SOTB: Pandemics, meltdowns and other catastrophes edition

A week free of Twitter storms. Star Trek stayed at the top of its trending topics all week and there no Motrin/KFC/Domino's-like incidents to report. But there will be no rest. Let's use this quiet Twitter week to talk about real catastrophic events, the fear they generate and the consequences for marketing. First the financial crisis, now a flu pandemic.

1) The Age of Pandemics: Larry Brilliant
"In 1967, the country's surgeon general, William Stewart, famously said, 'The time has come to close the book on infectious diseases. We have basically wiped out infection in the United States.'" How wrong he turned out to be. Instead, Larry Brilliant argues, we are entering a new age of pandemics and it's only a matter of time before a flu or some other disease, natural or man-made, wipes a lot of us out. Maybe it won't be this swine flu but something's coming. So, even when we finally emerge from this recession, there's plenty more to fear around the corner.

2) Brand Building in the Face of Fear: Branding Strategy Insider
"What do guns, burglar alarms and condoms have in common? Their sales have all boomed in 2009." But why? Martin Lindstrom's explanation is that, in the atmosphere of fear started by the financial crisis and now fanned by the media, we have reverted back to our more basic needs and instincts. He believes that you can't build brands in a recession unless you are able to manage fear. That's what he thinks was so great about Hyundai's "Buy any new Hyundai, and if in the next year you lose your income, we'll let you return it" offer. Sales of Hyundai shot up while the deeply discounted U.S. cars continued to fall. Hyundai addressed people's fear for their job while American car manufacturers thought that price alone would be the answer.

3) Why Anxiety Matters: JWT Anxiety Index
JWT has created a site specifically designed to help brands navigate consumer anxiety. It includes a monthly anxiety index, a monthly report of the anxiety of different nations (Japan, the most; Brazil, the least). As they say: "Anxious consumers look for brands that can give them a sense of control over their lives, whether that means staying within their budget at the supermarket or finding cheap alternatives to going out. Navigating consumer anxieties is not about exploiting fear. It’s about finding better ways to connect with consumers looking for trust, credibility and answers."

4) ‘What Happens Here Stays Here’ is here to stay: JWT Anxiety Index
One of JWT AI's recent posts shows that knee-jerk price cuts to deal with the recession sometimes backfire. Las Vegas' successful "What Happens Here Stays Here” theme was dropped last year for a new message that focused on affordability. The new message bombed because, it turns out, people still like the idea of Las Vegas as a place to indulge. The old theme has now been revived with just a wink to the recession:



5) Angry Ads Seek to Channel Consumer Outrage: New York Times
How are other marketers reacting to the fear dynamic? According to the NYT: "The mad men of Madison Avenue are really mad these days, creating a spate of angry advertising campaigns that seek to channel the outrage, frustration and fear felt by consumers hit hard by what some are calling the Great Recession." From Harley-Davidson that deplores “the stink of greed and billion-dollar bankruptcies” to (even) Post Shredded Wheat cereal, which declares in new ads that “Progress is overrated,” companies are going for brutal honesty responding to the climate of fear and worry.

6) The Upside of Fear: Pamela Slim
Not everyone thinks that fear is such a bad thing. Here's Pamela Slim recorded at an Ignite Phoenix event. Rather than "power it out" or "let it wash over you," Pamela believes that we can learn a lot from fear. The storm around us gives us the chance to grow in new and different ways.



(Thanks to Tom Asaker for sharing the tip about how to resize these videos so they don't spill into my right-hand column. If you're having the same problem, let me know and I'll pass the tip along. )

Jennifer Senior provides a similar perspective in her recent Recession Culture article in New York Magazine. She find that the reduced focus on money in NYC has its plus side perhaps making the city a touch more neighborly and civic-minded.

That's it! See you here on the blog or on Twitter (@martinjbishop) for more stories from the world of brand strategy.

Saver's remorse: Another reason to start spending

Watch out those of you who are ignoring our President's pleas and (voluntarily) cutting back on spending. You may feel pretty good about yourself right now but there's such a thing as saver's remorse to worry about.

John Tierney, in a The New York Times article called: "Oversaving, a Burden for Our Times" says saver's remorse is the regret about not buying things, the mirror opposite of buyer's remorse. Says Dr.Kivetz from Columbia University who has been researching this area: "People feel guilty about hedonism right afterwards, but as time passes the guilt dissipates. At some point there's a reversal, and what builds up is this wistful feeling of missing out on life's pleasures."

Some people so habitually prepare for the future rather than enjoy the present that they have earned a label: "Hyperopic" (the opposite of myopic). The good news is that this is a manageable condition and we marketers can help. Kivetz has shown that people will change their shopping behavior with a little prompting. When he asked shoppers to imagine how they would feel about their purchases in the distant future rather than the following week, they ended up spending more money and bought more indulgences like jewelry. (Without this prompting, they bought practical stuff like socks.) He had managed to shift the shoppers mindset and got them thinking more about saver's remorse than buyer's remorse.

In another experiment, and tapping into the fact that hyperopically-minded people often recognize that they have a problem, Kivetz explored ways to help them "precommit to indulgence." What he found is that if offered the choice between cash and "hedonic luxuries" like wine or vacations, the majority chose the luxuries even when cash was the better deal. One of the participants is quoted as saying: "If I took the cash , it would end up going into the rent." Whereas the offer of luxuries was forced pampering.

Has there been any marketing recently that's tapped into these behaviors? Is such an approach possible at the moment or do we need to wait a bit before we start imagining a brighter, more indulgent future?

48 hour rain guarantee

Photo: me

Operating a car wash can't be easy in a recession. As people think about ways to cut back on expenses, going to the car wash one less time per year/ month/ week is likely to be on the list. Probably higher than cutting back on the morning visit to the coffee shop.

Some car wash businesses are getting creative. One of the ones near us has started offering rain guarantees. Makes sense. It could stop some people from procrastinating and, even if it does rain and, even if they do come back for a do-over, it doesn't cost too much to honor the guarantee. (However, I took this picture yesterday when it was already raining. Does that mean that I could have driven round and round, wash after wash?) It's a bit more surprising to see the same offer from CleanTown USA in Pittsburgh (rain forecast: 6 out of 7 days starting this weekend).

Meanwhile, the Metro Car Wash in Tucson, AZ (which also offers a rain guarantee but where there's no rain in the forecast) is offering a $5.99 Economy Car Wash, illustrating the deal with a depression-era photograph showing unemployed people standing in line for food. Not too subtle but, on the other hand, not much more than a Venti latte.

Don't make too much hay while the recession rages

Photo: The_WB (Flickr)

Not everyone is having a lousy year. McDonalds is doing well. So is Wal-Mart.

Abu Mallick posting on the JWT Anxiety Index blog asks an interesting question: "If bad times equal good times, what happens when the good times return?" How will those companies like McDonalds that are doing well now fare when things get better?

Maybe this recession will change lifestyle habits permanently: "thus fostering a permanent love for affordable brands among mainstream consumers" or perhaps the current love of affordable things is just a: "short-term coping strategy." Brands that are doing well because of the recession have to be careful not to become too closely associated with it. Otherwise, when the good times eventually roll, they'll be abandoned.

"Thank God we don't have to go there anymore," is the consumer thought they need to avoid.

Can Saturn be saved?

The very first Saturn rolls off the assembly line in Spring Hill, Tenn: Saturn on Flickr

Amidst all the doom and gloom coming out of Detroit, perhaps a spark of hope?

When I first heard the news that Saturn dealers were going to try and save the brand, I was only half-listening and I just assumed that they were going to try and do some buy out or try and find private equity (a la MG Rover) . ºDoomed to failureº, I thought.

But now, as I read this report, I think that well maybe this plan might work. The deal, still being negotiated, would spin off Saturn's distribution network and open it up to products from other automakers.

"The goal - from a product perspective - would be to find future vehicles that match the Saturn brand: fuel-efficient, safe, reliable and affordable," Jill Lajdziak, general manager of Saturn, said in the memo sent to the dealers.

Now, on the one hand, we're not exactly short of dealerships right now and everyday there's news of dealers closing up shop. On the other hand, it's the dealership experience that has always been the true differentiator for Saturn ever since it opened up back in 1990 with its "no hassle" flat price promise. So to create a new business that focuses on the dealerships and allows them to source cars from different manufacturers makes a lot of sense. It plays to the real strength of the brand's equity.

It certainly seems a lot more promising than Saab's approach. It has just filed for creditor protection and will be leaning on the government to protect the jobs of its workers. Here GM's failure to invest in the brand is much more damaging because Saab is all about performance and having a technological edge, something that can't easily or quickly be restored.

Mad as hell and lashing out in all directions

Photo: Archie McPhee Seattle (Flickr)

In "AAAGH!", Y&R's Simon Silvester analyzes the likely consumer impact of the recession and describes a 5-stage process that investors will go through as they grieve for their lost money.

Recent news headlines suggest we have collectively started to move from #1: Denial into #2: Anger. "Public flogging for bailed-out marketers" headlines Advertising Age as it talks about public criticism of the marketing activities of GM, Citi, Wells Fargo and Bank of America. With some politicians only too happy to lead the charge and people on the look out for someone to blame, this is an extremely tough environment for marketers.

Wells Fargo got caught up in all this last week as it was forced to cancel what had been dubbed "employee junkets" to Las Vegas. Rather than accept this and move on, the company decided over the weekend to go on the offensive, taking out a full-page ad in the New York Times to call the media stories about this event misleading: "These one-sided stories lead you to believe every employee recognition event is a junket, a boondoggle, a waste, or that it’s for highly-paid executives. Nonsense!”

Ever tried having a logical and rational argument with an angry person? It doesn't work so, whatever the merits of its case, Wells Fargo is only likely to generate even more anger by this approach. One comment on the news story starts: "rediculous (sic)..... they should not be going on these recognition events and we the tax paying citizens have to foot the bill, send them flowers, that is enough..."etc

So what should marketers, especially those working for companies that have taken some public assistance, be doing? It's going to be tough for a while but ideas worth considering: Focus on value, reduce complexity, keep on innovating and try and figure out a path towards restoring trust. Eventually, customers will work their way all the way to #5: Acceptance and then you need to be ready.

Meanwhile, perhaps we marketers need some reassurance that what we are doing is not, as it has been described, manipulative, deceptive and intrusive but is, in fact, an engine of value creation with noble intentions. Or, as Peter Drucker put it: “Because its purpose is to create a customer, the business enterprise has two—and only these two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.”

Just in the nick of time, then, comes Harvard Business School professor John Quelch with an article called "In Praise of Marketing." He makes a strong case for marketing, builds on Drucker's thoughts and considers marketing's positive influence on our quality of life. Worth printing out and keeping close by to read when needed and as necessary.

The cult of accountability (#6 in the Death by tools and metrics series)

Photo: jecate (Flickr)

Although there are some things that each financial crisis has in common (e.g. a bubble in a commodity that bursts spreading problems across the whole economy), each crisis also has its new elements.

Jerry Muller, writing in The American, says that what's new about this particular crisis is the role of "opacity" and "pseudo-objectivity." By opacity, he's referring to the complexity of financial instruments designed to reduce risk but which, instead: "created a fog so thick that even its captains could not navigate it."

By pseudo-objectivity, he means the search for standardized measures of achievement as a way to supervise and coordinate activity across large and disparate organizations. His thoughts on this fit with the themes I've explored in earlier Death By Tools and Metrics posts (see below).

Here's how he starts his critique on this "cult of accountability": "Its implicit premises were these: that information which is numerically measurable is the only sort of knowledge necessary; that numerical data can substitute for other forms of inquiry; and that numerical acumen can substitute for practical knowledge about the underlying assets and services."

He continues: "Attaching a number creates a belief that the information is more solid than is actually the case..... In each case, it is a response to what (to recoin a phrase) one might call alienation from the means of production, the attempt to substitute abstract and quantitative knowledge for concrete and qualitative knowledge."

He gives, as an example, pay for performance compensation. This, he says, creates tremendous incentives for executives and traders: "to devote their creative energies to gaming the metrics, i.e. into coming up with schemes that purported to demonstrate productivity or profit by massaging the data, or by underinvesting in maintenance and human capital formation to boost quarterly earnings or their equivalents."

As I said in an earlier post in this series, there is an inherent "risk of relying and focusing on things that can be measured rather than things that matter." And focusing on the wrong signals in a thick fog, well that's a recipe for disaster.

Earlier posts in the Death by Tools and Metrics series:
1) Discounted cash flow
2) The P&L
3) Same store sales
4) ROI
5) Treating the numbers

CMOs: Getting rid of brands won't necessarily make your life any easier

Photo: cobalt123 (Flickr)

In these troubled times, as companies see their sales slump and dark days ahead, marketers are battening down the hatches, eliminating non-core businesses and looking for ways to cuts costs and save money.

For CMOs such times, hard to deal with as they are, nevertheless provide an opportunity to push for changes that otherwise might be impossible. For those that have been frustrated trying to manage a complex portfolio of brands and products in a organization with independent-minded business units, this may seem like the perfect time to strike. What better chance to kill these two efficiency-draining birds with one stone? How much simpler, organized and controllable life would be with just one brand, run from one place, run by one person? If you are a CMO tantalized by this opportunity, hold on there just one minute. Here are a couple of things to bear in mind.

1) Fewer brands = less loyalty and less brand equity: Neil Morgan and Lopo Rego published the results of a 10-year study on brand portfolio strategy in the January 2009 edition of the Journal of Marketing. Their examination of 72 Fortune 500 companies concluded that brand portfolio strategy has a significant impact on a company's financial and marketing performance. The study shows that, while a small portfolio of brands has important advantages over a large portfolio (in terms of both marketing spend efficiency and market share), these advantages come at the expense of customer loyalty, brand equity and consistent cash flows. Efficiency has its price.

2) There are better ways to solve organizational challenges: David Aaker was interviewed by strategy+business about his new book: "Spanning Silos: The new CMO imperative." In the interview, Aaker makes the case that siloed marketing, where individual business units do their own thing, is inefficient and incompatible with an era of globalization. But he also points out that breaking the silo mentality can be a big challenge especially in companies that have developed a strong, decentralized culture, a distrust of centralized marketing and have incentive schemes that reward silo behavior.

As Aaker points out, typically an aggressive move to take authority away from silo managers is a recipe for failure. But in these economic conditions, that direct approach may have a better chance of success for the brave of heart. Otherwise, he recommends that CMOs find less threatening ways to boost communication and cooperation.

What I think is certainly not the right approach is to use brand architecture to try and solve such intractable organizational issues. Given that reducing the number of brands generally leads to a more centralized and standardized marketing system, it's tempting to go this route just to break down silos and get better control of marketing activity. This might work from an internal, organizational perspective but it's also likely to lead to sub-optimum brand strategies that make serving customers needs that much more difficult.

No easy answers, I'm afraid.

How long will the nation shoppers resolve to stop spending?

Photo: chrisphoto

We're two weeks into the New Year. Still feeling good and strong about those New Year resolutions? Sliding on anything yet? Or still confident that, this time, you're really going to make it and stop/reduce/cut out whatever long-held bad habit you've chosen to tackle?

Lee Scott, the outgoing CEO of Wal-Mart, thinks that the recession may have caused a "fundamental change" in our shopping habits. Speaking at the National Retail Federation's (NRF) convention of retailers and suppliers in New York, Scott cited a recent meeting with young shoppers. They told him they aren't eating out or going to the movies any more. "Everyone has given up something and said how good they felt about it," he said.

If over-consumption is the bad habit that Americans have been indulging in, Scott sides with those who believe that the recession will give us the resolve to change. I don't agree. I think that our resolve will fade away and we'll go back to shopping a go-go just as soon as the economy lets us. Or perhaps a couple of weeks afterwards.

As I mentioned in my weekend post, we've been here before. Back in the 70s, in a previous recession, Jimmy Carter said: "We’ve discovered that owning things and consuming things does not satisfy our longing for meaning." He was wrong. Do we really think things will be different this time after the fun of frugality wears off?

Is brand equity elastic?

Jonathan Salem Baskin had an interesting post over the holidays titled: Holidays 2008: Price Cuts Eroded Value. I didn't buy the main argument which was (and I hope this is fair) that consumers are entering a new age of enlightenment where they will no longer be influenced by branding trickery.

But this quote got me thinking about brand equity elasticity:

"When Chanel kicked-off the October with an 8% or more price cut, it didn't offer more "value" to consumers as much as remove the "luxury tax" it normally charged for its products. Being charged less is not the same as getting more.

Does the premium that consumers are prepared to pay for brands vary depending on market conditions? Now that we're in a recession, will premium or luxury brands have to reduce prices not just because people have less money but also because the amount extra they are prepared for a brand name is also less? What Jonathan describes as a "luxury tax" might also be called a brand premium surcharge.

As with many of my posts, this one might be completely off-base so please set me straight if necessary.

Chopping prices without killing the brand

It's all very well for people to say that brands should not cut prices to prop up volume. But these are recessionary times. In Economics language, the demand curve has shifted and the law says prices must fall or quantity will fall even further.

Some may try and ride out the storm but most will take a hard look at their pricing strategy and come up with options, hopefully trying to figure out which tactic will help sales without hurting the brand. Here are some of the pricing strategies I've seen or heard about recently. Let's see if we agree about their brand impact:

1) Costco TV bundled pricing: Ah! the venerable Buy One Get One deal. Favorite of sales people everywhere because it "moves boxes." Costco has come up with an inventory-clearing variation of the theme by "bundling" TVs together and selling them for one low price: Two Sharp 42"LCD HDTVs for $1,499.99! "One for the living room, one for the bedroom." Best Buy is also using bundling pricing at the moment but its strategy is a little more sophisticated--they are bundling different things together like TV and an Xbox or a TV and free installation.

Brand Equity Verdict: This promotion is great for Costco, not so good for Sharp. A 50% off deal would have been worse so perhaps Sharp should be relieved. Best Buy's approach is much kinder to the manufacturer's brand equity.

2) Starbuck's 20% off sale: Starbucks broke one of its cardinal rules with this promotion: "We will not discount our whole bean coffee." For a limited time in December, Starbucks had 20% off merchandise as well as some blends of whole bean coffee.

Brand Equity Verdict: A promotion that lacked imagination and was poorly executed, at least in the store I visited. Just some unenthusiastic hand-written notes on the merchandise and a message on the chalk board. The short time period helped but overall not helpful for the troubled Starbucks brand. The company's efforts to boost the attractiveness of its loyalty card seem much more promising.

3) The Black Friday sales: Not just the early opening feeding frenzy sales that had such unfortunate consequences at the Walmart in New York but the general trend to start sales earlier and earlier. Sales that were once designed to clear out inventories after the holidays are now used to draw in customers at the height of the season.

Brand Equity Verdict: Consumers have learned the game and are now well-trained to avoid paying full price for anything. If brand equity is measured by the premium that brands can charge, then these sales have done an effective job in wiping it out. Still, now that almost all retailers have played this card, it's only the brave few that won't join in. Abercrombie & Fitch's CEO Michael Jeffries is one of those few. He told analysts during an earnings call, “We will use markdowns only to clear through seasonal product in a brand-positive way…It is clear to us that the short-term relief provided by the use of promotions is more than offset by the damage inflicted on the brand in the long-term.”

4) Bailey's value-added holiday pack: Baileys (and a host of other brands) took center stage at BevMo! in the holiday period with packs featuring free glasses. Although these packs were designed for gift buyers, the same principle can be applied to add value as an alternative to discounting. In my Coffee-mate days, we sold our fair share of bonus packs or jars shrink-wrapped together as a way to boost sales without cutting prices.

Brand Equity Verdict: Adding value rather than cutting price is a preferred approach but watch out. Programs like these can be logistical nightmares. Not just dealing with the new codes, manufacturing headaches and new shipping arrangements etc but, most difficult of all, forecasting accurately. Produce too few and suffer the wrath of unsupplied retailers. Produce too many and wait for ship-backs and/or clearance bins (which are real brand killers).

Any other/better examples?

Other people's thoughts on price discounting and pricing strategies:
1) Can your brand afford to discount? Paul Williams
2) Price Reductions Threaten Brands: Jack Trout
3) How to Think About Pricing Strategies in a Downturn: Nick Wreden
4) The Illogic of Sales: Jonathan Salem Baskin
5) Frequent Price Promotions Threaten Quality Brands: ScienceDaily
6) more power to ya, a&f: Denise Lee Yohn
7) Segment Customers and Price Accordingly in a Downturn: Dana VanDen Heuvel

Golf and Soap stars suffer with Detroit

First, Tiger Woods and GM's Buick division ended their partnership one year early in a "mutual and amicable separation."

Then Days of our Lives announced the departure of Deidre Hall and Drake Hogestyn (They were the stars.). And now even Susan Lucci herself has been asked to take a pay cut.

The troubles in Detroit are starting to have far reaching consequences. So far, GM is still planning on giving the Super Bowl MVP a Cadillac. But, if things get any worse, perhaps it'll be a Chevrolet Vega instead.

What a waste, what a waste

(Ian Dury introduced by Peter Cook as the "Lionel Bart of the 70s")

I came across two different, astonishing examples of waste yesterday:

1) Food and water waste: Did you know that 50% of food that's grown and almost 50% of agricultural water is wasted? Maura Mitchell says in her newsletter: InformAction that's "stunning, but true." Waste occurs at every step in the food chain. As she describes: "In developing countries, 15-35% of food goes bad in the field, and another 10-15% is lost during processing and transportation. In the US, much less waste occurs on farms, but more occurs at retail, restaurants, and homes." That means we produce enough food and water to take care of everyone on the planet but there's so much waste from food to fork that we fall short. "Forward thinkers," Maura writes "are focused on ways to better use what we already have."

2) Marketing waste: According to a study by the Association of National Advertisers, 64% of CMOs and brand managers say their brands do not influence decisions made at their companies. Denise Lee Yohn (quite rightly) says on her blog: "What's up with that?" She goes on to say: "I’m not sure what to think of the study results — do they mean that most companies are pouring millions of dollars into marketing and advertising without really basing their business on the values and attributes they’re communicating?" David Ogilvy famously said: "Half of my advertising is wasted, and the trouble is, I don't know which half." Well, this study seems to identify a critical source of waste and, just like the food chain, suggests that there are ways to better use what's already available. In this case, companies should take advantage of brands to guide and power their business.

Ian Dury may not have have minded back in the 70s. But, at times like these, we should.