I have a question - How much advertising is too much. We can easily identify situations where a business can benefit from more advertising, or other forms of marketing. But what about situations where it appears that the cost of advertising must be reaching diminishing returns?
This question arose in my mind related to two companies - Verizon and GEICO. Both have wonderful ad campaigns, full of features, fun, and financial information. Verizon has two major campaigns - "The Network" for its wireless business, and "The Cable Guy" for it's triple play phone, Internet and cable TV FIOS business. The ads are great, with the network geek and his army of helpers providing "the Network", and the cute FIOS guy always beating the bumbling cable guy to replace the customers cable connection with a new FIOS connection.
GEICO is even more pervasive, with four campaign themes - the gecko, the caveman, celebrity helpers, and the most recent, "money with eyes".
I think the ads are some of the best in media, and in fact I am a satisfied Verizon and GEICO customer. I have first-hand knowledge that the Verizon network is great, and that GEICO provides auto insurance at a good price with excellent service.
So I'm saying that the ads are great, and they honestly present products and services that are great. My question is - when is enough enough? These ads are pervasively presented on both TV and radio here in the northeastern USA. Do these company's know that the marginal cost of having more ads in the media is really leading to marginal sales and profits that make this investment possible, or is it possible that there are significant diminishing returns for this very high "share of voice"?
Finally, who will let these companies know that "enough is enough?". Probably not the ad agency or media buyer. Maybe the company's market research group, or brand marketing leaders (although they usually find themselves fighting for more money). The CFO has the other bias, so they are often looking to cut the marketing budget.
My sense is that a rigorous business case review would find that the optimal spending for ads on radio and TV might be less for established brands like Verizon and GEIO. What's your impression or opinion?
Thursday, March 19, 2009
Wednesday, March 18, 2009
The Good Liddy
I happened to be able to see the live testimony of Edward Liddy of AIG before a congressional committee today. I was very impressed with his leadership and forth-rightness in what was obviously a set of House members that were "loaded for bear". He answered each of their questions and had a valid point of view on the situation. He described AIG's Financial Products business, where all the trouble occured, as having a large book of business (over $2 trillion) that needed to be unwound in an orderly manner. His strategy was to direct the current AIG personnel to do that, and if they did that successfully, they would earn their contracted retention bonus. From what he described, this process was working well, in distressed market conditions, and the size of the portfolio had been successfully reduced to $1.6 trillion.
Hw indicated that he knew the "retention bonus payments" would cause an adverse reaction, but he was balancing that against the risk of not having experienced personnel on board to be able to efficiently manage the reduction of the remaining $1.6 billion in a manner that would yield the best return to the American taxpayer.
There will be more to come on this story, but my impression of Edward Liddy was very positive, in contrast to the last "famous" Liddy to come to Washington, the infamous G. Gordon Liddy from the Nixon administration. I'm happy that we have "a good Liddy" in the center of this crisis.
Hw indicated that he knew the "retention bonus payments" would cause an adverse reaction, but he was balancing that against the risk of not having experienced personnel on board to be able to efficiently manage the reduction of the remaining $1.6 billion in a manner that would yield the best return to the American taxpayer.
There will be more to come on this story, but my impression of Edward Liddy was very positive, in contrast to the last "famous" Liddy to come to Washington, the infamous G. Gordon Liddy from the Nixon administration. I'm happy that we have "a good Liddy" in the center of this crisis.
Turning the Corner
We are approaching the end of the 1st Quarter, and the US economy may be turning the corner. This "glass half full, and rising" perspective comes from the following:
1. As GM goes, so goes the USA. GM recently indicated that they will not take an additional $2 billion in funding offered by the US government. If GM can survive, or go into some sort of breakup/packaged bankruptcy as a stronger company than it appeared to be 3 months ago, this is a good sign.
2. Citibank stock it rebounding from under $1 to over $2.50 in a week. Same story as GM, if Citi can survive, this means less US government support for the US banking system.
3. Housing prices stabilizing. The reduction in housing prices and and interest rates seems to have reached a point that buyers are emerging, and home prices in some areas of the country are stabilizing. For example, on www.zillow.com, an Internet site that "quotes" current housing values, my home in NJ lost 20% in value since the time I bought it in 2005, but over the past three months the value has gone up 5% from the late 2008 low.
4. Quality merger activity. Four strong pharmaceutical companies (Pfizer/Wyeth and Merck/Schering Plough) has agreed to mergers, and there is word today that IBM might be looking to purchase Sun Microsystems. These transactions signal that company valuations on the US stock market have reached a "bargain" level, and may be signaling a bottom to the intense reduction in values that started in September 2008.
I'll update this perspective in a couple of weeks, but if these 4 points are "signs of life" in the US economy, recovery may be on it's way in the latter half of 2009, which would be much sooner than many other projections.
1. As GM goes, so goes the USA. GM recently indicated that they will not take an additional $2 billion in funding offered by the US government. If GM can survive, or go into some sort of breakup/packaged bankruptcy as a stronger company than it appeared to be 3 months ago, this is a good sign.
2. Citibank stock it rebounding from under $1 to over $2.50 in a week. Same story as GM, if Citi can survive, this means less US government support for the US banking system.
3. Housing prices stabilizing. The reduction in housing prices and and interest rates seems to have reached a point that buyers are emerging, and home prices in some areas of the country are stabilizing. For example, on www.zillow.com, an Internet site that "quotes" current housing values, my home in NJ lost 20% in value since the time I bought it in 2005, but over the past three months the value has gone up 5% from the late 2008 low.
4. Quality merger activity. Four strong pharmaceutical companies (Pfizer/Wyeth and Merck/Schering Plough) has agreed to mergers, and there is word today that IBM might be looking to purchase Sun Microsystems. These transactions signal that company valuations on the US stock market have reached a "bargain" level, and may be signaling a bottom to the intense reduction in values that started in September 2008.
I'll update this perspective in a couple of weeks, but if these 4 points are "signs of life" in the US economy, recovery may be on it's way in the latter half of 2009, which would be much sooner than many other projections.
Friday, February 27, 2009
If You Knew, What Would You Do?
Hi to all,
One of the questions I like to ask the executives I work with is "If you knew, what would you do?" For example, if you knew, in September 2008, when the banking/credit crisis hit, that the economy would be weak for the next 6 months or more, and that credit would be hard to get, what would you do (have done)? Looking at your situation today, some answers would become apparent:
"I would have gotten some cash from our $100,000 credit line from the bank, because now they won't lend us any money."
"I would have reduced my prices by 10%, so I would have increased my sales for a few months before things got really bad."
"I would not have hired those new people, who I now might need to lay off".
So one result of asking this question is to find out how prepared an organization is to change their "business as usual" approach when external conditions look like they may change.
A second result of the question "If you knew, what would you do?" is more forward looking. It relates to potential investments in getting better, faster, more comprehensive, and/or more insightful information with which to make business decisions. While looking at the trends of an organization's historical performance, questions that can be asked are as follows:
"What would you do if you knew, over the next year:
- That you could sell 20% more of your stuff by promoting it to a new customer segment or channel?
- That your costs would increase 10% due to commodity price increases?
- That a major competitor would be going bankrupt?
- That the government would be "supporting" your industry through stimulus funding?
- That the government would be "overseeing" your industry through new regulation?
- That the government would be "threatening the funding" of your industry through budget cuts or changes in tax policy?"
It might cost some time and money to get the information to know if these things are likely to occur. If knowing this information would result in you making a change to your business plans, it might make sense to make an investment in "finding out". However, if you reflect on these issues and conclude that knowing this information wouldn't change your approach, then it wouldn't make sense to invest in information gathering and analysis around these issues.
Clearly, today's business leaders need to think about how to answer the question "If you knew, what would you do?". Foresight below the "tip of the iceberg" will be a key skill in leading an organization to profitability and success in these turbulent times.
Or, you may be faced looking back at what happened and lamenting like Bob Seeker did in his song Against the Wind from 1980 - "I wish I didn't know now what I didn't know then".
One of the questions I like to ask the executives I work with is "If you knew, what would you do?" For example, if you knew, in September 2008, when the banking/credit crisis hit, that the economy would be weak for the next 6 months or more, and that credit would be hard to get, what would you do (have done)? Looking at your situation today, some answers would become apparent:
"I would have gotten some cash from our $100,000 credit line from the bank, because now they won't lend us any money."
"I would have reduced my prices by 10%, so I would have increased my sales for a few months before things got really bad."
"I would not have hired those new people, who I now might need to lay off".
So one result of asking this question is to find out how prepared an organization is to change their "business as usual" approach when external conditions look like they may change.
A second result of the question "If you knew, what would you do?" is more forward looking. It relates to potential investments in getting better, faster, more comprehensive, and/or more insightful information with which to make business decisions. While looking at the trends of an organization's historical performance, questions that can be asked are as follows:
"What would you do if you knew, over the next year:
- That you could sell 20% more of your stuff by promoting it to a new customer segment or channel?
- That your costs would increase 10% due to commodity price increases?
- That a major competitor would be going bankrupt?
- That the government would be "supporting" your industry through stimulus funding?
- That the government would be "overseeing" your industry through new regulation?
- That the government would be "threatening the funding" of your industry through budget cuts or changes in tax policy?"
It might cost some time and money to get the information to know if these things are likely to occur. If knowing this information would result in you making a change to your business plans, it might make sense to make an investment in "finding out". However, if you reflect on these issues and conclude that knowing this information wouldn't change your approach, then it wouldn't make sense to invest in information gathering and analysis around these issues.
Clearly, today's business leaders need to think about how to answer the question "If you knew, what would you do?". Foresight below the "tip of the iceberg" will be a key skill in leading an organization to profitability and success in these turbulent times.
Or, you may be faced looking back at what happened and lamenting like Bob Seeker did in his song Against the Wind from 1980 - "I wish I didn't know now what I didn't know then".
Thursday, February 26, 2009
Consumers and Customers
Hi to all,
When I work with my clients, I like to get them to think about two classes of people (in the B to C world) or two classes of businesses (in the B to C world). These two classes are:
- Consumers (some person or business who might buy your product/service
- Customers (some person or business who has purchased your product/service
Consumers are not "everyone" or "every business" out there. Consumers are candidates to buy your product or service. Targeted consumers should meet these three criteria, that I saw in a recent blog by Seth Godin:
“You need a group of consumers that:
1. You can identify and reach.
2. Have a problem they want to solve, and your solution can address.
3. Have a desire and the ability to spend money to solve that problem.”
Once you have identified your targeted consumers, you can begin to market to them using my "4 A's" approach (Awareness, Attitude, Action, and Advocacy).
If you've targeted your consumers using Seth's three criteria, you can then make them aware of your product/service (since you know how to identify and reach them).
You can make a relevant offer (since you know they have a problem you can solve).
You can make a sale (since they have money to spend to solve the problem, and your product/service can address the problem).
And as the sale then transforms these consumers into your customers, you can continue to encourage their repeat purchases and advocacy of your products and services to other consumers.
When I work with my clients, I like to get them to think about two classes of people (in the B to C world) or two classes of businesses (in the B to C world). These two classes are:
- Consumers (some person or business who might buy your product/service
- Customers (some person or business who has purchased your product/service
Consumers are not "everyone" or "every business" out there. Consumers are candidates to buy your product or service. Targeted consumers should meet these three criteria, that I saw in a recent blog by Seth Godin:
“You need a group of consumers that:
1. You can identify and reach.
2. Have a problem they want to solve, and your solution can address.
3. Have a desire and the ability to spend money to solve that problem.”
Once you have identified your targeted consumers, you can begin to market to them using my "4 A's" approach (Awareness, Attitude, Action, and Advocacy).
If you've targeted your consumers using Seth's three criteria, you can then make them aware of your product/service (since you know how to identify and reach them).
You can make a relevant offer (since you know they have a problem you can solve).
You can make a sale (since they have money to spend to solve the problem, and your product/service can address the problem).
And as the sale then transforms these consumers into your customers, you can continue to encourage their repeat purchases and advocacy of your products and services to other consumers.
Tuesday, February 24, 2009
Awareness, Understanding and Knowledge
Hi to all,
As a management consultant, I help leaders think about how they think. This helps them understand how they take the content of their work and put it into a workable context. One of the best frameworks I've found for this comes from the philosophical/spiritual/metaphysical literature that talks about three levels of thought:
- Awareness
- Understanding
- Knowledge
Awareness is the thought that something exists - it answers the "what" question.
Understanding requires more information, enough so I can form an opinion about something, and maybe answer some basic questions about it.
Knowledge is the deepest level of information, and comes in two forms: to "know about" something (like a biographer of Abraham Lincoln might "know about" Lincoln), or to truly know something, which is to "be" it (Only one person on earth, who lived in the 19th century, really knows what is is to be Abraham Lincoln.
In business, this framework has several uses. My favorite revolves around how this can be used to view your consumer/customer base for your products and services. Consumers first need to gain "awareness" of your business - who you are and what you sell. After additional contacts or research on your company, they develop an "understanding" of what you are selling, and form an opinion and potentially a purchase intent about it. When consumers buy a product or service of yours, they use it and begin to "know" it. With repeat purchases, they deepen that knowledge, and may pass that knowledge (favorable or unfavorable) on to others.
So to provide clarity to your thinking, first individually and then as a team looking to fulfill the purpose of your organization profitably, you may want to adopt the key words Awareness, Understanding and Knowledge into your conversations, meetings, writings, and analysis.
As a management consultant, I help leaders think about how they think. This helps them understand how they take the content of their work and put it into a workable context. One of the best frameworks I've found for this comes from the philosophical/spiritual/metaphysical literature that talks about three levels of thought:
- Awareness
- Understanding
- Knowledge
Awareness is the thought that something exists - it answers the "what" question.
Understanding requires more information, enough so I can form an opinion about something, and maybe answer some basic questions about it.
Knowledge is the deepest level of information, and comes in two forms: to "know about" something (like a biographer of Abraham Lincoln might "know about" Lincoln), or to truly know something, which is to "be" it (Only one person on earth, who lived in the 19th century, really knows what is is to be Abraham Lincoln.
In business, this framework has several uses. My favorite revolves around how this can be used to view your consumer/customer base for your products and services. Consumers first need to gain "awareness" of your business - who you are and what you sell. After additional contacts or research on your company, they develop an "understanding" of what you are selling, and form an opinion and potentially a purchase intent about it. When consumers buy a product or service of yours, they use it and begin to "know" it. With repeat purchases, they deepen that knowledge, and may pass that knowledge (favorable or unfavorable) on to others.
So to provide clarity to your thinking, first individually and then as a team looking to fulfill the purpose of your organization profitably, you may want to adopt the key words Awareness, Understanding and Knowledge into your conversations, meetings, writings, and analysis.
2009 - The Year in Review
Hi to all,
It's now December, 2009. How profitable was your professional and personal life this year? How long where you able to follow your New Year's resolutions? How did you work through your major challenges in key areas of your life - health, wealth, love, and being/doing what you choose?
The second habit of Stephen Covey's "7 Habits of Highly Effective People" is to "Begin with the End in Mind". The year 2009 still has 10 months to go. You can still achieve what you seek to achieve, even if you've gotten of to a slow start. For your health, if you were to lose one pound a month for the rest of the year, you'd be 10 pounds lighter in December. If your work has not been as fruitful as you'd like, remember to create value every day, and give your customers, bosses, and co-workers an honest effort towards the mission and vision of your company. And do it in a cost effective manner, so that the customer is satisfied and you are contributing to the profits of your organization.
In the areas of love and self-expression, these are very trying times for many people. Seek to be kind and generous (spiritually and physically) to the people you come in contact with each day. My father used to say "It doesn't cost anything to be nice to people". And if you have resources to spare, look to help a person or organization in need, by either buying their products and services, or offering a financial gift or loan for a person or organization in need.
It's December 2009 - did you live the year profitably?
It's now December, 2009. How profitable was your professional and personal life this year? How long where you able to follow your New Year's resolutions? How did you work through your major challenges in key areas of your life - health, wealth, love, and being/doing what you choose?
The second habit of Stephen Covey's "7 Habits of Highly Effective People" is to "Begin with the End in Mind". The year 2009 still has 10 months to go. You can still achieve what you seek to achieve, even if you've gotten of to a slow start. For your health, if you were to lose one pound a month for the rest of the year, you'd be 10 pounds lighter in December. If your work has not been as fruitful as you'd like, remember to create value every day, and give your customers, bosses, and co-workers an honest effort towards the mission and vision of your company. And do it in a cost effective manner, so that the customer is satisfied and you are contributing to the profits of your organization.
In the areas of love and self-expression, these are very trying times for many people. Seek to be kind and generous (spiritually and physically) to the people you come in contact with each day. My father used to say "It doesn't cost anything to be nice to people". And if you have resources to spare, look to help a person or organization in need, by either buying their products and services, or offering a financial gift or loan for a person or organization in need.
It's December 2009 - did you live the year profitably?
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