Bush bends, UAW wins big … automakers still bankrupt.

December 15, 2008

Excerpted from IBD, “Rewarding Failure”, December 12, 2008

The proposed $15 billion bailout of the Big Three failed in the Senate for one major reason: Some lawmakers stood up to the unions. But their stand may be moot, since automakers may get the money anyway, even though the idea is wildly unpopular among voters

In addition to major restructuring by the automakers, GOP senators insisted on givebacks by the United Auto Workers. The UAW responded with a resolute “No.” 

Gold-plated union contracts are a big reason for U.S. automakers’ woes (though managerial incompetence at the Big Three also played a role). The average Big Three worker made $73.26 an hour in 2006; the average worker at a foreign transplant, $44.20.

Last year, Toyota made 9.37 million vehicles. GM, virtually the same number. Yet, Toyota made a profit of $38.7 billion on its global operations, or $1,874 per car, while GM lost $38.7 billion, or $4,055 a car, almost entirely due to its operations in the U.S.

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Full article:
http://www.ibdeditorials.com/IBDArticles.aspx?id=313977740860863

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Bold idea for the Detroit automakers: Leave Detroit (and, maybe, the country)

December 15, 2008

Jagdish Sheth, a professor of marketing at Emory University’s Goizueta Business School says:

“The car companies should legally separate their international divisions from their domestic operations, so they no longer subsidize the U.S. operations. Many of the automakers are actually doing well overseas, especially in emerging economies like China, India, Russia and Brazil, where demand for vehicles is still relatively strong”.

Excerpted from Knowledge @ Emory
http://knowledge.emory.edu/article.cfm?articleid=1201

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Ken’s Take

Sheth may be onto something. So, why not take his idea a step further? 

Perhaps the Detroiters (at least Ford & GM) should legally separate the international operations, then enter bankruptcy proceedings in the U.S.  Then, either a real restructuring would happen, or the companies would become profitable entities without a U.S. presence.

Aren’t corporate strategists taught to exit unprofitable markets? 

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"Car czar" must have sound judgement … which disqualifies anybody who would take the job.

December 15, 2008

Car czar “is an undesirable job. Managing bailout funds in an industry resistant to change won’t be easy. It’s also a government job. Taken together, that means a high risk of waste, fraud, and more bailouts afterward. Nobody wants to sign on to failure.”

Excerpted from IBD, “Romney For Car Czar”, December 11, 2008
http://www.ibdeditorials.com/IBDArticles.aspx?id=313892314464564

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Ken’s Take: AMEN !

Mitt and Volcker are smart enough to stay away from this one, right ?

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To continue in English, please enter your credit card number … a new low in customer service courtesy of Dell

December 15, 2008

Excerpted from Wash. Post,”The Bangalore Backlash: Call Centers Return to U.S.; Some Firms See Value in Familiar Voices”, December 11, 2008

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If you prefer a customer service agent who speaks “American,” then computer maker Dell has a deal for you.

Catering to consumers put off by the accents of Bangalore, Manila and other call-center hubs around the globe, Dell will guarantee — for a price — that the person who picks up the phone on a support call will speak “American”.

The Your Tech Team service, with agents in the United States, costs $12.95 a month.  It also promises that wait times will average two minutes or less. Without the upgrade, a customer is likely to get technical help from someone in India, the Philippines or the other places where Dell has operators.

Occasionally, “we’ve heard from customers that it’s hard to understand a particular accent and that they couldn’t understand the instructions they were getting,” said Dell. “This illustrates Dell’s commitment to customer choice.”

“Most people in the customer service world believe that if you have sold me a product, then support for that product should be free,” the managing director of  a call-center consultancy.

Full article:
http://www.washingtonpost.com/wp-dyn/content/article/2008/12/10/AR2008121003574.html 

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Playing hard ball … UAW says "$75 per hour sounds about right" … what happened to "no more special interests in Washington"?

December 12, 2008

Below are a few highlights from today’s WSJ report on the apparent collapse of the Detroit 3 bailout loan.  My ‘take’ and predictions follow …

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Highlights excerpted from WSJ, Rescue Bid for Detroit Collapses in Senate, Dec. 12, 2008

A frantic, last-ditch attempt to forge a relief package for the auto industry collapsed in the U.S. Senate, dealing a giant blow to the immediate hopes of the Big Three.

The talks, which appeared close to a deal several times, broke off due to a sharp partisan dispute over the wages paid to workers at the manufacturing giants.

Republicans demanded the bill be strengthened to exact concessions from the industry. “We simply cannot ask the American taxpayer to subsidize failure”

The initial White House-backed package saying it doesn’t require auto makers and their unions, suppliers, creditors and dealers to make changes needed to return to a sound financial footing.

[Now, both Democrats and the car companies] hope the White House will now relent and allow the Treasury to provide emergency loans from the $700 billion Wall Street fund.

Harry Reid said the Senate would be in recess, and would stand in pro forma session until January, when the new Congress will be convened with stronger Democratic majorities.

After a marathon day of negotiations, top Democrats appeared close to a deal that would toughen the bailout package in a bid to raise Republican support, which had proved an insurmountable stumbling block. The focus of talks was on seeking commitments to restructure the industry’s debt load and bring labor costs in line with wages paid by Toyota and Nissan  in the U.S.

But those talks fell apart after Republicans insisted that wages reach parity in 2009.  Mr. Reid declared talks at an impasse.

Sen. Christopher Dodd, a Connecticut Democrat, complained that Republicans had attempted to turn the wage issue into a political matter about organized labor, instead of making it an “an economic issue.”

The collapse of the talks represents a major defeat for three companies and an auto union that once wielded immense political clout. Even after two appearances in Washington by the GM, Ford and Chrysler CEOs, and a show of solidarity with the UAW, the auto makers were unable to convince many skeptical lawmakers to change their minds and support a bailout.

GM will also discuss plans for its Saturn division. One option includes putting the division into bankruptcy protection, as it is technically a separate entity.

The collapse of the deal raises the stakes for Chrysler and its majority owner, Cerberus Capital. Lawmakers had called for Cerberus to put more money into the company, but Cerberus maintains it can’t because the bylaw of its investment funds prevents it from putting more than a small percentage of its investors’ funds into any single investment.

Full article:
http://online.wsj.com/article/SB122903816924599853.html?mod=testMod

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Ken’s Take

  1. There is zero chance that the Detroit 3 can survive with  line workers getting $150,000 per year in salary and benefits.  Yes, it was weak management (in the 1970s, when business was booming and the UAW was striking) that saddled the companies with the problem.  But, there is no imaginable plan that can neutralize a $1,500 to $2,000 per car cost disadvantage.  Adding a  $5,000 battery to each car doesn’t solve the problem — it only exacerbates it.
  2. The problem isn’t “wages”.  The difference in take-home pay between Detroit and the “transplants” is only a couple of dollars.  The problems are gold-plated benefits (about twice as much for the Detroiters,  restrictive work rules that limit flexibility to move workers around (within the plants), and “featherbedding” — paying non-workers. 
  3. This is the issue that will really test Prez-O.  He campaigned, in part, on “no special interests”.  Well, the UAW threw $11 million into his campaign coffers and probably expect some “considerations”.  We’ll see …
  4. My favorite: Cerebus says it can’t throw in more money because of its by-laws.  That is being said at a time that there’s pressure to legislate the re-writing of mortgages and practically every other contract in America.  B.S.  Cerebus knows it’s good money after bad — and they want it to come from taxpayer’s pockets, not their’s.
  5. The “car czar” idea is frighteningly stupid.  Let’s see: the SEC, etc.,  can’t effectively oversee financial companies,  Boards of Directors can’t seem to oversee companies that they’re responsible for …. but, some uber-dude will be able to parachute in, learn a very complex business at warp speed, and — oh yeah — get the UAW in line.  Call me cynical, but I don’t think so.

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Ken’s Predictions

  1. Bush will cave and fund the initial stages of this folly … with few “teeth” in the plan except to make the companies promise to “try hard”.
  2. Any teeth that are put in will be relaxed or reversed  on January 21, 2009.  The money will flow from Washington to Detroit, the UAW will prosper, and the Detroit 3 will still be teetering on bankruptcy. 
  3. A car czar will be appointed — the lobbying and politics will be overwhelming — and the poor sap will fail

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What’s wrong with this statement: “People won’t buy cars from an automaker in bankruptcy”

December 12, 2008

I’ve heard this refrain at least a dozen times on CNBC today.  It’s been repeated so many times that it’s starting to take on the aura of fact.

Let’s dig a little deeper.  Pundits are saying “people who are surveyed say they won’t buy a car from a bankrupt automaker”.

Well, guess what.  The Detroit 3 (or at least GM and Chrysler are bankrupt!

The “fine hair” of difference is whether they go through a “bankruptcy proceeding” that potentially restructures them (and their burdensome union contracts) into a healthier condition.

I’m sure the survey question is — at least implicitly — “would you be more likely to buy a car from a financially healthy automaker or one that is bankrupt?”  Obvious answer, right?

The question should be “would you be more likely to buy a car from an automaker in bankruptcy proceedings, or one that is hanging by its financial finger nails and likely to go into formal bankruptcy in a couple of monthes?”  Rational answer: “none of the above”

What am I missing?

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Re: SUVs … the proclamation of their death was a bit premature

December 12, 2008

Excerpted from Business Week, “The SUV Is Rising from the Dead”, November 26, 2008

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Americans are downsizing to the smallest vehicle they can tolerate. But in many cases, that’s just another kind of SUV—one that gets about 22 mpg

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When gasoline blew past $4 a gallon in July, pundits declared the era of the gas-guzzling sport-utility vehicle over.

Since then, of course, prices have dropped 50%, and …  more visitors to the Edmunds.comsite are researching SUVs … and appear to be ‘cycling back to our ‘bad’ car-buying habits.”

It’s more complicated than that. Americans are downsizing to the smallest vehicle they can tolerate.

But in many cases, that’s just another kind of SUV—one that gets about 22 mpg. That’s more eco-friendly than a Hummer, but this is hardly the era of conservation that some had predicted.

Gas-electric hybrids, which typically cost at least 15% more than conventional cars with similar mileage, are a tougher sell than they were just three months ago.

According to Edmunds, the number of people intending to buy a hybrid has been declining along with the fall in fuel prices. When gasoline prices peaked in July, 700,000 visitors to Edmunds.com checked out hybrid cars. But in October, only about 150,000 did so.

Meanwhile, J.D. Power & Associates (MHP) says that 36% of people who traded in large SUVs in November turned right around and bought another one.

“Consumers tell us they don’t want a small car.They want something roomy (to haul kids and cargo) and more fuel-efficient.”

Full article:
http://www.businessweek.com/magazine/content/08_49/b4111063900772.htm 

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Buzzword: "Cause" Marketing

December 12, 2008

Excerpted from Washingtonpost.com, “Cause Marketing Matters to Consumers”, by Kim T. Gordon, October 14, 2008

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In this new era of social responsibility, what you don’t do can cost you. “Cause marketing” is now the norm, and customers who visit your website and see your advertising want to know that you share their desire to make the world a better place by supporting an important cause.

If your business or brand doesn’t stand for a cause, consumers may turn to your competitors. The number of consumers who say they would switch from one brand to another if the other brand were associated with a good cause has climbed to 87 percent, a dramatic increase in recent years, according to a Cone Cause Evolution Survey.

Even niche markets, such as the nation’s college students, now show a striking preference for brands they believe to be socially responsible. According to a newly released College Explorer study from Alloy Media, nearly 95 percent of students say they are less likely to ignore an ad that promotes a brand’s partnership with a cause.

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The challenge is to make your socially responsible efforts a winning proposition for the nonprofit group you support, the community and your business. You can master this marketing challenge by following these important steps:

– Choose a related cause: A solid cause-marketing campaign often starts with the right affiliation. So as you go through the nonprofit selection process, look for a cause that relates to your company or its products.

– Contribute more than dollars: For many types of businesses, cause marketing involves donating products or services and not simply writing a check. This can help form even stronger consumer associations between what you offer and the good work you do.

– Formalize your affiliation: To make your affiliation a win-win for everyone, work with the nonprofit you choose to define how it will help your business increase its visibility, brand or company awareness. If the organization has a newsletter or other communications with its constituents, negotiate for opportunities to do joint promotions. Discuss how you will use the organization’s logo and name in your marketing campaigns, and how it, in turn, will use your company logo and name in its press releases, on the organization’s website and in other materials.

– Mount a marketing campaign: Success in cause marketing often means motivating an audience to take action, such as making a donation or participating in an event.. Using a dedicated marketing campaign, you can reach and persuade the target group while also raising awareness for your business and its commitment to social responsibility.

Edit by DAF

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Full article:
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/17/AR2008101702913_pf.html

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Just say "no" … 62.7% oppose Detroit 3 bailout loans … Dems split …Congress says "let's roll"

December 11, 2008
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    image

    http://www.ibdeditorials.com/PollsPopUp.aspx?id=313629919786029

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    Excerpted from Rasmussen Reports,”14% Say Federal Government Will Run Big Three Better”, December 09, 2008

    Nonetheless, Congress and the White House are fast reaching a deal on a bailout plan for the Big Three that many suggest is just a step short of nationalizing the U.S. auto industry since it gives the federal government a say in how the automakers spend their money and what kind of cars they build.

    The short-term loan plan being worked out in Washington calls for the creation of a federal “car czar” who will develop benchmarks by which to measure the automakers’ restructuring and who will have the power to push management, unions, shareholders and others to implement changes

    A longer term bailout plan proposed by President-elect Obama goes even further. “It could mean that the government would mandate, or at least heavily influence, what kind of cars companies make, what mileage and environmental standards they must meet and what large investments they are permitted to make,”

    But only 14% of U.S. voters think the Big Three automakers will run better if they are run by the federal government.

    While voters display little confidence in government control of the automakers, 59% say senior managers of a company should be replaced if taxpayer funding is provided to keep the company afloat.

    Full article:
    http://www.rasmussenreports.com/public_content/business/general_business/just_14_say_federal_government_will_run_big_three_better

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Letting the Chicken Loose to Understand the Bottom of the Pyramid

December 11, 2008

Excerpted from WSJ, ” McCann Offers Peak Lives of Latin America’s Poor” By Antonio Regaldo, December 8, 2008

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During presentations at McCann Worldgroup’s office in Bogotá, Colombia, staffers have taken to letting a chicken loose to hunt and peck around clients’ feet. Racks of potato chips and other products on display in McCann’s Mexico City conference room, which has been designed to look like a bodega…

The point of these exercises: to give big marketers some insight into the lifestyles of Latin America’s low-income consumer…McCann’s move comes as multinational companies increasingly consider such “emerging consumers” as a big opportunity. But these consumers’ tastes, habits and needs remain largely an enigma to global marketers…

McCann’s research is helping Nestlé market Nido Rindes Diario, a brand of fortified powdered-milk product…one of Nestlé’s challenges was to overcome the perception that milk powder is a specialized formula for babies, and too expensive for the whole family to drink. McCann says its research helped position the product…

The idea of targeting low-income consumers may raise some eyebrows. But greater access to industrialized products like deodorant, and packaged food, can improve their physical and “psychological welfare…We do not pretend to be Mother Teresa”…

Advertisers say practical insights into low-income groups are hard to come by. “A lot of people talk about the emerging consumer, the bottom of the pyramid, but no one really has a structured approach…We have to do a lot for ourselves, and sometimes fall on our face doing it.”

In Mexico, Nestlé decided to sell Nido Rindes Diario exclusively through mom-and-pop stores, not supermarkets…That decision came after McCann found that local shopkeepers exert outsize influence in tightly knit, low-income neighborhoods. “It’s the shopkeeper who can recommend or disavow a product,” he says…

Some experts say marketing directly to low-income groups has yet to become a full-blown trend. “Usually multinationals just put out a Mexican version [of their product] that looks as American as possible”…But examples of products tailored to thin pocketbooks are increasing…

Edit by SAC

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According to the theory of the bottom of the pyramid, there is a combination of profit opportunity and social responsibility to be had by marketing to consumers at the bottom of the economic pyramid. Critics of the theory argue that the benefits of marketing to this group are overstated and that marketing to this group can be exploitive.  Whether the profit opportunity is real or a mirage, McCann is taking the right steps to help Nestle benefit from this group by working to understand the group’s purchase desire and developing tailored solutions for the market to ensure that consumers are able to access the product.

* * * * *Full Article:

 

 

http://online.wsj.com/article/SB122824726034173129.html

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Consumers Go Cheap as Brand Loyalty Suffers

December 11, 2008

Excerpted from WSJ “At the Supermarket Checkout, Frugality Trumps Brand Loyalty” by Ellen Byron, November 6, 2008 

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When Summer Mills visited her local CVS drugstore recently, to save a few dollars she bought the store-brand facial scrub rather than the Olay she normally uses.

“I thought I’d be able to tell the difference, but I couldn’t — I looked at the ingredients and they seemed almost the same,” says Ms. Mills…On her next shopping trip, “I’m going to buy the store-brand moisturizer and cleanser — it’s less money.”

Many Americans are changing their everyday purchases and abandoning brand loyalty, prompted by the persistent financial pressure of rising food, gasoline and electricity prices. Over the past 24 months, consumer prices have risen 7.8%…From coloring hair at home instead of at the salon to trying cheaper laundry detergents, new evidence indicates that Americans are modifying even minor household habits to save money.

Kimberly-Clark’s CEO noted that sales of the company’s potty-training pants, once one of the biggest sales-growth products in the baby aisle, have fallen off in recent months. “You’re seeing consumers leaving children in diapers longer…the diaper is less expensive per piece than a training pant”...Shoppers are even buying toilet paper differently. “When they get to the end of the month, and they’re out of paycheck, they may buy a smaller-count pack”…

To be sure, overall sales of name-brand goods are still higher than those of store brands. Still, about 40% of primary HH shoppers said they started buying store-brand paper products because “they are cheaper than national brands”…Store brands on average cost 46% less than name-brand versions, Mintel found…

Paper napkins suffered the steepest declines over the past year, followed by facial tissue and paper towels. “Not surprisingly, toilet tissue is holding up the best,” Mr. Lockwood says.  Laundry habits are changing, too. Early signs indicate shoppers are switching to cheaper detergents and softeners, a rare shift in one of the most brand-loyal product categories…

Though low-income consumers have been cutting back for the past several months, now upper-income shoppers — those with household incomes of $100,000 or more — also are making significant changes…

“This isn’t belt-tightening, it’s belt-notching…These ritual changes are much deeper and happening much faster than we expected”…

Shoppers’ changing behavior prompted P&G to alter its marketing approach and focus on in-store promotions. “More decisions are made in the store, and we have to be competitive,” CEO A.G. Lafley said…

[Household Spending Habits]
Edit by SAC
Full article:
http://online.wsj.com/article/SB122592835021203025.html

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"Stop those foreclosures, now !" … Nope, that’s a bad idea.

December 10, 2008

Ken’s Take:

“Stop those foreclosures, now !” is one of three recent mortgage-related refrains that make me scratch my head.

The first is a variant of the above one: “we’ve got to keep people in their homes” — with the emphasis on “their”.  Seems to me that folks are conveniently confusing “ownership” with “occupancy”.  Some lug who makes no downpayment and makes at most a couple of mortgage payments at promotional interest rates doesn’t own anything.  He started with no equity, built no equity, and may even be in a negative equity position.  It’s not “his” home simply because he squatted there for awhile.  Geez.

The second came from the mouth of Ben Bernanke himself: “Putting these people through the foreclosure process (instead of cutting rates & principle) will put a permanent, detrimental mark on their credit records.”  No kidding, Ben.  Isn’t it the role of credit records to report to prospective lenders that somebody has a history of stiffing people who lent them money in the past.  Seems fraudulent to me that the government puts together a process that spackles over that serious flaw.

Now, here’s one of hundreds of reasons that we shouldn’t “stop those foreclosures now.” …

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Excerpted from IBD, “Bad-Loan Lipstick”, December 09, 2008

Foreclosures: A new federal report shows that most bailed-out borrowers slip back into default within six months.

It seems agreed on all sides that bad home loans got us into our economic crisis. So, goes one argument, wouldn’t it make sense to modify those loans into good ones — that is, loans not in default? That would seem to get at the root cause of the trouble. Besides, help for struggling homeowners is good politics. Sounds like a plan.

The chairwoman of the FDIC and  leading Democrats in Congress want to modify some 2 million high-risk loans by [cutting interest rates, lengthening terms, and even cutting the principle loan balance].  

This week,the Comptroller of the Currency released data showing that … 53% of the mortgages modified by lenders end up back in default –usually within 6 months.   

Were the loans so badly underwritten that borrowers simply could not afford them, even with reduced payments?

After al, they went to borrowers who put little or nothing down, and who lacked the credit history and documented income that lenders would have demanded in saner times.

These loans started to sour in good times. And easing up on their terms now won’t cure their fundamental flaws. 

For these toxic loans, the best thing to do is to let them run their course into foreclosure, and work to contain the damage.

Full article:
http://www.ibdeditorials.com/IBDArticles.aspx?id=313719048815277

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They’d rather play than eat … huh??

December 10, 2008

Excerpted from Marketing Daily “How We Cut: Restaurants First, Video Games Last” by Sarah Mahoney, November 12, 2008

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While there’s no shortage of consumers who are dialing down their spending-.  Guess what consumers axe first when they are worried.

When asked how they planned to trim the fat, dining out is in the hot seat–with 57% of respondents saying they plan to spend less.

Clothes were the next casualty, with 54% cutting back–followed by entertainment, with 50%.

Somewhat safer were beauty products and music, both identified as categories to cut by 44% of the survey, and movies at 43%.

Only 39% say they plan to spend less on toys, and 35% on video games…

How long consumers will continue to tweak their purchasing habits is anyone’s guess, but as far as people are concerned right now, the changes are for the long haul…

Younger consumers are the least hopeful…Those in the 65-plus category come in second in the pessimism parade, with only 7% saying they believe that recovery in less than a year is possible.

Overall, men tend to be less likely to believe we are in a recession, and more likely to believe the economy will bounce back fast.

Edit by SAC 

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Full article:
http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=94580

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What Downturn? Luxury Brands Keep Consumers Dreaming

December 10, 2008

Excerpted from Knowledge @ Wharton “Luxury Brands: Marketing the Upscale During a Downturn“, November 12, 2008

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As 2009 shapes up to be the most challenging year in more than a generation for luxury items such as high-end apparel and fragrances, marketers’ plans for targeting aspirational 16-year-olds and expanding rapidly into the new money hubs of Russia or the United Arab Emirates are suddenly “out.”  What’s now “in” for marketing luxury in this difficult era is pampering the wealthiest and most loyal customers…

In a recession in which even upscale consumers may find themselves strapped for disposable cash, it is a bad strategy to chase customers too far down the economic ladder. “We don’t want to see huge price cuts that will create a lower-priced brand…you don’t want to tarnish your brand…you still have your brand reputation to uphold”…

Many experts believe that the economic pain of the deepening recession could fall disproportionally on these marketers of high-end perfumes, trendy clothing or sleek fashion accessories…Conspicuous consumption seems practically un-American in these troubled times…As a result of the hard times, consumers are likely to see some moves aimed at selling high-end products at a slightly lower cost.

The key is not to make any move that will diminish the value of a brand with a well-established name for luxury…For luxury goods, the business plan places trust in the artistic vision of a designer — and hopes that will lure customers.

Because of the luxurious image they must portray, these marketers said they also need to guard their brands in ways that mass-market companies do not…That does not mean, however, that luxury firms do not want their products to reach a fairly broad audience… But to boost the bottom line, fashion firms are likely to focus now on pampering their best and most loyal consumers, using computer technology to increasingly customize upscale products that will be designed or tailored especially to their needs.

The success of individualized luxury goods — such as designer clothes or eyewear — is a development that could keep a customer repeatedly coming back for more, according to the panelists…Among the designer trends in customization are monogrammed handbags, personalized options for a color or a fabric in accessories, or a wider array of fragrances that are “personalized”…

Ironically, while the panelists were not particularly enthusiastic about the short-term prospects for emerging overseas markets, their companies continue to position themselves for when the time is right…

Still, regardless of where the global economy winds up, luxury marketers say their principle mission will remain the same: Selling a more glamorous way of life to aspiring consumers. “You’re buying into that dream…And you’re buying into that grand theme, which is our job.” 

Edit by SAC

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Full article:
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2091

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Let’s get some accountability … Ask your Congressman to put his "you-know-whats" on the table if he votes for the bailout … Better yet, demand it !

December 9, 2008

Ken’s Take: All of these bailouts are flat out nuts.  The worst is the seemingly inevitable tossing of money down the Detroit sink hole.  There is no chance whatsoever that Detroit get on the road to prosperity.  They can’t compete with a $1,500 or more cost disadvantage on every car sold, and the politicos are determined to patronize the UAW. Getting rid of senior management bonuses and corporate planes doesn’t even qualify as rounding error.  A fundamental restructuring of overhead costs (i.e. massive white collar layoffs) and a competitive labor agreement are required.  Neither will happen. If ever there were a case of putting good money after bad, this is it.  No government loans will ever be repaid — either the companies won’t have the wherewithal to repay or the loans will be forgiven by Congress if the companies act like they’re doing something green.

To vent my frustrations, I emailed my Congressman — asking him to make a simple pledge to the dwindling number of taxpayers.  I know it won’t change anything, but I felt better.  You should try it.

* * * * *

Congressional Accountabilty Pledge 

Dear Mr. Congressman:

Stop wasting my tax dollars.

There is no chance that the Detroit 3 will repay bailout loans made to them.

If you vote affirmatively to approve any bailout loans, in any form, to any or all of the Detroit 3 automakers, you should accept personal accountability for your vote and make a binding, irrevocable public commitment to resign your government position on January 1, 2011 if the loans have not been repaid to the government in full by then, regardless of circumstances.

Period.

Your’s truly,

One of a dwindling number of taxpayers

* * * * *

To email your Congressional Representative:
https://writerep.house.gov/writerep/welcome.shtml 

* * * * *

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From the folks who want to micro-manage Detroit: 3 years late and 134% over budget … geez.

December 9, 2008

Three years behind schedule and almost $360 million above budget, the Capitol Visitor Center  is to open to the public on Dec. 2.

The final cost of the project is put at $621 million, more than double the $265 million estimated cost had the center been completed on schedule in December, 2005.

Security was a key factor in the cost overruns. Congress decided to add two tunnels, one for truck deliveries and one linking the Capitol with the Library of Congress, that could also serve as emergency evacuation routes.

Then there were the usual overruns associated with a project where 9,000 workers set more than 400,000 pieces of stone, some weighing as much as 500 pounds. The excavation phase required the removal of 65,000 truckloads of dirt.Congress also approved the addition of House and Senate office space.

* * * * *

Excerpted from MSNBC, “Capitol Visitor Center opens after delay, cost overrun”, Nov. 10, 2008

Full article:
 http://www.msnbc.msn.com/id/27648214/ 

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If you want to be Costco, you gotta cut costs …

December 9, 2008

Excerpted from BusinessWeek, “Costco’s Artful Discounts”, by Jena McGregor, October 20, 2008

* * * * *

In Costco Wholesale’s New Jersey distribution center, some 2 million rolls of paper towels recently sat stacked in a mountain of green and orange plastic. Nearby, row upon row of jumbo tissue rolls formed a wall of cushiony toilet paper.

A year ago, the space was virtually empty.

Costco’s customers have not, of course, suddenly stopped buying paper products. The 258 truckloads of Bounty and Charmin are the result of a “buy-in,” just one strategy Costco ( has been using to hold prices down amid rising costs. After Procter & Gamble announced a 6% price increase in August, Costco bought as much as it could stuff into its depots at the old rate.  “We’ll have a six-week supply when everyone else is going up in price.”

* * * * *

At Costco, where more than 29 million households pay $50 to $100 a year to shop, low prices aren’t just a nice-to-have. They’re a way of life.

Not only does Costco’s famously frugal CEO James D. Sinegal cap margins at a sacrosanct 14% on branded goods, he’s constantly pushing his buyers to find creative ways to lower prices and add value while getting his managers to crank up their efficiency efforts. Besides the buy-in strategy, Costco has been redesigning product packaging to squeeze more bulky goods onto trucks and revamping processes for moving goods through its depots. 

 For one, holding prices low is the best way to protect profits: About 75% of Costco’s operating earnings come directly from membership fees, and if prices rose too quickly, some members could flee.  Costco’s reputation for bargain prices and surprise designer goods could inspire a new crop of warehouse chic devotees. 

* * * * *

What Sinegal isn’t doing is wavering from the basic model that helped him  build Costco into a retail phenomenon. The company’s warehouse model relies on selling core items at rock-bottom prices while scooping up excess inventory from high-end brands. The average store does $137 million in annual sales, a volume so high that Costco turns its inventory 11.9 times a year, meaning it often sells goods before it technically has to pay its suppliers. Combine that with high-income customers—the average Costco household makes upwards of $75,000—and “what they’re doing is really high velocity retailing.”

As consumers cut back, Costco is finding more available inventory and fielding more calls from companies hungry to boost slumping sales. Lately, the loot in that treasure chest is getting even more high end. Over the last year, Versace dinnerware, Waterford crystal, and pastel girls’ Lilly Pulitzer dresses have all made their way into Costco’s stores. “Their ability to sell stuff is staggering.”

* * * * *

With about 4000 SKUs, compared to 5300 at Sam’s Club and 40,000 at an average grocery store, Costco’s pared-down approach can make vendors more willing to cut them a deal.

The limited SKU count also helps to drive impulse shopping and remind customers that Costco doesn’t stock everything. “In a tough economy, the ability to change your assortment towards products that are selling more is a huge advantage  …If the item isn’t a value anymore, or isn’t generating the sales hurdles, it’ll be deleted.”  This holiday season, for example, almost all of Costco’s Christmas lights will be light-emitting diode because of the demand for energy-efficient bulbs. Regional food buyers also have significant sway to reflect local tastes.

* * * * *

Costco has even gotten vendors to redesign product packages to fit more items on a pallet, the wooden platforms it uses to ship and display its goods. Putting cashews into square containers instead of round ones will decrease the number of pallets shipped by 24,000 this year, cutting the number of trucks by 600. By reshaping everything from laundry detergent buckets to milk jugs, Costco has needed 200,000 fewer pallets a year overall.

Sinegal acknowledges that he can’t hold back the cost increases forever. “The biggest concern to me is that we lose our way and start thinking it doesn’t matter if you charge another dime or another dollar or another hundred dollars,” he says. “Without those disciplines, we don’t have anything.”

Edit by DAF

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Full article:
http://www.businessweek.com/magazine/content/08_42/b4104058856320.htm

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Last comic standing … oops, sorry … I meant "banker"

December 8, 2008

Excerpted from NY Times, “Saluting a Banker in a Year Worth Forgetting”

* * * * *

From the NY Times

It’s like being named the outstanding British soldier of 1776.

The trade publication American Banker unveiled its Banker of the Year award last week: It went to Kenneth D. Lewis, chief of Bank of America.

While Mr. Lewis is a respected executive, 2008 hardly seems like the year for any banker, given how unpopular the industry is these days.

‘One banker observed: ‘He’s a great executive and B. of A.’s a great bank … but it just doesn’t seem like the right time to be dancing in the streets and celebrating banking.”

American Banker said editors  felt they had to laud someone this year.

Its party for the bankers of the year was held Dec. 4 at the Plaza Hotel.

*  * * * *

Added observation

The financial crisis hasn’t been kind to some past honorees.

Kerry Killinger, the 2001 winner, was ousted as CEO of Seattle-based Washington Mutual Inc. in September over disastrous bets on risky mortgages.

The 2005 winner, Ken Thompson, was forced out as CEO of Charlotte-based Wachovia Corp. in June.

In 2006, American Banker gave a Lifetime Achievement award to Countrywide CEO Angelo Mozilo, who gambled on subprime loans and saw his company disintegrating before selling out to Bank of America.

J.P. Morgan Chase & Co. acquired WaMu in September, and Wells Fargo & Co. is buying Wachovia.

Even Bank of America hasn’t come through the crisis unscathed.  Its stock has declined 65% year-to-date.

* * * * *

More from the NY Times:

Corporate executives’ fortunes can fall quickly.

For example, in 2001, Fortune put Enron on its most admired companies list, and Business Week put Tyco International at the top of its best performers list.

Worth magazine placed Jeffrey K. Skilling, the former chief executive of Enron, at No. 2 and L. Dennis Kozlowski, the former chief executive of Tyco, at No. 10 on its list of America’s best chief executives.

Later in 2001, Mr. Skilling resigned as Enron began falling apart. In 2002,Mr. Kozlowski resigned. Both Mr. Skilling and Mr. Kozlowski are now convicted felons.

** * * * *
Full article:
http://query.nytimes.com/gst/fullpage.html?res=9E05E2DA1F38F930A35752C1A96E9C8B63&scp=1&sq=banker+of+the+year&st=nyt

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Brands Battle as Man Grooming Grows

December 8, 2008

Excerpted from Advertising Age, “The Battle of the Brands: Old Spice Vs. Axe” by Jack Neff, November 17, 2008

* * * * *

One of the crowning achievements of…P&G…has been the rebound of Old Spice in the battle for hearts and minds of men…

“Old Spice was in decline. They’ve now turned that around. It’s growing. Axe has not only stopped growing. Axe is in decline.”

Unilever, of course, begs to differ.

Needless to say, there’s some controversy about that in a battle that’s been a flashpoint in the global struggle between package-goods behemoths. Unilever says Axe continues to grow in body spray and beyond, most recently with the launch of Dark Temptation body spray…

Rather than trying to run away from its grandfatherliness, Old Spice instead embraced a big-brother persona and a purpose…described as “helping guys navigate the seas of manhood” by offering experience…

In practical terms, that’s involved a lot of funny ads from offering campy voices of experience…As a result, Old Spice is no longer declining. Sort of. The publicly available numbers don’t quite make a forceful case for an actual rebound. They do show Axe slowing across most of its business, which had been until the past year or so one of the biggest marketing success stories of package goods, or anything, of the decade…

Edit by SAC

* * * * *

While these two brands battle it out in deodorants and body spray, the market for men’s grooming products continues to grow.  P&G’s Gillette extended its brand this year with a line of body washes, shampoos and conditioners earlier this year.  Unilever’s Vaseline also recently entered men’s grooming with Body & Face and Hand Lotions specifically for men.  As the market grows Old Spice and Axe are sure to face increasing competition from one another and new entrants.

* * * * *

Full Article:
http://adage.com/article?article_id=132559

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Breaking through all that clutter …

December 8, 2008

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

* * * * *

It’s hard to cut through the clutter.

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

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

* * * * *

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

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

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

* * * * *

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

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

* * * * *

Can the marketing message piggyback on another brand?

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

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

* * * * *

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

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

* * * * *

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

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

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

Edit by SAC

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

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

December 7, 2008

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

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

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

* * * * *

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

Sentiment running 62% against a bailout for the automakers.

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

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

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

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

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

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

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

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

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

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

Those are better odds than congressional mismanagement would offer.

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

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

December 5, 2008

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

* * * * *

From the article

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

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

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

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

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

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

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

* * * * *

Ken’s Take

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

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

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

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

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

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

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

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

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

December 5, 2008

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

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

This logic, of course, makes no sense.

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

* * * * *

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

* * * * *

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

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Hot-Wired Hotels

December 5, 2008

 

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

* * * * *

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

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

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

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

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

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

* * * * *

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

* * * * *

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

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

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

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

* * * * *

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

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

Edit by DAF

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

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Posted in Internet - Soc Networking, Mktg - Brands | Leave a Comment »

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

December 4, 2008

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

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

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

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

* * * * *

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

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

Coincidence, or is the UAW monitoring The Homa Files?

* * * * *

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

* * * * *

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Detroit's fuzzy strategy reflected in its brands …

December 4, 2008

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

* * * * *

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

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

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

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

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

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

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

GM’s brands themselves are practically worthless.. 

Edit by SAC

* * * * *

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

* * * * *

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

* * * * *

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Luxury Cars Still Selling

December 3, 2008

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

* * * * *

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

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

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

* * * * *

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

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

Edit by DAF

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

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* * * * *

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

December 3, 2008

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

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

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

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

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AMS: Cutting Cell Phone Churn

December 3, 2008

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

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

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

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

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image

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Edit by DAF

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

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Smart Cars Get Big But Still Get Stares

December 3, 2008

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

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

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

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

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

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

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

Edit by SAC

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

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

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Catalina Coupons Customized for You

December 3, 2008

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

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

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

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

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

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

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

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

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

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

Edit by SAC 

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

 

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

December 2, 2008

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

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

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

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

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

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

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

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

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

* * * * *

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

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

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

December 2, 2008

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

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

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

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

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

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

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

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

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

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

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

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

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

[Review & Outlook]

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

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What percentage of mortgages are subprime?

December 2, 2008

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

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

Today they’re 20%.

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

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

December 2, 2008

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

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

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

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

* * * * *

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

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

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

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

* * * * *

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

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

* * * * *

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

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

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

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

Edit by DAF

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

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

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CPG’s ask: What are they thinking?

December 2, 2008

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

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

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

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

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

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

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

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

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

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

Edit by SAC

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

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

December 1, 2008

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

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

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

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

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

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

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

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

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

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

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

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

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

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Auto Marketers See at Least One Shade of Green …

December 1, 2008

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

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

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

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

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

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

Edit by SAC

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

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

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Marketing in the World of the Web

December 1, 2008

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

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

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

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

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

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

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

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

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

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

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

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

* * * * *

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

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

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Digital Marketing Momentum Loses Steam

December 1, 2008

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

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

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

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

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

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

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

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

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

Edit by SAC 

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

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Posted in Internet - Soc Networking | 1 Comment »

Vespanomics: Touting Green Exhilaration & Practicality

November 28, 2008

Excerpted from Adweek, “Vespa Touts Scooters for Americans” by Eleftheria Parpis, Nov 24, 2008

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Convincing Americans to ditch their SUVs for scooters seems an impossible marketing task, but what about getting consumers to augment their gas-guzzlers with a snazzy new Vespa for short trips? That is a much more realistic goal for Vespa USA, which recently launched a Web site that positions the iconic brand as fun and functional.

The site…offers product info, reviews and tools to post and plot favorite routes and calculate fuel savings. The objective is to convince more Americans to consider scooters as alternative transportation.

So far, Americans have heard few stories about ways to cut down on carbon emissions: either downsizing vehicles or switching to electric hybrids…”If you combine the usage of a car or SUV with a motor scooter–which millions of Europeans do every day–then you can achieve the same results.”

The venue offers a “Vespa vs. Auto MPG” tool where consumers can compare the scooters’ mileage to the performance of cars. Users can then determine how many miles per gallon they would save by combining Vespa travel with trips in vehicles they already own…

While Vespa…has seen an increase in sales since gas prices began rising, the challenge is to convince consumers that Vespas offer serious riding options, not just trips around the neighborhood…the site’s Google map-based “Community Rides” tool allows scooter owners to share, rate and comment on riding routes.

“Hopefully, over time, people will…realize these are not toys and that people really do use this as a transportation vehicle”…

Edit by SAC

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The new Vespa website introduces the term “Vespanomics”, which refers to the ecological and economic benefits that Vespa provides riders with the additional promise of “total exhilaration” that comes from riding a “stylish, high performance Vespa.” In the past Vespa has emphasized the brand’s the style and lifestyle more than its practicality and efficiency.  Online and at dealerships, Vespa sells everything a rider needs to live the brand from scooter accessories, to clothing and beach towels to mini-notepads and lanyards.  Vespanomics is the tool Vespa needs to bring new users to the brand and to extend the brand lifestyle to include eco-concern.

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Full Article:
http://www.brandweek.com/bw/content_display/esearch/e3i550533f2636cdbd1a765ce9cdcca1936

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$2 gas dampens enthusiasm for hybrids … no kidding.

November 27, 2008

Excerpted from:WSJ,”Americans Drive Less, Creating a Problem”, NOVEMBER 24, 2008

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When gasoline prices shot over $4 a gallon this summer, Americans … took action on their own by driving less and switching to more fuel-efficient cars.

The good news is that gasoline consumption has fallen … vehicle miles traveled — the wonky term for how much we drive — have dropped for 11 straight months, and fell 4.4% in September, according to the Department of Transportation.
http://www.fhwa.dot.gov/ohim/tvtw/08septvt/08septvt.pdf

In short, many Americans, by choice or by default, did what the people who worry about the climate and U.S. dependence on petroleum wanted them to do. They burned about 5% less gasoline than a year ago.

By jamming the brakes on driving, rediscovering mass transit and walking past Hummers to buy compact cars like the Honda Fit, American consumers caused big trouble for powerful interests.

The oil industry and oil-producing nations have an acute problem, because the combination of conservation and the worst world-wide economic slump in decades has once again made a mockery of recent projections that oil would remain expensive and scarce forever.

The short term looks like a re-run of the late 1970s and early 1980s, when … oil prices soared, interest in electric cars, windmills, solar heating panels and other petroleum alternatives accelerated. When conservation and new oil discoveries caused oil prices to collapse, the economic justification for expensive, immature oil replacement technology collapsed as well, and it was a skip and a jump to the age of the SUV.

The federal government is conflicted, too. Yes, policy makers want us to conserve oil. But now that we have, the funds that pay for roads, bridges, rail transit and other transportation infrastructure are falling right along with gasoline tax receipts … gasoline taxes paid into the highway trust fund fell by $3 billion in the 2008 fiscal year.

One approach (for funding infrastructure) would be to raise the federal gasoline tax from its current 18.4 cents a gallon. By comparison, the tax rate in the U.K. is about $2.85 a gallon. Higher gas taxes could finance improvements to roads and mass transit, encourage further conservation or offset the costs of the various federal bailouts.

The collapse of gasoline prices since the summer — a drop of more than $2 a gallon — is an economic stimulus worth more than $200 billion a year.

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All of this puts the people who seized on the recent gas price shocks as the moment to push green vehicle strategies in a bind.

At current gasoline prices, however, consumers who buy expensive electric or plug-in hybrid cars would find it smarter financially to buy a reasonably efficient, conventional subcompact and work from home one day a week.

If gasoline prices stay low, demand for vehicles that use sophisticated technology to consume less gasoline per mile will depend on consumers making long-term decisions that aren’t in their short-term economic interests. Otherwise, these new high-mileage cars might not sell for high enough prices to cover their higher costs.

A lot depends on whether Americans keep doing what they’re doing, regardless of what the numbers are on the gas station signs.

General Motors Corp. has insisted that its plug-in hybrid Chevy Volt, due in 2010, will survive the cost-cutting as the auto giant struggles to survive.

Full article:
http://online.wsj.com/article/SB122728664289448183.html

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How much profit does Toyota makes on a Prius?

November 26, 2008

Excerpted from Washington Post, “The Car of the Future — but at What Cost?”, Steven Mufson, November 25, 2008

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Hybrid Vehicles Are Popular, but Making Them Profitable Is a Challenge

Sen. Charles E. Schumer said last week. “We need a business model based on cars of the future, and we already know what that future is: the plug-in hybrid electric car.

“But the car company Schumer and other lawmakers envision for the future could turn out to be a money-losing operation, not part of a “sustainable U.S. auto industry.

“That’s because car manufacturers still haven’t figured out how to produce hybrid and plug-in vehicles cheaply enough to make money on them.

After a decade of relative success with its hybrid Prius, Toyota has sold about a million of the cars and is still widely believed by analysts to be losing money on each one sold.

U.S. lawmakers want the companies to produce automobiles of the future, using advanced technologies and featuring hybrid or plug-in vehicles.But there’s no guarantee that the new business model would be any more viable than the current one.

Automobile experts estimate that the battery in a plug-in vehicle could add at least $8,000 to the cost of a car, maybe considerably more.

Most Americans will be unwilling to pay the extra price, especially if gasoline prices languish around $2 a gallon.

One of the mysteries about GM’s plans to introduce the Volt in 2010 is how much it will cost to buy one.

“What’s the Volt going to cost? I would be happy to answer that if you can tell me the price of oil in 2010,” said Robert A. Kruse, GM’s executive director of global vehicle engineering for hybrids, electric vehicles and batteries.

“I can tell you to the penny what it will cost GM, but pricing is much more related to market conditions.”

“In 10 years are they [at GM] going to solve the technological problems with respect to the Volt? Sure,”

“But are they going to be able to stake their survival on it? I’d say they can’t. They have to stake their future on Malibus, the Chevy Cruze, and much more conventional technologies.”

“Do you bet on lighter, smaller, more fuel efficient but ultimately less profitable cars or do you hold back a little on technology development and look at new versions of existing cars.”

Many experts say that gas guzzlers will not fade away as long as Congress fails to impose higher taxes on gasoline to steer people toward fuel-efficient cars.

“I can easily imagine three years from now when public is focused on a new set of priorities . . . that this whole hubrid thing would go poof.”

Obama proposed a $7,500-a-vehicle tax credit for plug-in vehicles during his presidential campaign.

Roughly half of Americans don’t earn enough to take advantage of such a big tax credit.

Many others don’t have the cash to purchase an expensive vehicle then wait for a federal refund.

So,  GM and other car companies, while preparing plug-in vehicles, are more likely to live or die based on the sales of conventional cars that get better fuel efficiency through improved transmissions, reduced weight or hybrid technology.

GM says it will offer nine hybrids for sale by the middle of next year.

Reinert says that Toyota will eventually offer hybrid versions of all its car models.Auto industry experts say that the basic problem is that the U.S. industry geared up to make 18 million cars and light trucks a year and that it will be lucky to sell 11 million this year.

“There’s fluff and there’s reality,” Keller said.

 “The fluff is the Chevy Volt . . . That’s not going to save GM in the next five years. What will save GM is more small sedans and more crossovers. That’s what people are going to be buying.”Full article:

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Getting Your Network To Work for You

November 26, 2008

Excerpted from WSJ “Networking? Here’s How to Stand Out” by Joann Lublin , November 4, 2008

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Fans of Bruce Mount sang his praises to BzzAgent before he applied to become vice president of engineering of the Boston word-of-mouth marketer.

In late June, the software-development manager asked nearly two dozen present and past colleagues to tout his abilities. “Even one sentence will help!” he assured them. Their testimonials ranged from a brief haiku to a multipage missive dubbing him “a freakin’ goldmine of knowledge, ingenuity and kindness.”

Mr. Mount’s creative approach “made him stand out,” recalls BzzAgent’s director of recruiting. He was the frontrunner among 166 outside prospects…

Unusual times demand unusual networking tactics. Most candidates find work through networking, surveys show. But in today’s dismal job market, many feel frustrated with standard strategies such as tapping friends for referrals…

“The bar has been raised on what it takes to make networking work,” concurs Scott Allen, a consultant about online networking. “Virtual interaction allows us to create the illusion of networking by making electronic links with people,” but online ties represent “just a starting point,” he says. “You still need some kind of relationship.”

For job hunters who use networking Web sites like Linkedin.com, Mr. Allen favors a more-sophisticated approach. When you invite someone to join you on LinkedIn, he proposes including a personalized offer of help, such as an introduction to a customer or a useful link to a relevant article.

In the real world, you can improve your networking by finding out whether key executives of potential employers will attend a trade group meeting and then scheduling encounters during the event… “Don’t expect to just show up and bump into these people,” he cautions…

There are additional ways to network more effectively at events. “Be the only person like yourself in the room”…An offbeat but memorable “elevator pitch” will also make you stand out in a crowd, says Lorraine Howell, a public-speaking trainer in Seattle…

Still frustrated? Your network may know why. Ask friends, relatives and associates to anonymously assess your strengths and weaknesses through SurveyMonkey.com…

Possible questions to pose in an anonymous poll of your network:

  • What three words come to mind when you think of my strengths? Areas where I could improve?
  • Is there one aspect of my hunt where I am making a big mistake but appear unaware? If yes, what is my mistake?
  • What jobs do you think I might be good at that I haven’t considered?
  • What type of jobs have I looked down on that might pay well?  

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Full article:
http://online.wsj.com/article/SB122575114437694677.html

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Stimulus rebates would be so much better … if they worked.

November 26, 2008

Excerpted from WSJ, “Permanent Tax Cuts Are the Best Stimulus”, Taylor, Nov. 25, 2008

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The major part of the first stimulus package was the $115 billion, temporary rebate payment program targeted to individuals and families that phased out as incomes rose. Most of the rebate checks were mailed or directly deposited during May, June and July.

The argument in favor of these temporary rebate payments was that they would increase consumption, stimulate aggregate demand, and thereby get the economy growing again. What were the results? The chart below reveals the answer.
The upper line shows disposable personal income through September. Disposable personal income is what households have left after paying taxes and receiving transfers from the government. The big blip is due to the rebate payments in May through July.
The lower line shows personal consumption expenditures by households. Observe that consumption shows no noticeable increase at the time of the rebate. Hence, by this simple measure, the rebate did little or nothing to stimulate consumption, overall aggregate demand, or the economy.

[Commentary]

Based on the permanent-income theory of Milton Friedman, and the life-cycle theory of Franco Modigliani, temporary increases in income will not lead to significant increases in consumption. However, if increases are longer-term, as in the case of permanent tax cut, then consumption is increased, and by a significant amount.

The mantra often heard during debates about the first stimulus was that it should be temporary, targeted and timely. I recommend alternative principles: permanent, pervasive and predictable

Full article:
http://online.wsj.com/article/SB122757149157954723.html 

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General Mills Milks its Margins to Stay Lean

November 26, 2008

Excerpted from Fortune “Cereal Cost Cutters” by Mina Kimes, November 3, 2008

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At General Mills, the maker of Cheerios, cost-cutting is a way of life:

Company execs meet weekly to discuss ways to streamline products. The company’s Holistic Margin Management system has helped them sustain higher margins than their peers…

“Was it cute that the pretzels in our Hot ‘n Spicy Chex Mix spelled H-O-T?” 

 “Sure, it was cute, but we had 14 different pretzel shapes. By getting rid of some of them, we save $1 million a year.” A million bucks may not seem like much for the $13.7-billion-a-year company, but General Mills…makes hundreds of such cost-cutting decisions each year. And those cuts add up:

Last year General Mills  posted a 13% gain in profits…and analysts say that it has fatter margins than Kraft and ConAgra…

CEO Ken Powell attributes the gains to a General Mills-designed fat-trimming system called holistic margin management.

General Mills had worked on improving efficiency for decades, but the rise in inflation a few years ago spurred it to seek a more effective companywide productivity solution…  

Powell’s team first applied the system to struggling Hamburger Helper. At the time the company sold 50 versions of the product, with 25 pastas ranging from wagon wheels to spirals. Executives researched the costs of producing the different options as well as how much consumers liked them, then eliminated half of them. They excised unimportant spice and cheese pouches. They shrank the size of the box while keeping the serving size the same. The upshot: Hamburger Helper now costs 10% less to make.

Margin management soon grew into a structured process at General Mills…Ditching multicolored Yoplait lids…saved $2 million a year.

Factory-floor workers will point out when box sizes are inefficient for putting in trucks. And consumer researchers identify flavors that aren’t selling…

One group recently looked at the oils, flour, and sugar that its baking division uses. The team found a way to consolidate purchases of such items, giving General Mills more buying power. The changes resulted in $12 million in annual savings.

Of course, frugality is just one of many ingredients needed to be successful in consumer foods. Innovation and marketing drive sales, and General Mills’ revenues rose 14% last quarter after it heavily promoted new products such as Fiber One yogurt. But the money for such aggressive initiatives, says Powell, comes from margin management.

“First you have to protect your margins,” he says. It figures that the company that makes Wheaties would understand that sometimes the best offense is a strong defense 

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Full article:
http://money.cnn.com/2008/10/29/magazines/fortune/kimes_generalmills.fortune/index.htm?postversion=2008110311

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Big Idea: Rallying private capital to stabilize housing prices.

November 25, 2008

Summary: Ken’s plan for handling part of the  foreclosure problem and geting housing back on track.  Guaranteed.

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A stark reality of the current mortgage crisis is that there have been — and will continue to be – an unprecedented and destabilizing number of foreclosures that need to be absorbed into the housing market.  Until they are, home prices will continue to slide and the crisis will persist..

To date, most of the government’s programmatic emphasis has focused on mitigating the financial pressures on lending institutions and investors who funded bad loans, by injecting supplementary capital (loans or preferred stock purchases), or by buying toxic securities..  Some political rhetoric has centered on preventing distressed citizens from “losing their homes”, but few substantive steps have been taken.  Why?

First, once a mortgage has been “securitized” – as most have been — there are contractual limitations on possible loan modifications.   In these instances, mortgage “servicers” have their hands tied.  They are only empowered to collect payments and foreclose on non-payers, with very little latitude between the extremes.

Second, there is the proverbial elephant in the middle of the room.  Many so-called home owners are – truth be told — really “occupants” not “owners”.  Some have no equity in the homes.  Some never did – even before housing prices crashed, submerging loan balances under water.   Many wouldn’t qualify today for restructured loans under the most liberal of terms – e.g. lowered interest rates, extended payment periods, reduced principle balances (to the current fair market value of the homes).  Whether the people legitimately qualified for their initial loans is irrelevant.  Whether their initial loan terms were predatory is also largely irrelevant. Objectively, the low bar is whether they can foot the bill for a restructured mortgage.  The emerging evidence seems to suggest that many – maybe most – can’t.

That leads to an inescapable conclusion: regardless of what remedial government bailouts are enacted – the housing market will continue to be flooded with foreclosures. 

So, a pivotal economic policy question is how to get the foreclosed properties off the market and into the hands of private owners (i.e. not onto the government’s asset rolls), and how to keep them there until they can be remarketed at an orderly pace and higher prices.

Three straightforward changes to the income tax code – throwbacks to yesteryear — could provide the necessary financial incentives to rally private capital back into the housing market to buy, hold, and rent foreclosed homes: (1) eliminate ALL of the capital gains taxes on residential property that is bought from now until, say, December 31, 2010 and held for at least 18 months, (2) allow these “qualified residential properties”, if they are rented, to be depreciated for tax purposes at an aggressively accelerated rate (say, over 5 or 10 years) to generate high non-cash tax losses, and (3) allow ALL tax losses generated by these “qualified residential rental properties” to offset owners’ taxable ordinary income with no “passive loss’ limitations, thereby reducing their federal income tax liability.

For example, assume that an investor buys a foreclosed home for $200,000 and rents it out at a price that simply breaks even on a cash flow basis.  That is, the rental price just covers interest, taxes, insurance, maintenance, etc.  Assuming a 5-year accelerated depreciation schedule, the rental would generate an annual non-cash tax loss of $40,000 that could be used to offset the investor’s ordinary income.  If the investor were in the Obama-boosted 39.6% marginal tax bracket, that ordinary income offset could save the investor almost $16,000 in federal income taxes each year that the property is held and rented.  If the home were then resold – say, in 3 years for $250,000 —  the investor would book $170,000 in capital gains (the $50,000 home price increase, plus the $120,000 in depreciation claimed against ordinary income when the property was being rented), but the investor would owe no capital gains taxes. 

Such a program potentially offers several benefits: (1) it would entice private capital to buy (and hold) foreclosures and other distressed residential property, (2) it would likely provide affordable rental housing to people (maybe the current occupants of the homes) who realistically can’t and shouldn’t shoulder the costs of home ownership , and (3) it might take some of the sting out of President-elect Obama’s proposed tax hikes.

It’s a win-win solution to part of a thorny problem.

© K.E. Homa 2008  

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Posted in Financial Services & Crises, Mortgage Crisis | 6 Comments »

Re: Energy … consumers in denial, blame government (and everybody else)

November 25, 2008

Excerpted from PR NewsWire, “Obama White House to Face Long-Held Consumer Denial and Awareness Hurdles in Realizing New Energy Solutions”, November 19,2008

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Consumers Blame Government, Assume Little Self-Responsibility

There is  long-held U.S. consumer denial about personal responsibility in driving energy demand and resulting prices; consumers have a’ “tailpipe-driven” understanding of energy use and environmental impact.

Despite government reports documenting that consumers now use more electricity than five years ago, 61 percent of consumers deny using more.

But, 62 percent of Americans indicating they have experienced home utility cost increases of 10-30 percent or more. So, “For the first time in four years, we increasingly see economic concerns driving consumer interest in conserving energy.”

“However, most Americans don’t view their own consumption behaviors or energy-use demand as having much to do with energy costs,” less than one-fourth of consumers mention U.S. consumer demand as most to blame for rising energy prices.

While more consumers are becoming knowledgeable about renewable energy, one-third erroneously think cars and trucks are the No. 1 cause of global warming, while only four percent cite the actual primary culprit of greenhouse emissions: coal-fired electric plants, today’s most prominent source to heat, cool and power buildings – largely homes.

Also of note: most consumers either blamed kids in the home for increased electricity usage.

Oil companies were thought to be the primary culprits for rising gasoline costs (27 percent) — the U.S. government was the second most common answer, at 24 percent.

“What should the government be doing?” The top answers were “should invest more in research to find alternatives” (29 percent), “should be more proactive and develop a plan” (16 percent), and “should allow drilling in the Arctic National Wildlife Refuge and / or off the U.S. coast” (13 percent).

The primary reason to participate in energy conservation activities or purchases:

1.) To save money (ranked No. 3 in 2007)

2.) To protect our environment and save natural resources (remained No. 2 from 2007)

3.) To preserve the quality of life for future generations (ranked No. 1 in 2007)

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Full article
http://www.tickertech.com/cgi/?a=news&ticker=a&w=&story=200811200811190800PR_NEWS_USPR_____CLW024 

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Chain Stores Going Green

November 25, 2008

Excerpted from New York Times, “Green Plans in Blueprints of Retailers”, by Andrew Martin, November 8, 2008

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Across the country, a race is under way among stores and fast-food restaurants to build environmentally friendly outlets, as a way to curry favor with consumers and to lower operating costs. Most chains are focusing on prototypes at the moment, but the trend could eventually change the look and function of thousands of stores.

The green building boom is partly being driven by retailers’ desire to capture the attention of consumers who have become fascinated by hybrid cars, energy-saving light bulbs and wind turbines.

But more important for the companies, it is a way to shave long-term operating costs at stores and restaurants, which consume copious amounts of energy and water for ovens and fryers, heaters and air conditioners, sinks and toilets.

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While the “green” moniker is ill-defined and vulnerable to exaggeration, many of the chains, including McDonald’s, are seeking LEED certification from the United States Green Building Council, a nonprofit agency in Washington whose rating system is a widely accepted standard.

Marion Nestle, a professor of nutrition at New York University and a frequent critic of fast-food chains, said the green buildings were laudable but were ultimately intended to make people feel better about eating unhealthful food.

“Takes your mind off the calories, doesn’t it?” she wrote in an e-mail message. Ms. Nestle added in an interview, “I think it’s fabulous that they are doing it, and McDonald’s always has a tremendous impact. But it’s still making junk food.”

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Retailers say building LEED-certified buildings make economic sense, particularly with energy prices becoming so unpredictable.

At Wal-Mart, for instance, all new stores have highly efficient lights, skylights and improved heating, cooling and refrigeration systems. The floors of the stores are not covered but instead are exposed concrete slabs made with recycled steel and fly ash, a waste product. The high-efficiency prototype stores are equipped with even more efficient heating and cooling systems; a store in Las Vegas, for instance, is expected to save 45 percent in energy costs over traditional stores. 

Peter DiPasqua, a Subway franchisee with 89 stores in central Florida, said he originally thought his green store in Kissimmee was largely a “feel-good thing.” But he said as construction progressed, he became more impressed with the benefits of LEED-certified construction.

The store cost about 20 percent more to build, Mr. DiPasqua said. But he said he was saving 20 percent a month on electricity even though the store, in a prime location, is selling 43 percent more than a store down the street.

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Full article:
http://www.nytimes.com/2008/11/08/business/08build.html?ref=business&pagewanted=print

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Boost your ROI by building your brand ..

November 25, 2008

Excerpted from Brand Channel “Trust as a Tangible Brand Attribute” by Mary Weisnewski, November 3, 2008

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How do you transform your company’s core values into a business asset you can see and feel?

Investing in branding is a good start.  Unfortunately, too many companies slow their efforts to a grinding halt after the rollout party to unveil the new website design and hand out pens embossed with the new logo..

.“Investing in brand development is increasingly important to build credibility and differentiate…People are making purchasing decisions based on how closely aligned their values are with an organization and how much they trust what that organization is providing. This is as true whether people are making donations to nonprofits, buying consumer products, or hiring consultants.”

Revealing your organization’s core values by developing an authentic brand platform, then consistently walking the talk of those core values, is the foundation of employee and customer trust and loyalty—both of which directly affect your bottom line.

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Trust is the engine that powers your brand. When a brand delivers consistently on what it says it will do there are tangible results. When the visual brand is aligned consistently with the experience it communicates an honest, reliable organization and there are tangible results. It’s all about building loyalty and long-lasting relationships…

Trust results from a reliable cache of perceptions and experiences, built over time. We think of organizations just like we do people we know. If I have heard of you I am more likely to trust you. If you do what you say you are going to do, my level of trust will increase…

You have to survey, or audit, everyone involved with your organization to find out what they really think and feel about what you’re offering, and listen to their concerns and desires…

What every company really wants, regardless of its size or market niche, is brand equity: tangible results that show a return on investment. When United Way underwent a rigorous brand evaluation in 2003, they discovered that the strong brand was 67 percent of the reason why people chose to invest in the organization.

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Making your brand tangible leads to: ongoing affirmation of purpose, organizational alignment, differentiation, stronger relationships and connections, increased recognition; stronger recruitment, and increased ROI.

The bottom line is that a tangible brand is a win-win for your company and your customers…When a brand delivers consistently on its promise there are tangible results. This is true whether your company is just starting out or has a well-known national or international presence….People will pay more for, and choose faster, the experience and peace of mind a healthy brand promises.  

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Full article:
http://brandchannel.com/brand_speak.asp?bs_id=205

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