You Can Stimulate Your Way Back to Stability

But you can only invent your way back to prosperity.

“Historically, recessions are a time when new companies are born and great companies separate themselves from the competition,” quipped Thomas Friedman last week in a NY Times editorial.

Amen to that, Tom, who opined further: “We might be able to stimulate our way back to stability, but we can only invent our way back to prosperity. We need everyone at every level to get smarter.”

Getting companies smarter is more easily said than done these days, but it’s happening and not just at Google, Amazon and Facebook.

The Times’ Friedman still believes America, with its unrivaled freedoms, VC industry, research universities and openness to new immigrants has the best assets to be taking advantage of this moment – to “out- innovate our competition.” Unfortunately, most corporate coffers are nailed shut. Easy bank financing is a faded memory and venture capital is going through a seismic contraction.

“Personally I think the funds have gotten too big. Our biggest challenge is to think smaller and make smaller, smarter investments,” noted VC icon, Alan Patricof of Greycroft Partners at a recent venture investing conference in San Francisco.

According to the National Venture Capital Association, investment in venture capital funds shrank to $4.3 billion in the first quarter of 2009, from $7.1 billion in the same quarter of 2008. That’s a whopping 40-percent drop, but some experts think it’s a blessing in disguise, because it lowers the flow of capital into these funds. There won’t be as much excess money chasing bad deals and the VC industry may start seeing double digit returns some day. NVCA says investors are seeing about six-percent annually on their money over five years, down from 48 percent annually at the start of this decade.

With easy bank financing and easy VC money a thing of the past, organizations large and small are going to have to keep operating smarter.

More proof against cutting back on ads in a downturn

Just as cutting back on innovation during tough times comes back to haunt you when better times return, dramatically cutting back on advertising can be severely damaging to your market share and reputation.

Two recent surveys surveys of banking and retail consumers by research firm, Ad-Ology, found advertisers who cut back substantially during the downturn are building negative brand association. For instance:

• 48% of respondents agreed such advertisers “must be struggling”
• 12% of responds agreed “they may not be in business much longer.

Could good ol’ common sense be making a comeback? Read below for two examples.

Pearls of wisdom from the common-sense department

Generic Web site names that are self-explanatory deliver much higher click-through rates than a more abstract or clever name, says a new study by Memorable Domains. The study compares three sites using AdWords pay per click campaign for ads for electric bikes. “ElectricBicycles.co.uk” got 45 percent more clicks than “YourBikes.co.uk” and 105 percent more clicks than “InaHurry.co.uk”

Why? Experts says the self-explanatory site name makes sense and reassures prospects to see search terms reflected in a Web site address.

Tech companies: research says disclose price info if you want to make the sale

Many marketers are reluctant to disclose prices online, but that’s what many prospects want. According to a 2008-09 Marketing Sherpa {www.marketingsherpa.com} survey of 3,108 decision makers. Eighty-nine percent agreed that a technology vendor got the sale or inside track for a sale at their company because they were more open than rivals about their pricing.

There’s never been a better time to re-examine every way you do business, from selling into new markets, supporting existing customers and developing new products and services. But, while your immersed in financial navel-gazing, remember, you’ve can’t neglect to keep the advertising and marketing faucet turned on. And while you’re at it, make sure you tell ‘em exactly what it is you do and how much you charge. It’s just a matter of how (not how much) you choose to invest your marketing dollars in explaining your value proposition.

Turning the spigot on and off as business conditions fluctuate isn’t the answer. Your customers will see through the ruse during good times and forget about you when times get tough. Not only will you fail to separate yourself from the competition, but your competitors will start separating you from your long-time customers.

Millionaire Returns to Prime Time. Investors and Home Buyers Return to Markets

And you just had your budget slashed and headcount trimmed. How to sell beyond the spreadsheet.

It’s just so predictable. We’re on the verge of one of the greatest economic recoveries in a generation and Corporate America is still figuring out how to hunker down and get even leaner and meaner. At HB we’re all for spending wisely, but at some point, you can’t keep asking what’s left of your staff to run on fumes, smoke, mirrors and duct tape.

Sooner or later you’re going to have to start investing in talented people and regaining your market share with some smartly placed ad spending. If not, you’re not only going to be left alone on the launch pad; you’re going to be singed by your competitors’ after-burner fumes. Pink slips continue across all sectors of the workforce, including the media business. Conde Nast shutters Portfolio. More marketing directors report cuts in spending. IDC's marketing barometer study, which looked at b-to-b marketing trends for the first quarter of 2009, noted overall spending was down about 10 percent.

So what. Back in March on this blog, we called the statistical end to the Great Recession (aka “Great Disruption”) of 2008-2009. Since then, positive indicators keeping cropping up like dandelions in the northern climes of this country. You don’t have to look too hard to find them.

The Equity Markets: The S&P 500 is in positive territory for the year – having rebounded more than 34 percent from its 12 year low in March. The Nasdaq Composite Index is up nearly 12 percent for the year.

Housing: Pending sales of previously owned homes rose for a second month in March, while construction spending edged higher. A Federal Reserve survey of loan officers showed demand for prime mortgages rose in the first quarter for the first time since early 2007. The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in March, rose 3.2 percent as first-time buyers waded into the market to take advantage of favorable prices and mortgage rates, and an $8,000 federal tax credit.

Consumer Confidence: For the first time in five years, more Americans than not think the country is “headed in the right direction” (48% to 44%) according to the latest Associated Press/Roper GfK Roper Public Affairs poll released last week.

Popular Culture: The game show “Who Wants to Be a Millionaire” – which got a nostalgic boost from “Slumdog Millionaire’s” dominance of the Oscars this spring, will return to prime time (ABC-TV) for a two-week tournament this summer, with Regis Philbin again as host. (Disclosure: my wife works in production for this show). Millionaire, which has been quietly chuggling along nicely in syndication for years, since being dropped from prime time in 2001 (with “only” 10 million viewers). At its height in the late 1990s, it had 30 million viewers. Wealth and life-altering hope is back.

Macro Economy: The U.S. economy is on track for a recovery later this year, but the pickup is likely to be sluggish and the jobless rate is likely to rise further, Federal Reserve Chairman Ben Bernanke said Tuesday. "We expect economic activity to bottom out, then to turn up later this year," he said in testimony prepared for delivery to the congressional Joint Economic Committee. Bernanke said the expected recovery will only gradually gain steam and that the economy would grow below its longer-run potential for a while. "Businesses are likely to be cautious about hiring, implying that that the jobless rate could remain high for a time, even after economic growth resumes," he said. Go back and review your history books. That’s a green light if we’ve ever seen one! He didn’t even mention that borrowing rates, oil prices and inflation rates are at the lowest levels in a generation.

What Online Publishers Can Learn From Print Sales

Since we’re sometimes accused of being too hard on print media, we’d like to point out a smart pro-print piece in Online Publishing Insider blog the other day by Kevin Mannion of Sky Road Consulting. Again, we don’t believe in bashing print or any other media. We just don’t believe the days of a single media dominating the landscape are likely to return.

Here are some excerpts of Mannnion’s commentary: “As a rule, digital media is numbers and results-oriented, while print has traditionally relied on a more conceptual sell. Online selling is geared to the spreadsheet; print to the PowerPoint presentation. Print selling emphasizes market knowledge, educating clients --especially on the marketer side -- on buying dynamics, and telling a compelling sales story that shows clients how they will succeed. Digital selling is fast, RFP-oriented, emphasizing media technology knowledge and campaign metric optimization.

Successful digital selling requires going beyond the spreadsheet, while selling print ads needs to be more metrics-oriented than ever before. But the best online sales teams have learned from the legacy of print selling. They don't rely on hits and clicks and answering RFPs with agency spreadsheets neatly filled in with the right numbers. They know how to move beyond the RFP to market creation. And most important, they know how to sell their audience engagement story -- and sell it as a highly compelling advertiser/audience engagement story.Simple truth: Advertisers care about how you can help them see more business through their sales funnel.”

Sure, we could spend the rest of this space hedging our optimism with talk about “bear market rallies”, less-tha-stellar bank stress test results and fears of inflation. But if you want your organization to be a leader rather than a follower, you’ve got to throw out your lifelines, commit to business as usual and start gobbling up market share that your rivals are leaving on the table. If you don’t someone else will.

Final answer!

Recession Petering Out? (Part 2)

Readers express cautious optimism laden with caveats.


Last week’s post: “Recession Running Out of Steam?” seemed to hit a nerve with many of you. While no one actually called us crazy, feedback fell generally fell between “not getting worse” and “cautious optimism with lots of caveats.” Mike, who runs a small regional law firm in the Southeast, was pretty representative of our readers:

“Hank, I like your optimism. In certain sectors and regions, the recession/depression will bottom by the end of this year. In others, like credit card debt, commercial real estate and commercial debt and vacation home and high end housing ($500K+) (no realistic financing), I think we are a long way from bottom.

Much depends on how the world reacts to whatever happens with GM, some recovery in international activity (China, Panama Canal, etc.) and some private money coming back into the credit markets. The banks will not get anybody out of this mess and they never have been a part of any solution.”

Whether or not you really do feel more optimistic right now, it’s important continue projecting an upbeat attitude within your organization and when dealing with clients, customers and investors. Here’s why. Winners like to associate with winners. People naturally gravitate to companies and leaders who seem to have things going in the right direction and they’re more likely to stay in contact with you and make referrals if they think there’s going to be a positive “rub off” effect by associating with you.

Here’s are some more upbeat factoids you can use in your sales scripts and Powerpoint presentations:
• The percentage of Americans who think this country is headed in the right direction just hit 39% up from 15% when Obama took office (Source: NYT/CBS News poll).

• 20% of Americans now think the economy is getting better -- up from 7% who thought so in mid January (Source: NYT/CBS News poll).

• The equity markets finished five consecutive weeks of gains. The 25% surge in the S&P 500, for instance, was its best performance over that span since 1938.

• The Index of Volatility (VIX) on the Chicago Options Exchange reached to its lowest close since late September, just ahead of Wall Street's meltdown. That means financial markets are stabilizing and hopefully moving back to fundamentals over fear.

• We’re starting to see signs of life in the credit markets: The 30-year fixed mortgage dropped to 4.61% -- believed to be the lowest level on record.

• Thomson Reuters said businesses with better credit ratings issued $200 billion of debt in the first quarter of 2009, up from $188 last year.

• The London Interbank Offer Rate (LIBOR), which tracks short-term/overnight borrowing costs between banks, fell to 1.16%, down from 1.27% last month and from 4.8% a year ago. The next to nothing rates banks are charging are among the lowest levels ever recorded.

• The U.S. Federal Reserve said consumer borrowing on credit cards dropped last month at an annualized rate of $7.8 billion (9.7%), the sharpest drop since the Fed began keeping records in 1968.

How does this help me?

On one hand, high levels of consumer saving, means folks are still pretty fiscally constipated. They're reluctant to open their wallets to increase spending as employers cut millions of jobs and and reduce pay and benefits for those still hanging on to their jobs. But this reluctance to spend also means consumers are saving more than they have in decades. That’s not great if you’re in retail and consumer staples, but it’s actually a good sign if you market financial services, electronics, autos, high-end appliances, professional services and other goods and services with a long term sales cycle or purchase consideration phase. In other words, advertising’s going to matter more than it has in a long time as both an awareness builder and decision influencer.

Both consumers and businesses are doing more homework than ever before they commit to a purchase decision. You better be out there – and you better be out there with a compelling story to tell.

How top agencies are helping clients tell stories

“We live in a time of extraordinary change—change that will be amplified and accelerated by the recession, ushering in perhaps a new age of business transformation,” said John Favalo, managing partner-group B2B at Eric Mower & Associates, the #2 midsize agency in 2008 according to BtoB magazine’s Top Agency rankings

“Business models, marketing and communications will transform, and successful agencies will be instrumental in helping clients through the dramatic changes.” Eric Mower also had its best year on record last year, increasing its total agency revenue by 30% and winning major new clients such as GE Energy.

Favalo said one of the most important things an agency can do to succeed during these challenging times is deliver relevant, personal solutions to clients, based on their unique needs. “We make business-to-business person-to-person,” he said. For example, the agency developed an online application called “Solutions Advisor” for Motorola's Enterprise Mobility unit. The tool serves up custom solutions for clients and prospects based on their information needs.

Agencies of all sizes say they are expanding their social media and video practices to keep up with client demand.

“Our work in social media is increasingly essential to the needs of our clients,” said Tom Stein, president-CEO of Stein Rogan+Partners, winner of BoB’s small the small agency category. “We see some very interesting vectors between search marketing, social media and more traditional media such as print, broadcast and online.”

For example, Stein Rogan created a social community of school district administrators for client SchoolWires, a provider of communications technology. Called “Share,” it enables users to share templates, forms, reviews and other user-generated content.

So whether or not you’re convinced the recession has hit bottom, it’s time to start behaving as though the recovery has started. Now is the time to crank up your marketing, R&D and staffing so you’re locked and loaded when two years of pent up spending and decision-making finally lets loose. It’s going to be a time of dramatic change with unprecedented opportunities for those who have been making – not struggling to follow -- the new rules of the marketplace.