Posts Tagged 'Marketing'



“I wish that I could be like the cool kids”

In today’s digital environment, marketers are often seeking a viral way to spread news about their product or to stoke a trend. Traditional thinking was that trends spread predictably. Trends were seen to launch on the west coast (usually from urban environments), spread to the east coast, and eventually make their way to middle America and a mass market. This is why so many “cool seeker” or “trend seeker” researcher panels were established. By connecting to the cool kids in the right environments, marketers could get an early sense of what was going to happen next and get on board for the ride. They could seed ideas with the right audience and let nature take its course.

The Internet has largely blown up this paradigm. It has become a great “leveler” of youth trends. Now, a trend can start anywhere, become viral seemingly randomly, and spin out of control quickly. A geographic center of trends is hard to pinpoint if it exists at all. In research, “trend seeker” panels have become more of an oddity in market research – and have been supplanted largely by online communities of teens from across the country.

How can a communications and “connecting” technology (the Internet) have such a profound impact on how innovations and trends take hold?

Innovation diffusion to the mainstream has been the subject of academic study for some time.  Perhaps the most seminal work in the field came in 1962 when Everett Rogers published The Diffusion of Innovations. This book has been required reading at MBA marketing programs for more than 50 years.

In this book, Rogers outlines a classic theory. Innovators (2-3% of the population) start using a product. Early adopters (10%-15%) see what the innovators are doing and jump on board quickly. Next, the early majority (30%-35%) jumps on board as the hype around the product peaks. The late majority (30%-34%) gets on board. Finally, eventually the laggards (10%-15%) join in.

For decades, this thinking caused marketers to focus a disproportionate effort on the innovators – the 2%-3% of the population that supposedly spark new trends. This concept is the underpinning of why marketing dollars flow towards young people, urban consumers, minorities, etc. as marketers hope to start a chain reaction through the Rogers segments. Why have we had such a focus on youth marketing? It isn’t because they have a lot of money to spend, as compared to other age segments they don’t.  It is because marketers feel they are influential.

New media and viral marketing has made this thinking even more prevalent. If we can just reach the influencers, we’ll let loose a viral effect and sell a lot of product. Unfortunately, this thinking is a good example of applying an old paradigm to a new world.

Even in the pre-Internet past, this thinking tended to work more on a “fad” than a “trend” level. To illustrate this, in presentations I often ask the audience to write down what they think the most successful marketing brands and products have been in the past 10 years that are youth-oriented. I pause, and then list them out on a whiteboard. Typical responses are as follows:

  • The iPhone
  • Harry Potter franchise
  • American Idol
  • Barbie
  • National Football League
  • Various Boy Bands

I then point out that franchises like these, which have hit it incredibly big with youth, all have one thing in common. They didn’t diffuse to the mainstream in the Rogers fashion. They didn’t start by being popular with cool kids. Rather, they found a way to go directly to the mainstream. Oftentimes, they got there by being shunned by the cool kids.

I believe the rise of the Internet will eventually (once they catch on) cause marketers to stop thinking in the traditional way about how new trends diffuse to the mainstream. The introverted kid in the Midwest who has a popular blog is fast becoming more influential than the hipster on the street in Los Angeles. Marketers will find more direct tributaries to the mainstream, and the cool hunter research panels that still exist in the market research industry will disappear.

What has two eyes, one brain, and costs a quarter million dollars to educate?

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Publicly-funded education is perhaps one of America’s greatest triumphs. Education has been part-and-parcel to our democracy and the founding fathers realized early that if government was going to be of the people, for the people, and by the people, then the people better be well-educated.

The idea of compulsory public schools goes back to the founding of the nation but actually took some time to gain traction. This is likely because education was and (despite recent history) remains largely a local responsibility. Throughout the 1800’s States passed laws making education compulsory. It took some time for these laws to create a culture where education of children was largely left up to the State, sort of “outsourced” from parents.

In 1912, 72% of America’s children were in school. By 1930, this percentage had reached virtually 100%. I believe this is the main factor behind the dawning of American dominance in the 20th century. There were other factors, but the US had early success in making education compulsory, which gave us a head start in innovation and business. It led to almost a century of leadership of the world’s economy.

Yet, somehow this educational prominence has slipped, or at least has been perceived to have slipped. International comparisons tend to show that our students are not doing well compared to other developed countries. Although many of the prophesies of “A Nation at Risk” have not come to fruition, the concerns expressed more than 30 years ago are resurfacing.

Complaints about the educational system seem to flow with the business cycle and peak at times of economic uncertainty. And we shouldn’t ignore the economics: the resources we spend to educate our children are considerable. My local school district currently spends $12,684 per student per year. Some quick math implies that it cost about $165,000 to educate my child from grades K-12.  Since I have two children, it has cost about $330,000 to get them to a high school diploma. As a parent, I owe our local taxpayers a thank you.But, as a taxpayer soon to not have children in school, I have to be concerned about this level of public investment.

Take the case of a child in the school district where I live, which is a suburban district in New York State.Most students from this district end up going to a 4-year college. For demonstration sake, I picked the closest State college and closest private university to where I live. The annual tuition, room and board, etc. for these students runs $18,055 at the State college and $45,602 at the private university. I am assuming this captures the full cost of what it takes to educate a student for a year at these institutions. These costs might be paid by parents and students, or loans, or grants. For this example, it doesn’t matter where the money comes from.

Using these figures, the total cost of educating a child in our district from Kindergarten until he/she turns the tassel at college is about $237,000 for the State college and $347,000 for the private university. This is what it costs “society” to educate a child from my area, with society being a mix of tax dollars, parent and child money, scholarships, loans, etc.

This is likely an underestimate of the true costs of education. Costs are higher than this calculation for the State college, as they receive government subsidies that help keep their tuition costs down. And, there is an opportunity cost to not having the student in the workforce and contributing to the economic output of the nation until he/she is 21 or 22 years old.

This example shows that there is an understandable economic underpinning to current criticisms of our education system. At a time when we have pressed an increasing base of students to go to college, the college costs have risen substantially. That in itself is not problematic – more problematic is that the costs of college have been growing at a much faster rate than the benefits.

A recent piece by the Wall Street Journal indicates that since 2006, the cost of a 4-year degree has increased by 16.5%. At the same time, starting salaries have stagnated, and I have even seen calculations suggesting first year salaries for college graduates have fallen for the first time in history, when calculated on a real basis.

So, is this a bubble that will have to pop? I guess the definition of a bubble is that nobody really knows we are in one until it punctures. But, it is predictable that education institutions, both K-12 schools and colleges and universities, are going to be under even more intense pressure in the future.

Marketing in Schools – A Necessary Evil?

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The youth marketing industry’s practices are coming under increased scrutiny by the media, academics, and government. Issues such as increased commercialism directed towards children, online privacy, marketing in schools, the content of children’s media and advertising, and childhood obesity have become part of a national discourse.

This post is going to stress the topic of marketing in schools.

There has been a lot of information and misinformation placed into the public debate regarding commercialism in schools. At Crux, we feel we are in a unique position to comment. We have worked with and for school districts for many years and have close relationships with many school administrators. At the same time, we work with some of the most respected brands in youth marketing. So, the topic of marketing in schools is one we contend with often.

Commercial presence in schools is not something new. Local corporations have a genuine interest in the quality of their school districts. Not only are companies significant taxpayers that want to be sure their taxes are being spent wisely, but the quality of the workforce they can attract, local housing values, and quality of life for their employees depends greatly on the schools.

In terms of brands in schools, there has been marketing in schools for a long time, but it has really been the last 20 years or so that commercial interests really started to see schools as an untapped resource. I don’t think too many people would deny that the level of marketing activity in schools has been on the rise. You can notice this in your own travels in schools. You just “see” brands in school environments much more than you used to.

I thought I would share some of my own anecdotal conversations I’ve had with school Superintendents.

First, when I myself first starting “selling” our research to school leaders, I learned right away that the “pitch” had to be couched in a certain way. I had to show them how the research would lead to greater staff productivity or greater parental involvement in the schools. And, it was the moment that I had information that showed that our studies directly lead to greater student achievement that our services got easy to promote.

Which leads me to an important point: the motivations of school leaders are very pure – in a way you don’t see often in the corporate world. They are all about the kids. If you have a program and want to win over a school administrator’s heart, show them how it benefits the kids. Financial issues are very real to them – but are not what makes them tick.

Second, if you think you have pressures in your job, consider theirs. I’ve been to dozens of school board meetings. These are people that are at the center of many controversies. They are negotiating with the union. A parent has a concern. They have a crazy school board member to appease. The governor has given them some more unfunded mandates. They are adapting to new Common Core Standards. In short, they have a lot of battles to fight. Don’t assume that yours is going to make their priority list. So I learned that early on – if you are doing something that creates controversy, they will shy away.

Budgeting and school law are a big part of their job. But, it is also a part of their job they hate.

Finally, and probably the salient point for those who want to market their brands in schools, is when you speak to Superintendents about marketing in schools, the ONLY thing they will play back are the financial benefits. I have never met a school official that thought allowing marketers into schools is a good idea. But I have met plenty that feel it is a better option than making further cuts to the school music program.

And that is a perception that needs to change.

So, why do we see corporate involvement in schools? First and foremost, school budget issues are very real and acute. But, there is also a sense that society has become so commercial with advertising clutter everywhere, that allowing it into schools isn’t such a big deal.

And, the youth market is seen as a growth area – more and more marketers are developing plans for the youth demographic. The youth market has become increasingly lucrative. At the same time, schools have become relatively poor and more focused on their finances.

This makes a point that I think many people in the corporate world don’t realize. Typically, somewhere between 80% and 90% of the annual school budget is not under the discretion of school leaders. Between the union contract and state mandates, there really is little discretionary spending. The budget situation became dire in the recent recession and has yet to pick up.

So, what we see are schools taking some desperate measures to stay afloat fiscally. Some of these measures would be quite comical if they weren’t true. We have found cases where schools have hired marketing firms to sell naming rights to their buildings and facilities, have held fundraising telethons, etc.  We have even found a case where parents held a blood plasma drive in order to make enough money to save a teacher’s job.

Now certainly all schools aren’t this desperate, but they are certainly not flush with cash either.

So, let’s think about it a little more rationally. Why would educators want corporate involvement in schools?

Certainly, financial considerations are important. But there is also a big trend towards narrowing the curriculum to core subjects. Schools are being held accountable for test scores in math and reading.  So their resources are flowing to core subjects. This is putting non-core subjects (music, languages, arts) all at greater risk.

And, since the economy hasn’t been great recently, taxpayers have not been supporting tax increases like they once would.

At the same time, corporations want to be in schools like never before. Young people spend about a fifth of their lives in schools, and schools are about the most uncluttered advertising environment available.  Also, to some extent the medium is the message – an advertising message delivered in schools carries an implied endorsement.

Finally, traditional advertising venues are not working – at least not as well as they used to. Media has fragmented and the way young people use media has fundamentally changed. It is a bit of a mess.

So, companies do a variety of things. They place ads in the schools, on buses, on scoreboards, and on book covers. They distribute product samples in schools and place yearbook ads. They work with textbook publishers to get their products mentioned in books. They sponsor programs like the High School Heisman, Odyssey of the Mind, National Science Bowl, and National Spelling Bee.

And, in what might have been the straw that broke the camel’s back, they establish vending machine contracts and pouring rights for soft drink companies. This created such controversy that sugary drinks have been disappearing rapidly from school hallways.

It is easy for the youth marketing industry to look like a villain, but there are some strong arguments that can be made in support of advertising in schools:

  • Companies provide materials and financial support that would not be available otherwise.
  • Commercial materials present an opportunity for teachers to discuss media literacy in their lessons.
  • Teachers are capable of evaluating materials for commercial bias and using materials appropriately.
  • Businesses have unique information and resources that improve education – often better resources on some topics than educator’s have.
  • Problems with marketing in schools have been exaggerated. Commercialism is everywhere today and our kids can handle it, perhaps better than adults.

Of course, there are strong arguments against having a commercial presence in schools:

  • We are ceding control of education to people outside of education, and education is supposed to be locally controlled. Education isn’t and shouldn’t be a business.
  • School marketing efforts can compromise the integrity of education.
  • Ads in schools imply an endorsement from the school, which isn’t accurate.
  • There is a blurring of the line between education and advertising and kids don’t understand the difference, particularly younger kids.
  • Teachers are not appropriate gatekeepers as they have no training in this area.
  • We are promoting materialism.

So, how can youth marketers get on the right side of these issues?

Well, some ways of reaching young people in schools are seen as more appropriate than others. Sponsoring sports competitions, providing loyalty programs that reward schools for gathering product labels, purchasing sports equipment with brand names on them, school book fairs, and advertising in school newspapers tend to all be seen as appropriate tactics to reach children in schools.

Advertising on school buses, advertising on school book covers, and integrating brands into instructional support material and lessons tend to be seen as inappropriate.

So, below is our 6 step guide for organizations who seek to further their brands in a school environment.

  1. First, realize that to date opposition to in-school marketing has effectively positioned youth marketers as the “bad guys.” It doesn’t have to be that way, but the industry is starting from a negative position.
  2. Improve PR:  It is not inconceivable that marketers can be positioned as a “savior” and not a “villain.”  Done right, school marketing provides more than financial support – it can provide educational support as well.
  3. Stop doing the “really dumb” things. Your involvement has to be more than just advertising. It has to further an educational mission at the same time.
  4. Clearly delineate commercial messages – don’t “veil” them in curriculum, place them in contexts that are obvious advertising vehicles.
  5. Show that your involvement makes a difference to an educational need, and not just a financial one. I think most school leaders would agree that this is the essential approach.
  6. Leave curriculum and instruction to the educators, but if your organization has an expertise that is relevant to the curriculum, offer it!

Remember, school leaders have to choose their battles. Your in-school marketing can be something they trumpet, not something they have to defend.

Time is Money; Money is Time

The most interesting call I ever received as a result of a poll we conducted was from a college student. We had released a data point demonstrating that college students have an enormous amount of uncommitted, free time — 8.5 hours a day on average to be precise. We defined discretionary time as time students are not sleeping, going to class, studying, working out, commuting, or working at a paid job. What is left is time that is up to the student how to use.

The college student called to tell me how this data point must be wrong, because all the college students she knew were incredibly busy. After mentioning that she must be hanging with a different crowd of people than I hung with in college, I told her to call me back in 10 years when she had a career, a spouse, a couple of kids, and a house to maintain. I suggested it is likely a matter of perspective and how you view your discretionary time, and that perhaps time that she considers “obligations” our researcher’s eyes classify as discretionary.

In the context of many decisions we make, we trade off the concepts of “time” and “money.” In the short-run, both are fixed commodities. In the long run, our financial situation may change for better or worse and our concept of time may change even though each day remains at 24 hours.

Our discretionary income follows a well-known path in our lifetime. It starts at zero when we are born, grows to a modest level as teenagers, tends to level off through the college years, grows considerably in our working years, and then falls off in retirement.

Discretionary time follows a different pattern. It starts out very high, moderates in the school years, grows considerably in the college years, and then pretty much falls off a cliff as individuals are raising their own families and building their careers. Discretionary time then moves upwards during the empty-nester time frame, and then is maximized in retirement. Note that we define discretionary time as “uncommitted” time – time that you get to choose how to spend.

The graph below illustrates how time and money progress over our lifetimes.

Time and Money

The interesting part of this for marketers is that “time” and “money” are often used to “buy” each other. We can buy more discretionary time by outsourcing aspects of our lives. I don’t change my own oil, plow my own driveway, or iron my own shirts. In all these cases, I value the time saved by not having to do these things more than the money it cost to outsource them.

This relationship goes the other way as well. We can use “time” to save “money.” I’ll sometimes spend hours on the Internet to find the best price for a flight or a hotel room. I’ll drive an extra 15 minutes to a grocery store because something I like is on sale there and not at the store closer to my home.

Look again at the graph above. The most interesting life stages are the ones where there is a big gap between the time and money lines. An obvious place where this happens is the college years. This is a time frame when consumers have relatively little discretionary income, but relatively high discretionary time. This concept is why for years we have been saying that college students are pretty much the most savvy consumer group out there. They are smart (hey – they are in college!), highly connected with each other, necessarily frugal with their funds, and have enormous amounts of time to research products and prices. But, they are more than cheap customers who have a lot of time to find the best price. They emerge as adult consumers, and lifelong associations with brands often start in the college years.

Another interesting point on the graph is at mid-career (30’s-40’s). This is the point where there is the largest gap between discretionary income and discretionary time. So, this is the life stage where we most see consumers trading money for time. Price sensitivity tends to be at its lowest during this time frame.

Money is time. With money I buy for cheerful use the hours which otherwise would not in any sense be mine. — George Gissing

2013 re:fuel College Explorer Findings Released!

Follow the link below to learn more about the 2013 re:fuel College Explorer – powered by a poll conducted by Crux Research!

Tech-Savvy College Students Are Gathering Gadgets, Saying Yes to Showrooming and Rejecting Second-Screening

Half of our advertising money is still wasted

money_down_toilet

The most vaunted saying in all of marketing was made over a century ago by John Wanamaker: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”

About a decade ago I was making a presentation at a marketing conference where I brought the quote up. I said that even though Wanamaker said this more than 100 years ago, it is as true today as it was then. Which means that over all that time, marketers and researchers haven’t had any true breakthroughs in understanding how advertising works, or at the least, our knowledge hasn’t kept pace with the changes in the advertising and media world. If it did, whenever I bring the Wanamaker quote up in a meeting, I wouldn’t see so many heads nod.

After my presentation a number of testy researchers confronted me. “You can’t say things like that,” they implored, “it is too damaging to our field.” I asked them why they thought so many ineffective campaigns are launched. Their response was that it had to do more with agencies having too much clout and protecting their creatives at all costs. But, none of them challenged me on the point that at least half of advertising dollars are still wasted. They just didn’t want researchers to take responsibility.

If the research community truly had a handle on what makes advertising work, we’d see more effective ads. I don’t think this is the researcher’s fault necessarily – advertising is just very challenging to understand. When we survey consumers they tell us it doesn’t affect them. But, when we spend money on ads, sales go up.

A rapidly changing media environment adds another layer of complexity. Researchers had become reasonably adept at predicting how well ads would work in traditional media, at least for products with a clear frame of reference for the consumer. But today, there is so much noise resulting from a proliferation of media, determining the ROI of a campaign is not easy.

Advertising research is a large field, with a rich background of competing theories and black boxes. To me, this implies that communications research cannot be a one-size fits all approach. Each situation needs to be looked at specifically. With the amount of money being spent on advertising (~$500 Billion annually), the potential for waste is very large. We think it is important for researchers to admit that we own part of this problem. Our clients should be able to count on a better than 50/50 chance that their ads will work.

Don’t sequester your marketing budget!

We’ve all been there and seen it. An organization is facing a tough stretch. Maybe the business cycle isn’t in its favor. Maybe a competitor has emerged. Maybe there is a new CEO on board who wants to assert his/her direction on the company and show results quickly.

What is the easiest way to improve profits for the next quarter?  Just cut any investments that aren’t expected to pay off in the short term.  Many times this is research and development, but it is often marketing budgets that first feel the pressure in bad times. Particularly market research. Research projects take time and money, acting on their insights take time and planning, and the payoff from the projects is typically down the road.

There are some great anecdotal stories of companies that, during a rough stretch, invested heavily in marketing and came to dominate an industry.  During WWII, because of wartime rationing, Wrigley’s could not obtain enough raw materials to produce gum. Their production came to a virtual standstill but their marketing lived on. First, they shipped the product they could make to the troops overseas,and made sure domestic customers knew they were doing this. A Wrigley’s ad in this era showed an empty wrapper with the tagline:  Remember this Wrapper.

WrigleysWrapper

When the war ended, Wrigley’s quickly reintroduced their brands, and went on to dominate their categories for decades. It is a brilliant example on how marketing intelligently in a difficult time, and keeping a long term perspective, can pay off.

More recently, before the stock market downturn that occurred just before and after 9/11/2001, there were dozens of PC manufacturers vying for share. Dell had begun to emerge as one of the most successful ones. Dell realized they were in a better position to weather the downturn and saw an opportunity.  They kept their prices low, invested heavily in marketing. Remember this guy?

delldude

During this time, Dell withstood the financial pressures to cut marketing investment. Post recession, while companies were going out of the PC business, or deep-pocketed large firms (IBM) were giving up on it, Dell was positioned as a major player.  Within a couple of years, Dell was the world’s largest PC vendor.  Much led up to this position, but increasing marketing investment in a difficult time had the effect of shaking up the market and leaving fewer players intact at the end. Interestingly, Dell’s current plan to become a private company is being done in large part to escape the short-term pressures so they can make better longer term decisions. They are struggling because being a public company prevents them from long-term thinking.

The Wrigley’s and Dell examples show that keeping the long-term in mind in the midst of short-term pressures can pay off.  But the spending has to be smart.  In many organizations, the long-term takes a back seat.  CEOs are under quarterly pressure from investors. Brand managers are in their jobs for just a few years before moving on, so they are looking for marketing seeds that will sprout quickly. Often it is the slow growing ones that yield the greatest results.


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