EIDSON & PARTNERS

Word for the day -- Recessionista

Business Week's Christopher Palmeri reports that the word recessionista is making a come back.

Wordspy.com defines recessionista as "a person who dresses stylishly on a tight budget."

Wordspy also notes that the number one term related to recessionista is conspicuous austerity -- "2. a lifestyle in which a person openly and deliberately uses goods and services that convey a lower socioeconomic status."

Palmeri notes year-to-date sales increases of 6% and 15% respectively for Salvation Army and Goodwill stores.

It is hard to believe that just four months ago (June), we were blogging about food and fuel price increases.

The Other Side of Declining Auto Sales

US auto sales results for June might not be what it appears. Automotive News reports that sales would have been better if automakers had had enough four-cylinder engines to meet demand.

Rising gasoline prices have generated a solid demand for four-cylinder cars – the highest since the 1980s.

The Power Information Network reports that more than half of all new cars and trucks purchased in June were powered by four-cylinder engines compared with less than one-third of new vehicle sales one year ago.

In every sales forecast, there is an implicit assumption about costs.

What are the energy cost assumptions underlying your sales forecasts? What are the competitive implications? Is there an opportunity there that your competitors might not embrace?

Investing in Lifetime Value of Customers

For several years, Bank of America has made a significant investment in the potential lifetime value of a relationship with graduating doctors. They offer medical school grads a mortgage program with no down payment, no PMI insurance and an array of mortgage products including interest only mortgages. It is a huge savings for young doctors and, no doubt, a major expense to the BoA marketing budget. But, think of the potential!

How much of your marketing budget represent a solid investment in future customers?

Social Responsibility & Survival

Monday's Wall Street Journal reported on studies of consumers' willingness to pay premiums of products that are produced in socially responsible ways.

THE UPSIDE - Studies suggest that consumers will pay a 17% premium (versus control) for coffee produced with respect for employee diversity, product safety, human rights and the environment. These studies were conducted by the University of Western Ontario.

This willingness to pay a premium is similar to the results of a 2004 study conducted by the Animal Ag. Alliance that reported consumers would pay a premium for meat labeled "humanely raised". 31 percent of respondents indicated a willingness to pay a 5% premium. One person in 10 would pay a 20% premium. FYI. This study did not define "humanely raised". Respondents simply reacted to labeling.

THE DOWNSIDE - The Western Ontario study resoundingly addressed the downside.

Coffee associated with unethical production standards sold at a 40% discount versus coffee associated with ethical production standards.

No-one in business can ignore the implications. Ethical production standards have some pricing upside.

Unethical standards have huge, potentially catastrophic, risks.

IMAGINE ... that you wake up tomorrow with huge product safety crisis. If you have a solid history of high ethics and you manage the situation well, your brand or company will get a second chance.

If the product safety issue can be traced to unethical practices, your brand or company is done. DONE.

Borat & The Paradox of Choice

Barry Schwartz's book, The Paradox of Choice, has a lot to say about marketing. The book's premise is that when consumers have too many choices in a category, they tend not to make a choice. 

The book cites a simple, but elegant, research project in which consumers were given an opportunity to sample jams.

In the first leg of research, consumers had a choice of six varieties of jam and 30 percent of consumers made a purchase.

In the second leg of research, consumers had a choice of 24 jams and only three percent made a purchase.

This issue appears to be that consumers tend to become overwhelmed with too many choices and do not buy.

The problem of overwhelming choices is vividly illustrated in the movie, Borat. A clip is available at youtube  in which Borat walks the length of a grocery store dairy case with a store manager.

The dialog is the repeated question, "what is this?". The consistent reply is "cheese". It illustrates the overwhelming choices in a single food category – cheese.

To us, the larger issue is reasonable choices versus overwhelming choices.

As marketers, the challenge is to create a distinctive array of products with clear positioning and benefits.   

How many times each week to we all hear someone refer to a product as simply a "different flavor"?