Consumer Psychology in a Recession: Harvard Business School Video

Recessionary consumer behavior is discussed in this video with Professor John Quelch of Harvard Business School. He also talks about 4 types of consumers who are reacting in different ways to the economic environment, whether current consumer behaviors will become permanent, and when you should invest in marketing in a recession.

Fast Forwarding, Advertising in a Recession, and Dangers of Discounting

Here are some articles or posts that you might find informative.

Do We Process Skipped Commercials? Nueromarketing

In this post Roger Dooley discusses research that shows our brains do process fast forwarded commercials. Dooley points out that the group that viewed fast forwarded ads had a recall rate at twice the expected rate. Some advertisers are optimizing commercials for fast forwarding. Fast forwarding can also increase alertness because you are attentive to when your program returns says the author.

I think that our brains can recognize well known brands when they zip by, but the problem is that there is no brand messaging going on. This is about as effective as banner ads. However, when something interesting catches your eye it can get you to watch the commercial because you are actively viewing.

Brand Progression in a Recession Barry Silverstein

Silverstein argues that well established brands that represent both quality and value can actually benefit from a recession. A recession can weed out weaker brands. Trusted store brands can appeal to budget conscious consumers. A recession will force brands to communicate or find their brand soul. “It is well documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times.” said Harvard Business School professor John Quelch.

I think spending on marketing during a recession can put you in a dominant position over your competition when the recession ends. Many enduring companies have been born during a market downturn.

Discounting Your Prices Discounts Your Brand Marketing Profs Daily Fix

Paul Williams writes that discounting can erode your long-term margins and your long-term sales. Discounting re-calibrates the perceived value of your product or service. Sales can encourage customers to wait and only buy when there is a sale. Instead of discounting, consider add-on services or products.

This is good advice for avoiding devaluing your brand even when facing difficult time. Companies with regular sales often train customers to only buy during sales.

Image Courtesy of timparkinson

Recession = Time to Build Market Share

One of the secrets of the super successful is that they do the opposite of the crowd. When American’s wallets are getting tight and most companies are cutting their marketing spending, this can be one of the best opportunities to grow your brand. Some historic examples of this are Proctor & Gamble pushing Ivory soap during the Great Depression, and Walmart’s “Every Day Low Prices” during the post dot com slowdown [1].

The brandchannel article Brand Progression in a Recession quoted Harvard professor John Quelch who wrote “It is well documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times.”

However according to Dr. Lilien of Penn State, it takes a special type of company to ramp up marketing during a recession . “If you think about a distance runner — if the distance runner is really strong, when the runner hits a hill, the runner is gonna speed up. What happens? The runner has the capacity, but he also has the strategy and the nerve to do it.”

It may be really tough to make a marketing push when you are on a diet of leaves and twigs, but if you can survive, it can pay off significantly when the market recovers. During a recession, the fat get skinny and the skinny die, and many weak marketing organizations may go extinct. If you are engaged in a war with a weaker competitor, a strong marketing push can be a knock out blow. If you are tied with a competitor, a strong campaign may give you a great advantage if they go AWOL with their marketing efforts during the recession period. If you are able and can handle the risk, increasing marketing during a recession can be a winning strategy.

1. Should You Up Your Marketing During a Recession Bnet
2. Brand Progression in a Recession brandchannel

Microsoft's Answer to Apple vs PC

It is one of the most talked about ad campaigns that I can remember. According to TWIT, it is costing Microsoft $10 million for Jerry Seinfeld and $300 million total for the campaign. Ryan Block, who was on TWIT, pointed out that the advertisement uses metaphors. The discount shoe store represents Microsoft that costs less than say Apple, but still delivers great value. I think this will be one of Micosoft’s best campaigns because it is episodic. It tells an ongoing story, so people actually want to see the ad to see what happens next. People will likely stop zipping through commercials on their DVR, so they can see the next part of the story. The campaign is like a serial show, and that is why I predict it will ultimately be a home run for Microsoft.

By the way, part 2 “New Family” is out if you go to the site.

What I Would Have Learned If I Attended New Media Expo

In the latest episode of the Podtini podcast, Don talks about his recent trip to the New Media Expo and some of his best take aways from the conference. One of the best take aways is the use of partnerships in social media, in other words reaching out to fellow bloggers and sharing content. This could be as simple as you writing a guest post for someone else’s site, which would help them generate new, unique content while helping you drive links and traffic back to your site. Hopefully they will want to contribute to your site as well.

I think this is an excellent idea, and one I am planning to implement to grow my audience. If you look at most really successful blogs, they are usually collaborative. They often have more than one regular contributor and or even several guest authors. In a Google dominated internet, having a community that is willing to contribute content to your site for free is an ideal situation. 

Ask blogs that you follow if they will let you write a guest post or if they are willing to partner with you. It’s a win, win situation. 

Image Source shundaroni

Marketing: Not the Source of Unhappiness

In a recent post Seth Godin wrote a post called Destroying Happiness where he cites marketing as a source for unhappiness in the world. “What you have doesn’t make you unhappy. What you want does. And want is created by us, the marketers. Marketers trying to grow market share will always work to make their non-customers unhappy.”

I think this is an over-generalization and over-simplification of human psychology and I don’t think marketing can be blamed for unhappiness. Of course, I do not believe Seth was suggesting that marketers are the only cause of unhappiness, there are an unlimited number of things that can make someone unhappy: work, lack of relationships, lack of safety. However, I don’t think marketing is a good explanation for why we are far richer than someone in the middle ages, but not really happier.

Positive psychology is basically the study of happiness and has become very popular in recent years. One of the major findings from this research, from the amalgamation of numerous studies, is that money has a very low correlation with happiness. Once you are out of poverty, an increase in money has almost no affect on your happiness level. Another equally important finding is that happiness remains essentially static for an individual. For instance one study followed a group of individuals who had won the lottery and another group who were paralyzed. Amazingly, after about one year both groups had returned to their base level of happiness.

So this can suggest that the reason that we are no happier today than we were a hundred years ago is because an increase in wealth does not cause an increase in happiness. In other words, marketing is not the reason we are unhappy.

The underlying question is whether marketing causes culture to be the way it is, or if human nature causes marketing to be the way it is. It is human nature to desire things, material and immaterial. Would the world be better off if everyone lived like Buddhist monks and didn’t desire ownership of anything? It’s very difficult to say but I don’t think it would.

Image source jaja

Cool Marketing Links for June

Inconspicuous Consumption The Atlantic

Does the idea of a weak economy scare you? It shouldn’t!
Drew’s Marketing Minute

Free! Why $0.00 Is the Future of Business by Chris Anderson Wired Magazine

Cool Apps for June
Splashup free flash based graphic design and photo editing. Think Adobe Illustrator and Photoshop clone.

280 Slides
free online Powerpoint clone that allows you to download files in the Powerpoint format

10 Best Marketing Quotes of All Time

Put these quotes on your fridge, read them when you wake up, and tell them to your friends:

10. The greatest enemy of a good plan is the dream of a perfect plan. –Carl von Clausewitz

9. As long as I have failed to defeat my enemy, I must fear that he will defeat me; therefore I am not in sole control; he controls me just as I control him. -Carl von Clausewitz, On War (1832)

8. Try not to become a man of success but rather a man of value. -Albert Einstein

7. Either write something worth reading or do something worth writing. -Benjamin Franklin

6. Great wisdom not applied to action and behavior is meaningless data. -Peter Drucker

5. Advertising is a tax for having an unremarkable product. -Robert Stephens, Founder of the Geek Squad.

4. Customers can’t always tell you what they want, but they can always tell you what’s wrong. -Carly Fiona on the Entrepreneurial Thought Leaders podcast

3. If you want to understand how a lion hunts don’t go to the zoo. Go to the jungle. -Jim Stengel CMO of P&G

2. The purest treasure mortal times can afford is a spotless reputation. -William Shakespeare

1. It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change. -Charles Darwin

More Quotes
“Yes, I sell people things they don’t need. I can’t, however, sell them something they don’t want. Even with advertising. Even if I were of a mind to.” -John O’Toole

“I know that half of my advertising dollars are wasted … I just don’t know which half.” –John Wanamaker

“The customer is the most important part of the production line.” -William Deming

“Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.” –Peter Drucker

If Thomas Edison had used a focus group he would have just invented a bigger candle. -from The Brand Show episode “The Science of Branding”

Seller Beware

The internet has empowered customers to fight back against corporate injustice. These activists who have been dubbed “Consumer Vigilantes” by Business Week in their article about customers who go way beyond telling their friends about their bad experience.

One angry Apple customer smashed his Apple with a sledge hammer on You Tube, which has been viewed 360,000 times. Adage columnist Bob Garfield created Anyone can email top executives at Comcast by finding their contact information on sites like The Consumerist, a consumer advocate site with more than 2 million unique visitors a month.

Huge corporations can no longer ignore the individual like they have for so long. A new approach to customer service is required to prevent an army of vigilantes from using their new powers against them.

New Marketing Models for Selling Music

Jonathan Coulton
is a musician who is trying a new approach to marketing his music, licensing it under the Creative Commons license. The Creative Commons license basically means that anyone can copy, distribute, transmit, or remix the content as long as they attribute it to the creator. The creator is allowed to add restrictions to this, for instance if they don’t want people to make money off it.

Jonathan Coulton has been able to grow a strong community of raving fans, in part due to the Creative Commons, which allows fan videos like the one above that spread across the internet. This strategy allows artists to avoid record labels from taking their profits, while empowering their fans to share their music with their friends. He also has released his songs for free, on his Song a Week podcast, in which he released a new song every week for a year. Giving away his music has helped him build a loyal following who will attend his concerts and buy merchandise. He also offers the option of buying song downloads at his site.

Nine Inch Nails became the first major artist to release a new album on creative commons. NIN also offers the first 9 tracks of the album for free on their site or all 36 tracks for 5 bucks. They have already sold out of the 2500 Ultimate Deluxe Limited Edition Packages that includes a Blu-Ray disc, a book of photos, an autograph, and costs $300. With many customers being frustrated with the RIAA and CD sales sliding, I think that releasing music for free or under Creative Commons will become a more prevalent business model, which is great for consumers.