Monday, February 23, 2009

Relevant Recession metrics

One could make quite a fortune by understanding and utilizing the right metrics that would indicate when the US economy has finally reached bottom, the moment in time when it would show again some decent growth numbers. I have a suspicion that we don’t consider the right metrics that we need to follow (beyond Consumer Confidence and other long established indicators) to understand this turning point. Consumers have fundamentally changed their consumption behavior, therefore the underlying metrics need to be adjusted, too. 

Let’s take car sales. We always assume that US car sales have to reach sooner than later a positive upswing. Currently people don’t buy too many cars anymore but they will buy again after their cars are getting older and less reliable. In 2006 (the best car sales year ever) almost 17 million cars were sold in the US, last year it was much lower, this year will be even worse. So, we are all waiting for the sales curve to move upwards again. Why? Because we expect the future to behave like the past, at least sometime in the future.  

But when we look at an interesting metric from Japan, we might realize that we are looking at the wrong thing. Yesterday New York Times writes in article about the mentality changes of Japanes consumers:

“A survey last year by the business daily Nikkei found that only 25 percent of Japanese men in their 20s wanted a car, down from 48 percent in 2000.”

This means that no one in Japan expects that the annual car sales will ever reach again the good numbers from a few years ago. It is irrelevant to look at total car sales from the past but it is more important to understand consumers’ intent in today’s world. 

We should probably spend more time and energy to truly understand consumer intent metrics and compare them over time. It’s easier for a consumer to report his intent (despite all the bias of self reported data) in a particular category than an overall judgment of confidence in the economy of his personal situation. I am curious if any research company looked at “New car purchase intent” behavior by age group over the last 10 years and was able to correlate it to actual sales figures. 

Thursday, February 19, 2009

Black and white swans

Nassim Nicholas Taleb, author of “Fooled by Randomness” and the more popular but less technical “The Black Swan”, gets a great deal of attention and press/media coverage over the last 6 months, mainly because people think that he predicted the current financial disaster. I think he deserves all the attention but there are quite a few misperceptions that touch onto our marketing data field:

  • He did not predict the current financial mess but he was prepared for it. And he probably made some money with it. But there is a huge difference between “predicting” and “being prepared”.
  • He warns strongly against a blind arrogance and trust into predictive data models but he is still using them to attempt to understand the world around him. It’s a big difference between not using data models and being realistic about their limitations and shortcomings
  • He is extremely weary about believing that the past holds the key to understanding our future. But he is still studying the past, less to predict the future but more to understand human behavior and market dynamics.
  • He is a big Karl Popper fan. That’s why he is using data to falsify theories not to verify them. This is a big fundamental difference that is difficult for most marketers to grasp. A particular data set is helping us in two ways: Inspiring new hypothesis and falsifying existing ones. But it does not hinder any decisive action but it puts one’s decision into a realistic framework of probabilities and size of a particular outcome that we hope to achieve with our decision.

 Taleb is a very smart and fascinating writer but he seems to be more misunderstood than most authors.


Thursday, February 12, 2009

Interactive Manifesto

Randall Rothenberg from the Interactive Advertising Bureau wrote a pretty interesting piece about the winning principles of interactive marketing and its current hurdles. 

I don’t agree necessarily with everything he wrote but he has some interesting arguments, like:

  • While the principles of direct marketing are critical for good interactive work, most direct marketers ignore the aesthetics of communication which provides true long term value to a brand.
  • A lot of interactive marketers are only interested in optimizing the results of their programs without understanding the “why”. This limitation of knowledge curiosity hampers the growth of interactive
  • He observes that a lot of digital agencies are named after inanimate objects or nonsense words whereas traditional agencies are named after human beings. This reflects a certain depersonalization of advertising that endangers responsible long-term marketing.
  • Along with RG/A’s Bob Greenberg he argues for a third member of the creative team: the creative technologist.

 It’s worthwhile to read the whole piece. 

Wednesday, February 11, 2009

Reverse Specialization?

Over the last 500 years we have further specialized every single human activity to create more and more distinct areas of expertise. This specialization has helped us to have doctors who only focus on fixing up knees or bakers who are experts in cup cakes. This would have been unthinkable 50 years ago. This focus on specialization enabled an enormous amount of progress, it created wealth for a big majority of mankind.

But are we now entering a reverse specialization due to the continuing digitalization of our world and all available information? Are Google and other digital information aggregators a mean to recreate some of the notions of an “universal man” of the Renaissance who knows more than just a very tiny field of expertise?

People are becoming nowadays more experts in health related issues when they face a health issue. They will search a lot of information before they agree to a knee operation. They will acquire a wealth of knowledge that would have been unthinkable 10 years ago. Or they will become cup cake experts if they plan a their daughter's birthday party to ensure the organic quality of all the baked ingredients. 

I don’t think that we will reverse the specialization trend but we are witnessing a parallel trend that motivates and enables people to acquire a more general knowledge beyond their professional area of expertise. This will not great another Da Vinci but it will create more information enabled human beings. It democratizes the possibility of being a “universal man”.