimes the role of the client is to be the referee.  Clients have to referee between two agencies to make sure that a great idea lives on.”  So there are times when BMW has to force the issue but that is not often.”

From the media side, we heard Greg Coleman of The Huffington Post observe the way agencies are blurring their roles and trying to stay in the game. “We are seeing PR agencies getting into the branding area.  We need clients to be the referee.”

Of course Elliott’s sense of humor and skepticism is never far below the surface.  When McKenna said that advertising is storytelling, Stuart Elliott responded, “Fairy tales.”

My trust in Blagojevich is renewed

Mea culpa.

I was wrong in my last post.  Blagojevich did show up at the Trust seminar this morning.  I arrived just after he left.

Now my trust in him is fully renewed!

Trust?

I came to the trust panel at advertising week to see the former governor of Illinois, Rod Blagojevich. But he wasn’t here.

So much for trust…

Advertising week

It’s Advertising Week in NYC.

A time to celebrate and learn and hang out and look for great new talent that we can hire…

This just in! Recession ended in June 2009! Extra! Extra!

In case you missed it, the NBER has officially decreed the end of the Great Recession and dated it to June 2009.  It’s the end of the recession as we know it!

Whew!  Time to open the champagne bottles!

So does this mean companies are back to “normal”?  Back to business as usual?  No.  Not even close.  The downturn was steep and long.  Of course there is a difference between the end of a plummet and a robust growth cycle that takes us to new highs.  In fact, for many people and companies it doesn’t feel like the recession has ended at all.  To be fair…

…the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month.

Here’s the release in full.

The Recession Has Ended…sort of

The recovery is slow and uneven.  Some companies are winners and some companies are losers.  The ways that individual companies responded to the economic smackdown is now determining how well they are recovering.  In the initial drive to cut, cut, cut in 2008, many companies cut too far or cut the wrong things or missed an opportunity.   Others took a more strategic perspective to reinvent their marketing.

Examples:

McDonald’s vs. Burger King

Apple vs. Dell

Samsung vs. Sony

Hyundai vs. GM

The slow growth/no growth economy we are in today means that the marketing lessons from The Great Recession are still valid and relevant today.  Too much capacity, too little demand.  Demand is slow.  Demand is low.  Business will only recover when there is stronger demand.

It is a perfect opportunity for companies to use their marketing to gain competitive advantage.  Marketing is about generating demand, about shifting demand from their brand to our brand.

This is a time when strong marketing approaches can pay off.  It is also a time when many executives will be cautious.  So the question ahead — which companies will reinvent marketing and which ones will play it safe?

One key indicator — companies are making more profits (up $224 Billion in Q1 and $41 Billion in Q2) while holding down the size of their workforce.

Everyone needs a Touchstone

the new Touchstone colophon

We’ve been having fun this week following the re-branding we did for Touchstone books this summer.  Stacy Creamer, the publisher of Touchstone books, gave an interview to Publisher’s Weekly last week about the renaming and redesign of the Touchstone imprint.

“We really are one team, one staff, and one unique publishing imprint. It seemed that we only needed one name,” said Creamer.
Editorial direction typically changes when new editors and publishers join imprints, and that has been the case at Touchstone. Creamer came to Touchstone/Fireside from Doubleday Broadway in May 2009. “Ever since I got here, I have been eager to rebrand us,” she said. “It’s more like the name catching up with reality than anything else.”

Touchstone has also launched a new Facebook page facebook.com/touchstonebooks.  There you can see some of the famous authors and rock stars who are being published by Touchstone.  That includes Rick Springfield, Philippa Gregory, Duff McKagan from Guns ‘n Roses and Lance Armstrong.

Here’s a photo of publisher Stacy Creamer with Rick Springfield.  [Correction! Photo credits and rights belong to Jane Grimaldi]

Rick Springfield and Stacy Creamer (photo credit and copyright: Jane Grimaldi

Here’s the Touchstone story, in the words of the publisher:

The books were publish are themselves touchstones, superlative examples of their types, against which others in their categories may be judged.

For our new colophon, we’ve chosen a figure that is expressive of the spirit that animates Touchstone’s approach to every book on our list, which is to say one of boundless energy and genuine, passionate enthusiasm.  Nothing could be truer about our dedication to our authors and their books.

Here’s a toast to a superlative success for Stacy, David Falk, Cherlynne Li and everyone else at Touchstone!

Consumer attitudes – or – who’s to say what’s normal?

Okay, some more evidence that there is a real change in consumer attitudes.  This from The NPD Group.

In sum, their data shows a dramatic shift in values and attitudes. We’ve moved from an era of conspicuous consumption to the “calculated consumption era.”  According to NPD’s Marshall Cohen, the last ten or so years have been “an abnormal period”.

While I agree that attitudes have changed, I’m not so happy to think that the past decade of my life has been “abnormal.”  After all, who’s to say what’s normal?Marshall Cohen on “calculated consumption”

Will the Great Recession have an lasting effect on consumer attitudes?

Okay, this post is a bit nerdy and not the typical brand blogging kind of stuff.  It looks at some of the deeper economic and psychological issues involved in the on-going Great Recession.

Since the beginning of 2010 I have been asked by clients and friends, Is this downturn really going to make a permanent, generational shift in consumer attitudes?  Or will people just return to their old habits once the economy picks up more?

Are we in a state of a “new normal” where the changes are fundamental and profound?  Or is this just another swing in the on-going see-saw in response to the business cycle?

The answer to this question has serious implications for businesses.   To make a broad generalization, if a company believes the changes are temporary, then they will not make dramatic changes in their product lines going forward.  If another company believes there is a fundamental change in attitudes and behaviors — a lasting change — then they will move quickly to capitalized on that new trend.  They will align their offerings and their brand with the shift in consumer values.

The question comes up whenever there is a downturn.  Usually the answer is that people will resume their previous patterns.  Here are two examples:

Following the oil shocks and inflation of the 1970s, many people predicted that Americans would make a generational shift to smaller cars.  The price of a gallon of gas rose to $1.35 by 1981 — which is equivalent to $3.24 in today’s dollars, adjusted for inflation.  Source: Inflationdata.com, based on BLS statistics.  Fuel economy was the catch-word of the day.  Gas rationing was fresh in everyone’s minds.  [A short detour into history of the times.  During the 1970s OPEC companies put an embargo on oil to the US.  One result was that people could buy gas only every other day, depending on the last digit of their license plate being an odd or even number.]  Within a couple of years the cost of gas dropped back down.  The American love affair of minivans and then SUVs soon knocked out any serious discussion of changes in consumer attitudes and behaviors.

Inflation_adjusted_gasoline_price

Inflation_adjusted_gasoline_price

On a Monday in October of 1987 I was standing at a window on the 21st floor of 1515 Broadway, watching the news ticker on the Times Square Tower.  The news was astounding — a drop of over 22% in stock prices during just one day.  My client at the time, The Prudential and Prudential-Bache was concerned that this signaled the end of people buying mutual funds and other investments closely tied to the stock market.  Was this going to be a generational shock like the crash of 1929?  We conducted market research among mutual fund and stock owners.  Rather than rushing to sell their mutual funds, most said they were going to hold and see what happened.  That was when the stock market high was 2,700.  We all know what happened next — that more and more people put more and more money into the stock market in the years that followed.

Based on past experience it is reasonable to assume that attitudes and behaviors will return to “normal”, that the disruption in purchasing behavior is just temporary.

However, this time really does appear to be different.  This time there is considerable evidence that the severity of the Great Recession is deeper and longer lasting than previous downturns in the US and Western Europe.  Go beyond the typical measures of employment and GDP and look at price inflation.  Or, rather, deflation.  In this downturn prices have actually dropped across the board for almost everything.  Down for home prices, down for commodities, down for goods and services.

In my opinion, it is price deflation, or negative inflation, that makes this downturn different from all others.  And that is why we can expect a longer lasting shift in attitudes.  A generational shift.

What is price deflation?  It is the phenomena of falling prices.  What is expensive today is cheaper tomorrow.  Sounds like a great idea, since everyone wants to pay less for what they are buying.  In practice it is far from a great idea.  It is the exact opposite of a great idea.  Price deflation is dangerous for businesses.

Here is a simple hypothetical example of how deflation works:

The price of a toaster oven is $100 this week.  In a stable price environment it will be $100 next week and so on.  You can but it today or tomorrow and it will make no real difference.

In a slightly inflationary environment it may rise to $102 within a year.  That gives you an incentive to purchase the toaster oven today so that the price doesn’t rise tomorrow.

But in a deflationary cycle the cost will drop from $100 down to $90 (hypothetically speaking).  Therefore you will not buy today or tomorrow.  You will wait for prices to fall further before you buy.  Your demand for the product has now declined.  Why buy a toaster oven today when it will be cheaper in a few months?

This sets a trap for marketing.  Advertising price drops should, in a normal economy, stimulate demand.  So many companies will continue with the price promotions from the recent past.  In a deflationary period it simply reinforces the belief that prices will decline, so consumers will continue to wait before purchasing.

Pushing hard on pricing also de-values a brand.  So now you have a price deflator attached to your brand.

In a deflationary time, marketing has to work harder than ever to stimulate and support consumer demand.  It needs to stimulate desires that counter the consumer psychology of deflation.  Easier said than done, however.

So how real is the threat of deflation?  Very real.  Below is a chart on inflation rates.  Real price deflation has already happened.  And we are on the verge of a long term slide into more deflation or, at best, virtually no inflation.  This is not just an academic exercise or something for politicians and Paul Krugman to argue about.  It has a real effect on stock prices, on the ability of people to buy goods, on income levels on the overall demand for goods and services.

inflation rates

inflation rates

So, yes, this time there is good reason to believe that changes in consumer attitudes are real and lasting.


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