Category Archives: economy

The faltering marriage of hope and innovation


So our brother is getting hitched next year and as we teased his fiancée over Thanksgiving dinner about vegetarianism, Walmart and energy consumption (let’s just say she believes in change), we thought of hope. You know, that crazy belief that if you do something different in the world, something good will follow.

We bring this up because the dour economic news is starting to choke hope in business. Inside marketing and planning circles hope is known as innovation, and the leaders of innovation are starting to falter.

Cutting-edge innovator Tesla, the upstart producer of high-end electric cars, has tapped most of its $150 million of investment and been forced to delay its second sedan model until 2011.

Internet innovator Twitter
, the web communication service that proved invaluable during last week’s Mumbai attacks, still attracts $500 million buyout offers but makes some wonder if it can survive the recession while still in a “pre-revenue” stage.

And old-school innovator GE, the largest producer of wind turbines in the U.S. and one of our best hopes that humanity will figure out how to live on alternative energy sources and clean water, has had its stock hammered down to bargain-basement levels.

It’s worrisome because we don’t want to see electric cars, open communications or alternative energy die. Failing to innovate due to a bad economy is a good way to miss future growth. It doesn’t have to cost a lot; PNC Bank is grabbing market share among twentysomethings with a web site that rebrands stodgy banking to a hip “virtual wallet” — complete with a slick interface that forecasts how much money you’ll have next week after your paycheck clears. A little clever code, and PNC is putting on 4,000 new customers a month.

Sure, innovation requires risk. Johann Gutenberg went bankrupt in 1455 after printing 200 bibles … but within 50 years a half-million books and intellectual revolution had followed. Starting something new is like getting married. You don’t know where the road will lead, and you probably can’t afford it, but the act of faith gives birth to the future.

Photo by Rodney Smith via Maximo.

Recession is here. Good-bye, Zima.


Today MillerCoors announced it was ending production of the clear malt beverage Zima. We have no data to prove it but this seems one more sign of the economic sorting mechanism removing superfluous products during a recession.

Zima launched in 1993 after test marketing in Nashville and two other cities, and sales peaked a year later with 1.2 million barrels sold. It broke ground as a unique malt beverage at a time when most wine coolers still contained wine (a footnote, wine coolers soon also switched to malt ingredients after an increase in U.S. excise tax on wine in the early 1990s squeezed margins) and fared better among women than men.

Seems as times darken, U.S. consumers turn traditional in their drinking. In early 2007 U.S. wine sales were expected to top the world by 2010; Americans have slowed that growth a bit as they adjust to higher bottle prices resulting from the weak dollar, but U.S. winemakers say the overall growth trend continues. No more fancy clear bottles, please; just pour it like grandma did in the glass. Via Sara_MC.

Recession is here. So why are sex sales up?


Call it a new form of cocooning. With financial markets in the tank, most retailers face a pinch this holiday season — but sellers of intimate-related goods are finding, well, a good time.

In New Zealand, Wendy Lee, director of the sex gear retail chain Dvice, says sales are up about 20% this year with consumers moving to more expensive, big-ticket items (whatever those might be). In England, sales of Durex condoms are up 22%, making us wonder whether Brits are cuddling in fear or just trying to avoid the high cost of children. And sales of lacy things remain strong in the U.S., with a Forbes analyst noting Victoria’s Secret should be immune to the spending declines afflicting other clothing retailers. Lace, it seems, does well no matter how cold the weather.

The only dark cloud on the intimacy front is Hugh Hefner may be laying off bunnies at the Playboy mansion. The UK Telegraph wrote, “Hefner has been advised to cut back on staff … to cope during the global economic turmoil.” Apparently when faced with reality, consumers want to do more than just read about it.

Bailout dies. Cause of death: bad branding.


The jaw-dropping failure of the U.S. government’s $700 billion bailout package was remarkable not because of the histrionics in Congress but rather that most Americans were against it. A survey by CNN found that 54% of U.S. citizens were opposed to the bill, even if most couldn’t explain it.

The bill failed because it had a lousy brand.

In communications, sound bites matter — and explaining that most businesses such as your employer operate thanks to credit called commercial paper that allows businesses to meet the ebbs and flows of cash balances, and that credit markets behind commercial paper might lock up and cause every business in the U.S. to stop buying supplies or not make payroll, is rather complicated.

But saying a $700 billion bailout is bad ’cause it helps rich guys on Wall Street is easy.

So the bill died, not because it was good or bad, but because the nuances of credit markets can’t be explained in 10 seconds. The bill’s backers should have known better. Think of the history of political spin: the estate tax was renamed the “death tax“; anti-abortion groups call their movement “right to life”; abortion advocates on the other side say they are “pro choice.” Both sides of most debates pick a powerful brand name that creates an immediate, emotional response.

The bailout sponsors forgot to build a brand. It’s a good lesson for marketers everywhere who have complex stories. If you can’t keep it simple, you, like a bank, will fail.

Coors reminds you, use a wide mouth


Thanks to the ailing economy you now can drink beer faster.

Let us explain. Imported wine prices are up 10% in the UK and expected to rise in the States, due to high oil prices and a crumbling dollar, creating a sweet opening for domestic brewers. Coors Light has made aggressive strides in the past two years to return to its advertising “mountain” roots, leaving blondes in bikinis and the Freudian Silver Bullet train behind. Sales in the past 12 months are up 8 percent.

To build momentum, Coors is pushing its product packaging into look-at-me territory. Colored ink in labels turns blue when the temperature is just so. And if you’ve ever worried that your beer can did not provide a “smooth pour,” rest easy, because Coors Light now comes in “vented wide mouth cans” that use a trick of air to unbubble the beer flow. The billboards proclaiming this are damn ugly, and damn noticeable.

It’s all good for Coors. Finally, something to ease the pain of the SUV depreciating in our driveway.

Photo: Richard Kelland

The Top 10 Toys you need for summer

Want to avoid recession? Surf. Swim. Spend some cash. Your dollars give other people jobs, and eventually all that dough flows back around into your own paycheck. So here are 10 things worth consuming this summer.

1. The ScullTrek rowing bicycle. This svelte Slovakian rig is what Lance Armstrong would build if he had rowed crew at Yale. There’s an alternative Rowbike design by Rollerblade inventor Scott Olson, but the European rig is cooler. (Note: Nick Heil writes in Outside that pretty women passing on real bikes will laugh at you hysterically.)

2. The Decathlon 2-Second Tent. Basically you throw the thing in the air and a spring design pops the entire tent open. Rumor is Decathlon went out of business but you may find this cool shelter on Ebay for under 100 bucks.

3. A zip line. Like this 1.2 mile, 918-feet-high zip line in South Africa that rockets you to 100 mph. Would also be good for exercising dogs if the leash is long enough.

4. The Flip camcorder, a tiny $180 digital video gadget that makes filming a snap. Like you on a zip line, or a buddy getting a tattoo.

5. Surfing lessons. From Malia Jones. Because if you’re gonna learn how to surf, you want to learn from someone really good, and who cares if she is also a tan supermodel in a bikini with long, flowing hair?

6. Fake abs. So we look hot on the surf board or zip line. This will require an assistant, like Mariah Carey’s, skilled in ab makeup.

7. The Uno Cycle. A motorcycle with one wheel (OK, really two side by side, but it sure looks like one). Uses gyroscope technology like a Segway, except this thing is crazy dangerous.

8. Indiana Jones’ leather bullwhip. Because we heard Spielberg mailed bullwhips to news rooms with the PR kit, and we didn’t get one, and if it makes 65-year-old Harrison Ford look cool think what it will do for us, too.

9. The Tesla Roadster, a pure-electric $92,000 lithium ion-celled sports rocket. Zero to 60 in four seconds. For getting to the beach or the zip line.

10. The Helmet Hero, a headcam that records 56 minutes of TV-quality video or 1,400 consecutive photos every 5 seconds. Because we’ll probably drop the Flip camcorder while surfing with Malia Jones.

Please note that these are unpaid endorsements and if you kill yourself with any of these ideas, the authors do not accept liability. Happy summer.

How grass peer pressure leads to towing icebergs


This morning, while walking our two young dogs, we ran into a new neighbor, a really nice guy around the corner who was spraying Roundup on the weeds by the curb and who confessed that the only reason he was working on his yard was he didn’t want to have a worse lawn than his neighbors, and frankly, he didn’t really care.

We laughed — because that’s exactly the same reason we work on our lawn. And all that neighborly peer pressure adds up. The “turfgrass” industry in the United States is now huge, accounting for 822,849 jobs, $57.9 billion in spending, and $2.4 billion in indirect taxes to state and local governments. All that money spent on weeds and seed flows around to stimulate demand for other products and services, such as the stuff you sell, so by fertilizing your backyard you’re in effect boosting your own paycheck.

This demand is all relatively recent; 50 years ago selective herbicides didn’t exist and Americans left their lawns green or yellow, weeds and all. It’s remarkable, really, to think that a multi-billion dollar industry can spring up in a single generation for a good as common as the green stuff you walk on out back. The fad may pass; concerns about the environment have led to pesticides being outlawed in Canada, and water shortages make running sprinklers more expensive. Wired’s recent Peak Water report notes that aquifers are beginning to run dry in the United States, Britain meets the World Bank standard of a water-stressed region, and so to keep up with demand Western water companies are toying with sci-fi ideas such as seeding clouds and towing icebergs from the Arctic.

As for us, we’re avoiding lawn chemicals because our silly puppies eat grass. This year we’ll use a spade to kill dandelions, no herbicidal sprays, and will cut back on the sprinkler.

That may hurt the economy, and our lawn may have some yellow spots — but maybe, as this catches on, our neighbors will simply breathe a sigh of relief.

Competing when the economy throws cold water


Ever wonder why official statistics on inflation are so low, about 4%, while your actual cost of living seems to go up much faster each year? Harper’s Magazine casts a little cold water on reality this month by exposing the fact that official U.S. government statistics on inflation and unemployment have been toyed with for years.

We thought of this this morning driving past a diesel pump in Danbury, Conn., where some poor soul had just poured $100 of fuel into her tank at $4.50 a gallon. U.S. “core inflation” stats do not include energy costs, housing, or food — you know, the major categories that eat up most of your monthly paycheck. If your outlay for home heating oil or air conditioning or groceries jumps to $1,500 a month, it won’t count in how the Feds follow inflation.

John Williams, an economist over at ShadowStats.com, watches these numbers games carefully and notes the real annual inflation rate is about 11%, if you toss in the cost of your mortgage, bread and milk. Unfortunately, there really is no way out of our math fakery, because a lot of things we consumers want — loans, jobs, low taxes — are tied to phony numbers. If federal stats say inflation is low, banks can lend money at lower interest rates, and your boss can hire more people because she doesn’t have to boost salaries as much every year. If unemployment rates are low, the cost of labor seems cheap, thus buoying stocks on Wall Street.

Your job and 401k depend on the fact that official economic stats are an illusion.

Marketers need to take heed, now, because even with fuzzy math inflation is edging up. High energy costs will eventually impact the prices of your goods (like farmers facing reduced demand for dairy due to $4 a gallon milk). One basic strategy is to decommoditize your offering. Rather than focus on price claims, rethink how you present value.

When customers get squeezed, they will make choices based on what provides the most return for their limited purchasing resources. You can’t control their resources, and you can’t stop the rising tide of out-of-whack prices — but you can increase your perceived value.

Update: Pallavi Gogoi at BusinessWeek gives scary examples of price creep in food, where American consumers spend one-seventh of their incomes. The cost of eggs is up 38% year over year. Flour +26%. Fryer chicken +23%. Cheddar cheese +27%. White bread +19%.

Ad pollution: An argument with our brother

What would it mean if the economy stopped growing?

We stayed up until 1 a.m. Friday night arguing this with our brother, a smart, liberal, arts- and granola-minded man who has settled down with a lovely woman in a tiny town in Maine. He’s taken up environmental activism and since we work in marketing — you know, stimulating demand while a bit worried about melting glaciers in our heart — and he works for a nonprofit job corps, the conversation rubbed a bit raw. Brother pointed out that our job in advertising leads to consumption, which triggers pollution, atmospheric poison, dead coral reefs, the end of an inhabitable planet, and eventually a burned out shell of carbon circling our sun, covered in the detritus of plastic CD casings and Christmas bubble wrap.

Well, if you put it like that. Steven Stoll raised the same question in the March issue of Harper’s: How long can unbridled consumerism last? The desire to ingest new things is the engine that turns the economy, and economic growth is the aspirational principle that eliminates disease, gives millions clean water, creates jobs, and pushes technology. The fact that you are reading this on a brilliant micro-computer more powerful than the machine that calculated orbital mechanics to put men on the moon is tied to the fact that your parents bought way too many things, stimulated business, and spurred investment.

Yet, man, the landfill off I-95 north of Hartford, Conn., is looking tall. Uncontrolled growth in biology has a very ugly term: cancer. So what will our voracious appetites and sprawling cities do to the planet if unchecked?

Stoll, in his essay, suggests that the past few hundred years have been an aberration, and that as the world’s resources eventually become scarce, human beings will be forced to adjust to a stationary state — an economy in balance. Trouble is, people tend to get ticked off when growth stalls. In the Great Depression, families starved, and in the stagflated 1970s U.S. cities had massive crime waves. Every time the GDP flattens out, society rebells.

Our brother suggests the individual path: Consume less. It’s a noble idea, we said, but we responded that the desire to consume is ingrained in human genes. Consider the hungry effect chocolate has on most people. Peter Rogers of University of Bristol in the UK noted it isn’t the chemicals in chocolate that give us the craving, but the fact that we know we can only eat a little and have to stop. The psychological impact of having to restrain ourselves — of not having enough — makes us want chocolate all the more.

And that’s the problem with the future of the planet. Resource scarcity creates an inevitable crunch (Google “peak oil” to get really scared), yet as resources grow scarce we all hunger for them even more. We told our brother that perhaps the only way out is to redirect human longing, like parents pointing bratty children at dinner to the vegetables, by leading people to consume things that are good for the Earth. Cars that run on hydrogen. Clothing made of bamboo and hemp. There are rays of hope in greener technology, and the maturation of Western Society into service-oriented businesses (advertising agencies, after all, don’t pollute).

The debate creates a business opportunity. Imagine the profits to be had by the first major company to produce cheap hydrogen fuel cells, allowing you to plug in your house, boot up off the grid, and emit nothing but water vapor as waste. A market exists to meet consumer demand with efficient supply, or better yet, goods and services that give something back. In the long term, we’ll have to get there when petroleum and forests begin to run out. In the short term, profit goes to the first mover that meets the unmet market need.

The choice is twofold: Either we stop wanting so much, or we start wanting things that are good for us. Since want seems to be part of the human condition, dear brother, here’s to wanting better things.