Saving the newspapers

A US Senator has drafted a bill to provide tax breaks to newspapers that become non-profit corporations.

Cardin's Newspaper Revitalization Act would allow newspapers to operate as nonprofits for educational purposes under the U.S. tax code, giving them a similar status to public broadcasting companies.

Under this arrangement, newspapers would still be free to report on all issues, including political campaigns. But they would be prohibited from making political endorsements.

Advertising and subscription revenue would be tax exempt, and contributions to support news coverage or operations could be tax deductible.

Senator Cardin says that the "bill was aimed at preserving local and community newspapers, not conglomerates which may also own radio and TV stations." According to other things I've read, though, it is not the smaller local independents that are hurting the worst, because they are not facing as much competition as the big metro dailies, and they are not over-extended financially as the chains are.

A few positive indicators

In my never-ending quest to counter what seems to be the never-ending pessimism that I hear around me, I want to point out some of the good things I came across this week.

First, we have this item, confirming previous similar surveys of economists I've read:

A group of financial wizards looked into their crystal ball Tuesday and saw some good news.

The recession will ease by the end of this year and companies will begin adding workers, signaling the end of the worst economic downturn since the Great Depression.

We'd all rather that the recession ends tomorrow, of course, but year-end doesn't seem all that far away.

And then there's this, indicating that consumer confidence, while low, is trending upward.

For the past two weeks, the percentage of respondents in The Gallup Poll who say the economy is getting better has been steadily ticking up. Monday through Wednesday, 29% took the optimistic view — the highest number since July 2007.

And finally, more specific to our business, we see Wall Street rallying on good news from consumer products companies and retailers:

Better-than-expected earnings from big consumer brands Best Buy, ConAgra Foods and Dr Pepper Snapple Group sent the Dow Jones industrial average up more than 174 points Thursday to its highest level in six weeks. It has surged 21 percent since hitting a nearly 12-year low on March 9.

Put it all together and we get ... nothing definite, but perhaps some reason for cautious optimism.

Repealing Leegin is Kohl's job #1

Senator Herb Kohl has been speaking out strongly against the Leegin decision, which legalized resale price maintenance under certain circumstances, ever since the Supremes handed it down almost two years ago. This matters because Kohl is chairman of the Senate Antitrust Subcommittee. The subcommittee announced its agenda this week, and guess what's the first item on the list?:

Discount Pricing of Consumer Goods: The Subcommittee will continue its examination of the elimination of the nearly century-old ban against manufacturers setting a minimum retail price as a result of the 2007 Supreme Court decision in the Leegin case. Allowing retail price maintenance has the potential to seriously harm discount pricing and retail competition. Senator Kohl intends to seek passage of the Discount Pricing Consumer Protection Act (S. 148), his bill to restore the ban on vertical price fixing.

There are few guarantees in life, but I'll be shocked if this doesn't pass.

NSI buys CoAMS

NSI Marketing Services has purchased CoAMS, a firm based in Chicago primarily involved in trade promo outsourcing services.

NSI Marketing Services (NSI), the St. Louis based channel marketing services firm, that provides technology-enabled marketing administration, communication and research solutions, has acquired privately-held CoAMS, Inc. In announcing the acquisition, Mark Mantovani, President and Chief Executive Officer of NSI, called the event “pivotal” as it “brings together two established firms with long track records in providing first-class channel marketing services to world-class clients.”

NSI was formerly known as The National System. They have a variety of channel marketing services, to which CoAMS' administrative offerings would seem a good complement.

Recessions have mixed effects on trade promo outsourcing companies. Some companies that do administration internally will consider going outside in order to reduce headcount and overhead costs. Offsetting that, however, some existing clients will put on pressure to reduce fees, or even move to a competitor offering a lower price. Joining CoAMS' services to the wider offerings of someone like NSI might ameliorate some of the price-shopping clients do -- the wider the range of services you provide to a client, the harder it is for them to move.

I worked for CoAMS for a number of years, and I hope this change works out well for my friends there.

Update Sunday: Relative to the point about the effect of recessions on outsourcing companies, Mark Mantovani, CEO of NSI, told me in some emails we exchanged that both CoAMS and NSI had increased revenues in 2008, with NSI up 32%.

The Trade Promo Stimulus Act of 2009

There was an article in Brandweek last week advocating a stimulus plan for advertising:

The government's stimulus plan won't work as planned if we don't get consumers spending again. But in the nearly $800 billion package, there is one thing missing that would surely help accomplish this: advertising. To get people spending again, and the economy moving, the government needs to provide help for businesses in America to advertise their products and services.

The author says that companies should receive a tax credit for advertising.

I will admit that when I read the article, my first inclination was to make fun of it. After all, it seems everybody is jumping on the bandwagon (perhaps I should say “gravytrain” instead) and asking for some of the taxpayers’ money.

But there is at least some merit in the idea. It is a proven fact that maintaining advertising in a recession has positive effects for a company (I wrote an article almost a year ago for the Journal of Trading Partner Practices, "The Importance of Recession Marketing Remains Constant through Time", summarizing results of studies on recessions from 1921 through 2001).

The problem is that the positive effects of advertising are not always immediate. Though some of the studies indicate that companies that maintain their advertising do better during the recession, most of the effects are seen when recovery comes. The point of a stimulus package is to stimulate now, right? So what form of promotion is it that has an immediate sales effect? Trade promo, of course: co-op/mdf, TPRs, end caps – all are intended to drive immediate incremental sales. So suppliers should receive tax credits to encourage them to spend more on trade promo.

But that isn’t all. We know that not all promotions are successful. There are some great analytics and forecasting tools out there that will help suppliers and retailers choose better which promotions will work. But unfortunately, many suppliers have not yet purchased and implemented such tools and, because of budget cuts, cannot do so now. Since the government wants their stimulus money spent effectively, it makes sense that they should subsidize the purchase and implementation of the best available trade promotion forecasting tools, which will then assist suppliers and retailers in designing promotions that will drive greatly increased sales and therefore save the economy and the country.

That’s OK, you can thank me later. Well, actually, when this bill passes, I expect something a bit more substantive than a “thank you” from Oracle, SAP, DemandTec and the others who would be the principal beneficiaries. I prefer cash – it stimulates my bank account.

Just in case you’re wondering – no, I’m not serious. Though I do think it makes better sense than subsidizing advertising. Come to think of it, it makes more sense than a lot of the stuff I’ve heard.

Settle the suit by buying the plaintiff

News America was being sued by Floorgraphics. Not any more. The two companies settled in mid-trial, and then a few hours later announced that Floorgraphics was being bought by New America. Perhaps a coincidence, but I don't think so.

The acquisition — which consists primarily of FGI’s client and supplier contracts and “other assets” — comes immediately after the two companies agreed to settle their lawsuit in midtrial over whether Rupert Murdoch’s News America had sabotaged FGI’s business by lying to its customers and hacking into its computers.

Coupon use up 15%

Coupon use rose in the fourth quarter of 2008, according to NCH:

Coupon use rose 15 percent in the last three months of 2008, compared with the same period of 2007, said Charlie Brown, vice president of marketing at NCH, the redemption unit of Livonia, Mich.-based Valassis ...

Apparently the percentage of coupons redeemed must also be increasing, since manufacturers produced only 5% more coupons. Low redemption rates are one of the biggest complaints I usually hear from manufacturers. NCH, of course, is quick to rattle off the benefits of coupons:

Larson rattled off the grocery coupon's various effects: They draw attention to a product, lower its price for past buyers and attract new ones, generate consumer "pull" during soft sales periods, remind even nonclippers of the product's existence, create a marketing synergy benefit when coupled with in-store specials, and they limit growth of private-label competitors.

A new type of store for Macy's

Macy's has opened a new store in Phoenix's East Valley that is the first of a new format:

For starters, the store is only one level and 122,000 square feet - smaller than a typical store - making it easier to shop, she said.

It's also designed with four entryways and extra-large dressing rooms featuring waiting areas with televisions. The store also features price-checking stations where customers can scan merchandise.

In terms of size and the single-story layout, Macy's seems to be taking a cue from Kohl's. Additional stores of this type are coming soon to Texas, Idaho, and Montana.

I'm not bullish on the department store channel, but it's good to see them still trying to find something that works.

How many ounces in a pint?

Not to get off-topic, but one reason I'd like to see the US switch to metrics is that I can never remember how many of this there are in that. But Ben & Jerry's is out to remind us that there are sixteen ounces in a pint.

This is not an instance of corporate high-mindedness -- taking on a civic responsibility of educating the masses. The reason for B&J undertaking this campaign is that their principal rival, Haagen-Dazs, has begun marketing fourteen ounce "pints" of ice cream.

"One of our competitors (think funny-sounding European name) recently announced they will be downsizing their pints from 16 to 14 ounces to cover increased ingredient and manufacturing costs and help improve their bottom line," the statement said. "We understand that in today's hard economic times businesses are feeling the pinch. We also understand that many of you are also feeling the same, and think now more than ever you deserve your full pint of ice cream."

I can see Ben & Jerry's having some fun with this, but I guess Haagen-Dazs has found itself caught between rising commodity costs and retailers who won't accept price increases. Cutting down sizes has been a traditional method of avoiding price increases, but it's one thing to shrink a candy bar or fill a cereal box a bit less full, and quite another to redefine accepted units of measure.

CVS and the "Lipstick Index"

CVS is taking the bold step of going upscale in the midst of a recession. According to this article, they have been trying for years to get prestige cosmetics and fragrance brands to sell through CVS, but were unsuccessful. Their solution is to open boutiques in the 2500-4000 square foot range, connected to but clearly separate from adjoining CVS stores. At present two are open, fifty are planned for 2009, with the possibility of up to 500 eventually (and talk of being a billion-dollar business).

According to Bloom, CVS shoppers had for years expressed a desire to purchase high-end cosmetics and skin-care products in a convenient location with great service. CVS certainly had enough convenient locations—60% of the female population in the U.S. lives within five miles of one of its 6,800 stores. The key was convincing the top brands to work with CVS. "Health and beauty is important to us, but suppliers have refused to sell us whole classes of products," says CVS CFO David Rickard.

Bloom enticed vendors with a retail environment that looks nothing like a CVS drugstore—white tiled floors, brushed-metal walls, and sea-foam color accents. (The stores measure between 2,500 and 4,000 square feet and are connected to adjacent CVS stores via a breezeway.)

In the course of the video interview attached to the article, a CVS exec refers to the "Lauder Lipstick Index" as part of the justification for the new stores. I had heard the term a couple times recently, but wasn't clear just what it was, so I did a bit of research: It's an idea, proposed by Leonard Lauder, head of the Estee Lauder company, in 2002, that consumers will cut back on big-ticket items in a recession, but will compensate by splurging on a few small "affordable luxuries". Thus a woman might make herself feel better about canceling a proposed winter holiday by buying an upscale lipstick from Estee Lauder.

It's an interesting idea, although The Economist gives it the kiss-off, so to speak, in this graph, which seems to indicate that there's little if any correlation between lipstick sales and the economy -- sales were up a bit in the 2001 recession, but sank in 1991 even worse than the economy did.

I don't know that Mr. Lauder meant his index to be taken quite so literally, though. The idea that people might compensate for foregoing big luxuries by indulging in little ones seems to make sense intuitively, and has obvious applications for a great many marketers in the current economic environment. It would be interesting to know if there is any proof for it, or if any research has been done.

To get back to CVS, their experiment seems like a worthwhile effort. Certainly the times demand innovation, and past history indicates that companies who innovate during recessions benefit disproportionately. Their timing is very good in one regard -- with the decline of department stores, historically the principal channel for prestige cosmetics brands, the suppliers are probably more open to the idea of working with someone like CVS than they were a few years back. They have signed on some leading brands, including Laura Geller, Paula Dorf, and Coty Fragrance.

Walmart opening "Supermercado de Walmart"

Walmart is opening two news stores, in Phoenix and Houston, catering to the Hispanic market. The stores will open in former Neighborhood Market locations of about 39,000 square feet.

The retailer said that the stores were in “strongly Hispanic neighbourhoods” and would feature a “new lay-out, signing and product assortment designed to make them even more relevant to local Hispanic customers”. The staff will also be bilingual.

Wal-Mart’s Sam’s Club warehouse store also plans to open a 143,000 sq ft Hispanic-focused store called Más Club in Houston this year.

Other supermarket chains (e.g., Publix, HEB) are opening similar stores, and a great many retailers, including Walmart, are customizing some of their stores to reflect the demographics of their area. It probably is relevant, as well, that the head guy at Walmar's US stores was formerly the head of Walmart Mexico.

New study questions in-store shopping decisions

Tradition says that 70% of shopping decisions are made in the store. I've heard that figure quoted so often that it seems to be almost an article of faith. From time to time, I've seen it questioned, but nobody questions that a great many decisions are made in-store.

An IRI study, though, says that a result of the recession may be that more consumers are planning out their shopping at home.

... IRI's research found that by the end of last year, more than three-quarters -- 76% -- of consumers were making their purchase decisions at home, up from 60% in the first quarter.

Just because people put together a shopping list at home, of course, does not mean that they follow it when they get to the store and see something they want. It does make sense, however, that people are more cautious in a recession, and will likely make fewer impulse purchases.

But the other point about this is that the article is entitled "Trouble in Store for Shopper Marketing?", with its theme being that if in-store marketing is likely to impact fewer buying decisions, then money should be pulled out of Shopper Marketing.

But that gets us back once again to the question we asked here a couple weeks ago: What is Shopper Marketing? In a poll we ran on the TPMA newsletter, we found that 71% believe it to be a hybrid of trade promo and brand-building. The Ad Age article seems to assume that it is strictly trade promo and that, therefore, if it does not produce immediate sales, it should be dumped.

For those making strictly trade promo decisions, it's worth noting the IRI study, and perhaps moving some promotions to formats where they reach the consumer at home (e.g., inserts or coupons). But Shopper Marketing decisions would be less impacted by the study.

FTC finally settles with Whole Foods

The Federal Trade Commission gave up their years of fighting the Whole Food / Wild Oats merger, getting Whole Foods to agree to a face-saving deal to sell off thirty-two Wild Oats locations (some of which were already closed), and give up the Wild Oats name.

The FTC said the settlement substantially restores competition that was eliminated by Whole Foods' acquisition of Wild Oats, its closest rival.

It does nothing of the sort, of course. It's unlikely that there will be many bidders for the locations to be sold, given the current glut of retail space. It's possible somebody will buy the Wild Oats name, but in reality there never was a competition deficit in the space -- Whole Foods' most serious competitor was not Wild Oats, it was the growing organic aisles/sections in every supermarket chain in the country.

Someday I hope someone explains to me why the FTC went off on such a crusade against this particular merger -- a fairly small one in the great scheme of things, and one that had little impact on competition -- when they were rather quiescent on so many other larger deals in recent years.

A tale of two RFIDs

Just a couple weeks ago, P&G announced that they are discontinuing tagging of displays at Walmart to track compliance, apparently because of lack of cooperation from Walmart.

Now we see the other side of the story, with Walgreen announcing that they are expanding their efforts in using RFID to track in-store implementation of promotions. Why? Because it works:

The results have been impressive: Over the past year, our in‐store execution has grown to nearly double the industry average. Incremental sales assure us that we are on a good path to improving our customers’ shopping experience.

The lesson here, I think, is not a new one. Information is only valuable if it is used. Walmart, for whatever reason, decided that the information it gained from tagging displays was not of sufficient value to use their resources to act on it. Walgreen felt differently. The numbers seem to support Walgreen's approach, but perhapr Walmart was looking at very different numbers from their efforts.

Triplefin acquires Flintfox USA

Triplefin, a Cincinnati-based provider of supply chain solutions, has acquired Flintfox USA as well as an interest in Flintfox's international business. Flintfox is based in New Zealand and offers a TPM package that will be complementary to Triplefin's offerings.

"Triplefin constantly works with our clients to make it transparent and easy for their staff, customers and other authorized users to create, execute and manage promotions," stated Jill Hein, Business Development Account Manager of Triplefin. "Triplefin has been a leader in promotion technology and execution for e-Commerce, DTC and retail channels, but it lacked a truly best-in-class technology for retail trade-spend. Flintfox is the answer, and I am very excited about the integration of Flintfox into Triplefin's Salefish technology platform," concluded Jill.

Flintfox had had a relationship with Kineticsware before that company ran into financial problems.

Is this the new look for Walmart PL?

Supposedly, this pic (and others here) are examples of the new logo and package design for Walmart's Great Value line.

Couldn't possibly tell you if it's true or not, but it's an interesting look. Not that anybody would ever hire me to do a graphics job for them.

This ties in with the post immediately below, speculating on the effect on suppliers if Walmart's private label efforts are successful.