Category Archives: Wall Street Journal

London and trend lines

David Hubert visited London and forgot his video camera, so instead took more than 3,000 still photographs and knit them together into this montage. The effect is to recast our vision — people in the Tube, cars on the streets — a bit differently, as if time had both stopped and sped up concurrently. It all reminds us of business trend lines and how few stop to watch them.

You know: The things in retrospect we should have seen coming. The mortgage meltdown killing real estate investment. The rise of video games (up 36% in first half of 2008) threatening the film industry. DVRs (now in 28% of U.S. homes) putting the pause on ads that fund commercial television. Diminishing results in newsprint (heck, even the Wall Street Journal bragged about it).

So many marketers get hooked on what worked yesterday and measure this quarter’s results against a standing-still-in-time yardstick … unaware that bigger changes are afoot. What’s your plan for watching the tide?

The mysterious case of the WSJ with different prices

Pricing is a strange and complex beast. We just got an offer from Wall Street Journal to subscribe for $99.00 — 82.2% off the regular street price of $556.50. Wow! Except we have to wonder, (a) does anyone really pay that inflated $556 price, and (b) if no one does, then doesn’t this entire deal smell like BS?

When marketers charge different amounts for the same thing, it’s called price discrimination. That sounds bad, but it’s really a technical term for a common pricing approach. If you think about it, it makes sense. If you buy an airline ticket “on sale,” someone else paid more for the same type of seat on the same plane. Grocery store coupons are another form of price discrimination — people who aren’t penny pinchers pay $0.99 for a can of beans, while the thrifty who bring in a coupon spend $0.79 for the same can. The supermarket just got two people to pay different amounts.

Price discrimination is common in service industries (such as subscriptions where resale is unlikely) or in markets were customers or the goods themselves have greatly differing value (think luxury hotels, concert seats, airline accommodations). It can even be a form of branding. A Starbucks latte is just burnt coffee and milk.

There are three ways marketers make price discrimination work.

1. First-degree price discrimination, in which each customer pays a different price. Airline tickets come close to this model.

2. Second-degree, in which price varies by quantity sold. Think bulk toilet paper at Costco.

3. Third-degree, where customer segments drive differences.

Ah, that brings us back to The Wall Street Journal. We used to subscribe, for about 3 years, then quit. WSJ wants us back. So they’ve sweetened the offer, like a bad husband courting his spurned spouse with flowers, with a $457 “discount.” Great! But next year, what happens when we enter the Year 2 Customer Model … will prices creep up? Could be.

We shopped around for a year WSJ subscription and found the same $99 offer on the web site. But if you call 1-800-JOURNAL, the friendly sales rep will sell you the same 52 weeks for $249. We’re not sure what re-subscription rates cost. $556.50 perhaps?

The point for marketers is that price strategy is part of the “value perception” of your product. By setting reference prices, and then discounting, you make the deal seem better. By adjusting pricing to different segments, you can pull new accounts in while increasing overall profitability.

Just be sure it’s fair and legal, or you’ll end up in the pages of The Wall Street Journal.

Web location, location, location

Our phones have been ringing lately with calls from brokers of mortgages, windows, cabinets and siding services — all asking how to advertise now that the real estate bubble has burst.

We say go online. A new report predicts that real estate web spending will outpace offline media by 2012. Today, about 65% of real estate advertising is spent in newsprint vs. 35% online; that will soon be a 50-50 split. Google, behavioral targeting, videos in banner, and real estate content verticals should all be in your ad mix.

The web is also a treasure trove for home targeting data. WSJ has published free maps of areas of the U.S. where home mortgage defaults will be highest, when $600 billion in U.S. adjustable rate mortgages reset at much higher rates next year. (Note, even the affluent are going to get squeezed in 2008, and this will set off hot spots of home sales churn.) Companies such as Mediassociates can provide customized analysis of ZIP Codes where home values or market churn are highest (and of course tie it to brilliant media plans). You can also find interesting heat maps at Zillow showing areas of hot home values, such as these pretty pictures of Florida.

The average home price in Florida is $212k, but by zooming in, you’ll find orange and red highlights indicating homes of higher value ranges. Plot it against your own geo target, and even a small business owner can pinpoint home-service marketing at the ZIP Code level. Isn’t it nice to find such sweet tools for free online?

Why it feels so right for Walt to be so wrong

Years ago we read a Request For Quote from a mobile phone company desperately seeking advice on how to stop its customer churn. It faced a horrific, potentially bankrupting problem — the business was losing nearly 25 percent of its customers every year.

Which is why we find Walt Mossberg’s polemic against cell phone carriers so interesting. Today WSJ devoted an entire special section to its technology columnist’s rant against the many sins of big wireless cos. Geez, Walt. You even called them a Soviet Ministry.

Sure, there’s a lot to dislike: Onerous contracts, inflated phone prices, artificial rebates, locked technology, incompatible networks, overage charges, rollover minutes that vaporize, spotty coverage, missing SIM cards, missing software, crappy web interfaces, incomprehensible bills, and inconsistent subscription pricing. In fact, you probably pay a very different rate for your monthly service than other users on your network. Don’t believe us? Get your bill, call your carrier, explain you want to sign up as a new customer — and hold your breath at the price differential.

Alas, there is a reason for all this mess, and it’s you, dear customer. You see, customers are fickle, and a sizable portion of the population skips around from utility to utility every year. Admit it. A sexy new cell phone comes strutting by, and you’re out the door. If this were a human relationship, you’d be a floozy.

Companies that provide commodity services such as cell phones — remember, it’s just a phone call, after all — have to compete with other companies that offer exactly the same service. And they know you’re cheap. Now, put yourself in their shoes. About 20 percent of their customers defect every year. They have to replace them. So big wireless cos do two simple things: Install switching costs to keep old customers from leaving, and offer discounts and incentives to get new customers to sign up.

Rollover minutes? They are a positive switching cost — if you leave, you give up something of apparent value, the 2,000 “free minutes” you’ve accumulated. Termination fee? Now that’s a negative switching cost. If you leave, that will be $299 please. Get it?

We’re sorry to inform you, Walt, and you, U.S. consumer — but everything you hate about cell phone companies comes from your own behavior. In a commodity marketplace where consumers constantly shop around, the big companies will create barriers to try to wall them in. They have to, to recover the billions in investment they make in cell phone towers and untested technologies. If you took out loans to build cell phone towers, you’d be worried, too. Years ago, priests invented marriage contracts to keep us all in the pen. Now, we have cell phone contracts. If we humans all weren’t so disloyal, maybe our communications would work just a little bit better.

Murdoch, smitten with media love, chases NY Times

Rupert, we love you man. First you hang with Yale MBAs like this, and then you buy the Wall Street Journal, causing the media world to shiver and quiver. Now, the world is not enough. You want to take down The New York Times. We hear you’re pointing the new children’s-pint-size edition of WSJ straight at Sulzberger’s throat by building an alternative national paper. You’re increasing WSJ staff in Washington, pumping up political coverage, and–rumor has it–will stop forcing business readers to pay for the online edition. This could sweep readers away from the Times and into WSJ arms. Get more readers, and maybe you can add back that inch you ripped off the paper’s format! Print may survive after all! No wonder she likes you. You’re a tiger!

P.S. You’ll get even more readers if you don’t bury news such as Gore winning the Nobel Peace Prize deep on page 5.