Present-Day Marketing Math

For These Guys,  1 + 1  =  1-Zillion

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There’s a Dilbert Episode [1] where he ends up being canned for revealing company secrets, only to find himself employed shortly thereafter by Nirvana Company – “The greatest engineering firm on the planet.” Unlike his prior employer, Nirvana wasn’t plagued by absurd or misguided constraints imposed by the whimsy of a marketing department that the former was literally being choked to death by.  And so, after a time, a morbid sense of curiosity prompted Dilbert to ask what happened to Nirvana’s marketing division.  Come to find out they never had one.  But executive management was intrigued by the idea.  You can see the writing on the wall here.  Implementation of said division immediately resulted in chaos which prompted a precipitously disastrous chain of events that ended up leveling the company.

I think that was the episode that sealed it for me.  I was laughing all the way to the point where I realized how unfunny it actually was.  And then I never watched another episode again.  Not unexpectedly I’ve found myself in similarly frustrating circumstances where marketing jack-@sses literally ran projects right off the rails with totally unrealistic demands and deadlines… and it wasn’t funny then either.  The scariest part of the whole thing was how wrong they often were and how little they ended up paying for all of it. We’d go to enormous trouble most of the time to design everything to meet ‘supposed’ customer demands only to find later that the customers could care less, or that it didn’t provide any competitive advantage whatsoever.  Any time there were serious design flaws we paid for it with tireless hours of work and stress.  But when marketing forced us to design entirely the wrong product?   Well.  Heads never seemed to roll then.

“So all that trouble we went to just to defy the laws of physics weren’t even what they actually wanted?  Yeah.  There’s a surprise.”

What is it about marketing guys these days that make them so despicable?  And why is that they’re so easy to hate even from a customer perspective?  Whatever the case, they’re rapidly working their way to the top of ‘the most hated’ list along with sleazy CEO’s, corporate strategists and attorneys.

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Here’s a perfect example of what I’m talking about.  Credit card companies have made so many underhanded changes to cardholders’ existing agreements, and stolen so much money in fees and sneaky interest, that it’s a wonder financial reform didn’t happen sooner.  Consider these remarks by the President at the recent signing of The Credit Card Accountability, Responsibility and Disclosure Act:

Contracts are drafted not to inform, but to confuse.  Mysterious fees appear on statements.  Payment deadlines shift.  Terms change.  Interest rates rise.  And suddenly, a credit card becomes less of a lifeline and more of an anchor.

That’s what happened to Janet Hard of Freeland, Michigan, who’s here today.   Where’s Janet?  Right here.  Janet is a nurse.  Her husband is a pipefitter.  They’ve got two boys.  Janet and her husband have tried to be responsible; she’s made her payments on time.  But despite this, Janet’s interest rate was increased to 24%.  And that 24% applied not just for new purchases, but retroactively to her entire balance. And so, despite making steady payments totaling $2,400 one year, her debt went down only by $350 that year.

And Janet’s family is not alone.  Over the past decade, credit card debt has increased by 25% in our country.  Nearly half of all Americans carry a balance on their cards.  Those who do, carry an average balance of more than $7,000.  And as our economic situation worsened — and many defaulted on their debt as a result of a lost job, for example — a vicious cycle ensued.  Borrowers couldn’t pay their bills, and so lenders raised rates.  As rates went up, more borrowers couldn’t pay.

Millions of cardholders have seen their interest rates jump in just the past six months.  One in five Americans carry a balance that has been charged interest rates above 20%.  1 in 5.

I also want to emphasize, these are costs that often hit responsible credit card users.  Interest can be charged even if you pay your bill on time.  Rates can be increased on outstanding balances even if you aren’t late with a payment.  And if you sit — if you start to pay down your balance, which is the right thing to do, a company can require you to pay down the debt with the lowest interest rate first — instead of the highest — which makes it much harder to ever get out of the red. [2]

(See the accompanying testimony for all of the glorious details on corporate misbehavior)

Somewhere out there are a group of marketing weasels and strategists that get paid exorbitant salaries and bonuses to exploit and change little pieces of existing card agreements in order to squeeze out every last drop of profit in fees and interest.  And for companies that already pull down about 1-3% on every single transaction [3] for every credit card in use, it’s truly disgraceful. I don’t honestly know how these guys can sleep at night.

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Just to balance the scales a bit, here’s one for the playbooks of anyone interesting in proper marketing strategy.  The cell phone sector has been so saturated and ultra competitive that you’d think there was no room for another product let alone half the ones that are already out there.  And yet – Apple Inc. not only managed to crack into that market but break it wide open while simultaneously stealing market share from seasoned industry veterans like Nokia.  How could something like this happen?  Easily – and for two simple, but significant reasons.

Design Side: First and foremost the engineers and software developers went nuts creating the ultimate cell phone – something that other companies hadn’t been willing to do for years.  In the grand scheme of things they also limited project scope in order to successfully test what they had without overextending on peripheral features that obviously weren’t ready, and one could argue, weren’t yet necessary – examples being cut-and-paste, search, etc.  And then, only after rigorous testing with its iTunes interface, did they release the product – not before – but after the engineering and software groups were satisfied that it all worked properly together.  And that’s it.  They made a great, new, cutting-edge product suite and then made sure that it actually worked before releasing it.  Novel, isn’t it? And what a way to show competitors the obvious superiority of vast, flexible, touch-sensitive screen real estate!

Marketing Side: Apple’s marketing execs not only pegged what customers would want in a next-gen high-tech device, but allowed the engineering staff to go unmolested and hog wild making it… and then priced and marketed accordingly.   In my mind there hasn’t been a finer example of surgical and appropriate marketing in at least a decade – not on the design or sales side.  And that about covers it for significant reason number one.

The second significant reason that Apple cracked the cell phone market was because of the nicklin-and-dimin that competitors have been doing for years.  One thing that marketing weasels never clue in on with consumers is how much they h-a-t-e when companies try to capitalize on microscopically insignificant upgrades to a product.  Word to the marketing sector – once again – wringing out every last drop of profit from a product before moving on just pisses customers off, so stop doing it. Either sell something significantly advanced for a reasonable price or don’t bother selling it.  All told – if you cell phone marketing hacks are still wondering why it was so easy to wipe out the competition, stop belaboring the issue.  It doesn’t take a genius.  All I can say as both a hardware designer and consumer is that it was great to finally see some marketing masterminds stomp all over an entire industry sector of their weasel cohorts.

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I want to elaborate on the idea of  “pegging what customers would want”  for a minute.  The auto industry.  Here we have a sector of powerhouses without a clue.  In their defense they’d say that they’ve done rigorous marketing research for years only to discover that customers want big, powerful, safe vehicles and don’t care enough about fuel economy.  Auto marketing idiots – have you ever thought about asking people the right questions, like for instance what they’d really want if gas prices went up?  I’d be willing to bet hands down that the answer would look something like this:

Well – first and foremost – a vehicle with great gas mileage, of course!”

I mean – it’s inevitable right?  So why not assume that it’s gonna happen sooner than later and find out what consumers would want from next generation products.  And then here’s a crazy idea – deliver it rather than running the same old scenarios over and over again and showing the same stale results.  Couldn’t that just as easily be classified as insanity?  Or it is just plain stupidity?  Whatever the case it’s too late to tell American automakers what Toyota et al. already knew and acted upon over a decade ago – that big industry leaders don’t just have the ability and vast resources to look forward and discover what customers would want under changing conditions, but the responsibility to make it happen when the time comes – to help bring us across the divide so to speak – rather than, once again, holding us back and essentially hostage while they squeeze out every last drop of profitability from the same old crap.  Industry leaders – do what the title says and lead!

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BIG PICTURE NOW:  Change is hard.  We all know that.  And it’s even harder when you’ve invested heavily into something and are trying to get reasonable returns on that investment.  But there’s a difference between the reasonable and the obscene.  And a lot of companies are shooting for the latter these days in an effort to maintain adherence to what I’ve coined as “the ever increasing profit and growth model. For some reason corporate success (most notably with respect to publicly traded companies) is now based on the absurd idea that if you’re not constantly growing then there’s something fundamentally wrong.  And this mentality has got to change because in a world with finite size and resources it’s obviously unsustainable.  Companies are imploding because of this philosophy all the time.  They’re running themselves right into extinction whenever even moderate adversity occurs.  One plus one does not equal 1-zillion people.  It’s not good business or innovative or even progressive to suck the marrow out of every last bone of your customer-base. It’s desperate and despicable.  So get your marketing humps off of our backs, and above all – prescribe to a different success model!  Otherwise you’ll risk angering and losing any loyal following and ultimately that of your entire customer-base.

On that heavy note, I leave you with something a bit lighter and possibly even more entertaining – Time Magazine’s “20 Reasons to Hate the Airlines”:

How much is it worth to you to cut in line at the airport? You can find out this summer, as several airlines have begun charging passengers a fee (between $10 and $30, depending on the airline) for the privilege of being first in line to board, ahead of that family of four with seven carry-ons. It’s just the latest in the airlines’ long campaign to boost their bottom line by quietly upping fees, cutting back on services and finding new ways of charging customers for things they used to get for free. Indeed, ever since the 1978 deregulation of the airline industry, the history of air travel has been one long, painful chronicle of nickel-and-diming the consumer to distraction. Here’s a brief history, in 20 chapters. (Hit this LINK to continue on to the list) [4]

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[1] Dilbert Episode 3 – Entirtled “The Competition”.  He actually gets canned for sneaking in to answer his office telephone.

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[2] SOURCE:  White House – Office of the Press Secretary, May 22, 2009.  EVENT:  President at the signing of The Credit Card Accountability, Responsibility and Disclosure Act.  Embedded LINK here.

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SOURCE:  New York Times, TITLE:  Obama Signs Overhaul of Financial System, DATE:  July 21, 2010,  AUTHOR:  Helene Cooper,  LINK: http://www.nytimes.com/2010/07/22/business/22regulate.html?bl

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For the whole story see the following testimony:

Testimony of Adam J. Levitin, Associate Professor of Law, Georgetown University Law Center, Hearing: Credit Card Industry Practices, 3/13/2008, U.S. House Committee on Financial Services, Subcommittee on Financial Institutions and Consumer Credit.

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Testimony of Adam J. Levitin: Modernizing Consumer Protection in the Financial Regulatory System; Strengthening Credit Card Protections: Hearing Before the S. Comm. On Banking, Housing, and Urban Affairs, 111th Cong., Feb. 12, 2009.

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SOURCE:  The Consumerist – Shoppers Bite Back.  TITLE:  Nobody Knows the True Cost of Credit, AUTHOR:  Carey Alexander, DATE:  December 31, 2007 12:15 AM, LINK:  http://consumerist.com/2007/12/nobody-knows-the-true-cost-of-credit.html

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[3] SOURCE:  Website called “The True Cost of Credit.”  LINK:  http://truecostofcredit.com/

More at…  http://freakonomics.blogs.nytimes.com/2009/01/28/the-true-cost-of-credit/

More at… http://consumerist.com/2009/01/your-credit-card-costs-consumers-50000000000-per-year.html

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[4] TITLE:  And So It Continues, AUTHORS:  Richard Zoglin, Christine Lim and Deirdre Van Dyk Friday, Jul. 09, 2010.

LINK: http://www.time.com/time/specials/packages/article/0,28804,2002620_2002604_2002582,00.html

LINK: http://www.time.com/time/specials/packages/completelist/0,29569,2002620,00.html

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