The Smarter Approach To Marketing

Just saw a news story on Ad Age. It is titled “Will Retailers or Consumers Come Out on Top on Black Friday?” The story references how Sears, Kmart and other retailers have begun holiday sales ahead of time as shoppers start early, searching for deals. According to Ad Age, Black Friday 2009 has become a massive game of chicken among retailers and consumers, as the closely watched post-Thanksgiving sales data will largely decide which succeeds at outsmarting the other.

Is this the right attitude?

As marketers, are we really trying to outsmart our customers?

If we are customer-centric, we would not be trying to one-up each other, but would focus our efforts on helping our customers solve their needs with relevant and differentiated offers.

As I defined in one of my earlier posts, providing value to customers by fulfilling their specific needs (relevance), recognizing their unique contribution to the business (recognition) and rewarding them with specific offers (reward) will create a win-win proposition. I defined the equation as 2RL + 2RC + RW = CL.

By doing this, the customer gets what they need from the brand and the brand gets the transactions that add strength to the business while building value in the relationship.

It is not about being smarter than them. It is about serving them well.

A simple idea. One that works

Another Sign of our Decline?

I grew up in India. One of the realities there was the concept of what we called Indian Standard Time (IST). Everything would happen about 30-45 minutes after it was scheduled. The reason for this was simple. The infrastructure in those days was quite old and one would say a bit decrepit. Old roads. Old rail lines. One airline with old planes. The result of this was breakdowns, malfunctions, mechanical failures of equipment and potholes too numerous to count. The kinds of issue and challenges one accepted of what was considered (in those days) a “third world country”.

When I moved to this wonderful country a couple of decades ago, I was exposed to (as Dan Zajac, my first boss called it) American time. 9 AM meant 9 AM. It was awesome. Everything ran on time. Everyone worked on time. The train from Naperville to Chicago’s Union Station was only late once in a 2 year period. And that got most of the passengers upset. Flights from O’Hare (except on those stormy winter or spring days) were quite regular. The lights on the Expressways came on exactly at 7. Roads got fixed in the Summer so that they were new for most of the year. The reason why we were the “first” country in the entire world.

I’m sure you’ve noticed, but things have changed in the past few years. I travel a lot, so this is based on personal experience. These days, very few flights are on time. It has become such an endemic issue that we just expect it and plan around it. The train from Naperville to Chicago has been late eight of the last ten times I have taken it (not statistically significant, I know). The reasons? Switch failure, mechanical issues, stuck tracks are some. This last winter, as reported by the Chicago Tribune, we had over 10,000 pot holes in the Chicagoland area. Driving around was an adventure, to say the least. These are a few personal examples of the fundamental weakening of our roads, rail and air systems. The fragility of our aging infrastructure.

Is this what we should expect? I have been excited with all the talk in Washington about investing in our infrastructure. That’s exactly what we need. I am totally on board. We need this to ensure that we keep our country in the lead but more importantly, create an environment that is sustainable for the generations to follow.

We need to make sure the trains run on time, the planes fly on schedule and the roads are in good shape. This will allow us to again live on American time while improving our productivity further. Let’s not forget that our emerging competitors are building new roads, rails, airlines and systems. This will give them the advantage in the new global economy. We need to stay competitive. Invest in our roads, rails, and air. Bring new expansive technologies into play. Invest in ourselves to put away the sceptre of any possible decline. And create the opportunity to deliver on our limitless potential.

Economic Uncertainty

There is currently a great deal of conflicting data and speculation on the state of the economy. Housing starts are up while foreclosures rates also remain high. The stock market is up, but unemployment continues to climb. This confusion is creating both a sense of optimism as well continued apprehension about what lies ahead.

Confusing data is also leading to opposing viewpoints and predictions. Home Depot Chief Executive Frank Blake recently told investors that he didn’t expect a year-over-year increase in same-store sales until the second half of 2010. According to the Wall Street Journal, Blake remarked “We remain concerned by the high level of foreclosure activity, which we believe continues to put pressure on the housing markets.”  Target CEO Gregg Steinhafel, however, stated that Target was well positioned to grow profitably.  While it is still early in the back-to-school selling season, Steinhafel said those sales “show promise.”

So what is the reality? To get a better sense of where the economy is headed, let’s focus on the most important thing – consumer behavior. This is the one factor that can truly help us predict future economic activity. Currently, people are not spending money like they used to. They are not shopping, they are not going out. This is the root of the problem.

We have gone from an internet economy to – as I am now defining it – a People economy. You and I (and the remaining 329 million Americans) drive our GDP. Given that we are a People economy, it will take a significant shift in consumer behavior before we can begin to climb out of this economic recession.

For this reason, it is my belief that our economy will not stabilize until fall/winter 2010. If you reflect, you will see that people and things work in threes. Three strikes you’re out. Third time’s the charm, etc. This is no accident. I believe that it will take three holiday seasons (from 2008) before our economy returns to normal. But only time will tell.

What do you think? Do you have any predictions of your own?

Back-to-School Budgets: Not Just For Parents

This year’s back-to-school shopping season will be quite different than years past, thanks to the focus on the economic recession and saving money. For retailers, back-to-school season is considered the second most important shopping season of the year (behind the holidays) and is often used to predict second half sales. Many fear that a tough back-to-school season could indicate an even tougher holiday season.

While retailers are cautiously examining their inventory and sales, consumers are also paying close attention to their numbers. According to the National Retail Federation, four out of five Americans have made some changes to back-to-school plans this year as a result of the downturn. In fact, the NRF predicts that the average family with children in grades K-12 will spend $548.72 on school merchandise, a decline of 7.7% from 2008.

One tactic that many parents are using to deal with a lack of funds is to teach kids how to budget their money while they shop for the essentials. This approach definitely ties in with the sales- and price-focused messages seen from retailers this year. Target is even encouraging parents to make back-to-school shopping “one of the first math lessons of the year” by doing just that. They offer several list-making tools on their website, a Target ‘09 College Facebook page and a 44-page “Smart scholars save dollars” catalog.

I have two children going back to school. Sanaa (11) will start her first year of junior high and Aamir (14) is going into high school. This year, my wife and I developed clear lists and established budgets with the kids. We also selected just one store to buy from (Office Max). Making sure we were prepared with shopping lists, budgets and sticking to one store allowed us to save both time and money. We were able to get everything the kids needed for school and still had money from their budgets left over.

Marketers should take a cue from their customers and use this time to look at their own budgets. They should make sure that their marketing dollars are being spent wisely and on effective programs. The only way to ensure this is to test and learn using analytics. Analysis of current programs and customer behavior can help refine marketing campaigns, increase loyalty and drive profits during this challenging back-to-school season and beyond.

Is Smarter Spending Here to Stay?

The current recession is on everyone’s minds right now – business leaders, politicians, marketers and consumers alike. Constant reminders of economic doom in our professional and personal lives have clearly changed the way we behave. Consumers are shopping differently. They are acting more frugal, researching each purchase and avoiding impulse buys. At this point, this change is old news.

But when our economy returns to its normal, pre-crisis state, will shoppers’ behavior revert as well?

As referenced in a recent Ad Age article, this issue is on the mind of many marketers. According to the article, this recession has had a much bigger impact on people than the last big crash in 1987. People really fear for the future. Thanks to vanishing retirement funds, people are being forced to work much longer than they had ever anticipated. In fact, 40% of people over 55 are currently in the workforce – a 10 year high, according to Barron’s.

As a result, people are re-thinking about what’s important to them and, in a sense, returning to more traditional values. Their attitudes may be the same – they still want that new car – but they are behaving differently – they aren’t necessarily buying it. People are being much more practical and focusing on saving for the future.

I believe, however, that the American consumer’s mindset is not changed forever. The frivolous spending and over-the-top consumerism that was prevalent over the last 30 years may be gone for good, but people innately like to shop. Consumers will likely make more of an effort to find good deals on significant purchases, but I think that impulse shopping will continue to be a part of the American culture.

The current economic downturn may permanently impact American values and shopping behavior, but eventually consumers will return to some of their old ways.

Targeting Teens During A Recession

It looks like anxiety over today’s economy has spread to a younger demographic. While in the past, young consumers were relatively recession-resistant, today’s teens are adjusting their buying behaviors accordingly. This shift highlights the difference between this generation of youngsters and generations before them.

In 2006, Euro RSCG Worldwide conducted a Global Cross-Aging Study, which polled people on their attitudes about aging. The study found that today’s youth is being forced to grow up too quickly and that older people are behaving youthful longer. This key issue is being exacerbated by the uncertainty and angst concerning the economy.

The destruction of net worth is forcing Baby Boomers to work longer. While their parents confidently retired at age 65, the anxiety of diminishing retirement funds is causing Boomers to rethink their plans. Young people, on the other hand, are being forced to mature much earlier. They are dealing with money worries at an age their parents never had to. With the threat of nonexistent social security and rising rates of unemployment, teens and young adults are feeling even more pressure to save money. In fact, 58% of American youths say they regularly save or invest for the long term.

Suddenly, this emotional observation has become a pragmatic reality.

American Student List (a company with the most comprehensive list of students) conducted a study on recession-minded teens and young adults, which was featured in a recent Ad Age article. Interestingly, this study found that while both genders are worried about the economy, males and females are reacting differently. Female teens and young adults are more likely to engage in money-saving activities (41% v. 35%) than males. Additionally, nearly half of females in this age group are looking for sales (48%) and staying home (51%) more often than a year ago, compared to fewer than 43% of males in both categories. On the other hand, almost half (48%) of the males polled buy high-end brands just as often, and nearly one-third (29%) spend money on entertainment more often.

These findings shed light on the immense opportunity for gender-specific behavioral marketing that engages teens and young adults – especially when it targets teens that spend their own money. In this recession, marketers should communicate with male and female youths in a unique way in order to get the best results.

The ASL study also highlights the importance of brand loyalty in today’s economic environment. The study found that when teen and young adult consumers’ store relationships grew stronger, shopping frequency during the past year also increased. For this reason, marketers will benefit most from advertising brand value and finding new ways to become part of this age group’s daily lives.

This key consumer group should be reached on a personal level, taking into consideration age, gender and lifestyle. Now more than ever, young people will be extremely choosy when it comes to where they spend their hard-earned money. Brands need build to Brand Rituals™ among their teen and young adult customer groups in order to engender loyalty and keep them coming back for more – regardless of fluctuations in their piggy bank.

A Sign Of The Times – Companies Changing Their Marketing Focus

It takes a fundamental change in the environment for marketing models and approaches to change. In the current environment, we’re seeing a significant number of companies begin to use the principles of retention marketing (over acquisition marketing alone).

Banks are leading this paradigm. Given their unique situation, they have recognized the benefit of retention-based marketing strategies over typical acquisition-driven efforts. Last week, Mintel Compermedia reported that banks registered a 57% increase in direct mail geared toward selling additional products and services to current customers. A very big shift.

Banks also increased CRM-related mailings by 37%, including loyalty messages, renewal notices and upgrade offers to entice current customers. In fact, 94% of all bank emails in 2008 were sent to existing bank clients. The number rose from 89% in 2007, while acquisition-based emails dropped from 10% to 6%.

While acquisition-directed mail still accounted for the overwhelming majority of all bank direct mail, the percentage dropped from 85% in 2007 to 81% in 2008. Conversely, retention-based mailings increased to 15% last year.

Banks are clearly beginning to realize the importance of focusing on their existing customers. In today’s tough economic environment, it is more difficult than ever to acquire new clients and much more expensive. Companies in other categories need to learn from this and do the same. Especially retail, where most marketing departments are still being asked to drive traffic by acquiring new customers and very few have organized retention marketing programs.

This shift in your strategic focus – protecting your current customers and getting them to buy additional products and services is the best way to drive profitable growth at this time. And by communicating with them and engaging them in a deeper relationship with your brand, you can build valuable customer loyalty in a time of financial uncertainty.

Think current customers. Think retention first. You will see better results.

BIGresearch Reports BIG Changes In Shopping Behavior

We all know that the current economic climate has changed the way people shop. A new study by BIGresearch highlights some of the specific changes in shopping behavior. The study found that consumers are acting more practical, with 90% of respondents saying that they plan to change their spending habits in the long term. Over 55% reported that they will consider each purchase more carefully and just over half of consumers plan to become more price conscious over the next five years.

Trends In Spending Habits From BIGresearch

It is also important to point out that these long-term adjustments are being made by consumers in various income brackets In fact, 83% of respondents earning $150,000 or more say that the current economic crisis will impact their lifestyles over the next five years.

The shift toward budget shopping is reflected by the popularity of discount retailers among the polled group. Discount retailer Walmart led nearly every category in the report, with significant shares in Women’s and Men’s Clothing, Footwear, Health and Beauty, Groceries, and Linens/Bedding/Draperies. The only two categories that Walmart did not lead were Consumer Electronics, which Best Buy won (Walmart was second) and Prescription Drugs, which was led by Walgreens (Walmart was third). Other top retailers in the study included Kohl’s, JC Penney, Target and Macy’s.

What other long-term changes do you foresee for consumers in the coming months? How do you think this will affect retailers and marketers?

If A Customer Behaves In The Forest And No One Is Around To Analyze It…

According to the Annual Marketing Survey by Alterian, companies will continue to invest heavily into online marketing in 2009, but less than half of marketers plan to use analytics to measure their campaigns.

Online direct marketing will also increase this year, with 62% of organizations planning an increase in that budget. Additionally, companies will look towards social networks, email, SEO and pay-per-click advertising. Yet, only 47% of those surveyed will use analytics to measure the success of this activity.

The data gathered around these types of consumer behaviors can be extremely valuable. It is this kind of information that can help you recognize your best customers and how they respond to your brand’s communications. Analysis of customer behavior can help refine your marketing campaign, increase customer loyalty and ultimately drive profits in today’s challenging economic situation.

So why aren’t more of you doing it?

Black Friday Behavior Versus Attitudes

For the last few months, retail industry experts and research firms have been predicting some pretty grim holiday sales numbers. It is no secret that our country is experiencing tough economic times. However, this “Black Friday” surprised many with an increase in sales of 3 percent from last year, according to research firm ShopperTrak RCT Corp. Reportedly, sales rose to $10.6 billion. This is the smallest increase since a decline of 0.9 percent in 2005 – compared with an 8.3 percent surge last year.

While the increase is smaller in years past, it is still an increase in sales. This is just another example of how people tend to focus on consumer’s thoughts or attitudes rather than their behavior. American shoppers behaved. They still shopped this weekend, despite their more frugal mind-set.

What does this mean? Have prices finally gotten low enough that customers are buying all of the things on their list? Could this mean that consumer confidence is not as low as we once believed? Is behavior outpacing attitudes?

What do you think?