Spending Growth Slowed in January, Consumers Shifted to Savings Mode

Reuters
WASHINGTON | Mon Feb 28, 2011 5:44pm EST
By Lucia Mutikani

WASHINGTON (Reuters) - U.S. consumer spending barely edged up in January as households took advantage of tax cuts to rebuild their savings, suggesting spending would offer only a modest lift to the recovery in the first quarter.

Other data Monday painted a bullish picture of the manufacturing sector, with a gauge of factory activity in the country's Midwest hitting a 22-1/2 year high this month, which should help the economy weather rising oil prices and maintain its steady growth momentum.

The Commerce Department said spending rose 0.2 percent, the smallest increase in seven straight months of gains, after an upwardly revised 0.5 percent increase in December.

"The data shows that the manufacturing side continues to be extremely solid," said Omair Sharif, an economist at RBS in Stamford, Connecticut. In contrast, he said, consumer spending would be "only a modest driver of growth this year.

"We are going to improve as the year goes, but it's going to be a gradual uptick," he said.

New York Federal Reserve Bank President William Dudley, speaking in New York, cautioned against withdrawing support for the economy too soon.

Fed Chairman Ben Bernanke testifies before Congress on Tuesday and Wednesday and is likely to echo Dudley's comments. Some Fed officials have said the central bank should consider paring its $600 billion bond buying program aimed at keeping interest rates low and bolstering the economy.

FEELING THE PINCH

Consumer spending -- which accounts for 70 percent of U.S. economic activity -- rose at a robust 4.1 percent rate in the fourth quarter, making up the bulk of the economy's 2.8 percent annualized growth pace.

But the rising cost of gasoline and food has begun to eat into household budgets. The spending report showed consumer inflation rose at a relatively brisk 0.3 percent last month.

Taking the higher prices into account, spending actually fell 0.1 percent, the first decline in a year. That prompted some economists to downgrade their spending growth forecasts for the first quarter to as low as a 2 percent rate.

The report, however, offered little evidence that food and energy costs were sparking a broader rise in inflation.

A core inflation gauge closely watched by the Fed edged up just 0.1 percent. In the 12 months through January, this index rose 0.8 percent, just off a record low.

Tax cuts helped lift incomes by 1.0 percent in January, the largest rise since May 2009, as the government began to withhold less for the Social Security retirement program.

The lower tax withholding was part of an $858 billion tax cut package enacted last year. Economists expect the extra income to cushion consumers against high gasoline prices.

With spending tepid and incomes strong, savings jumped to their highest level since August.

MANUFACTURING POWERING RECOVERY

Separately, the Institute for Supply Management-Chicago's index of business activity in the Midwest rose to 71.2 -- the highest since July 1988 -- from 68.8 in January as new orders and deliveries and backlogs increased.

A reading above 50 indicates expansion in the regional economy.

The data, combined with other upbeat regional factory surveys, suggested a national manufacturing report Tuesday could show more strength than had been expected. According to a Reuters survey of economists last week, the Institute for Supply Management's index of national factory activity probably rose to 61.0 this month from 60.8 in January.

"The big surprise of this recovery is how strong and how robust the manufacturing sector has been," said Kurt Karl, head of economic research at Swiss Re in New York.

The data had a minimal impact on U.S. financial markets, where an announcement by value investor Warren Buffett that he was eyeing "major acquisitions" put stocks on track for their third straight month of gains.

U.S. government debt prices rose modestly, while the dollar fell to a 3-1/2 month low against a basket of currencies.

A third report showed the recovery continues to elude the housing sector. The National Association of Realtors Pending Home Sales Index, based on contracts signed in January, fell 2.8 percent. Pending home sales lead existing home sales by a month or two.

(Editing by Chizu Nomiyama)

Total Radio Ad Revenue Grows

Eric Sass 9 hours ago
MediaDailyNews
February 22, 2011

Total radio advertising revenue rose 6% from $16.3 billion in 2009 to $17.3 billion in 2010, according to the latest figures from the Radio Advertising Bureau.

This relatively strong performance decisively reversed the downward trend of previous years, and included consecutive quarterly increases of 6% in the first quarter, 6% in the second, 5% in the third, and 7% in the fourth, when total revenues rose to just under $4.6 billion. p> Calling the fourth-quarter results "the best comparative figures we've seen in over a decade," RAB President and CEO Jeff Haley attributed the growth to big increases in key categories, including automotive, where spot spending jumped 22% in both the fourth quarter and full-year results.

The other top categories included communications and cellular, restaurants, TV networks and cable providers and financial services.

In terms of specific companies, the biggest advertisers in 2010 included AT&T, Verizon Wireless, McDonald's, Comcast Cable, Safeway, GEICO, JPMorgan Chase, Toyota Dealer Association, Walmart and Chrysler.

Total political spending came to $105.2 million, driven by the hotly contested midterm elections in November. (Forty-nine percent of all political spending occurred in the fourth quarter.)

As far as ad formats, digital advertising led the way with a 24% increase for the full year to $616 million, while spot edged up 6% to just under $14.2 billion, network increased 3% to $1.1 billion, and off-air grew 3% to just under $1.4 billion.

The strong digital growth is encouraging, but it represents just a small fraction (3.6%) of total radio ad revenues. The medium has a long way to go to make up lost ground: 2010's total of $17.3 billion is still down 20.3% from its peak of about $21.7 billion in 2006.

'Idol' Still Holds Sway, ABC, NBC Thursday Tanks

MediaDailyNews
Wayne Friedman, Friday, February 18, 2011, 3:18 PM

Fox's "American Idol" may be down from a year ago -- but it continues to upset the Thursday night apple cart, as well as gain separation from its competitors.

ABC -- which used to be top dog on Thursday a year ago -- took another beating, for example. Every one of its Thursday night shows hit another round of season lows --- "Winter Wipeout" down 14% to a Nielsen 1.9/6 from a 2.1 rating. "Grey Anatomy" off the same amount to a 3.7/10 from a 3.9 rating, while "Private Practice" is down 8% to a 2.4/7 from a 2.7 number.

NBC went south -- and one better than ABC -- witnessing its lowest regularly original programmed night of the season.

"The Office" was down 6% to a 3.3/9 from a 3.6; "Parks & Recreation" sank 8% to a 2.3/6 from a 2.6; "30 Rock" was off 13% to 2.0/6 from a 2.3; "Outsourced" crumbled 12% to a 1.5/4 from a 1.7; and "Perfect Couples" was down 13% to a 1.4/4 from a 1.6. Only "Community" was able to maintain its number versus a week ago, at 1.8/5. That said, these results tie season-lows, as well.

Fox's "Idol" is now down around two full percentage points for its results show that ran on Wednesdays. Thursday's results left it with a 7.6/22, for example. Week-to-week, however, the most recent "Idol" result show was actually up a bit from a 7.3 rating.

Only CBS was able to give Fox somewhat of a fight.

While "The Big Bang Theory" and "$#*! My Dad Says" were down around 5% to a 3.7/11 and a 2.6/8, respectively, "CSI: Crime Scene Investigation" and "The Mentalist" both grew a little from the week before. "CSI" was at a 2.9/8; and "The Mentalist," a 3.0/9.

CW continues to have mixed results for its Thursday night. "Vampire Diaries" was strong again with a 2.0/6 in its key women 18-34 numbers -- ranking second, right behind "Idol" for the night. It also gained in total viewers and 18-49 numbers. "Nikita" did a bit better than a week ago -- up in total viewers to 2.1 million and in 18-34 and 18-49 data, each at a 0.8/2. But its key women 18-34 results still suffer, posting the same 1.0/3 as a week ago.

For the night among key 18-49 viewers, Fox scored a 5.5/15, followed by CBS at a 3.0/8, and ABC at a 2.7/8. Univision was tied with NBC, each with a 2.1/6; and CW at a 1.1/3. Fox also won among younger 18-34 viewers, with a 4.3/13. Univision was next at a 2.4/8, followed by NBC at a 2.4/7, ABC at a 2.2/7, CBS at a 1.8/5, and CW at a 1.2/4.

Ad Spending Confidence Reaches Highest Levels, Especially For Mobile, Online, Cable TV

MediaDailyNews
by Joe Mandese, 6 hours ago

The optimism of ad executives, as measured by their plans to increase spending over the next 12 months, is now greater than it was at its pre-recession peak in the spring of 2007, according to the latest installment of a semi-annual tracking study of the sentiment of advertisers and media-buying executives. The finding, which is based on surveys conducted by Advertiser Perceptions Inc. of top ad executives conducted in the fourth-quarter of 2010, shows that significantly more advertisers and agency executives plan to increase their budgets over the next 12 months than those who say they plan to decrease them.

Using the spread of percentage points between executives planning to increase or decrease their ad budgets as an index, AIR says ad confidence now stands at an index of 10, the same as it was in the spring of 2010, which is two points higher than the industry had at its pre-recession peak in the spring of 2007.

The current ad spending sentiment is 15 points higher than the spring of 2009, when API's Advertiser Optimism Index reached its low point of a negative five index.

"Advertiser optimism generally foreshadows increases in ad spending," stated Ken Pearl, CEO of API. "After three waves of improving and now steady optimism, the outlook for advertising in 2011 is positive overall. That is especially true for targeted accountable media, such as, digital, mobile and cable."

He added that while overall confidence is improving, the new data shows a "continuing decline in the number of media brands being considered - and bought - for advertising across all media.

Mobile media has the highest ad confidence level of all media, with an index of 66, followed by digital/online media, which has a current index of 59.

With a current index of 15, cable TV is the next strongest medium, but broadcast TV (-1), magazines (-12), and newspapers (-31), still have more downside than upside expectations among ad executives responsible for buying media over the next 12 months.

Think Reciprocity

MediaPost's Engage Boomers
By Jim Gilmartin Monday, February 7, 2011

Contemporary theories of marketing are increasingly defined in the context of collaborative relationships between a marketer and consumers that operate on behalf of meeting needs of the latter. But honoring this idea is often problematic because a continuing focus on sales quotas pressure marketing and sales staff to concentrate more on making deals than on helping people meet their needs and fulfill their aspirations.
At play here is the issue of corporate culture and the challenges involved in synchronizing the espoused corporate values, marketing and operating policies and practices. It also depends on redefinition of rules and terms to which staff and management have long become accustomed.

One of the terms begging redefinition is marketing. The Cluetrain Manifesto defines marketing -- or what its authors think it should be -- as "a conversation." However, too often marketers frame the contents of a monologue rather than the outlines of a conversation. That is how it was in marketing -- when the marketer had virtually full control over the message and the medium. To optimally benefit from a company brand a company needs to assume the role of conversant instead of message master.

There is a need to understand what it takes to generate and maintain authentic, enduring and mutually satisfying conversations with customers and other stakeholders. Our colleague David B. Wolfe author of Ageless Marketing and Firms of Endearment has identified three elements that form the foundation of such conversations:

Conversational reciprocity. Relationships work best for all parties when each party evidences to the other that he's not only listening, but also is being influenced by the other party. The spirit of conversational reciprocity should be liberally present throughout a brand's message universe. Little will do better to convey a company's standing as a ready collaborator with customers in fulfilling their aspirations. It's a matter of creating marketing messages that talk "with" rather than "at" intended audiences.

Reciprocal empathy. Empathy is "identifying with and understanding another's circumstances, feelings and motives." However, traditional marketing only takes into account the marketer's empathetic connections with customers. In brand husbandry it's important that empathetic connections flow bilaterally -- that a consumer empathetically connects with the brand and vice versa.

Reciprocal vulnerability. Marketers want consumers to let down their defenses and be vulnerable to their product messages. However, marketers ignore the need in satisfying relationships for sustaining mutual vulnerability. Reciprocal vulnerability humanizes relationships and helps to keep the "me" in balance with the "we" in relationships.

The result of the successful adaptation of these three elements is mutual trust which is better viewed as a report card on how well a marketer is expressing those elements than as an isolated objective.

To have a strong presence a brand must stand for something that is meaningful to consumers aside from its functional attributes. It must symbolize values and beliefs that resonate with consumers' own values and beliefs. In telling its story, a company needs to project their values, but a thin line exists between brand messages that reflect an organization's social conscience and messages that are merely expressions of braggadocio.

Maslovian resonance (aspiring to self-actualization) considers life as being processed à la B-cognition (for being-cognition) by self-actualizing people. We spend most of our lives processing the world through D-cognition (for deficiency-cognition) said Maslow. Typically traditional marketing takes its cues from the D-cognition domain. For that reason marketers see themselves as "curing" consumers' deficiencies. This presents unfamiliar challenges. How do you approach consumers who have no sense of deficiency in a Maslovian sense their lives? The answer is creating a culture that serves as a gateway for being (meaningful) experiences that support achieving customer life aspirations.

The Maslovian orientation can give a company a formidable competitive distinction that is likely immune to erosion by competitors. However, reaching that state depends on a profound understanding of the differences between marketing based on consumers' deficiencies and marketing based on consumers' beingness.

Finally, understand and build your campaign upon the principles of Ageless Marketing. As appropriate and depending on your product or service, as you execute your marketing efforts fashion your messages to:

Reflect your product or service as a gateway to meaningful experiences, and aspiration fulfillment
Connect your brand with core human values and motivators (identity, connectedness to others, purpose, adaptation and preservation of well being) that are the fountainhead of all behavior
Reflect images/copy of who customers want to be not who they are -- an introspective context
Reinforce your product or service as being in touch with your customers values and motivators and that you want relationships them
Reflect your product or service as providing/supporting a sense of meaning and purpose to a customer's life
Reflect your product or service as meeting desires for a simpler and balanced life
Reflect your product or service as offering novel experiences to help maintain a sense of vitality
Reflect your product or service as offering opportunities for learning for pleasure, personal growth and improved skills
Reflect your product or service as offering productive pursuits and self expression to achieve a vibrant physical and mental self

3 Keys to Competing

Feb. 2 2011 - 11:33 am
FORBES
By AUGUST TURAK

When we consider “the competition” as other companies offering similar products we are only partially right. There are three levels to competition and our direct competitors are only the first and most obvious.

The second level of competition is indirect competition. In the early days of spreadsheets, VisiCalc and Lotus 123 were first to market. A Wall Street Journal article at the time argued that both companies were so busy competing with each other that they failed to notice that most people still didn’t think they needed any electronic spreadsheet. The challenge for both companies was not being the best spreadsheet, but generically selling the category “spreadsheets.” VisiCalc’s competition was not just Lotus, but everything else besides spreadsheets that a client could buy.

Selling a category in order to sell a specific product into that category is what I call a “two step sale,” and though this indirect competitive challenge is most acute for new ideas it never goes away. Long after becoming a huge company, Campbell’s was still spending millions of dollars touting “Soup is Good Food.” Campbell’s realized that the real competition was not the soup made by Heinz or Progresso but everything consumers eat instead of soup. Campbell’s spent big dollars generically competing for soup despite the fact that this also benefitted its direct competitors. When I worked for MTV, our competition was not merely our direct television rivals, but anything that indirectly competed for the consumer’s leisure time.

Indirectly competing for “budget” is as important as getting the deal once the budget has been allocated. Indirectly moving a category from “nice to have” to “must have” is critical even if once in a while it means losing a deal to a direct competitor piggybacking on all our work.

The third level of competition is the most insidious, most often neglected, and hardest to overcome. In most cases we don’t lose the deal to direct or indirect competition. We lose deals because the client does nothing at all. Our number one competitor is procrastination and procrastination is just another word for fear of change.

Despite the fact that many self appointed “change agents” think there is something inherently irrational or even pathological about the fear of change, there are damn good reasons why it has survived the incessant pruning of natural selection. All change is not good, and this is why the adage “No one ever got fired for buying IBM.” has persisted for so long in the mythos of business.

We started our business on a few thousand dollars and a shrink wrap accounting system. Seven years later an Israelis company acquired us and that same $149 accounting system for millions of dollars. Despite the fact that we rapidly outgrew that accounting system, cursed it daily, constantly looked at wonderful alternatives, and even allocated budget, we never replaced it. Why? Fear of change.

We were terrified that something would go wrong during the transition that would bring our business to its knees. We were afraid to find ourselves with the worst of both worlds: an old accounting system no longer functioning and a new one not yet on line.

All authentic change goes through three stages:

1) Anticipation

2) Regression

3) Consolidation

Anticipation is the exciting stage of change where we anticipate the benefits and make our transitional plans. Regression is when things get worse before they get better. Consolidation is when we turn the benefits of change into business as usual.

The problem lies with the regression phase, and our fear is that this regression will become permanent. When we quit a good paying job to start a business we anticipate that owning our own business will mean more fun and more money. However we must be prepared for a regressive stage where we initially make less money and have less fun than we did at our old job. Our greatest fear is that if the business fails this regressive stage will become permanent. We end up with the worst of both worlds; no job and no business.

It is not change per se that people fear but more specifically the fear that the regressive stage will become permanent. As a result, we try to ring out the risk by looking for an evolutionary change model that skips over the regressive stage. However this is like expecting to change your golf swing without getting worse before you get better. Taking a step backwards in order to take two forward is an essential aspect of authentic change.

The reason why all those accounting system sales reps vying for our business never got a sale is that they never addressed our fear of the regressive stage of change. Instead the salesmen repeatedly discounted their products.

As an old salesman, running a sales driven company, nothing infuriated me more than watching salesmen discounting perfectly good products because it was easier than uncovering and addressing the real objection. Yet even when I explicitly told these reps that they were wasting my time and their money discounting, they never addressed our fear of change and consequently never got the sale.

Fear of change is the number one competitive challenge. Offering the kind of hand holding services that guarantees a successful transition from anticipation through regression to successful consolidation is the only way to overcome the procrastination that kills the vast majority of potential deals.

Whether you are in sales, marketing, or management take an inventory: Does your strategy take into account all three levels of competitive pressure? Are you planning for direct, indirect, and fear of change based competition? It is not enough to have great product in a compelling category. Our challenge is making sure that our company takes its rightful place among that pantheon of elite companies that never cost a buyer his job.