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The Flight To Quality — and Value

“The Flight To Quality” is an investment term for when investors move their capital away from riskier investments to the safest possible investment vehicles. In The New Normal I write about, I believe we are seeing a flight to quality across a broad spectrum of business: media & marketing, retail, entertainment, sports and more. And I believe it takes the form of a a “Flight To Quality…and VALUE“.

Sometimes it is truly about quality and less about price…Take for example the recent case where a package of bed linens bargain-priced for $35.00 at Kmart sold significantly LESS than a quite similar package at Pottery Barn that was priced at $129.00. Was this because upper middle class shoppers at Pottery Barn are spending more freely in the recession than lower middle class shoppers at Kmart? Maybe — but actually I believe it was because the Pottery Barn product was higher quality, longer lasting and therefore ultimate a better value.

Similarly, look at what has happened to the live entertainment industry in 2010. (See WSJ article.) A shockingly large number of high profile, major tour dates were canceled by some of the world’s best selling music artists: The Eagles, Christina Aguilera, The Dixie Chicks and others. The reason? Low ticket sales. The reasons cited were (i) the artists were touring too much (over-saturating their market) and (ii) they weren’t releasing any new music (no new albums). So the public said: “These tickets are expensive, really. I saw this artist last year, and he/she doesn’t have a new record.  It’s not worth it.”

“It’s not worth it.” The attitude and outlook of the New Normal is defined by the question: “Is it worth it?”

  • In Sports: “Is it worth it to re-up and continue being a season ticket subscriber in the face of my team’s lousy management and escalating ticket prices?” see NY Times piece on personal seat licenses
  • In Media and Marketing: “Is it worth it to re-up and spend lavishly on traditional (read: expensive) media buys like radio, TV and print? Or should I shift my focus even more to measurable media online and in the mobile space, where I can calculate my ROI?” WSJ 9/23/2010

The margin for error has gotten smaller. And whether you’re buying sheets, tickets or advertising, these days you are going to buy:

  1. what works
  2. what lasts
  3. what provides the most VALUE

Sometimes it is about lower price, sometimes it’s not. But making sure you get what you want and need has never been more relevant.

Sir Richard Branson. “Our businesses need to be innovative, maintain a certain quality, be value for money and have a sense of fun.
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Media & Marketing 3.0

Over the past several years I have reflected frequently on where we are in the evolution of media and marketing — with one (1) goal in mind:  what is the best way to market and promote a product or service RIGHT NOW.  What is the How/What/Where/Who?  To answer this question effectively it is helpful to review where we have been over the past 90 years.  There have been three main phases:
  1. Media & Marketing 1.0:  1920-1955 (Pre-Television Era)
  2. Media & Marketing 2.0:  1955-2009 (Post-Television Era)
  3. Media & Marketing 3.0:  2009 onward (Post-Digital Era)

In today’s world — the Post Digital Era — traditional mass media are in decline.  Just look at the numbers for newspaper, television and radio advertising.  New media (web, email, social and mobile) are of course on the rise.  Look no further than what major brand marketers and consumers are doing:

  • In 1999 mainstream media (TV, Print, Radio) captured 98% of all Ford Motor Co’s advertising dollars in North America.  Today it captures less than 70%. (source: Ad Age 2009)
  • Today internet advertising is greater than all broadcast radio ad spending (6% for Radio, 8% Internet) (source: NAB & IAB)
  • In 1985 there were 2 out-of-home audio choices (terrestrial radio, the Walkman).  Today there are at least 5 choices (satellite radio, mp3 players, Internet radio, terrestrial radio,  iPhones).

Bottom line: consumers are consuming media in many more ways than they were 10-15 years ago — thanks to the Internet.  And within digital media there are dozens of choices for advertisers to make when they decide on how to push out their message.  Below are just a few…12 to be exact:

web banners
 email
 paid search
behavioral targeting
 widgets
 social media
SEO (organic)
 video
 mobile media
iPhone apps
 iPad apps
 Internet radio

This list is not all encompassing either.  There are more areas within digital.  The point ultimately is not to get overwhelmed by the plethora of choices but to embrace them…and to find the sweet spot that is Marketing 3.0.  The diagram up top is a rough illustration of this.  Somewhere between Traditional Media, Internet and Mobile/Guerilla, is the right mix for any marketing campaign.  It is a more complicated world now; so the degree to which marketers become skilled “media mixologists” is more important than ever.

Embrace the choices,  embrace the mosaic of ways to get the message out.  You will be surprised and delighted when your mix hits just the right note.

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Wall Street Responds…And I Rebut

A good friend who works on the Street responded to my last post:
Just came across this email again.. My position doesn’t change. Wall Street was certainly a part of the equation but Barney Frank and his merry band of pranksters coupled with a willing and extraordinary irresponsible material driven populace are also complicit in the meltdown. Its easy to blame the “Banker” but let us not forget the power hungry “Politician” and the short sighted and often time fraudulent “Borrower” for they are equally at fault. Where’s the outrage about the massive pensions and gold plated health care that so many municipal workers have landed over the past 20yrs? Where’s the outrage about the tax payer funded loans the auto industry took and has yet to pay back. The same auto industry that for 20yrs was warned about fiscal discipline to no avail and negotiated with unions “job banks” to protect their workers while loosing money all the while? Where’s the rational discussion about the Feds role in strong arming the banks into funding low income (some might call sub-prime?) loans in order to increase home ownership to the highest levels in this country’s history. Where is the outrage beyond the “Banker”??

My counterpoint:
By the way, I am not vilifying successful Americans. I am an entrepreneur after all. I actually believe there ARE good bankers out there. And I am certainly not saying we should nationalize the banks or dismantle the free market system. Those aren’t good ideas. And neither is raising taxes. But a famous management guru once wrote: “People do what they are paid to do.” (i.e. “All economic activity boils down to incentives.”) WS folks got rewarded when they did things that weren’t always good for their firms in the long run, weren’t always good for Borrowers & Clients, and strayed over the line in terms of risk. Today they are still rewarded when they take risks with other people’s money (client’s, Main Street’s, government’s). As William Cohan wrote in the NY Times: “…the fact remains that the Dodd-Frank Act does nothing to change the terribly warped incentive system that continues to reward Wall Street bankers and traders for the revenues they produce by taking risks with other people’s money. It does nothing to hold bankers and traders responsible for their actions where it really matters — in their pocketbooks.”

My point is that bankers and traders should be held responsible for what they do. Just as Borrowers should be…and Auto makers…and Unions. We all should be. And of course at the end of the day we absolutely need the financial system, but can’t we ask for the same accountability from it that we expect from other sectors? I was interested in Bernanke’s comment in Congress this week. He said Americans were justifiably angry that bankers “who drove their companies into a ditch walked off with lots of money.” A simplification of the events, but perhaps a simple truth nonetheless.

As for credit being available…I don’t see it. Banks are not freely lending — at least not yet. Neither to small businesses nor consumers.