First quarter GDP was revised from +4.2% to +4.4%, disappointing the experts who wanted to see the number reach +4.5%. But on the other hand, this made them happy because somehow that 0.1 less was not inflationary, while meeting the projection would have been disappointing. It sure seems that the certain path to unhappiness is to become an expert at something. No matter what happens, reality proves you wrong; and then if reality is close to the expectation, you'll still find a way to be unhappy.
We're still tracking along at that +4.0% to +4.5% GDP growth rate that I have often cited, and I'm still concerned about inflation even though others may not be. Whatever the case, the economy is in good shape overall, with the biggest uncertainty being terrorism and Iraq. That, of course, will be the main topic of the presidential election, since only people seeking bad economic news have to look really hard to find it, and the recovery is more obvious than ever.
If they do look hard, they would find negative new housing starts, but those data are still higher than they were just a few months ago. Durable goods were down, but the auto industry is weak, and may have to actually lower prices (what a creative idea this is!) and shift their product mix, at least in the short term. So even the supposedly bad news isn't too much of an issue. And anyway, one month does not a trend make.
Corporate profits are increasing more slowly than in recent months, but that might be the result of?perish the thought?increased spending on infrastructure and other expenses which were neglected during the tight times. That's right, corporate purse strings might actually be loosening. Don't tell the accountants, but when you spend more, it affects your profitability, though I suspect they already knew that. Although corporate profits increased by +1.2%, corporate cash flow was up almost twice that, at +2.3%. The latter is more important than most other measures in terms of corporate health and spending attitudes.
On the Web:
Inflation is of growing concern, as mentioned last week. One of the signs of inflation is the rise in oil prices. The combination of world tensions and increased demand worldwide is the cause, combined with lack of new processing capabilities. While the media is full of stories about these being the highest prices in history, the usual comparison of apples and oranges is being made, ignoring inflation. Once gas hits about $3.50 per gallon, we'll be at price levels not seen since the second oil embargo, but not until then. We actually have quite a way to go. But get ready for $55/barrel oil, because that's more likely than $30/barrel oil. Neither may happen. And neither would be a disaster or a blessing.
The American Petroleum Institute documents the fact that prices have been higher:
Also, EPA data show that mileage per gallon achieved by our vehicles is 20% higher since 1980, improving at almost 1% per year, which means that the mileage per dollar has also improved. The reason that oil prices are an issue is is that this is a year divisible by four and that businesses were not prepared for the spike (huh? Yeah, they just found out that a lot of the oil is from unstable countries, and problems there can affect prices paid at the pump. Meanwhile, let me tell you about that swampland I'm selling)...
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Yes, that's included in a report from Advertising Age about how turnover in this position leads to inconsistency in corporate strategy and a host of other problems. This article is highly recommended reading. Ever wonder why companies can't establish good brands? More about that below.
A recent report from the Chief Marketing Officer Council, indicates a preference for doing measurable promotional activities. The CMO Council is mainly comprised of marketing executives from technology companies. Yes, whether or not the promotional activity makes sense, it's more important that it's measurable. I always worry about activities that have an illusion of accuracy or that are measured solely because they can be measured, and not because they are really important. (Sales calls are a good example. all too often it is the number of calls that are measured when it's what happens during a sales call that really matters). Here are some key quotes from the release with my comments in parentheses:
- Companies that have formal performance measurement systems consistently achieved a higher level of CEO confidence in the marketing function. (Of course, if you don't measure it, it won't get done, as they say. But what's the tradeoff, doing what's right, or doing what keeps your job? That dilemma is as old as commerce itself.)
- Measurements most frequently reported to management include qualified leads generated, revenue impact, feedback from sales and channel groups, as well as web site traffic and content viewing. (Notice that the Internet is measurable; whether or not site traffic leads to sales, it is easy to measure the traffic itself, and traffic is considered to be a surrogate for interest. Qualified leads generated is an old favorite, yet no one measures how good branding causes interested people to come to you as opposed to sales, which is you going to them. Remember Drucker's statement: ?the purpose of marketing is to make selling unnecessary.? And leads are only as good as the sales people following up on them. I'll never forget how some sales reps I have known in my past would get leads and already know that person or company, and how others were always surprised by the leads they got, where every one of them was ?new.? Great sales reps don't have to wait for leads.)
- Hardest-to-measure activities were results from advertising, sales and marketing collateral, and branding. (Unfortunately, these are printed materials for the most part. Just because the Internet can be measured doesn't mean it's the best way to communicate, and because print isn't effectively measured, it's not really in the game in the opinion of these marketing executives.)
- Easiest-to-measure activities were results from direct mail and e-mail campaigns, Web site and Internet search engine presence, and telemarketing and contact management programs. (The easiest to measure media with the quickest feedback get the most attention.)
The issue for me as someone who was once a marketing executive is the concern that corporate image and brand building suffer in this kind of environment and are trampled by a preoccupation with a ?sales today? mentality. These companies will never be able to reduce their long-term marketing costs because everything is so short-term oriented. If the tenure of a CMO is less than two years, is it any wonder that they focus on short-term results? They focus on low-hanging fruit, activities that have quick returns, that give the illusion of progress. It's like a friend of mine once described an executive: ?He has twenty years of experience, but unfortunately it's the same year twenty times.? Executives who keep focusing on the short term always end up repeating the same mistakes. It's better to have the twenty years of experience cumulatively, don't you think?
I hate to keep mentioning Wal-Mart in my column, but that company's sharp focus on prices and location in its marketing means that its spends less on television and newspaper inserts than its competitors. One of the four P's in the marketing mix is ?place.? Wal-Mart spends considerably more on IT and logistics infrastructure than its competitors. That kind planning can't be done by executives whose necks are on the chopping blocks all of the time. People think Wal-Mart got where it is because of low prices. Nope. The lesson of Wal-Mart is long-term planning by effective people in it for the long haul.
Here are some essential articles about executive information habits. No surprise, more are using the Internet than ever before.
Wall Street Journal / Harris Interactive Executive Computer and Internet Habits
Key facts: 99% of executives in large companies use the Internet at work and 97% also use it at home; it now totals more than 13 hours a week, which is up by more than two hours since 2000. The most popular use is reading business news.
Interland Survey of Small Business Internet Use
Interland is an Internet services provider, so you have to ?consider the source? when interpreting these data. Key facts: ?45% said they spent more time in 2003 gathering information through e-mails/e-newsletters and 36% through industry/business Web sites;? business magazines were up 8% in use.
Personalization and Databases: How Dull Would Life Be Without Them
Finally, an article about how databases have changed our lives and made everything we do easier. Sure, we can make the tradeoff in privacy and convenience. We do it every day.
I always like the AFLAC commercials, probably because they were hated by AFLAC executives who are now in love with the booming business those commercials have helped create (and who now probably say the ads were their idea).
The new iShares commercials from Barclay's Bank are a bit more subtle, and I don't know how effective they are yet. But the point they are trying to make is that the old way of doing things is over, so they use the metaphor of the end of a movie. I think the commercials are good, but the concept might be too subtle for many to ?get? the first time. On their site, look for the commercial called ?Credits.?
Cabot Cheese of Vermont has always had some very entertaining radio commercials. You can do a lot on a tight budget if you're creative. If you're in marketing and have been victimized in college with a bad advertising course, listen to Cabot's ?How to Advertise? commercial on its Web site.