Archive for February 4th, 2009

Did the Social Security crisis just go away ?

February 4, 2009

A couple of years ago, the hot socio-economic topic was the projected insolvency of Social Security. 

Remember how Al Gore wanted a “lock box” to insulate FICA contributions from Congressional money grabbers?  Or, how Bush wanted to privatize Social Security so folks could earn higher returns?

Now, pundits (e.g. Robert Reich, Larry Lindsay) are calling for payroll tax holidays.

President Obama is bound and determined to give payroll tax rebates to low income folks who don’t pay income taxes.  That is, to reduce their Social Security contributions … by about $135 billion annually.

Does that mean that Social Security has miraculously found strong financial footing?

Hardly.

Social Security is a trust fund (currently over $2 trillion).  Workers make contributions to the trust and draw benefits from it when they retire or become disabled.  In concept, the contributed inflows and trust earnings (i.e. interest) are supposed to cover the benefit outflows. (Think Ponzi and Bernie Madoff … see excerpted article “Social Security: National Ponzi Scheme ” below)

Currently, about $785 billion in Social Security taxes are collected annually  from about 163 million workers and $585 billion in benefit checks are sent out  to 50 million Social Security recipients.

Well, according to the Social Security trustees, because of demographic shifts (i.e. more retirees, fewer workers), outflows will exceed inflows somewhere around 2020 — a little earlier if interest on the trust isn’t counted, a little later if it is.  And, they project that the trust fund will be completely exhausted by around 2040.

With t-bill rates now hovering slightly over zero, earnings on the Social Security trust must be minimal (and less than considered in the projections).

So, if the Feds cut contribution inflows to the trust by over $100 billion annually, won’t Social Security be in a world of hurt — sooner rather than later?

I haven’t heard any of Obama’s smart guys in the room talking about this part of the problem … and it’s a big part !

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Excerpted from IBD, “Social Security: National Ponzi Scheme”, Williams, February 02, 2009

Congress collects about $785 billion in Social Security taxes from about 163 million workers to send out $585 billion to 50 million Social Security recipients.

Social Security’s trustees tell us that the surplus goes into a $2.2 trillion trust fund to meet future obligations.

The problem is that whatever the difference between Social Security taxes taken in and benefits paid out, Congress spends it.

What the Treasury Department does is give the Social Security Trust Fund non-marketable “special issue government securities” that are simply bookkeeping entries that are IOUs.

According to Social Security trustee estimates, around 2016 the amount of Social Security benefits paid will exceed taxes collected.

That means one of two things, or both, must happen: Congress will raise taxes and/or slash promised Social Security benefits.

Each year the situation will get worse since the number of retirees is predicted to increase relative to the number in the work force paying taxes.

In 1940, there were 42 workers per retiree, in 1950 there were 16, today there are three and in 20 or 30 years there will be two or fewer workers per retiree.

Full article:
http://www.ibdeditorials.com/IBDArticles.aspx?id=318470763456742

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Posted in Gov't Spending, Government & Politics, Social Security, Taxes | Leave a Comment »

Uh-oh … the perils of becoming president

February 4, 2009

According to the Rasmussen Reports, President Obama’s approval index (the % of people strongly approving of the job he’s doing less the % of people strongly disapproving of the job he’s doing) is down by half since inauguration day — from 30% to 15%.  Hmmmmm.

image

http://www.rasmussenreports.com/public_content/politics/obama_administration/daily_presidential_approval_index

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The Axe Effect: A Whiff of Truth

February 4, 2009

The Team’s Take:  While a somewhat shallow example, this study shows how products are benefit-based. Axe is more than a physical product.  It is a bundle of emotional and psychological benefits that as this study shows includes not only odor protection, but also self-confidence and the perception of attractiveness. 

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Excerpted from AdAge, “Scientists Prove the ‘Axe Effect’ Is Real. Sort of” By Jack Neff, January 07, 2009 * * * * *By now everyone is familiar with ads for Axe deodorant showing women chasing men who use products from the Unilever personal-care brand. And a new study in the U.K. … indicates that there might be a whiff of truth in it. The research found that men who used Lynx deodorant, Axe’s British-brand cousin, were seen as more attractive by females than men who used a “placebo” deodorant with no fragrance … Of course, the findings might not pass everyone’s sniff test, because the women didn’t meet the men face to face, so technically did not smell them … But the research indicates a statistically significant proportion of the women did find Lynx-wearing men more attractive than their non-deodorized peers when they watched 15-second videos the men made describing themselves …

Men also graded their self-confidence before and after the 48-hour [Axe] trial. Those in the unfragranced group showed a slight and gradual decrease in their self esteem, according to Unilever, while those in the fragranced group had a slight boost in their confidence. The confidence gap apparently was what made the difference for the women … “We wanted to know if this confidence would actually translate into anything that’s really brand relevant … And we saw that link, which was a really nice bonus we got out of the study … Deodorant is supposed to make you feel good about yourself and give you confidence in the mating game, which is what Axe says.” One caveat: The Axe effect could evaporate when men open their mouths. Women rated the fragranced men as more attractive when the sound on the videos was off, but had no statistically significant preference when the sound was on. That clearly indicates body language played a decisive role in making the fragranced men more attractive …  “One way you could look at it is that the Axe Effect works as long as you’re very quiet … We shouldn’t tell the guys not to speak. … Inevitably, what you say will also contribute to your overall attractiveness.”

Edit by SAC

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Full Article:
http://adage.com/article?article_id=133621

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Posted in Mktg - Benefits Based, Mktg - Brands, Mktg - Positioning | Leave a Comment »

Stubborn Customers Shun the Greatest Product Innovations …

February 4, 2009

Excerpted from MediaPost.com,”Stubborn Customers Shun The Greatest Product Innovations”,Kalehoff,  Mar 14, 2008

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40% to 90% of all new products fail.  According to Harvard prof John Gourville that’s because consumers are creatures of habit and they irrationally overvalue the benefits offered by products they’re already using. They despise having to change their behavior to use an innovation. Consequently, they often reject products that are objectively superior to the incumbents they’re already using.

Conversely, companies mistakenly mark their own innovation as a frame of reference, and therefore irrationally overvalue the benefits it provides. This deadly combination results in a “mismatch between what innovators think consumers desire – and what consumers really want.”

In response, Gourville suggests anticipating and managing consumer resistance to changes as innovation requires during adoption. Specifically, he recommends:

1. Gauge the Degree of Behavioral Change Required. For example, is your innovation an “Easy Sell,” which provides limited benefit and limited behavioral change? Or is it a “Sure Failure,” offering few benefits and significant behavioral change? Is it a “Long Haul,” providing great benefit but also great behavioral change? Or is it a “Smash Hit,” offering tremendous benefit and little behavioral change?

2. Minimize Consumer Resistance. Not surprisingly, Gourville recommends making products that require little behavioral modification. Uniqueness and features – often marketers’ top selling points – can be detrimental. Second, market to new consumers who aren’t loyal to competing incumbents. Thirdly, market to consumers who “prize” the benefits they’d gain, or don’t value those they’d have to give up.

3. Manage Consumer Resistance. Gourville recommends bracing for slow adoption. Especially with “Long Haul” innovations, be careful to deplete marketing resources too quickly. Furthermore, consumers overvalue existing benefits of incumbent products by a factor of three, on average, while companies overweight the benefits to consumers by a factor of three – resulting in a nine-fold gap. To overcome the “9X Effect,” companies must introduce products with 10 times the benefit.

http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=78486&passFuseAction=PublicationsSearch.showSearchReslts&art_searched=gourville&page_number=0 

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