Dateline: June 2010. The recession is over... (and it has been for nearly a year)

Remember how the beginning of the recession was announced?

It wasn’t.

For much of 2007, and virtually all of 2008, consumers and companies knew something was wrong. But anytime it was brought up, someone on Wall Street, at the Treasury, or in the White House would essentially say, “No, a recession is defined as two consecutive quarters of negative growth in the GDP, so technically, we’re not in a recession yet.”

Then, on December 1, 2008, it was made official. Not only that we were in a recession, but that we had been for a full year. Why am I re-hashing all of this? Because: A recovery will be announced in virtually the same way.

To say that a recession exists when there are two quarters of declining GDP is not entirely accurate. The basis of a recession involves much more than that, including real trade and manufacturing sales, personal income rates, inventory liquidations and more (including two consecutive quarters of a drop in the GDP). All of this is why I’m not a math person. But the important point is this: These measures are taken over time. And by the time all of these indicators confirm that the recession is officially over, the recovery will have been underway for twelve to fifteen months.

A recession is not one singular event with a clear beginning or end. It is a set of complex criteria, which relies on historic data more than today’s information or tomorrow’s forecast.

Implications: If you’re waiting for someone to give you the green light, indicating that it’s time to start getting back to normal, you’re likely to be run-over from behind.

Editor’s note: I had the privilege of attending the recent ANA conference in New York, where the best speaker of the day was the chief investment strategist from Charles Schwab. Her name is Liz Ann Sonders, and she gave wonderful—useful—clarity to how recessions work, and what we might expect from a series of economic recoveries. I share more about what I learned at that event at a posting titled, “Enough about recessions. Let’s talk about recoveries.”

Mike Anderson

Sorry, friend... but I can see right through you

Like many people around the globe, I am watching the post-election unrest in Iran with great interest. One of the most fascinating aspects of these reports: They’re not coming from reporters.

While officials have allegedly cancelled the credentials of many journalists who are visitors to their country, they have failed to stop the export of information. Individuals, working through blogs and social networks, are organizing protests, sharing information, and publishing eyewitness accounts… in real time, world-wide. In this uncontrolled, unfiltered media space, I'm sure some of this reporting is accurate, some of it is not, and some of it is probably outright propoganda. The New York Times had a great story about this people-to-people information exchange in Monday’s edition. It was followed by an article on Tuesday about how the U.S. State Department is doing what they can to help Twitter and other social networking sites stay up and running (click here to see that follow-up story).

It is not my intent to begin covering international affairs at this site. But it is my intent to consider how those affairs are being covered. Remember the days when a company would privately craft a press release, and embargo the distribution of that information until a certain date and time?

Those days are over. Information seeks to be known… and in the age of social networking, it will be.

Implications: Just because News Corp announced a significant layoff of its MySpace workforce this week doesn’t mean social networking is in its death throes. On the contrary, the size of the audiences (or more accurately, the number of participants) involved with MySpace, Twitter, Facebook and other SN sites continues to grow. (The challenge for most of these companies continues to be figuring out how to monetize that critical mass.)

By now, most companies have begun to explore—or at least consider—how to best harness the power of social networking as a marketing resource. (Recently, I heard Rich Godwin of Google deliver a speech about how the Obama campaign leveraged Web 2.0 as an important set of tools in last year’s presidential election… and how marketers could/should be doing the same.)

But has your company conducted any kind of a risk assessment, with regard to the potential damage that could be caused by an uncontrolled viral campaign? One authored by an angry customer, or a disgruntled employee? Walk through you store, factory, dealership, restaurant or firm… asking yourself this question: “What if anyone could know about anything we do here?”

• Is there anything with your walls that you would not want someone to photograph with their mobile phone camera, and then post online? (Examples might include a crude poster hanging in an employee cubicle, or a dirty food preparation area.)
  
• Have you thought about how your company would respond to the unintended release of sensitive information, or even the distribution of misinformation?
  
• Have you provided customers with a way of lodging a complaint within your organization—a system that strives to satisfy their issue or at least makes them feel “heard”—so they feel less compelled to take their issue elsewhere?

I’m not telling you that marketers should operate their companies in a manner that makes them virtually transparent.

I’m telling you that ship has sailed.

Mike Anderson

Where credit is due

More than two years ago now, I began citing a story in the Los Angeles Times about how strange things had become with regard to financing a car or truck. In the story (12/2007), a couple had traded-in their 2001 Suburban toward the purchase of a new F-350 pickup truck. The irony of the story is that they still owed roughly $9,500 against the suburban, and paid nothing down in the transaction. In other words, they drove away from the dealership owing more than $44,000 on their new pickup truck, the sum of debt between the two vehicles.

Extreme? Perhaps. But in 2008, the average car loan was 60 months. And 45% of all car loans were for terms of six years or longer.

But that trend could be shifting. From the first quarter of 2008 to the 2009 first quarter, the number of new auto loans plunged 40.5 percent, according to an Associated Press story that appeared in today’s Minneapolis Star Tribune. The story went on to say that the average auto payment fell nearly 9 percent, to $361 from $395 a year ago.

The bills are coming due, and more consumers seem to be having difficulty making all the payments. The Star Tribune story indicates an increase in debt defaults on a variety of fronts. In the first quarter, 0.83% of car loans were at least sixty days late (up from 0.65% a year earlier). 5.22% of mortgage holders were two months late, and the delinquency rate for bank-issued credit cards rose 11 percent from last year, to 1.32 percent for January through March.

Implications: The de-leveraging of the consumer is not entirely the will of that consumer. There comes a time when the consumer simply cannot find anyone to roll-up ever higher levels of debt into a new purchase. The dealership and the consumer have both begun to realize that they’re not just financing a car; that both the consumer and the dealership might be mortgaging their futures. When so many consumers so up-side-down in debt, their ability to buy a car in the years ahead is impaired, just as dealership and/or lender has diminished their ability to sell to that debt-laden group.

Are you prepared for a return to the day when ultra-qualified buyers were treated like royalty? Circumstances may be in place for the return to a marketing scheme that places premium attention on well-qualified buyers. Special incentives, customer rewards, value-added services?

In a world where customers with outstanding credit ratings might be harder to find… accept that they might also be harder to keep, due to the more competitive selling atmosphere that now obviously exists. Just as the forces of Supply & Demand can influence the value of the product or service you sell, it can dictate the value of qualified buyers. The shorter the supply of qualified customers, the more valuable each one becomes.

Mike Anderson

Furloughed and forlorn

On more than one occasion, we’ve discussed the impact of staff cutbacks on the service capacity of a company, the corresponding satisfaction of its customers (or lack thereof), and impact on remaining workers (survivor’s guilt, increased workload, fear, etc.)

An interesting story in this morning’s New York Times looks at labor market churn from another perspective: Workers who have been cut back, but still show up for work on their days off.

Implications: Whether you’re a customer being served by these workers, a company who employs them, or the competitor of a company that is making full-time use of furloughed personnel… this practice is likely to impact you. Note the number of times “emotion”—or a word that describes a particular emotion—was used in this story. Strong feelings surround this issue, whether it’s the fear of an employee who feels compelled to continue working full time—without full pay—as a means of “earning” their full job back… or the resentment of a worker who senses a “wink and a nod” expectation that they continue working five days for four days of pay.

If you are an employer with “furloughed” personnel, what steps are you taking to make sure workers actually receive the time-off they are entitled to? (Do you expect the same output from your company even after a reduction in human resources? Are your expectations realistic?) What are you doing to keep furloughed personnel informed and optimistic… and their expectations realistic? Candid conversations about future prospects, even if they are bleak, can reinforce the respect and loyalty of the workforce.

If you compete with a company that you’ve heard is abusing the terms of workforce reductions, is now a good time to harvest their key talent? An economic recovery is inevitable if not imminent, and it will certainly arrive sooner and with greater strength for the company with happy and productive employees. But be careful… that immutable truth works both ways.

Mike Anderson

Enough about recessions. Let's talk about recoveries.

Like most people, I’ve been hit with relentless waves of information about the recession. So while listening to Liz Ann Sonders at a recent conference of the Association of National Advertisers in New York, I was pretty excited to hear the chief investment strategist from Charles Schwab suggest that we may have hit bottom in the last two weeks of April or the first week in May… and that a recovery may be underway. Then, Ms. Sonders proceeded to go through a checklist of reasons for her suspicion.

She reminded the audience that new layoffs are a better indicator of economic health than real employment numbers… and the number of new layoffs has been dropping of late. She cited the sustained fall of long-term interest rates, the increase in consumer confidence, the low levels of wholesale inventories, and the imminent increase in new factory orders that should follow. And referring to these two elements as the most important indicators of improved economic health, she noted that the sale of homes and stocks are beginning to stabilize. (With the stock market, we’re not seeing the extreme spikes and drops that we saw over the winter. Overall, stock values are showing the power to sustain their gains, relatively speaking.)

But note the nuance, in her opening remarks: She said, “A” recovery may be underway. Not necessarily “The” recovery. Instead of a “V” at the bottom of a chart, our exit from the Great Recession could look more like a W… or a series of W’s. And just as there is no singular cause for a recession, there will be a number of drivers influencing the ebb and flow of these recoveries. But we can all agree that these issues are less scary if you see them coming.

The leading risk: Inflation. Wholesale inventories are low right now, and so are commodity prices. As consumers begin spending, and demand for new products rises, the supply of commodities may not keep up with demand, and a bidding war (inflation) could follow. [Note: An article about this risk, with regard to Oil, appeared here back on April 1st (The Fuel Economy), and in another story on April 28.] Unlike previous recessions, when companies had warehouses full of goods to satisfy their “just in case” strategy… technology has allowed companies to empty their warehouses and operate under a “just in time” strategy. So there’s not a huge backlog of goods to supply any sudden demand.

Another governor that could slow the engine of recovery: The de-leveraging of the consumer. Savings rates have shot up, use of credit has fallen. Retail sales that are credit-reliant (furniture, automotive, other big-ticket items) could see additional challenges on the road to recovery.

Implications: If your company is determined to “get aggressive” as soon as there are some signs that a recovery is underway, beware of two important caveats.

First, the recession and the recoveries may not be as distinct as black & white.

Second, don’t be discouraged if the impending “Ups” are seasoned with a few “Downs.”

Once again, all of this makes a strong case for the Elm Street Economics mentality… that you should focus less on what’s going on with Wall Street, Washington, or Ottawa (the macro economy), and focus more on the way you run your business, and the relationship you enjoy with the consumers who live down on Elm Street (which represent your company’s micro economy).

Let the recoveries begin.

Mike Anderson

Sustained restraint, or re-defining value?

Stories about a new era of conservative spending have been plentiful. In this week’s Advertising Age, there was another story about the new “Consumer Frugality.” It explained how companies like Proctor & Gamble and The Home Depot are reading—and responding to—what they perceive to be a new consumer mindset. (Click here to read the AdAge story.)

Implications: Pardon me, but I’d like to pick a fight over this issue… because once again, too many people are trying to over-simplify and over-generalize “consumers” as one clump of people who move through life, single-file, all the same, like a bunch of lemmings. And anyway… people have not gone “frugal” as much as they’ve simply come to their senses.

A few years ago, lots of people spent as if money was no object, jobs were easy to come by, and we can live like there’s no tomorrow. Now, lots of people have realized that today is that tomorrow, money is an object, and their jobs are worth protecting.

That does not mean they won’t buy anything if it's not on sale, or that anything on sale is worth buying.

Consumers—acting individually—are revisiting how they define “value.” Is this product worth the price? Should I spend more so I might have to replace this item less often? If I “do it myself” instead of calling a contractor, could I save money for use on one of our family’s other priorities? Is there an economic alternative to taking a trip on our vacation this year? Am I choosing this product because it’s really better, or simply out of habit?

Increasingly, companies need to communicate the Unique Selling Proposition (value) of their product. How it enriches the consumer’s life (or family, or job…). How it makes life easier, or better, or more rewarding… in a way that competitive products, services, or options do not. Absent a Unique Selling Proposition, price becomes the default influence over every purchase decision.

Maslow (the hierarchy of needs guy) once said, “If a hammer is the only tool you have, you tend to see every problem as a nail.” Likewise, if the only weapon you have is a discount or sale price… you tend to assume that is what every consumer is after. But today at the mall, grocery store or dealership, everything on sale will not be sold. And everything bought will not be on sale.

Forget about "all consumers." Focus on your customers. Research what matters, why they buy, and why they don't. When you focus on your best customers, and deliver on the benefits they seek, you're not solving the world's economic problems. Just your own.

Mike Anderson

If I'm still a customer, you owe me!

One of the byproducts of the great recession is a sense of empowerment when we spend. Consumers have heard endless reports about how businesses are hurting (even though many are not), and how absolutely no one is shopping right now (even though that would hardly be accurate).

The result of all this economic hype? When we go shopping, we don’t just want to be seen as shoppers. We want to be treated like caped heroes! “If it weren’t for me,” after all, “this place might just go out of business!” (Or at least, that’s an exaggeration of what many shoppers are feeling.) “If you have precious few customers, then I want to be treated like I’m precious.”

A recent story in the Media Post Marketing Daily supports my assertion. But don’t take my word for it, or anyone else’. Just notice the swagger of bag-carrying consumers the next time you walk through the department store or shopping center.

Implications: If you have precious few customers, what are you doing to make them feel precious? I was in a furniture store the other day that had set-up an area where they were serving soft drinks and fresh-baked cookies. Not a big deal… but it made an impression. I’ve heard of a car dealership that washes your car after appraising its’ trade-in value… whether or not you actually trade it in, you’ve received value.

The consumer can get a good deal anywhere. To stand out, you have to give them a cookie… or some other form of value-added that shows you appreciate their business. Companies are getting very creative about the way they deliver value to their customers.

Are your competitors doing that, too? Are you?

Mike Anderson

"Revenue is down" is not the whole story

Once again, you can call me captain obvious… but the first question one should ask when revenue is down is, “Where did it go?” In other words, is the spending ending? Or is it simply migrating to more attractive alternatives.

I read a good Marketing Daily story, recently, which encouraged us to think about the three stages of trading down.

First: Changing Channels. An example of changing channels might be when people migrate from restaurants (out-of-home dining) back to grocery stores (to support in-home dining) as a means of saving money… or move from the grocery to the club store for select product purchases.

Second: Changing Departments. That’s when someone might stay with the same grocer, for example, but move toward more private-label goods or make their choices based on what’s on sale.

Third: Changing Stores. Perhaps the consumer still dines out-of-home, but economics influences their decision as to which restaurant they’ll go to… or when the consumer is inspired to change from the premium grocer to the EDLP supermarket.

But enough about my book report. You can read the story for yourself by clicking here (Media Post Marketing Daily, May 18, 2009).

Implications: If revenue is down, don’t just lament the loss. Figure out where it went, and why. Often, the spending didn't end... it just moved.

If you’re looking for ways of making revenue go up, ask which competitors might be vulnerable in your category. But also, consider which new categories you could compete with (just as the grocery store competes with the restaurant down the street).

Mike Anderson

DYG's view of how consumers are winding their way through the recession

In a session called “What’s Next? Navigating the Economic Crisis,” an important speaker at this year’s ACT conference was Lee Boylan, senior associate at DYG, Inc.

Citing contractions in the economy, housing, and labor markets, Boylan provided a quick review of what has brought the consumer to her current state of mind, and asserted what she described as a corresponding shift in values. These value shifts include increasing personal responsibility and self reliance, thoughtful sacrifice, “smarts” (not intelligence, so much, as cleverness, or savvy), increased caution and risk reduction, and a more populist approach to their opinions (trust the opinion of people like me, over traditional authorities/information resources). The tendency toward thrift/frugality was seen as another shift attributable to recent economic turmoil, as well as a sense of essentialism (paring down, less is more), and choosing personal priorities over materialism.

Boylan offered a number of trends and attitudes that DYG considers responsive to these changing values:

Soldiering on. Consumers are responding to the economic storm with a sense of stoicism. (No matter what you throw at me next, I can handle it.)

Suspicion and scrutiny. The economic crisis has caused consumers to begin examining everything more closely, including the news, and virtually all purchase decisions. Homework is the name of the game, including research about coupons/specials, and long-term value on major purchases. A new premium is placed on knowledgeable, credible employees… and reviews found on social sites, through word-of-mouth, etc. 64% of consumers in a DYG survey said they’re striving to reduce risk.

Sobriety. “The race is on to abandon excess and frivolity, to strip away over-abundance and over-indulgence and get back to basics. Now it is coming a badge of honor to have something that is old and dated - no need to have the newest blackberry.” Consumers almost feel embarrassed to indulge in vast excesses.

Streamlining. The economic crisis is providing the impetus (excuse) to deal with super saturation. According to Boylan, there are 120 different choices when it comes to toothpaste at Walgreen’s. People are overwhelmed by all of these choices. Streamlining helps us cut-down on choice overload.

Status from self, not stuff. As economic life grows harder and status from materialism grows elusive, consumers are finding new sources of satisfaction… including their relationships, ethics, personal well being, health and appearance. According to DYG data, the percentage of people “feeling better about family relationships” is up 4% since 2005, hitting 60% in 2008 (the heart of the recession).

One example of “Status from self, not stuff,” is a phenomenon Boylan called “Parentensity.” Whether infants or 30-year-olds, parents continue to spend on their children… and seek ways of staying involved in their children’s lives.

Rich Godwin of Google with lessons from the Obama campaign

In his “Lessons from the Obama Campaign" presentation to the recent ACT conference in San Francisco, Rich Godwin made a connection between high-tech political campaigning... and his role as the Head of Industry, CPG at Google. (You almost have to be impressed that Google even has someone that is a captain of Consumer Packaged Goods marketing.) The six lessons included:

Know what game you’re in. Using a review of the Nixon-Kennedy debates, Godwin pointed to the manner in which the Obama campaign embraced new media fully, much the way JFK’s team studied the nuances of the medium before engaging in this first-ever televised debate. Search, social media and email were not awkward extensions of primary media campaigns, but central components to the marketing plan.

Be “Always On.” Obama’s people used the web to give constituents 24/7 access to information, and as a means of delivering the complete transparency voters sought. They used the web to head controversy off at the pass, by publishing responses to character questions in a manner that the general public had no problem learning more, and dispelling myths.

Start “All Way” communication. It’s not enough to talk at your customers. You should use social sites and networking to help constituents talk amongst themselves.

Reach them where they are. The goal of online marketing was not necessarily to get people back to the Obama campaign web site. Whether through banner ads, social sites, or intuitive use of texting and email… the Obama campaign met constituents on their home turf.

Embrace change. It’s not like the campaign ignored traditional media… in fact, they used Newspaper, Television and Radio very, very well. But they allocated resources to online and search to a greater extent than the opponent. They didn’t reluctantly filter-in new media. They embraced it.

Don’t let go. Just because the election ended, didn’t mean the marketing ended. The Obama camp continues to reach-out to constituents through their online video, social network and email relationships. It has been an effective public relations tool in promoting the initiatives of the new administration.

Every day, companies campaign for customers, and departments within companies campaign to have their ideas adopted. Do any of these rules apply to you?

One trend hunter's guide to the galaxy

In a keynote presentation that was as much show business as it was social observation, Jeremy Gutche spoke at Association for Consumer Trends forum in San Francisco. Jeremy is from Trendhunter.com, and the focus of his talk was “Unlocking Cool and Exploiting Chaos.”

Jeremy pointed out that it’s not enough to be the first, or even to be the best at something. For his example, he cited a company that invented the laptop word processor, grammar checkers, built-in dictionaries and even started building PDAs in 1994: Smith Corona. They were the first to introduce many product innovations, they were among the best at their core competency, and they were bringing in $500 million in 1989. So, according to Gutche, they thought they could afford to take a “wait & see” approach to the idea of personal computing. They thought that if this new “computer thing” really took off, they could simply buy-up a computer company “down the road.” In fact, they did buy into ACER at one point… but sold their interest. A few years later, Smith Corona went bankrupt, and ACER went on to become the 4th largest computer manufacturer in the world.

Gutche used the example to warn that if you are afraid of failure, you are headed for it. Failure should be pursued, embraced, and celebrated… because failure means you’re trying new things, and new ideas lead to breakthrough products. “A decent proportions of your projects must fail. Success can often lead to complacency… and complacency will be the architecture of your downfall.” Successful organizations not only innovate to "optimize" their position on their hill… but they are also constantly looking for bigger and better hills.

Frankly, when I first visited his website (TrendHunter.com), I thought it was bit of an unorganized mess… with thousands of contributors tossing in a multitude of random observations. (Some not-so-random; a few contributors almost seem to have either an agenda or bias of some sort, and a few even appear to be more product-placement than social observation. And a few of the submissions are a bit less than tasteful.) But there’s more to the site than initially meets the eye. Jeremy has created a community in which countless observers all over the planet are submitting ideas for consideration. Later, Jeremy and his team meld these observations into something a bit more useful… sharing those more distilled components at a companion web site, JeremyGutche.com. There, you will find promotional materials selling Gutche’s services, but also some videos and slide decks that distill a diverse collection of input into something that’s easier to get your head around. I don’t find all of the material entirely useful—again, some of it is designed more to entertain than inform—but if you’re looking for a place to consider a wide range of possibilities, it’s worth a visit from time to time.

Here’s a link to the video Gutche used as the closing summary of his presentation.

This just in: The customer is in charge

Last week, I attended the Association for Consumer Trends forum in San Francisco… which focused on matters of technology, diversity, sustainability, and more. This week, I went to the Association of National Advertisers conference in New York... which was titled “Brand Building in Tough Times & Beyond.”

There was one conspicuous, common denominator to both events: Lots of companies have lost touch with who the consumer is and what they want. At the ANA conference, in particular, there seemed to be a sense of urgency to the message; that companies have overlooked the most important player in their marketing plan: The customer.

I’m not ashamed to admit that I’m suffering from a bit of information overload right now. In the past two weeks, I’ve received input from people at Charles Schwab, Google, Dunkin’ Donuts, Fender, DYG, Frito Lay, and more. Over the next several weeks, I will do my very best to (as Google would say), organize the information, and make it useful.

Mike Anderson