Thursday, March 22, 2018
There are many stereotypes about how the wealthiest households spend their money. Here are some of the research-based findings on that topic.
According to a The Wall Street Journal article, the most popular cars among people in the wealthiest 25 zip codes in the USA (median home prices from $3.4 to $6.7 million) are: Tesla Model S (starting price: $71,070) (accounting for the most car sales in 8 of the 25 zip codes - all in California), Mercedes-Benz E-Class ($51,905), Jeep Grand Cherokee ($28,690), BMW 3 Series ($33,475) and Ford F Series ($25,065). Notice that the list does not include Bentleys, Bugattis, Ferraris, Lamborghinis, Maybachs or Porsches.
According to the Bureau of Labor Statistics, high income households spend significantly more than average households on food away from home (more than one-half of their food purchases), housing operations, supplies and furnishings, personal insurance and pensions, cash contributions, education, entertainment and apparel and services. High income households also spend more on alcoholic beverages, reading and transportation.
According to Experian's 2011 Discretionary Spend Report, households with discretionary spending of $30,000+ (that is, households with median household incomes of $204,000+) index much higher on airline affiliation cards, American Express cards, paying full balance on credit cards, having home improvement, home equity and mortgage loans, and contributing to arts, culture and humanities organizations.
According to another study high-end department and technology stores and cultural amenities (museums, art galleries, concert halls, etc.) are frequented most by high income households.
According to AdAge, The Wall Street Journal is the periodical with the highest household income, followed by Barron's, The Economist, United Hemispheres, Washington Post Sunday, The New York Times Sunday, The New York Times daily, American Way, Conde Nast Traveler, The Atlantic, Southwest Spirit, Architectural Digest and Yachting. Magazine reading habits of the affluent also include Ivy League Magazine Network publications (alumni magazines (Brown, Chicago, Cornell, Dartmouth, Harvard, Pennsylvania, Princeton, Stanford and Yale) and several other travel magazines (Global Living, Afar, Travel & Leisure and Elite Traveler). Other interesting publications include Boat International (super yachts and luxury yachts), Private Islands (for people who own or want to own private islands) and Black Ink (only available to American Express Centurion cardholders - $7,500 initiation fee).
While the nouveau riche might strive for outward expressions of their newfound wealth to establish their socioeconomic status, old money prefers to downplay their wealth, not only because they are secure in their position but also because they have discovered that too much outward display of wealth only invites unwanted interest.
So, on what types of spending are households with large disposable incomes focused? Mostly services and experiences- travel, fine dining, educational and personal development experiences, cultural activities and charitable activities. And if they are seeking luxury products and experiences, what are they looking for in those products and experiences? Artistry or beauty, exceptional design, quality craftsmanship, limited availability (exclusivity), a rich history and heritage, and a high level of service including respect and civility.
Regarding today's status symbols of the wealthy - college or university (Ivy League is best), zip code, travel (exotic is best), unusual experiences, private jets, multiple homes, equestrian sports, yachting (super yachts among billionaires), wine cellars, ultra-luxury watches, jewelry, art, private clubs, board memberships, civic involvement and ample leisure time.
Tuesday, March 20, 2018
Today's chief marketing officer (CMO) has to have a very broad set of skills. Here is a longer list of skills and abilities one should look for in that individual:
- Demonstrated ability to lead and inspire teams
- Passionate customer advocacy
- Business development skills
- Excellent analytical skills
- Strategic vision
- Creative thinking
- A passion for continuous learning
- A willingness to stay abreast of the latest brand management and marketing trends
- A willingness to stay abreast of the latest industry trends
- Outstanding written and verbal communication skills
- Strong influencing and persuasion skills
- Strong observation and listening skills
- An ability to view the world through the lens of others
- A profound understanding of human motivations
- Common sense
- An entrepreneurial spirit
- Agility and adaptability to change
- Financial management skills
- The ability to interact well with cross-functional peers on the senior leadership team
- Understanding the varied marketing needs of different internal stakeholder groups
- Understanding all the ways in which the marketing function needs to interact seamlessly and productively with the sales organization
- Being familiar with different types of organization designs/structures for marketing departments and sales organizations
- Understanding the pros and cons of different approaches to sales incentives
- Knowing how to determine the appropriate size of the marketing budget and how to optimize its use across a wide variety of marketing functions
- Being able to create professional development programs and plans for marketers throughout the enterprise
- Willingness to inform and educate the organization about the brand's unique value proposition
- Knowing how to develop succession plans for marketers including when and how to cross-train them in various marketing sub-functions
- Knowing how to identify organizational knowledge gaps and ways to fill those gaps
- Knowing how to gather sales and customer data from throughout the enterprise
- Knowing how to gather competitive intelligence
- Knowing how to discover, interact with and use organization outsider feedback loops through social media
- Knowing how to measure and provide an ongoing internal feedback loop of customer satisfaction and loyalty
- Knowing how to create an appropriate brand scorecard and suggesting which metrics should be included on a balanced organizational scorecard and in common measures
- Knowing how to create and manage a sound marketing planning process
- Knowing which marketing strategies and tactics lend themselves to accurate ROI assessments
- Knowing how to choose and best manage marketing agency relationships
- Having a knowledge of the different types of research methodologies and understanding which work best to identify and extract different types of information
- Understanding CRM and its uses
- Understanding pricing strategy
- Understanding distribution strategy
- Understanding marketing research, big data analytics, brand management, brand licensing, advertising, media planning, promotion, direct marketing, corporate communications, public relations, investor relations, product development, package design, digital marketing, mobile marketing, retail merchandising, membership management and trade marketing as appropriate
Wednesday, March 14, 2018
I recently received this question from a blog reader: What are the most effective marketing and growth strategies for risk-averse organizations?
First, one must assess the source of the risk aversion. Often it is insularity. The organization doesn't know any markets other than the ones it is currently serving or it doesn't know how to produce any products other than the ones it is currently producing. It could be that the organization has too many fixed costs associated with a very specific production process and would find it prohibitive to reconfigure or set up a new production configuration. Sometimes, when a company is privately owned by a prominent member of the community, that person is more concerned about his or her reputation and is worried that a risky growth move might cause an embarrassing setback. Sometimes, the organization is just run by a risk-averse person or group of people.
There are a few ways to identify risk aversion. One is the unwillingness to invest capital. Another is the percentage of revenues that come from new products or markets. A slow or declining growth rate may also be a symptom of risk aversion. And finally, some organizations perform an inordinate amount of marketing research to identify potential problems. A related tell-tale sign of risk aversion is how many decision-making steps are present in the new product development process of the organization (if they even have a new product development process).
So, what are some of the best ways to grow despite risk aversion? The easiest way is to expand distribution geographically or through new distribution channels. Another way is to hire additional salespeople or to create new sales channels. You can also make your brand more accessible by selling it online or by extending store hours.
Risk adverse marketing approaches include (low cost) publicity, targeted online marketing, providing additional sales support and tracking the cost of generating sales leads and tracking which of those leads results in new business. Co-marketing with other non-competing brands stretches marketing dollars. Offering co-op marketing budgets to retailers if your product is sold through retailers is another option.
While these are some of the approaches that may be easiest to to "sell" to risk-averse organizations, these are not necessarily the most risk-averse approaches. Often, the best way to assess the potential of new products, services, revenue streams and marketing approaches is to test them in some markets and, based on the results, modify and expand the approach/offering or pull the plug on it. But this is more the sign of an organization that is willing to take calculated risks.
I found this to be an interesting question. I hope it has helped you think about the topic.
I was recently asked two related questions: Why are new no-name brands able to topple big decades old brands in today's environment? How can a small start-up brand effectively challenge older established brands?
There are so many different ways to answer this, many related to technology, but some also related to legacy brands resting on their laurels. The advent of digital photography (invented by Kodak) killed Kodak's previously highly profitable business model that was driven by film purchase and developing. This disruption was amplified by the advent of smart phones with built-in cameras.
Uber's online platform not only revolutionized and democratized the way people can get rides but it also made it much simpler to find, hail and pay for a ride. Plus, it provided for a record of one's paid automotive excursions. This is an innovative model that is scalable and has network effects. Also working in Uber's favor is the general low level of quality of taxi service compared to the service offered by Uber drivers driven by a constant customer feedback loop.
Though backed by a lot of money from Pay Pal's founder Elon Musk, Tesla also has made significant inroads vis-a-vis legacy automobile brands. It has done this by sheer strong will and innovation. From its vigorously pursuing the concept of a luxury all electric vehicle to its sales and marketing innovations, Tesla has taken the risks to do things differently.
The Internet also makes it easy for smaller companies to seem bigger than they are and compete effectively with larger, more well-known companies. And the customer targeting offered by Facebook and other social media platforms makes it more cost effective to go after highly targeted customers.
CarMax, though supported with major funding, came into existence because legacy used car dealerships did not treat customers well. CarMax saw the opportunity to make automotive purchasing easier and more transparent. Again, it relied on an innovative business model and a transformative technology, a database that can be accessed from anywhere through the Internet.
Airbnb is another example of a brand that has used the Internet as its platform to achieve scalability. But it also is driven off of the concept of shared resources. This same sharing of resources has worked for Zipcar and Zagster.
So, in summary, these examples point to the following sources of legacy brand disruption and displacement:
- An innovative business model
- A superior model of customer service delivery
- New superior technologies
- The Internet
- Software-driven solutions
- Network effects
- Resource sharing
- Product differentiation
- Highly targeted marketing
Friday, March 9, 2018
This year, I am volunteering on six not-for-profit marketing committees. These committees are usually comprised of marketing professionals from the community. Some are retired and some are in between jobs, while most are just busy marketing professionals who are generous with their time and talents. One of the committees on which I volunteer is associated with a social membership organization and is comprised mostly of non-marketers.
A recent committee meeting was interesting. People had lots of ideas. "Let's stuff mailboxes in nearby neighborhoods." "Let's offer a discounted first year membership through a silent auction." "Let's advertise on Facebook." "Let's put up posters at nearby cafes and similar establishments." "Let's co-market through non-competing local organizations." "Let's have an open house." "Let's offer trial memberships." "Let's offer an incentive for current members to recruit new members." And the ideas kept flowing.
While the ideation was energizing, it was also frustrating because there was little focus. This is where I inserted myself, understanding that there is a marketing discipline that requires a specific order in decision making. Hopefully, this is completely obvious to most experienced marketers, but here is the order in which marketing decisions must be made. There are no short cuts. To execute marketing effectively, one must answer the questions raised by each step before one precedes on to the next step in the process.
These are the steps:
- What are the business and marketing objectives that this marketing plan or campaign is intended to address? That is, what are we trying to accomplish? What are the metrics and what are the goals?
- To make this happen, who are we targeting? What market segments will best help us achieve our goals? Think demographics, psychographics, attitudes, behaviors and geographics. Be as specific as possible.
- What does our brand stand for? Do we know what its unique value proposition is? What is its promise? (This step could be accomplished earlier in the process however often the target customer definition can lead to developing a more powerful unique value proposition and brand promise.)
- What are our brand's most important messages? What do we want to say that will cause our target customers to be interested in and choose our brand?
- What communication vehicles and tactics should we use to reach our target audiences with these key messages? What are the most effective and efficient ways to reach our audiences? (This may include a variety of strategies and supporting tactics, and along with the next step, full-blown marketing and media plans.)
- Given what we are trying to accomplish, what is the right timing for each marketing tactic?
A consistent brand architecture and identity system and execution should underpin all of this. And one should set up success measures if at all possible to determine which messages, strategies and tactics worked best. And, of course, the plan will have to work within a specified budget. On occasion, it might also inform or lead to a request for a specific budget.
So, while marketing tactic ideation is fun, there is an order of steps that will lead to a much more thoughtful plan and successful outcome. If you are a seasoned marketing professional, this just highlights and summarizes what you already know. If you are new to marketing, please follow these steps. They will help you develop much better marketing plans and achieve much better outcomes.