Money to Burn?

It appears there isn't the political stomach in D.C. for bailing out the automakers. That's unfortunately because the main problem with the bailout is perceptions... not reality. The main problem with te auto biz right now is that automobiles aren't selling. Period. No one is selling cars, not Honda, Toyota, BMW, Ford, or GM. The photo above is from NYTimes.com showing cars stacked up in port because no one is buying them. If you look closely you will see Toyota Priuses (Priusi?) lined up. So, if no one is buying, what good is a bailout? In my opinion, if the gov. were going to truly "bailout" the big three, it would start buying a lot of American cars and bury them in Texas somewhere.

Don't take this wrong, though, I'm for the government bailout of the domestic 3. But it's not a "bailout". It's not even a good loan. I see it as a stay of execution or priming the pump for a merger of two.

As evidence: GM is burning about $1.15 Billion in cash per month, giving them cash through Jan. (as of end of Oct.). So, if we give them another $20 Billion (over two-thirds the proposed bailout), that gives them about a year and a half to turn it around. They believe that with this cash, they can cut enough to survive until the economy turns a corner. To do so, though, they have to cut their monthly spending. How do you cut $1.15 billion in spending per month at a mammoth like GM (or Ford, or Chrysler)? You cut staff. You cut vehicle programs. You shutter plants. Bottom line, even with the "bailout", we would be seeing a lot more bad news before we see good news.

This would seem to say that congress killing the bailout is a good thing, right? And why is this marketing guy talking about all this anyway? Well, to answer the first question, the problem is GM, Ford, and Chrysler need cash and they need it now. Whether it comes from this bailout or some other loan program, the fact is our economy (even in good times) can't absorb the loss of one or two of them. There's just too much as stake.

And here's why a marketing guy is talking about this: there is enough ill-will towards the big 3 for perceptions that they have lazy UAW workers, years of crappy quality, and its lack of innovation (whether right or wrong, those are perceptions often spouted on talk shows these days), that if they receive the bailout and then cut staff, programs and staff (which they will HAVE to do), there would be a LOT of crying "foul!" Politicians are essentially hoping, that without the bailout, the big 3 can tap into other loan programs that won't have the appearance or political stigma of taxpayers throwing money down a blackhole, as bad news continues to roll out.

Of course, here's the rub: the money that is going to end up giving the big 3 a stay of execution is going to be the money that had been allocated (and they need) for new programs. So, your neighborhood plant may not close this time, but there won't be new product in the pipeline for it in the next few years.

THAT's why the bailout is needed and the talking heads should be looking at the reality, not perceptions.

Surviving the holidays

If you watch or read the news or generally have see any business news at all, you will see that the economic outlook for the holidays as we know them is not so good (particularly in the D). How will your business fare in this environment? I've got three ideas that will help you answer that question positively:

• CRM - Yep, those three magic little letters that are often hard to define. For the purposes of this holiday season (and beyond), I'd think of CRM as a tool for holding on to your current customers. To me, this seems of key importance right now. Doesn't now seem like a great time to launch a loyalty program? What about website revisions that make it more interactive? What about becoming more connected via facebook, myspace, or other web 2.0 sites? Do you currently have a system for customer feedback? Basically, the goal is a two way conversation that allows current customers to interact and feel like they are a part of your success.
  
• New Incentives - why do you have loyal customers now? (If you don't know, see Research below.) How can you tap into their loyalty to spread the word? Maybe a "bring a friend" incentive. Perhaps its time to do some impromtu sweepstakes, party, or other creative event to bring in new traffic. What companies are around you? What about a special incentive for their employees or a new supplier and family discount?
  
• Research - it may seem counterintuitive to be spending money on something right now that may not have a direct ROI calculation. These items are often the first to cut. However, I would argue that now is the PERFECT time for this. You have to better understand what consumers are willing to spend money on, why they spend their money with you vs. competitors, and what they "can't" live without. This doesn't have to be complicated. You could offer a gift certificate to get folks to come into the shop and sit down with you to talk. You could set up a short online survey using one of the many online survey tools (I personally like surveymonkey.com) or set up a new topic for improvements on your forum. I see this as an excellent the start to a conversation with your customers (see CRM above).

Any of these will give you something positive to present to customers, employees, and investors, rather than just the doom and gloom that all of them are getting anyway.

Good Marketing for Bad Times

It's no secret that the Detroit area has been hit pretty hard by the economy. This all started about a year ago (or longer) here. The latest national news sounds like just a rehash of problems that Detroit has been living with for a while. When the economy tanks, there is a lot of news about big changes in American's lives. For example, a poll for Fortune Magazine from January 2008 shows that even back then (doesn't that seem like a long time ago now??)....

• Almost half have been cutting back on spending
• 4 in 10 believe that their personal economic situation has gotten worse in the last 12 months
• 1 in 4 believe that gas (and energy) prices are responsible for the slowing economy

Add to this the horror stories about getting financing we're hearing right now (auto loan refusal is at its highest rate since 1984, according to Businessweek), and you may find yourself wanting to run for the hills.

So, is it time to close up shop and take a long nap until this storm blows over? Hardly. It's time to get to work. From that same Fortune survey...

• Half believe that their personal economic situation has not changed in the last 12 months (15% believe it has improved)
• Almost 3 in 4 have been able to keep up with their credit card payments, and 9 in 10 are able to keep up with other payments (such as mortgage, rent, car payments, etc.)

What this tells me is that there is still money out there, and a savvy business can survive (some may even thrive) in this difficult environment. Additionally, there's an excellent change to set the stage to have your brand be force when this storm does pass. But it's not a time to cut back on that marketing budget. The key to surviving or thriving in this kind of economic environment comes down to refocusing your brand:

• Awareness Is Not the Ultimate Goal - while no one with any sense will tell you that awareness isn't important, keep in mind that just telling people you exist is not the ultimate goal of any marketing that your doing. A friend of mine runs a bike shop that sponsors a lot of events with a tent, repair equipment, staff, and even items to sell. A while back, I asked him why he sponsored them and the answer was "awareness" so that folks know about the shop. But if that's the goal, why spend the time, money, and energy to actually show up? He could have just sent a banner to do the same thing. The real goal of these sponsorships is to move one step past awareness to get entered into the consideration set for purchase (or even make a few sales at the event!). This is the start to an emotional attachment (something very difficult for banners to do by themselves).
  
• Find Marketing Activities that Connect with Customers Emotionally - one of the first things that get cut out of a budget are a business that don't add an emotional value for consumers. Consider Netflix: as they expand further into social networking so that consumers can share their movie lists or take recommendations from friends, the activity becomes more of a social outlet, a connection. This strengthens the emotional connection to the Netflix brand and reduces the likelihood that it ends up on the household budget chopping block.
• Deliver Greater Value with your Marketing - greater value is OFTEN talked about in board meetings and marketing meetings but seems to be lost or watered down too far to be actually useful by the time it hits the trenches. Award or frequent buyer programs are a great way to increase the value of marketing, and I think a very useful way to capitalize on viral marketing techniques. If you provided unique content, games, or parties for those who have X number of points or purchases at a level between your current "free stuff" or discount levels, folks are going to get more out of the path they are on with your brand.
• Understand Why/How People are Spending Money with You - As the household budget gets trimmed, folks are going to have to shift the way they spend their money. Maybe you'll be lucky enough not to be impacted by this, but chances are you've seen a change in sales in the last few months. Talk to your customers. Get a better understanding of what they are buying with you and why things may have changed. There's a chance that while you may not be able to talk them into spending a lot more, you may be able to make changes to the store layout or menu or whatever to help direct customers to more profitable items or items that supplement other products and thereby increase their value while increase the overall sale. But talk to you customers before you make substantial changes. They'll tell you the why and how they are making changes to their spending habits with you.

Now, obviously, it's not a time to relax, but it's not a time to panic and undermine your brand either.

The death of Fair Trade Certified marketing?

I read in Brandweek this week that marketers at Walmart, Target, and Starbucks (among other large retailers) "eye Fair Trade Certified as the new 'green'" marketing tool.

As someone who ran/runs a independent coffee roasting company, trying to compete with big chains is always a challenge. The juggernaut Starbucks not only sells many of the same products, but also has more locations and lots of marketing bucks behind that star. However, its not impossible, despite everything Starbucks does well. And, it helps that Starbucks is closing/has closed eight of its stores in the Detroit area, including three in the city itself. One of the ways that I was able to get a favorable comparison to Starbucks (and other big chains or big roasters) has been to capitalize on selling Fair Trade Certified (F/T) products.

Overall, though this article is good news. This will help the farmers (and that is really the point to the F/T certs). "Every small coffee roaster in Bareto or Santa Cruz is important to us, but the reality is a big retailer is like a faucet," said Anthony Marek, spokesman at TransFair USA. "And if you're a drip, that faucet can help tens of thousands of farmers across the world."

As F/T gets pushed out into Target and Walmart (and hotel chains?!?), independent coffee roasters and retailers are going to be put under even more pressure to find creative ways to differentiate their products and to increase their visibility, particularly in the current economy. Lynn Dornblaser, director-CPG trend insight at Mintel asserts that with the downturn in the economy, Americans are likely to be much more focused on their wallets, rather than third world countries. Savvy marketers for smaller shops can use this along with the things that make independent shops great in the first place: location, atmosphere, quality product, customer service.... to capitalize on the downturn.

Just don't rely on F/T as a differentiator.