Marketing in the age of frugality

In the article "The New Consumer Frugality," by Egol/Clyde/Rangan from strategy+business magazine, the authors restate and expand opinions I made in earlier posts, including Fear and the American Consumer, wherein I supposed a world where fear, uncertainty and doubt (FUD) was the primary motivation of consumers and again in this post, where I suggested that there was a new normal of a higher savings rate, less consumer spending on credit, and general 'new religion' on main street.

The authors state that according to a Booz and Company study, fewer than 20% of consumers will return to their pre-recession spending levels. (It's nice to be right.)

The authors state: "A new frugality, characterized by a strong value consciousness that dictates trade-offs in price, brand, and convenience, has become the dominant mind-set among consumers in the United States — and probably in other wealthy countries as well. Two-thirds of American shoppers are cutting coupons more frequently, buying low price over convenience, and emphasizing saving over spending. Per capita consumption expenditure has declined across demographic groups. Consumer sentiment remains weak. These trends are not going to change, no matter the pace of economic change."

Then again, given that more than half this country's GDP is consumer spending, it'd be good to be wrong in this instance.

Still, what does this New Frugality mean for marketers?

Repeating a mantra of marketers weathering each recession, the authors state that we should continue aggressive marketing in a recession - but that unlike earlier times, that the return to 'better days' will not be marked by a return to normal strategies in product, pricing, promotions or distribution. The increased emphasis on, and redefinition of, value (defined as a combination of price, brand, and convenience) will drive decisions across all consumer groups - and this, combined with the community and transparency brought about by the rise of Web 2.0 means that credibility and performance will be paramount to consumers; views of this value judgment less impacted by status positioning and clever brand advertising than by collective market experience. And while brand awareness and loyalty are proven out by the experience, the post-recession consumer will seek out distribution channels that offer the best measure of that brand combined with price and convenience.

So two main lessons of the quoted study involve pricing strategy and promotions strategy: When looking for pricing solutions, the identification and segmentation of customers is, as one might expect, paramount. Price only to maintain profitable return on the most loyal customer segment where value continues to be perceived. As I stated last December, consider pricing strategies and tiers for various channels to deliver the best value as judged by each segment using different channels.

The second lesson involves MarCom. Develop promotional strategies that articulate the convenience (in distribution), pricing tiers and brand selection at all consumer/brand touch points. As the authors remind us, this will require marketers to embrace new advertising and promotion capabilities, particularly those around new digital tools that engage consumers at all points in the buying decision and encourage desired purchasing behavior.

The New Frugality is more than a new economic normal. It is a sea change. We now find ourselves in the 'frugal age' - and it will define us as much as the digital, space, or industrial ages did before.

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• Ignore the Optimism; Retail Frugality Is Setting In (seekingalpha.com)

The Cure For What Ails Ya?

The turn-of-the-(20th) century practice of ‘snake-oil’ salesmen travelling the country to sell remedies of questionable efficacy has returned in the form of ‘Patent Marketing’, a term I’ve coined to play off ‘Patent Medicine’, the term given these early ‘medicines’.

I am seeing a lot of ads for – and an increasing number of small start-ups buying – crowd-sourced logo development, marketing plan builders, and social media starter kits touted as an inexpensive equivalent for professional guidance - and by extension, purposeful reflection and consideration on the part of business owners themselves.

I understand the appeal of these services. We are a society of the easy fix, the cheap alternative, a society where Wal-mart sets the expectation. Plus, much of marketing and advertising can appear on the surface as obvious and intuitive. (The reason for this is that generally, 'the obvious and intuitive' was created by marketers who created that perception from the complicated and obscure, but I digress.) Marketing, it then appears, is certainly not the province of supposed ‘experts’ – many of which by my own admittance, aren’t worth a tinker’s damn themselves.

Still, it is simple due diligence to find a consultant with whom you can feel confident. One that knows, or is committed to learning, your industry and your business. One that will take your lead but feels confident not to necessarily follow it. One with relevant experience that allows them to apply past experiences and ask the right questions.

The idea of selling ‘Mad Libs’ style pre-written marketing plans or picking a logo contest winner is worse than doing nothing at all: it is potentially destructive. It allows sloppy thinking, hides what might be an under-capitalization of the business, reinforces marketing as a support, and therefore, optional, function, and suggests that marketing’s end game is a document or advertisement, and not an ongoing process of communication with stakeholders.

Your business is unique. Can what you are selling be reduced to a document like an off-the-shelf lease agreement? If the communication with your customers can be reduced to being positioned like every other business that purchases your same ready-made document, then perhaps that’s all the differentiation that you can muster for your own product or service. And ultimately that’s another way these services are truly destructive, providing insufficient differentiation and discounting the real value of your product or service.

Snake oil remedies were touted as a cure for ‘what ails ya’, but were generally loaded with opiates that made the patient feel good for just long enough for the salesman to pack up his wagon and move on. If you are in business for the long haul, you’ll need a better prescription.

You don’t need marketing.

As the old saying goes, “People don’t need a quarter-inch drill bit. They need a quarter inch hole.”

“No, we don’t need marketing. We need sales.”

“No, we don’t need marketing. We need more prospects to include us in RFPs.”

“No, we don’t need marketing. We need our customers to know how to use the product better.”

“No, we don’t need marketing. We need to attract better applicants for our open positions.”

“No, we don’t need marketing. We need our employees to understand what we stand for.”

“No, we don’t need marketing. We need to sales to understand our target customer.”

“No, we don’t need marketing. We need a bigger goal.”

True enough, people don’t need marketing. They need everything marketing provides.

So in a sense, you’re right. You don’t need marketing.

You need a miracle.

But wait... NOW how much would you pay?

Today on CNBC’s Squawk Box morning show, one of the talking heads opined that the reason the stimulus package was, arguably, an unsuccessful policy (only 6% of Americans believe it was successful in creating jobs or preventing job loss) was that because it wasn’t “branded” properly, like the more ‘successful’ Cars For Clunkers campaign had been.

Political commentary aside (as there are plenty of reasons to be cynical of any government spending program), the idea that the success or failure of a public policy is effectively the result of how well branded it is seems absurd on its face. Yet as much as we may agree or disagree on matters of public policy, policy itself is effectively one of the ‘products’ of government. As such, Americans judge policy as they do any product, and therefore attach a brand message to it. The question is whether that policy’s brand is accurate or well stewarded.

Consider the State of the Union Address as simply a product pitch. As amusing as it is to equate our Congressional Leadership to housewives listening to Vince Offer go on about the ShamWow, the analogy holds.

I mentioned in a much earlier post about renowned adman Roy Spence, who once suggested the establishment of a cabinet position of Secretary of Marketing – a position that, if successful, could replace all the others.

Don’t believe it?

Maybe you are familiar with the growing group of fiscal conservative activists now shaping the dominant political parties’ messages? No? Well, perhaps you know the Tea Party Movement. Perhaps you know about the group of suburban parents whose collective core values shaped the political races in 2000? No? Well, maybe you remember the Soccer Moms. What about that politically motivated community organizer who leveraged contacts in the Chicago political machine establishment to quickly climb the political ladder? He flipped that establishment background under a convincing brand of ‘Change’ and became our current President.

So, you want to change the world? Great! Just answer me the question I ask of all my clients… what’s your branding strategy?

Top 5 Things In Marketing I’d Like To See Change In 2010

My full list of Things In Marketing I’d Like To See Change In 2010 is actually quite a bit longer than this, but I haven't an entire day to dedicate to crafting that long of a blog entry. So for now, I'll leave you with my Top 5. May we see an end to:

1. The exponential growth in Social Media 'experts'. You’re young, you’re plugged in, you’re mayor of a half-dozen Foursquare sites, and you’ve attended a keynote by Chris Brogan. This does not make you an expert. Having a Facebook page doesn’t make you an expert to anyone except your elderly great aunt. After all, I have a dog but this does not make me a veterinarian. (If you need a real SM expert, let me know. I can refer you to a great one.)
   
2. Abandoned experiments in New Media. Whether it’s a blog, a Facebook page or a Twitter feed, the Web 2.0 landscape is as littered with abandoned efforts as Mount Everest is with abandoned oxygen bottles. Honestly, know what you are getting into. Bad, but improving, efforts are laudable. Abandoned efforts just create a mess of your brand.
3. Hearing the same thing said more than twice. There is only one Seth Godin or Tom Peters. Chances are, they are not the only one who’s had the same thought, so it’s possible it’s been thought or articulated twice. But really, if you’ve read it already, rewording it doesn’t make it yours. Credit where credit’s due.
4. Marketing used as a synonym for MarCom. Marketing professionals are responsible for allowing themselves to be limited to ‘prettying up’ PowerPoint slides. There are 4 Ps in McCarthy’s model, not just one. I’d like to see more marketing departments taking the lead on more than Promotion. Marketing needs to lead in Product, Placement and Pricing as well. And it has a lot to offer in the area of People and Purpose too.
   
5. Fog over facts. There is no excuse to do anything in marketing that isn’t supporting a specific, measurable objective. If marketing professionals cannot quickly and confidently answer the question, “What is our specific objective with this initiative?” clearly and quickly if asked, then chances are it shouldn’t be done. And if no one is asking, that’s a problem in itself.

What would you like to see different in the industry in the New Year?

Is That The Best You Can Do?

A Souk in Dubai

In just the past couple of weeks, I calculate that I’ve saved roughly $400 by simply asking, “Is that the best you can do?”

It’s a standard haggler’s phrase, and I’ve grown more comfortable asking the question as time wears on. It started when I was in Dubai several years ago, when, purchasing my wife some earrings at the hotel gift shop, the clerk asked, “You’re an American, yes?” When I replied in the affirmative, he told me he was going to give me an automatic 30% discount because he understands that “Americans don’t haggle.” It was reinforced a year or so later when my dentist, realizing that I’d recently hung a shingle and therefore had decided to forego dental coverage as a cost-saving measure, quickly volunteered to take 10% off the bill. “It’s not that we necessarily mark-up for insurance, but your cash helps.” Well, I got to thinking, if there are places that voluntarily negotiate even when I don’t; well then, I should try it more often.

So, as I’ve successfully negotiated, among other things, the cost of an airsoft rifle for my son at a flea market, the number (and necessity) of expensive tests with my physician, the price of a mattress at a retail store, and successfully argued data service charges with AT&T, my family is used to my asking the question when it comes time to save a little cash.

You should try it.

But what if you also applied the question “Is that the best you can do?” to all your business encounters? What better terms, better margins, better quality, better service, or better turnaround times could you expect? And moreover, what if you applied that question to your own proposals before issuing them? How much more competitive could you be? How much happier could you make your customers?

And what if we applied the question to ourselves, perhaps as a New Year’s resolution? Commit to asking it of yourself before succumbing to every possible weakness - and the question becomes a resolution that in itself could serve to help accomplish all the others. Think about it: reaching for a cigarette? A doughnut? Sleeping in, instead of working out?

“Is that the best you can do?”

In which he foretold the future.

So, about a year ago, I posted an entry in response to a survey from Chief Executive Magazine regarding my prognostications for the year just past. I offered my learned opinion, shared it with you, and now, in the interest of full disclosure (not to mention I'm too busy and not clever enough to come up with an original end-of-year post) here's the results:

I said:

On December 31, 2009:
Dow Jones (currently at 8,932) will be at 9621 points
Oil (currently at $40.50) will be $59 per barrel
Interest Rates (the Fed Funds Rate, currently at 1.00%) will be: 1.00%

Actually, on December 28, 2009:
Dow Jones (currently at 8,932) is at 10,547 points
Oil (currently at $40.50) is at $78 per barrel
Interest Rates (the Fed Funds Rate, currently at 1.00%) is at: .50%

Prediction comments:
(I said) Uncertainty is driving the market and the economy; once some certainty arrives with new administration - for good or bad - wild swings will stabilize and the widely oversold market and general malaise will slowly lift.
What happened:
Uncertainty was driving the market and the economy; but any sliver of not-bad, or less-bad news, swung the pendulum back just as wildly as the markets moved to cover shorts and other dubious financial mechanisms. The seating of a new administration, alas, had nothing to do with it as the market didn't settle for months after the inauguration.

Confidence comments:
(I said) Business decision-makers will become comfortable de-coupling their decisions in the real world from abstractions like the Dow. But once that fog clears, the impact of government intervention on national debt and as a general signal of the new regulatory environment will be a drag on growth.
What happened:
Ooo. Seems I was on the money; particularly regarding new regulations - and predicted tax law changes. Yet something went unsaid - the new normal of a higher savings rate, less consumer spending on credit, and general 'new religion' took hold on main street.

So there you go, there's a lot more to the year past than a brief blog post, and others would question some of my inferences, but in the end I was more pessimistic than necessary - or perhaps just more realistic - about the real state of the 'main street' economy. But the reality is far more immediate than Wall Street prognostications... to paraphrase Ronald Reagan, "Are you better off today than you were a year ago?"

Happy New Decade.

The price is falling! The price is falling!

Just a note for the editors of marketing pubs out there: "how to market in a sagging economy" articles have been done. To death. Okay, we get it. Preaching to the choir here. Move on.

Its a valid subject, but most of these articles are promotion-oriented. What hasn't been discussed as much is the role of price strategy in a sagging economy, and generally. This especially occurs to me today because of a current client project, where pricing strategy is the current key gating concern prior to product launch.

Obvious Secret #1: Pricing strategy, especially in a weak economic environment, has little to do with, well, price.

Even in the best of times, great products, great promotions, clever ads and a loyal base can be undone by a misguided or misapplied pricing strategy. This is because left to their own devices, finance and sales executives will see sagging demand as a numbers issue and not a brand issue. Plus, it is expedient to react instinctively with a red pen (cutting prices) when profits shrink and sales falter.

Bad plan.

Unstudied discounts are not as easily undone tomorrow as they are done today. Price cuts are a short term solution to a larger, longer term issue; that is, the product hasn't established the brand position to maintain margin in a discount environment. Understand that price cuts are welcomed by consumers but always create subtle dissonance - an inability on the part of the consumer to properly relate price to value, so when the market returns upward, as it always does, this results in a nearly Sisyphean effort to re-establish a brand position held prior to the discount. Pricing is not a cost issue - it is a value issue.

Understand the way customers make buying decisions and become far more visible, and more efficient, in delivering on these criteria; this will always be more effective in building recession-proof brands. This is because pricing is a long-term strategy, not a short term tool. When the economy sours, there are other levers to pull - operating costs, added value, extended hours, free upgrades. Think about supplier pricing and work new billing models to manage cash flow. Invest in money-saving IT investments such as Unified Communications and collaboration products. Reevaluate your market position and consider new marketing initiatives to go after markets competitors might have recently abandoned. Fire some costly customers. Adjust invoicing offers and procedures to improve cash flow and reduce defaults. These tools and others are manipulated in good times and bad with far greater flexibility than price, which can only move in two directions: up, or down.

Its easy to be Chicken Little and think in blocks of fiscal-quarter-bound panic over a current fiscal situation, but creating and applying the right principles for pricing allows for decisions that over time not only weather current storms, but position a company for consistent growth over the long haul.

Using Context in Creative - Part Two

As with my last post on the subject, here are excellent examples of understanding and leveraging the nature of the media when developing creative. Courtesy of Alltop.

On worry and inaction: The sequel

In this case, the sequel is far better than the original: Leo Babuta, of Zen Habits coincidentally posted this today: The Little Rules Of Action. Anyone who has ever worked for or with me will recognize #3. ("Progress over perfection, there's always version 2.")

On worry and inaction

Jeremy Kloubec, a former colleague of mine now with consulting organization Infosys, writes recently about the dire unrealized predictions facing the VC community just a year ago. He details the shifts in the industry and partially credits the architects of the still-nascent recovery programs.

His comments reminded me of something my mother often said: "95% of things you worry about never come to pass."

Of course, its that 5% that keep us up at night.

As it pertains to our business life, if, as Peter Drucker is credited with stating, "the best way to predict the future is to create it", then 100% of our angst can be squeezed to 5% insignificance by the simple act of doing. Dire warnings and worry generally come with the same highly unlikely assumption: "If things do not change, ..." That peculiar assumption ignores the fact that humans - particularly capitalist humans - are not given to inaction. Even our base 'fight or flight' instinct indicates an action of one type or another. Change is inevitable.

And so it is with this crisis. We're not out of it, not by a long shot, and our myriad collective and individual actions will differ in effectiveness and certainly create new crises even as they create new solutions. But our reactions to events and the actions we take are all we've got and will continue to alter the linear path.

If history is any guide, that's more than enough.

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• Drucker at 100: What Will You Do Differently on Monday? (blogs.harvardbusiness.org)

All Work and No Play

Image via Wikipedia

Tonight, someone owes me an email and isn't delivering. And I don't really mind, because as you can tell by the dates of these posts, its been a month since I had the time to muse over a post so I'll enjoy the rare time. I've been working awfully hard lately, on an interesting but demanding project. I guess it doesn't help that I'm also battling some sort of weird respitory thing and fighting insomnia.

My candle burneth on both ends.

So that brings me to offer this public service announcement for those of you who are weary of the world of work. Yes, I know that we are glad to have a job and feel it unsympathetic to those who wish they had a job to complain about, but as a Forbes ad asked years ago: "Which is worse, to be laid off on Friday or to pick up the slack on Monday?" There's not much to be said about either.

Take a moment and review these websites... and remember to frown into the screen as you peruse these helpful sites. No, not because you'll be frustrated or angry, quite the opposite. Frown so others think you are researching something critical. Because, after all, you will be.

http://my-bad-habits.blogspot.com/ Ian Newby-Clark is a professor of psychology who studies our habits and offers interesting insights as to why we do what we do and why we don't really need to.

http://www.revrun.com/ Philospohy and wisdom from an innovator in the hip-hop movement. (Why do you look so surprised? Because Run has something to say or because I know who he is?)

http://lifehacker.com/ Simplicity for the geek in all of us.

http://www.fourhourworkweek.com/blog/ Author Tim Ferriss is a divisive character, but he's always good for a little wisdom or interesting story here and there.

http://zenhabits.net/ Leo Babauta says it best on his site: "Zen Habits is about finding simplicity in the daily chaos of our lives."

Do you have other insights or websites on self-improvement, life balance, or simplicity? I'd love to hear about them!