Nerve Collective
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Thoughts & Musings

Will the Demise of Private Equity Be Good for Marketing?

That's one of several provocative questions posed yesterday in a very interesting Wall Street Journal opinion piece by Andy Kessler called The Glory Days of Private Equity Are Over. You may or may not like Kessler's swaggering style, nor the Gordon Gekko-like persona he adopts in his books (the best-selling Eat People is one of those), but he makes a compelling case that the private equity model is, for a variety of reasons, coming to an end. He defines the overall private equity model this way: 

You buy a company, putting up some cash and borrowing the rest, sometimes from banks but often via exotic instruments that Wall Street is happy to sell. Then you manage the company for cash flow, making sure you can make interest payments with enough left over for fees and investor dividends. With enough cash flow, you either take the company public or sell it to someone else. And how do you generate cash flow? You can expand the company, but more likely you slash costs, close divisions, cut staff, curtail marketing, eliminate research and development and more. In other words, cutting to the bone.

The...model has worked for the past three decades. But it's a bull-market investment vehicle whose time is done. 

The reasons he offers are varied, from interest rates to lending slowdowns and tax reform. However the main issue he cites is a lack of tempting targets. Just as in the world of house flipping, are only so many fixer-upper businesses out there to strip to the studs and re-sell before the market runs out of properties that most firms can afford.  

The reality is that the best companies with high-enough cash flow to pay down interest can’t be bought. No one is buying Apple or Google. But this is also true of cash machines Uber and Airbnb or high-growth companies like Snapchat and Pinterest. Private equity can’t afford them. And with the Dow bobbing around 18,000, public companies are increasingly off the table. Maybe the oil patch? Good luck with that. 

Capital will still chase increasingly expensive deals. That won’t end well. So it’s back to basics—creating companies rather than squeezing the last life out of old ones. Just like Wall Street shrinking and curtailing once-profitable businesses, private equity will begin a slow decline. Yes, we’ll see more deals and even a few successes. But the returns from private equity won’t match those of the past 30 years. And capital will flow elsewhere—let’s hope to productive and wealth-creating segments of the economy.

The reverse of the private equity model by definition means more spent on growth activities like expansion, hiring, product development and, yes, marketing. Is it crass to hope the model goes down hard — and soon? 

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Good Creative Gets Out of the Way

We all know creative work is a lot of fun to do. But what role should it play in marketing...if any? On one extreme you’ve got the curmudgeonly “clever ideas only get in the way” school, which holds that creative — especially if it’s funny — is nothing but a distraction from the sell. Sure it grabs attention, but once the audience has consumed the fun they move on without remembering any important messages. You see this attitude a lot in the direct response and promotions world, where getting to the point is job one. 

On the other extreme is the gung-ho “any-attention-is-good-attention” school which holds that virtually anything that manages to break through the clutter is good — the more creative the better. Any attention you get from the consumer is at best a gateway to a sale, at worst a show of the brand flag. You see this strain of thought at work in a lot of traditional ad agencies, especially if they do a lot of broadcast, most especially if they produce Superbowl halftime ads.

The sweet spot between the two is the “good creative gets out of the way” school. It’s an offshoot of post-modern industrial design, in which flourishes or doodads that distract a user from efficiently interacting with, say, an automobile dashboard, are scrupulously avoided. Smoothing the path from thought to action is the goal. Which is not to say the dashboard isn't designed well, it’s just designed for usability. 

Effective creative works the same way, smoothing the path from a consumer’s unmet need to the meeting of that need. To do that the creative component has to be clear first and foremost: about what’s on offer, and what the benefits are to the consumer. If the creative can be fun on top of that so much the better, both for the consumer and for the brand. 

But when developing creative, it’s helpful to take a lesson from the fussy postmodernists: how much fun can I have before I start to lose the point? How much of what I’ve just created is relevant to my goal of getting my point across? What can I get rid of to increase the power of my message? In that balance lies the difference between creative for creative’s sake and creative that artfully gets out of its own way. 

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What One Dress Teaches Us About Color

Ah, the wacky world of the Internet. By now I’m sure you’ve come across this dress on *insert social media feed here*. Some of you have maybe even engaged in, ahem... “spirited” debate on the subject. We at Nerve wonder how can something this seemingly insignificant become so polarizing to so many people?

Two extremely emphatic camps — those who see white and gold and those who see blue and black — went toe to toe yesterday, proclaiming their rightness in a battle akin to a modern day Waterloo. While there are numerous scientific reasons for the split, the debate also brings to the surface something that we designers deal with as a daily part of our professions: colors simply look different on different sources.

I could go into a long discourse on color theory and the classic works of Seurat, but suffice it to say how we see color isn’t always as important as where we see color. The digital age has put devices into our hands that, as amazing and technologically advanced as they may be, are still unable to consistently and accurately represent color. Whether it be personal brightness and contrast settings, the lighting of the environment you’re in, or the device you’re on – MacBook, PC, iPad, Samsung Galaxy, whathaveyou – you will often not see colors as they were intended. This leads to many a discussion with many a client about colors looking off or not accurately representing a printed piece (which is whole other subject that we’ll tackle at a later date). It can quickly become a struggle. A First World struggle, yes. But a struggle nonetheless.

So although we might never be able to agree on the color of the dress*, at least we can all agree on one thing: the Internet is a marvelous place.

* It’s blue and black.

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SodaStream’s Cautionary Tale

A great article on the importance of defining your brand and your value here in Fast Company. SodaStream is in the process of clawing its way back into the American market after a disastrous year pursuing the wrong audiences and pushing the wrong messages. Great reading, however we’re inclined to dispute SodaStream CEO Daniel Birnbaum’s claim that Americans don't care about the environment. Americans definitely do care, the problem is that environmental responsibility is rapidly becoming a table stake, something consumers are simply coming to expect from packaged goods sellers. Show me what’s different and valuable here. That’s what consumers are demanding. It’ll be interesting to see what SodaStream does next!

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Content Marketing’s Big Downside: The Content

Content creation is hard. Companies around the world are figuring that out as the gospel of content marketing/inbound marketing spreads. On its face content marketing is a great idea: disintermediate the content creators we marketers have been slaves to for so long — all those bozo TV and radio stations, newspapers and magazines — and start publishing our own content. Put it on our website/blog/YouTube Channel/Pinterest page, let the search engines index it and pretty soon we wont have to go looking for customers anymore, theyll find us! Itll be cheap, fast and completely under our control. And no more of that “succinct messaging” crap. From now on well be able to tell our customers everything we want to tell them — at length, any time at all.

Except that creating content that people actually want to consume — thats fresh, informative, useful, well-presented, moderately entertaining, not totally self-serving, consistent and delivered often enough that prospective customers want to keep coming back — is hard.

A few good blog posts certainly arent difficult to produce, neither is a good video. Either will feed the maw of the content beast for about a week. And then...? What about next week? Next month? Next year? Where will the ideas come from? Who'll produce everything? Wholl distribute it over all our various channels? Wholl field questions and manage social media? And above all: how will we pay for it all??? 

Its the failure to come to terms with these sorts of questions that causes so many promising content marketing initiatives to crash and burn. However it is possible to have a quality, ongoing content marketing program that wont break the bank, require you to build your own TV studio or staff an entire online magazine. Success in content marketing is all about picking tactics and being careful about where you apply your resources. Here are a few tips to get you going:

1. Start with a solid content strategy. Decide what the best use of your energy is and dont worry about covering every channel (at least at first). Pick the ones your customers are most likely to use and focus on them. If your product is visual, make images and video the center of your effort. If the product is technical, blog about it, do live events or webinars. You can still have a presence on all those other channels, youll just use them to drive audiences to the tactics you do well. 

2. Enlist the help of the organization. Trained, dedicated communicators produce the most polished and effective content. But lets face it, an organization can only afford so many of them. Which means the lions share of your content is going to have to come from the rest of the organization. Thats going to mean two things. First, a shift in your companys culture, because in todays media environment were all communicators. Second, your job description has just changed. You are now no longer just a professional communicator but a communications coach. 

3. Relax the rules. Getting the rank and file of your organization involved in content generation is a project all its own. Theyll need practice and encouragement. Discourage perfectionism and let people be themselves on the blog or in front of the camera. Initial efforts will likely be stilted and self-conscious, but the good news is your audiences are more interested in authenticity and utility than they are in perfect grammar. You cant produce a steady stream of content without making at least a few mistakes, especially at the start.

4. Take the long view. Any content marketing initiative will take time to build an audience. The best way to get started is simply to start. Dont wait for the perfect plan or perfect team to materialize. Everybodys content is so-so at first, but even so-so content generates SEO. Six months or a year from now youll have a much better focus, a more developed methodology and a more distinctive voice. Good content marketing isnt a single event but a habit, one that takes time to develop but that pays handsome dividends in the end.

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This Just In: Consumers Aren’t Sheep

The retail world is buzzing over the recent J.C. Penney announcement that they'll start printing their famous catalog again after a 5-year hiatus. The company admits they grossly misjudged the market when they assumed their customers would naturally migrate to their website when the print experience wasn't available anymore. Turns out the 120-page book was, even though they didn't realize it, one of their most important branding vehicles. 

In one sense it's hard to blame them for the mistake. Who wouldn't want to quit an expensive print habit, especially at a time when the entire retail world was moving online and Amazon was eating everyone's middle-to-low-cost retail lunch? Add in statistics showing that most consumers want fewer catalogs and the decision was probably easy. Yet what J.C. Penney failed to see — or more accurately find out — was that the catalog was the preferred mode of interaction for a big chunk of their customers. 

Because it turns out consumers are much less sheep-like than some retailers assume. They interact with different brands through different channels, often using a combination of print pieces, websites and stores to find and acquire the products they're looking for. Some rely on catalogs exclusively. Others (about a third according to retail consultants Kurt Salmon) start with a catalog then head online or to a store to buy. Still others ditch the catalog altogether and head to a store to see a product before buying it online (so-called “show rooming”), or do the reverse and browse online before buying in a store (“web rooming”). 

Confusing? Yes, but more evidence to show that sales channels never really die, they just fade from the headlines. You know how shopping malls are "dead"? Turns out they aren't so long as they've got solid anchor stores. How about those trade shows that "nobody goes to anymore"? Attendance has been rising steadily since 2010.

The lesson here? You can't write a marketing plan based on which channels are trending in Forbes. Your customers have their own ideas about how, when and where they want to use you. Find out what those ideas are and match your marketing to them, even if it means printing a catalog.

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McDonald’s Nails It With “Signs” Ad

If this ad is any indication of where McDonald’s is going with their branding this year, 2015 is going to go down as Mickey Ds year of bold moves. Sales were down last year by a startling 4.6%. At least some of that is due to an improving economy as people with more money in their pocket start choosing somewhat pricier eateries. But certainly a good chunk of the loss can be chalked up to smaller and/or more localized competitors who have been pushing the anti-chain rhetoric hard the past several years. 

The new Signs ad pushes back in a big way against the perception that McDonalds is a big, distant and impersonal food behemoth. It reminds its audiences that McDonalds stores are part of the very fabric of their communities, that theyre staffed (and in many cases owned) not by corporate robots but by friends and neighbors who care about them. In that sense theyre the very definition of ”local”. Talk about co-opting a meme!

The fact that the ad has inspired no small amount of controversy only speaks to the power it has to provoke emotion. People who both love and hate McDonalds are reacting strongly. So hats off to the team at Leo Burnett, the ad’s creators — very well done gang!

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Great Creative Starts with Clarity

When campaigns fall short of expectations the temptation is to blame the creative: we just weren't exciting enough! Rarely do we ask the question: how clear were we? How well did we define ourselves and our offering? How forcefully did we proclaim our value and points of difference? How well did we frame the customer's problem and the solution we're offering? 

Clarity is the soul of good marketing. That's a truism that gets truer every day as the media environment gets more crowded and windows for impression-making get smaller. Which means the onus is on us as marketers, not only to grab attention but to do something constructive with that attention once we have it. (Quickly). 

So here's a suggestion for a Monday: today, look beyond the hook and headline. Check those subheads and that body copy (if there is any). Analyze those typefaces and images. If you find any elements that don't advance the goal of crystal clarity, nix them and replace them with things that do. Because your audience doesn't have time for any filler, they're busy. And only too happy to buy a competitive product that they actually understand. 

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In Praise of Small Data

We've been working on a research project for a small client this week and it's been a very pleasurable experience. There’s nothing like asking real people real questions when you want to get real, actionable intelligence about a business problem. 

Between phone calls we've been musing on the subject of research and analytics generally, most especially the hype that’s surrounded “big data” the last year or two. Truth be told big data is somewhat over as technology trends go (the latest being the “internet of things” but that’s another post). It seems like every week there's an article about some large organization or industry group expressing disappointment with the promise of big data. 

That shouldn’t come as too much of a surprise. There’s no question that advances in technology have made it possible to capture and at least to some extent crunch the vast amounts of consumer data flowing through our phones and tablets as we move around, make purchases and use social media. So there’s no problem compiling big data. The trouble is using it. 

Because a mountain of raw data doesn’t volunteer opinions. The great illusion about big data for many business people was that once the data was captured the servers would start offering up tactical recommendations on their own. “Hey Bob, tweet now about rolled oats and sales will be up 14% by Thursday.” 

The reality of course is that big data, just like any other data, has to be interpreted before it can be used. Drawing useful conclusions from mass amounts of raw information takes effort, probably a few full-time statisticians and a good deal of time and money. And of course there’s no guaranteeing that once all the analysis is done (even assuming it's good analysis) the result is going to be of any practical use. 

“This sine wave shows our customer retention rate flux over the most recent 20 month period.”

Er…is that the question or the answer? Obviously we don’t mean to imply that big data is useless. In narrowly defined circumstances, for example scientific research, it’s proven itself to be almost boundlessly useful. However when it comes to delivering the marketer’s fantasy of a predictive mathematical model of consumer behavior, it’s a flop. The days when we’ll be able to truly define the laws of "social physics" — when we'll confidently deploy message A to influencer B through device C and get transaction D — are a long, long way off. In fact we’ll probably never get there. 

Which is why we're so pleased with our (very revealing and useful) small data. Because business, at rock bottom, is all about human relationships. Ask human beings questions about your product and they’ll respond — and in the bargain probably offer up answers to some questions you didn't even know you had. Which is something you'll never get from a server farm. 

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Don’t Hate This Headline

I know, there’s a negative in it. But please, just give it a chance. Why? Because contrary to accepted wisdom headlines containing negatives don’t turn off audiences or depress response. In fact there’s evidence to show that headlines containing negatives actually increase response by as much as 30% (that according to a study of 65,000 link headlines done by Outbrain back in 2013).

So why the longstanding — and enduring — prejudice against negative terms in headlines? Our guess is it’s mostly a matter of taste. However it could also be a matter of changing tastes. Audiences, especially millennial audiences, may well be getting burned out on headline happy talk and are starting to gravitate to messages they perceive as being more “real”.

But whatever the case, fear not the negative. It’s one of Jim’s New Year’s resolutions for 2015. Jason’s is to fear not “the fold”. Actually Jason hasn’t worried about folds for a while now. That idea — that web pages work like the printed newspapers of old, and anything below “the fold” gets ignored — was disproved years ago. Users like scrolling pages, even very long scrolling pages. Expect Jason to explain why (probably at length) when you see him.

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