Lairig Marketing

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.

All You Need to Know About the Length of the Recession

Two loyal readers wrote to ask me why I was so sure the recession would be ending sometime around the spring of 2009. I have a ton of reasons, two examples being:

- the historical average duration of a recession
- the current recession starting way sooner than the day Paulson realized the economy needed a bailout

But I also look ahead, for signs confirming or contradicting my forecast. Here was a major signal reported last week, excerpted here:

“A survey [conducted October 23rd] of top economists released Monday shows that the vast majority of them believe the economy has fallen into a recession that will continue throughout all of 2009.
According to the National Association of Business Economists, 90% of the 102 members responding were more pessimistic about the economy than they had been in July.
The economists indicated that a recession is likely to continue at least through the end of next year, with 79% saying the economy will grow less than 1% and 38% saying the economy will shrink next year.
…44% of respondents reported rising demand in July and only 19% reported falling demand.”

Can you imagine anyone who was NOT at an extremely low pessimism level about the economy in July? And what industry was seeing an INCREASE in demand this summer - Airlines? Apparel? Home construction?

Couple all that with this well-cited quip from Nobel Prize-winning economist Paul Samuelson: “Economists have correctly predicted nine of the last five recessions.”

Ergo, I will take this as a confirming signal.

Keep working on those turnaround plans.

Happy Holidays - If You Think Outside The Gift Box

Maybe the retail analysts and economists will be right about the coming holiday season. At least on paper, sales might grow at a slower rate than years past, or even decline. But I think there will be a lot of “hidden” spending on gifts this year, with traditional retailers bypassed.

This Christmas (or insert your favorite end-of-year holiday), I believe, will be about gifts people can use or consume, not things people can wear or look at (who needs another picture frame?). With that, I give you my “Great Gift Ideas for Christmas 2008” list.

• Booze, and lots of it - examples: flavored vodka, boxes of wine
• Entertainment - examples: restaurant coupons, theater tickets
• Personal Services - examples: hair salon visits, one-time maid service

Am I telling you this so you can start your shopping now? No. I’m telling you this in case you are a marketer for a discretionary product, or an agency exec who works with one. In the next three months, holiday shopping will comprise a large portion of discretionary sales. Get your share.

Don’t rely on gift cards, which are fast becoming a drag for the giver and the recipient alike. Make it easy and fun for consumers. Be as flexible as you can with pricing, selection and timing.

Here are two illustrations; enough, hopefully, to get your creative juices flowing.

Casual restaurant
Make up a nicely done index-card-size piece that says something like “Take the pressure off this shopping season. Treat your loved ones to a meal at (name of your restaurant). Purchase before December 1st, and get 10% off your selected gift price!” Attach this card to every guest check the server drops on his or her table, starting tomorrow.

Garden supply center
Avoid the ho-hum gift card scenario. Make up point-of-sale or end-aisle displays that list five top sellers for the spring season (potting soil, lawn fertilizer, etc.), saying something like “Give the gardener in the family something to look forward to this spring. Purchase now, get 5% off, and we’ll deliver it free when you tell us to.”

This can work online also, but the idea here is to grab the captive customer (without paying extra costs for traffic).

Wish lists are long, but shopping lists aren’t. Find a way to get on them.
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JUST WONDERING…How much of Nexium’s record-setting “purple pill” website traffic was due to men actually looking for the “blue pill”? And why do they spell NEXIUM in caps on the site but not on the pill itself?

Planning For the Turnaround - Part 1

Floyd Norris of the New York Times and I might be the only two people who believe a U.S. recession started at the turn of this year. Now, with the $700 billion bailout, every johnny-come-lately marketing blogger is telling us we are in a downturn, offering the incredibly unhelpful advice “now is not the time to cut marketing,” and claiming with no proof “a recession is the best time to advertise.”

Even the #1 marketing blogger on earth said he would start a new business today (with the important caveat “if I wasn’t running a business already”).

Well, no he wouldn’t. If the governor of California has to go hat in hand to the federal government to keep his state open, what bank does Seth Godin believe has money to lend him? He’s good, but he is no Arnold Schwarzenegger.
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Bloggers who have not worked in a corporation for a while, if ever, don’t understand that marketers have little control of budget in times like these. The CFO or owner or chief accountant see revenues falling and, in order to protect margins or maintain break-even, tell each department how much expense needs to be cut. Advice to “get out there and do something” is not grounded in business reality. I therefore award these bloggers the “Worst Blogging Advice of 2008” award

I’ve been posting about recession marketing strategy since January 18th. If you are not already executing against a recession strategy, you are f*cked. You will simply be bouncing from pillar to post for the rest of this calendar year.

While others believe we are now “hurtling toward a recession,” Floyd Norris and I believe we are at the inflection point, the long road back up the steep hill. Get your act ready.

Management will soon be sending guidance for next year’s budgeting process. The tone will be gloomy, and you will be asked to make do with less.

NOW is the time to think about why your marketing group will be the one that says “Wait a minute. We need a plan for when things start to turn around next spring. If we plan for disaster, that’s what we’ll get.”

Tomorrow’s post = as much detail as I can fit into 350 words on how to get ready for the 2009 economy.
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WATCH FOR THIS…I mentioned the Resolve pitch man’s ape-hairy arms August 1st. Recent TV spots have shown him either in a LONG-SLEEVE shirt or with a model’s arm for the close-up shots!!!

The Difference Between Want & Need

More retail numbers out this AM. Many journalists, economists and Wall Street analysts swarm like so many bees to the data. The likes of Wal-Mart and Costco are reporting same-store sales gains, while Saks and Nordstrom are not? "See, we told you the recession would finally sweep up all the rich people."

Today’s August same-store numbers (Wal-Mart up 3%, Costco up 9%, Saks down 6%, Nordstrom down 8%) brings more swarming:
“And high-end retailers Saks Inc. and Nordstrom Inc. posted weaker results as their affluent customers start to feel pinched.”

Maybe because this is the first consumer-driven downturn in the past three cycles since 1990, younger journalists/analysts are unclear how recessions operate. It’s pretty simple actually - consumers, rich or poor or in between, adjust their financial management habits accordingly.

For example, this story from Reuters tells you what rich people do in tough times:
Many of the world's wealthiest people have moved their money out of stocks and bonds and into cash…“The first half of 2008 has seen a notable change in client expectations and investment choices," said Peter Braunwalder, chief executive of HSBC Private Bank, the British-based bank's main affiliate catering to the ultra-rich. "Faced with inflation worries, volatile asset prices and sudden changes in exchange rates, a majority of investors have reduced their transaction volumes in equities, bonds, and structured products…”

So, while it might appear Saks is suffering because rich people stopped spending, it’s because most people have stopped including stuff they don’t need in their financial management. Saks and Nordstroms are stores mostly of “want.” Wal-mart and Costco are stores mostly of “need.” Rich or poor alike.

See Coach. Sales increased 5% in its most recent quarter, the period that might prove to be the “epicenter” of the recession. The affluent still need handbags.

Lest you pray this will go away soon, at worst by Christmas, consider this data assembled by Tim Melvin of thestreet.com:
“…there is an 11.2 month supply of homes on the market. In all, 4.7 million homes are for sale, the highest number since [NAR] began keeping track back in 1968. According to a report from Moody's, an additional 2.8 million homes will face foreclosure or simply be turned back to lenders in the next year.”

Right now consumers need value. The road from need to want is very long.
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ASSHATS, INC…This is beyond unbearable to watch.

Chicks on Bikes. Harley Go Lightly.

Harley-Davidson is at the top of the list for U.S. brands, with one of the highest “net promoter” scores. The company is often overlooked, however, when people talk about great brands, probably for a lot of wrong reasons. The product is loud and annoying, the ticker symbol and owners clubs are named “HOG,” the typical biker is a fat dufus, etc.

Wrong, at least, on that last one. HD has been able to attract one of the most prized customer bases of any non-luxury company. Stories are legend about millionaire / billionaire CEOs taking their favorite bikes for a leisurely Sunday drive. And if you think women don’t ride Harleys, you’ve got another thing coming.

HD claims that the number of women who have bought Harleys has tripled over the past 20 years, with women now making up 12% of its new buyers. Those heavy leather jackets and motorcycle helmets make it hard to tell who is at the wheel, or handle bars, I guess.

So, to keep a good thing going, the company has been aggressively marketing to women these past several months. The company is giving away designer rings to women who buy a bike and/or graduate from its new-rider training program between June and October. Dealers are hosting women-only “garage parties,” where demonstrations show how Harley’s bikes can be suitable, and suited, for the female rider.

My only complaint about the campaign is HD not playing up the area on its site devoted to the women rider (www.harley-Davidson.com/womenriders).

Going after an underserved segment is an excellent move in a recessionary period. It works best, of course, if you already have a decent base and track record with the segment, as Harley-Davidson certainly does with women.

Beware, though. Sometimes a category leader can create trouble for itself with smart marketing. In this case, Harley-Davidson runs the risk of generating motorcycle awareness for females who then defect to low-noise, easy-to-ride, high-mileage scooters instead of Harleys.

With sales of scooters going in the opposite direction of big bikes at present, it is a probable scenario. But if you want to be a hog, or a hoggette, buying a little scooter won’t cut it.

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WHERE ARE THEY NOW?…Whatever happened to the guy who trained Countrywide CEO Angelo Mozilo on using e-mail (for example, the appropriate use of the “reply to all” button) ?

Could A $10 Box Of Cereal Be In Your Future?

You get both sides of the recession marketing coin with this post. On one side, the ready-to-eat (RTE) cereal manufacturers, nudging prices up (and up). On the other, the unseen response from cereal substitutes.

For about a year, the major RTE cereal manufacturers have been raising prices, literally or through a back-door move - reducing carton size while keeping prices the same. General Mills started it last June, and today Kellogg announced a similar move, on the heels of outright price increases just a few months ago.

http://www.msnbc.msn.com/id/25217848/
“Kellogg Co. is using smaller packaging while charging the same prices…The company started shipping the new boxes to stores in early June. Boxes were reduced by an average of 2.4 ounces for 14 items…We did an extensive analysis of all of our brands to determine what made the most sense for our business…”

I bet the winning “extensive analysis” had the maximum profit calculation. It certainly worked for General Mills, who today reported higher sales compared to last year. Through the first nine months of this fiscal year, it showed cereal growth at 3%. Not bad for a recession.

If this seems like déjà vu all over again, it is.

Cereal prices rose 91% from 1983 to 1994, double the rate of general food prices. Not surprisingly, demand started to fall for the first time in decades. Store brands and cereal substitutes (breakfast bars, etc.) were fans on the flame.

If you recall, the cereal guys tried an everyday low price strategy soon after. Since volumes didn’t jump and margins fell, we are now seeing a change in that strategy. (Rising input costs aren’t helping, to be sure.)

So, back to the future - people complaining about $6 boxes of cereal. This time Kellogg and General Mills don’t appear to be hurting on the volume front. It’s a risky recession play, but they have set a new threshold. Just like we’ll never see $3-a-gallon gas again…we won’t see a $4 box of cereal either.

The other side of the coin? Time for the cereal substitutes to go for the kill, assuming they don’t get stupid and simply jack prices also (one of the conundrums of course is that the big cereal manufacturers also sell substitute products). How about “Save Money, Live Better.”

Oops, that one’s already taken. Geniuses.

Recession Marketing – Getting New Customers. Without A Shotgun.

Last Friday we discussed what a good first step it would be, in (what looks like) a recessionary period, to focus on your best customers.

Few businesses can survive on existing customers alone, however. There is typically a “leak in the bucket,” so new customers are required for replenishment. And for industries where customers only make a purchase every few years (e.g., autos, homes), new acquisition is all you can do right now.

Since this is a blog, today’s ideas are not going to constitute a complete list. And the explanations will be high level. If my examples don’t resonate, at least consider the overall theme – step back, think differently, and be selective. A shotgun approach is not advised.

Idea #1 – Find carbon copies of your best customers
This will be easy if you already took in the idea of existing customers from last Friday. The notion is to find others with similar needs and attributes. This is a very focused form of segmentation and targeting.

Idea #2 – Exploit an emerging competitive weakness
Certainly you’re watching everything the competition does in the marketing arena. But look deeply into the business drivers, and see if something else is afoot that you can take advantage of. Here’s an example in the tax services business.

http://www.reuters.com/article/businessNews/idUSN0322142420080103?feedType=nl&feedName=usdai

The IRS is considering stopping H&R Block and Jackson Hewitt from offering refund loans on tax returns not yet filed. If you run an independent accounting firm, this just made the playing field much more level for you. Find and jump on any opportunity similar to this.

Ideal #3 – Message about value
Unless you can afford to cut prices, you’re going to need to define clearly and compellingly how prospects will get real monetary value in the purchase you want them to make with you. Make this the main marketing message until further notice.

Who knows how long a recession will last? Thoughtful marketing strategy can make it a whole lot shorter for your company.

Weekend Homework: A Stimulus Plan for Marketing

I hate to end the week on a down note, but I’ve got a sense the newspapers, talk radio, and TV commentary this weekend will be “all recession, all the time.” Look at what Jim Cramer wrote a full day before the market dropped a gazillion points on Thursday.

http://www.thestreet.com/p/_htmlrmm/rmoney/jimcramerblog/10398953.html

“We are in the heaviest, most intense deflationary spiral of our lives.”

“We can't seem to get any closure whatsoever on the toxic residential mortgage debt, and it doesn't take a genius to see that credit card and auto debt are next.”

“Ladies and gentlemen, like a few other times in my 29 years -- 1979-1981, 1987 and 1990 -- there's nothing good happening.”

This is going to be a tough year for the Marketing function. If consumer debt does indeed go “toxic” broadly, those in discretionary industries will have a year miles beyond tough.

The funny thing is, you probably don’t know it yet. Whether you’re client side or agency side, marketing budgets most likely aren’t set. Promotional calendars aren’t firm. Campaigns aren’t approved. Everyone is waiting for the bell to go off so the new year can finally, really begin.

And when the CEO or President comes in Monday and says “Holy shit, did you see the news this weekend? We’re going off a cliff!” the heavy Finance artillery will slowly roll, on the hunt for “fat” to cut.

So here’s some thinking you can do this weekend. Figure out the existing customers you’d want to put a fence around. Most money, volume, visits, profit, – whatever the right metrics are for your industry. What can you do to keep them and get more from them, and what does that equal in dollars? You’ve just figured your minimum retention budget.

I’ll post about new customers sometime next week. For now, though, think less about fishing and more about harvesting. Unless you’re in a recession-proof industry or you’ve got a new Jobs-like product ready to roll, acquiring new customers in the next six to nine months will be a battle and a half.

So…how would you go with the horses that brung ya?

The World's Most Obvious Marketing Prediction for 2008?

It's that time of year of course when every smart person trots out his or her prediction, and maybe even a quantitative forecast or two, for the marketing arena in 2008. I saw a reference in several newsletters to a batch of predictions from Merrill Lynch. This was all I could find as an original source:

http://online.wsj.com/article/SB119921379097860487.html?mod=googlenews_wsj

Hard to tell if the content was from the Merrill Lynch analyst or the Journal reporter or both, but this sentence struck me:

"Softness in the economy also will likely drive more money to the Internet, which can be cheaper than other media and has a reach that is easier to measure, which is attractive to advertisers in slower times."

There's no question (except with Larry Kudlow of course) we are soft. And no question advertisers (can we call them marketers please?) will be forced to cut back. But "cheaper" and "easier to measure" - a.k.a. the Web - will be a dangerous line of reasoning.

Two issues which I'll pursue more here this year: (1) "cheap" and "effective" often find themselves on opposite ends of the spectrum; (2) pay close attention in 2008 to the unfolding soap opera that is web analytics - companies are drowning in site data, beyond comprehension of the most basic facts.

Yes, ad spending on the Internet will grow at double-digit percentages this year. That was easy. But if "cheaper" and "easier to measure" are the drivers, I don't expect much gain in marketers' satisfaction with it.