Posts Tagged 'economy'

Are Happy Days here again?

The big spenders are back!

The sheer number of P&G products sold – volume — grew 7 percent over the recession-plagued 2009 quarter, the strongest year-to-year growth in 18 quarters, the company said. Management credited a stream of new products and beefed-up advertising and promotions. “Volume growth was strong as we accelerated our pace of innovation and increased marketing support,” said CEO Bob McDonald.

I’ll hedge and say, “perhaps.”  Or, “some.”

Our research among CMOs shows that fewer feel themselves under strict executive scrutiny and pressure than a year ago.  It is down from 89% in 2009 to…80% this year.  So compared to last year, this is good.  But in absolute terms we probably all think differently.

Here’s my simplistic analogy.  Our economy was a car going 100 mph.  Come 2008 and we hit the brakes hard.  Too hard, going from 100 mph down to 0 mph.  This year the engine is revving up and we are now cruising along at 50 mph.  It feels fast, very fast, compared to last year.  But it is still 50 mph.

New restaurants in old car dealerships

This weekend I went to an event in California at a restaurant located in a former Chrysler dealer’s showroom.  It was a great beautiful space, with gorgeous windows.

In the conversion from showroom to restaurant, they kept many of the signs and nameplates.  It was very cool space.

Later I though it was also a powerful commentary on the state of our economy when car salesmen are replaced by waitresses.  Is Chrysler becoming a nostalgia brand?  Will it be more profitable as a theme restaurant than a automotive manufacturer?    Will Pontiac and Dodge become the names of competing restaurant chains?

On the other hand, Wittgenstein was not a brand guru

Okay, so I took the Harvard Business Review seriously.  Back in 2004 they ran an issue about breakthrough ideas for 2004.  Number 9 on the list was “The M.F.A. is the new M.B.A.”   The piece was written by Daniel Pink.

Yes! I said at the time.  Yes!  Exactly!  

Here’s an example of how I see an MFA benefiting companies.  It can improve the ability of your branding to engage consumers. More engaging branding = more effective branding. It can be put into practice by having one key person on your team who really knows and understands the elements and structure of narrative.  That  is extremely valuable if your brand marketing is to be more than just a hit or miss process.  It is extremely valuable if your marketing department is to get the best work out of your outside creative agencies.

But…

An MFA alone won’t succeed.  You need someone who is equally an MFA and an MBA.  You need someone with the skill and ability to synthesize both the creative and the business perspectives.  Those people are rare.  I suspect that is because our society tends to discourage people from crossing boundaries between the creative and business sides of life.  

It’s stereotyping, of course.  The recent stories about the photographer Annie Leibovitz being in financial difficulties is an example of the stereotypical view that great artists aren’t such great business minds.  Never mind about T.S. Eliot being an executive at Lloyds Bank.  Or that Franz Kafka was an insurance executive.  Henry Green was a business executive, too. Louis Begley (About Schmidt) was a highly successful lawyer.

Just adding an MFA to the marketing department will not work miracles.  It is also important to create an atmosphere where the MFA and the MBA can work as a team of equals, with mutual respect.  From my perspective that is not so easy to accomplish in the real world.  And in today’s economy having an MFA in the marketing department can seem like a frivolous extravagance.

A good place to start would be having some interaction between the business school and the school of the arts at places like NYU, Columbia or the University of Pennsylvania.  Just imagine how much richer (in content) the marketing programs would be!

Full disclosure: I have both a degree in Economics and an MFA in creative writing.  There is probably a good deal of bias in this post!  

Even without an MFA, everyone can gain a fundamental understanding of the structure behind great narratives.  All you have to do is spend an afternoon reading through Aristotle’s Poetics.  Aristotle was perhaps the first brand guru, laying out all of the elements of a great narrative in his Poetics.  He knew that a value proposition was limp and unconvincing without having metaphor, character, plot, visual elements and music to give it the breath of life.

However, I do draw the line at other philosophers.  Wittgenstein just got it wrong.  “Whereof one cannot speak, thereof one must be silent.” (translation by C.K. Ogden).  Clearly the man was word-mad.  Communications through images, visual metaphors, sound — all are powerful.  In fact, more powerful than words alone.  Frankly, it’s not worth the effort to read Tractatus Logico-Philosophicus.  This afternoon would have been better spent if I had just left it unread on the shelf along with all of the unread marketing books I’ve collected.  

Oh, and one last question.  Why did HBR choose Number 9?  The Beatles’ White Album, anyone?

Organizing marketing departments

It is generally agreed and supported by research that the practice of marketing is undergoing many changes to meet the needs of today’s world.  However changing the practice of marketing cannot happen without organizational changes.  

Simply stated, if the marketing department continues to be organized the way it was 5 or 10 years ago, it will have great difficulty putting into place new methods of marketing.

One of the areas of greatest change is the area of customer experience.  In today’s world there is an qualitative and quantitative expansion in the way that a company interacts with a customer — or prospective customer.  For instance, customer support has gone from calling an 800# to online.  And it is online on the same website that is marketing other offerings.  Ordering a product happens on that same site, too.  Suddenly you have a need for integrating customer service, sales, order processing and marketing into a single customer experience.

But companies are not organized that way.  The customer service, sales, order processing and marketing are separate departments.  They do not have the internal organizational structure or processes for integrating their efforts.

There is a great gap between what needs to be done and what is being done.  

Our research shows that 82% of CMOs/Marketing VPs say that their marketing departments are working more closely with other departments that touch the customer.  

At the same time, 78% say that internal silos are the single biggest barrier to integrating marketing with the customer experience.

This is a classic example of how companies are working at cross-purposes.  The internal structure is getting in the way of meeting customer needs. They become self-defeating organizations.  That leaves an opening for a new competitors who have developed either organizational structures or processes that allow for substantially better integration.

So why don’t companies simply reorganize their marketing functions?  

We have  identified 3 reasons:

1. In today’s economy the role of marketing appears to be dropping in company priorities.  Shortsighted or not, it is a reality driven by the economic turmoil and uncertainty.  

2. There are few role models to follow.  Organizational consultants — the McKinsey’s of the world — look at best practices.  They benchmark other companies to identify models that have been successful.  This is great in a stable environment or where innovators have risen to highly visible success.  But during times of rapid change the benchmarking process points to the past, not the future.  

3. Internal resistance to change.  Integrating marketing into other areas is often seen as taking away the initiative and independence of those other departments.  There is internal resentment that becomes the underlying emotional driver.  Of course it is not stated that way.  There is always a rational and logical reason that each department has for the status quo.

There are companies and executives who will recognize the situation either through a moment of great insight or through a dramatic need to change in response to competitive pressures.  The change will come.  Marketing departments need to be reorganized and their relationship with the rest of the company needs to be redefined.

Will tweet for food…

In case you missed it, Pizza Hut has announced a nationwide search for a Twitter summer intern.

Wonderful move to get PR for a summer internship. And it sounds like a very cool job.

On the other hand, it worries me a bit that Pizza Hut is relying on an intern — with all due respect to the intern — for something as important as being a public spokesperson for the brand. Twitter is still a nascent medium, perhaps nothing more than a short term fad.  But for the short term it is having an influence over other conversations.

This might also be the beginning of a new trend.  Out of work actors might begin tweeting for their favorite restaurants instead of waiting on tables.  A whole barter system of tweets for sweets could grow up.  I am thinking of getting my cat to do some tweets for me but she’s rather curl up on my freshly laundered clothes and fall asleep.

Beneath all of this is the larger question of how do companies adapt to and adopt changes in media without wasting money and without losing opportunities.   Trial and error may have a lot to teach us as we grope our way forward into the brand new world of multiplatform media with odd-ball names.

Is it a Value brand or just Cheap?

There’s a wonderful phrase in economics called the “Utility Curve”.  It’s how economists explain why you’ll pay extra to buy a diet coke at the corner deli when you could save fifty cents by walking two blocks to the Gristede’s supermarket.  The marginal utility of not walking 2 blocks is equal to the marginal utility of the closer soda.  Or some such mumbo-jumbo. 

Basically it’s a fancy term for making our irrational choices fit neatly into economic formulas.  One of my professors called it the Finagle Factor — the way to wiggle around the stuff you can’t figure out.

Well, those utility curves are on the march, in many cases downwards.  Our Utility is walking a bit further to save money.  We all want to be seen spending our dollars wisely.  And if you look at advertising, suddenly the word “Value” is cropping up everywhere.  Value brands.  Value stores.  Value segments.

I think we are all fooling ourselves into thinking value is somehow calculated in people’s minds with an equation related to quality and price.  Value means cheap. So why not just say it straight?  Cheap brands.  Cheap stores. Cheap segments In these days, being cheap is a good thing.  

The word cheap used to have a much more positive connotation.  It meant getting a great bargain.  It was a sign of being clever. There was even a best selling book called Cheaper By The Dozen back in the late 40s.  Cheaper by the Dozen

I get the feeling that the people who are really most comfortable using phrases like “Value Brands” are the advertising agency folks.  Working on a “Cheap Brand” just doesn’t have the portfolio cachet of “Luxury Brands”.  Which would you rather have on your resume — Bergdorf’s or Walmart?

On the other hand, the vast majority of people in this country really just want to know the cheapest place they can buy what they need.  Because the Utility of convenience doesn’t mean much when your job has evaporated and you have all the time in the world.

The Utility Curve has shifted.  Now it’s time to shift the language.  Cheap is in.  Cheap is cool. Cheap is smart. We are entering the era of Cheap Chic! Just ask MTV.

What is a Chaotics?

One of the wonderful things about Philip Kotler is that he never gets stuck in the past.  His openness to new ideas and new ways of thinking about marketing are remarkable.  Most of us learn one way in our 20s and stick to it for the rest of our lives.  Not Phil.  His curiosity about the world is undiminished.

Evidence of this is in his new book — co-written with John Caslione.  I love the title of this book.  “Chaotics”

 

Cover of Kotler/Caslione's new book

Cover of Kotler/Caslione's new book

The book is being published in the next couple of weeks.  Very timely, given the current flat-tire economy.  It’s a book that everyone senior manager should read through.  

It doesn’t have the answers to all of the problems companies are facing.  Instead it gives a thoughtful framework for getting to the answers that are right for your company.

Marketing our way out of the mess

From 1998 until 2006 I had the great good fortune and opportunity to travel to Venezuela quite regularly on business.  My client there was Cantv, the country’s largest telecommunications company.  

During my visits I had the opportunity to observe how the country was functioning during the on-going economic and political turmoil.

Conditions for many people were deplorable. There were torrential rains followed by mud slides that killed uncounted thousands of people.  The crime rates were rising.  In the streets of Caracas there were marching mobs of Chavez supporters.

And yet in the middle of all this crisis there were billboards for mobile phones, there were advertisements on TV for chocolate bars, cars, laundry detergent. Newspapers were filled with ads.  Radio stations had ads. Cantv itself was undergoing the country’s largest rebranding program to support their business strategy.   

Why did companies continue to market amid all this human suffering and economic and political chaos?  Why were they spending the money to create or strengthen their brands?  

Today, in America, in the face of our economic chaos, companies are pulling back hard on their marketing.  Marketing and training are two of the first areas to be cut.  And the cutting just keeps continuing.

So what is it that we know that the Venezuelans don’t?  Or, rather, what do they know that we don’t know?

Even in difficult times the companies knew that they needed to continue to market if they wanted to keep their business moving.  They intuitively knew that when the marketing stops the demand for their offerings stops.

I am confident that most companies in America will recognize the same truth that Venezuelan companies have seen.  We need to market our way out of this economic mess.

Where is the urgency?

In Richard Clarke’s book about the months leading up to 9/11 he quotes the CIA director George Tenet being so emphatic about the risks that his “hair is on fire.”  The administration remained complacent until too late.

Is marketing is going through the same sit on the sidelines and wait approach to the current economic emergency?  Where is the urgency?  

This economy is unprecedented.  As Paul Krugman says, “It’s not your father’s recession.” 

My hair is on fire.  Metaphorically, since I don’t have enough hair to have a real good bonfire. 

Now is the time for companies to prioritize and fund the initiatives that will have the greatest benefit for the company.  It must be both strategic and tactical.  It has been my experience that in times like this marketers will reach for a list of tactics.  Some may be brilliant.  Some may be duds.  But without a strategic framework it’s hard to separate them out before hand.  And that just wastes money as the time companies can least afford it.

We have developed a streamlined process to help companies find cost efficiencies that will also increase the effectiveness and flexibility of their brand marketing.  

What do companies have to lose by examining new scenarios for marketing?  The playing field has shifted.  The risk of doing nothing out weight the risks of experimenting.

Demand creation

Back in the 1960s, as the anti-war protest movement gained momentum,  there was a saying, “What if they gave a war and nobody showed up?”

I think today’s version of that saying is, “What if they gave a sale and nobody showed up?”

That pretty much describes the shopping season lately.  I cannot walk down Broadway without coming across one store after another announcing sale upon sale.  

Consumer demand is falling for just about everything.  And where the demand isn’t falling, consumers are doing more trading down to lower cost options. 

At the same time, many corporations are cutting their marketing spend.  

There is nothing wrong with making some cuts in marketing.  Many companies can probably cut their marketing spend by 10 to 20 % and increase their overall effectiveness at the same time by making some very strategic moves (more about that in another post).

However, many companies seem to be engaged in a paradox of counter-productive cutting.  They are seeing falling revenues so they cut everything possible.  Marketing is an easy target because the savings go right to the bottom line.  It’s hard to justify running advertising or launching a new brand when people in other departments are losing their jobs.  

The paradox is that brand marketing is essential for a company to create demand.  At a minimum it will slow the decline of demand.

Some companies use these conditions as a catalyst for deeper changes in their marketing.  

For instance, all the research shows that there is a growing need for better cooperation and coordination between marketing, product development, customer service, CSR, online development and so on.  At the same time, our study with Forrester shows that 78% of marketers see internal silos as the biggest barrier to integrating marketing with other parts of the customer experience.  Isn’t this the perfect opportunity to remove those silos and make everyone more efficient and effective?

In some categories as single dominant company can raise demand for that category.  But that is an unusual situation.  

But imagine if every company did all they could to raise consumer demand.  Not by spending more but by spending more effectively.  Imagine how that would contribute the economic recovery.  Alone we can influence our own destiny.  Together we can shape society.


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