Lairig Marketing

The Best Mutual Fund Customer Newsletter - Baron Funds

There was little opportunity to escape the carnage this year. Investors have nearly $10 trillion in U.S. mutual funds, which own about a quarter of the shares of U.S. companies. With rare exception, investors have significantly less money on account now than at the beginning of the year.

You would expect the newsletters we receive from our fund managers to go into some detail about what’s gone wrong and what plans they have to keep our remaining money safe…and maybe even how they intend to earn some of it back.

According to a recent item on Yahoo News, you would be wrong.

Most funds are acting as if the events of 2007/2008 are the normal ups and downs of the market. The article notes that no funds have gone negative on the financial services companies that got us into this mess - no bad write-ups in their customer newsletters and certainly no use of voting power to introduce needed corporate-governance reforms.

I receive newsletters from six fund companies. Over the past year, five of them have done nothing more than advise “stay the course,” and upsell and cross-sell as if I had the desire to throw good money after bad.

But the sixth newsletter has forever marched to its own beat. Baron Funds has only seven mutual funds. Yet each quarter I get ten times the information and analysis and reassurance than from the other five combined.

Baron’s newsletter isn’t written by professional copywriters nor outsourced nor delivered on glossy paper. It is written by Ron Baron and his fund managers. It goes into detail about the companies in each fund - how it makes money, why Baron has invested, and the medium to long-term outlook.

Stories, history, cornball jokes, and completely made up rules of punctuation, grammar and syntax. Therein lies its beauty. You feel like a part of the family.

If you want to know what Ron Baron thinks about what’s gone wrong this year, you can read it yourself. Unlike other fund companies who have dodged it, Baron pre-empted his third-quarter newsletter with the transcript of his speech at Baron’s annual investors conference. It is available at baronfunds.com. You don’t even have to be a customer to get access to it.

Sounds like a throwback to a distant time, no? Sometimes that’s the best kind of marketing there is.

Dear CMOs - Turn In Your Stinkin’ Badges

Well, another year has passed. Another year where pundits said CMOs will prove they have what it takes to sit at the big corporate table. That they would show us all they knew how to advance their brands, create demand effectively, work collaboratively with sales to generate profitable revenue, and leverage cutting-edge technology to prove Marketing adds value to the business.

And, now at the close of 2008, we can say another year of opportunity has passed CMOs by.

Exhibit A. The latest CMO Council survey of 650 heads of Marketing across the globe. I only have access to the abstracted findings, and I am glad for that. Who would want to see the detail behind things like this:

• Only 46% said they have good insights into retention rates, customer profitability and lifetime value
• 60% said introducing better segmentation, profiling and targeting were the top ways they are trying to better engage core audiences
• Almost 50% said they need to add or improve database marketing systems

See the pattern here? You guys are afraid of data. Unable to invest the time to partner with the CIO and build the right performance tracking systems. Unwilling to make a decision by saying “Rather than pull something out of my ass again, let me have a look at the facts and get back to you.”

No data = no measurement = no clue as to what is working and what isn’t.

And then there was this gem:

"Making communications more personal and relevant, as well as more targeted and timely, was among the top strategies for realizing greater revenue and profitability from existing customers."

That is you job description, something you should be doing every minute of every day.

This CMO study was called, oddly enough, “Routes to Revenue.”

“Groundhog Day” is more like it.

Demand Trumps Supply. Still.

On the MarketingProfs experts forum recently, someone submitted a request for advice: I’m going to “launch a new online video guide/portal website worldwide & I'm looking for a tagline/slogan/website name.”

[Aside: The number of “slashes” in a sentence is inversely proportional to the strength of the idea.]

Later in the post, the requester says, “ive noticed that theres quite a few websites online that include online video guide or online video portal [sic, all of it]…”

It might seem like I’m picking on this guy, but this pretty much passes for marketing strategy nowadays. As an example - we don’t need any more health-related websites, but that didn’t stop the recent launch of “BeWell,” whose point of differentiation will apparently be its “high-profile” doctors. Ummm, does Dr. Koop ring a bell?

Here’s how most marketing strategies seem to develop in today’s world:

• See market.
• Enter market.
• Differentiate using “catchy name.”
• Wonder why business not succeeding.

Instead, the first few steps should go like this:

• See market.
• Conduct customer research.
• Conduct competitive research.
• Establish differentiation by delivering unique value.
• If prior point not feasible, go back to step 1.

We are overrun with too many video portals, health portals, blogs, social networks, even Twitter copycats. I call it the pedicab syndrome. Walk into Central Park any warm summer’s evening, and you’ll see a line up of pedicabs like so many mothballed aircraft in the Mojave. The drivers practically tackle unsuspecting tourists trying to get them to go for a ride.

I used to call it the magazine syndrome, where we have always had about 25% more journals than we needed. But the current economy is taking care of that one, in spades.

Supply and demand is a law, like gravity. You can’t beat it, not even with a “catchy name.”

Experiential Marketing - That Old Black Magic

What’s old is new again, as some marketers rekindle that personal feel with customers. Offline. Real world. Face to face.

I know, how early 90s it all is, but picture yourself inside any of these stories:

1. In early November, BSH Home Appliances opened a training center in Scottsdale that the company says represents a shift in its marketing strategy into a year-round experiential focus. The BSH Gallery immerses builders, designers, and architects with fully operational appliances in working kitchens and laundry rooms featuring culinary sessions and product demonstrations. Each brand - Thermador, Siemens, Gaggenau and Bosch - has its own tailored experience space.

2. Just after Thanksgiving, Jordan’s Furniture of Reading, Massachusetts got together to build a special space inside a Jordan’s store resembling a home setting, where consumers can test out FiOS Internet and FiOS TV projected on a 192-inch flat screen TV.

3. As a takeoff on its Brand Saver coupon program, P&G launched some pop-up stores on Black Friday to showcase certain hair care and household brands where visitors can experience things such as a CoverGirl makeover, a Clairol Virtual Hair Color consultation, an Olay skin consultation, and demonstrations of Tide and Dawn 2X.

Again, nothing new, but it‘s nice to see marketers stick to the fundamentals and get a 1+1=3 or 4 dynamic.

• Don’t do it alone - partner with other brands and/or service providers
• Target unique value - the relevance of the experience for the user
• Communicate it - here is the Jordan/Verizon announcement as an example
• Layer the excitement - sustain it with events and complementary programs (such as P&G’s ongoing couponing program)

How do I know experiential marketing is a good thing? I only need this quote from my cabbie, er, I mean Bob Passikoff from 2003 about a related strategy for Viking grills:
“The issue is creating loyalty to a brand, and I don't know that giving consumers the ability to road-test something like a range or a dishwasher makes such a large contribution in terms of loyalty…” Correct. You don’t know.

Stick with Ol’ Blue Eyes, who told you what aim experiential marketing should have, from That Old Black Magic…“the same old tingle that I feel inside.”

Reading The Black Friday Tea Leaves

It’s not much of a holiday season, this year. You can see in the accompanying pic what this turkey thinks of it (insert your own nasty caption).

Here’s what you are bound to see in the news/marketing media starting next Monday:

• Reporting of Black Friday’s shopping data
• (Over)analysis of same
• A lull (back to Microsoft, Twitter, Facebook and anything Google for a couple weeks)
• Reporting of deep discounts leading up to final shopping days
• Numerous johnny-come-lately quotes like “Looks like we are headed for a recession.”

Loyal Lairig Marketing readers (LLMRs), however, will look past all this falderal and thoroughly evaluate the Black Friday data and much, much more. They are going to be watching for early warning signs, to ensure their 2009 turnaround plans are teed up properly.

Black Friday Data
What others will focus on: online and offline revenues.

What LLMRs will focus on: store traffic volumes, credit versus cash purchases, sales trends by category, internet traffic and top-ranked search keywords; all of these data points relative to last year.

Economic Data
What others will focus on: government-agency data releases.

What LLMRs will focus on: housing data for November; they will want to see where things are headed now that Treasury might throw some rope to the housing industry, now that the decline in home sales prices is slowing sequentially, and now that the U.S. has more new households being formed than new houses in inventory.

Industry Data
What others will focus on: stocks or industry sectors related to their individual stock portfolios.

What LLMRs will focus on: statistics from the semiconductor industry, and end-of-quarter financial guidance from B2B companies; for the latter, focus on revenues rather than earnings since, for marketers, recessions are about sales, not profits.

The level of link-baiting headlines, misguided analyses, and bad advice from the mainstream media and the Interwebs and the blahggers will be unprecedented this season. So keep the mixers fresh, the ice bucket stocked, and the bottle openers close at hand.

No wonder alcohol never suffers a recession.

How Would You Save Sprint?

Strange to think a company with 50-million-plus customers and a lock on the #3 position in an industry needs saving, but wireless carrier Sprint is unique. Whether through bad luck or design, it is unable to build any momentum - every step forward seems to be paired with at least one (if not more) backward. For each month this continues, Sprint increases its risk of being hunted from below.

The Nextel merger produced a near-bottomless pit of pricing and customer care issues. Pivot, Clearwire, iPCS, iDEN…the list of distractions seems endless. Each quarterly report yields more bad news than the one before. In 2008’s third quarter, Sprint lost another million wireless consumers, putting it down nearly 10% from last year.

Device & Other Partnerships
The cellular industry is confusing to a sizable portion of consumers who don’t really know (or care?) about the differences between Motorola and Verizon, for example. The hype over iPhones and BlackBerries and Androids makes it ever more difficult for Sprint to grab mindshare. Who is going to be Sprint’s Apple? Is Samsung the ticket? Any more NFL-like tricks up the sleeve?

Database Marketing
It’s been reported that Sprint is intentionally jettisoning “bad” customers. If it is that good at value modeling, then Sprint should be able to implement a more targeted marketing strategy by creating a nice list of high-value “look-alikes,” millions of prospects it could pursue with some hard-working direct marketing (and, hopefully it would not churn them days later).

Hesse’s TV Tour of NYC
OK, Dan, you’ve hit all the top spots - from the Meatpacking District to the Empire Diner. But the gray hue and your drab nature create zero emotional resonance. Dave Thomas did a better job building excitement around 99-cent baked potatoes. You are a highly capable CEO, and no doubt a nice man, but it’s time to step away from the camera and let the professionals craft the story of how Sprint is the future of cellular communications - massive amounts of data delivered to your hand.

Focus. Quality (not quantity) channel partnerships, a compelling campaign about the “data future,“ and less spray-and-pray marketing.

The closing of 11 customer service centers this year might be a positive sign. But shareholders shall not rest until real results are apparent.

Sprint is definitely in a sprint now.

The Search Engine No One Wants To Talk About: Ask.com

Remember the good ol’ days? Dot-com mania, and a butler for a mascot? Remember Ask Jeeves, 1996?

The poor guy has been put through a number of makeovers. Yet Ask.com still holds its place as the perennial fourth- or fifth-ranked search engine, regardless of how good or bad the “next great idea” was. Here are some of Ask.com’s major business or marketing strategy initiatives over the past few years:

• Acquired by Barry Diller’s IAC
• Fired the butler, became simply “Ask”
• Launched major TV ad campaign
• Launched major revisions to page layout (since done away with)
• Missed out on the opportunity to be spun from IAC
• Declared it was becoming a “women’s search engine”
• Days later, undeclared women’s search engine idea
• Added in Dictionary.com
• Rolled out the 11th version of the site

Through all these travails, up and down, back and forth, Ask.com somehow hangs on to 4.5% of the search audience, according to comScore and other sources. Not bad, considering Google’s dominant share continues to increase every quarter, seemingly at the expense of Yahoo.

There’s a pony in there somewhere, obviously, most likely technology based. Ask.com was early with innovations we now recognize as natural language search and universal results display, for example. Barry Diller seems happy with the pace of progress, and his market share…even while pundits have been writing off Ask.com for at least the past 3 years.

Nothing lasts forever, of course. That 4.5% share can only go in one direction (unless Ask.com pulls another technology trick out of its bag).

So why aren’t any of these being discussed?

• Barry Diller buys Yahoo?
• Yahoo buys Ask.com?
• Barry Diller buys AOL?
• Steve Ballmer buys Ask.com?

WWBD. What Would (Will) Barry Do?

What Would the Butler Do?

The Bermuda Triangle - Starbucks, McDonald’s, Dunkin Donuts

By luck or by design, the overanalyzed triumvirate of Starbucks, McDonald’s and Dunkin Donuts have carved out distinct segments of the market. But you wouldn’t know that from reading “analysis” like this from Scott Rothbort of thestreet.com:

“Just today McDonald’s reported global comp sales increases of 8.2%, and I guarantee you that part of that surge was coffee, tea and breakfast sales coming from Starbucks customers.”

That’s interesting, because McDonald’s didn’t mention it in its earnings review - it credited sales growth to a Monopoly promotion and its new Southern Style Chicken breakfast item. Something tells me McDonald’s grand experiment with coffee is not going to turn out as hoped.

I’ll tell you where those McDonald’s customers are coming from, Scott. From the likes of IHOP and Applebee’s.

Dunkin Donuts, on the other hand, doesn’t need a journalist to misrepresent its situation. It can handle that duty itself. The company, which seems to have just about completely lost its mind as far as marketing goes, is in the middle of a “taste test” campaign, in which it claims to have beaten Starbucks.

Sort of like asking a beer drinker to give you some suggestions on what wine to serve.

And finally, Starbucks. Here is Brad Stone (stage name?) of the New York Times:
“But many people are now abandoning the product, if not the lifestyle that goes with it.”

The writer apparently divined this from Starbucks’ recent earnings report where comps were down 4% (I sent him an e-mail, as well as Rothbort, for clarification, but don’t expect to hear back).

You see, Brad, “lifestyle” is all Starbucks is really selling. If you walk by one, then compare the scene to the inside of a Dunkin Donuts and a McDonald’s, you’ll see what abandonment would really mean to the Starbucks customer. Ain’t happenin’.

So, to all you “coffee analysts” out there: calm down. The situation is under control. Three good companies, three good futures.

Lay off the caffeine for a while.

How Would You Save Detroit?

This month’s “save” is off the normal track of a business fallen upon hard times. But like previous entries such as Krispy Kreme and Red Envelope, Detroit could use a little marketing TLC, as it reels from well-known issues:

• Implosion of the “Big Three” auto manufacturers, contributing to the second-highest unemployment rate among major U.S. cities (near 9%)
• Continuing population decline in the city proper, falling under 1 million in 2000, and now below 850,000 (although the suburbs have boomed until recently)
• Top-five ranking for home foreclosure rates
• Mayoral scandal adding instability to desperately required municipal leadership

And Devil’s Night is just around the corner.

More than marketing is required, to be sure, but that’s no reason to wait for a miracle.

Blue Ribbon Marketing Panel
Since the local ad agencies have a little more free time right now, put them on a pro bono panel to study other cities that turned themselves around. Sort out the “best of the best” marketing ideas, and get cranking.

Redeploy Manufacturing & Engineering Talent
There are thousands and thousands of experienced, hard-working industrial workers and engineers on the dole around Detroit. Most of them would rather be earning a living wage. Why shouldn’t every U.S. wind turbine, solar panel, battery pack, etc., be built in Detroit? Fete the VCs from Silicon Valley.

Have the Marketing Panel run campaigns across the globe to get companies to inquire about moving industrial and engineering operations to Detroit. The advanced health care technology industry is another nice target. (Of course, these campaigns aren’t going to work with executives who prefer to outsource overseas at 15 cents per day.)

Destination Detroit
Blitz the neighboring five or six states to draw in tourists to the new gambling industry and renovated waterfront. Get the local arts community energized. Help local hotels put together unique holiday/New Year’s packages. Draw in more events (like this spring’s Red Bull race).

And while we’re at it, convince Rick Caruso to build one of his shoptainment malls.

Detroit is not simply “too big to fail,” like some of the banks we are bailing out. Rather it is too important to fail. This country won’t heal without high-end manufacturing, and it won’t heal from the coasts. Detroit is key to our healing from the center, the heartland, the soul.

Planning For the Turnaround - Part 3

Part 1 recap: While everyone craps their drawers due to the economy, you smile about the recession strategy you put in place months ago. You now start thinking about a recovery strategy for early next year.

Part 2 recap: You create a high-level budget estimate for an acquisition-weighted marketing strategy, revenue based and driven by informed metrics such as cost-per-customer-acquired.

Before we conclude with Part 3, two quick updates.

First, I mentioned Monday that the sooner Wall Street flushes itself the better - was Tuesday soon enough? Now, as I type, Asian markets are down 10%. How soon until Bernanke steps in with an emergency cut to 1%? [UPDATE: OK, so he cut to 1.5 after I went to sleep.]

Second, a survey was just released with two data points that ought to stifle the canard “now is the time to advertise.” Point #1: Epsilon surveyed some CMOs and assorted other marketing execs, with 65% saying their ad budgets will decrease because of the troubled economy. Point #2: 94% agreed with the statement "a tough economic period is precisely the time when marketing plays a key role." How noncommittal.

The Fudge Factor

I mentioned yesterday to inflate your budget calculation by 35%. Here’s the explanation:

- 10% is to give back to the CFO so he or she feels like they beat you down

- 10% is for customer research

- 7.5% is for consulting support (such as positioning work, channel strategy, etc.)

- 7.5% is for training

Get the latter two on the calendar early in the year. Otherwise, you might find yourself in a “give back” dilemma later in the year when the CFO comes looking for discretionary spending to cut.

Reverse the Acquisition Funnels

Map out the different channels the new customers will flow through. For each channel, reverse the funnels to determine the number of prospect touches required. Multiply by average media cost for each channel, and sum all channels. Tweak this model until it jives with your total acquisition budget, calculated as shown in Part 2.

Make the Case

Turn all this math into a compelling story about an acquisition and growth strategy. The owner, CFO, et al. should appreciate that much more than a list of tactics randomly spliced together.

It’s all a bit mechanical and boring, indeed. But the strategy part isn’t supposed to be sexy.

I’m living proof of that.

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With what’s going on in the world, Yom Kippur should be a national holiday. So I’m going to do my part. “See” you Friday AM.