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al berrios IMKTG REPORT
11.12.02: Psychology of Economics; more
THIS WEEK'S CONTENTS ARE:
[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
[1] JUST SAY IT:
>> "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: http://www.alberrios.com.
(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.
[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.
READ MORE:
Kmart
Kit Helps New Moms
Making
the Most of the Multicultural Market
Momentum
= Mass x Speed x Direction
[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.
READ MORE:
Nobel
Laureate Debunks Economic Theory
Nobel
Laureate Proves It In The Lab
Fears
Increase, but Consumers Keep Spending
WAR,
ECONOMIC UNCERTAINTY HINDER NET HOLIDAY FORECASTING
POLL:
HOLIDAY SPENDING WILL HOLD STEADY
Behavioral
Economics (pdf)
Making
Sense of Predictive Analytics
Scratching
a Niche
How
Analytics Fights Consumer Fraud
^
>>>>> >>>>> >>>>>
[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.
READ MORE:
College Students Choose
Print Newspaper for Daily News
ON
YOUR DAY'S TO-DO LIST, IS READING THE PAPER A MUST? (dead link)
SINGLETON
URGES NEWSPAPERS TO EMBRACE WEB
LAX
MEDIA LET LEGISLATORS HIDE TIES
NEWSPAPER
GROUPS TEST SPECIAL GEN Y EDITIONS
PUBLISHING
TURNS A PAGE
AN
OLD-TIME NEWSPAPER WAR FOR YOUNG LOYALTIES
CHICAGO
DAILIES DUKE IT OUT IN BATTLE FOR YOUNG READERS
CHICAGO
TRIB AD PUSH WILL PAINT THE TOWN RED(EYE)
SUN
CUTS PRICE TO ADD READERS
NEWSPAPER
CIRCULATION GAINS SLIGHTLY
Newspaper
Circ Holds Steady
Media
Bias (pdf)
Negative
Media? That's News to Me
[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.
READ MORE:
"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
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