Lairig Marketing

Fast Follow-up Week – Shocking Nonstrategists

We put a lot of time, effort and thinking into our five-part series on the economy last week. Nowhere else in the marketing blowhardsphere has there been anything that comes close to help you think about, and plan for, near-to-intermediate-term wheel-spinning.

One of the posts focused on employment, and the recent few months of “headfake” data – i.e., hiring up, unemployment claims down. We looked deeper, and prepared you for bad news.

Last Friday we received government data on hiring for March. Atrocious. From Bloomberg News:

“The 120,000 increase in payrolls reported by the Labor Department [for March]…was the smallest in five months and less than the most pessimistic estimate in a Bloomberg News survey of economists…”

Note, as always, professional economists remain clueless. This also puts to bed the conspiracy theory that the Obama administration is doctoring the data.

Then, this Monday, we received government data on unemployment claims for the prior week. Atrocious. From Reuters:

“The number of Americans filing for jobless aid rose last week to the highest level since January…increased 13,000 to a seasonally adjusted 380,000…defying economists' expectations for a drop to 355,000.”

Note the economists again, on cloud nine. Or perhaps cloud ten – check this out from the same Reuters article:

“Some economists blamed the Easter holidays for the spike in claims…”

At least they didn’t blame Passover.

Coincident data show personal income flat for January and February, and credit card debt plummeting.

Now you know why the fifth part of our economic series told you to include a recessionary scenario and a flat scenario in your planning. Nothing similar yet from Ad Age, Adweak, Seth’s blog, nor Guy Kawasaki’s (who only posts once a month anyway).

This is why loyal readers keep coming to Lairig Marketing. And why, if you’re a new reader, you should too.

Warning: Hazardous Economy Ahead (Part 5 – The Conclusion. For Now.)

So what? After all this digging, filtering, and assessment of economic data, what’s a good strategic marketer to do?

First, realize your advantage: forewarned is forearmed.

While everyone else is standing around with their hands on their ass, waiting for the release of the next seemingly one-off economic data point – that will no doubt be at crosswinds to the one from the week prior, prompting them all to drool in unison – you’ll have a fuller context that allows you to forecast what each new number will be.

>>> Summary of Takeaway #1 – Start developing your own near-term forecasts for all the economic signals we’ve discussed across this series: weekly unemployment claims, housing sales, foreclosures, GDP, etc.

Then, instead of reading TechCrunch, look around for practical subject matter experts, who give lucid explanations of how economic factors impact businesses.

>>> Summary of Takeaway #2 – Create a list of trusted sources in the field of economics (feel free to start with the ones mentioned in part 4. Consult them frequently as you undertake the third step…

…Which is to develop 12-month-rolling business revenue forecasts for three scenarios:

1. GDP growth of 2% throughout 2012, 3% throughout 2013.
2. “Turning Japanese” scenario of 1% GDP growth throughout 2012 and 2013.
3. Recession scenario of negative GDP growth from middle of Q2 through middle of Q4 2012, followed by 2.5% GDP growth in 2013.

Modify each scenario’s parameters as new data come in. Adjust business forecasts accordingly. With luck, the third scenario falls away over time.

>>> Summary of Takeaway #3 – Forecast business revenues across “bad,” “flat,” and “tepid” economic scenarios. Project marketing strategies, resource requirements, and contingency plans for each.

Every moving part of your marketing should be addressed at this part of the process. For each scenario, what changes will occur for existing-customer focus? agency relationships? partner marketing programs? prioritization of acquisition target segments? media allocation? new-product launches? distribution channels? – just to name a few.

Think of the advantage all of this will give you. While your competitors plan for ever-elusive growth, they remain completely unprepared for stasis or collapse. Vice versa for you.

If the only thing your business is unprepared for is growth, that will be a great problem to have in 2012.

Warning: Hazardous Economy Ahead (Part 4)

In this series on the near-term economic outlook, we’ve looked at housing, commerce, and unemployment data. [Start with part 1 here if this is your first visit to Lairig Marketing.] Now, let’s hear what the real experts are saying.

Here are some sources of economic insight that Ad Age or Mashable would never point you to.

First up are some long-time “Street” guys, writing for TheStreet.com. It’s hard to find serious analysis in a short-term bull market, but here is an interesting observation from Gene Balas, a CFA who has managed money using economic-based strategies.

Among his own ongoing series on the economy, Balas wrote a thoughtful piece on government stimulus. In sum, we are running out of ways to generate real gains in productivity, and almost none of the Fed’s “easing” over the recent years has had anything to do with technology or infrastructure. Money simply sloshing around on balance sheets.

Add to that the voice of another street.com contributor, Roger Arnold, an economist who earns respect because he is not an academic. Arnold has been brutal in his near-term evaluation of the U.S. economy, but always based on facts:

“…social security tax receipts collected by the U.S. Treasury from companies on behalf of their employees are declining, even as the Bureau of Labor Statistics reports that employment is increasing…[this] dichotomy is difficult to rationalize or explain, as is the lack of inquisitiveness by financial pundits and equity-market participants.”

“Freight and cargo shipments are declining rapidly worldwide.”

“Every post-World War II expansion in the U.S. has been led by housing.”

Great analysts keep an eye on the economic research group ECRI, which signaled the prior two U.S. recessions well in advance. Here’s what ECRI says now, as it signals another recession, in the face of so much mainstream-media twaddle:

“We find that year-over-year growth in ECRI’s Weekly Leading Index remains in a cyclical downturn and, as of early March, is near its worst reading since July 2009.”

Our own industry? It’s been forgotten already, but let’s recall that digital – yes, digital – ad spending went negative in Q4 2011, dragging the whole pile down with it. Kantar Media reports it was the fifth in a row of downtrending quarters of ad-spend “growth.” We’ll remind you that the ad industry is typically a leading economic indicator on the way in, lagging on the way out.

Finally, some contrarian views. First, the academically focused and tin-eared National Association for Business Economics. According to its January poll, these gray beards were MORE optimistic about GDP growth than its prior survey, with the typical “GDP is OK now, will improve later” outlook.

Confirming that we should “zig when they zag” is the just-released Business Roundtable Q1 CEO Economic Outlook Survey. The outlook index score from “the guys in the ivory tower” is now back to a level seen in late 2006.

And we know how that one turned out.

Warning: Hazardous Economy Ahead (Part 3)

This short series has so far tackled recent housing and marketplace data as they relate to future perspective on the U.S. economy, something all good marketing strategists should be developing right now (but aren’t being encouraged to by any trade journalists or marketing “gurus” – today Seth Godin will bore you with the difference between “no” and “yes”; Guy Kawasaki just released NINE tweets in the past hour – honest to God – one of them about a picture of a caterpillar).

[You can start with part 1 of our economic series here if you missed the beginning.]

Today, we look at employment. Or unemployment, depending on your outlook on life.

This bit of data is one that mainstream media (see: Reuters) has spun like mad. We have been told to put on a happy face, now that monthly jobs reports have shown “good” numbers over the past three months:
- December, 2011 = + 223,000
- January, 2012 = + 284,000
- February, 2012 = + 227,000

As a simple series of three, for consistency and trending the data is pathetic. The numbers are no higher than a full 12 months ago. And readers with good memories will remember that the new-jobs count went over the cliff last May, falling nearly to zero inside of two months.

March 2012 numbers will be reported this Friday. Will they be “Good”? You bet. Somehow the gubberment will come up with 250k+, and Reuters will signal the “all clear.” When we really need to be coming in around 500k to have any real impact.

Flip the coin over and look at weekly unemployment claims data. We are told to turn cartwheels now that the numbers have settled into the 375,000 range. Comparisons are made to May 2008 – the last time the numbers were “this low.” Odd choice of timing, since Great Recession #1 was underway then.

Here’s your real benchmark – steady state during normal times. Weekly unemployment claims then are in the range of 315,000. The U.S. economy seems a few months removed from that scenario.

[In tomorrow’s post, we’ll review what some real experts have to say about it all. Don’t miss it.]

Out in the real world, here’s what workers in Illinois have been seeing and hearing, according to Crain’s, in just the past two months:

“Job cut announcements by Illinois-based employers quadrupled in January from December and rose 86% from January 2011.”

Notable cuts: Kraft Foods – 1,600, Archer Daniels Midland – 1000, Abbott Labs and Northern Trust – 700 each, Jewel Osco – 220, PepsiCo – 150. Thank God, at least, the weather has been nice this winter.

Add to this a nationwide plan – actually a survival tactic – by the USPS to eliminate some 35,000 jobs.

Depressing stuff, to be sure. But unless you wade knee-deep into it, you are at the mercy of Reuters et al. As well as at the mercy of Guy Kawasaki, who just – honest to God – tweeted again: “TSA confiscated scissors find new life as art.”

Warning: Hazardous Economy Ahead (Part 2)

Yesterday we began this series with a long introduction and a focus on recent housing industry/economic data. In summary, in our view at least, housing will continue to do all it can to keep the U.S. economy from getting better.

What else should strategic marketers be thinking about as they evaluate plans for the balance of 2012?

Next up – the general marketplace.

A phrase you might want to get comfortable with is “sales pulled forward.” The Commerce Department reported that December retail sales fell (excluding auto sales) from November’s level (with lots of use of “unexpected” in related business articles). Meaning, the “great” sales during Black Friday 2011 were sales pulled forward from December, exactly what we predicted on December 1.

Exhibit A? Our friends in the consumer electronics space, off nearly 4% in December on a month-to-month basis.

So far this year, Commerce calculated that retail sales were up roughly 1% for each of January and February (again, excluding auto). With record-breaking warmth across the country, those data points may very well represent – wait, here it comes – sales pulled forward. March and April retail sales data will be a critical tell. Worth putting in your “alerts” or tickler file.

Meanwhile, what are they doing and saying on the other side of the counter?

McDonald’s, who seized the recessionary moment back in 2008 and piled on the market share, recently stated it would reload its weaponry. MORE promotions for MORE “value-priced” menu items, including the downgrading of cookies and ice cream cones to the lowly dollar menu.

And how about this from Darden Restaurants management, asked to portray the immediate near-term environment, during the Q&A portion of its most recent earnings call:

“If you look at today's environment across the [casual dining] industry, it is somewhat weaker than it was during the holiday and immediate post-holiday period.”

Which, as pointed out above, was essentially a field of crickets.

Sounds like barely enough strength to pull much more forward.

Warning: Hazardous Economy Ahead (Part 1)

You will want to read this series if your job duties include forecasting or new product launches, if you have a P&L target to hit this year, or if you are simply confused by the daily swings in economic data.

You won’t find this topic anywhere else in the marketing world. Just more articles about Google, P&G, and Facebook (including a sad, sad story on Social Media Today about a man heralding how Facebook’s new Timeline has helped him relive THE PAST THREE MONTHS OF HIS LIFE).

Back at the beginning of October, we said this:

“Many, many months from now [October] the NBER will mark the Great Recession Part 2 as having started sometime in August or September of 2011. GDP might be slightly positive this Q4 with a holiday head fake, but it will plummet again in January.”

Ironically, the S&P 500 fell nearly 3% by the end of that day, finishing a two-month nearly 20% drop, and moving straight up ever since.

However, the real economic data since October has been anything but a bull market. Results have been all over the lot, spun positively in all cases – witness how often Reuters has used the term “unexpected drop,” for example.

Fourth-quarter GDP was 3%, hardly a recessionary number – yet two-thirds of it was driven by businesses foolishly increasing their inventories. Weekly unemployment claims are analyzed like tea leaves – yet they vary by no more than 1% each period. We add 200,000-plus jobs each month – yet no one can explain how the unemployment rate drops 0.5 percentage points as a result one month, then doesn't change at all the next month.

Back in October, we were troubled by the outlook for housing, employment, credit availability, government financing, and Europe. We were troubled, as well, that no one - no one - in the marketng trade was talking about any of it. None of the issues, not even the so-called resolution to Greece, are put to bed.

Let’s start with housing, a near-20% direct contributor to GDP. From yesterday’s news:

“Home prices dropped for the fifth consecutive month in January, reaching their lowest point since the end of 2002…prices were down 3.8% from 12 months earlier, according to the S&P/Case-Shiller index.” Still. No. Bottom.

One of every five homes in the U.S. is “underwater.” Millions are still to make their way through the foreclosure process. Mortgage applications are at a seven-month low. And there are no new jobs in residential construction.

The only winners in this part of the economy are landlords. And we know how they hate to share their spoils.

Is Best Buy’s Best Gone Bye?

The world must wait until the first week of the New Year to know if the “record” 2011 Black Friday results mean anything. Once all the holiday shopping has been accounted for, we will know this:

• Was Black Friday really just this week’s sales pulled up a few hours?
• Did Black Friday convince holdouts to buy like mad?
• Did Black Friday prove there is no recession?
• How the f&ck can retailers make a profit when everything is on sale?

Our best (pun?) tell will be Best Buy. There is no real national competitor of similar size and scope (take that, Circuit City!). And, since consumer electronics reportedly made up 50% of the Black Friday basket, then what better indicator of retail holiday fortune?

In case you haven’t been following Best Buy going into this shopping period, here are some things you should know, buried only one layer deep in its financial results.

Best Buy’s topline growth is the result of acquisitions. On a comp-sales basis, here are the past five years in reverse chronological order: minus 1.8%, 0.6%, minus 1.3%, 2.9%, 5.0%. If the economy wasn’t a factor for this past Black Friday, then it shouldn’t have been for the past three years either, no?

While you’re considering that, think about this also – the emergence of indirect competitors of every shape and size. Local brands like hhgregg, mass merchandisers like Walmart, online retailers like Amazon, and direct-to-consumer plays like Apple. Multiply by a million, and what do you get?

A company that continues to flatten itself with more and more acquisitions. Best Buy is even expanding into kitchens, for God’s sake (Sears, anyone?). In addition, a whole small business arm is growing with acquisitions of “managed servicers” like mindSHIFT (think of an adult Geek Squad).

Over five years, more than a 50% increase in number of stores. Yet only a 33% increase in square footage. Comp-store sales the past two quarters have been atrocious. The real kicker? Operating income as a percent of revenues – formally stuck at 4%, is now under 3%.

No shock then that Best Buy’s stock price, which had recovered nicely from the Lehman days, collapsed last holiday season, and is now around 50% below the year-ago level.

This is not a marketing communications story, nor a “branding” story. (And oh the irony that Best Buy has long been heralded as one of the best in social media marketing.) This is one of those big “P” stories – “Place” and “Product.” Best Buy is spread way too thin in both for focused growth in sales and operating profit.

Depending on what Best Buy management does after taking in the sobering holiday-season-2011 results come next January 7th or so, this will end up five years from now being the story of an ocean liner that was slowly turned in a better direction…

Or the story of a modern-day Titanic.

Farther Out On The Recession Limb

Once again, Lairig Marketing finds itself the contrarian in the world of marketing blogs. The only one to have broached the economic topic that dare not speak its name – Great Recession Part 2.

As others guffaw over an October aggregate retail sales increase of 0.5% compared to September (and failing to note, for example, the 0.7% drop in apparel and 1.2% plunge in department store sales), we’ve been tracking other evidence over the past 30 days or so.

It isn’t all of it, and it is certainly not a pleasant read. But it is information you’re not going to find on Mashable, Ad Age, nor Search Engine Fantasy Land:

Almost 25% of large-company chief execs expect to cut jobs in the U.S. over the next six months, according to a survey by the Business Roundtable. That is more than double the result from its June survey…

JPMorgan said it would cut 1,000 jobs from its investment banking business...

AstraZeneca, Level 3 Communications and Verso Paper disclosed plans to cut hundreds of jobs…

Lowe's is closing 20 of its U.S. locations, eliminating 1,950 jobs, and slashing its store-opening plans…

Credit Suisse announced it is cutting another 1,000 jobs, on top of the 2,000 positions the bank said in July it would slash…

Whirlpool plans to cut 5,000 jobs, about 10% of its workforce in North America and Europe, as it faces soft demand. The world's biggest appliance maker also cut its 2011 earnings outlook drastically…

3M reported disappointing quarterly results and cut its full-year guidance. Sales in its display business fell 14% due to weakness in the LCD TV business…

Visa reported fiscal fourth-quarter revenues grew at the lowest rate so far this year…

Goldman Sachs survey of Street analysts, the GSAI, fell 0.9 points to 42.4 in October (a sub-50 reading means more analysts see contraction rather than expansion). The 3-month rolling average dipped below 50 for the first time since September 2009…

On average, consumers put 3.6% of their earnings into savings in September, the government reported. It marks the lowest level of saving since December 2007…

Through all of this, we should not forget to seek counsel from our wanker economists. Here is an exemplary assessment, following the “big” retail sales increase referenced in paragraph #2 above:

“Another recession is pretty unlikely…The report “suggests a very strong start to the quarter. We’ll continue expanding at a better pace.”

This economist’s name? Samuel Coffin.

Which should just about put a nail in this one.

Private Label In The Privvy

Another story you’ll only find here at Lairig Marketing, as the rest of the marketing world ignores it or, more likely, doesn’t understand the implications…

Back in the day, we were the only ones to dissect the data on private label sales. While everyone else was oohing and aahing and predicting private label as the “NEXT NEW THING,” we told you this:

“If the private label sector ruminates a bit on the PLMA 2010 sales data, it might find that being so private about marketing fundamentals will make 2011 results look even worse.”

Well, the data is in (or the data are in, for you English majors).

The SymphonyIRI Group published a report “Brand Positioning in the New World Order,” comparing private label to branded product sales through the end of August 2011.

Once again, private label’s share of unit sales fell, reverting closer to its 2008 share level. So much for the “future” of the new normal.

And private label’s share of dollars? It continued to edge up, which as we told you before is the wrong strategy long term. Private label will rue how slow it was to learn the concept of “price elasticity.”

Watch, soon, as other marketing bloggers start getting wise to a reborn recession (which, so far, Lairig Marketing is the only one to make the claim). They will herald private label as the savior.

Oops.

Here is the real recession learning, courtesy of the private label gang:

If you are not currently #1 or #2 in your category, or in your category’s growth rate, you are f*cked for the next six months or so. Keep your focus on your best customers, spend wisely, and make the best of it.

For those who are currently on top, now is the time to put the pedal down on marketing spend. Here’s your chance to make private label competition a bigger secret.

Recession Stares – Retailers Blink

If you didn’t like our Great Recession Part 2 forecast a couple of weeks ago, maybe this AP article from yesterday will do the trick.

A seasoned marketer might have moved right past the dopey headline: “Price Matters For Holiday Season.” That’s been true for three holidays in a row now. No news there.

For example, from the article:
“In a recent poll of 1,000 shoppers by America's Research Group, 78% said they were more driven by sales than they were a year ago. During the financial meltdown in 2008, that figure was only 68%.”

Note the use of “only,” when the number in reality represents TWO-THIRDS of shopping public. This is just a little more recess for your recession.

This time around, I fear, the numbers are driven by consumers seeing the fear in retailers’ collective eye. The AP article lists several examples of big-name retailers promising not to be beaten on price. (To show how limitless its dysfunction is, Sears promises to beat any price BY TEN PERCENT!).

Remember, too, these holiday strategies come in the midst of forecasts for a banner Halloween, as if anyone cares.

In describing its plan to give consumers gift cards if they find a better price elsewhere, a Walmart exec had this to say about what he called the other guys’ “promotional intensity and gimmicks.”:

“[our gift card plan] gives customers peace of mind that we are an advocate for them…"

No. It shows consumers how panicked they should feel, a full month before Black Friday.

Another retailer was quoted as saying “The days of marketing the stuff in your store because it was a hot brand are over…"

I’d say that the day you call the stuff in your store “stuff” is when you should pack it in.

Congratulations retailers, for not even trying. You might have just marked the tipping point for Great Recession Part 2.