Subscribers tell cellphone companies: Take your 2-year contracts and shove ‘em

May 18, 2010

Bottom line: Folks aren’t giving up their cell phones in a tough economy, but they are looking harder at hidden fees and charges for unused minutes.  More are opting for “by the drink” plans – so that they only pay for what they use.

* * * * *

Excerpted from AP:  Wireless users opt for service without commitment, May 14, 2010

Together, the seven largest U.S. wireless carriers added just 230,000 contract subscribers in the first quarter. That’s negligible compared to their entire customer base of 280 million.

Prepaid service, meanwhile, attracted about 3.1 million new subscribers to the seven largest carriers in the quarter.

This marks a sharp reversal of trends. In the same quarter just two years ago, the comparable carriers added 3 million subscribers under contract, and 2.3 million to prepaid plans.

The carriers that rank third and fourth in the U.S. by subscriber numbers, Sprint Nextel and T-Mobile USA, are losing contract customers. No. 1 Verizon Wireless and No. 2 AT&T are still adding contract customers, but at the lowest numbers in more than five years.

* * * * *

Wireless subscribers have been making a big shift away from two-year contracts toward “prepaid” cell phone service, which often costs less and does not require contracts … even though contracts are needed to get popular phones such as the iPhone and the Droid.

One out of every five Americans with a cellphone had a prepaid plan at the end of 2009. In some markets, up to 30% of subscribers are on prepaid plans.

Unlike contract plans that bill subscribers each month for the services they used the previous month, prepaid services traditionally let subscribers buy minutes in advance for around 10 cents to 20 cents each. When the minutes are used up, people “refill” their accounts as needed.

For years, such plans were marketed primarily to people who did not have the credit to qualify for plans with contracts. But as the recession forced more people to cut costs, prepaid service appealed to a broader slice of the market, and prepaid services responded by offering better deals.

Now it’s possible to make unlimited calls and text messages on a prepaid plan for $45 a month – half of what it costs a customer with a contract on Verizon Wireless.

  • The prepaid market heated up in January 2009, when Sprint began offering a prepaid plan with unlimited minutes for $50 a month under its Boost Mobile brand.
  • Tracfone, a unit of Mexico’s America Movil SA, countered with Straight Talk, which provides unlimited calling for $45 per month on Verizon Wireless’ network, sold exclusively by Wal-Mart Stores Inc.
  • MetroPCS and Leap, which sells service under the Cricket brand, have responded by eliminating add-on fees for taxes and roaming, effectively cutting prices. The price war looks like it will continue.
  • Sprint and Wal-Mart Stores Inc. announced a trial of another prepaid plan: Common Cents, which is designed for people who don’t use their phones much. Calls will cost 7 cents per minute.

The popularity of text messaging is also making some people move away from contract plans that provide a big bucket of monthly minutes that may not get used.

* * * * *

Full article:
http://www.washingtonpost.com/wp-dyn/content/article/2010/05/14/AR2010051401345_pf.html

Posted in Mktg - Pricing, Telecom | Leave a Comment »

AG Holder: “It’s unconstitutional … No, I haven’t had a chance to read it”

May 17, 2010

Talk about shooting first and aiming later.

AG Eric Holder has made cameos on new shows warning that the Arizona law enforcing U.S. immigration laws could lead to racial profiling, might prompt Latinos to stop cooperating with police, and might be unconstitutional — all “on the basis of things that (he has) been able to glean by reading newspaper accounts, obviously, television”.

When asked by Rep. Poe of Texas if he had read the 10 page bill, Holder admitted “I have not had a chance to — I’ve glanced at it – I have not read it”.

Note: the entire bill is only 10 pages long.

Below is the video and a transcript.

http://www.youtube.com/watch?v=6rH1FEcbi4A

* * * * *

REP. TED POE:  So Arizona, since the federal government fails to secure the border, desperately passed laws to protect its own people. The law is supported by 70 percent of the people in Arizona, 60 percent of all Americans and 50 percent of all Hispanics, according to The Wall Street Journal/NBC poll done just this week. And I understand that you may file a lawsuit against the law. It seems to me the administration ought to be enforcing border security and immigration laws and not challenge them and that the administration is on the wrong side of the American people. Have you read the Arizona law?

ATTORNEY GENERAL ERIC HOLDER: I have not had a chance to — I’ve glanced at it. I have not read it.

POE: It’s 10 pages. It’s a lot shorter than the health care bill, which was 2,000 pages long. I’ll give you my copy of it, if you would like to — to have a copy.

Are you going to read the law?

HOLDER: I’m sure I will read the law  … I’ll spend a good evening reading that law.

POE: Well, I’ve gone through it. And it’s pretty simple. It takes the federal law and makes it — enacts it in a state statute, although makes it much more refined in that it actually says in one of the sections that no state or subdivision may consider race, color, national origin in implementing the requirements of any subsection of this law.

It seems to outlaw racial profiling in the law. I know there’s been a lot of media hype about the — the legislation.

You have some concerns about the statute. And it’s — it’s hard for me to understand how you would have concerns about something being unconstitutional if you hadn’t even read the law.

HOLDER: Well, what I’ve said is that I’ve not made up my mind. I’ve only made — made the comments that I’ve made on the basis of things that I’ve been able to glean by reading newspaper accounts, obviously, television, talking to people …

* * * * *

Full transcript:
http://www.foxnews.com/politics/2010/05/14/transcript-holder-hot-seat-arizona-immigration-law/

Posted in Immigration, Obama Administration | 1 Comment »

Gatorade before, during and after … the game, that is.

May 17, 2010

TakeAway: After three years of declining sales, PepsiCo wants to regenerate the product life cycle by designing a three-step system for Gatorade consumption and targeting a niche market of elite athletes.  Particularly after a failed makeover dubbing the drink “G” last year, PepsiCo needed to find a way to regain profits for a mature product.   

*****

Excerpted from WSJ, “Gatorade: Before and After — PepsiCo’s New Ad Campaign Touts Three-Drink System for Sports Beverage” By Valerie Bauerlein, April 23, 2010

The campaign promoting the new lineup of “G Series” drinks for athletes, aims to demonstrate that Gatorade isn’t just a sports drink that replaces nutrients sweated out during the game, but a system with three steps: a carbohydrate-loaded “Prime” concentrated liquid before play; the traditional “Perform” sports drink during; and a light, protein-rich “Recover” drink after.

Gatorade’s basic “thirst quencher” message of hydration hasn’t changed much in 45 years. But PepsiCo wants the G Series to expand the Gatorade message to broader sports performance.

Teens are Gatorade’s main target.  To create the G Series line, Gatorade interviewed more than 10,000 teen athletes, parents and coaches. Many said they already ate something with carbs before a game (candy, chips), a sports drink during and something with protein afterward (sandwiches).

The three products — Prime, Perform and Recover — together will cost about $7. A 20-ounce bottle of Gatorade costs about $2.

The company also plans to reach out to adult athletes. Gatorade is launching a separate new line next month called G Series Pro, aimed at marathon runners, personal trainers and other elite athletes. The products will be sold in specialty stores such as GNC and Dick’s Sporting Goods.

Gatorade is PepsiCo’s third-biggest selling global beverage brand after Pepsi-Cola and Mountain Dew, so its 14% sales volume decline in the U.S., its biggest market, last year was a concern for executives, analysts and investors.

PepsiCo’s first-quarter earnings, released Thursday, showed that the company has yet to turbo-charge Gatorade, although sales are improving. The company posted a 26% jump in first-quarter earnings, boosted by the February acquisition of its two biggest bottlers. While quarterly revenue in the company’s Pepsi Americas Beverages business, including North America and Latin America, rose 32%, beverage volumes fell 4%.

Edit by AMW

Full article:
http://online.wsj.com/article/SB10001424052748704830404575200404277708326.html?mod=WSJ_Advertising_MIDDLETopNews

*****

Posted in Beverages - Soft Drinks, Mktg - Positioning, Mktg - Product & Innovation | Leave a Comment »

Your green neighbor wants an electric car … get out your wallet!

May 14, 2010

This week I was again struck by the irony: the US Feds – who have no money and are deeply in debt — are going to borrow still more money from China to bail out the Greeks – who are deeply in debt.  That’s nuts.

And, the few remaining US taxpayers are going to asked (make that ‘told’) that they (and the Chinese lenders) subsidize their neighbors new green rides. 

And incumbents wonder why voters are dispatching them one after another …

* * * * *

Excerpted from WSJ: Welfare Wagons The new electric cars are powered by taxpayer credits, May 12, 2010

Congratulations. You’re about to buy a fancy new Nissan Leaf or Chevy Volt . . . for someone else.

The all electric  Nissan Leaf is a car for a wealthy hobbyist — good for a trip of 100 miles after which it becomes an inert lump at the end of your driveway (or behind a tow truck) for the many hours it will take to recharge. 

The Leaf will roll out in December with a surprisingly modest price of $25,280. That’s after a $7,500 federal tax credit is counted.

Buyers will also have to spring for a $2,200 charging station, but another tax credit ($1,100) cuts the cost in half.

Some states – e.g. bankrupt California, Georgia and Tennessee — will chip in additional consumer tax credits as high as $5,000.

  • Note: total tax credits = $13,600

By pricing low and going for volume, Nissan is making a calculated grab for the lion’s share of the available tax dollars — and also pressuring Washington to extend the program when the money runs out.

iPad lust applies to cars too, and early adopters can be expected to line up around the block.

But it is insane to subsidize these vehicles with taxpayer dollars.

Tax handouts for electric vehicles are emblematic of an alarmingly childish refusal to take account that the U.S. government is deeply in debt. Running up more debt to subsidize electric runabouts for suburbanites is not such a sign.

* * * * *

Even if you believe saving gasoline is a holy cause, subsidizing electric cars simply is not a substitute for politicians finding the courage to jack up gas prices.

Think about it this way:

  • You can double the fuel efficiency of any car by putting a second person in it.
  • You can increase its fuel efficiency to infinity by refraining from frivolous trips.

These are the incentives that flow from a higher gas price.

Exactly the opposite incentives flow from mandatory investment in higher-mileage vehicles. If you paid a lot for a car that costs very little to operate, why not operate it? Why bother to car pool? Why not drive across town for a jar of mayonnaise?

* * * * *

Full article:
http://online.wsj.com/article/SB10001424052748703880304575236692175987752.html?mod=djemEditorialPage_h

Posted in Autos - Travel, Batteries - Lithium Ion, Debt - Deficit, Taxes | Leave a Comment »

Mercedes, BMW … and Lincoln?

May 14, 2010

TakeAway: Just because Ford calls Lincoln its luxury brand doesn’t make it so.  Luxury is in the eye of the beholder and Ford faces the challenging task of changing customer perceptions of its stodgy, “upscale” brand.  So far, the results have been disappointing.

The less-than-luxury perception of Lincoln is not just the result of a communications gap.  Ford has been slow to update the Lincoln product line with original designs not based on middle-market Ford-branded models.

Training Lincoln dealers to offer “high-touch” service is important for the luxury segment, but shouldn’t Ford first figure out how to get customers to the dealerships?  The new models launching this summer will tell us if they got it right.

* * * * *

Excerpted from Bloomberg Businessweek, “With Lincoln, Ford Isn’t in the Lap of Luxury,” by Keith Naughton, May 6, 2010

Business is booming in Jack Kain’s Ford dealership in London, Ky. Not so much, though, at his Lincoln showroom, where new models … go begging for buyers …

Ford is on a roll, as mainstream car buyers embrace the American brand that didn’t go bankrupt. Now that CEO Alan Mulally is unloading Volvo, however, Ford’s upscale ambitions are riding on Lincoln. Sales at the unit are down 64% from its 1990 peak and buyers average an industry-high age of 62 … “To younger generations, that’s grandpa’s car,” says auto analyst Jesse Toprak … “That doesn’t help when you’re going up against Mercedes and BMW.”

Ford is trying to give Lincoln a hip implant. It’s outfitted four new models with more-dramatic design and installed high-tech features including a voice-activated phone and entertainment system …

The new look isn’t helping much. Lincoln’s U.S. market share is stuck at a paltry 0.8% this year, while the Ford nameplate grew at its fastest rate since 1977 … Lincoln is still defined by the black Town Car that has ferried generations of business travelers to the airport,

Ford long ignored Lincoln, in part because … it bought a stable of European luxury brands that seemed to hold more potential: Jaguar, Land Rover, Aston Martin, and Volvo. But … Mulally began dismantling what he called Ford’s “house of brands,” selling off the European lines at fire sale prices. The idea was to first fix its largest franchise, the middle-market Ford brand … Lincoln, whose models are based on Ford’s mechanical platforms and built in Ford plants, would be kept and fixed later.

Ford is retiring the Town Car next year and launching new models aimed at younger buyers like the MKX sport wagon this summer. It’s infusing Lincoln advertising with Gen X-friendly music from the 1980s. And Lincoln dealers are being trained to offer the high-touch service given by some European manufacturers …

The bottom line: Ford dumped its luxe brands to focus on its core vehicles. Now it’s left with aging Lincoln just as luxury demand is set to take off.

Edit by DMG

* * * * *

Full Article
http://www.businessweek.com/magazine/content/10_20/b4178023174411.htm

* * * * *

Posted in Autos - Travel, Mktg - Positioning | 2 Comments »

Implementation is the hard part … especially if you don’t have any experience.

May 13, 2010

Back in December, there was a report circulating that “In the Obama administration over 90 percent of the players’ prior experience was in the public sector, academia, or law practices. Virtually no business experience per se.”

obamacabinet

For details, see: Help Wanted, No Private Sector Experience Required
https://kenhoma.wordpress.com/2009/12/04/help-wanted-no-private-sector-experience-required/

At the time, liberals debunked the study as both untrue and irrelevant.

In the past week or so, I spotted 2 articles that play on the original report.

One is from the right-leaning Washington Examiner, so it’s likely to be dismissed by many folks as partisan.

As the president said about the passage of his new national health program: “We proved we’re still a people capable of doing big things.”

More accurately, it proved that Washington is still capable of saying big things. The doing part is another matter.

The RAND Corp. told us that rather than holding off premium increases, the president’s health program will drive premiums up 17 percent. The Congressional Budget Office projected that 10 million people will be booted from their employer-based policies. Medicare’s chief actuary predicted a $311 billion health spending increase on Medicare and dramatic cuts to services over the next decade.

Whether you love the idea of government-guaranteed health insurance or hate it, no sensible person expects what’s been enacted to work properly.

Excerpted from Washington Examiner: Trust gap will haunt Democrats in November, May 10, 2010
http://www.washingtonexaminer.com/politics/Trust-gap-will-haunt-Democrats-in-November-93238804.html

Another is from uber-liberal Joe Klein of Time magazine.  Not so easily dismissed.

Obama’s health care reform, and the soon-to-be-passed financial-reform bill, will create scads of new and reinforced regulatory agencies. They will have to be managed well if those new programs are to succeed — and good management is, sadly, neither a government specialty nor a priority.

Democrats tend to be more interested in legislating than in managing.

They come to office filled with irrational exuberance, pass giant fur balls of legislation — stuff that often sounds fabulous, in principle — and expect a stultified bureaucracy, bereft of the incentives and punishments of the private sector, to manage it all with the efficiency of a bounty hunter.

Traditionally, Republicans were more concerned with good management than Democrats.

But even if Republicans were intent on managing the necessary bureaucratic evils, and even if Democrats understood that making the government run brilliantly was the key to building support for their programs, there would be problems inherent in the nature of the beast.

Most bills are designed for passage, not implementation. They are stuffed with special provisions inserted by lobbyists and predatory politicians. They are empretzeled with circuitous funding mechanisms.

And then there is the nature of the bureaucracy itself.

Three types of people tend to seek government work: idealists, those looking for sinecures and those who want to build lucrative private-sector careers based on their knowledge of government regulations. All three types present problems.

There is a pretty good, but not overpowering, reason government workers are hard to fire: they need to be protected from political pressure. But that protection inevitably produces regulators who, as in a recent notorious case at the Securities and Exchange Commission, spend more time watching porn than riding herd on Wall Street.

Too many of their colleagues who are not watching porn are building expertise that will enable them to beat the regulatory system when they exit the revolving door into private finance.

Even the idealists, who are prominent in places like the Environmental Protection Agency (EPA), can cause trouble if they are naive and inflexible in their enforcement of rules and regulations.

Management 101: What the Democrats Need to Learn, by Joe Klein Thursday, May. 06, 2010
http://www.time.com/time/politics/article/0,8599,1987358,00.html

Gee.  Do you think adding a couple of experienced business managers to the team might help ?

Posted in Obama Administration | Leave a Comment »

How cool are you? …. Quick, what are the top 10 booze brands?

May 13, 2010

The World’s Most Powerful Spirits & Wine Brands, 2010
http://www.drinkspowerbrands.com/top-10.html

 

Smirnoff‘Smirnoff  launched a wide range of flavoured variants and a number of quality variants.

It faces fresh challenges at the top end from Absolut  and Grey Goose.

It is also being undermined from below, from the likes of Svedka – the highest new entrant in 2010 – and Eristoff. 

Johnnie WalkerJohnnie Walker has had a pretty tough year with volumes down 11%.

However, Johnnie Walker still remains the most powerful whisky brand in the world outstripping its nearest rivals by some margin – three times bigger than its nearest Scotch rival, J&B,

 
 
Bacardi

Barcardi is the rum market …

The brand leverages its relationship with music which helps drive relevance and volume in the nightclubs and bars on which it so much depends.

Martini VermouthThe sustained appeal of cocktails and Martini’s consistent association and sponsorship of glamorous events …

Positioning Martini as a versatile summer long drink and pitcher option when mixed with fruit juice will extend the brand’s relevance and opportunities for consumption.

HennessyFrench brand Hennessy is the most powerful cognac brand in the world.

The Hennessy brand remains incredibly strong and continues to be a hit with the rap community which has adopted the brand as its own. This association with some of the world’s hippest stars ensures Hennessy’s continued cultural relevance and presence among the world’s most powerful spirits brands.

Jack Daniel'sIts iconic square bottle and black and white label help differentiate Jack Daniel’s from the rest of the whiskey market.

Jack Daniel’s volumes increased slightly in one of the most difficult years for a generation, testament to the brand’s strength and loyal following.

AbsolutAbsolut has lost its status as the world’s strongest vodka brand to Smirnoff.

However, Absolut’s history of innovative marketing activities, that have given it its unique position in the market, gives the brand a solid platform from which to regain its crown.

 

Chivas RegalChivas Regal’s premium range of aged whisky continues to be appreciated as one of the finest in the world.

The brand’s premium status is supported with sponsorship of premium creative events such as Chivas and Cannes Film Festival.

 
 

Captain MorganCaptain Morgan reached the top 10 by entering into the spirit of social media trend, accumulating over 200,000 Facebook fans.

 
 
 

Ballantine'sBallentine’s  caters for different tastes, giving consumers choice without having to leave the brand.

The brand is beginning to make inroads into the lucrative cocktail market …  introducing the  brand to a new generation of loyal followers.

Source:
http://www.drinkspowerbrands.com/top-10.html

Posted in Beverages - Soft Drinks, Mktg - Brands | 1 Comment »

Surprise: you’re picking up the health care tab for 26 year old slackers …

May 12, 2010

Yesterday, the Feds reported that ObamaCare’s slacker insurance – calling 26 year olds “adult children” and adding them to mommy and daddy’s health insurance policy as “dependents” — wouldn’t actually be free after all.

Surprise, surprise, surprise.

The Feds estimate: cost will be about $4 billion annually – and by law, the cost must be spread across all policy holders.

Translation: you’re paying for you neighbor’s 26 year old “adult-child”.

The source article extract is below, but first, I have to boast that HomaFiles was all over this one back in March:

Slacker insurance: Extending parents coverage to 26 year olds
https://kenhoma.wordpress.com/2010/03/26/slacker-insurance-extending-parents-coverage-to-26-year-olds/ 

At the time, we said:

OK, everybody knows that under ObamaCare insurance companies will have to allow parents to cover their “adult children” until age 26:

SEC. 2714. EXTENSION OF DEPENDENT COVERAGE FOR YOUNG PEOPLE UP TO 26TH BIRTHDAY THROUGH PARENTS’ INSURANCE .
(a) In general – A group health plan and a health insurance issuer offering group or individual health insurance coverage that provides dependent coverage of children shall continue to make such coverage available for an adult child (who is not married) until the child turns 26 years of age. [Effective 6 months after enactment.]

The way the media is covering this aspect of the plan, there seems to be a presumption that this is a free-rider program — just add them to the policy and pay the same premium.

I don’t think so …

Two months later, the Feds discover what we knew then:

Excerpted from AP: Adding 26-year-olds will raise premiums 1%, May 11, 2010 

According to HH&S, letting young adults stay on their parents’ health insurance until they turn 26 will nudge premiums nearly 1 percent higher for employer plans.

The new ObamaCare benefit will cost $3,380 for each dependent, raising premiums by 0.7 percent in 2011 for employer plans.

Some 1.2 million young adults are expected to sign up, more than half of whom would have been uninsured.

The regulation also specifies that young adults offered extended coverage through an employer cannot be charged more than other dependents, nor can they be offered a lesser set of benefits. Instead, the cost must be spread broadly.

Family coverage through the workplace now averages about $13,400 a year — counting both the shares paid by the employer and worker.

* * * * *

The situation is different for people buying their family coverage directly from an insurer, as many self-employed parents do. Unlike employers, insurers in the individual market do not have to spread the costs broadly. Parents would face an estimated additional premium of $2,360 in 2011.

http://www.northjersey.com/news/health/93377904_26-year-olds_will_raise_premiums_1_.html

Better health care, lower premiums, cut the deficit … yeah, right.

Posted in Health Care / Medical Insurance | 1 Comment »

Cherry Coke is so yesterday … now, add a shot of whatever to your Coke

May 12, 2010

Coke is trying to boost its fountain business (in restaurants, etc.) by letting people add a shot of flavors to its drinks – kinda like Starbucks does.

Remember when Coke changed the basic formulation? Folks balked at New Coke. 

So, let’s dink with flavors some more and confuse people re: what a Coke tastes like.

Might work … but I resisted headlining this “adding fizz to the soda biz”.

The soda business is in need of some innovation.

Sales volume in the U.S. has slipped steadily for the past five years, and fell 2.1% in 2009 to 9.42 billion cases.

Fountain sales, which make up about a quarter of soft-drink volume, slipped 2.7%.

Coca-Cola hopes a new high-tech soda fountain will add some life to listless soft-drink sales by letting restaurant-goers mix up 104 different drinks, creating inventions such as Caffeine-Free Diet Raspberry Coke.

Coke is the giant of the fountain business, with 70% of the U.S. market.

A key to Coke’s strategy is to sell more sodas when people are dining out, presumably with family and friends.

The Freestyle is a wireless device, capable of beaming back information that helps Coke realize that sales of non-caffeinated drinks skyrocket after 3 p.m., or that a particular restaurant will need a concentrate shipment by the next week, based on usage patterns.

Although Coke is charging more for a Freestyle machine than for a traditional soda fountain, the company expects restaurants will ultimately raise the price of a drink by about 10 cents.

Excerpted from WSJ: Coke Goes High-Tech to Mix Its Sodas, May 10, 2010
http://online.wsj.com/article/SB10001424052748703612804575222350086054976.html?mod=djemMM_t

Posted in Mktg - Pricing, Mktg - Product & Innovation | Leave a Comment »

Why Waxman canceled the CEO hearings …

May 11, 2010

Dirty Harry would say to Waxman: “You can’t handle the truth”.

Remember when Rep. Waxman ordered a group of CEOs to testify before his subcommittee for writing down earnings to reflect one of the impacts of ObamaCare?

Then, the session was abruptly canceled.

Wonder why?

Well, according to documents obtained by Waxman  — and reported on by Fortune: “The Committee’s majority staff issued a memo stating that the write downs were “proper and in accordance with SEC rules.”  In other words, the companies were simply following the law.

And, to add fuel to the fire, the company documents indicated that the requirement to allow dependents to remain on their parents’ policies until age 26 will prove costly — very costly. Caterpillar puts the added expense — which is likely to be passed on to the employees — at $20 million a year.

Further, the documents revealed that the companies all were evaluating the possibility of dumping their health care plans, paying the employer mandate penalties, and letting the government handle their employees health care.  Why ?  To lower their costs — significantly !

For example, Caterpillar  estimated in November, when the most likely legislation would have imposed an 8% payroll tax on companies that do not provide coverage, that it could shave $25 million a year, or almost 10% from its bill. Now, because the penalty is $2,000, not 8%, it could reduce its bill by over 70%, by Fortune’s estimate.

Similarly, AT&T revealed that it spends $2.4 billion a year on coverage for its almost 300,000 active employees, a number that would fall to $600 million if AT&T stopped providing health care coverage and paid the penalty option instead.

That raise two issues. 

First, Obama says everybody can keep their health care plan if they like it.  Not if employers stop offering the programs.

Second, Fortune estimates that if 50% of people covered by company plans get dumped, ObamaCare costs will rise by $160 billion a year in 2016, over and above the ‘gold standard’ CBO projections that propelled passage of the bill.

Oops. Maybe premiums and the deficit won’t come down after all.

That would be a shocker …

Full article:
http://money.cnn.com/2010/05/05/news/companies/dropping_benefits.fortune/

Posted in Health Care / Medical Insurance | Leave a Comment »

Hot waitresses get bigger tips … that’s a shocker, isn’t it ?

May 11, 2010

The overall conclusion isn’t new news … but the finding the high quality service accounts for less than 2% of tips’ variance does surprise me.

And, you gotta love when an academic says “Ugly people are not a protected class”.

Excerpted from AOL News: Survey Shows Patrons Grading Waitresses on Their Curves, May 7, 2010

Restaurant patrons might be using their tips to reward cup size more than stellar service, according to a new survey that links a waitress’s gratuities to the amplitude of her breasts.

Michael Lynn, a Cornell University professor of marketing and tourism, surveyed 374 waitresses and asked them to assess their physical characteristics, including their breast size, and evaluate whether they perceived themselves as attractive.

Those with bigger breasts, slender waists and blond hair reported receiving the best tips.

High-quality service, Lynn’s analysis concluded, had less than a 2 percent effect on tip.

Lynn suggested that restaurant managers might be wise to keep his research in mind during the hiring process, because servers who make better tips are more likely to stay at a given job.

“Ugly people are not a protected class, legally,” he said. “It is not in fact illegal to hire only attractive waitresses.”

This isn’t the first time Lynn has raised eyebrows with tip-related research. In fact, he’s published dozens of studies on the subject.

Full article:
http://www.aolnews.com/nation/article/survey-waitresses-with-bigger-breasts-get-better-tips/19468878

Posted in Behavioral Economics | Leave a Comment »

Pres. Obama says "policies are working" … as unemployment rate jumps to 9.9% … huh ?

May 10, 2010

Last Friday’s jobs report was interesting. 

Reportedly, the  economy added almost 300,000 jobs — which is certainly better than losing jobs — but not enough to to keep pace with the number of people entering (or re-entering) the labor force. 

So, the unemployment rate went from 9.7% to 9.9%, the number of unemployed people increased to 15.3 million, and the underemployment rate — which includes people whose hours have been cut as well as those working part time because they cannot find full-time jobs — rose .2 to 17.1

President Obama’s take on April’s job report: “particularly heartening … showing that the “difficult and at times unpopular steps we’ve taken over the past year are making a difference.”  
http://www.cbsnews.com/8301-503544_162-20004423-503544.html

The media’s spin is that folks who were frustrated and stopped looking for work have turned optimistic, jumped off their couches, and took to the streets to look for jobs. 

Or, it could simply be that their 99 weeks of unemployment compensation ran out and they had no choice but to start looking again.

I’m betting the latter, but we won’t be seeing much of that in the mass media … 

* * * * *

Math Note

Some of the bump in the unemployment rate was simply rounding. 

The reported rate was 9.9% — up .2 from 9.7.

Unrounded, the unemployment rate rose to 9.863% from 9.749% in March.

That calcs to ‘only’ 0.114 percentage point.

* * * * *

Posted in Employment - Jobs | Leave a Comment »

How to tell when a waitress (oops, I meant “server”) is working you for a tip …

May 10, 2010

Dr. Michael Lynn, Cornell School of Hotel Administration says there are 12 tactics servers often use to increase their tips.

Here they are.  Three are common sense: introducing yourself, smiling, and thanking folks. 

The others vary from cute to annoying.

Next time you’re dining out make a game of it — see how many of the antics you can spot.

  1. Introduce yourself by name.
  2. Smile a lot.
  3. Personalize your appearance — wear a funny tie, hat or flower to make you stand out.
  4. Kneel down next to tables.
  5. Recommend appetizers, wine and other extra items to increase your sales — and resulting tips.
  6. Tell a joke or play a game with customers.
  7. Touch customers.
  8. Draw a picture on the check.
  9. Use credit-card tip trays.
  10. Call customers by name.
  11. Give customers after-dinner candy.
  12. Thank customers.

Think these tactics don’t work ? 

Dr. Lynn’s studies indicate that high-quality service has less than a 2 percent effect on tips.

* * * * *

Source:
http://www.npr.org/templates/story/story.php?storyId=1329241

Posted in Behavioral Economics | Leave a Comment »

Decades of economic pain … until lucrative union & government pension plans go to the graveyard.

May 7, 2010

I’m a believer that commitments should be kept.  Even when they turn out to be disadvantageous.

So, I’m conflicted.

For decades, companies and governments have made major concessions to their employees — often reflected in lucrative retirement and pension plans (think UAW and Federal gov’t), regarded as too distant in the future to worry about, and inconsequential if growth rates stayed very high.

Well, now they (and we) are paying to the piper.

The pension obligations in most states and for many companies is choking the economic horse.

And, there’s no means of avoiding the burdensome costs — save for reneging on past deals made.

Since I rule out that option, I see our economy saddled by these obligations until retirees have the political courtesy to go meet their maker. 

That’ll take awhile … though the rate may accelerate under ObamaCare’s seniors’ rationing rule.  Hmmm …

* * * * *

Excerpted from WSJ: How to Tackle Government Labor Costs, April 29, 2010

State and local governments’ … pension obligations are underfunded to the tune of $1 trillion … propelled over the last decade by rising municipal employment.

The inescapable conclusion: Labor costs, which at $1.1 trillion in 2008 account for half of state and local spending, simply must come down.

Years ago, there was an informal “social contract” — public employees generally received lower wages than private-sector workers, and in return they got earlier retirement and generous pensions, allowing them to catch up.

For years, state and local government employees have received pay increases in excess of inflation, and they now have wages that are 34% higher on average than in the private sector.

Partly responsible for these trends is unionized …  pay levels higher than needed to attract qualified employees. The average quit rate among state and local employees is a third of that in the private sector.

Public employees also have a 70% advantage in benefits. Health insurance, retirement benefits, life insurance and paid sick leave are not only much more available to them, but much richer. In 2009, the costs of health insurance were 2.18 times as much for state and local employees as for private-sector workers.

Public-sector retirement costs also are high because many can retire at age 55 after 30 years of employment with pensions equal to 60% or more of final salary, which is often jacked up by lots of overtime in final working years. In some states, employees can “double dip” by retiring early and then resuming their previous jobs or taking other government positions. So they get salaries and pensions at the same time.

With slow economic growth, limited income expansion and high unemployment likely in future years, a taxpayer revolt may be brewing.

Americans still want basic municipal services like police and fire protection, good schools for their kids, clean streets and garbage collection, but at lower costs and budgets that don’t kick the deficit can down the road.

State and local government labor costs can be reduced in an orderly way.

  • Following in the footsteps of bankrupt GM, two-tier wage structures would allow existing employees to continue at current salaries, but pay new hires much lower wages that are nevertheless adequate to attract and retain qualified people.
  • And the new people can be enrolled in defined-contribution pension plans that require employee contributions instead of defined-benefit plans. Retirement ages can be increased.
  • While waiting for existing employees to retire, their pay can be frozen.
  • Pension formulas can be reformed to avoid the system being gamed by heavy overtime in final years on the job, and double-dipping can be eliminated.
  • Retirees in the public sector can be required, as they are in the private sector, to pay meaningful shares of their health-care costs.

These changes would be profound and shake up the high-paid, secure image of state and local government jobs. But essential services would still be delivered, only much more cost effectively. Push has come to shove.

Full article:
http://online.wsj.com/article/SB10001424052748704131404575117943161614762.html?mod=djemEditorialPage_h

Posted in Economics, Financial Crisis | 1 Comment »

Expiration dates are for wimps …

May 7, 2010

Takeaway: Traditionally, grocers ascribed one of two categories to their food – fresh or stale – and any inventory in the latter category was discarded.

However, some retailers have recently discovered that their customers see residual value in older food and online grocers are selling these items to consumers with a lower willingness to pay than the average shopper.

As marketers maximize profits by finding new markets for these perishables, one must wonder who’s hanging out at the far end of the demand curve.
 
* * * * *
Excerpt from FastCompany, “Questionable Trend of the Week: Expired Grocery Food Trading” by Ariel Schwartz, January 22, 2010.

Fresh groceries are just so expensive. Perhaps that’s why sites that sell out-of-date items have become so popular. One British site reported a whopping 500% increase in sales from December 2008 to the same time in 2009. Most of the goods sold on these discount sites are past their “best-before dates” but not the “use-by” dates, and have been bought at knocked-down prices from wholesalers, suppliers and supermarkets.

Once consumers get past the “ick” factor, they’ll discover that expired Hershey’s chocolate or canned tuna tastes the same as the fresh stuff. Expired food is cheap, too — some analysts estimate that customers save 75% compared to average retail prices.

So far, it seems like the trend is limited to the U.K., but the U.S. has the same problem with expired-but-good food being tossed into the trash on a daily basis. Would you turn down a slightly expired cart of groceries if it would save much-needed cash?
Edit by BHC
 
* * * * *
Full Article:
http://www.fastcompany.com/blog/ariel-schwartz/sustainability/questionable-trend-week-out-date-grocery-food-trading
* * * * *

Posted in Mktg - Pricing | Leave a Comment »

Taking money from widows and orphans (and retirees) … I’m talking the Feds, not Goldman Sachs

May 6, 2010

Appropriately, much attention is starting to get focused on the likely TRIPLING of the marginal tax rate on dividends (see the WSJ article below). 

Right now, the top rate on ordinary dividends is 15%.  The current Senate budget resolution calls for the rate to jump on January 1 to the pre-Bush ordinary income tax rate of 39.6%.  In 2013 — when the ObamaCare tax collection mechanism gets revved up — you can add another 3.8%, pushing the high marginal rate up to a whopping 43.4%

That’s for rich folks.  But what about the widows, orphans, and retirees?

Many folks don’t realize that the current 15% dividend tax rate only applies to folks in the upper tax brackets — starting, for married folks, at $67,800.  Married folks below that threshold are in the zero, 10% or 15% marginal tax brackets — their current tax rate on ordinary dividends is ZERO !  That’s right, ZERO.

So, if their dividend tax rate for low-earners also gets upped to their ordinary income tax rates, most of them will be paying 15%.  Statistically speaking, that’s significantly different from zero.

Going after the dividend receiving fixed income retirees … hmmm… I think they call that an unintended conseuence.

* * * * *

Excerpted from WSJ: The Dividend Tax Bill Arrives, April 29, 2010

As the big tax increase day of January 1, 2011 approaches, the Democrats running Congress are beginning to lay out their priorities. Get ready for bigger rate increases than previously advertised.

Last week the Senate Budget Committee passed a fiscal 2011 budget resolution that includes an increase in the top tax rate on dividends to 39.6% from the current 15% — a 164% increase. This blows past the 20% rate that President Obama proposed in his 2011 budget and which his economic advisers promised on these pages in 2008.

(See “The Obama Tax Plan,” August 14, 2008, by Jason Furman and Austan Goolsbee: “The tax rate on dividends would also be 20% for families making more than $250,000, rather than returning to the ordinary income rate.”)

And that’s only for starters. The recent health-care bill includes a 3.8% surcharge on all investment income, including dividends, beginning in 2013. This would nearly triple the top dividend rate to 43.4% in Mr. Obama’s four years as President. We suppose the White House would call this another great victory for income equality.

* * * * *

Dividends which are payouts from business earnings are already taxed once at the corporate rate of 35%. The individual dividend tax is a second levy on that same income, and at a rate of 43.4% would take the total tax on each dollar paid in dividends to something like 60 cents.

You can expect fewer businesses either to offer or increase dividend payouts, which means less dividend revenue for the government.

The punitive tax rate on dividends combined with the deductibility of interest on borrowing also increases the tax code’s bias toward debt over equity. But aren’t we supposed to be living in a new era of healthy deleveraging?

* * * * *
Full article:
http://online.wsj.com/article/SB10001424052748703709804575202481173165478.html?mod=djemEditorialPage_h

Posted in Taxes | Leave a Comment »

It’s your brand that determines your advertising, not the other way around

May 6, 2010

Key Takeaway: Flashy ads. Pretty packaging. Bright colors. For those who have not taken the Homa Trilogy, this may be what comes to mind when marketing is brought up in conversation.

For the well informed marketer, however, it is crucial to understand that these tactics all need to work together in order to add value to your brand (and ultimately increase profitability).

As you think about creating your next advertisement, be sure that it allows viewers to develop (or reinforce) a single, overarching, and consistent brand identity.

* * * * *

Excerpted from Businessweek, “How to Create Better Advertising” by Steve McKee, April 16, 2010

Conventional wisdom says the secret to great advertising is developing a big idea for a campaign. In reality, the trick is developing a campaign for a big idea.

As a young company takes root and expands, it begins to establish its brand. With each passing day, the things it does enhance (or detract from) the value of that brand.

The world’s best marketers understand that as valuable as their products and services are, products and services come and go. Brands, however, live on indefinitely.

Apple’s (AAPL) animating idea is innovation. Whether it’s the design of the iPhone, the functionality of iTunes, the customer experience in the Apple Store, or the light humor of the “Mac vs. PC” ads, the company is all about providing pleasant surprises to its customers. As a result, Apple has a legion of loyal followers and is able to command premium prices for its offerings.

Foundation for Lasting Success

For Wal-Mart (WMT), the idea is savings—a concept the company has so effectively owned over the past 48 years that it became the world’s largest retailer. Occasionally it loses sight of its originating idea, but it always returns to the core.

What these and other dominant companies know is that sustainable success is built on the foundation of a singular idea, around which everything they do is oriented. Advertising is just one of those things.

It’s hard to argue with happiness. It’s hard to be against happiness. And it’s hard to find anyone who doesn’t like happiness. Coke has decided to equate its brand with happiness, and orients its product, packaging, and promotion in that direction. (Ever see a “Happiness Machine”?). In a fast-paced, pressure-filled world, anyone can take a moment to “Have a Coke and a smile.” (If that old slogan sounds familiar, it only proves the point.)

Happiness. Motivation. Innovation. Performance. Imagination. Savings. These aren’t advertising ideas; they’re business ideas that have advertising implications. If you want your advertising to be more effective, ensure that it’s rooted in the idea that animates your company. If you’re not sure what that idea is, it’s probably related to why you got into business in the first place. Rediscover your animating idea, make sure it’s still sound (see “How Solid Is Your Brand?”), and orient everything you do around it—including (but not limited to) your advertising.

Edit by JMZ

* * * * *

Full Article:
http://www.businessweek.com/smallbiz/content/apr2010/sb20100416_222501.htm?chan=innovation_branding_top+stories

Posted in Mktg - Marketing Mix | Leave a Comment »

A parody of parroting: "… from day one …"

May 5, 2010

Grandma Homa adage “say something often enough and people will start believing it.”

Well, President Obama has proven beyond a shadow of a doubt that American people will believe absolutely anything if it’s said often enough.  Think “not one single dime” or “on C-Span” …

For the record, I’m not on the ‘slow response’ bandwagon — I wasn’t on Bush for Katrina —  and to be consistent — I can’t jump on Obama for the oil spill.

But, I am amused by the Administration’s rapid response to re-write history. 

Even the NY Times has turned on Obama : “It took the administration more than a week to really get moving. The timetable is damning.”

The Administration’s response?  A downright laughable media blitz with the talking point mantra — “from day one” — that’s being parroted ad nauseam by administration lackies so of often that it’s becoming a parody of “on message”.

Click the pic to see it for yourself:

image

I expect “from day one” will become part everyday jargon now … and proof positive that if you say something often enough, people will believe it. 

Grandma Homa had it right on that one.

* * * * *

Excerpted from NY Times: Unanswered Questions on the Spill, April 30, 2010

President Obama has ordered a freeze on new offshore drilling leases as well as a “thorough review” into what is almost sure to be the worst oil spill in this country’s history — exceeding in size and environmental damage the calamitous Exxon Valdez disaster in 1989.

The company, BP, seems to have been slow to ask for help.

Yet the administration should not have waited, and should have intervened much more quickly on its own initiative.

A White House as politically attuned as this one should have been conscious of two obvious historical lessons. One was the Exxon Valdez, where a late and lame response by both industry and the federal government all but destroyed one of the country’s richest fishing grounds and ended up costing billions of dollars. The other was President George W. Bush’s hapless response to Hurricane Katrina.

Now we have another disaster in more or less the same neck of the woods, and it takes the administration more than a week to really get moving.

The timetable is damning. The blowout occurred on April 20. In short order, fire broke out on the rig, taking 11 lives, the rig collapsed and oil began leaking at a rate of 40,000 gallons a day. BP tried but failed to plug the well. Even so, BP appears to have remained confident that it could handle the situation with private resources (as did the administration) until Wednesday night, when, at a hastily called news conference, the Coast Guard quintupled its estimate of the leak to 5,000 barrels, or more than 200,000 gallons a day.

Only then did the administration move into high gear … with a series of media events designed to convey urgency — including a Rose Garden appearance by the president and dispatching of every cabinet officer with the remotest interest in the disaster to a command center in Louisiana.

We now face a huge disaster whose consequences might have been minimized with swifter action.

http://www.nytimes.com/2010/05/01/opinion/01sat1.html

Posted in Communications, Obama Administration | Leave a Comment »

BP’s brand equity … it’s leaking, too.

May 5, 2010

Some Homa family members avoided Exxon stations like the plague after the Valdez accident.  My bet: they weren’t alone.

Same fate for BP (nee British Petroleum} ?

Early data says yes — BP has gone from being No. 1 in its category in a brand-loyalty index maintained by research company Brand Keys — to dead last.

Next question for BP: how to restore its brand equity ?

Good news for BP: no signifcant retail competitors except , well, Exxon.

Excerpted from BrandChannel: BP’s Brand: Is the Damage Done?, May 3, 2010

BP’s brand equity has exploded almost as quickly as its faulty well mechanism at the bottom of the Gulf. Reportedly, BP has gone from being No. 1 in its category in the brand-loyalty index maintained by Brand Keys — to dead last.

Part of BP’s long-term problem will be that the company has gone so far out of its way over the last several years to position itself as the “green” oil company, with a sunny new logo composed of green and yellow; a new slogan, “Beyond Petroleum,” and the playing up of the BP acronym instead of its name; and its boasts about alternative-energy initiatives such as wind farms.

All of that seems laughably hollow now as BP is unmasked as – gasp! – basically an oil company — drilling the world’s deepest wells in the Gulf of Mexico, scouring for oil in the Arctic, squeezing natural gas from the rocks of Oman.

British Petroleum must fight to not join the ranks of all-time corporate villains, a list that includes fellow oil giant Exxon Mobil, which achieved infamy for Alaska’s Valdez disaster in 1989.

While BP is adamant that it will clean up this spill — the bigger challenge may very well be cleaning up and restoring the BP brand.

Full article:
http://www.brandchannel.com/home/post/2010/05/03/BP-Brand-Damage.aspx

Posted in Energy, Mktg - Brands, Oil & Energy | Leave a Comment »

The "spill" will be a problem for Obama … here’s why.

May 4, 2010

Lots of chatter on the right-leaning talk shows along two points:

(1) Obama was slow to respond to the crisis … no better than Bush on Katrina.

(2) There goes off-shore drilling as a source of oil for the U.S.

I can’t take the slow response criticism seriously.  I didn’t think Bush deserved it (should he have declared the LA Governor and N.O. Mayor to be grossly inept and Federalized the state ?)  … so I can’t criticize Obama on this one.

Interestingly, Obama got boxed by some bad timing.  Just a couple of weeks ago he announced expansion of off-shore drilling. While the announcement had no substance to it (actually cut back on authorized areas), it did provide some pro-drilling sound bites.  If he hadn’t said it, he would be in the catbird seat now: “See, I told you offshore drilling was bad.”  But, now he’s rhetorically in the offshore canoe.  We’ll see on that one.

My take: There will be a ‘discontinuity’ in offshore production.  This well is gone, and others will be shut or slowed by government inspections and reviews.

So what? 

I expect gas prices to be over $4 by the end of the summer … and maybe as high as $5 … due to curtailed supply and the oil companies costs of clean-up and mandatory rig upgrading.

The impact? Uh-oh for the economy. Oil is a major cost component of many products.  So, if oil prices spike, a broad range of prices to go up, demand will falter, and the expected recovery will sputter.

That means that unemployment stays high going into the November elections.

That’s a problem for the President.

Posted in Obama Administration, Oil & Energy | 3 Comments »

The power of branding … What does "BP" stand for ?

May 4, 2010

I’ve been a bit surprised that I haven’t heard or seen a single news report of the rig blast and oil spill that has referred to BP by its former name BRITISH PETROLEUM … or have made reference to the fact that its the UK’s largest corporation.

Now, I imagine that there have been some references that I’ve missed.  The bigger points are:

(1) Why the hush-hush ? … the omission strikes me as odd — certainly the reports would be different if the company were, say, formerly known as Bush Petroleum 

(2) Why haven’t we heard a peep from the British government ? … maybe because they’re in an election cycle

(3) Isn’t branding a powerful tool ? … imagine if the company was still called British Petroleum.

* * * * *

For the record … right from the people’s encyclopedia:

BP is the UK’s largest corporation.

BP plc (formerly The British Petroleum Company plc then BP Amoco plc) is a British global energy company that is the third largest global energy company and the 4th largest company in the world.

The company is among the largest private sector energy corporations in the world, and one of the six “supermajors” (vertically integrated private sector oil exploration, natural gas, and petroleum product marketing companies).

The company is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

British Petroleum merged with Amoco (formerly Standard Oil of Indiana) in December 1998, becoming BPAmoco until 2000 when it was renamed BP and adopted the tagline “Beyond Petroleum,” which remains in use today.

The company states that BP was never meant to be an abbreviation of its tagline.

Source: http://en.wikipedia.org/wiki/BP

Posted in Energy, Mktg - Brands | 1 Comment »

One of these things is not like the others …

May 3, 2010

Remember the Sesame Street skits where — as a kid — you had to identify that in a group consisting of an apple, an orange, a dog, and a grapefruit that the dog “wasn’t like the others” ?

* * * * *

Let’s play that game again.  Here’s the group:

(a)  “When you spread the wealth around, it’s good for everybody.”
http://www.youtube.com/watch?v=RZcEHLr4gBg

(b) “I do think at a certain point you’ve made enough money.”
http://www.realclearpolitics.com/video/2010/04/28/obama_to_wall_street_i_do_think_at_a_certain_point_youve_made_enough_money.html

(c) “There will be time for them to make profits … now is not that time.”
http://www.realclearpolitics.com/politics_nation/2009/01/obama_now_is_not_the_time_for.html

(d)  “I’m not anti-business … or anti-capitalism”
http://www.businessweek.com/magazine/content/09_32/b4142000676096.htm

* * * * *

If you were raised on Sesame Street, you probably picked (d) … correct.

* * * * *

There are a bunch of ironies:

(1) Some people seem genuinely surprised these days that Obama is trying to spread the wealth around … geez, he said he was going to do it and people voted for him and his ideas.  As the President likes to say (over & over & over): elections have consequences.

(2) Apparently $5.5 million per year is below the threshold of “you’ve made too much money” since that was what Obama raked in last year while in his $400,000 per year job as President … hmmm.  Remember in a debate John McCain answered “what’s rich?” with the answer: $5 million … double hmmm.

(3) Jobs, jobs, jobs … if the Dems have an Achilles Heel this November it’s the unemployment rate.  Other than bloating the government bureaucracies and watchdog agencies, where does the President think the jobs are going to be created?  Does he really think that he can rally American businesses by constantly vilifying them — one after another?  I guess the approach might work, but I’m taking the under bet …

Posted in Obama - Promises Made & Kept, Obama Administration | Leave a Comment »

It’s Powerpoint’s fault … oh, really ?

May 3, 2010

The article below has gone viral, providing ammo for folks who dislike Powerpoint presentations.

To me — an avid Powerpointer —  the argument is downright laughable.

It’s a bad idea to get somebody to organize their thoughts and present them in a logical sequence?  Better to let them ramble aimlessly and hide behind undocumented points-of-view?

If there’s not enough information for deep understanding, then demand it !  There’s plenty of space on a Powerpoint slide and in appendices.

Takes too much time to prepare?  Try writing a 5 or 10 page memo.  Knock it out in less time?  Call me skeptical.

You think Powerpoint pitches are mind-numbing?  Then what do you think about windy teleprompter speeches?

As the saying goes: slides don’t kill, people do …

* * * * *

Excerpted from NY Times: We Have Met the Enemy and He Is PowerPoint, April 26, 2010

PowerPoint has crept into the daily lives of military commanders and reached the level of near obsession.

“PowerPoint makes us stupid,” says Gen. James N. Mattis of the Marine Corps, the Joint Forces commander.

Brig. Gen. H. R. McMaster banned PowerPoint presentations … and likens PowerPoint to an internal threat.

“It’s dangerous because it can create the illusion of understanding and the illusion of control … Some problems in the world are not bullet-izable.”

In General McMaster’s view, PowerPoint’s worst offense is … rigid lists of bullet points that take no account of interconnected forces. 

Behind all the PowerPoint jokes are serious concerns that the program stifles discussion, critical thinking and thoughtful decision-making.

“Death by PowerPoint,” the phrase used to described the numbing sensation that accompanies a 30-slide briefing, seems here to stay.

Commanders say that the slides impart less information than a five-page paper can hold, and that they relieve the briefer of the need to polish writing to convey an analytic, persuasive point. Imagine lawyers presenting arguments before the Supreme Court in slides instead of legal briefs.

No one is suggesting that PowerPoint is to blame for mistakes in the current wars, but the program did become notorious during the prelude to the invasion of Iraq.

Full article:
http://www.nytimes.com/2010/04/27/world/27powerpoint.html?emc=eta1

Posted in Powerpoint pitches | 2 Comments »

If you’re looking for profit, don’t overlook the power of pricing

May 3, 2010

Key Takeaway: There are many ways to drive profitability for your brand. While line extensions, increased unit sales, and cost reductions may increase the ever-important bottom line, pricing strategies may be the most overlooked options.

A sound pricing strategy has the potential to improve profitability more than other tactics, as any change in price will inevitably trickle all the way down to the organization’s overall profits.

By knowing your market, establishing target prices, and giving consumers options at different price points, you will have the potential to improve profits for your existing brand or line your new business up for success.

* * * * *

Excerpted from Businessweek, “Effective Pricing Strategies to Improve Profits” by Tapan Bhatt, April 19, 2010

Current turmoil in the financial markets, highly competitive markets, and downward pressure on product prices strain the profits of companies both large and small. Now more than ever, companies must turn to the most influential, yet overlooked driver of profits: active price management.

Improve price responsiveness. To prevent margin erosion, companies should continuously fine-tune pricing across products and services so that it aligns with prevailing market conditions. Communicating prices across the network of sales reps, partners, and distributors also arms teams with the pricing data they need to compete effectively.

Address low-margin business. Companies can accurately identify low-margin business and associated root causes to make informed decisions as to whether certain deals make strategic sense despite low profitability. This way corrective action can be taken if needed.

Tighten cost-to-serve recovery. Tough economic times demand tighter cost-to-serve policies. Companies can classify customers into categories such as “strategic” and “opportunistic” to ensure appropriate cost-to-serve recovery for opportunistic customers while serving the needs of strategic customers.

Set granular pricing. Rather than using an ad hoc approach, companies should set prices and negotiation guidance according to different customer segments. Segment-specific pricing considers factors such as customer perception of product value, prevailing market conditions, and position vs. competitors.

Control “maverick” selling. The absence of guidelines on pricing negotiation, or the ability to enforce them, creates substantial variability in negotiation outcomes. Companies can increase negotiation consistency and improve margins by establishing target prices, approval levels, and floors.

Edit by JMZ

* * * * *

Full Article:
http://www.businessweek.com/smallbiz/tips/archives/2010/04/effective_prici.html

Posted in Mktg - Pricing | Leave a Comment »

Docs say ‘Shove it’ to ObamaCare …

April 30, 2010

Yes, the AMA supported ObamaCare, but … less than 15% of practicing docs belong to the AMA … and “90% of the AMA’s funding comes via a government sanctioned monopoly whereby the AMA sells the billing codes upon which the entire health care system relies”

Vested  interest?  You decide …

* * * * *

Excerpted from Forbes: Why Physicians Oppose The Health Care Reform Bill, 04.28.10

The medical establishment is not celebrating ObamaCare. In fact, the mood in exams rooms is downright morose.

A recently released poll of more than 2,000 physicians is alarming:

  • 79% of physicians are less optimistic about medicine since the passage of health care reform.
  • 53% indicate they will consider opting out of insurance plans with passage of the bill.
  • 66% indicate that they will consider opting out of all government-run programs.

Many physicians may ultimately be faced with the choice of opting out of government insurance programs or going out of business.

A significant number of physicians are realizing they cannot stay in business — let alone remain independent — if they continue to accept artificially low government reimbursement rates.

The same reform bill that will provide “care for all” may drive away more physician caregivers than attract previously uninsured patients.

What a predicament that would be. Health care without active physician participation is no health care at all.

* * * * *

How can physicians be so pessimistic ?

For one, the bill addresses none of the issues most consistently ranked by physicians as the most critical for lowering costs and improving access.

Tort reform, streamlining billing and payment, and fixing the flawed government formula for calculating physician reimbursement are given little, if any, serious attention.

Instead of fixing these issues, the government will be reducing physician reimbursement, just as the country is counting on even more physicians to be available.

* * * * *

What of the much-touted American Medical Association’s support for the bill?

Less than 15% of practicing physicians are AMA members, so any AMA support is more a reflection of the AMA’s financial interests than what physicians in this country truly want. This is a situation that proved opportunistic to proponents of the bill but could prove painful for America’s health care system.

The AMA, which counts less than 10% of its $300 million dollars in revenue from physician membership dues (the rest comes from a government sanctioned monopoly whereby the AMA sells the billing codes upon which the entire health care system relies) had little choice but to endorse the bill, lest the government retract its exclusive license on billing codes.

* * * * *

Full article:
http://www.forbes.com/2010/04/28/health-care-reform-physicians-opinions-contributors-daniel-palestrant_print.html

Posted in Health Care / Medical Insurance | Leave a Comment »

If you’re opposed to the illegal immigration law … then boycott Arizona (Tea) … huh ?

April 30, 2010

The problem: Other than its brand name, Arizona Tea has nothing to do with the state of Arizona … it’s brewed in New York. 

Ready  =>  shoot  => aim …

* * * * *

Excerpted from NY Daily News: Opponents of immigration law call for boycott of Arizona Iced Tea, April 28th 2010

Arizona’s new state law allows cops to demand citizenship papers from anyone they stop for a violation and think looks illegal.

Opponents of Arizona’s new anti-immigrant law are calling for a boycott of the state’s products – including the popular Arizona Iced Tea.

The problem: Arizona Iced Tea is actually brewed in New York.

Misguided tea fans vowed to switch to Lipton or Snapple:

  • “Dear Arizona: If you don’t change your immigration policy, I will have to stop drinking your enjoyable brand of iced tea” 
  • “It is the drink of fascists”.

Founded in Brooklyn in 1992, the firm was based in Queens before moving into a new $35 million headquarters in Nassau County last year.

Actual Arizona firms facing a boycott: Cold Stone Creamery, U-Haul and Best Western.

Full article:
 http://www.nydailynews.com/news/politics/2010/04/28/2010-04-28_ariz_law_leads_to_misfired_ire.html#ixzz0mTxCBHo1

Posted in Mktg - Brands, Mktg - Consumer Behavior | Leave a Comment »

Hey doc: your turn to bend over …

April 29, 2010

The gist of the below article: Primary care physicians are grossly underpaid compared with specialists, so there are fewer are them.  (No kidding ?)  

So, pay them more and there will be more of them. (It’s called an upward sloping supply curve !)

Yeah, yeah.

But, here’s what caught my eye: “A family physician or general internist averages about $160,000 a year; a specialist averages $267,000.”

BW focused on the $100k difference (which they multiplied by 35 to make it look, well, 35 times bigger).

My focus: the $267,000 level … just enough to target the specialists as rich enough to get hit by Obama’s soak-the-wealthy tax rate increases.

So, under ObamaCare, docs who are arguably the best get hit with reimbursement caps (that cut their earnings) and tax increases (that grabs more of what’s left).

Bend over doc.

* * * * *

Excerpted from Business Week: General Practitioners Need to Make More Money, April 26, 2010

In 1997, The Council on Graduate Medical Education, a little-known federal panel … suggested a cap on the overall number of medical residents as part of federal cost cuts. And so it was done.

Now, the Council is about to recommend an increase in the number of primary-care physicians—and pay them a whole lot more.

Primary-care doctors comprise 32% of the physician workforce. Factor out pediatricians and just over 23% of doctors deal with adults, and that number is shrinking.

A family physician or general internist averages about $160,000 a year; a specialist averages $267,000.

That means the general practitioner will earn about $3.5 million less over a lifetime.

The panel is calling for a 40% hike in the number of primary-care doctors — and a 40% income increase for those entering the field. That should get general practitioners to within 70% of the median income of specialty physicians.

* * * * *

Did you know ?

Medicare determines the baseline for doctors’ pay, and since most medical students elect to train in the non-primary-care jobs generating the majority of charges, procedure-oriented specialists end up the winners.

Medicare finances the system via direct subsidies to pay residents’ salaries and indirect payments to hospitals for tests and other duties fulfilled by residents.

Full article:
http://www.businessweek.com/magazine/content/10_18/b4176043937119.htm

Posted in Health Care / Medical Insurance | Leave a Comment »

EC says “not so fast” on internet sales …

April 29, 2010

TakeAway:  Who should have more control over where goods are distributed – manufacturers or retailers? 

Seems like the maker of the good (i.e., the manufacturer) should have the say over where its goods are made available for sale. 

Not so in Europe.  The European Commission is prepared to mandate retailer-favored distribution policies.

* * * * *

Excerpted from WSJ, “EU to Overhaul Online-Retail Rules,” By Peppi Kiviniemi, April 19, 2010

Heavy lobbying from luxury-goods companies has led the European Commission to water down proposals aimed at expanding online sales of goods in Europe …

The new rules … will protect luxury-goods manufacturers against damage to their image by allowing them to insist in many cases that online sales be restricted to retailers who have “bricks and mortar” stores … This would prevent online-only retailers like Amazon and Ebay from selling the goods directly.

Preventing consumers from buying clothes or cosmetics brands over the Internet from a company that has an “online-only” business model will limit consumer choice and lead to higher prices and less innovative goods, said Director General of the European Consumers Organisation BEUC. But famous names like LVMH and Estée Lauder have argued that an uncontrolled push online could damage their image, and that online entrepreneurs shouldn’t benefit from the brand recognition they have worked hard to build up …

With the Internet now the fastest-growing retail channel in Europe, the overhaul of the competition rules has been long expected by the industry. Previously, luxury-goods makers had full control over who could sell their goods and they were able to prevent most online sales.

Overall, the new EU-wide rules will open up online sales by ensuring that manufacturers cannot discriminate against online shops when setting up their distribution networks, the document shows.

Any qualitative conditions that manufacturers set on who is allowed to sell their products must apply equally to high-street and online sales. This means that shopkeepers who are allowed to sell branded goods on the high street can also set up a store inside eBay or elsewhere on the Web to sell the same products online, provided that their online presence meets the brand requirements for look, feel and pre- and after-sales services …

Edit by TJS

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Full Article
http://online.wsj.com/article/SB10001424052748704671904575193993537322862.html?mod=WSJ_business_whatsNews

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Posted in Mktg - Distribution | Leave a Comment »

Snippet from the Goldman Sachs hearing …

April 28, 2010

Amid the blah-blah-blah. one question caught my attention:

Sen. Levin: “Which do you put first, the interests of your customers or the interests of your firm ?”

The GS guy stammered and gave a non-answer.

I wish he had answered either:

(a)  “Obviously, the interests of our customers because they are our business — so serving their interests is in the best interest of our firm.”

… or better yet, wish he had answered the question with a question …

(b) “Senator, when you vote, which do you put first, the interests of your constituents (the majority of whom are and were opposed to ObamaCare), or the interests of your party and President Obama ?”

The guy would have been charged with contempt of Congress, but it would have made for great theater …

Posted in Congress | 3 Comments »

In response to smart phones, LG says ‘keep it simple, stupid.’

April 28, 2010

Takeaway: It’s a classic strategic response: when the competition goes left, you go right.

As Apple, RIM, and Google race to make the smartest phones, LG hopes to connect with customers looking for simplicity and style.

Though smart phone usage has grown exponentially, these devices capture less than 20 percent of all US cell phone users.

LG believes there is tremendous opportunity in focusing on the larger portion of the overall market. LG’s strategy also reduces dollars required for R&D that can instead be redirected to design, branding, and…oh yeah, shareholders.

Will LG prove that less is more? Or, will the market develop to expected more and drop LG’s call?
 
* * * * *

Excerpt from Advertising Age, “Style Over Smarts: LG and Sprint Pitch Simpler Phones” by Andrew Hampp, April 8, 2010.

Even as Apple promises new features for the iPhone, the industry anticipates the iPhone’s arrival on Verizon and Palm retools its marketing strategy, LG and Sprint are starting a campaign aiming for the vast swath of consumers still choosing among simpler phones largely on the question of style.

The campaign and an accompanying MTV miniseries called “LG Fashion Touch” pair two LG phones being introduced April 19, the Lotus Elite and Rumor Touch, with Victoria Beckham and Eva Longoria Parker, respectively. The Lotus Elite is an edgier, more colorful flip phone that suits Ms. Beckham’s bombshell look, while the Lotus Elite is a more sleek, classic phone that complements Ms. Longoria Parker’s daily style.

The smartphone wars still don’t apply to a large group of women, said a VP of marketing and innovation at LG.

“Although there’s a large percentage of consumers going to smartphones, there’s still another segment who are saying, ‘I want phones that reflect my personal style’ without all the bells and whistles of a smartphone.”

Indeed, only 19.4% of U.S. mobile phone subscribers were using smartphones in the three months ended Feb. 10, compared with 80.6% using simpler devices, according to ComScore.
 
Edit by BHC
 
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Full Article:
http://adage.com/madisonandvine/article?article_id=143184

Posted in Mktg - Positioning, Mktg - Product & Innovation | Leave a Comment »

Still more trouble for tanning salons …

April 27, 2010

These guys just can’t catch a break … now they get hit by studies that tanning can be as addictive as drugs.  Oh my.

* * * * *

Excerpted from Washington Post,  Study: Indoor tanning may be addictive,  April 20, 2010

Researchers reported in the Archives of Dermatology that as many as a third of young people who use indoor tanning facilities may be addicted to the behavior.

Among people who said they had used indoor tanning facilities in the past, 69 percent met  criteria for addiction.

Among those who scored positive for addiction, 78 percent said they had tried to cut down on the time spent tanning but couldn’t, and 78 percent said they felt guilty about using tanning beds or booths too much.

Further, 26 percent said that, when they wake up in the morning, they want to use a tanning bed or booth, and nearly one in four admitted that they had missed scheduled activities — social, occupational or recreational — because they decided to go to a tanning facility.

The findings are the latest to suggest that tanning, whether natural or indoors, activates the same parts of the brain triggered by drug dependence.

Full article:
http://voices.washingtonpost.com/checkup/2010/04/study_indoor_tanning_may_be_ad.html?wprss=checkup

Posted in Laughs | Leave a Comment »

Tax Facts: Hooray for married people.

April 27, 2010

Too bad they’re a diminishing breed …

* * * * *

Excerpted from IBD: New Tax Math: Single Moms + Big Brother, 04/23/2010

The news that the U.S. has become a two-class society — i.e., half of Americans pay federal income taxes and half don’t — has been bouncing around the media and shocked some Americans who had no knowledge of this appalling economic fact.

Married taxpayers pay 75% of all federal income taxes, whereas two-thirds of single parents who file as head of household pay no income tax at all.

In 2008, 40.6% of children born in the U.S. were born outside of marriage; that’s 1,720,000 children …  7% of those babies were born to girls under age 18 … over three-fourths were born to women over 20.

LBJ’s Great Society set up a  system whereby millions of people were taught they had an “entitlement” to pick the pockets of law-abiding, taxpaying families if they met two conditions: They didn’t work, and they were not married to someone who did work.

Now, about 40% of Americans receive federal government handouts of cash and valuable benefits …  20% of Americans get 75% of their income from the federal government and another 20% get 45% of their income from the government.

Obama’s stimulus law will add nearly $800 billion in welfare spending over the next decade.

That means $22,500 for every poor person in the U.S., which will cost over $10,000 for each family that pays federal income taxes.

Full articler:
http://www.investors.com/NewsAndAnalysis/Article.aspx?id=531278

Posted in Taxes | Leave a Comment »

An undercover look at a television show’s impact on a brand

April 27, 2010

Key Takeaway: With viewership that can reach in the tens of millions, popular television shows tend to be the golden child of advertising. Perhaps the only thing better than having a 30-second commercial is having an entire show focus on your product…right?

A study looked at how CBS’ hit show, Undercover Boss, has influenced three establishments. The research shows that while perceptions improved in the short-run, they ultimately drifted back towards the pre-show numbers.

It goes to show that while you can expect television to create buzz around your product, it cannot be the only tactic if trying to change your brand image.

* * * * *

Excerpted from Brandweek, “‘Undercover’ Boosts Brands?” April 23, 2010

Retail chains with negative reputations expecting big, long-lasting buzz boosts from appearances on CBS’ Undercover Boss better think again.

YouGov’s BrandIndex examined three establishments featured on the hit program to learn if the exposure persuaded consumers that these were places they’d consider working for.

7-ELEVEN
7-Eleven received the lowest reputation score in the Grocery Store sector, so the timing was ideal for the February 21 broadcast.
President and CEO Joseph DePinto’s disguised himself as a trainee on the night shift in a Long Island, N.Y., store, where one employee confides that he’d never recommend working at the chain because it’s a dead end job.

That out-of-the-blue upbeat finale moved the meter only slightly for 7-Eleven — from -23.1 on the night the show aired to a short-term gain of a couple of points. However, in the long run, the chain made it as high as -17.2, and is now tracking at -19.3, a decent amount above its -24.7 score from January 1

WHITE CASTLE
Dave Rife — great-grandson of the hamburger chain’s founder — was surrounded by relatives, expensive cars and a personal trainer when his turn to work undercover arrived on February 28.

After revealing his identity, he told an employee to start a wellness program. He also handed out two $5,000 checks: one to an aspiring cook as a scholarship, and another to a worker for a “leaders of tomorrow” program.
That resonated the most with consumers, who sent White Castle’s reputation score upwards from -11.4 to -5.9 in a matter of three weeks. The brand has since settled in at -9.8, just a few points higher than the January 1 score of -13.4.

HOOTERS
The Atlanta-based restaurant chain has had one of the most undesirable workplace perceptions in the dining sector, so the appearance of president and CEO Coby G. Brooks on Valentine’s Day couldn’t have come at a better time. The chain’s reputation low point of the year came on January 21, with -31.1, around the same time the owners who licensed the brand name for Las Vegas’ Hooters Hotel and Casino announced they had “substantial doubt about our ability to continue as a going concern.”

Hooters’ reputation score got a modest shot in the arm, as it climbed leading up to the February 14 airing, hitting -26.2. It then moved up to -23.7 in late March — the chain’s highest score since November 2009. However, Hooters has slid to -27.7 — and its very existence is shaky now that it has one month to find a buyer to resolve a legal brawl over Coby Brooks’ father’s estate.

Edit by JMZ

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Full Article:
http://www.brandweek.com/bw/content_display/news-and-features/direct/e3icc341acc4f9c061e30d034bbbaf1c758

Posted in Media, Mktg - Brands | Leave a Comment »

This is big: Florida puts ObamaCare "individual mandate" on Nov. ballot …

April 26, 2010

First, the news and a sample of how it’s being covered … below is my take on why it’s important.

In Florida, voters will decide this fall whether to ban health insurance mandates, including those required by the federal health care overhaul.

The Republican-controlled Florida Legislature voted on Thursday to place a constitutional amendment on the Nov. ballot that would ban any laws that compel someone to “participate in any health care system.”

Republican legislators said the amendment was needed to block an attack on freedom and individual rights by Congress.

Democrats said the debate echoed the battle over states’ rights when the federal government ordered school integration and said the amendment could not trump federal law.

Sixty percent of voters must approve the amendment in order for it take effect.

Excerpted from NYT: Florida: Health Overhaul on November Ballot, April 22, 2010
http://www.nytimes.com/2010/04/23/us/23brfs-HEALTHOVERHA_BRF.html

* * * * *

Ken’s Take: I think the pundits are missing the point on this one.

Whether the constitutional amendment passes or not is largely irrelevant.

An important part of the the Bush / Rove election strategy in 2000 was to get wedge issues on ballots — gay marriage bans. The intent: to draw social conservatives to the polls.

Well, ObamaCare is still opposed by a majority of the electorate — and, many in that majority are passionate about the issue.

So, if ObamaCare shows up on the November ballot, it’ll draw right-leaning voters.

Watch for more of these issues to make their way to the Nov. ballots.

Whether the specific proposals win or lose is irrelevant — it’s all about turnout.

Posted in Health Care / Medical Insurance | Leave a Comment »

ObamaCare and New Coke

April 26, 2010

Punchline: “Admitting a mistake is almost constitutionally impossible for today’s corporate chiefs, and even harder for politicians. Sometimes it’s best to admit your mistakes. Presidents, like CEOs, can pay a steep price for not admitting error.”

Note: My students will know that I’m conflicted on this one.  While I like the message and the implied recommendation, I may be the last living person who thinks that New Coke was a strategic coup — it got Coke plenty of heightened exposure, it strengthened ties with the Classic Coke buyer (when Classic was promptly re-introduced), it got Coke extra shelf facings (New Coke + Classic Coke), and it provided the flavor formula for Diet Coke (<= bet you didn’t know that).

* * * * *

Excerpted from WSJ:  ObamaCare and New Coke, April 24, 2010

This week marked the 25th anniversary of the introduction of “New Coke.”

New Coke was not just another product launch: It crossed over from product marketing into the social and political sphere.

New Coke was introduced by the company with high hopes: It was a drink that consumers in blind taste tests rated superior not only to Pepsi, but also to Coca-Cola.

Despite consumers’ immediate acceptance of the new beverage and an initial jump in sales, resistance began to form in small protests around the country. Sales began to lag.

The objection was not so much to the new product itself, but to the company’s hubris in removing the traditional Coca-Cola from the shelves to make way for the new.

* * * * *

There may be some lessons here regarding ObamaCare.

Just as most Americans were happy with the old Coke, 85% of Americans were happy with their own health-care plans at the time that ObamaCare was introduced.

In essence, those plans were taken away from them in the same way the old Coke was taken away.

And, as was the case with New Coke, opposition has continued to grow.

This is personal for the American people.

* * * * *

Faced with a successful launch but growing and vocal public resistance, the Coca-Cola Company’s leadership did the extraordinary.

Coke reversed paths and returned classic Coca-Cola to supermarket shelves just 77 days after the debut of New Coke.

Coke said: We were wrong, but at least we’re smart enough to listen to you.

People not only rejoiced, they rewarded the company with unprecedented gains in volume and market share.

* * * * *

Full article:
http://online.wsj.com/article/SB10001424052748703876404575200550394710626.html?mod=djemEditorialPage_h

Posted in Mktg - Brands | 1 Comment »

First ever face transplant …

April 26, 2010

Precisely as presented on the Drudge Report …

Gotta wonder:

(1) Geithner or Bernanke ?

(2) Worth the effort ?

image

image

http://www.drudgereport.com/

Posted in Laughs | Leave a Comment »

Reeling tanning salons take another direct hit …

April 23, 2010

Punchline: The European Union declares vacationing a right and subsidizes holidays for the underprivileged so that they can hit the beach … the tanning salon guys just can’t catch a break these days.

* * * * *

Excerpted from WSJ: Cash for Tanners, April 23, 2010 

The European Union’s “social tourism” project advocates subsidized holidays for the underprivileged, saying that visiting foreign countries is a “right,” and one that could soon be financed by EU taxpayers.

This gives a whole new meaning to the concept of “paid vacation.”

The EU last year launched a project to identify and promote measures to help the needy to go on holiday.

The project specifically targets the disabled, poor families, senior citizens and “youth,” a group that in geriatric Europe includes people up to 30 years of age.

Cash for tanners is also being touted as good economic policy.

At an EU meeting last week, Spanish Tourism Minister Miguel Sebastian said tourism “should be an asset all citizens can enjoy, in particular those with physical disabilities or financially disadvantaged.”

Full article:
http://online.wsj.com/article/SB10001424052748704448304575195820988457124.html?mod=WSJ_Opinion_AboveLEFTTop

Posted in Laughs | 1 Comment »

Mr. President: my Toyota lost market value … how about writing off some of my auto loan ?

April 23, 2010

This one just won’t die … and it gets me riled every time its heart starts beating louder.

Why should people who bought houses they couldn’t afford have their bad behavior rewarded with loan forgiveness while their mortgage paying neighbor has to pay off the full amount they borrowed ?  It just doesn’t make sense.

Maybe they should cut mortgage principle balances across the board — good loans and bad loans.  Let real home “owners” (like me) feed at the trough, too.  Better yet, extend the program across all loans — say auto loans.  I bet many Toyota’s are underwater these days …

CNBC: Force Banks to Cut Mortgage Principal: Watchdog, 20 Apr 2010

The watchdog overseeing the $700 billion bank bailout said that the Obama administration should consider forcing lenders to make principal reductions for struggling homeowners who owe more than their home is worth.

Further, he  urged the administration to consider extending the amount of time unemployed homeowners are forgiven from making mortgage payments as the maximum six months now allowed may not be long enough.

Full article:
http://www.cnbc.com/id/36658764

Posted in Mortgage Crisis | Leave a Comment »

Beating the promotion cycle

April 23, 2010

TakeAway:  Jos A Bank responded to the downturn the way many companies did – discount, discount, discount.

But Jos A Bank, unlike most companies, appears positioned to carry its short-term success into long-term profitability. 

Thanks to several operating decisions (maintaining control over most of its manufacturing and shipping, and exploiting the downturn real estate market to negotiate low rent leases), Jos A Banks is maintaining profitability while acquiring new consumers. 

Did Jos A Bank figure out how to successfully execute and beat the margin killing promotion cycle?

* * * * *

Excerpted from Washington Post, “The economic downturn suits menswear retailer Jos. A. Bank just fine,” By Ylan Q. Mui, April 19, 2010

… Jos. A. Bank began making headlines when — just days after the stock market plummeted to a 12-year-low — it offered to refund any suit purchase to customers who lost their jobs.

It rolled out aggressive promotions — such as buy one suit, get two for free — to lure new shoppers. The retailer revamped its Web site, opened new stores and started renting tuxedos. Last week, it announced it would open five pilot outlet stores that could become models for a new line of business.

Such moves have fueled an 11 percent increase in sales … during the last fiscal year and a 21 percent jump in profits … Wall Street valued the company at $1 billion this spring for the first time. Its stock price has more than doubled since last summer …

It seems an unlikely time for a rally. Retailers suffered massive losses as the financial crisis of 2008 froze consumers’ wallets and high unemployment rates stymied prospects for recovery …

Jos. A. Bank responded to the downturn with sharp pricing and inventive promotions … “They have a compelling price-value message with a good-quality product. . . . In this environment, that is what draws the consumer.”

But discounting can become a vicious cycle, and many retailers have struggled to wean shoppers off heavy promotions. Jos. A. Bank experimented with more traditional pricing during Father’s Day last year — typically one of its busiest holidays — and found sales dropped off. When it returned to aggressive promotions, customers came back. It has tested traditional pricing several times since with limited success.

Black said the company will continue discounting as long as necessary. Because it manufactures nearly all of its products, the retailer has greater flexibility to determine prices. The promotions have squeezed profit margins, but the company has made up part of the difference by saving on shipping and materials and negotiating some lower rents …

The retailer’s trademark suits have become increasingly important sales drivers, accounting for nearly 40 percent of sales last year compared to about 30 percent in 2008. Though Black said existing customers are purchasing less, the chain has enticed new shoppers away from competitors. Its customer file has grown 18 percent …

Meanwhile, Jos. A. Bank is testing several new concepts. Early this year, it began offering tuxedo rentals at some stores through a third-party distributor. The company is hoping the service will bring new customers through its doors, who could then be persuaded to purchase other clothing …

Edit by TJS

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Full Article
http://www.washingtonpost.com/wp-dyn/content/article/2010/04/18/AR2010041802777.html?hpid=artslot

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Posted in Mktg - Promotion | Leave a Comment »

Wall Street : Back to the Future ?

April 22, 2010

Below is a quick take on the context of the Goldman bruhaha and financial regulatory reform. 

The “factors that moved Wall Street from the old model to the new” don’t get talked about much …

* * * * *

IBD: Goldman Case Marks Shift On Wall Street,  04/21/2010

Once upon a time, Wall Street’s leaders saw themselves as arbiters of capital, helping allocate society’s savings to productive uses.

By contrast, Wall Street’s major firms now see themselves as captains of “the market,” navigating it — for themselves and sometimes their clients — for maximum gain.

This is a distinction with a difference.

As arbiters of capital, Wall Street was paid to make judgments. It tutored investors on which stocks to buy, advised companies on which mergers and acquisitions to pursue. It decided which companies deserved capital through the sale (“underwriting”) of new stocks and bonds to investors. Wall Street made money through fees and commissions.

Now the prevailing model is different. Wall Street firms still give advice — and earn fees. But their main business is trading for their own accounts and creating trading opportunities for clients.

About 80% of Goldman’s $12.8 billion in Q1 revenues came from its trading and proprietary investment accounts. The rest represented underwriting, financial advice and management.

Greed and shortsightedness didn’t originate yesterday. Wall Street’s old model bred abuses. Brokers “churned” clients’ accounts to generate commissions. Investment bankers earned fees by rubber-stamping dubious mergers. Underwriters blessed poorly managed firms or companies with no real businesses (remember the dot-com bubble). And there were swindles.

Many factors moved Wall Street from the old model to the new:

  • the end of fixed commissions on trades, which squeezed revenues;
  • computer technology, which made rapid trading and exotic financial instruments possible;
  • the replacement of partnerships with publicly held firms. When partners were individually responsible for a firm’s losses and mistakes, they restrained excessive risk-taking.

These changes won’t be reversed. But if Wall Street can’t control itself, someone else will.

Full article:
http://www.investors.com/NewsAndAnalysis/Article.aspx?id=530938

Posted in Wall Street | Leave a Comment »

Loose women cause Quakes … with a capital "Q"

April 22, 2010

I figure that if the Iranians can close in on a nuclear bomb, they must have a knack for science. 

Intuitively, it makes sense that a whole lot of shakin’ could cause some quakin’ …. but seems it would take an enormous number of women being simultaneously “loose” to cause a Quake.

Maybe religion and science should stay out of each other’s knickers…

CNN: Iran cleric says Promiscuous women cause earthquakes,April 21, 2010

Iran suffers regular earthquakes, including a devastating one that destroyed the ancient city of Bam in 2003, killing tens of thousands.

A leading Iranian hard-line cleric has said that women who dress provocatively and tempt people into promiscuity are to blame for earthquakes,

The prayer leader, Hojatoleslam Kazim Sadeghi, says women and girls who “don’t dress appropriately” spread “promiscuity in society.”

“When promiscuity spreads, earthquakes increase.”

Full article:
http://www.cnn.com/2010/WORLD/meast/04/20/iran.promiscuity.earthquakes/

Posted in Laughs | Leave a Comment »

It’s called "principle": Why tea partiers swayed by a dollar-a-day …

April 21, 2010

Punch line: Tea party supporters are not easily bought off with dollar-a-day tax credits — they resist an emerging culture of dependence.

* * * * *
Excerpted from Washington Examiner, Tea Partiers Fight Culture of Dependence, April 19, 2010

The Obama Democrats’ vast expansion of the size and scope of government — is really not just about economics. It is really a battle about culture, a battle between the culture of dependence and the culture of independence.

The Obama Democrats see a society in which ordinary people cannot fend for themselves, where they need to have their incomes supplemented, their health care insurance regulated and guaranteed, their relationships with their employers governed by union leaders. Highly educated mandarins can make better decisions for them than they can make themselves. That is the culture of dependence.

The tea partiers see things differently.

They’re not looking for lower taxes — half of tea party supporters, a New York Times survey found, think their taxes are fair. Nor are they financially secure — half say someone in their household may lose their job in the next year. Two-thirds say the recession has caused some hardship in their lives.

But they recognize, correctly, that the Obama Democrats are trying to permanently enlarge government and increase citizens’ dependence on it. They believe that this will destroy the culture of independence which has enabled Americans over the past two centuries to make this the most productive and prosperous — and the most charitably generous — nation in the world.

Seeing our political divisions as a battle between the culture of dependence and the culture of independence helps to make sense of the divisions seen in the 2008 election. Barack Obama carried voters with incomes under $50,000 and those with incomes over $200,000, and lost those with incomes in between. He won large margins from those who never graduated from high school and from those with graduate school degrees, and barely exceeded 50 percent among those in between.

The top-and-bottom Obama coalition was in effect a coalition of those dependent on government transfers and benefits and those in “the educated class,” who administer administer those transactions. They are the natural constituency for the culture of dependence.

The in-between people on the income and education ladders, it turns out, are a constituency for the culture of independence.

Tea party supporters are not in the mood to be bought off with $400 tax credits. They have a longer time horizon and can see where the Obama Democrats are trying to take us.

Full article:
http://www.realclearpolitics.com/articles/2010/04/19/tea_partiers_fight_culture_of_dependence.html

Posted in Obama Administration, Tea Party | Leave a Comment »

In this economy, “earned success.” is harder to come by …

April 21, 2010

Punchline: This economy makes job satisfaction a thing of the past … and in the future, will people be happy forking over their earnings to the government or will they find real satisfaction when holding their hands out to the government?

* * * * *
Excerpted from RCP: Under Obama, Reducing Choices for the Future, April 5, 2010

As Americans, we get such satisfaction when we believe the work we are doing — in workplaces and in community activities and voluntary associations — is serving interests broader than our own.

We’re making use of our talents, whatever they may be, to make a contribution to society.

It’s hard to get that kind of satisfaction in this kind of economy.

People say, “At least I’ve got a job.”

Not a satisfying job, not one that it makes full use of their talents and interests, not one that provides a sense of earned success.

Just a job, a source of income.

The kind of job in which you keep looking at the clock, counting the time before you can leave, counting the hours until the weekend comes.

The economy we enjoyed between 1983, when the Ronald Reagan tax cuts kicked in, and 2007, when the housing market collapsed, provided many more jobs in which people could gain such satisfaction.

You could make a living as a master carpenter, as an actor or sewing quilts because steady economic growth and low inflation meant expanded markets for custom goods.

You could do work you really wanted to do. You didn’t have to settle for a data-entry or bolt-attaching job.

The economy we have now doesn’t do that.

Full article:
http://www.realclearpolitics.com/articles/2010/04/05/under_obama_reducing_choices_for_the_future.html

Posted in Employment - Jobs | Leave a Comment »

Gillette’s retaliation may give Shick razor burn

April 21, 2010

Takeaway: For years, the makers of men’s razors have focused on improving their products’ engineering specs, namely by adding blades. Shick has finally broken this cycle of one-upmanship by focusing on the needs of their customers, which center around comfort.

However, in making this potentially breakthrough move, Shick has awakened a giant. P&G’s Gillette will be quick to follow with a relaunched Fusion razor aimed to address the same needs as Shick’s product.

Will Shick’s launch provide the company with a first-mover advantage in comfort positioning? Or, will Gillette’s brand recognition, enormous advertising support, and best-in-class distribution system leave Shick all cut up?

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Excerpt from New York Times, “New Razors Place Focus on Comfort, Not Blade Count” by Andrew Adam Newman, April 18, 2010.

When Gillette introduced the first three-bladed razor in the United States in 1998, it struck some as absurd, and “Saturday Night Live” at the time pitched a 14-blade razor in a parody commercial. But blade escalation continued: Rival Schick introduced the four-bladed Quattro in 2003, and Gillette struck back with the five-bladed Fusion in 2005.

Schick is introducing a new razor, the Hydro, however, and this time it is not raising the blade ante. The new razor is available in both five- and three-blade versions, and advertising focuses less on blades than how a moisturizing gadget reduces irritation.

New television commercials show men getting an unexpected splash from a boxing glove or a soccer ball exploding like a water balloon, drenching the player.

“As you continue to add more blades, there are diminishing returns because more and more blades make a bigger cartridge and that makes it hard to shave in all the nooks and crannies on your face,” said a Schick brand manager. “So instead of more blades, we’re providing a more lubricious, smoother, more comfortable shave.”

The razor replaces the moisturizing strip on the razor’s head with a gel reservoir that exudes aloe and vitamin E.

“It’s by far the biggest launch we’ve ever done, our largest capital commitment for R.& D. and marketing, and by far the best technology we’ve ever come up with,” said a company representative.

Schick, which was bought by Energizer in 2003, is dwarfed in the razor category by Gillette, a Procter & Gamble brand. Gillette has 66 percent and Schick has 25 percent of the nondisposable razor segment. In the $781 million replacement cartridge segment, Gillette commands an 83 percent share, compared with 14 percent for Schick.

“In brand marketing, when you do something and it works, you keep doing it until it stops working, and that’s what it felt like was happening when companies went from one to three to five blades,” said marketing professor at New York University. “They added so many blades that they have unwanted effects, like more irritation. It was absurd, frankly, and it got to be a marketing gimmick.”

While razor makers tend to stress technological advances and performance, which can make razors seem more like racecars, the new Schick campaign focuses more on how it treats skin.

Schick says its internal research found that only 30 percent of men shaved five or more times a week. The company is publicizing a poll it commissioned which found, conveniently enough, that men who shave five or more times a week have sex twice as frequently as the stubbly, and that 82 percent of women prefer cleanly shaven men.

Gillette, meanwhile, will introduce a razor in June that, rather than add another blade, similarly promises to make shaving with five blades less irritating. The Fusion ProGlide, as its name makes clear, will not be an entirely new razor, but rather an extension of Fusion, a brand that Procter & Gamble reports grew faster than any other in its history, earning $1 billion within two years of its introduction.

“If you’re going to address comfort, the place to start is not by adding blades but rather to work on the engineering of the blades themselves,” said Stew Taub, associate director of male premium systems at Gillette.

The ProGlide makes seven comfort-related improvements to the Fusion, including using thinner blades with improved friction-reducing coating. The company also will introduce a preshave facial scrub that causes a warming sensation, as well as a postshave cooling lotion under the ProGlide label.

“Consumers vote with their purchases and have overwhelmingly said Fusion is best, and we’ve chosen to take it up a notch,” said a Gillette spokesman.

Mr. Jones said the innovations in the ProGlide had been in development for years. But some industry analysts think Gillette is rushing a comfort-driven product to market to steal Schick’s thunder.

“It looks like a fairly quick and defensive move on Gillette’s part,” a marketing professor at NYU said. “For me the big news is that Schick, after being almost an afterthought in the category for many years, has staked out some smart territory, and is acting like a real brand marketing company.”

Edit by BHC

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Full Article:
http://www.nytimes.com/2010/04/19/business/media/19adco.html?ref=media

 

Posted in Mktg - Product & Innovation | Leave a Comment »

How to live in your home for free … and buy the things you’ve always wanted

April 20, 2010

Punchline:  Steve Martin has a dated comedy routine: how to get a million dollars tax-free.

First, get a million dollars.  Then, simply don’t pay any taxes.  If the Feds come knocking, say “I forgot”.

Here’s a contemporary twist: how to live in your home for free and buy the things you’ve always wanted.

First, stop making your mortgage payments.  Then, buy whatever you want until your cash runs outs.  When the repo man comes, say “I forgot”.

It used to be that American homeowners would pay their mortgage first, then the rest of their bills, and then spend whatever is left over.

My, how times have changed …

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Excerpted from CNBC: Mortgage Defaults May Be Driving Consumer Spending, 12 Apr 2010

Recent studies show Americans are now far more likely to pay their other bills first before their mortgage (which is a big turnaround historically speaking.)

That means they pay off their credit cards, cable bills, car loans in place of their home loans.

Paul Jackson, publisher of Housingwire.com, wrote a fascinating article last week that describes a case study of someone who applied for the government’s Home Affordable Modification Program.

The person had an $1,880.00 monthly mortgage payment on which they’d defaulted, but said person’s monthly bank statement showed payments to a tanning salon, nail spa, liquor stores, DirecTV bill with premium charges, and $1,700.00 in retail purchases from The Gap, Old Navy, Home Depot, Sears, etc. 

Writes Jackson:  Even if you assume that just half of the current 7.4 million currently delinquent mortgages fit this sort of ’spending profile’ (that is, they are spending their mortgage) and you assume a $1,000 median monthly mortgage payment for most U.S. homeowners — you get a $3.7 billion boost per month to consumer spending. It’s certainly enough spending to matter in the overall scheme of things. 

Since it currently takes well over a year, in some cases nearly two years, to go from missing a payment to being chucked out of your home … it’s just another, innovative way of using your home as your ATM.

Full article:
http://www.cnbc.com/id/36422316

Thanks to SMH for feeding the lead

Posted in Mortgage Crisis | Leave a Comment »

Here come the bumper stickers …

April 20, 2010

President Obama seems to have struck a nerve with unhappy taxpayers by mocking them: “They should be telling me thank you!”

The campaign bumper stickers have already started appearing.
 

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Posted in Obama - Promises Made & Kept, Taxes | Leave a Comment »

How low can you go

April 20, 2010

TakeAway:  If it’s possible to lower price, Wal-mart usually leads the way. 

And it has done it, again.  Wal-Mart, seeking to firmly establish itself as a price leader, has cut prices. 

The move serves two purposes – block competition from other discount retailers and retain middle-class consumers, who are now feeling more financially stable and may consider upgrading to Kohl’s or Target.

Of course, Wal-Mart plans to preserve its margins by simply passing the cost of lower prices onto its suppliers.

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Excerpted from WSJ, “Wal-Mart Bets On Reduction In Prices,” By Miguel Bustillo and Timothy Martin, April 9,2010

Wal-Mart is cutting prices on thousands of products in an aggressive campaign to reinforce its reputation as a discount leader, as the company seeks to reverse months of slowing U.S. sales.

The world’s largest retailer was a rare beneficiary of the economic slump, as bargain-hungry Americans … flocked to its supercenters from supermarkets and specialty clothing stores.

But Wal-Mart’s sales from U.S. stores open a year or more have edged lower recently, while other retailers have started to see an uptick in consumers’ discretionary spending. That suggests to some analysts that Wal-Mart is having trouble hanging on to middle-class shoppers.

 

Wal-Mart says that it isn’t so. Its executives attribute the chain’s slowing sales to a general decline in food and electronics prices …

The company says it believes that, despite growing consumer optimism, many Americans will continue to struggle in the months ahead. So, it is cutting prices this week on roughly 10,000 items, mostly food and other staples …

“We felt we needed to increase the intensity and excitement with our customer, especially the feeling that Wal-Mart has great deals.”

Wal-Mart is publicizing its price cuts with a barrage of placards in the aisles of its 3,700 U.S. stores and a media campaign describing how the company’s cost-cutting moves …

Wal-Mart expects to expand its price cuts with help from suppliers. The chain is encouraging them to reduce what they charge Wal-Mart in exchange for having it spotlight their products as part of its price “rollback” …

Retailing experts question how effective the strategy will be in lifting Wal-Mart’s sales, since consumers already regard the chain as a low-price leader.

Though the company may get a modest near-term sales boost, the cuts are more likely to intensify the loyalty of shoppers who came to Wal-Mart during the recession … “This will make customers say, ‘if I go back to Kohl’s and Kroger I may be missing deals at Wal-Mart.’ ”

Despite its sales slowdown, Wal-Mart has continued to post solid profits, in part due to widening margins. Some analysts believe that gives the retailer room to cut prices without sacrificing profit. Getting suppliers to share the costs of the price reductions would also mute the impact on its bottom line …

The price reductions could help Wal-Mart fend off a growing list of no-frills competitors, such as the U.S. branch of Germany’s Aldi discount grocery chain and variety stores such as Dollar General, which are nipping away at Wal-Mart’s less-affluent core customers.

Yet whether Wal-Mart is committed to pushing the envelope on pricing as it did in the days of its late founder or is merely hyping promotions as it pursues a more margin-driven strategy, is the question the industry is asking …

Edit by TJS

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Full Article
http://online.wsj.com/article/SB20001424052702304198004575172271682347064.html#mod=todays_us_marketplace

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Posted in Mktg - Pricing | Leave a Comment »

Obama says that taxpayers should be saying thank you … huh ?

April 19, 2010

Obama mocked Tea Partiers, saying that they should be thanking him. 

President Barack Obama struck a hyperpartisan note Thursday, telling Democrats that he was “amused” by the Tax Day Tea Party rallies. 

Obama, addressing a Democratic National Committee (DNC) fundraiser in Miami, did little to endear himself to the Tea Party groups protesting around the country, saying:

 “”I’ve been a little amused over the past couple of days where people have been having these rallies about taxes …they should be saying thank you”  because of the tax cuts he has signed into law. 

‘You Would Think They’d Be Saying Thank You’, April 16, 2010
http://thehill.com/homenews/administration/92625-obama-amused-by-tea-party-rallies 

click for video:
http://tinyurl.com/y3a88zf 

Oh really ?  

His rationale: he cut taxes for 95% of Americans. 

Give me a break, please. 

First, the tax break he was selectively talking about was a whopping dollar-a-day refundable tax credit that was part of the Stimulus package. 

Second, most of it went to the people who don’t pay income taxes anyway.  Those folks are already saying thank you … when they’re not saying “gimme, gimme, gimme” 

Third, the dollar-a-day program is more than offset by $670 Billion in enacted tax increases, about 1/2 of which hits folks reporting less than $200,000 in income … that works out to about $2,100 per citizen, and $4,200 per taxpayer collected by 16,000 additional IRS agents. 

According to a Ways and Means Committee staff analysis:

“The list of $670 billion in tax increases includes at least 14 violations of the President’s pledge not to raise taxes on Americans earning less than $200,000 for singles and $250,000 for married couples.”

This specific group of tax hikes totals $316 billion over 10 years.

http://www.house.gov/budget_republicans/press/2007/pr20100415whereisbudget.pdf

As RealClearPolitics opined:

President Obama just can’t help himself from playing the Comic-in-Chief and ridiculing his opponents.

It’s good for a laugh from the partisan crowd, sure, but it often comes across to average folks (and, of course, to the opposition) as petty and/or unpresidential.

That’s not … what the public might expect from a President who promised to rise above petty partisan politics.

http://realclearpolitics.blogs.time.com/2010/04/16/obama-may-not-be-so-amused-in-november/

Posted in Taxes | Leave a Comment »

Clash of the Titans: U.S. vs. G.S. … my bet’s on Goldman.

April 19, 2010

First, friends and family know that I’m no fan of investment banks.

My view: IBs are heavily populated with soulless folks who have strayed way too far the constructive role of efficiently raising capital for “producing” firms that make things and serve people … to a focus on simply making money via maneuvers that don’t advance the economy (e.g. 2nd and 3rd order derivatives).

Second, I took the bait on Friday and thought the SEC really had something on Goldman … that the crooks had gotten their come uppance.

Now, I’m not so sure. 

Admittedly, I’m heavily swayed by today’s WSJ editorial that reads in part:

The Securities and Exchange Commission’s complaint against Goldman Sachs is playing in the media as the Rosetta Stone that finally exposes the Wall Street perfidy and double-dealing behind the financial crisis. Our reaction is different: Is that all there is?

After 18 months of investigation, the best the government can come up with is an allegation that Goldman misled some of the world’s most sophisticated investors about a single 2007 “synthetic” collateralized debt obligation (CDO).

Far from being the smoking gun of the financial crisis, this case looks more like a water pistol.

WSJ, The SEC vs. Goldman, April 19, 2010
http://online.wsj.com/article/SB10001424052702303491304575188352960427106.html

Fundamentally, the “synthetic CDO” at issue did not hold mortgages, or even mortgage-backed securities.

This is why it is called a “synthetic” CDO, which means it is a financial instrument that lets investors bet on the future value of certain mortgage-backed securities without actually owning them. (see pics and link below)

It was simply a mega-bet peddled to “whales” — sophisticated investors (mostly financial institutions with floors of MBAs and lawyers)    — a bet structured by an uber-bookie who took the other side of the bet.  A common practice among “players”. 

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The main impact of the “action” was transferring a few billion dollars from the long-side housing gamblers (the financial institutions and other fat cats)  to the bookie (Paulson & Company).

Since the market crashed — i.e. the “favorite” lost the game — the whales (e.g. the Royal Bank of Scotland)  lost big — especially since they were betting with borrowed money.

My take: This wasn’t numbers being run on the city streets of Baltimore … it was big guys vs. big guys … who cares if they all lose? 

This didn’t cause the housing bubble or its bust … and Goldman will walk on the rap. 

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Anatomy of a CDO

Wall Street Journal has an interesting depiction of how a synthetic CDO is put together.

Click either of the pics to go to WSJ’s interactive description — cool, but complicated.

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Posted in Housing - Mortgages, Investment Banks | 2 Comments »

Pay your taxes, fool? … Didn't you know that — according to Harry Reid — “Paying taxes is strictly voluntary”

April 19, 2010

“Paying taxes is strictly voluntary” … so says Harry Reid

Don’t you feel silly for sending in a check yesterday ?

It makes me shiver to think that this guy is the second most powerful person in the country (after Nancy Pelosi)

This is worth watching …

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http://www.youtube.com/watch?v=R7mRSI8yWwg

Posted in Taxes | Leave a Comment »

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