al berrios IMKTG REPORT 11.12.02: Psychology of Economics; more

[1] JUST SAY IT: al berrios & co.
[2] BRANDSTRATEGY: Momentum = Mass x Speed x Direction
[3] CONSUMERFOCUS: Consumers Are Irrational
[4] MEDIA: Newspapers Without News or Paper?
[5] MANAGEMENT: Following Customers Around

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>> "Despite the loss of about two million jobs, the steep fall in the stock market and the Sept. 11 attacks, household spending has defied the traditional pattern and grown every quarter since the recession began." - David Leonhardt and Floyd Norris, New York Times reporters

Good morning execs,

Consumers are not numbers. They are not clicks you follow around to figure out patterns. They are your kids, neighbors, and co-workers. Their needs and wants are constantly changing. And there is only one way to really understand what they are all about: ASK. For a couple of weeks now, I've been hinting at some changes here at al berrios. Well, these changes are finally here. It's my pleasure to introduce to you (drum roll) al berrios & co., a consumer strategies firm. In short, this change reflects our commitment to guiding your strategic brand, media, and business decisions based on our direct connection to consumers. It's consulting, with creative, and without the number crunching typically associated with research and consulting. Our insight comes directly from thousands of conversations with your customers about what they want. We discover areas where they want improvement and execute on these improvements within your company. To understand consumers, al berrios asks. Are you ready to listen? Enjoy the change things are only going to get better. For more info visit our re-launched site: (Forgive load times, our servers suck.)

So, Alan Hevesi won. That just shows you the response this newsletter gets.

If you missed NYNMA's event last week, you missed an amazing event. Tons of great speakers, tons of great people to meet. Don't miss it next time. No, they didn't pay me for this, it was really that good.

The Audit Bureau of Circulations Annual Conf at the Waldorf was also amazing. Other than the meeting and greeting, I absorbed so much about the issues affecting the print industry that it felt like school. Now that I'm more informed, I'll have plenty to say in today's ([4] MEDIA section) and upcoming REPORTS. Some predictions: Hillary vs. Condaleeza-Rice for President 2008; magazines may raise all rates across the board in an effort to become less reliant on advertising; Bush's war will be like the Gulf War, quick and hi-tech. (Refer to DISCLAIMER below.)

Next week: Adtech 2002, American Agency Federation Hall of Achievement Awards, a keynote by Barbara Corcoran on the State of NY real estate, and Variety Magazine's Content + Commerce Seminar. You better get out there your industry's changing and you're missing it.

As you can see, I've stopped sleeping. If I can do all this for my business, imagine what I can do for yours. Enjoy the rest.


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[2] BRANDSTRATEGY: Momentum = Mass x Speed x Direction

"Momentum" is a new book by the VP of Marketing at Cisco. He claims that you should look at your brands momentum like a dashboard, continuously gauging what consumers think and which way your brand is going. He claims to have been able to beat competitors by doing this since 1994, when he implemented the strategy. But what is it?

Brand Mass:
1) relevance of value proposition (the importance of the brand's promise to its target audience),
2) ecosystem potential (how the product and category help other companies achieve success),
3) category leadership (product's dominance in a category and how well it solves customers' problems)

Brand Speed:
1) market agility (how well the company creates/manages fluxes in the market)

Brand Direction:
1) brand integrity (the company's trustworthiness, how well it follows through on promises),
2) management vision (executives' skill at making their company impact the market and at evangelizing vision of market's future)

Through extensive research of 20,000 customers, the writers deduced these six forces of differentiation and calculated their impact on purchase intent. These forces change depending on current events, state of consumer sentiment, or competition, but by staying aware of which force is decreasing, or increasing, your competitive edge will remain sharp.

BOTTOM LINE: Unless you're Cisco, who cares? Kmart seems to care since they've recently increased their attention to their Latino and AA consumers, creating new publications and rewards for this audience. Kmart realizes that it cannot compete effectively in Brand Mass, so it's hyper focused on Brand Speed and Direction with a niche consumer segment. Their goal, profitability, not market share. And it's working.

Kmart Kit Helps New Moms
Making the Most of the Multicultural Market
Momentum = Mass x Speed x Direction


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[3] CONSUMERFOCUS: Consumers Are Irrational

Wow: Economics is based on utility. Markets are created because as rational humans with needs, we engage in exchanging something of lesser value for something of greater value, value being subjective, and humans being those with less than a few billion bucks in the bank. Economists, and just about anyone with a calculator, continuously predict that the state of the economy is so bad, consumers shouldn't be spending, instead hunkering down for war and unemployment, as rational humans perceiving more value in saving for an upcoming rainy day. But the reality is that consumers are spending. Internet spending is actually up 16% over Q401. What's going on? Are economists wrong? Are analysts wrong? I say hell yeah! It's not optimism, it's a healthy dose of psychology into the economic model. Again, if economics is based on utility, it's based on logic. But as it turns out, consumers are not entirely rational, seeing huge losses/gains in the short term, (which makes them very risk averse), and the state of their wealth in the long term, (making them less risk averse). Consumers are not thinking about some potential future rainy day. They perceive greater value in food, clothing, entertainment, and travel now than saving, even if saving is what would make more sense as a long term, economically healthy strategy.

BOTTOM LINE: By tailoring our communications to consumers with long term value, we can persuade them to purchase now, regardless of our brand's necessity in consumers' daily lives. If we tailor our communications with urgency, listing potential rewards or terrible losses by not acting now, we expose ourselves to the risk of losing consumers who would ordinarily spend on our brand, but were so risk averse to our offer, that they decided not to make a choice at all. However, as a hedge, increase the size of the reward, to encourage a serious commitment from those consumers that are persuaded by your offer. There is no way to actually predict human behavior, as proven by Nobel Laureates, however, by sticking to these fundamental principles, our chances increase that we will not be affected by any economic "sag". The implications and strategies that can evolve from this form of thinking are huge, but we'll get deeper into them later.

Nobel Laureate Debunks Economic Theory
Nobel Laureate Proves It In The Lab
Fears Increase, but Consumers Keep Spending
Behavioral Economics (pdf)
Making Sense of Predictive Analytics
Scratching a Niche
How Analytics Fights Consumer Fraud

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[4] MEDIA: Newspapers Without News or Paper?

If journalism isn't dead, it's dying. In an effort to increase circulation figures and ad pages, many newspaper publishers are trimming prices, releasing "youth oriented" editions, and increasing their celebrity and "spin" coverage, or stories made to be more memorable. It appears that 18-34 readers (advertisers' bread and butter) are no longer considering newspapers a critical part of their daily lives. And since many newspapers still use old "gimmicky" methods to grow subscriptions and have poor to no web presences, these consumers just aren't picking up the paper as often as publishers would like them to.

BOTTOM LINE: Should newspaper publishers simply forget about reaching anyone younger than their core 35+ reader? As the industry has been trending, should newspapers also increase sub and ad rates to compensate for a lowered circ? The first thing I'd ask consumers is: what section appeals to you most and why? How reliable or how much credit do you assign to your local paper's coverage of "important stories" and why? Why do you purchase the competitive newspaper? I'm willing to bet that size and "ink-fingers" are big hurdles as well and as traditional and established as these attributes are, should be changed. But don't fret publishers, college kids still read their college papers. In fact, a new study says that 75% do. This opens up new strategic opportunities (i.e. competing on-campus with college papers? Subscription with your tuition?). College kids aren't the only newspaper readers: turns out that car buyers' #1 source of information at the last phase of the decision making process is newspapers, according to the guy that's in charge of buying all media for GM. This leads me to wonder if certain consumers still read newspapers because that's how they prefer their content or because newspapers have been around so long, it's habit. When we get the answers to these questions, we'll be able to manage a newspaper brand more profitably. Lucky for you, you have me to get the answers for you.

College Students Choose Print Newspaper for Daily News
Newspaper Circ Holds Steady
Media Bias (pdf)
Negative Media? That's News to Me


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[5] MANAGEMENT: Following Customers Around

Shopping online: A shopping cart knows everything a shopper's done, suggests relevant offers and products, and generally does an ok job of increasing the purchase amount. Shopping offline: Same thing. But why is it creeper to have shopping carts personally advertise to consumers and keep track of shopping patterns if consumers readily surrender their privacy to online stores? Safeway has been rolling out "smart shopping" carts to help consumers find more relevant products a.k.a. spend more money. But consumer advocates hate it and customers don't entirely like the idea of having Safeway following them around. It seems like a logical transition from your "plus" or "savings" card that consumers get scanned during a check-out for discounts. Since retailers make the short-term rewards worth the loss of short-term privacy, consumers willingly tell the retailer what they've purchased. But the irony is that retailers don't generally make use of all this data, since it's too costly to manage. Now, retailers' solution: follow customers around the store. Researchers are drooling at the wealth of data they think they'll learn from following consumers around offline as well as online. Is this a sound strategy?

BOTTOM LINE: Any strategy that helps you learn more about your consumers is good, if the consumer consents. The problem is there's a fine line between informed consent and un-informed consent. And chances are, most consumers who plan to buy milk and O.J. don't expect Safeway to be watching their every move the same way criminals are observed. Is there a better way? Yes. Invest more in the data you currently have, leverage your in-store management to conduct customer surveys and interviews, and continuously experiment with store layout and your merchandizing, because if consumers can simply find things easier, you wouldn't have to remind them to get it with a beeping shopping cart. Safeway probably won't loose too many customers over this silly, costly venture, especially since it so closely resembles an online environment, but that doesn't mean it's the right way to learn about your consumers. The right way? ASK.

"Smart" carts on a roll at Safeway


Disclaimer: The recommendations, commentary and opinions published herein are based on public information sometimes referenced via hyperlinks. Any similarities or likeness to any ideas or commentary from any other sources not referenced is purely coincidental. al berrios & co. cannot control any results occurring from advice obtained from this publication nor any opinion(s) conveyed by any reader of this publication.

(c) 2001-2005. All Rights Reserved. al berrios & company, inc. Published by al berrios & co. This Report may not be reproduced or redistributed in any form without written permission from al berrios & co., subject to penalty.


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