Archive for December, 2008

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Breaking through all that clutter …

December 8, 2008

Excerpted from The Wall Street Journal “Notice Me: Cutting Through the Clutter” by S. Balasubramnian and P. Bhardwaj, October 20, 2008

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It’s hard to cut through the clutter.

Even as customers are constantly bombarded with advertising messages, they are getting progressively better at tuning out the endless stream of come-ons. Companies then typically up the ante and try to out-shout their competitors to draw attention. All of which just leads to more shouting, and everybody is drowned out…

Here are five questions marketers should ask themselves as they craft new strategies to capture customers’ attention in an increasingly noisy marketplace.

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Can the marketing stimulus be delivered at a time when the customer has few other distractions?

Marketing messages should target customers at times when they are unoccupied, perhaps even actively seeking some sort of information to process. Consider, for example, an airplane on the landing path into an airport. Sitting upright, with in-flight entertainment and electronic devices switched off, passengers have little to do but to look out of the window and wait for the aircraft to land.

Seeking to capitalize on this opportunity, London-based Ad-Air Group PLC places advertisements flat on the ground over an area as large as five acres alongside flight paths in and out of the world’s busiest airports. Depending on their landing approach, passengers are provided with an unrestricted view of an ad for more than 10 seconds.

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Can the marketing message be designed to pique the customer’s curiosity?

Piquing customers’ curiosity can be more effective than inundating them with information. Stimuli that are carefully placed, so that they are encountered in sequence, can be particularly successful at this task…

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Can the marketing message piggyback on another brand?

With television and newsprint media being increasingly saturated, marketers need to seek out new and interesting formats and media for their messages.

Goodyear Tire & Rubber Co., for example, has teamed with Addidas AG on a range of motorsport-inspired driving and sports shoes. The soles of these shoes are made of rubber with tread patterns designed by Goodyear. If customers viewed the shoe purely as an Adidas product, Goodyear’s contribution would remain unnoticed. However, the Goodyear brand is prominently displayed on the outsoles of the shoes. The result is that every person wearing the shoes is now a messenger for the Goodyear brand.

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Can the product or service occupy a piece of the physical environment that the customer frequently interfaces with?

Consumers today tend to spend inordinate amounts of time interfacing with just a few objects — for many, it is their computer screen at work. Marketers must consider how they can capture the customer’s attention when they interface with these objects. Customers, however, guard access to these objects zealously…

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Can your company build into its messaging a consistent stimulus that affects one or more of the five physical senses?

Successful marketing messages excite customers not only when they first encounter them — they ingrain themselves into the customers’ permanent memory. Once a message is embedded, customer resistance to processing it drops when it is encountered in the future…

Not each of these five questions will necessarily generate a great idea for every company. But they do provide a common language for comparing, debating and improving managers’ proposals. 

Edit by SAC

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Full article:
http://online.wsj.com/article/SB122427109679945225.html

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Congressional oversight of the Detroit 3 … That’s a joke, right?

December 7, 2008

Ken’s Take: There is zero chance that the Detroit 3 will pay back any bailout loans.  Period.

Restoring competitiveness against the “foreign transplants” requires substantial restructuring than won’t be done under the ever watchful eyes of a business-ignorant Congress (how many Reps and Senators have ever run a ‘for-profit’ company — or for that matter — even held a real job?) or until the labor contract is seriously renegotiated (no company can afford to pay factory laborers $150,000 per year in wages & benefits).

Bankruptcy is inevitable,  Let’s bite the bullet and get it over with …

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Excerpted from IBD, “Prepackaged Failure”, December 05, 2008 

Sentiment running 62% against a bailout for the automakers.

But, Congressional Democrats are desperate to bail out the Big Three — but even more desperate to bail out the automakers’ unions. After all,the UAW spent more than $11 million in the last election cycle to elect Democrats.

Even a “prepackaged” bankruptcy  … doesn’t stand a chance because the unions reject it out of hand. As UAW President Ron Gettelfinger put it, prepackaged bankruptcy is “not a viable option.” Translation: Unions would have to make big, and permanent, concessions.

That leaves the latest bright idea:  Congress would in essence become the Big Three’s uber-manager, telling them how to become profitable again.

Excuse us, but are we supposed to believe that the same Congress responsible for next year’s estimated $1 trillion deficit can profitably run a market-sensitive company like a car manufacturer?

Or that the same Congress that sat on its hands as the financial meltdown unfolded and helped create the mess will know how to financially restructure America’s highly complex auto business?

Or that the people who just last year imposed $85 billion in new “efficiency” standards on a teetering industry will be savvy enough to run them anywhere but further into the ground?

Does Congress have the know-how to do this? Of the 11 Democrat members on the Senate Banking Committee who grilled Big Three CEOs last Thursday, and who will decide the outlines of any bailout plan, just one Senator — Montana’s Jon Tester, a farmer and former manager of a butcher shop — had any real business experience.

None of the rest, from committee chairman Chris Dodd on down, has any private-sector experience to speak of, apart from brief stints at law firms. Fact is, Congress isn’t equipped to run anything.

The Big Three are burning through $6 billion a month, so $34 billion won’t last long. Chapter 11 bankruptcy, or something like it, would at least let them get out from under costly union contracts.

Given union opposition, this is highly unlikely, even though about 77% of all billion-dollar companies survive bankruptcy. 

Those are better odds than congressional mismanagement would offer.

Full article:
http://www.ibdeditorials.com/IBDArticles.aspx?id=313373158944445

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A FICA tax holiday? … It’s worth considering.

December 5, 2008

Inspired by IBD, “Bail Out Bill Or Bail Out Joe?”, December 04, 2008

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From the article

Nancy Pelosi (wants) another bailout bill in the neighborhood of $500 billion to be ready for President Obama’s signature on Jan. 20.

Rep. Louie Gohmert, R-Texas, has come up with an idea of what to do with that $350 billion, and it involves not rescuing those who have gummed up the works, but relieving the burden on those who have been trying to pull the wagon — suspend FICA and income taxes for two months starting in January 2009.

Gohmert would declare a tax holiday for FICA (Social Security and Medicare) and income taxes.

American taxpayers [a slim majority of adults] pay an average of 25% of their wages in federal income taxes.  [Virtually all American workers pay another 7.25% for FICA — which funds Social Security and Medicare.]

So, in aggregate, Americans pay over $101 billion in income taxes and another $66.5 billion in FICA taxes each month. Two months’ worth is around $332 billion. The employer’s portion of FICA would also be suspended, giving businesses large and small $65 billion in tax relief to expand and hire more workers.

[For an average American family making about $50,000 a year, the FICA tax is about $300 per month — taken directly out of their paychecks.] So, there would be a dramatic increase in take-home pay for the working poor and middle class, and might save more homeowners from bankruptcy and foreclosure.

And, the unspent $350 billion left in the government’s TARP fund could be used to cover the revenue losses in the Treasury, so Social Security and Medicare would not lose a penny.

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Ken’s Take

(1) The income tax part is a non-starter for reasons of “fairness” and administration — since withholding doesn’t match perfectly with end-of-year tax liabilities.  Some people have too much withheld and get refunds; some have too little withheld and pay taxes on April 15.

(2) But, I think the the FICA suspension has merit.  Prior to the election, I was opposed to co-mingling income taxes with  “contributions” to the Social Security and Medicare Trust Funds (they’re called “contributions” in the statutes).  But, Obama’s “relief” to the middle class irreversibly lumps them together — folks who don’t pay income taxes get credit checks if they pay so-called payroll taxes. 

(3) So, why not dole out the payroll tax related tax relief in the fastest, administratively easiest way.  Ditch the income tax part of the proposal and suspend FICA for a couple of months. 

I think IBD screwed up the math a bit.  Employers have to match employees’ FICA contributions dollar-for-dollar — so the FICA  free-up would be about $130 billion per month.

The  FICA tax holiday could be extended to 3 or 4 or 5 months by simply capping the monthly “holiday” at, say, $300 per worker so that high income folks don’t get too much of the benefit .

(4) While I still don’t like the co-mingling of income taxes and SS-Medicare contributions, I do like the potential stimulative aspects of the plan: (a) the paycheck effect of the plan would be significant to lower income folks (b) businesses — especially those employing lower and middle income folks get a tax break — which allows them to hire more workers (or stay in business).

(5) Note: this is largely Obama’s middle class tax relief — “rebranding” the philosophically repulsive “refundable tax credits” and adding some tax relief for employers.
 
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Full IBD article:
http://www.ibdeditorials.com/IBDArticles.aspx?id=313284571794137 

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Posted in Financial Crisis, Government & Politics, Taxes | 1 Comment »

To stimulate the economy, break a few windows … huh ?

December 5, 2008

158 years ago, the  pioneering French economist Frederic Bastiat, wrote about the “broken window fallacy.”

It goes like this: Most people agree that when someone breaks a store window, it’s a tragedy for the shopkeeper. But many also believe the overall economy actually benefits, because the shopkeeper now must buy a new window, a kind of “stimulus.”

This logic, of course, makes no sense.

Yet it’s the basic idea behind all government stimulus plans. The money for the window comes out of the shopkeeper’s pocket. Instead of carrying more stock in his store, or hiring a clerk, he must spend his money instead on a window. So the “stimulus” is really zero — or negative.

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Excerpted from IBD, “The Cost Of Green”, December 03, 2008
http://www.ibdeditorials.com/IBDArticles.aspx?id=313199997499579

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Ken’s Take: Also keep in mind that the government is playing with OTM — “other people’s money” — your’s, if you’re one of the dwindling number of taxpayers.

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Hot-Wired Hotels

December 5, 2008

 

Excerpted from the New York Times, “Hotels Offer Guests the Latest Technology Tools”, by Susan Stellin, November 11, 2008

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Hotels are under such pressure to keep up with their gadget-obsessed guests that they are working with technology companies to regain their edge.

Sheraton teamed with Microsoft to create its new Link@Sheraton lounges, as part of an overhaul of the brand that includes carving out spaces in lobbies where guests can use public computers to check their e-mail, print boarding passes and record video greetings to send to family and friends.

Westin struck a deal with Nintendo to outfit some of its fitness centers with Wii consoles and games like Wii Fit, a game that uses a balance board to guide players through exercises and yoga poses.

Even smaller brands are turning to technology leaders to equip their public spaces and guestrooms with the latest electronics. The Gansevoort Hotel Group is working with Sony to develop a lounge at its new Gansevoort South property in Miami Beach. The goal is to relocate the traditional business center to a more social setting near the lobby. The lounge will have Sony computers and PlayStation 3 game consoles as well as digital book readers and cameras.

“What we’re trying to do is give people the chance to experience firsthand the latest in technology,” said Elon Kenchington, Gansevoort’s chief operating officer, explaining that choosing the right technology has become as critical as other elements of a hotel’s design.

“It’s an integral part of not only the success of an operation, but also what makes one brand better than another or more interesting to travelers than other brands,” he said.

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Technology companies, in turn, have a chance to show off their wares to a desirable demographic. “The same guests that walk through the hotel lobby are the same consumers Microsoft targets,” said Sandra Andrews, hospitality industry solutions director for Microsoft.

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One challenge for hotels is making sure guests are comfortable using the technology and not being forced to wrestle with products that are too complex. 

“If you need your neighbor’s teenage kid to help you figure out how to use something,” said Henry H. Harteveldt, a travel analyst with Forrester Research, “it’s probably too complex for a hotel to implement.”

That is why the James hotel in Chicago has been spending the last few months testing technology made by Control4, known for its home automation systems. On trial in one guestroom, the system allows guests to operate the lights, the blinds, the thermostat and the television using one remote. It can even be used to set a more customized wake-up experience, in which, for example, the TV turns on and gradually increases in volume.

Another company working with Control4 is the Mandarin Oriental Hotel Group, which plans to use the system to create a welcome experience at its Las Vegas property, scheduled to open in late 2009. Guests arriving in their room after checking in will be greeted by the drapes opening, the lights automatically turning on and the television displaying a customized message with the guest’s name.

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Given the economic climate, Mr. Harteveldt cautioned that hotels ought to focus on Internet access and other essential technologies that either help justify a higher room rate or attract more guests.

“Hotels have to make sure they address the basics before they think about the fanciful,” he said. “This is not a time for the fanciful.”

Edit by DAF

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Full article:
http://www.nytimes.com/2008/11/11/business/11technology.html?_r=1&oref=slogin&ref=technology&pagewanted=print

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UAW says Detroit won’t have to pay for non-working workers … that’s big of them.

December 4, 2008

Excerpted from WSJ, “UAW Gives Concessions to Big Three” Dec. 4, 2008

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The United Auto Workers union Wednesday offered two major concessions to the Big Three auto makers

Two weeks after insisting his union had already done enough to help the car makers, UAW President Ron Gettelfinger said the union would allow the companies to delay billions of dollars in payments into funds that will cover health-care costs for retired workers. The union also will suspend a “jobs bank” program under which workers continue to collect most of their wages after they are laid off.

Full article:
http://online.wsj.com/article/SB122832097499675993.html?mod=testMod

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Ken’s Take: Earlier this week, we noted: “under the UAW “job bank” program, over 12,000 laid-off workers get nearly full-pay to play cards or do crossword puzzles in a congregating hall.  That program costs the Detroit 3 over $1.5 billion annually — about over $600 per car sold.

The Detroit 3’s  total labor cost disadvantage (vs. ‘transplant’ carmakers in the South) is more than $1,500 per car.  UGH !”

Coincidence, or is the UAW monitoring The Homa Files?

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Ken’s Take #2: Next step, the 12,000 laid off workers who won’t be getting paid any more will stop making their mortgage payments and the 57% of Americans who pay income taxes will end up buying  their houses for them.  The vicious cycle never ends, does it ?

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Detroit's fuzzy strategy reflected in its brands …

December 4, 2008

Excerpted from AdAge, “If GM Has a Brand, It’s General Misery” by Al Ries, December 02, 2008

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Of the 100 most valuable brands in the world, according to Interbrand, 52 are owned by U.S. companies. And how many of the 52 are U.S. automobile brands? Just one: Ford. None of GM’s eight automobile brands made the list…however, 10 automobile brands from outside the U.S…

Part of the fundamental nature of Detroit’s Japanese competition is its ability to build brands. Toyota stands for reliability, Scion for youth, Prius for hybrid, Lexus for luxury.

But what does Saturn stand for? Or Chevrolet? Or Pontiac? Or Buick? Or Cadillac?…

The conventional wisdom is that General Motors has too many (eight).

Over the years, Gillette, has marketed seven different brands…Gillette has an astounding 71% of the world’s wet-shaving market, in part due to its multiple brands.

The difference between Gillette and GM is that each of the seven Gillette brands stands for something specific and each of the eight GM brands does not… 

To build a brand, you generally need to “contract” the brand.  Instead,  GM has introduced expensive Saturns and cheap Cadillacs.

GM’s brands themselves are practically worthless.. 

Edit by SAC

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To make matters worse GM’s plan to Congress slash its marketing spending by $600 million by 2012.  The bright side of this significant reduction in advertising and promotions is that GM will focus its efforts on Chevy, Cadillac, Buick, and GMC, which according to its restructuring plan, account for 83% of its business.  While the tighter budget may prompt focused efforts it does not guarantee improved branding.  GM will need both to compete.

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Full Article:
http://adage.com/columns/article?article_id=132938

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Luxury Cars Still Selling

December 3, 2008

Excerpted from BusinessWeek, “A Tough Auto Market? Not If You’re a Maserati Exec”, by Dan Strumpf, November 21, 2008

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With the U.S. all but certainly in a recession and many skittish consumers hesitant to buy even a Honda Accord, it would seem the last thing anyone would need is a $400,000 Rolls-Royce Phantom.

But sales of many high-end luxury cars are bucking the trend of plummeting car sales, as ultra-luxury cars are often highly resistant to economic downturns.

“You’re dealing with the ultra rich who, even if they take a hit, a car purchase for them is a very, very fractional piece of their net worth. Whether they’re paying $50,000 for a car or $200,000 or $300,000 for a car, it really makes no difference in their net worth.”

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Sales at many cream-of-the-crop carmakers are bearing that out, and are either flat or down modestly. Some, like Rolls-Royce, have actually increased.

Ferrari’s U.S. sales, for example, are down just 3 percent for the first 10 months of the year, compared with an industrywide slump of 14 percent, according to sales figures compiled by Autodata. Maserati sales are up 10 percent, while sales at Rolls-Royce are up a whopping 32 percent.

Edit by DAF

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Full article:
http://www.businessweek.com/ap/financialnews/D94JAGOO0.htm

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The $1,500 new car option … (ok, it’s not really an option)

December 3, 2008

GM provides health benefits for a million people today — only a fraction of them actual workers.

These health-care expenses account for over $1,500 of the cost of every GM vehicle.

Common Observation: GM is no longer a car company that provides health benefits, but a health-care company that happens to make cars.

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Excerpted from WSJ, “What’s Good for GM Could Be Good for America”, Dec 2, 2008
http://online.wsj.com/article/SB122818153973071061.html 

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AMS: Cutting Cell Phone Churn

December 3, 2008

Excerpted from the McKinsey Quarterly, “New ideas for customer segmentation”

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Customer life-cycle management, though a likely and proven strategy, presents a vexing challenge to prepaid mobile operators. They often resort to blanket promotions that risk destroying value by needlessly cutting prices or offering free services.

One alternate way is for marketers to look more closely at their billing systems, which contain a wealth of information; to create segments, often as small as 100,000 subscribers; and to plan tailored promotions for each group.

The exhibit below illustrates one prepaid mobile operator’s strategy to reduce churn rates by segmenting subscribers through their usage patterns. Tracking the number of days before a customer is “lost” helped the company to introduce promotions most likely to increase usage and retention while minimizing revenue lost to scattershot offers and unnecessary discounts.

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image

image

Edit by DAF

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Full article:
https://www.mckinseyquarterly.com/newsletters/chartfocus/2008_11.htm

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Posted in Mktg - CLTV, Mktg - CRM, Telecom | Leave a Comment »

Smart Cars Get Big But Still Get Stares

December 3, 2008

Excerpted from Marketing Daily, “U.S. Now 3rd-Best Market For Smart ForTwo Car” by Karl Greenberg, December 1, 2008

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The ultra-diminutive Smart car still draws stares, but it isn’t as rare a bird as it used to be.

The Smart ForTwo car has been on sale in the U.S. for 10 months now…the U.S. is now the third-highest sales market for the 10-year-old ForTwo, behind Germany and Italy…since it began selling them in February, it has sold over 20,000 ForTwos through October.

Smart has eschewed advertising, relying instead on grassroots efforts, word-of-mouth and PR events…And the company still funnels prospects for the $11,990-$16,990 cars to a Web site launched last year, where consumers can reserve a car for $99…the company now has 73 “Smart Center” retail outlets in 35 states…about two-thirds are partnered with Mercedes-Benz dealers…

“We have always said our demographics are based on attitude and lifestyle, not income…the company is aiming to appeal to four demographic targets: baby boomers wanting a second or third car; empty nesters; people in large urban areas, “whose age could range from 18 to 80,” and first-time buyers.

“We are seeing a pretty even split across these groups in terms of who is buying the vehicles”…Smart will adhere to a no-advertising policy, focusing instead on online reservations, social networking, and discovery marketing…Next year, Smart will engage dealers to run promotions, and will begin to do owner events…

The car is selling strongly in New York, Los Angeles, the Pacific Northwest, South Florida and even Texas, as well as in large Midwestern cities.

Edit by SAC

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The Smart car has come to the US at the right time as more Americans seek smaller, fuel efficient vehicles. It isn’t surprising that Smart appeals to a range of targets and with the very low hurdle rate of a $99 reservation fee nearly anyone can go online to customize and reserve their very own Smart car.  Especially when the fee is refundable at anytime. 

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Full Article:
http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=95741

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Catalina Coupons Customized for You

December 3, 2008

Excerpted from The Wall Street Journal “Personalized Store Ads Take Off” by David Kesmodel, October 23, 2008

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For years, supermarket cashiers have handed shoppers coupons as they left the checkout aisle. These days, shoppers often get narrow paper strips printed with something else: ads related to the shopper’s own buying habits.

Recently, Stouffer’s has used such ads to encourage buyers of its single-serve frozen entrées to join its Dinner Club. Joining the club allows consumers to earn points for buying the Nestlé unit’s products. The points can be used to bid for rewards like TV sets and magazine subscriptions.

Targeted ads like these began appearing in some of the nation’s major grocery stores about two years ago, but big consumer-product companies like Nestlé, Coca-Cola and Kraft Foods are just starting to buy them in significant numbers, as they and other marketers put more emphasis on reaching the right consumer at the right time…

The company behind the ads is Catalina Marketing, a closely held marketing-services firm…Catalina, armed with data provided by retailers about shoppers’ buying habits, showed Stouffer’s that 6.7% of all shoppers accounted for 80% of its single-serve volume. So, Stouffer’s targeted ads at many of these regular buyers, bypassing those who hadn’t bought its products.

Catalina learns which shoppers buy a particular product by tapping into the vast reservoir of data retailers collect from customers who use loyalty cards. Stores offer such cards to their customers as a way of tracking their purchases, typically in return for discounts or access to special promotions…

GlaxoSmithKline has bought ads for its Tums antacid to target shoppers around holidays like the Fourth of July and Thanksgiving, when they tend to eat more heavily. Catalina serves up the ads to shoppers who have bought Tums in the past…

Still, the strategy isn’t foolproof.  Catalina says 80% of consumers read its coupons “most of the time.”

The service tends to be most effective in driving customers to buy more of a product or try a newly launched product.

It is less effective at getting shoppers to cross categories, buying a beverage, for example, from a manufacturer whose cereal they like. 

Edit by SAC 

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Full article:
http://online.wsj.com/article/SB122472576115361225.html

 

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Detroit 3 says "smaller more efficient cars" … even if they’re unprofitable ?

December 2, 2008

Excerpted from WSJ, Ford Plans Shift to Small Fuel-Efficient Cars, Dec 2, 2008

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Ford plans to tell Congress it is retooling itself to build small fuel-efficient cars and break from the past strategy of focusing mainly on large pick up trucks and sport-utility vehicles.

Ford’s plan would likely emphasize its new fuel-efficient gasoline turbocharged direct-injection engines across its lineup and plans to bring popular, high-mileage cars from its European operations to the U.S

GM’s plan includes cutting brands and focusing on new fuel-efficient vehicles …  to meet new stringent federal mileage rules. GM hopes to have an electric plug-in car, the Chevrolet Volt, on the road sometime in 2010.

Ford, like GM, will likely express a willingness to seek further cost-cuts and concessions from the United Auto Workers union

Ford has concerns about the payments it’s already made to a new health care trust for retiree union workers. GM owes the fund $7.5 billion by 2010 – an amount many suspect the auto maker cannot afford – while Ford just paid more than $4 billion in its similar obligation earlier this year.

With regard to possible concessions by the UAW. UAW President Ron Gettelfinger is open to eliminating the jobs bank, the program that pays workers most of their wages even when they are laid off and no longer work in plants.

[Ken’s Note: the job bank — laid-off workers getting near full-pay to play cards or do crossword puzzles in a congregating hall — costs the Detroit 3 over $1.5 billion annually — about over $600 per car sold — making their total labor cost disadvantage (vs. ‘transplant’ carmakers in the South) over $1,500 per car]

But Mr. Gettelfinger wants to see management sacrifices in return, and some kind of future retraining program to help laid-off workers get high-tech jobs in areas such as battery development for electric vehicles.

* * * * *

Auto companies were also devising alternative travel plans after lawmakers excoriated Detroit’s CEOs for previously using expensive corporate jets to make their way to Capitol Hill. Mr. Wagoner is considering driving from Detroit to Washington in one of GM’s hybrid models.

Full article:
http://online.wsj.com/article/SB122817144031770385.html?mod=testMod

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The American auto industry you rarely read about … the profitable one

December 2, 2008

Excerpted from WSJ, “America’s Other Auto Industry”, Dec. 1, 2008

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There are the 12 “foreign,” or so-called transplant, producers making cars across America’s South and Midwest.  Ths “other” American car industry is a model for how to do it.

Toyota, BMW, Kia and others now make 54% of the cars Americans buy … and employ some 113,000 Americans, compared with 239,000 at U.S.-owned carmakers.

Detroit has already adopted some of its efficiency and employment strategies, though not yet enough. To put it concisely, the transplants operate under conditions imposed by the free market. Detroit lives on Fantasy Island.

Consider labor costs. Take-home wages at the U.S. car makers average $28.42 an hour,that’s on par with $26 at Toyota, $24 at Honda and $21 at Hyundai.

But include benefits, and the picture changes. Hourly labor costs are $44.20 on average for the non-Detroit producers, but are $73.21 for Detroit.

In 1995, a GM car took 46 hours to make, Chrysler 43 and Toyota 29.4. By 2006,  GM had moved it to 32.4 hours per vehicle and Chrysler 32.9. Toyota stayed at 29.9. 

[Ken’s Note: [That’s about $2,400 of labor in each Detroit car; about $1,300 in each transplant car; over $1,000 difference per car in “applied labor”.  And that doesn’t include the costs of the UAW “job bank” Laid-off workers get nearly full-pay to play cards or do crossword puzzles in a congregating hall.  That program costs the Detroit 3 over $1.5 billion annually — about over $600 per car sold. So, their total labor cost disadvantage (vs. ‘transplant’ carmakers in the South) is more than $1,500 per car.  UGH !]

Over the decades the United Auto Workers won pension and health-care benefits far more generous than in almost any other American industry. As a result, for every UAW member working at a U.S. car maker today, three retirees collect benefits; at GM, the ratio is 4.6 to one.

The international producers’ relatively recent arrival has spared them these legacy burdens. They also located in investment-friendly states. The South proved especially attractive, offering tax breaks and a low-cost, nonunion labor pool.

The absence of the UAW also gives car producers the flexibility to deploy employees as needed.  At Detroit’s plants, electricians or mechanics tend to perform certain narrow tasks and often sit idle. That rarely happens outside Michigan.

Attempts to unionize foreign-owned factories have generally been unsuccessful; their workers know too well what that has meant for their UAW peers.

Another transplant advantage: Their factories are newer and production process simpler. As a result, they can switch their assembly lines to different models in minutes. Such a change would take weeks at UAW plants.

[Review & Outlook]

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Full article:
http://online.wsj.com/article_email/SB122809320261867867-lMyQjAxMDI4MjA4MTAwOTEzWj.html

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What percentage of mortgages are subprime?

December 2, 2008

In the early 1990s, subprime mortgages were virtually unheard of.

By 2000  they made up more than 9% of the market for mortgage originations.

Today they’re 20%.

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Excerpted from IBD, “Stop Covering Up And Kill The CRA”, November 28, 2008
http://www.ibdeditorials.com/IBDArticles.aspx?id=312766781716725

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High "Volt"-age? Can Their New Hybrid Jump Start GM?

December 2, 2008

Excerpted from the New York Times, “G.M.’s Latest Great Green Hope Is a Tall Order”, by Micheline Maynard, November 22, 2008

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The Chevrolet Volt, a plug-in hybrid, will not arrive in showrooms until late 2010. But it is already straining under the weight of an entire company.

Executives at GM are using the Volt as the centerpiece of their case to a skeptical Congress that their business plan for a turnaround is strong, and that a federal bailout would be a good investment in G.M.’s future.

But whether the Volt can live up to its billing is already a matter of debate. And some industry analysts note that GM has a poor track record of introducing green technology to the market.

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The Volt is a big long-term bet. New vehicles typically cost $1 billion to develop, and the Volt requires new technology that probably inflated that price tag even more.

G.M. says the car, which is scheduled to arrive in showrooms two years from now, will be able to travel 40 miles on a charge, but it will also have a small gas engine to extend the range to as much as 640 miles using both the battery and gasoline. It is expected to cost about $40,000.

To some, the Volt will remain a niche vehicle until its cost drops sharply and its range rises dramatically.

“If you’re the affluent individual who wants to make a statement, it’s one thing.”  “If you’re Joe the Commuter, you’re not going to spend $40,000 on an electric car. It’s insane.”

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Once it arrives, GM believes, customers will adjust more rapidly to the Volt than they did to the Prius, Toyota’s hybrid gas-electric car. “I don’t think that’s going to be that big a deal for most people to get their heads around.”

“We’ve turned into a plug-in society. We’ve got cellphones, PDAs, you name it, that are all plugged in. To a certain extent, it’s not much more complicated conceptually than coming in and plugging in your cellphone.”

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The Volt is not General Motors’ first electric vehicle. In 1996, G.M. started leasing the EV1, an electric car, to customers in California. Although its few hundred owners loved it, the EV1 was discontinued just three years later.

G.M. reportedly spent about $1 billion in the 1990s to develop the EV1, which it dropped after saying it could not make money on the cars. The EV1, which was available only in lease deals, sold for the equivalent of up to $44,000 but cost G.M. about $80,000 apiece to make.

Other efforts to earn green bragging rights have missed the mark, too. Only two years ago, G.M. promoted flexible fuel cars that run on E85, a blend of ethanol and gasoline, as the way to wean Americans off gasoline. But interest in ethanol has waned amid concerns about the environmental impact of using corn for fuel rather than food.

The company is building its largest sport utility vehicles with hybrid gas-electric power trains as well, but they have sold poorly.

Edit by DAF

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Full article:
http://www.nytimes.com/2008/11/22/business/22volt.html?pagewanted=print

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From Business Week, a compendium of articles re: Hybrid Cars
http://bx.businessweek.com/hybrid-cars/

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Posted in Autos - Travel, Environment - Green, Oil & Energy | Leave a Comment »

CPG’s ask: What are they thinking?

December 2, 2008

Excerpted from Marketing Daily “Understanding, Leveraging Consumers’ Five CPG Mindsets” by Karlene Lukovitz, October 16, 2008

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Consumers approach different categories of consumer packaged goods with different mindsets, and marketers that understand and leverage these can enhance their products’ performance.

CPG marketers “don’t want to get it wrong in the fleeting nano-second of purchase decision  … Marketers need to know what buttons to press to influence their shoppers and win on the ultimate marketing battleground–the store aisle.”

Here’s a summary of the five CPG mindsets and how marketers can best exploit these. The insights apply across all retail channels where CPG’s are sold, including grocery, drug stores, convenience stores, mass merchandisers and club stores.

Indifferent auto-pilot and blinkered auto-pilot mindsets: When it comes to products like bathroom cleaners, bar soaps, dishwashing soap and cotton swabs, consumers’ pilot buttons are set to “indifferent.” Rather than spend time on decisions, they automatically reach for the brands they usually buy, generally without comparing prices. Since there’s low brand-attachment, consumers have no problem switching if their usual brands aren’t available.

To avoid such switches, marketers of leading brands in these CPG categories need to ensure against out-of-stocks or visibility and distribution issues … The overall key to influencing consumers on auto pilot lies in knowing when and how that mindset can be disrupted by external stimuli, so that they are ready to consider alternatives and new offers…

Browser mindset: Consumers are more engaged with products such as shampoo and conditioner, body washes, and toothpaste and brushes–they check out labels and packaging, sniff and test these. This means that marketers need to provide a wide product assortment and realize that packaging innovations can be persuasive in decisions.

Buzz mindset: Hand and body lotions, air fresheners and baby toiletries are among the product categories that are “buzz-activated.” Shoppers actively seek out information about these.

Constant innovation in packaging and new product attributes–introduction of attention-grabbers such as “age-defying,” “shimmering,” tanning and aromatherapy, for example–combined with exciting advertising and new product introductions, are the keys for these categories.

Bargain-activated mindset: Unless there’s hot news about some brand, shoppers tend to switch brands on toilet paper, laundry detergent, paper towels, facial tissues, liquid hand soaps and batteries based on which are on sale or appear to be bargains.

Edit by SAC

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Full article:
http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=92836

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In the new political economy, smart lobbyists will be arriving in hybrids …

December 1, 2008

Excerpted from IBD, “Job One: Wean The Economy Off Of Politics”,  Krauthammer,  November 28, 2008

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We have gone from a market economy to a political economy.

In the old days, if you wanted to get rich, you did it the Warren Buffett way: You learned to read income statements and balance sheets. Today you learn to read political tea leaves.

Today’s extreme stock market volatility is largely a reaction to meta-economic events: political decisions that have vast economic effects. You don’t anticipate Intel’s third-quarter earnings; instead, you guess what side of the bed Henry Paulson will wake up on tomorrow.

We may one day go back to a market economy. Meanwhile,  the two most important implications of our newly politicized economy are the vastly increased importance of lobbying and the massive market inefficiencies that political directives will introduce.

Lobbying used to be about advantages at the margin — a regulatory break here, a subsidy there. Now lobbying is about life and death.

You used to go to New York for capital. Now Wall Street, broke, is coming to Washington. With unimaginably large sums of money being given out, Washington will be subject to the most intense, most frenzied lobbying in American history.

The other kind of economic distortion will come from the political directives issued by newly empowered politicians.

For example, bank presidents are gravely warned by one senator after another about “hoarding” their bailout money. But hoarding is another word for recapitalizing to shore up your balance sheet to ensure solvency. Isn’t pushing money out the window with too little capital precisely the lending laxity that produced this crisis in the first place?

Even more egregious will be the directives to a nationalized Detroit. Sen. Schumer, the noted automotive engineer, has declared “a business model based on gas” to be completely unacceptable. He says,  “We need a business model based on cars of the future: the plug-in hybrid electric car.”

The Chevy Volt, for example? It has huge remaining technological hurdles, gets 40 miles on a charge and will sell for about $40,000, necessitating a $7,500 outright government subsidy. Who but the rich and politically correct will choose that over a $12,000 gas-powered Hyundai?

The new Detroit churning out Schumer-mobiles will make the steel mills of the Soviet Union look the model of efficiency.

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Full article:
http://www.ibdeditorials.com/IBDArticles.aspx?id=312760589983880 

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Posted in Autos - Travel, Environment - Green, Financial Crisis, Government & Politics, Oil & Energy, Taxes | 1 Comment »

Auto Marketers See at Least One Shade of Green …

December 1, 2008

Excerpted from Brandweek, “Taking the Road Less Traveled” by Steve Miller, Superbrands 2008

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In April, a revolution went down. New vehicle sales dipped 8%, cars began to outsell trucks, and sales of compacts and hybrids leaped, gratifying greenies everywhere and giving the auto industry a headache…

The momentum in the market has clearly shifted. A Kelley Blue Book survey in April found that 60% of new-vehicle buyers say gas prices have changed or influenced their purchase decision. Now, better-made small cars and gas prices have turned consumers on to cars like Toyota’s Yaris and Nissan’s Versa…

Marketing has tried to follow the bouncing ball that is consumer preferences…Meanwhile, hybrids…continue to play an emerging role in sales of small cars. Hybrids now account for 3.2% of all new car sales, up from 2.6% at the end of 2007…

But while environmentalists have embraced the vehicles, the price point difference (they are up to $5,000 more) and the fact that other gas-powered cars are now approaching hybrid-like fuel economy are challenging the technology. “The wallet always dominates in the car-buying decision…If [hybrid marketers] can conveniently make that case and make the economic equations easier, that will seal the deal”..

With all of the fuss about hybrids, alternative power trains and controversial fuels such as ethanol, most every automaker is now including something to draw attention to their own “enviromerits.”…Any campaign now has to, at least, give a nod to the green…But while green (as in environmentally conscious) is good, green (as in dough) is even better when it comes to marketing message…

Edit by SAC

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While auto marketers focus their message on the green ($) is great theme consumers are beginning to realize that purchasing a hybrid may not be the smartest financial decision.  As the hybrid market evolves its consumers are also evolving, which means marketers must do even more to understand their preferences and likely, communicate to a new shade of green. 

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Full Article:
http://www.brandweek.com/bw/superbrands/article_autos.html

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Marketing in the World of the Web

December 1, 2008

Excerpted from WSJ, “Marketing in the World of the Web”, November 29, 2008

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Bemes, clouds and MySpace: Welcome to the brave new world.

As the evidence mounts about the power of social networks to reconfigure individual behavior, the crucial question is: How to leverage this phenomenon into actual profits?

The second generation of Internet (“Web 2.0”) companies such as MySpace, Facebook, Linked/In and YouTube exploded upon the scene three years ago. Today, MySpace and Facebook together have more users than the entire U.S. population; and the online community concept is already becoming a powerful tool for everything from creating customer loyalty, to assistance in product design, to a sounding board for company strategy.

There isn’t a smart company today that isn’t implementing some kind of online community, wiki or blog strategy. But companies with millions of members of online communities are now asking: How do we sell them products and services?

Very few of the traditional techniques of classical marketing (call them Marketing 1.0), or even of eCommerce (Marketing 2.0) will work in the world of social networks. A very different set of tools, concepts and practices is needed. Call it Marketing 3.0. Here are five:

– From loyalty to attention. Before you can win consumer loyalty, you have to capture and reward consumer attention. Smart marketers will of necessity become obsessed with customer attention in the way they once obsessed over customer loyalty. The shrewd brands will create elaborate attention-rewards programs, and incentives to break through the noise and make that critical initial connection.

– From crowds to clouds. Once you get that attention — once you generate heavy traffic to your site, gather a large league of “friends” on MySpace, or spawn a dedicated following on Twitter — how do you monetize the crowd? Smart brands are turning their crowds into “clouds”: organic, self-forming and often self-governing communities of interest. In the old model, customer-service departments aimed to placate or jettison disgruntled customers. In the cloud model, the idea is to cultivate and reward them. That’s not an easy transition.

– From places to spaces. Consumers are increasingly organizing themselves into new communities — not just the big generic social communities, but myriad idiosyncratic slices of narrow, passionate interest (i.e., BlackPlanet, Inpowr and MomsCafe).   These new  “meganiches,” may seem small, even strange at first. But when they’re efficiently targeted, they can be highly responsive, lucrative and loyal. With this shift toward self-organization by consumers, national advertising campaigns as we know them will increasingly become a waste of time and money for many companies. The trick for brands is to cohabit social spaces with these consumers.

– From memes to bemes. In the Age of Broadcast, good advertising could occasionally manufacture memes of tremendous social impact. Think of “Where’s the Beef?” or “I can’t believe I ate the whole thing.” If you can’t recall an irresistible or effective turn of phrase of late, it’s because it is exceedingly difficult to spread a meme in today’s fragmented media environment. Marketing 3.0 is now the science of devising and managing directed business memes: call them bemes. Bemes are sent by members of social communities to each other and typically contain a reward or exclusive offer, which, when redeemed, also results in a reward coupon for the sender. This encourages members of social communities to propagate a “viral” ad.

Brute force marketing won’t work inside social networks. The best online marketing now takes place among people who know and trust each other. Want to be a sensation? Create a beme that consumers willingly accept and share with others.

– From silos to simultaneity. Too many retailers today persist in believing that online shopping is merely a virtual extension of real world shopping. That is a big mistake. he physical world has become the showroom for the virtual realm. Retailers now must reimagine a world where consumers experience products in stores but ultimately buy them on the Web: Stores are for experiences, the network is for inventories.

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All of this suggests that Marketing 3.0 is not only different from its predecessors, but actively undermines them. If your marketing program fails to adapt to this new world, it won’t just become irrelevant — it will actually work against you.

Full articel:
http://online.wsj.com/article/SB122792310060465901.html

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Digital Marketing Momentum Loses Steam

December 1, 2008

Excerpted from Wall Street Journal “Marketers Cut Back on Digital Media” by Emily Steel, October 16, 2008

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Financial woes likely will derail the growth of a slew of advertising technologies that until recently were being hailed as the next big thing.

In recent years, marketers have set aside a portion of their ad budgets to experiment with digital technologies such as Web video, mobile phones, gaming and virtual worlds.

But with broader economic turmoil reaching Madison Avenue, these “experimental” budgets are among the first to hit the cutting-room floor.

Chrysler LLC has already slashed its experimental ad buys. With each ad dollar facing additional scrutiny, especially in the hard-hit auto industry, these ad buys will now make up about 5% of the auto maker’s marketing budget, down from as much as 10% in previous years…

Areas like mobile, virtual worlds and widgets are expected to be hit particularly hard, as it remains unclear what kind of impact ads in these media have. These campaigns often reach a small number of people, and standard measurement systems have yet to be developed. “When we get into the need to drive results, you can’t spend money on the experiments and hope to keep your job and get your sales goals.”

Spending figures for emerging advertising remain small compared with spending in the overall online ad market,…  in 2007,  U.S. advertisers spent $878 million dollars on mobile marketing, which includes ads delivered through text messages or displayed on a mobile Web site.

 U.S. ad spending on widgets and applications — small computer programs that can contain videos, interactive games and music that Web surfers can post to blogs, social-networking or personal Web sites — was $15 million.

PepsiCo says emerging media remains an important way to engage today’s consumers. “The market is not going to drive us to miss one of the largest opportunities that we’ve had in a long time.” 

Edit by SAC 

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Full article:
http://online.wsj.com/article/SB122403310652235021.html

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