IMKTG REPORT February 18 2003

al berrios & co. IMKTG REPORT 02.18.03: Cingular, Pepsi, Media Influences, more

THIS WEEK'S CONTENTS ARE:
[1] JUST SAY IT: al berrios & co. Updates
[2] BRANDSTRATEGY: Wireless: Your Product, Access, is a Value-Based Product
[3] CONSUMERFOCUS: Black History Month & Pepsi
[4] MEDIA: An Analysis of How Media Companies Influences Consumers
[5] MANAGEMENT: Love Your Customers? Then Love Your Service Reps
[6] Events REPORT: The 2003 Cable Advertising Conference

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[1] JUST SAY IT: al berrios & co. Updates

>> "It took cable 20 years to finally figure out what business they were in." - Louis Chunovic, Senior Editor, Electronic Media

Good afternoon execs,

Sorry today's REPORT is late. Who suffers with once-in-a-decade snow: retailers. (What a waste of a perfectly good sales holiday). Who wins: media. With sweeps season in full swing, (ABC and FOX are both running Michael Jackson private life specials!), expect bigger than expected ratings. Just remember to account for it when paying for advertising.

Check out http://www.musiccdsettlement.com/english/default.htm for money owed to you by music industry. Yeah, the whole country is suing all labels and retailers for alleged fraud and you're entitled!

Finally, we've been working hard to create content that's exclusively online and useful to you. This week we launch 3 all new sections: "al berrios & co. Predictions", where every week, we will offer you our predictions on the potential direction of certain businesses; "al berrios & co. Directory of Software Providers That Affect Consumer Experience", that'll be updated regularly and hopefully help you compare and contrast for your business; and "Industry Events REPORT" reporting on events my team or I have attended. If you haven't already checked it out, www.alberrios.com has undergone more redesigning to make all this information easier for you to get. In the last few weeks, I've spoken with senior executives and prestigious academics who have read our insight, and all have agreed, it's great stuff.

Enjoys today's REPORT.

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[2] BRANDSTRATEGY: Wireless: Your Product, Access, is a Value-Based Product

Cingular claims to have a 3-pronged strategy to leverage its network: Communications (txt, email, pics, mpegs), information (internet, on-demand info alerts, maps, directories), and entertainment (ring tones, graphics, games). But as I've mentioned before, wireless service providers are in the business of access, not content. Consumers have other technologies available to them for content, and expect to only "reach out and touch someone" on their phones. Verizon has its "Get It Now" platform offering the same things, and now streaming video. Nokia has gone one better, and offered an entire gaming platform, similar to Nintendo's Gameboy, with cartridges and all. Cingular has has even partnered with CNN to offer news.

BOTTOM LINE: Last week, I provided an analysis of how content becomes a commodity. Repurposing content for other media that consumers don't necessarily consider media is a surefire way to continue that content-as-commodity trend. In a refinement of our prior recommendations to the wireless industry, al berrios & co. recommends to Cingular and Verizon Wireless to 1) pursue strategies that doesn't devalue the content you're trying to offer via your service. Understand that consumers interested in CNN via their cell phones most likely get CNN at home, via their PDAs, in-office TVs, or probably even via their XM satellite radios, therefore the key to getting them to pay another content fee is to differentiate using relevant (niche) content to attract; 2) Understand that other consumers still don't feel they even need a phone due to cost, let alone additional services, therefore, start directing your consumers to additional services through greater price flexibility; 3) Remember, thanks to Nokia, mobile phones can be lifestyle products, therefore differentiate your product by how it can enhance their social lifestyle, not their anti-social desires to play video games by themselves or get really annoying and loud ring-tones.

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[3] CONSUMERFOCUS: Black History Month & Pepsi

Last year, I made opinionated, yet accurate comments regarding the perception of MLK Day amongst East Coast black youths, between 6-20. My assessment was that they didn't care. This sense typically originates at home (assuming most other human behavior originates at home), leading me to speculate that their parents probably considered MLK just another holiday, not anything special. What a difference a year makes. As we're in the midst of Black History Month, a Harvard University study reveals that "School Segregation on the Rise Despite Growing Diversity Among School-Aged Children" and University of Michigan faces affirmative action issues. In addition, black Americans are still seeking reparations (they want compensation for the slavery suffered at the hands of white Americans for centuries in the form of tax credits), however due to increased geographic diversity, Harlem is no longer a central place of power for prominent black politicians to make their demands heard. Then there are the new media outlets for black Americans (read Events REPORT below). But most indicative of the tight rope we still walk when addressing this very politically sensitive topic (what? Black people?) is Trent Lott's racially tinged career and grand ouster, the raucous created by Vanity Fair's Madam Edna's highly inflammatory comments about Latinos (is the topic minorities?) and Shaquille O'Neil's culturally insulting, yet "sportsmanlike" comments about Yao (oh, right, the top is still about skin color.)

BOTTOM LINE: As the firm that discovered for Pepsi last summer that Ludacris was the #1 preferred artist among their target audience for the launch of their Pepsi Blue, I track every instance of their current public relations fiasco with the artist. The latest news is that they've met Russell Simmon's HipHop Action Summit Network's demand for reparations towards Ludacris and HipHoppers in general for Pepsi's insulting termination of Ludacris as a spokesperson (due to Fox's ratings-whore Bill O'Reilly's prior demands to boycott Pepsi for hiring such a bad influence to kids), in the form of a $5 MM donation to the Ludacris Foundation. It wasn't a case that Pepsi was ignorant or insensitive, but rather they were stuck in the middle, trying to please everyone, and misunderstood the consequences from taking either side. Because paying-off one side can potentially lead to requests for reparations from the other, Pepsi failed at managing this situation. A better solution would have been to address this consumer lifestyle, predominantly black in this case, and take into account all of the current events pointed out above all coming to a head simultaneously during Black History Month. Pepsi should have made it clear their decisions affecting consumers are skin-color neutral, completely ignoring social commentators not on the payroll and tabloid headlines, and a change in their strategic direction designed to increase sales, not offend anyone. It's surprising that a brand so adept at leveraging celebrity reputations better than their rivals fumbled so badly in this case. (IMKTG REPORT Opinion: But when it comes to blacks, Latinos, and Asians, some companies think they're too good to take the advice of those more experienced than them.) If we nationally recognizing any individual culture, lifestyle, or skin-color, as we, as marketers, do during Black History Month, are we risking alienating all others that make up this great and diverse country we all share? Black History Month may or may not be relevant to future generations, but what'll happen when black is clearly no longer the dominant minority? White History Month anyone? Happy Black History Month.

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[4] MEDIA: An Analysis of How Media Companies Influences Consumers

Continuing our two-part series, al berrios & co. has analyzed, interviewed, and tracked instances that explain how media companies shape and alter our perception of everything from what we buy to even when we do things. To get from media (point A) to influence (point B) we have identified the following transitional phases in consumers perceptions:

MEDIA INFLUENCE MODEL™:
Media (aggregator) >>> Personality (content) >>> Familiarity (reach + frequency; "familiarity breeds acceptance") >>> Trust = Credibility (relevancy) >>> Loyalty (admiration) >>> Influence

In an interview with New York commentator Deroy Murdock, a syndicated columnist with the Scripps Howard News Service and a senior fellow with the Atlas Economic Research Foundation in Fairfax, Virginia, IMKTG REPORT inquired about his thoughts on our media-influence transition:

IR: We spoke briefly on celebrity effects on people (i.e. most young people aspire to be like rap stars). Certain writers and other well-known and respected thinkers evoke similar aspiration from admirers. My question is, do you believe influence comes from a familiarity an admirer has with their "celebrity" or do you believe influence is purely the result of a "herd-like" mentality shared by multiple people?

DM: I guess it depends on the issue and the "expert," to what degree people listen to celebrities. I think people would be likelier to listen to someone like Robert Downey, Jr. urge people to avoid drug abuse since he has had such trouble in that area. While his celebrity may draw attention, his credibility as someone who has experienced something makes him worth hearing out. Barbara Streisand, however, does not seem to know a whole lot about the myriad issues on which she chimes in. Thus, with little credibility beyond the fact that she is famous, she is not taken very seriously when she opens her mouth. Another issue is whether or not celebrities have actual influence in changing people's minds. When Sean Penn returned from Iraq and attacked President Bush's policies on Saddam Hussein, he generated plenty of attention. However, I doubt most people made up their minds, one way or another, based on what he said. They may have tuned in to hear what he had to say, but my hunch is that he did not move many people toward his position.

IR: When or where do you believe audience attention span started to shrink? Why do you believe media has encouraged this habit, rather than attempt to reverse it?

DM: I can't give you an exact timeline, but TV certainly has something to do with it. I believe MTV's quick jump cuts and rapid edits probably shortened our attention span, as did "zapping" with the remote control. The constant distraction of network TV, cable TV, 900 channels, e-mail, Internet, fax, cell phone, pagers, beepers, junk mail, love letters, magazines, books, etc., etc., etc., etc. all serve to keep people too frazzled to focus on anything for very long.

In last week's first part, we discussed how media companies' expansion and consolidation accelerated their evolution into a value-based commodity. In their quest to attach a long-lost premium price to their product, they've done everything from reduce our attention spans to reducing our ability to question why things are the way they are. But due to faulty strategy, premium pricing can only be achieved through volume, resulting in tactics to increase their audiences. And to do this, media companies seldom inform, they must entertain (as discussed by leading journalists during the "Future of News Content" panel and reported in IMKTG REPORT Jan 14, 2003 Management section). However, that doesn't mean their influence decreases. Media companies claim to produce content that reflects their audience, which explains the dearth of quality journalism, since many audience members aren't interested in anything outside their personal worlds. After all, do you care about the same things your parents cared about? This leaves informative news coverage struggling to remain relevant to a new generation of viewers and readers. The lean towards entertainment is furthered as news organizations revamp anchor and writer line-ups to a younger generation of journalists, who didn't experience war, nor civil liberties issues, and grew up in a poorer educational environment. This cultural change naturally leaves plenty of room for bias and ultimately impairs consumers' ability to choose brands effectively. (Assuming all advertisers spent the same amount of money.)

BOTTOM LINE: Based on our assessment of media and content, can you, as an audience member, ever trust what media companies reports as being what audiences tell them (in polls, in interviews)? Yes, as long as you have more than one point of view from various media companies. As content companies, can you ever remain objective? No, because that's what differentiates you from the competition. However, you are responsible to your audience. Although censorship is extreme, you should have some standards that help you navigate the choices you have in what content to produce. As media buyers, can you ever realize the full value of your budget as media companies are able to influence their audience less and less? Yes, since the reason they influence less is less is because audience attention is increasingly segmented among more relevant, niche media & content choices. Economists and politicians, can you ever accurately forecast and understand constituents knowing that what they're thinking and doing isn't directly related to what they actually want to do, but rather what media companies have told them to do and think? Yes, as long as you are able to capture their behavior and attitudes in a media-less vacuum. People like that exist, but would they be a representative sample of the entire population? Our analysis leaves much to think about, and al berrios & co. is here to help you sort through the mess that is consumer perception.

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[5] MANAGEMENT: Love Your Customers? Then Love Your Service Reps

al berrios & co. concentrates substantial resources to understanding the consumer. Our relationship with them online frequently puts us in a position to analyze various brands and how consumers perceive them. A recent campaign for an apparel brand illustrated how important a strong sales force can be, particularly customer service representatives at retail level. These folks are your in-store brand advocates, walking & talking ads. Amazon will never replace you because people love face-to-face interaction with knowledgeable, qualified, and now, more frequently, objective personnel to help them evaluate their purchase decisions. And although many companies understand these fundamental tenets of retail-level employees, they continue to treat their lower rank and file as if they aren't doing all the heavy lifting when it comes to generating your sales. I've logged five long years of retail-level experience and can recount for you almost every single customer interaction at over 7 different retail environments, but in a continuing retail & human resource management series starting here, I will objectively analyze the current state of this component of your organization from an often over-looked perspective - the service rep's. Aside from establishing al berrios & co's expertise in advising retailers and their store managers, we hope on providing in-depth knowledge about what is currently happening at some of the largest employers in the country (that you won't read anywhere else), as well as recommendations on making your customer experience with your service representatives better.

BOTTOM LINE: The name of the game isn't about reducing your costs. If you could ship retail employees to third world countries like your manufacturing, I'm sure you would, but it takes American customer service to move $4 trillion bucks in goods and services. The problem that al berrios & co. has identified and will present to you with interviews, conferences, and analyses is that customer service and innovation at retail-level fluctuate to the dismay of shoppers. Whether a consumer is being waited on in a restaurant or can't find the product they want in a cluttered, messy aisle, this experience affects your sales. Oh, you know that already? But do your employees, who don't care until you're visiting a store? How can you address this situation cost effectively, while simultaneously improving moral, consumer excitement, and employee perception of being taken care of by the company at that level? Please continue to read this section for al berrios & co. advice and recommendations.

RELATED ARTICLES:
>> Re-Evaluating Your Entry Level HR Strategies
>> Re-Evaluating Your Entry Level HR Strategy: II
>> Re-Evaluating Your Entry Level HR Strategies: Unions & EEOC
>> Re-Evaluating Your Entry Level HR Strategies: State of Education

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[6] Events REPORT: The 2003 Cable Advertising Conference

Last week, I attended "The 2003 Cable Advertising Conference" hosted by the Cable TV Ad Bureau. The audience learned cable programmers' updated programming strategies, advertising issues, and the affects of competition. Some interesting take-aways:

1) stock traders anticipate decreased interest in the stock market post-war since investors perceive alternatives such as real estate and bonds to be safer.

2) domestic travel is expected to grow post-war (as opposed to international travel), with companies like Disney Theme Parks benefiting, due to decreased interest in traveling abroad for leisure.

3) Richard Parsons basically proved our point about content as commodity (thanks Richard) which we published last week.

4) FTC Chairman Tim Muris does have a serious agenda when it comes to deceptive weight loss advertising, but only proposes guidelines that cable broadcasters can use to determine whether an ad is deceptive, rather than anything as drastic as in-house screening systems in effect at network television. Tim means well, claiming consumers are defrauded out of billions of hard earned cash, but since advertising doesn't pay his bills, he's not seeing that fine line between information gatekeeper and just surviving in a bad ad economy.

5) There are at least three channels starting to compete with BET: Comcast/Radio One, Rev. Jesse Jackson and other prominent African American celebrities are forming an entirely new channel, and UPN is re-positioning as a home for the AA viewer. Why is this big news? It shows marketers increased interest in reaching out to African American consumers in new ways, as opposed to not wanting to spend much just 5 years ago. Naturally, look to BET to increase rates to in an effort to position itself as the CNN of reaching AA.

Look out for more fresh insight on the industry from al berrios & co.

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Disclaimer: The recommendations, commentary and opinions published herein are based on public information sometimes referenced via hyperlinks. Any similarities or likeness to any ideas or commentary from any other sources not referenced is purely coincidental. al berrios & co. cannot control any results occurring from advice obtained from this publication nor any opinion(s) conveyed by any reader of this publication.

(c) 2001-2005. All Rights Reserved. al berrios & company, inc. Published by al berrios & co. This Report may not be reproduced or redistributed in any form without written permission from al berrios & co., subject to penalty.

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