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Thursday, April 30, 2009

A brief update to yesterday's posting about H1N1 (aka Swine Flu)

Overnight, the World Health Organization elevated the threat level to Phase 5. The move, along with the comments offered by health experts, seems to at once suggest that pandemic is inevitable, but also that the consequences will be less than dire for the vast majority of victims.

While some countries are canceling public events and banning certain border crossings and international travel, the U.S. consensus seems to increasingly favor a strategy of mitigation, rather than containment.

In the weeks ahead, consumers might be more careful and considerate with regard to travel, or attending events that involve large crowds. And to repeat an observation from yesterday, consumers are likely to appreciate it when you offer hand sanitizers and clean washroom facilities, and when you invite employees who might demonstrate symptoms to stay home from work.

For an explanation of the mitigation vs. containment strategy, click here to watch a video on the topic from the New York Times.

For more insight about what raising the threat level means, and perspectives on the expected symptoms most people will suffer, watch this video from CBS News (commercial pre-roll required). - Mike Anderson

Watch CBS Videos Online

Wednesday, April 29, 2009

A pandemic of pandemics

The SARS outbreak in 2002 (aka Severe Acute Respiratory Syndrom), The Influenza Virus A outbreak in 2006 (aka Avian Flu, Bird Flu), and now, Swine Influenza Virus (aka Swine Flu). It seems this decade has brought us an outbreak of new disease outbreaks.

But has it really? Ours is a population that, in large part, thought many of these devastating diseases had been virtually wiped from the face of the planet. The industrialized nations have largely been spared the wrath of Cholera, Polio, Malaria, Tuberculosis, Typhus and other legendary, catastrophic pandemics over the past fifty years. But those diseases persist in less developed parts of the world.

A few short years ago, few of us had even used the word “pandemic.” Now, the term seems to be used in the nightly news with remarkable frequency. But the reality is that the western world is far from immune to pandemic. Other strains of influenza have had widespread impact in recent years. (One example is the Fujian Flu [H5N1], which was largely impervious to the vaccinations developed during the 2003-2004 flu season.) And until 1981, Human Immunodeficiency Virus (HIV), and Auto-Immune Deficiency Syndrome (AIDS) went virtually unrecognized. Now, HIV/AIDS is certainly considered a worldwide pandemic.

Implications: Scientists worldwide are working frantically to better understand and develop treatments for the fast-spreading Swine Flu. Meanwhile, the best defense against this most recent pandemic threat remains precaution and personal hygiene.

Some companies (indeed, some countries) have prohibited travel to countries where the disease is known to be pervasive. Policies are being revisited with regard to standard hand-washing, and the distribution of anti-bacterial soaps and lotions. (How will your company respond? Do you have a corporate plan, or plans, depending on the various scenarios that could develop?)

I’m wondering whether the relatively low impact of Bird Flu and/or SARS here in the U.S. might result in a “Boy who cried wolf” mentality toward this, a similar threat. (Not for me. I travel extensively and take these matters quite seriously.) On the other hand, if the disease continues to spread quickly—or even accelerate from its current pace—will people become alarmed, and perhaps even over-react?

At times like these, it is nice to know my job is not to have all the answers… but to ask questions. What, if anything, can your company do to render aid, provide comfort, assist in prevention, or otherwise respond to this increasingly high-profile issue? What do you offer that might make a household more self-reliant, if traditional shopping patterns are disrupted?
If recent history is any indication, this won’t be the last time we are confronted by new or unfamiliar, and rapidly spreading diseases. This is a conversation worth having, and a number of scenarios should be considered.

CNN did a story, recently, on what we can learn about pandemics, based on the experience gained during the SARS pandemic in Asia. It was an eye-opening piece, and can be seen here (commercial pre-roll required):

Back to School 2.0

A rough economy can be good for business… if what you sell is a way for people to enhance their skills and gain advantage in the job market. Schools all over report strong demand from a wide variety of constituents.

Discovering a tight entry-level job market, more high school graduates are heading to campus rather than the help-wanted section… and even students who had dropped out of school are dropping back in (see this story from MSNBC). Fighting to stay relevant in a more competitive workplace, even middle-aged and older workers are heading back to the classroom in a search for advantage… either to help them preserve their current job or make themselves marketable for the next opportunity.

Implications: This new student body isn’t necessarily buying education. It is buying relevance. It strives to be marketable in a more competitive workplace. In some cases, it sees education as a save haven while the economy shakes out. It seeks to discover what new demands the economy will place on its available workforce… and it seeks to acquire the skills that can supply that demand.

Think of the power behind this mentality… and ask how your company, product or service might harness that power.

If you’re an automotive service center, recognize that people cannot afford to be sitting on the side of the road, late for work, due to a breakdown; this labor market may not show mercy, regardless for the reason an employee is late.

If you sell clothing, realize that the incentive for looking sharp is very strong right now. (In a world where layoffs are being decided, I don’t want to be seen as the least best dressed.)
If you sell technology tools (laptops, mobile phones, PDAs), realize that the promise of doing more—and in less time—is a promise that may get my attention.

And regardless of what you sell… if you can offer expertise or know-how as a value-added component to my purchase, that is an advantage I’ll be interested in.

We’re not just going back to school. We’re gravitating to anything that might give us a competitive edge.

Tuesday, April 28, 2009

An update on "The Fuel Economy"

Back in early April, I wrote a story pointing to the potential for another spike in petroleum prices, which could kick-in about the same time an economic recovery sets in. The reason for that spike: During the recession, many oil companies have greatly reduced research and development. When consumers start spending again, demand for petroleum could go up quickly… and the absence of new source development could result in an inability to supply that demand.

Recently, CBS News ran a story that sheds more light on this possibility. See below (commercial pre-roll required).

Watch CBS Videos Online

What (and where) do you want to be when you grow up?

Fewer people want to be Wall Street bankers, apparently.

Recently, I’ve noticed several news accounts that seem to indicate that investment firms may have to compete a little harder to recruit future talent. One is a New York Times story that implied an exodus from the Wall Street world, due to shrinking salaries, reduced bonuses, and decreasing job stability.

Those same elements, along with a general change in the perception of what it means to be a Wall Street banker, seem to be causing business graduates to re-think their end game, and consider jobs outside the financial epicenter. (See this NY Times story.)

Implications: One of the benefits of being a big, successful company (or industry) is that you earn a reputation for being "an employer of choice.” The recent turmoil in the financial world seems to be impacting not only current and prospective customers, but current and prospective employees, too.

Lots of companies are facing challenge right now. (Turmoil is certainly not limited to the financial world!) Is your company meeting its challenges in a way that might seem over-reactionary, knee-jerk, or quirky? Or are you responding to challenge with a sense of confidence, conviction, and purpose? Do you behave as if your company has a bright future?

As symptoms of economic recovery become more apparent and frequent, companies will soon be competing for top talent to join their team. The track record that will make you an employer of choice (or not) is being built right now.

Certifiably green themes still attract

A few years ago, any product with an environmentally-friendly slogan seemed to sell well. These days, the consumer is more environmentally intelligent, and looking for something a little more authentic, when it comes to buying-in to a “green” proposition.

Examples? Sun Chips recently announced an initiative to package their product in a fully compostable package by Earth Day, 2010. And in another Marketing Daily story, coverage was given to Macy’s for their two-pronged eco-friendly campaign. During their “One Good Turn” single-day sales event, and at their online “Eco-Shop,” profits are shared with the National Park Foundation.

Implications: In a back-to-basics economy, environmentally-friendly initiatives still sell well. But ever more value-conscious consumers want to know the benefit is authentic, both to their own bottom line, and to the cause you claim to support. Because their dollars are spent more prudently, and their knowledge of environmental issues are more keen…

Can the consumer verify your positive impact on the cause?

Is the cause important enough to your consumer that your efforts will be valued?

Is your “green” campaign sustainable, or will it be seen as a one-hit wonder? (Often, campaigns launched “just in time for Earth Day” are seen as insincere; true environmentalists want to see an ongoing commitment, and might see anything less as greenwashing.)

Consider everything

Vespa sells scooters. When gas was around $4.50 a gallon ($1.55/liter), scooters were popular. Now, petro is cheaper. Fewer people are coming into scooter stores. So what’s a scooter seller to do?

Well, Vespa is taking their story out of the store. (Dare I say, "out of the box?") According to this Marketing Daily story, Vespa will go directly to the employees of Continental Airlines who work at the Newark airport, and market to them as if they were a special group of constituents. (Among other things, they will ask the workforce to consider the environmental impact of “reducing the wheel count” of 3,000 employees.)

Implications: This is a great time to break from convention. Think different. Create opportunity.

Never mind e-Bay. How about u-Bay?

All you need to do is walk through a local shopping mall, or drive by the nearest car dealer. For many companies, it seems like 75% off is the new regular price. (See this unpleasant story in the NY Times.)

If this loss of margin weren’t so painful, it might be funny. Because while price is almost always one of the criteria upon which a purchase decision is made, it is almost never the most important reason people buy. (Think about it. When was the last time you bought a product or service for which you had zero need or want… simply because it had a low price?)

Implications: We live in a time when the value proposition is more important than ever. How does your product or service impact the life of the consumer you serve? How does it enrich their family or their company? In what ways might the product you sell gratify the person who buys it? More than ever, companies, products and services must be presented in a way that illustrates their unique value proposition. Why?

Absent a unique value proposition, price becomes the default influence over every purchase decision.

In other words, if you’re not special, you’d better be cheap. Cheaper than Wal-Mart, or even Craig’s List or e-Bay. Can you quickly state your unique value proposition? Can your sales team? Can you build that value proposition into the greeting when people call your company? And is it the first (and final) impression people are left with when they enter or leave your building?

Recently, many retailers seem to be in a fierce race to achieve the lowest possible margin... focusing on pricing strategies that seem like little more than an auction.

While many are playing that game... few will win.

City and State, Inc.

A gardener will tell you that pruning a plant—cutting off the parts which are dead or dying—allows the plant to send water and nutrients to where they’ll do some good. In a rough economy, companies do the same… closing plants or eliminating product lines or services which might be unprofitable. Now, even some cities seem to be turning to this “right-sizing” strategy as a means of survival. A recent story in the New York Times explored the municipal pruning of cities like Flint, Michigan. According to the story, city leaders have simply begun to accept that they have finite resources for things like maintenance, fire, and police protection. And they are figuring out how to allocate those resources where they stand to do the most good. [Note: I know little of Flint, and neither agree or disagree with their strategy.]

Not lost on me as I read this story is that any neighborhood being razed will certainly have a collection of families for whom generations of memories will represent a strong opposing force. Nobody wants to be the branch that is cut from the tree. Just as no employee wants their plant to be the one that is shut, and no customer wants their favorite product to be the one that is no longer produced… nobody wants theirs to be the neighborhood that is abandoned by their town.

Implications: Where do I start!? First of all, watch for churn. If a resident feels abandoned by their city, watch for that resident to abandon their town. This trend could result in some inter-city migration, in addition to the intra-city migration the planners are hoping for. (Perhaps the policy will even lead to many interstate moves.)

But this story got me thinking in another direction, too. Cities and states are, in many ways,

It seems like every so often, companies launch a push to “diversify,” moving into adjacent categories or expanding into new businesses, in the name of gaining market share or broadening the revenue base. Maybe a few years or a few decades later, it seems like those same companies reverse course toward “consolidation” (also known as “right-sizing” or “returning to their core competence”).

City, state and federal governments often seem to operate by a similar pendulum. Adding services and initiatives when times are robust, and cutting them when revenues fall.
Recently, my wife and I sold our city home. We have been living in a second-ring suburb that could be described as pretty typical, here in Minnesota. As soon-to-be empty-nesters, we are “right-sizing” our dwelling… and the home we have made an offer on is part of a neighborhood association. In other words, we’re opting-in to a fee-for-services relationship. In addition to paying fees in the form of taxes to a city, we’ll pay a monthly fee to a corporation. In exchange, we expect amenities and maintenance that are a little better than the development or suburb next door.

When so many cities and states are cutting services, will the door be opened for more amenities, maintenance and services to be handled by the private sector? Shopping malls already hire private security firms to compliment police protection, for example. Many families hire distributors to deliver bottled water as an alternative to the tap. Charter schools are launched in spite of readily-available public education. What other products or services might “go private” as government services are cut?

After all, if
city and state governments turn to fees for service as a means of raising revenue (an attempt to make up for shrinking sales tax, income tax and property tax income), why should the consumer (tax payer) not accept bids from other vendors? A recession is a time of churn. Customers grow disenchanted with providers (both public and private), creating opportunity for vendors who can step in and deliver the benefit that consumer seeks.

Things are not always what they seem

Consider how this looks from the consumer’s point of view.

Merrill Lynch, Bear Stearns, Circuit City, Linens and Things, and now, Pontiac (per the story in this morning’s New York Times); all of these are brands that had seemingly been around forever (though some longer than others). And it was reasonable to assume that they would stay around forever. But now, they have either fallen off the planet, or they seem to be tilting in that direction.

What is the consumer to think?

Implications: Regardless of how strong and sound your company might be, you should not assume the consumer knows it or believes it. Even the most stalwart companies—even those with the longest, strongest legacies—can seemingly evaporate with relatively little or no notice (see list above).

If I bought a camcorder from Circuit City last year, and now it is broken, I’m on my own to navigate the repair with the manufacturer (the original retailer has left the building). If I was holding a gift card to Bombay Trading Company when it was shuttered, I’m seen as just another unsecured creditor (according to a company website).

In a world where so many companies vanish so quickly, it might be very smart for your company to (not claim, but) demonstrate that it will be around for a long time to come. What investments have you made in your stores, factories or facilities, lately? What is your heritage… but more importantly, what are your future plans? Do you have customers (testimonials) that will vouch for you? And if you’re in recruiting mode right now, are you doing it publicly? (Nothing says “we have a future” like, “We’re hiring!”)

It is important to communicate your strength and stamina to a consumer who has seen many heritage companies fade away. Mention your Web site in your advertising, and then make that site a source of full disclosure, complete transparency, and abundant detail for consumers who might be eager to research that you’re worthy of their investment, and someone that can offer a long-term relationship.

Wednesday, April 22, 2009

I'll "pencil you in"

As the economy continues to suffer spasms, it seems everything is negotiable; even things that have already been negotiated. Vendors are not surprised anymore when a long-stable client calls to adjust or even cancel a contract. Mortgage companies are no longer shocked when a homeowner simply stops making payments. And many workers have either experienced--or seem to anticipate--some kind of an adjustment to the terms of their employment. (There was a great story in the New York Times a couple of weeks ago, talking about the extent to which employment contracts have become “eminently rewritable”).

Implications: In January, Hyundai launched the Assurance Program, which essentially encouraged people to buy their new car, even if they were worried about the future of their job. “If you lose your income in the next year, we’ll take it back.” The company was up double-digits that month, even as other car companies were down double-digits (except Subaru, which was essentially flat).

A second iteration of the plan, Assurance Plus, holds that the company will make a few of your payments if you lose your job (it’s hard to look for a new job if you don’t have a car to get to your interview). As often happens in the automotive category, it seems like most other car companies have now piled-on to this concept. Everyone seem to have some kind of a “confidence” plan.

It occurs to me that another name for "confidence plan" is, "escape clause." We're giving consumers a way out of their commitment. We're offering a contract with a caveat.

Automotive is not the only place where contracts are not as solid as they were once thought. Consider the mortgage meltdown that had thousands of people stepping away from their bank. Or, people and companies who have gone through bankruptcy (or taken drastic measures to avoid it), with employment contracts or vendor commitments as casualties. We are surrounded by contracts that are frequently erased or ignored.

And now, in a way, consumers are being offered contracts which are equally "re-negotiable."

What does it mean when consumers are learning to “pencil you in?” It means earning the next sale might not be enough. You may have to re-earn the sale you’ve already made. That’s certainly no less true for the B2B vendor… than it is for the typical car company. Whatever business you're in, fundamental customer care--and knowing you're exceeding expectations and delivering meaningful value--are more important than ever.

Monday, April 20, 2009

A personal footnote about "security"

Sometimes, life is filled with odd timing and irony. Recently, I wrote about the premium that will be placed on "sense of security" during times like these. Today, a couple of things happened which reinforce my opinions on the topic.

First, a story in this morning's New York Times confirmed that, indeed, matters of security are likely to elevate in importance, as local police departments face a confluence of rising crime (presumably caused by difficult economic times) and reduced resources (caused by cuts to their operating budgets).

I am not pleased to share this personal anecdote on the matter: I was traveling to a speaking engagement this morning--waiting for a connection in Chicago--when my wife called to report that our home had been broken into. She discovered the aftermath upon returning home from running errands this morning; the broken doors and windows which permitted entry to the burglurs, and the mess they left while quickly grabbing whatever they could. Thankfully, the house was unoccupied when all of this was going on.

Implication: Ours is the kind of neighborhood where news like this will travel fast. Certainly, we are shaken by the intrusion (that is such a gross understatement). But so will the neighborhood in which we live be shaken by the incident.

What might people in the neighborhood do, in the interest of defending themselves and their homes, now that intruders have hit so close to home?

Thursday, April 16, 2009

Defining your Corporate Character (before someone defines it for you)

As recent history has taught us, indulging in anything that could be considered extravagant--after accepting taxpayer bail-out funds--is one way for any company to invite a public relations flogging.

Of course, having really savvy competitors is another way to pour salt on those wounds.

A relatively small bank recently celebrated the Colorado Rockies’ season opener by flying high over Coors Field… with a banner about their humble means of air travel. See the story (and a photo) in a recent issue of Marketing Daily. They built a campaign on the idea of not being jet-setters.

At the New York Auto Show last week, hecklers made it hard for presenters to promote their new vehicle offerings… even though the presenters have little influence over the policies of the companies they represent. Such is the resentment of companies seeking bailouts… or companies who might be seen as ignoring the need to alter their product offerings or operating structure. (An interesting story on the Auto Show appeared in Monday’s New York Times.)

Implications: I’ve written more than one story for this blog about the importance of Corporate Character… and making sure your company operates with the same values espoused and appreciated by the consumers you serve.

Every company has two types of identity they should be concerned with. The first is their intended personality, as evidenced by the marketing, advertising, and public relations efforts they put forth. But the second—and just as important—is their Corporate Character. I was raised to believe that your character is who you are, and how you behave… when you think no one is looking.

(Note to self: Someone is almost always looking.)

It looks like Corporate Character will continue to be an important influence for some time to come. Are you ready for the game? Are your competitors?

Mike Anderson

Thinking about the future, and getting a charge out of it

Driven by the desire to reduce greenhouse gas emissions--and dependence on foreign oil--the world seems more than ready for the electric car. We’re not just talking about the supplemental electric motor (aka “hybrid”) that kicks in to make a combustion engine more efficient. We’re talking about the completely electric car.

The key is in the battery, of course. Research and development teams are focused on building batteries that have the capacity and stamina to handle the job, as well as weight and heat characteristics that make the power plant feasible. (Notice how hot a mobile phone or laptop gets while the battery is discharging? Consider the heat generated by a battery that powers a 3,000 pound car.)

But we’re getting closer. A recent CNNMoney/Fortune online story shed light on the significant investments in battery power made by folks like Warren Buffet. And yet another story about how Ford is trying to power ahead with development of an electric car. (The video versions of these stories are offered under the implications segment below.)

Implications: The current economic climate should not keep us from considering the landscape that is just around the corner. In that spirit, I have a couple of questions for you:

In a world where roads are populated with electric cars, what does a gas station look like?

What will my garage look like?

Will there be “premium” parking ramps… equipped with plug-ins?

In what ways will “the grid” need to be upgraded to handle the increase demand for electricity/charging sources?

The electric car is a fascinating thing to think about. But the chain reaction effects that wait “just down the road” are no less interesting. From gas stations to quick-lube stores, a lot of money is spent on aftermarket products and the “traditional” automotive culture as we now know it.

Once in a while, it’s fun to wonder... because often, one innovation demands another.

Mike Anderson

Here’s the CNN Money/Fortune online story about Warren Buffet’s commitment to battery power (commercial pre-roll required):

Here’s the CNN Money/Fortune story about Ford’s progress in electric car development (commercial pre-roll required):

Speed dating for soups and cereals

There’s been a lot of trade press, recently, about how much more careful, deliberate, and frugal consumers have become in the face of a recession.

In the interest of fair play, I have to share this recent story about some research from Miller Zell. Their report, as highlighted in a recent edition of Marketing Daily, suggests that while the use of shopping lists is up substantially (with 65% of shoppers saying they use one), many purchases are still quite spontaneous. (Note: Miller Zell consults companies about in-store strategies.)

Implications: I can buy into the idea that consumers make many in-store decisions in as fast as 2.3 seconds. But if my people-watching skills are any indicator, most consumers also have a pre-conceived notion of the types of products they’re looking for before they ever even arrive at the store. Can an end-aisle display or price-point signage influence those pre-determined purchases? Absolutely! But previous experience, as well as advance exposure to a product or service could be precisely what made that decision so easy to make, and so quickly.

But then, in the interest of fair play, I’m a marketing guy.

Mike Anderson

Drinking leans domestic

A pair of recent stories from Media Post Marketing Daily indicates that consumers are trading down and drinking closer to home, in more ways than one.

One report, based on information from the Beverage Information Group, tells of a decline in sales of imported beers, wines and spirits.

Another article, although not rich in detail, suggests that growth in the beer, wine and spirits category last year was driven by off-premise (at home) consumption.

Implications: A variety of factors could explain why people are drinking closer to home. We might presume that folks are trying to avoid the mark-up that comes with ordering a bottle of wine at a restaurant, or a cocktail at their favorite nightclub. (Especially if you add-in the cost of the babysitter watching the kids back home.) A house party—or a casual evening with friends on the deck out back—could be seen as the economic alternative to a more pricey “night on the town.” But...
  • Could the fall in “out of home consumption” of alcohol reflect a growing trend toward social responsibility (could this issue be impacted by the idea that people are less inclined to drink and then drive home)?
  • Could a decline in imported beverage sales have anything to do with people simply wanting a product that is produced closer to home? (That sentiment often surfaces when the domestic job market becomes unstable.)
  • And of course, the increase in off-premise sales could be driven by a spike in alcohol consumption, overall. A quick scan for stories finds anecdotal evidence of that possibility in both the U.S. and Canada. (Note: Beer sales are actually off, but not as much as sales for wine and spirits are up.)

This is another one of those issues whose causes and effects might be greater than those shown on the surface. As often happens in marketing and research, one answer leads only to more questions.

Mike Anderson

Offering a secure angle in an insecure world

Is it safe to come out?

One topic that seems to be gathering an increasing number of headlines is security. Granted, the word “security” is not conspicuously used. But the collective profile of that issue has certainly risen. For example:

Recently, the Associated Press published a story about the aftermath of foreclosures in South Florida (see the piece here as found on in Washington). One of the great fears among people who still live in these now sparsely-populated developments is that crime will move in after neighbors have moved out.

But it’s not just abandoned property that inspires crime. Economic recession and unemployment can lead to crime rate increases, overall. And since the recession is global, the issue is not limited to the U.S. While crime wave fears are “on the radar” (see this NY Times story), a quick online search reveals that the conversation about crime is a world-wide dialogue (for example, see this week’s story on the matter from SBS Australia).

Now, according to a recent New York Times story, another trend could add to the anxiety. States are granting early release to more prisoners, sooner, in the face of government budget cuts.

Implications: Last Fall, I wrote a posting about the increase in sales of various home security products (“Selling Safe,” October, 2008). Since the recession has deepened, my hunch is that the profile of personal security matters will rise even higher. The thought occurred to me, recently, when a mobile phone salesman--talking to my wife--described one device as being popular because, “Women like that this one is easy to dial, even without looking, if you are in an unfamiliar place.”

In what ways might you provide additional security, indirectly, that consumers might appreciate?

  • Is your gas station or store particularly well-lit after dark?
  • Does your parking lot appear well-maintained (not ignored)?

Or, think even wider…

  • A warranty, or assurance of service after the sale?
  • Freedom to return or exchange… if I change my mind?
  • The testimony of some real-life satisfied customers?

It might be a smart idea to revisit matters of reliability, authenticity, and personal assurance. These attributes could provide a measure of security, in an insecure world.

Mike Anderson

Frozen foods heating up, and finding balance

An increase in at-home dining is now a years-long trend, beginning with the early hints of an economic slowdown back in 2006 and 2007. But that doesn’t mean that someone is rushing home to make pot roast and pie from scratch every evening.

Consumers are still want a side of “fast” with their order of “affordable.” So the frozen food section has become very popular, according to this Media Post story.

Implications: We live in a world where people are working harder, and for more hours, just to maintain the status quo. It is not surprising that more people are showing more signs of being time-and price-sensitive.

Are frozen foods the most economical meal solution in the supermarket? Maybe, maybe not. But they seem to deliver the right balance of fast, easy and affordable.

In what ways could you present your product or service in a more time-sensitive light? What can you do to reduce the time it takes to buy or use the product you sell? (Hint: Does your web site make it easy for the consumer to do some research in advance of a purchase? Does your car dealership offer sales-by-appointment? Does your bank lobby feature a “deposits only” teller window?)

Yes, people want cheap. But even more, people want balance. Ask your customers what perfect balance looks like.

Mike Anderson

Wednesday, April 1, 2009

The Fuel Economy: How low prices now could lead to higher prices later

Last summer, sweet crude peaked at $147 per barrel… and the memory of near $5/gallon gas is all too fresh in our minds. One might say that consumers are currently enjoying a “fuel dividend” right now, with gasoline expenditures now at between two and three dollars lower than we paid last year.

Different families are using that dividend in different ways. One couple that we’re acquainted with recently decided to go ahead with a new living room furniture set… citing the fact that they had put that the purchase off last summer when gas was so high. Now that prices are closer to $2/gallon, they felt they could afford it. For other folks, the lower cost energy has come just in time to help manage a reduction in income, related to a layoff or cutback in hours.

But for some time now, experts have been warning of a “second wave” of high energy costs, caused, in a way, by the fact that oil prices have fallen too far. Oil company income has fallen, so oil companies have cut-back their efforts related to research and development. Essentially, they’ve stopped looking for new sources of oil, because the world demand does not support pursuing new supplies. When the economy begins to recover, and the demand for oil rises quickly, those same oil companies will return to the shortage-side of the cycle; prices will skyrocket in the future for the same supply-and-demand reasons that have kept prices low right now. To understand this issue in greater detail, I offer these links to a story found in Newsweek last November, a more recent story in the New York Times which cites the McKinsey Global Institute study on the matter, or a story that appeared last week on CNBC.

Implications: First, if you have an energy-efficient product offering, and you're frustrated that it had traction while energy prices are down... stay tuned. Another window of opportunity is probabaly on the way. But for the rest of us, perhaps a there is a more important message here...

“Waiting out the recession” is not a viable strategy. A lot of smart people with a wide variety of experience have suggested that the road forward will present different challenges than the one that has brought us this far. As we’ve cited at this blog, Carl Steidtmann of Deloitte Research makes a great case for the de-leveraging of the consumer, and Lee Scott, former CEO of Wal-Mart suggests that some of the changes in consumer behavior could last a while. And as if the challenges we’re aware of weren’t enough, there are almost certainly new challenges to come. (Case in point: The possibility of a “second shock” of high oil prices.)

It is not my goal to cause worry. I’m just a big fan of facing reality. And the reality is this: If you’re waiting for a return of the good-old days when sales growth seemed to be set on auto-pilot… you might be waiting a while. Those companies who are embracing today’s realities, focusing on how to survive and even thrive, and figuring out how to play the hand they’ve been dealt… will do much better than those who take an ostrich-approach.

Consider, also, how you can apply the oil company challenge to your own business. Have you ended all Research & Development? Are you thinking about what the consumer might want next? Have your expense cuts reduced your ability to render service? When the consumer’s demand does increase—and it will—will you still be in a position to satisfy it? As I’ve said before, it takes one set of skills to survive a recession. It takes another set of skills to survive a recovery.

Mike Anderson

Business recalibration

In a posting titled Consumer Recalibration, I offered some observations about how people are shifting their purchase (and life) priorities in response to the current economy. Like those consumer shifts—or in response to them—most businesses are recalibrating, too.

Companies in virtually all categories are taking a second (and third) look at almost everything they do, and every dollar they spend. Legacy industries are scouring their practices, hoping to find cost savings. They know heritage companies are often home to things that are done a certain way, “Because that’s how we’ve always done it.”

In a nearly endless sea of business advice, I’ve set aside two different articles which seem to make sense of these corporate self-evaluations. One of those stories appeared in the New York Times, titled “How crisis shapes the corporate model.” The other comes from the Harvard Business Review, and offers “Five rules for retailing in a recession.”

Implications: Whether you’re a corporate strategist or a street-level retailer, you realize that few customers are spending money “The way they’ve always done it.” Thus, smart companies are not satisfied to run their business, “The way they’ve always run it.”

Has your company scrutinized any function that is process-based… and doubled-down on everything that is results-based? Are you cutting costs wisely… or chopping with an ax those expenses which should have been trimmed with a scalpel?

If you’re in a B2B industry, are you doing everything in your power to help clients see your expertise as an important “value added” ingredient? Many organizations are exploring uncharted territory right now. And the more you can do to help show them a viable path, the more likely you are to transcend the role of vendor… and achieve the title of partner.

For corporations, just like consumers… expectations are changing.

Mike Anderson

Abandonment Issues

As an example that there are still exceptions to the rule of recent market trends, my wife and I have successfully sold our home… by choice. While certainly lower than what we could have sold it for a few years ago, we got a price we could be happy with, and the closing date is scheduled for late May.

So we’ve been house shopping, hoping to benefit from current market conditions; many of the homes we’ve considered have gone through foreclosure. Everyone knows that process is terribly hard on a family… but we’ve also seen evidence of how hard foreclosure can be on a house.

One of the properties we looked at could conceivably be a $400,000 property near the Mississippi River. But it was originally listed at just $199,000… as the main water supply to the house had been vandalized and the basement flooded. The central air, water heater, air handling system and even the kitchen cupboards had been ripped out (and probably sold). With no bolts holding the restroom fixtures to the floor, we wondered whether this home had been the victim of a new urban legend: That former occupants dumped concrete down the sewer pipes on their way out, as an act of vengeance on their mortgage holder or the next owner. Recently, we noted that the house had fallen another $20,000 in price.

But houses are not the only properties suffering from abandonment issues. With increasing frequency, automobiles are being torched by owners who are upside down in debt. (See the CBS News video below. Commercial pre-roll required.)

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And as if to dramatize that the problem has gone beyond coast to coast, a story in today’s New York Times indicates that some folks have “abandoned ship,” dumping a boat they can no longer afford… leaving watercraft to litter the nation’s coastlines.

Implications: Professionally speaking, my first thoughts on this issue have to do with the how we will define “qualified buyer” in the future. I have to believe that companies who sell big-ticket items—of any kind—will be forced to change the way they decide whom to lend to. This new age of default has changed the game. Now, having a buyer or borrower who cannot pay for an item is the least of your worries. A company who sells or finances a major purchase must now worry about whether the customer will actually destroy the items sold... which often represents self-securing collateral for the transaction.

To continue the professional perspective, I’d watch for an explosion of recovery-based small businesses: Developers who move from building houses… to re-building them. Salvage specialists that can make abandoned watercraft sea-worthy once more. Will credit counseling firms go beyond payment renegotiation and financial coaching… to warning clients of the risk of criminal destruction of property?

The challenges and opportunities presented by this default-and-destroy mentality will not fall exclusively to private enterprise. Non-profits and public service organizations will also inevitably be involved. I’ll offer some personal thoughts with the goal of explaining what I mean. What is the environmental impact of coastlines and waterways littered with boats and yachts that have been strips of their sale-able parts? When so many charities have embraced the “donate your car” approach to raising revenue, isn’t it a tragedy to see so many vehicles going up in smoke? And wouldn’t it be great if a share of these abandoned homes could be leveraged to the advantage of people and families who don’t have one?

Mike Anderson

Consumer re-calibration

Expectations are everything. And right now, every expectation seems to be getting re-set.

Should I expect that my Everyday Low Price grocer will now have two or three cash registers open, instead of ten? Should I expect some wide-open spaces at my club store, where piles of pallets once sat? And forget the raise… should I be happy to hold-on to my job, even if I’ll work harder this year than last, but earn less?

People, in general, seem to be re-thinking what they expect, from almost every aspect of their lives. They know the stores they shop have cut personnel and inventory. And they know the company they work for is under pressure (at least).

For two thought-provoking takes on the matter, see this briefing from Josh Kimball at Iconoculture, or read this extended piece from Time Magazine.

Implications: Consumers are not the only people who determine new expectations. You do, too. Have you walked through your store or dealership—or used your product or service—from the consumer’s point of view? What aspects of your value proposition are most relevant in the mind of your consumer? What are you doing in-store that the customer could care less about? What unique attribute of your company, product or service made the consumer choose you… rather than one of your many competitors? And just as important as all of these questions: What doesn’t matter?

Looking at life (or a purchase experience) through the eyes of a target consumer can help you make the most logical cost cuts… while mitigating potential damage to your relationship with your customers. It can help you make the smartest product improvements and experiential enhancements.

The customer is re-evaluating what they expect… from companies like yours. Through your responsiveness, innovation and service, the consumer is re-learning what you expect of your company, with nearly every transaction.

Mike Anderson