The Monkey Shack

On Monday, three top executives announced their retirement from Toyota. One of them was Mitsuo Kinoshita, one of the primary architects of the company's global expansion the past two decades. Incoming president Akio Toyoda, grandson of the man who founded the company, plans to focus on abandoning kakushin, or "revolutionary change," current president Katsuaki Watanabe's term for changing the way Toyota designed its cars and factories. It spawned technological advances, but in Toyoda's opinion led to cars that were often costlier to produce.

Toyota is struggling through the global recession that seems to have a bulls eye planted squarely on the backs of automakers. Though Toyota is in a stronger position than GM, it still forecasts a loss at the end of the fiscal year March 31. The company is stockpiling unsold cars in of Fuji Speedway and is moving forward with plans to shutter factories in both North America and Japan.

Watanabe spoke often about innovation kakushin, kaizen (continuous improvement) and kaikaku (revolutionary change). A corporate philosophy built on those principles pushed Toyota to become the world's largest automaker and earn a reputation for the best and most reliable cars in the world.

Now they seek to distance themselves from those philosophies and focus instead on thrift and efficiency. Only time will tell if abandoning some of the core principles will help Toyota stay afloat and reemerge out of the recession even stronger, or if they will only sacrifice what decades of work has built and impede the company in the long run.

Last week, Billionaire investor George Soros said the the world financial system has effectively disintegrated and the resulting turbulence is actually more severe than during the Great Depression, then compared the current situation to the demise of the Soviet Union. Donald Trump said we are in a depression earlier this month.

Scary opinions coming from two very successful and influential global business leaders. But before you get too freaked out, consider that the US Gross Domestic Product fell 46% between 1929 and 1933. The current recession has seen it fall 3.86%. Unemployment reached a high of 24.9% in 1933, right now we sit at 7.6%. The stock market fell 86.7% during the Great Depression and took over 25 years to break even. Today stocks closed at their lowest point since 1997, down 49.8% from October 2006 and more consistent with the recessions of 1973-74 and 2000-03 (48.2% and 49.2% respectively).

While the current economic situation is certainly severe and likely to recover anemically next year, to say we are in a depression is nothing more than hyperbole, lack of perspective, and panic. We are not even close to the turmoil of the 1930s, and data indicates we are not going to come even close.

Yet consumer fear continues to hold the recovery back. Consumers have lost faith in business executives so they turn to politicians, only to hear Obama constantly suggest, "If the stimulus doesn't work, there's more to come," which further destroys confidence. The broken record rhetoric encourages investors and consumers to hold off, to see if a better deal materializes down the road. Even Bill Clinton says Obama has been too negative and needs to change his tone.

Results from a poll released this morning by CNN show what is really at the heart of this economic downturn. 73% of Americans say they're very or somewhat scared about the way things are going in the United States, six points higher than in an October 2008 poll. Nearly eight in 10 say things are going badly in the country, with just 21 percent suggesting that things are going well. The survey also says that three out of four Americans are angry about the way things are going in the country.

But three out of four questioned say that things are going well for them personally.

A Keynesian "paradox of thrift" mentality is settling in. Paradox of thrift is an economic theory which simply states that when everyone saves more money during times of recession, aggregate demand falls and in turn lowers total savings in the population because of the decrease in consumption and economic growth.

Consider a leaky bucket. A hole in a bucket, representing savings, is made a little larger, corresponding to people becoming more thrifty. Initially there will be a larger flow of water out. But this cannot continue indefinitely. Equilibrium exists when the inflow equals the outflow, and the inflow has not changed. This means that the water level must drop so that the pressure forcing water out the bottom will be reduced. Less pressure means less outflow, and at some lower level of water equilibrium will be reestablished.

Three-fourths of Americans think things are going well for them, meaning that economic turmoil does not exist as much in actuality as much as it does rather in the perceptions of the surrounding economy. Consumers fear that it is a dark, stormy sky outside and that the bad weather somewhere else in the country may eventually come to affect them. That's why so many say they are angry and scared, even though they're content with their own personal circumstances.

This mindset is totally understandable. Even last week I was too scared to buy tickets to Disney World for my family for these same reasons until I realized the mindset that was causing me to be hesitant. It is a mindset that is becoming deeply entrenched, reinforced by constant negativity from the leaders who ought to provide optimism and perspective. The paradox of thrift mentality is having an unintended consequence in delaying a recovery and prolonging and making the overall situation worse than it really is.

Marketers have to be bold, both for their own survival and for the good of the economy, and unapologetic in their encouragement of commerce and consumer spending. Constantly slashing prices and offering insane deals only causes a consumer to sit back and wait for a getter offer they know is inevitable.

Despite assertions to the contrary, consumers have not lost their appetite for spending. They still have their money and are willing to spend. They are resilient. They want to participate in the marketplace. But right now they need reassurance and encouragement. And this is what marketers must do.

Get to work, it's not raining as bad outside as you think it is.

After winning the US Open last June essentially on one leg, Tiger Woods took the rest of the PGA season off to recover from surgery on his stress fracture and torn ACL. He hasn't played a tournament since. With the sport's biggest star gone, television ratings and interest plummeted. Now the icon who brought golf into the mainstream is bringing it back from its 8-month spell of irrelevancy, announcing yesterday that he will play in next week's Accenture Match Play Championship in Arizona.

But am I the only one who thinks it is more than just a coincidence that Tiger chose to make his highly anticipated return at a tournament sponsored by Accenture, seeing as how they are one of his major sponsors?

The "fight or flight response" is our natural instinctive response that prepares the body to "fight" or "flee" from perceived attack, harm, or threat to our survival. Its hard-wired into our brains, which means it is difficult to regulate when these instincts kick in. Because most of the businesses I know are run by humans (not all but most), business leaders and marketers possess these same instincts when they encounter threats in a business environment. You can fight it, or you can flee from it.

A large number of businesses have decided to flee from the threats posed by the current economic downturn. Marketers expect to cut an average of 3% from their 2009 budgets. Some would argue that lower customer spending leaves some businesses with no choice, resulting in slashed marketing budgets and eliminating experimental programs. Instead of fighting and addressing the threat (or opportunity) head on, they flee.

At best this "survivalist mode" reaction only protects existing share of voice, but more often it will see that share slip away and leave a brand poorly positioned to connect with consumers and separate from the competition in the eventual economic recovery.

Brands must be bold and recognize the recession for what it is, an opportunity to reexamine core beliefs and strengthen relationships with consumers. The recession brings about new customer attitudes, values, and behaviors. All it takes is one simple decision, to choose not to participate in the recession.

Last year I bought a Dell XPS laptop for over $1400. I upgraded the machine to meet what I needed, and bought during a sale so I thought it was a bargain at the time. But today I went online to discover they are selling essentially the same laptop for $949. Other consumers who purchased new vehicles a few years ago are kicking themselves when they see the discounts and incentives some automakers are offering right now.

The recession has forced consumers to carefully consider where they spend their money. Companies across the board have reacted by slashing their prices, leading consumers to then ask themselves if they’ll ever consider buying anything at full price again. Ask Taco Bell if it could ever move away from having a 99 cent value meal.

In 2005, GM became the first automaker to allow customers to buy vehicles at the employee rate. The “employee pricing” promotion worked in the short-term, boosting GM’s sales 41 percent in June 2005. Ford and Chrysler then followed with their own employee pricing plans the following month. But that short-term strategy did little to offer added value to customers, but instead cannibalized their brand. Detroit’s automotive industry is now on life support.

During the Super Bowl, one automaker took a dramatically different approach. Instead of cutting back its advertising, Hyundai bought the spots vacated by GM. How do you think an assembly worker at a GM plant felt when GM said we weren’t going to advertise during the game, and let an overseas competitor come in and rub it in their faces that one of their models was named North American Car of the Year? I can’t imagine morale was at an all-time high at the GM plant the Monday after the game.

But that is a post for another day. Hyundai also took the time during the game to introduce its “Assurance Program,” where customers could return their vehicle without any damage to their credit if they lost their income in the year after their purchase. Instead of slashing prices, Hyundai added value.

As sales in the automotive industry continued their precipitous drop, Hyundai posted 14 percent increase in sales in January. I wonder why?

In an email I received this morning, brand expert Martin Lindstrom noted, “As every business goes about cutting their marketing budgets, slashing development costs and sticking their heads underground, experiences shows that those who take a chance on doing the opposite will emerge on the other side of the recession with the brand fresh in the consumers mind. A brand is first and foremost an investment, so why jeopardize the many years and millions of dollars spent building emotional connections with your customers? Now is the time to show the world that your brand is a survivor, and when Noah is calling, you'll make it onto the Ark. There are only few spaces left.”

What do you think? Has Joaquin totally lost his drug-addled mind, or do you think he is up to some sort of mockumentary PR stunt?

In what may have been one of the biggest public relations blunders in recent memory, the CEOs of Detroit's "Big Three" automakers flew to Washington DC on private jets to request government bailout money. Then word leaked out that Citibank, also a recipient of $45 billion in government funds, had ordered and was about to finish the purchase of a luxurious $50 million corporate jet from a French manufacturer.

The media and public both skewered the Detroit CEOs and Citibank at the time for their use of corporate jets. Its like asking your nurse for caviar and champagne when you're on life support. The Big Three disbanded their fleets. Citi canceled their order for their jet. And in the wake of the unexpected public backlash, orders for business jets have taken a sharp nose dive.

Across the industry, new orders for private jets have almost evaporated, and hundreds of existing customers have sought to defer or cancel orders that were placed in higher-flying days. In addition to layoffs, some jet makers have cut production by as much as 56%. Cessna Aircraft Co. is laying off more than 4,600 people, or roughly a third of its work force, to cope with the sudden drop in demand for private airplanes of all sizes.

Now Cessna is fighting back. In a campaign that launches today, Cessna will run an ad that says, "Pity the poor executive who blinks," and gets rid of the company jet. "One thing is certain: true visionaries will continue to fly." In another ad, Cessna says "Timidity didn't get you this far. Why put it in your business plan now?" Instead of retreating, Cessna argues, companies should adjust and make sure they are flying the right type of aircraft.

So far, Cessna is the sole jet maker to take on the negative publicity with a high-profile ad campaign. Total cost of the campaign, developed by Dickerson-Grace in Denver, is unknown, but a spokesman for Cessna did say the company has "redirected more than half of our promotional budget to this campaign."

Reed Hastings, the CEO of Netflix has reached out to President Obama and asked him to raise the taxes of anyone that makes over million dollars to 50% per year! But what Hastings may not know is that he can already pay more taxes. Angry Netflix subscribers who would rather not have their taxes raised so they can pay for things like, umm...Netflix memberships, can print and then cut-out the sheets below and include them when sending back their DVDs.

The cut-out sheets can be downloaded here.

My wife and I recently had the conversation about whether or not we should keep our Dish Network subscription or just cancel it all together. We'd had the same conversation before, but we've never actually gone through with it. As soon as the topic came up this time I immediately began trying to think of all the possible things I would ever want to watch on TV but would no longer be able to. What if I wanted to catch the game one night? What about when my wife wants to watch The Hills or Jon and Kate Plus 8? What about when our 3-year-old wants to watch a cartoon on Disney Channel after breakfast?

I've made similar lists when we have had the discussion in the past, and each time we agree that we'd better keep Dish instead. But I'm no longer convinced that is true. Let's start with my son. He would rather watch Cars for the 15,000th time than watch anything else on TV. Second, he and I watched two episodes of Handy Manny and Mickey Mouse Clubhouse on my BlackBerry last night before he went to bed. As for my wife, she watches The Hills or The City online more often than she does on TV. And I'm never home enough to actually watch a full game (I didn't even watch a full quarter of the Super Bowl), but have instead gotten used to following games on my phone with ESPN's mobile GameTracker.

Go to the web site of any network and you can watch full episodes of pretty much any show, at your own convenience. I haven't seen a single episode of The Office on TV in two years, instead watching them online over the weekend. Same goes for 24. And with sites like Hulu or Joost offering free movies and TV shows, rarely do you come across anything on television that isn't also readily available in its entirety online.

Internet users in the U.S. viewed a record 14.3 billion videos in December alone. That's BILLION, with a "B" (cue up Dr. Evil). Hulu visitors watched more than 24 million videos the same month. Joost users viewed 818,000 hours of video in January, up 25 percent from the previous month. The future of television is online, and that future has in many ways already arrived.

That's it, I'm gonna call Dish Network right away on my phone. As soon as my son is done watching cartoons on it.

I know I said I was going to post my reaction to the advertising from the Super Bowl, but I felt the ads were so poor that it has taken me the better part of the week to stop shaking my head at the work my industry released on that stage.

Personally, I thought the Denny's ad was the best one from the game. It was funny and entertaining, had a great promotion behind it, and got people to think about having breakfast at Denny's again. I hadn't even thought about Denny's in years, but they solved that in 30 seconds. Over 2 million people went to take advantage of the offer. Denny's CEO Nelson Marchioli said "This free offer is our way of reacquainting America with Denny's real breakfast and with the Denny's brand." Nicely done.



The other one I felt was a successful ad were the two Hyundai advertisements, one of which showed Lexus and BMW's reaction to Hyundai Genesis being named North American Car of the Year. In step with last year's Super Bowl ad, this one resorted to changing perception of the automaker without the juvenile, throw a snowglobe in someone's crotch sort of humor that others have come to expect from the game. Instead they fixed the biggest problem with their brand, that no one could pronounce their name. In another spot, Hyundai introduced their "Assurance" program which allows buyers to return the car with no penalty should they lose their income at some point in the following 12 months. Another great program to add significant value, all done without discounting or cheapening their product.




At Richter7 we held our annual Ad Bowl party the Monday after the game and rated each ad. Here is a clip from our party as covered by a local television station. (Just click the image and be forewarned, KSL puts a preroll advertisement in front of the clip so be patient).

Video Courtesy of KSL.com