Thursday, July 28, 2022

Will this be your first recession rodeo?

In a previous article I referenced Mark Twain’s quote, “history doesn’t repeat itself, but it often rhymes.”  If true, then this is a poem about marketing in a recession by reflecting on lessons which I will attempt to freshen...Ok, no more poetry.


I recently revisited the WikiBranding articles I wrote during the 2008-2009 meltdown that spotlighted best practices from a range of marketers.  It struck me that those of us who guided businesses through The Great Recession can share lessons we learned with managers for whom this downturn might be their first.  (Bob Barrie, Stuart D’Rozario and I had just co-founded BD’M; learning how to navigate the recession was not a choice!) 

 


Who decides if we’re in a recession? 

 

Spoiler alert:  the consumer decides.

 

News stories about the economy lead us believe we’re in a recession – the “R-word” is having its moment.  

 

Economists might say otherwise, based on their often used definition of a recession, i.e., two consecutive quarters of falling GDP.  Other economists take a more holistic view to define a recession, e.g., labor market, consumer and business spending, industrial production, and income. 

 

Taking that wider view, payrolls increased in June, as did hourly wages, both growing faster than expected, as well as consumer spending.  


All good, right?  Hardly.

 

These broader data points miss a deeper point.  Consumer spending accounts for 70% of GDP, therefore when consumers feel we’re in a recession, their behaviors follow suit.

 

And that seems to be what’s happening.  


New polls show 58% of Americans believe the country is in a recession, up from 48% in May.  Unsurprisingly, consumer confidence has declined for three consecutive months.  And all this is happening in an environment where inflation is at a 40 year high and the average 401k is taking a beating.  It’s easy to understand why consumers feel anxious.

 


Lessons from the Great Recession

 

It’s worth taking stock of the present day and see how the forces that caused the Great Recession differ from what we are currently experiencing.

   

The 2008 recession was caused in large part by greed.  Lenders knowingly dealt toxic subprime mortgages and consumers gorged on easy credit to borrow and buy more than they should.  Financial regulators were asleep at the wheel, or worse yet, complicit.  (I’m dusting off “The Big Short,” Michael Lewis’ epic recount of that economic wildfire.)

 

This slowdown is different; it was caused largely by the pandemic.  In 2020 companies worldwide shut down, reduced output, and laid off workers.  Fast forward to 2022 and we see how this crippled the global supply chain which cannot keep pace with the post-pandemic spike in demand (i.e, “pleasure revenge”), leading to inflationary prices.  

 

So here are some lessons from the Great Recession that today’s marketing leaders may want to consider. 

 

Fear was the enemy:  


In 2008, in an environment of layoffs and home foreclosures, the vast majority of consumers were not at risk of losing their income or home, yet began cutting back on spending because they were uncertain about the future.  Back then, most automotive marketers defined affordability as the problem and set out to solve that through cut rate financing and lease rates.  


Hyundai did something different.  The company correctly diagnosed fear as the problem to be solved – the consumer’s uncertainty about might happen – and launched its successful Assurance program, allowing consumers to return their new car within a year if they lost their job. 

 

Discounting didn’t differentiate:  


Marketers in many categories attacked the affordability problem through unsustainable price cuts that eroded long-term pricing power.  Circuit City filed for bankruptcy, proving discounting alone was a race to the bottom.


Best Buy, a client of BD'M that was facing the risk of becoming Amazon’s showroom, took action on two fronts by matching online pricing while also adding unique value (and customer reassurance) through its in-store Blue Shirts and in-home Geek Squad.  Both actions helped Best Buy beat online retailers by offering something they could not – service and support.  

 

Customers have long memories:  


Many B2B companies slashed support budgets – e.g., downsized sales force, training, and customer service – as a way to cut costs, leaving their customers to dangle in the economic wind.  


Other companies found unique ways to get closer to their customers.  American Express launched Small Business Saturdays to support main street merchants hammered by the downturn.  Ford Dealers still recall how Ford Motor Credit was their lifeline during the Great Recession, extending much-needed lines of credit.  Allergan ran outreach programs to train physicians to run a more profitable medical practice.

 

Don’t let a good crisis go to waste 


If necessity is the mother of invention, then a recession is the father of cool objectivity.  A recession creates a rare opportunity to reevaluate strategies that worked in good times; a time to think how you might refocus and reprioritize your product portfolio, marketing and media mix for the road ahead.


BD'M worked with United Airlines to develop Travel Options – an a la carte pricing program that enable flyers to design and pay for the experiences they valued – a merchandising strategy United still uses today.

 

Don’t put innovation on pause:  


Customer, marketplace and competitive dynamics move too fast to make standing still anything less than a corporate death-wish.  Even in a recession, consumers have needs that remain unmet by the competition.  


Remember, Apple waved its magic wand and lifted our spirts (and opened our wallets) during the Great Recession with must-have iPhones and MacBooks.

 

Friday, July 1, 2022

We are the supply chain problem.


We can’t go a day without hearing, or sharing our own story, about a seemingly simple purchase that is taking eons to arrive, an impatience that has heightened in a next-day culture.

In casual conversations we hear people cite the cause as having something to do with lazy workers, politicians, Russia’s aggression in Ukraine, or myriad other heard-then-repeated explanations.

Turns out, we are the problem: Our business models, our disconnected systems, our labor practices, our personal shopping choices. We are the forces straining the system.

That’s why this WSJ video is so fascinating. It starts with the sobering truth, that global demand is greater than what supply chains can handle. From there it unpacks the thorny thicket of disconnected problems raging through the system – i.e., through factories, ocean shipping, ports, trucking, and distribution centers – all made worse by rapid changes in DTC business models and the resulting shift in consumer shopping behavior.

And, spoiler alert, this story might not have a happy ending. Our supply chains may be forever strained without a massive rethink of how we solve – and connect– the problems.

For those of us who don't have time to binge a 54 minute video, here are some key highlights:

Supply Chains scaled down when Covid hit (e.g., capacity, inventories, labor, etc), expecting that global consumer demand would contract.  It didn’t. 

Shipping ports are a fragile point of failure.  Our ports, most notably the Port of Long Beach here in the US), represent a singular intersection of the problems spanning ocean shipping, trucking, labor and consumer demand. 

We don’t have enough truckers in the US.  Nearly 10M people have a CDL license yet only 3.5M are driving. Why? They are poorly paid (new drivers barely earn minimum wage), are seldom home, and work 14+ hour days. 

Seismic changes in consumer behavior, acclerated by eCommerce and DTC models, are further straining supply chains, which must now deliver more products to specific addresses instead of mass deliveries to fewer big box stores. And as we know, more and more consumers embraced online shopping during the pandemic 

Distribution centers experience high employee burn-out. People working at these fast-paced, always-on distribution centers experience work-related injuries at a rate that’s nearly double coal mining, construction, and most manufacturing industries. (Turnover at many of Amazon’s distribution centers exceeds 100%.) 

We have a shortage of last-mile delivery drivers.  These are the drivers that more often than not are working for delivery partners subcontracted by Amazon and others. (This is why Amazon started its own package delivery company, which will in time be the largest parcel delivery company in the US.)

Tuesday, June 21, 2022

Are EVs in the dial-up phase?

Several comments on my x-country EV roadtrip travelogues questioned whether the growth in the charging network can possibly keep up with increasing EV sales (a question also posed in this CNBC article).

This is where the lesson from Moore's Law comes in handy: We should expect battery capacity and range to increase exponentially, concurrent with network growth.

There was a time when the internet was shiny and new that we connected to it via dial-up. (If you're old enough, you'll undoubtedly remember the noises your modem made and how loooooooong it took to connect!) Back then we had no clue about the next-gen technologies – connectivity accelerants such as Broadband, Bluetooth, WiFi – that would soon emerge and radically change how we'd access the web.

The point? It's risky to predict the future based on today's technologies and infrastructure.


Monday, June 6, 2022

X-Country in an EV: Day 5...the home stretch!

Today is Day 5 – and the home stretch! – of my x-country drive in an EV. 


I set out to see firsthand if “range anxiety” is a valid pain-point that will stop broader EV adoption.  After five days driving from Detroit to SoCal in my Mustang Mach-E, EV range and the ability to easily recharge is not a problem. 


Charging stations are everywhere.  


Electrify America and Walmart have partnered well to ensure a fast charger is never out of reach.  (Though there’s so much opportunity to upgrade the CX at the charging stations, as I’ll outline below.)


The connectivity between the FordPass app and my Mach-E’s NAV system is seamless – the app mapped the route and charging stations and sent that itinerary to car’s NAV system.  


Oh yeah, my “fuel” bill is cut by more than half!


But let’s face it:  Driving an EV long distance requires more stops.  

The Mach-E has a 270 miles range, yet I never stretched it to that limit, opting instead to charge every 200 miles or so.  This added time to our trip, but having additional short breaks made the trip less tiring. 


There is so much opportunity to improve the quality of the CX at charging stations.  


I’ll focus on Electrify America, only because, thanks to their network, every single stop I made across the country was at EA, and predominantly at Walmart Supercenters.


Electrify America’s charging stations are well branded, clean and easy to use.  But there are steps they can take to improve the experience and help OEMs scale EV adoption:


Reduce the failure rate:  We typically found two out of eight chargers were not working. That might be an acceptable fail rate, but not if the two that aren’t working are the only two 350 kWh fast chargers.  (To be clear, at no point did we pull in to an EA charging station and not find a working charger.)


Improve night time lighting:  Journey Mapping will likely show that people charging at night find themselves in a remote area of an empty parking lot.  How might EA help people feel secure, perhaps through brighter lighting, a 911 alert button, etc.


Add (and monetize) amenities:  Minimally, vending machines. Ultimately, a waiting lounge with TVs, WiFi, etc.  With eCommerce on the rise, therefore fewer people in the parking lots, I would imagine the shopping center owners will be open to new revenue opportunities. 


For those of you that followed this travelogue, thank you.  I’ll spare you more posts about the EV odyssey.  

Now you’ll just have to suffer through posts about my electric mountain bike.  :)

Sunday, June 5, 2022

X-Country Drive in an EV: What's unfamiliar is actually familiar.

Welcome to Day 4 of our cross-country drive in the Mustang Mach-E.

Austin is in our rear view mirror this morning, destination El Paso.  

A great foodie and music town, Austin remains one of my fav cities in America, bringing back tons of fun memories with Bob and Stuart from when we’d visit our clients at Dell. 



Sarah and I took this southerly route to visit my sister and Tesla-driving brother-in-law, Denise and Steve, who planned a great night at Llama Kid, an off-the-chart delicious Peruvian restaurant.  As an added bonus, Sarah got to spend time with Leah and Craig who were up from Houston for a wedding.  


And as much as Bailey is a great roadtrip companion, it was great to take a break from sleeping in dog-friendly hotels. (Bailey is eyeing me with scorn as I type this…)


Days 2 and 3 took us from Nashville to Dallas, followed by yesterday’s short hop to Austin.


I think I learned more about driving an EV these last two days than I had in the last two months. 


For example, late Friday night, somewhere along the long, dark stretch between Texarkana and Dallas, I experienced for the first time the frightening sight of the LOW BATTERY alert.  My palms started sweating.    


Then I recalled how many times the LOW FUEL alert in my gas-powered car would tell me I had only 50 miles of range left in the tank.  Same with the battery alert – 50 miles left.  The alert came on again at the 25 mile mark, and even though I knew this was simply information and not a dire warning, I was on high alert.  


I know what you ICE lovers are thinking:  “Sure, the range warning lights may be the same, but I have gas stations everywhere.”  True that.  But with the Mach-E, the App and NAV system conspire to get your car to a specific charge station with a pre-determined reserve of battery range.  So far, this hasn’t failed us.  (We made it to the Electrify America charging station in Royse City with 15 miles of range remaining – just as the App and the Mach-E had planned.)


There are other parallels to EV and ICE “fuel economy.”  Want to stretch your range in a gas-powered car?  Well, don’t speed, nor do you accelerate fast or brake hard.  Same in an EV.  


The one difference I encountered was the impact of hilly terrain on EV efficiency.  (Is it different than an ICE vehicle?  Not sure, but I know I hadn’t factored this in). There were parts of Arkansas and the Texas Hill country where the power efficiency dropped. (Our midwest friends will never have to worry about that!)


Now, I do recall in my first post from the road that I promised to talk about the “robots.”  We’ll get to that tomorrow, when we witness Sarah’s first experience with hands-free, autonomous driving.  


That, and what Sarah and I believe was a UFO sighting.  (How’s that for a S1E4 cliff-hanger?)

Friday, June 3, 2022

The Elephant in the EV Room: "Range Anxiety"

 Day 2 of our cross-country drive in the Mach-E.


We made it to Nashville from Detroit, but before launching into EV roadtripping, I have to give a huge shout-out to Nashville – such a beautiful and fun city! As a music lover and writer, I have no clue why I never spent time here. Sarah and I enjoyed great music and hanging with a bunch of aspiring musicians. (Bailey was solely focused on the BBQ.) We will return!
Which brings us to today’s EV update. Let’s start by addressing the elephant in the room – “range anxiety.” We made yesterday’s 550 mile drive from Detroit to Nashville with only two stops to recharge, each stop lasting around 35 minutes. EV charging stations are everywhere. Before owning the Mach-E, I never noticed them because, unlike gas stations, they’re not on all four corners of an intersection. Where they are is in your local shopping center parking lot. Electrify America, which has the most ultra-fast DC chargers across the country (ChargePoint has the most

chargers overall) seems to have chosen Walmart as its location of choice. Both charging stops yesterday, as well as today’s upcoming stops from Nashville to Dallas, were at Walmart Supercenters.
Before starting out yesterday I was admittedly worried about range. We packed light to reduce weight in the car; thought we’d have to limit AC usage (which draws on the battery); and drive the speed limit (horrifying!). But in truth, none of that was necessary. The app plans when and where to charge. The car displays current battery range and distance to the next pre-planned charger, leaving nothing to worry about. And if you don’t want to plan ahead, the NAV system finds charging stations as easily as it finds your Latte fix. On the back half of yesterday’s drive I lost all range anxiety and switched the Mach-E into “unbridled” mode. The performance mode didn’t degrade efficiency and range all that much. Today’s leg will be a bit longer as we travel from Nashville to Memphis to Dallas…fully unbridled…with AC turned up to 11. 🙂

Thursday, June 2, 2022

Zen and the art of an EV roadtrip.

I remember the anxiety I had when I cut the cord and switched from Cable TV to streaming.  Could I still watch live sports? Would I get all my favorite programs? Sure enough, with YouTube TV, the answer was a resounding yes to both questions. 


Now I’m cutting a new cord — the gas pump — as I take my new Mustang Mach-E on a cross-country trip.  And like the time I cut Cable TV, I'm experiencing the same questions.  Will it have the range for a long drive?  Will I waste hours recharging along the way?


Well, today is Day 1 on the Mach-E's first ever long distance drive, as we say farewell to Detroit and head to La Quinta. 



For those of you thinking about buying an EV, I’ll be sharing daily posts to help alleviate so-called “range anxiety.”  (Trust me, in pressing the start button this morning, I’m taking a big trust-fall to shed the comfy muscle memory of ICE vehicles.)


Today’s cool feature:  The FordPass app which plans the route and most efficient charge points, then sends the trip plan to the car’s NAV system.  I’m placing my full trust in the robots! (Including the robots that will drive the Mach-E the majority of the trip.  More about them later.)  


PS:  Robert M. Pirsig's book, Zen and the Art of Motorcycle Maintenance, had a great impact on me.  His story about growth and discovery while on a long-distance motorcycle ride still resonates with me today.


Bailey loves the “Frunk” where we’re stashing all her worldly possessions, such as kibble & dried sardines.



Will this be your first recession rodeo?

In a previous article I referenced Mark Twain’s quote, “history doesn’t repeat itself, but it often rhymes.”    If true, then this is a poem...