I came across this article on WSJonline.com and it brought me to the tipping point for the post you are about to read:

So much of the current commentary on unemployment takes for granted a very shaky notion about the jobs that have disappeared… that they are coming back.  If we are indeed living through the worst economic downturn since the great depression, isn’t it possible that an observable economic Churn is underway?

From a very broad perspective the economy has upchucked, purged, churned those assets, both tangible and intellectual, that simply can’t keep up (think GM, Freddie Mac, unqualified borrowers, etc…)  and it will now replenish on a new diet. The key here is new. Jobs will steadily become more and more available, but they will be different than those that disappeared during the recession.  Let’s build the case:

1.) The recession was preceded by a time of loose credit and inflated consumer optimism. Consumers spent liberally, sales were up and it was easy for employers to look past inefficient labor.

2.) When consumer spending plummeted, businesses were forced into survival mode. This meant  scaling back resources and jobs to the core money-making drivers. Employees who weren’t laid off had to work harder to fill the gap. The recession trimmed all the fat.

3.) Because remaining employees learned to fill the gap and work harder, business owners got a taste of efficiency. They will now stay on a lean diet of resource use,  with excess revenue invested in new business developments that require different or improved skill-sets, aka different jobs.

Conclusion: Many of the jobs that disappeared aren’t coming back. Instead, new industries, ideas and jobs will emerge.

If you are among the unfortunate and large number of people who are unemployed, then a “Wait for the Upswing” strategy as implied by so many thinkers will likely keep you waiting forever.

Ask yourself why your position was eliminated? What made you unnecessary to the company’s success? What made “the other guy’s” position more necessary? The Churn will be complete when purged resources do whatever is necessary to re-allocate in positions that are truly resourceful and innovative.

With a handful of ailing financial ratios and bottom lines in the red, there’s no doubt the CEO’s at Ford, GM, and Chrysler are in tunnel vision for survival.  Ironically, their struggle with Washington to make ends meet will be the very thing that secures their extinction.

According to a recent poll by CNN, 61% of Americans oppose the bailout, and other polls indicate that Americans are ticked in general about the recent handouts from Washington. On top of a brand image of poor quality and irrelevant vehicles (Hummer + Green Movement = Bad), the brand managers at the Big 3 will now have to deal with resentment towards their brand over the bailout.

And it makes sense doesn’t it? After the highly contested $700 billion bailout earlier this year, my hunch is that tax-payers are now taking it personally. A bailout with tax payer dollars will be the nail in the coffin from a brand positioning perspective. Consider the Catch-22:

Option 1: Washington Bails Out Big 3. Detroit is saved from bankruptcy and survives the recession. Resentment towards American-branded cars increases as tax payer dollars are used to support deficient business. Ford, GM, and Chrysler can’t sell any cars. —Big 3 go Bankrupt.

Option 2: Washington Does NOT Bail Out Big 3. Ford, GM, and Chrysler can’t sell any cars. —Big 3 go Bankrupt.

The question is, Do we want the American auto industry as we know it to die slowly, with 25 billion in public funds wasted, or die now? I think the polls show how most of us would answer this question. Perhaps if the CEOs in Detroit could look past the Balance Sheet and see what’s happened to the American car in the eyes of their market, they wouldn’t waste our time or our money.

Of course, we haven’t talked about what should happen post-bankruptcy, which is another issue in itself. My inclination is that Detroit would be better positioned for a come-back if they didn’t have the brand resentment of a bailout on their plate.

Thoughts or advice for the Big 3?

In the frey of your normal management activities, take some time to develop a very important, yet often neglected, aspect of brand management: Brand Interactivity.

Brand Interactivity involves engaging your market directly, creating a unique and personal exchange between them and your company’s personality. This can mean letting them personalize your product, or even letting them choose from several “flavors” of a particular acquisition channel.

Consider M&M’s.com, where customers can actually order a customized bag of M&Ms where messages they create are printed on each piece of candy and delivered to their door. You can even send in a photo and have your face printed on every piece. This is interactivity and brand attachment at its finest.

The idea of interactivity is also taking root with major online brands such as iGoogle and MySpace, where users can create their own dashboard and tweak multiple aspects of their experience. This not only delivers immediate value to these applications, it creates a personal and unique dependence from the user.

Even small business owners can find ways for their brand to interact with potential clients. Employees of Blend Production Group, a high-end web design and production firm, actually carry 4 different colors of their business card. When asked for a card, potential clients are delighted to pick their favorite color; attaching themselves in fond memory to the brand.

Start with your lead generation stage and consider ways to enhance your Brand Interactivity all the way to the post-purchase experience. When your customers are familiar, comfortable and personally attached to your brand, the moat around your market share will increase in both circumference and depth.

It begins at home with the typical barrage of doom-and-gloom media headlines. Then it’s augmented by descending figures on our bank statements. And finally, it’s sealed at the office by clear anxiety on our co-workers’ faces.  Another day of Wall Street woes will certainly fuel this eerie, Armageddon-type fear that has spread virally among business owners and employees in the workplace.

In a scared and frenzied world, now is the time for business leaders to maintain their perspective on reality. With credit tight, consumer spending down, and operation costs high, there truly is an element of survival that must be acknowledged in these times. Put more practically, this is probably not the best time for a corporate retreat to the Caribbean or an “investment” in a few 52″ plasmas for the office. However, it would be a mistake to jump on the bandwagon of paranoia and confirm the fear that will dominate your business if you let it.

Even in a deep recession, smart managers will remain calm and pro-active; not only to protect the fundamental business drivers, but also to lay a foundation for progress when things swing up again. Like a clever gardener who understands deeply his crop and the soil in which it grows; business owners must prune the fundamental business drivers and sow the seeds for future growth. If you can tighten your advertising aim, cut excesses, exploit cost-effective channels and win the hearts of your customers, you will do more than survive the falling sky, you will conquer it!

Here are some management and marketing strategies that will lead you to victory:

1.) Read Ed Roach’s piece on managing your brand with maximum impact during an economic downturn. Give “honor to whom honor is due.” (Rom 13:7); His advice on staying dedicated to Brand Values is priceless.

2.) Keep Your Liquidity Ratio High. This is basically your “cash-able” assets divided by your current liabilities, or expenses. Any business with a liquidity ratio of 2:1 is considered healthy, but depending on your industry, revenue and cost structure, you may want to keep this even higher. There are several liquidity ratios that measure the ability of your company to satisfy its current liabilities.  But the important thing is that you have enough cash to pay for any potential cost increases of your daily operations. With such a volatile economy, overhead and production costs can increase unexpectedly. Make sure you have the cash to keep things afloat until you reach the end of this economic tunnel. Every business is different, but you should know what a safe liquidity ratio is for your business in these risky times.

3.) Scale Back Advertising on Un-Targeted, Mass Media. You need to stretch every square centimeter of your marketing dollar for maximum return. Although mass media channels such as television and radio provide a wide-scale audience for your message, it comes at a price and often reaches unqualified ears, drastically decreasing your ROAS. Unless you have a long tradition of advertising in these channels, with methods to track referrals from these campaigns, and a reported trend of ascending sales from these campaigns, it may be better to use these dollars on more targeted channels. Of course, you’ll need to look at your own numbers before making any advertising decisions, but un-traceable marketing campaigns are less lucrative in the light of economic turmoil.

4.) Focus Your Marketing Dollars on Highly-Targeted Internet Channels. Search marketing campaigns and emails blasts to high quality lists (double-opt in, with demographic info and subscriber counts) are very cost effective and can generate “rich” leads for your business. If you’re already running PPC campaigns, do a through ROI assessment for each keyword and cut those that have consistently underperformed. If you’re running email campaigns, find ways to segment your lists and send the most relevant message and products to each segment. Internet marketing campaigns are often the highest performing in terms of ROI. (Also, shoot me an email if you have any questions about these advertising channels. I’m a Certified Adwords Professional and a project manager for high-volume email campaigns.)

5.) Think Locally at the National Level. Untapped gold mines can also be hidden in locally-focused advertising channels; considering you know enough about your most valuable customers. If you only sell locally, find out what community publications your customers read and consider advertising in them.  If you sell nationally, look at where most of your sales come from, and then compile a list of 3-5 lucrative communities. Check billboard and publication advertising rates in those communities. These opportunities are not only affordable more often than not, but also provide high Share-Of-Voice (not many competitors), which means your chances of being noticed are greater.

6.) Tap into the Social Networks of Your Target Market. Free marketing has never been so rewarding. Whether you want to learn more about your target market or engage them directly with your product or service, social networks are a great way to gain exposure without increasing the strain on your budget. If you’re in a B2B industry, consider trade shows and industry events as a way of meeting potential customers; direct contact and word-of-mouth can have a compounding effect on lead generation. If you’re in a B2C industry, consider weighing in on the forums and message boards that interest your customers. Start by targeting two community networks in which to contribute. Just making yourself known and contributing real value to your targeted networks can produce significant gains in the number of sales and leads generated.

7.) Encourage Your Team with the Spirit of Opportunity. Don’t let the tall tales of impending destruction infect your managers or front-line employees. When you personally stay optimistic and manage without anxiety, it will take root in your day-to-day operations and give way to real progress. For your managers, it will give them the mental relaxation to stay fresh, creative and ambitious about achieving your company goals and looking for new ways to market. For your front-line employees, it will keep their morale up and help them transfer quality service and comfort to your customers. This can potentially separate you from your competitors, so when good times re-emerge, you’ll be ready.

It’s time to shake up the creative juices with a very short piece of historical fiction. Although I started this story as a writing exercise that requires the author to eliminate all modifiers (adjectives and adverbs), the concept evolved into a little story worth its own time and attention. That no-modifier story will be coming shortly. Until then, read about Johann:

—–*—–*—–

Smoke rose from beyond the hills, poisoning the sunset and the constancy once promised by the Italian countryside, even more so by Spezia. Far from the markets and galas of Genova, Johann thought he could afford in these acres what he could not in the city, insulation from harm. Yet it seemed he was successful at evading only the recruiters of Rome, and not the smoke he feared so dearly.

The sickness in his chest was nostalgic, yielding to the day when messengers from Marengo first brought word of invasion; that Napolean’s armies had broken the Austrian defenses, and all men of able body were to report in the ranks of Archduke John.

His parents urged Johann to follow his brothers and report immediately, but after bitter resistance he saddled the family horse and fled. With the prospect of salvation in the soil-rich hills of southern Spezia, Johann was satisfied to forget both his father’s shame and his mother’s tears.

From that day until this final one, his fevered conscience was hidden but in the care of his vineyard, which had grown tremendously in just two years of guilty toil. Yet now the flames consumed his penance, and as the burning vines crackled in the valley, the day of Johann’s cowardice dawned.

The frightening sight of well ordered Czapkas pierced the horizon, and Polish troops poured over the hills toward him, setting fresh flames upon every row of his vineyard. Sensations flushed wildly through Johann’s body, and in his last moments there surfaced a crisp revelation of fear, and its vanity.

Therefore, I say: Know your enemy and know yourself; in a hundred battles, you will never be defeated. When you are ignorant of the enemy but know yourself, your chances of winning or losing are equal. If ignorant both of your enemy and of yourself, you are sure to be defeated in every battle.

-SUN TZU
From The Art of War

Before we can apply the wisdom of Sun Tzu, we need to start where strategy begins, with the identification of goals. Put very simply then: Your goal is to hit targeted profits via the procurement of capital in exchange for your products or services. But this Granddaddy Goal is just the root of the entire tree of financial, marketing and operational goals that are specific to your business. From cost and revenue goals, to public relations and supply chain goals, these components makeup the final picture of what you want: targeted profits.

It’s important to keep this perspective fresh in mind before you even think about strategizing. If we attempt to strategize without clear, measurable goals in mind, we will not identify success from failure. This is critical even more so when it comes to Competitive Strategy, where pride, inferiority and personal ambition can often cloud our achievement of the final picture, which again is your total profit goal.

In other words, your personal desire to be #1 in the industry, control 90% of the market share or put your rival competitor out of business, is of no interest to your stakeholders unless doing so achieves the profits your company has targeted for the year. If you’re interested in personal conquest, go play RISK or join World of Warcraft; Business is about making money. Your competitors are such, not because they want to be #1 in the industry or put you out of business, but because they seek the same profits you need to reach your goals; this is why they are indeed your enemy. With this very healthy preface in mind, let’s move on to the value of competitive analysis.

If you’re already engaged in regular and periodic analysis of your competition, there is a good chance that your business has shifted its approach from immediate, reactionary thinking to comprehensive, proactive strategizing. When you engage in competitive analysis, you gain greater sight over the battlefield and can now calculate one of the greatest barriers to victory when making decisions.

As indicated by Sun Tzu’s statement above, knowing the enemy is only valuable to the extent you know yourself. For this reason S.W.O.T. analysis, or some variation thereof, has become a popular tool for businesses to assess themselves in light of their own resources, environment and competition. A thorough self-examination is the first step to knowing where you stand against your competition.

After performing a full S.W.O.T. analysis of your own company, the next step is to identify your top two or three competitors. Any more than this will be too overwhelming for practical changes or insights to be drawn. Next, role-play as the customer of your top competitor. If possible, try to experience every stage of their sales cycle, from awareness to post-purchase. Be sure to write down your observations as you progress through each stage. With your own company’s strengths and weaknesses fresh on your mind, new ideas and strategies will pour forth effortlessly.

Every business has constraints, but a thorough competitive analysis will help you identify where to go to battle and where to lay low. Take their strengths and improve upon them. Illuminate your strengths where they hide their weaknesses. Tout your already existing strengths and pound their weaknesses (with tact and professionalism, of course). You get the point; Knowledge of the competition can be the greatest weapon in the battle for profits.

At the same time, a smart strategist will anticipate this same kind of examination from their enemy. For this reason you must carefully guard your most distinguished secrets. If a customer seems unnaturally curious about the core elements of your product or service, be mindful of the competition. Aside from strict information barriers, there are also creative ways to frustrate the intelligence efforts of the enemy; such as leaking vague information in hopes they will use it to make an erroneous strategic decisions. And once again, be wary of this same kind of counter-intelligence in your own efforts. Only use competitive intelligence when you know that it’s sound.

Competitive Analysis is one of the most insightful and empowering steps to reaching your profit goals. Shift your thinking from the reactionary to the proactive and victory is not far behind.

A few weeks ago I critiqued the popular RFM model of customer segmentation, mostly for its un-actionable results, but also for its abandonment of a customer-centric approach to marketing. Too often I observe, or am a recipient of, a marketing strategy built on the fatal assumption that the needs of a potential market can be sculpted to fit a company’s value proposition.

No doubt you’ve been on the sour end of this stick; a direct mail offer or sales pitch that is beyond your price range, or is simply irrelevant. This is the result of a marketing team that asked the wrong questions: “Who do we want our customers to be, and what do we want them to buy?” Smart marketers need to avoid the tendency of drifting into fantasy consumer land, where customers bend like wet clay to the desires of the Master Marketing Potter.

On the contrary, we live in a world of increased globalization, where savvy consumers know what they want, have deep access to product information, and are a single click from your toughest competitor. This is why customer-centric companies will continue to outshine and eventually bury those that start a campaign simply with their margin goals in mind.

Don’t misunderstand me, EVERYTHING in a for-profit business must come down to just that, profit. But hopefully your company is shooting for long-term profits and sustainability, as opposed to quick cash and a temporal existence. This being the case, we can see a clear distinction between those companies that develop their products and promotions according to the dynamic consumer market, and those that don’t. Consider Apple, Toyota, Wal-Mart. All companies that have consistently asked the right questions: “Who are our customers, what do they buy, and how can our Value Proposition meet their needs?”

The answers to these questions will most likely result in a “Persona“. Which, according to Leigh Duncan at mpdailyfix.com, is “a representative profile, which summarizes a key demographic target”. Whether or not you institute the use of Personas to drive your marketing efforts, the idea is worth wrapping your head around in order understand the customer-centric approach.

Successful companies are just as in-tune with the psychology, behavior, and needs of their potential market as they are with their own financial goals. This results in more than just increased sales, but it results in repeat customers, viral exposure, insight for relevant upselling, and the potential to forecast changes in demand to win market share.

My advice is to switch positions with your customers: Envision your products and services as wet clay in the hands of a dynamic and demanding Consumer Market. How malleable is your Value Proposition?

To achieve your goals in the Age of Information, there are few principles more vital than that of Relevance.

For our purposes, Relevance is: the ability to sift out the circumstances, variables, possibilities, and data that do not give insight into the progress of your goals, in order to make a decision that will achieve those goals based on what matters, and nothing else.

In the last half-century technology has given us access to monumental amounts of information as quickly as we want it. Radio and television were the first widely used mediums of information that broke the limitations of proximity. Before long computers were used to parse and extrapolate data, delivering new insights on whatever input the user provided. And finally, the Internet matched the achievements of radio, television, and computing, as well as gave the world a platform to effortlessly share its wealth of knowledge. From an information standpoint, society has bit off way more than it can chew; the foundation of Relevance is knowing what to spit out.

And while the broad subject of Goals (“What should my goals be?”), Relevance (“What affects the achievement of my goals?”), Limitations (“What prevents me from achieving my goals”), and Foundations for Achievement (“What are the methods of execution?”) are important for every individual who has goals, our discussion about Relevance thus far has been a precursor to the central topic of this post: Key Performance Indicators (KPIs).

A Key Performance Indicator is a super-concentrated piece of information that delivers maximum insight into the progress of your goals. In other words, Key Performance Indicators are the most Relevant factors in your decision making progress. If you have specific and clear goals for your business, then Key Performance Indicators do exist for those goals, whether you’ve been using them or not.

The concept of using KPIs has grown tremendously in the realm of Web Analytics, where mounds of Internet information is available and reported to website owners that are interested in how people use their website. Working for a company whose primary sales channel is the Internet, I am VERY interested in how people use our website. No surprise that I was introduced to the concept of KPIs by the works of Web Analytics Guru, Eric T. Peterson. If you have a website, intend to have a website, or like the idea of having a website I STRONGLY encourage you to read Peterson’s set of Web Analytics and KPI books.

Of course, even brick-and-mortar businesses should recognize the tremendous value of the KPI/Relevance philosophy. If you want to save time, react quickly to problems, identify channels for increased success, and make smart decisions, then you are interested in the principle of Relevance. Focus on the concentrated pieces of information that help you achieve your goals, keep that information readily available, and use it to drive your business decisions.

I’ll leave you with a line from Eric T. Peterson’s Big Book of Key Performance Indicators,

“Any KPI that, when it changes suddenly and unexpectedly does not inspire someone to send an email, pick up the phone or take a quick walk to find help, is not a KPI worth reporting.”

In hopes of jump starting my early morning brain (it’s 11:02 AM right now), this is my first step toward a daily habit of “preliminary mental exercises” intended to get my mind in the game and increase productivity at work, life and all therein.

I’ve decided to complete at least one mental exercise a day, as warm up to the heavy mental lifting that often follows during the actual workday. Below is a creative writing exercise picked up among a long list of exercises at Fictionwriting.about.com. This exercise forces creativity by requiring the author to make associations between seemingly unrelated words, chosen randomly from a dictionary. Here we go…

spoony: foolish sentimentality in love.

vituperate: to overwhelm with wordy abuse, to find fault with.

sapid: agreeable to one’s mind, to one’s liking.

(all these have the makings of a love story.)

Among her observable features there was nothing I first appreciated; no impression that lingered beyond a glance or quality that pulled her from a crowd. Yet it was just this, her lack of impact, that stirred my curiosity, and eventually my attraction.

“Why!? Why!?” I asked myself. There were hundreds of boring girls I’ve never had to ignore, yet this one took all my effort to remain unnoticed. It was neither her face nor her figure, or even the sound of her voice, although I would come to love all these qualities later. But it was the undefined, a general sapid quality that followed her and filled the air in which she stood.

My attraction grew so dense and unmanageable that I soon felt threatened by her. And our personal interactions had now been reduced to a series of awkward and minimal exchanges, induced mostly by cordiality. It’s embarrassing to recall, but at both home and work, no matter how my thoughts began they always ended with some spoony day dream.

Within a month from when I started to ignore her, my attraction was in striking bloom. And I was not only mindful of her unobservable features, but had grown to be fully aware of all those qualities that stun a man’s mind when he’s in love. It was around this time that I arose early on a Thursday morning, more absorbed in my infatuation than ever and anxious to see her. Thursdays were particularly important.

I jumped off the bus and hurried to the bagel shop, running just a few minutes late because of some unworkable hair gel, or hair. There she was, scurrying across the street with thoughts surely set on her Thursday regular, a warm cup of coffee and blueberry muffin. About 20 feet ahead of me she neared the bagel shop and stretched out her long, slender hand to open the door when… WAM! A large, burly man with the same speed, twice the weight, and half the awareness suddenly slammed into her. She toppled over without so much as a stumble, and the man’s face was instantly struck with startling concern.

It was when he gave his hand to apologize and help her that I witnessed the most shocking transformation of a human being as I had ever seen. His apology was met with a volatile and genuine vituperation of words that lasted nearly two minutes. As she spouted profanities and insults I watched as each of the qualities I had come to appreciate quickly melted away. Even her brightness started to blend into the environment, and she crawled back into that crowd of persons who don’t need to be ignored.

I’m always interested in new strategies that could deliver deeper insight into our customers and would-be customers. But since burying my head into the mountains of marketing and management resources available, I’ve noticed a danger that managers can often fall into… Paralysis-by-Analysis. This is the tendency to crunch and re-crunch the numbers from every angle before deciding to crunch them again, and if there’s time, take a course of action.

Good marketers will bind themselves to ACTIONABLE analysis only. Whether it be customer survey data, customer behavior data, industry trend data, competitive analysis, or any other analysis activity, let us keep this question on our minds, “How will this information help me market MORE accurately and effectively.

I put the emphasis on “MORE” because you can waste your time tracking metrics that tell you something you already know from an ACTIONABILITY standpoint. Even if some new insight into your customers can enhance your marketing efforts, it needs to be approached from a cost/benefit perspective. In other words, “Will the changes I make to my marketing program from this new insight produce enough ADDED profit to justify the resources (time, energy, money) it takes to retrieve that insight?”

I asked myself this same question when looking into the Reach/Frequency/Monetary (RFM ) model that is used by many catalog retailers. Hats off to Mark Sakalosky over at Clickz.com, who wrote an excellent piece that educated me on the RFM Model. In a nutshell, RFM is a way of segmenting your customers according to how much they spend, how often they spend, and the last time they purchased from you.

Lets take a look at some possible scenarios with the RFM Model:

Goal (1.) Identify all the customers who rarely shop but purchase big ticket items when they do. Develop a marketing campaign targeted to increase the Frequency of purchases, essentially converting the customer to a more valuable RFM segment.

Goal (2.) Identify all customers who haven’t purchased in a while, but purchase big ticket items when they do. Develop a marketing campaign targeted to increase the Recency of purchases, essentially converting the customer to a more valuable RFM segment.

QUESTION: Is there a marketing campaign on this earth that will accomplish Goal (1) without simultaneously accomplishing Goal (2) ? This is just one way that the RFM Model seems to produce truly un-Actionable data.

As Marketers, we need data that can be used to form a marketing offer that appeals to the attributes of a specific customer segment. To be fair, some of the information delivered by the RFM Model can do this. And it makes more sense for catalog retailers, who heavily depend on the orders of their subscribers to implement the RFM Model.

But before you go through the pains of tracking, mining, and retrieving purchase behavior and customer information, consider segmenting your customers based on information that can help you form specific offers. Here are some good segments to track:

(1.) Order Value: One of the 3 elements of the RFM model, segment customers according to their average order value and give them an offer for products in their price range.

(2.) Product Category: Segment customers according to what they’re interested in and give it to ‘em.

(3.) Geographic Location: Offer an “Alabama Special Offer”.

Of course, there are many ways to segment your customers into meaningful groups. The key word here is “meaningful.”

Another problem with the RFM Model is that it reverses the customer-centric rule of marketing. Instead of discovering the desires of your customers and offering products to meet those desires, the RFM Model starts with your desire to get all of your customers to the “highest score” possible by increasing their Frequency, Recency, or Purchase Value. This can produce irrelevant offers that are out of touch with what your customers want.

Unless you work for a catalog retailer or have already implemented the RFM Model, I would focus on segmenting your customers where your Value Proposition meets their needs. This is the insight upon which high-performance marketing campaigns are built.

P.S. – I would love to hear other marketers’ opinions about the RFM Model.