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A Confidence Deficit

A lack of confidence in the economy and institutions is a recurring theme throughout most recessions. This one is no different. However, the depth and scope of the drop during this recession may be greater and deeper than most of the previous downturns. Check out these recent survey findings:

  • 57.6% of Americans say they don’t have a voice anymore and too much is being dictated out of Washington, according to the April American PulseTM (N=4023). On the other hand, a quarter of participants (27.2%) say their voice is being heard, while 15.1% aren’t sure.
  • Gallup’s daily tracking surveys from April 6-19, show that one of the casualties of the ongoing financial crisis is the amount of confidence Americans have in U.S. banks. With only 5% expressing "a great deal" of confidence and 13% "quite a lot" of confidence, Americans' confidence in banking has now fallen to its lowest level since Gallup began asking about the subject in April 1979.
  • According to The Conference Board, Consumer Confidence was relatively unchanged in March, after reaching an all-time low in February (Index began in 1967).
  • Workers who say they are very confident about having enough money for a comfortable retirement this year hit the lowest level in 2009 (13 percent) since the EBRI Retirement Confidence Survey started asking the question in 1993, continuing a two-year decline. Retirees also posted a new low in confidence about having a financially secure retirement, with only 20 percent now saying they are very confident (down from 41 percent in 2007).
  • Earlier this week, Gallup released data showing that most Americans still view big government as a more serious threat to the nation than big business or big labor. Gallup has asked the question periodically since 1965 and government has always been seen as the biggest threat. In addition, Rasmussen Reports released data this week showing that 70% of U.S. voters believe that big business and big government generally work together against the interests of investors and consumers. Just 14% disagree with the assessment, and 17% are not sure.

Faith and confidence in businesses and institutions is low. Very low.

It has never been more important to make sure you brand is delivering on your promises and maintaining the confidence of your customers. There is just too much mistrust in the market right now.

Providing great service, being authentic, talking with and not to your customers and keeping your promise is absolutely vital.

Measuring and monitoring your customers attitudes about your products and services should be part of everyone’s retention and survival program.

The economy is beginning to improve and keeping a focus on these items will not only instill confidence in your customers, it will keep your brand alive during the recession and into the recovery.

What Marketers Need To Buy Before the Economy Improves

Earlier this month, Forbes put out a list of ten things to buy right now (assuming you have the cash) before the economy improves. Deals can be had for most of these items and the deals will probably evaporate later in the year. Here’s the Forbes list:

  1. Car
  2. A Vacation
  3. High-Dividend Stocks
  4. Laptop
  5. Television
  6. Toys
  7. Diamonds
  8. Women’s Clothing
  9. Furniture
  10. House

From a marketing standpoint, what items should we be focusing on before the economy improves? Granted, all of these items are dependent on the health of your organization and company budgets. If you are in the right position, here are a few things to think about.

First, advertising deals are available. Those with the budget should lock in avails now. New or renegotiated office space should be on the list since prices are depressed and availability is plentiful. Plus, creating a workspace that reflects your brand, your organization and who you want to be when the economy turns is now within reach.

Technology should also be on the list. Typically, tech leads early in most recoveries and the deals will dissipate quickly. Right now deals can be had plus you have the opportunity to get a leg up on the competition by improving your current processes.

Buy the competition. Oracle snapped up Sun, keeping them from IBM. Oracle will be creating efficiencies at Sun while the economy is improving which should be very helpful to their balance sheet. Why not take a look at buying up the competition? If they are not as healthy, this might be the time to talk.

Go see your customers. Travel is cheap. Why not go now when others are avoiding travel and when the prices are reasonable?

Of all of these, the last one is the most important. Go talk with your clients and see where they are headed and see how you can be part of their growth story. Remember, their recovery is your recovery.

How Well Do You Know Your Customers?

Knowing and understanding your customer is important to any organization. It does not matter what industry or audience, understanding the wants and needs of your customer is absolutely critical.

One of the techniques I like to use when conducting voice of the customer type surveys is to test the questions on the requesting senior managers and management team.

Why you ask?

Most management teams think they have a strong understanding of their customers. By having the management team answer the questions how they think their customers will answer, I can compare how well they really know their customers.

Often the results don’t match and it is a real eye-opener to senior managers and line personnel. Plus, it is a great device to frame the results for your audience.

Coupon Usage Is Attitudinal, Except During A Recession

In the late 90’s, I spent some time in marketing with shared mailer Advo. Now part of Valassis, Advo was the largest mailer in the country and the largest customer of the USPS. Each week, those shared mail packages containing coupons and inserts reached most of the households in the US.

One objection our sales team often faced was the perception that coupon usage was demographic and primarily used by lower income groups. To combat that perception, we commissioned research to show that all income groups used coupons. Usage was attitudinal and not necessarily based on income. As you might guess, there are a lot of wealthy Americans who use coupons. The research confirmed our message and was part of many presentations.

In the current economic climate, I don’t think anyone would be surprised to see increases in coupon usage among a lot of different groups and markets. The amount of increases will vary from market to market. According to MRI, here are the top 10 DMA’s who used cents-off coupons in the last year:

  1. Harrisburg/ Lancaster/ Lebanon/ York, Pa.
  2. Pittsburgh
  3. Rochester, N.Y.
  4. Philadelphia
  5. Albany/ Schenectady/ Troy, N.Y.
  6. Syracuse, N.Y.
  7. Buffalo, N.Y.
  8. Hartford & New Haven, Conn.
  9. Minneapolis/ St. Paul
  10. Wilkes Barre-Scranton, Pa.

Source: MRI's Market-by-Market study, www.mediamark.com

Needless to say, one common element in each of these markets is job losses, particularly in the manufacturing sector. During difficult economic times, coupon usage and spending at discounters definitely increases, but this will vary from market to market. It is no surprise that these markets would be leading the pack.

It will be interesting to see if usage will hold up as the economy improves. Will this downturn be deep enough to have a lasting effect on usage and on attitudes? I’m guessing that a lot of people at Valassis are hoping that it will.

eBay Comes Full Circle

In 2003, I put together an analysis of the impact of eBay and Craigslist on the newspaper industry. In short, I concluded that the private party business for newspapers was about to go over the cliff. Not quite the answer the requesting audience had expected.

This morning’s news that eBay has launched an online automobile selling site closes the loop. eBay Motors has developed what might be called Craigslist for Cars, a local classified ad section for individual sellers.

The site is intended to connect buyers and sellers within a 100-mile radius of their local markets.

Losing private party auto liner ads will negatively impact the print ad revenues from dealers. The readership of those auto classified pages with their large dealer display ads is bolstered by the liner ads placed by private parties. As the liner business slips away, so does the readership and the response advertisers can expect from their ads.

It is not a surprise that eBay would finally take a shot at the private party liner ads. I’m just wondering what took so long.

The Perils of a Celebrity Spokesperson

Entrepreneur Magazine offers up a listing of tips to smaller businesses and startups interested in employing a celebrity spokesperson. The article’s advice for companies looking to boost their visibility offers more than a dozen tips on finding the right celebrity endorsement. Here are some of the more important takeaways:

  • Define expectations, budget and time frame
  • Be sure values, ethics and personalities jibe
  • Don't settle for just any celebrity
  • Evaluate with your head, not your heart
  • When shooting for the stars, aim high
  • For businesses whose market is strictly local, think local celebrity
  • Look for someone with charisma
  • Find someone willing to go beyond the call of duty because he or she has genuine interest in your product/brand
  • Weigh whether to hire an outside firm to help in the search
  • Know the risks-—and have an exit strategy

That last item is the most important. While the article spends a lot of time talking about the positive aspects of a celebrity spokesperson, it also brings a lot of risk.

When you employ a spokesperson, you are aligning your brand and organization with the face of a single individual. This can be very successful for all types of organizations. Wendy’s had a great run with Dave Thomas, Priceline has done very well with William Shatner and George Foreman made the Foreman Grill a success.

However, trouble for a spokesperson generally means trouble for the business or brand. Despite the familiarity and appeal of a celebrity (often calculated by us researchers as a Q-Score), their troubles are now your troubles.

Here’s a great example. Many years ago, a mid-sized southern regional bank tried to position themselves as friendly and caring about their customers. The campaign included the tag line “Where banking is still a people business.” It was great campaign that made the CEO the face of the organization. The CEO was the epitome of a bank CEO, tall, gray hair, and always wearing a blue suit. The CEO was included in local commercials dismissing the importance of technology and automation, always closing with the tag, “Banking is a people business!”

The organization spent a lot on the campaign and on customer service and measuring customer satisfaction. The entire organization was focused on customer service and customer surveys.

Just one problem. Profitability. The organization did a great job of focusing on the customer and developing the campaign, but they also made a lot of bad loans and lost sight of risk and profitability.

As you might guess, the CEO was removed and the spokesperson of the campaign disappeared. All of the investments that made the CEO the face of an organization focused on satisfying the customer was history, and so was the successful campaign.

Having a celebrity spokesperson ties your brand to that person. Everyone has ups and downs and their success or failure now become your worry. It can make a small company, just ask George Foreman, or it can be a complete headache. Whatever you do, it should never be done lightly and without some thought. I also would suggest not using a CEO. Being able to distance yourself from a celebrity is much easier than distancing yourself from your CEO or former CEO.

Focus On Value And The Influencers Will Follow

Ed Keller, who co-authored the book THE INFLUENTIALS, answered some of the recent criticism of the concepts popularized by his book on Media Post’s Marketing Daily today. Based on decades of research through the Roper Polls, Keller’s book and his work at RoperASW, along with Malcolm Gladwell’s THE TIPPING POINT, popularized the concept of a small number of Americans (say 10%) determining how the rest consume and live by chatting about their likes and dislikes.

The concept of influencers was not a new one at the time Keller’s book was published. A hundred years after John Stuart Mill penned these words on opinion leaders, research began to empirically prove the concept:

The mass do not now take their opinions from dignitaries in Church or State, from ostensible leaders, or from books. Their thinking is done for them by men much like themselves, addressing or speaking in the name, on the spur of the moment...

-John Stuart Mill, ON LIBERTY

In short, Keller tries to refute Guy Kawasaki’s October blog post that declared: "Reliance on influentials is flawed because the Internet has flattened and democratized information..." maintaining that "it's better to have an army of committed nobodies than a few drive-by somebodies."

I think Kawasaki, like Mill, is correct. Yes, I just paired Kawasaki and John Stuart Mill. Everyone is influenced by their 10%, which differs from group to group, a point Keller acknowledges. As Kawasaki points out, social media has flattened how information flows. I think using a traditional top down approach is becoming less effective and I don’t think Keller would dispute that statement.

To me, it is pretty simple. Consumers respond to a quality product, a compelling story and are apt to tell others about their positive experience.

It always comes back to the perceived value of the product and how you communicate that value. The online tools available to spread that message, both positively and negatively, are now flatter and faster than ever before and the access to people and influences has never been greater.

As David Oligivy pointed out many years ago,

The consumer isn't a moron; she is your wife. You insult her intelligence if you assume that a mere slogan and a few vapid adjectives will persuade her to buy anything. She wants all the information you can give her.

It does not matter how many bloggers, followers, friends, media personalities, or perceived influencers you have promoting your product if there is no value. Creating a needed product or service, testing it to ensure it fulfills those needs, and communicating value are the three keys to success that everyone should focus on despite the available technologies to communicate the message.

Fixing Detroit (The Big 3’s Real Problem)

Professor Byron Sharp of the University of South Australia, writing in this month’s Market Research Magazine from the AMA, makes an excellent point about the plight of the Big 3 us automakers.

In the US, customer loyalty rates for all manufactures including the Big 3 is in the 40% to 60% range. For the major domestic and foreign automakers, loyalty rates have remained pretty constant over the past few years at about 50%.

As Professor Sharp points out, the real problem for the Big 3 is acquisition, not loyalty. The lack of acquisition among new car buyers is eroding the market share of the domestic producers. For new auto buyers, the Big 3 are increasingly not considered an option and this is where Toyota, Honda and Nissan are stealing market share.

Customer loyalty and retention is important for all organizations and Targoz Strategic Marketing is skilled at helping organizations understand why customers are loyal and who is at risk.

Truly understanding why customers are loyal to your product or service is exceptionally important to maintaining a healthy brand and organization.

However, loyalty and retention is not a substitute for new business sales. Customer loyalty and retention only brings stability to organizations and creates a foundation for growth. Customer acquisition is the real key to brand growth and this is where Detroit needs to focus its energies.

Partnering for Life

Natalie Petouhoff, Ph.D has put together a report for Forrester detailing how organizations can improve customer experiences. An executive summary of Petouhoff's report is available at www.forrester.com/1to1cs

The report advocates repositioning the contact center as a strategic C-level business partner and offers six steps to improve the customer experience.

Step 1: Rethink service

Step 2: Define your customer strategy

Step 3: Use customer experience metrics

Step 4: Conduct a customer service gap analysis

Step 5: Implement customer service best practices

Step 6: Define who owns the customer experience

All of these steps are necessary for creating a successful customer experience. For many organizations, the contact center is regrettably viewed as a cost center where technology drives the center’s strategy.

It is imperative for any organization to truly understand the needs of the customer, create a customer driven strategy that drives the technology and satisfies the needs and wants of the customer.

However, assigning ownership is probably the most important and critical step. Often, the customer experience is “owned” by many groups within an organization. Without assigned ownership, contact centers are often caught between the competing interests of sales, marketing or customer service. In some cases, the lack of ownership leads to complete indifference.

In either scenario, the customer loses and you will drive down your customer lifetime value and reduce your bottom line.

And there isn't a company in this economy that can afford to do that.

Mine, Turning Pages Online?

Having conducted a lot of focus groups for print products, I can tell you that the desire for customized content has been a recurring theme from readers for many years. Time, Inc is planning to test a new product that provides customized content. The magazine called "Mine" combines reader-selected sections from eight publications. The magazine is free but the print edition is limited to the first 31,000 respondents, while an online version is available for another 200,000.

Online subscribers will get digital editions that look just like the printed version, but in a special format that allows virtual page turns with clicks. Editors will pre-select the stories that make it into every biweekly issue, and readers won't have the option of changing the picks from issue to issue. There are 56 editorial combinations.

This summer, MediaNews Group, publisher of The Denver Post, the San Jose (Calif.) Mercury News and other newspapers, plans to experiment with its own reader-created publication, likely at its Daily News in Los Angeles.

Readers will be allowed to choose specific stories, or those by author, keyword or subject. The customized publication will be laid out like a newspaper and sent with targeted advertisements as a digital "PDF" file for printing at home or viewing on computers or mobile phones.

I’m a little skeptical of both these ventures for one reason; they are both trying to digitally replicate a print experience. I applaud the efforts to try something new, but the online experience is different and distinct from print. Users navigate online products very differently from print and have very different expectations for each channel.

I would love to see both provide customized content online that is a true online experience. I think this would be a better test of how to purpose content by channel. Logistically, it would be a headache. However in the end, I think you would have a cleaner and more valuable test.

Correlation vs. Causation

Okay, I have been traveling the past week and my email is full of Freakonomics moments. In the event you have not read the book, Freakonomics does a great job of illustrating the differences between coincidence and causality. In short, coincidence does not mean causality.

Our first moment is this interesting little story. Several blogs have linked to a story citing research from Professor Martin Schmeldon of Harvard Business School that suggests excessive Twitter use may have caused the current economic downturn. Here’s the fun chart included in the story.

Yes, this is a joke and yes, some are taking the story seriously. For the record, there does not appear to be a Professor Martin Schmeldon at Harvard.

However, it is a funny illustration of the folly of confusing correlation and causation and should be required reading for both journalists and marketers.

For those looking for a 10 second explanation on causality, here’s a great illustration. Enjoy!

For the marketers out there, here’s a little deeper explanation of what to look for when presented data purporting to illustrate a point like our Twitter story above.

First, these reports and analysis are based on observational studies - also called prospective or cohort studies. In these studies, researchers look for disparities between large populations of people with different attributes. If disparities are found to exist between the groups, then researchers try to make the case that the differences (i.e. diet, lifestyle, advertising, etc.) is the driving force behind the disparity.

The observational study demonstrates a correlation. But at this stage that would be just a hypothesis - not a fact. So how do you test your hypothesis?

For most applications, regression is the next step. Drug companies and medical researchers can conduct clinic trials, but for marketers, regression is usually the next step. In most cases, correlation and regression should typically be performed together.

Correlation analysis measures the degree of association between two sets of quantitative data. For example, how are sales of product A correlated with sales of product B? Correlation is usually followed by regression analysis.

Regression is a statistical technique for the modeling and analysis of numerical data consisting of dependent variables and of one or more independent variables. Basically, regression analysis is used to explain the variation in one variable (dependent variable) based on the variation in one or more other variables (called independent variables).

The goal of the analysis is to ascertain the causal effect of one variable upon another—the effect of a price increase upon demand, for example, or the effect of changes in the money supply upon the inflation rate. For marketers, regression is typically associated with questions of sales forecasting based on independent variables.

Regression analysis is valuable tool but one that is often misused. It takes considerably more skill to critique a model than to fit a model. But in the right hands, it is an invaluable tool that can help organizations model future sales, predict changes to sales and revenue based on actions by competitors, etc.

Data needs interpretation, to be understood and shaped to use in actionable (and profitable) ways. It is imperative that marketers (who are not in research) ask questions about the inputs used for the analysis. It is not necessary to understand the statistics used by the analyst or the consultant, but understanding the ingredients used by the analyst is very important.

The Twitter Rule

According to the TNS Compete and the Consumer Electronics Association joint study, older age segments 50+ use many technologies at or near comparable rates as younger age segments.

Older Americans, however, rely more heavily on in-person information sources for purchasing electronics products and sixty-three percent spoke with a sales associate in-person when researching their consumer electronics purchase, compared to 47 percent of those aged 18-49.

Sixty percent of consumers aged 50 and older also indicated that a product having too many features was a main reason for being frustrated with technology, compared to 39 percent of consumers aged 18-49.

A couple of key takeaways.

Regardless of the segment or age cohort, products have to be intuitive, seamlessly integrated, and easy to explain. The Tivo remote will go down as one of the best examples of an easy to use product that could be easily explained by a Best Buy or Circuit City rep. It does not matter that the product is superior in terms of benefits and technology if the average consumer has to invest significant time into understanding how to use it.

This applies to any product, not just technology. Insurance products are notoriously difficult to understand and most financial products look like the Chief Legal Counsel wrote the marketing copy.

One side effect of this economic downturn will be a focus on ease of use and an easily understood value proposition. Smart companies and marketers will focus on understanding what customers need, creating brands and products that fulfill real needs, are easy to use, and can be easily explained.

In a sense, you could call it the Twitter rule. You need to be able explain the value of your products or how to use your products in 140 characters or less. Twitter is easy to use and forces users to really think about what they are saying. As a marketer, I can’t think of a better method to test understanding of a product and the value it provides customers.

If you can tweet it, you can probably sell it.

Relationships Matter

Regardless of size, advisory boards can help businesses learn more about their organizations, their products, and their sales staff. In downturns, having a relationship with key customers and learning what they need is key.

Advisory boards also help companies with small marketing and research budgets stay current with trends. It also gives firms an outside sounding board to test new products or initiatives. Customers, vendors, and service providers are all potential advisers.

Having created several advisory boards, I can tell you that it is quite easy to do and requires little expense.

If done correctly, the insights, reward and feedback can be invaluable.

Notice a Pattern?

According to MRI, here are the top 10 DMAs for adults who spent more than $150 on eyeglasses in the past 12 months:

  1. Ft. Smith/ Fayetteville/ Springdale/ Rodgers, Ark.
  2. Waco/ Temple/ Bryan, Ala.
  3. Huntsville/ Decatur (Florence), Ala.
  4. Minneapolis/ St. Paul
  5. Shreveport, La.
  6. Cedar Rapids/ Waterloo/ Iowa City & Dubuque, Iowa
  7. Knoxville, Tenn.
  8. Louisville, Ky.
  9. Tri-Cities, Tenn./ Va.
  10. Birmingham (Anniston and Tuscaloosa), Ala.

Source: MRI's Market-by-Market study

Notice any patterns in these cities?

Here’s a hint:

  1. University of Arkansas
  2. Baylor/Texas AM
  3. University of Alabama Huntsville/Alabama AM/Embry Riddle
  4. University of Minnesota
  5. Louisiana Tech/Grambling
  6. University of Iowa
  7. University of Tennessee
  8. University of Louisville
  9. East Tennessee State University/King College
  10. University of Alabama/University of Alabama Birmingham

Just a guess, but I would think per capita eyeglass purchases would be higher in towns close to a major university. The key to good research is to look beyond the bar charts and the top ten list. Understanding why these are top DMA’s is the real value of research.


While most non-profits are having a tough time right now, some are weathering the storm quite well. Non-profits such as Second Harvest Food Bank here in Nashville are doing a lot of creative things to maintain steady revenues.

One great idea, is using SMS to help grow contributions. The American Society for the Prevention of Cruelty to Animals has been successful at converting standard-alert subscribers to donors using SMS.

The ASPCA offers free cat and dog tips to mobile users by sending a text message with keywords CAT or DOG to short code 27722. At the bottom of the ASPCA’s SMS alerts, it asks subscribers to reply with the keyword GIVE to make a $5 donation.

Here’s the tag:

Reply GIVE to donate $5 to animals in need! Text CAT to 27722. Text GIVE to 27722

On average, 5 percent of ASPCA’s subscribers respond per call-to-action, with 86 percent completing the donation.

In early 2008, mGive launched mobile giving nationwide, giving nonprofits the ability to use the mobile channel for purposes other than messaging. This is a great tool if used correctly and it should be part of every charitable organization’s toolkit.

Earned Media In The Blink of An Eye

'High Life': All Miller needed to say.

Sales of Miller High Life popped 8.6% during the week after the Super Bowl vs. the same period a year earlier, and they were up nearly 5% during the week before the game, according to ACNielsen.

Miller announced plans to air the ads -- and placed a bunch of them online -- on Jan. 20. Despite NBC’s directive to its owned and operated stations not to run them, the spots and/or the hubbub around the spots worked. The one-second spot ran in more than 100 markets nationwide.

Great formula:

Leverage old media for earned media program + smart online strategy=8.6% growth.

One In Four Have It Right

According to a survey conducted by the Association of National Advertisers, 77% of marketers plan to reduce their advertising campaigns' media budgets.

Typically, advertising lags six to twelve months behind the economy. So, most advertising growth should occur in 2010. As the economy begins to improve late in the year, smart advertisers (i.e. the 23% not cutting budgets) will have plans and budgets in place to take advantage of lower rates, available inventory and opportunities to grab share.

It also looks like agencies will need to cut expenses to hold on to accounts. Check out these other findings:

  • 72% of marketers plan to reduce advertising-campaign production budgets
  • 68% plan to "challenge" agencies to reduce internal expenses and/or identify cost reductions
  • 48% are looking at reducing agency compensation

Paradox of Choices (The State of Publishing)

In his 2004 book The Paradox of Choice, Barry Schwartz argues that eliminating consumer choice can greatly reduce anxiety for shoppers. In short, he argues that there is a cost to an overabundance of choice. Consumers decide to not decide and do not put the effort into making a decision.

Last week, I witnessed a perfect illustration of this point. I accompanied three authors touring ten different metropolitan book stores to sign copies of their books. The number of books authored by the three ranged from three to over twenty.

It was amusing to watch all three authors try to find their books in the store. If the authors who know the product and the industry have to think and hunt for their books, how are readers supposed to find them? The sheer volume of choices and the number of titles available is mind boggling when you step back and take clear view of how books are merchandised and displayed.

Grocery store sets or layouts are somewhat consistent from store to store and chain to chain, but the array of choices and differences from book store to book store forces readers to make a lot of decisions.

Right now, the book industry is in a state of change and a lot of people of trying to understand their new reality. I think publishers will find success in decreasing complexity, costs, and causing readers/customers “mental fatigue.” Better promotion, merchandising and making it easier for readers to find a good read will make all the difference in the world.

The Song Remains The Same

It now appears that two thirds of the stimulus bill will not impact the economy for two to three years. This is eerily reminiscent of Jimmy Carter’s stimulus bill. The maximum impact of Carter’s program hit three years into the administration. By that time, inflation and high interest rates were a larger concern than the unemployment rates that initially spurred the program.

Granted, a third of the current program will quickly aid the economy and we will begin to see growth later this year. Yes, the employment situation is dire and hopefully employment losses are at the bottom or very close to it. The real concern is what the impact of this spending will have on the economy in 12 to 18 months. Commodity prices went through the roof during most of 2009. CPG marketers looked for manufacturing and supply chain efficiencies to help combat the increases and we incurred significant amounts of package shrinkage (i.e. Shrinking the size of the package while maintaining prices).

Having a strong grasp of brand value, brand equity, and tying those values to pricing models will be absolutely critical for CPG marketers in the next few years. Increases in commodity prices will be back with a vengeance in a few years. Putting processes in place now to address these increases will pay huge dividends next year.

The Real Potential Costs of Social Networking

San Francisco-based consultancy SALT Branding has released "Trends in Branding 2009" and cautions brands that "befriending" customers on social networks like Twitter and Facebook "has a price." That price, according to SALT includes providing consumers with financial discounts, inside information, sneak previews, competitions or incentives. The question brands need to ask about that price, SALT declares, is: "How high is it?"

While there is a short term cost that needs to be factored into the equation, it is important to measure the lifetime value of the relationship discounting potential expenses. The potential discounting involved in social launches are relatively modest compared with the potential lifetime value of the relationship.

Plus, there is an opportunity to acquire new customers and the acquisition costs for these programs are fairly modest vis-à-vis traditional programs.

The real danger or potential cost is launching online initiatives that don’t fit into the culture of the brand or the channel. Simply having a Facebook page promoting a product and discounts only indicates a lack of understanding of social media. This will simply damage the value of a brand and create a negative image of the company.

As with most new initiatives, it pays to do a lot of homework. Companies must really understand the audience, channel and their product to ensure that new social initiatives engages customers and does not detract from the brand. Being perceived as out of touch with the audience and the channel is the real cost to worry about.