Why You Should Keep Advertising

More than 48% of U.S. adults believe that a lack of advertising by a retail store, bank or auto dealership during a recession indicates the business must be struggling. Likewise, a vast majority perceives businesses that continue to advertise as being competitive or committed to doing business.

The latest Ad-ology Research study, “Advertising’s Impact in a Soft Economy,” analyzes consumer perception about businesses that continue to advertise, and those that do not, in the current economy.

The study finds advertising appears to play a key role in consumers’ view of how a business is doing, and by not advertising, businesses may be sending a warning signal to current and potential customers.

“It is critical to advertise in the current economic climate, to maintain long-term positive consumer perception of your brand,” said C. Lee Smith, president and CEO of Ad-ology Research. “Advertising not only assures consumers of a business’ reliability in a soft economy, but it can influence where and what they buy, especially when the ads address concerns about value,” Smith said.

Other key findings:

• 40% of consumers use coupons more now than a year ago
• Most consumers are as willing or more willing to pay more for ‘healthy’ or ‘organic’ products than they were a year ago
• A ‘deeply discounted price’ was the number-one factor that would make consumers more likely to purchase a big-ticket item (+$1,000)
• TV, newspaper, direct mail, and Internet top local media from which consumers saw/heard an ad within the last 30 days that led them to take action
• Store Web sites ranked second only to search engines as the way consumers research products and shop online

Gov. Huntsman Nominated as Ambassador to China

Yesterday Pres. Obama nominated Utah Governor Jon Huntsman to be the next Ambassador to China. I have met the Governor several times in my former capacity as Chair of the Wharton School’s worldwide alumni association. Huntsman’s amazing father, billionaire Jon Huntsman, Sr., is the head of Wharton’s Board of Overseers. Having spent a lot of time in Asia, the Governor speaks fluent Mandarin and presumably has a strong understanding of the bi-lateral issues between us.

This appointment is important on a number of levels. Of course our relationship to China is overwhelmingly key to our economic recovery and future success. We have become a huge importer of their stuff.  They are pretty much the US’s biggest lender. And of course they are one of the biggest economies in their own right. In the small and midcap world I live in, Chinese companies have gone public in the US in record numbers through reverse mergers and other IPO alternatives.

It is also notable in that Huntsman is a Republican who has been talked about as a possible Presidential candidate. Some may think Obama is sending him to China to keep him out of the 2012 race against him. I can’t imagine Huntsman is that dumb and doesn’t realize if that was the motive. Presumably he thinks Obama is a shoe-in for 2012 and he is waiting for 2016.

The question is whether the Obama Administration will keep him fully informed about its policy development efforts when he is a potential future rival. One hopes they will. The other question is whether Huntsman will be the loyal message deliverer or have his own approach to things. His predecessor, Clark T. Randt Jr., an old buddy of ex-President George W. Bush, was notable for no one noticing him. One would think Huntsman will be more high profile. It will also be interesting to see how his relationship develops with Secretary of State Hilary Clinton. Huntsman’s dad served in the Nixon Administration with former Vice President Dick Cheney, so we’ll see….

In Line with Recent Stock Market Uptick, 60 Percent of Consumers Will Maintain or Increase Online Spending Over Next 60 Days

Performics, the performance marketing expert inside Publicis Groupe’s Vivaki Nerve Center, has released the first month’s findings from its “2009 Online Buyer Economic Trend Study.”

According to the study results, online retailers may still find themselves well positioned in this depressed economy, with 60 percent of respondents saying they will spend equal or more money online in the next 60 days than they did at this time last year. Marketers who sell daily household items, in particular, could see sales increase by offering consumers deals to buy online, because two-thirds of consumers say that, while faced with cutting spending in most areas, daily household items remain a necessity.

“Despite difficult economic conditions, consumers still seem willing to spend money online, especially when offered incentives through coupons and other online discounts,” said Nick Beil, CEO of Performics. “These findings suggest marketers must implement actionable strategies that more effectively reach cost-conscious consumers to generate sales throughout the recession.”

One key behavior noted in the April survey is that consumers often turn to the Internet as a way to save money because it enables them to compare prices and find discounts. Other findings include:

• Nearly 70 percent of respondents used coupons when making purchases to save money.
• More than one-third of respondents say they are more likely to click on banner ads or sponsored search listings while shopping online to find better deals.
• Eighty-five percent of respondents say the recession will have a lasting impact on saving and spending habits.
• More than one-third of those receiving a tax refund will be applying it to debt.

“Consumers spend and save very differently in this economy,” added Beil. “Now more than ever it is imperative that marketers understand consumer behavior and the most effective campaign triggers to thrive in any environment. This ongoing study will ensure Performics and our clients stay in touch with rapidly changing consumer attitudes and behaviors. It is just one of the ways we’re working to harness the potential of the evolving online marketplace.”

SEC Targets Countrywide’s Mozilo

Remember that really tan guy appearing on all the cable news shows when the credit crunch began? That was Angelo Mozilo, head of one of the biggest lenders of subprime mortgages in its day, Countrywide Financial. Reuters has now confirmed that Mozilo is under SEC investigation for civil fraud apparently resulting from alleged insider trading and filing misleading reports to their shareholders and the public. Bank of America, which bought Countrywide last month for about $2.5 billion, confirmed the report.

In October 2006, as things were beginning to get bad, Mozilo changed an otherwise legitimate pre-arranged stock selling program to increase the amount of shares being sold. The question is whether that decision was based on material nonpublic information. Mozilo denies insider trading. Question is whether he will become a poster child of the subprime meltdown. We shall see.

Save Money. Live Better.

It is no surprise that Walmart is faring well in the current recession. Its relentless focus on low prices plays perfectly to the growing number of shoppers in distress. The latest IRI Times & Trends Report, “Walmart Stores: Helping Consumers Navigate a Transforming Economy,” reveals that Walmart’s success story is much more nuanced than simply a focus on low prices.

“By the mid-2000s, Walmart’s omnipresence had begun to work against increasing sales and income as cannibalization became a concerning issue. Walmart needed a new plan,” says IRI Consulting and Innovation President Thom Blischok. “The strategies enacted by management represent an outstanding example of a retailer with an acute sense of shoppers’ evolving needs and the ability to change to meet those needs.”

Walmart has redefined and rewired many of the ways it touches shoppers, focusing on layout, convenience, new media and sustainability. Just a few examples of the retailer’s new approaches are:

• Walmart’s “Win, Play, Show” merchandising strategy has improved the efficiency of assortment and merchandising investment.
• “Fast, Friendly, Clean” demonstrates Walmart’s renewed focus on speeding up checkout time, ensuring associates are friendly and providing a less cluttered shopping experience.
• A leader in recognizing the potential of new media, Walmart has created the ElevenMoms network of influential bloggers. In addition, multiple beta sites on Walmart.com focus on issues and solutions important to shoppers, and its presence on Twitter, Facebook and LinkedIn touch younger shoppers tapping into social media.
• Walmart’s aggressive sustainability goals include becoming 100 percent supplied by renewable energy, creating zero waste and selling a greater range of sustainable products.

In addition, Walmart has redoubled its private label strategy. Its “Great Value” label is the nation’s largest food brand, with products across more than 100 categories. Great Value combined with Walmart’s other private label brands account for just under 25 percent of Walmart dollar sales for categories that IRI measures.

The IRI report outlines the following action steps that manufacturers can explore to capture incremental growth within Walmart:

• Partner with Walmart to understand key consumers at the market level and optimize assortment and promotional programs against these segments.
• Develop best-in-class marketing, pricing and promotion strategies to ensure maximum relevance and impact among fiscally weary U.S. consumers.
• Re-evaluate pricing strategies to ensure alignment against value needs of key consumer segments.

CPG retailers should consider the following action items within competitive strategies with respect to Walmart strategic initiatives and growth trends:

• Increase frequency and focus of consumer and market assessments; identify and implement strategies to drive trips and basket rings among key consumer segments.
• Drive purchase behavior through solutions-based promotional and merchandising strategies with a clear value proposition.
• Develop optimal assortment and merchandising focus by market to reflect changes in purchase and consumption rituals.

“It is easy to dismiss Walmart’s success as based solely on its ‘Everyday Low Prices’ focus,” adds Blischok. “While this is a critical component of the retailer’s success, it is just one of many. Walmart’s management has done a superlative job of understanding shopper attitudes and behaviors and continuously evolving Walmart’s value proposition to meet changing shopper needs. This is especially evident during today’s recession. Walmart continues to post healthy penetration and average basket gains.”

Dreier Pleads Guilty, Stays in Apartment

Lawyer Marc Dreier, former head of then 250-lawyer firm Dreier LLP, has pleaded guilty to all 8 counts of money laundering, securities fraud and other stuff which were brought against him. He will be sentenced July 13. His lawyer Gerald Shargel says there is no deal in place but that Dreier has cooperated in helping find assets and such.

While he awaits sentencing, his $50,000 a month security guards (he and friends are paying for it) will continue to watch him at his NY apartment. According to Bloomberg, he signed an agreement authorizing them to use lethal force if he tries to escape.

In a prepared statement, Dreier admitted to the scheme. Bloomberg quoted him as saying, “I engineered a scheme to issue and sell fictitious promissory notes purportedly issued by companies in the United States and Canada.” He has now admitted to essentially bilking a bunch of hedge funds out of about $400 million. Where was the due diligence guys??

Judge Jed Rakoff said that Dreier “has disgraced the honorable profession of law.” Keep an eye on civil cases that might be brought against Dreier and/or his cohorts by accounting firm Berdon LLP (he allegedly forged financial statements with their name on it) and all the various creditors of the law firm in its current bankruptcy. Sheesh.

Journalist Saberi Apparently Freed

The Wall Street Journal online just reported that an Iranian appellate court has suspended US journalist Roxana Saberi’s sentence and reportedly she has been let out of prison. She had previously been sentenced to eight years in an Iranian jail.

Saberi, 32, has dual citizenship in the US and Iran, and claims she was there as a journalist working on a book, among other things. She was accused, then convicted, of spying. Neither she nor her lawyer were permitted to be present in the trial, reportedly.

Sensing the major potential political fallout, Iranian President Mahmoud Ahmadinejad ordered the case appealed. He is facing his own challenges at home as his boss, supreme leader Ali Khamenei, publicly criticized him recently, and it is not clear that Ahmadinejad will have Khamenei’s support in upcoming elections.

Given substantial economic hardship in Iran, some there are saying Ahmadinejad’s hard line on things is not helping improve things for the average Iranian. Could this small step of releasing Saberi help? Presumably. It will definitely be a feather in the cap of Obama and Secretary of State Hillary Clinton, who pushed hard for this. I’ll believe it when she’s back on US soil.

This matters to the US economy because the stability of the Mideast is a key component of our ability to grow without fear of major international strife.

Economic Decline Estimated to Continue Throughout 2009

Even though the market has rebounded over the past 30 days, experts are estimating that the economic decline will continue in the United States throughout the remainder of 2009.  This information is coming from the nation’s purchasing and supply executives in their spring 2009 Semiannual Economic Forecast. Expectations for the remainder of 2009 have weakened in both the manufacturing and non-manufacturing sectors.

Manufacturing Summary

While 15 percent of respondents predict revenues to be 13.7 percent greater in 2009 than in 2008, an overall revenue decrease of 14.7 percent is expected for manufacturing as 67 percent expect a 25.2 percent decline, and 18 percent expect no change. This represents a significant decline in expectations from December 2008 when the panel of supply management executives predicted a 1.1 percent decrease in 2009 revenues compared to 2008. With operating capacity at 67 percent, an expected capital investment decline of 22.7 percent and prices expected to decrease 5.3 percent during 2009, manufacturers will need to focus on cost-cutting to offset lower revenue. “Given the significant decline in activity, 2009 shapes up as a very difficult year for U.S. manufacturers,” said Ore.

Food, Beverage & Tobacco Products is the only manufacturing industry expecting a revenue increase in 2009.

Non-Manufacturing Summary

Fifty percent of non-manufacturing purchasing and supply executives expect their 2009 revenues to be lower by 14.5 percent than in 2008. Overall, respondents currently expect a 5.1 percent net decrease in overall revenues, much lower than the 0.7 percent increase that was forecast in December 2008. “2009 continues to be challenging for the non-manufacturing sector, with the steady decline in activity coupled with increasing unemployment,” Nieves said.

Non-manufacturing industries expecting increases in revenue in 2009 are: Finance & Insurance; and Other Services.

That NY Low Flying Air Force One Incident

John McCain called it the “Air Farce 1 photo op.” It cost over $350,000 of taxpayer money. It scared the bejesus (sp?) out of a bunch of folks walking around Lower Manhattan still, these years later, a little jittery. Obama was furious when he found out. NYC Mayor Mike Bloomberg was angry that his own NYPD didn’t tell him because the White House basically told them to keep it to themselves. The FAA approved it even though they acknowledged in doing so that it might rattle some people. They claim they were also doing other things, such as instrument checking. Hah? They had to do that in NY Harbor?

Yes it was the Air Force’s presidential airlift group’s idea, approved by the White House liaison, to send one of the Air Force Ones (there are several) on a low flyover the Statue of Liberty to take cool pictures, presumably to sell as postcards in the White House. That liaison, Louis Caldera, technically the head of the White House Military Office, resigned the other day, and Obama accepted it. He didn’t say he made a mistake, apparently all he said, according to Reuters, was that the controversy made it impossible for him to lead the Military Office.

White House spokesman Gibbs said that Caldera did not have a good explanation for why he didn’t tell the White House about this. Defense Secretary Gates had to issue an apology, saying “we deeply regret the anxiety and alarm that resulted from this mission.” I love that he called it a mission.

Various questions. Couldn’t they have just deftly photoshopped a groovy pic of the jet against another pic of Lady Liberty? Is Obama sending mixed messages to his government? One of humble determination to grow the economy and run a tight government, and another of brash entitlement to boast of all the trappings of power wherever possible? What led this guy to think no one would care about this? I can guarantee one thing: we will never know. It is clear Obama was not aware, so he should not be blamed for this. But he should be responsible for the tone he is setting and I hope the humble determination tight government thing catches on more.

HedgeACT.com Gives New Hedge Funds Pre-Launch Exposure

HedgeACT.com, an online community for hedge funds and accredited investors, has recently introduced the New Fund Launch feature to give emerging hedge funds instant exposure to thousands of accredited investors. The new service is available for all hedge funds from pre-launch through 12 months of operation.

At a time when investor communication and hedge fund transparency is critical to the success of any new offering, HedgeACT’s New Fund Launch service gives managers a customizable platform to showcase their new funds in a uniquely interactive setting.

Hedge fund managers can create and post a wide variety of information for investors, including videos, biographies, strategy descriptions, current performance data, previous track records and any other information that may help inform investors about a new fund. Further, they can initiate discussions with hedge fund managers directly.

“Showcasing a new fund on HedgeACT.com is an exciting and cost effective way for managers to create exposure for their funds,” said HedgeACT CEO Michael Griffin. “And for investors, the New Fund Launch section offers the transparency and depth of information they demand.”

When a new fund appears on the site, HedgeACT.com notifies all of the investors in its database of the news, creating immediate awareness for the new fund and manager. Further, once posted, funds remain searchable and easily accessible for investors with HedgeACT.com’s “Find a Fund” tool.

“With so many hedge fund screeners focused on returns, it’s hard for even the most promising new fund to step to the front for consideration,” said Griffin. “We hope HedgeACT.com can provide new funds with the exposure they need.”

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