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Reflections for 2011

03/02/2011

Social networks have not only become a channel for communication, but also our ally. According to our sales management expert, Victor Valencia, “Manufacturers are managers of networks, opinion groups and promotion, but they could facilitate their sales if they used a similar tag to that in advertisements for medications:  “Consult with your retailer or obtain the advice of your sales point”.  Taking advantage of the possibilities offered by social networks, manufacturers could obtain even better results.  The return on their investments would improve as the costs associated with production, launches and amortization would become much more profitable.”

It has been a while since fair winds have blown in terms of family spending (although in reality, only the last two years have been truly difficult, even though it seems as though it has been an eternity!).  The worldwide economy grows steadily closer to the American model where private consumption has replaced the consumption of services and industry as the driving force.  Many families are not in a situation to spend beyond their current means or on credit, something which requires two conditions:  job security and stability coupled with a solid economic outlook.  

Caught in the middle of this maelstrom, retailers, manufacturers and distributors find themselves all in the same boat, although marked by varying degrees of desperation. Everyone watches falling sales, which in turn, slowly and inevitably provoke a reduction in distribution channels, those businesses which previously acquired our products in order to fill their shelves and storefronts, storefronts which now are only displaying ‘For Sale’ or ‘For Rent’ signs.  

The market is shrinking in spite of voices from some politicians self-congratulating themselves for obtaining 0% economic growth.  Short of taking drastic measures and practicing some sort of fiscal disobedience (history has given us many examples of effective rebellion through refusal to pay taxes or tributes), our only consolation is to sit it out and hope that things improve soon as political winds change and evolve.

Adapting to Reality
To survive in this reality, we have to be clever and always learning.  Those of you in the business world are probably familiar with SWOT analyses which involve looking at Strengths, Weaknesses, Opportunities and Threats and then following up by correcting the weaknesses, adapting to the threats, maintaining the strengths and exploring the opportunities.  The pieces which are especially relevant to our needs are looking at the potential threats and opportunities and adapting and exploring accordingly.

Creativity in terms of what is on offer is the primary line of defense in the face of shrinking consumption on the part of the consumer.  The majority of consumers treat their purchases as a type of investment in which added value and the return become deciding factors.  In terms of babycare items, purchases are additionally justified based on the following principles:

•     The ability to share or pass on the item: if something can be shared the unit price is reduced.  If something can be passed along to various members of the family, the overall expense is diluted if everyone uses the item or it receives a lot of use in general and the overall unit price is reduced in contrast to a situation where only one user enjoys the item.  We can see this reflected in the example of family who buys a SUV and explains, “well, if we use it to bring the kids to school, they’ll be safer because they are riding higher in the vehicle.  Since it’s a SUV, in theory we have improved visibility thanks to the height, which also makes it easier to anticipate the moves of the other cars, and to top it off, they yield to us because we’re so big!”  This elaborate justification is created because if the family simply states, “I really like the idea of an SUV” they’ll end up without the SUV.  So, as you can see, shared advantages are fundamental for sales.

•     Left-brained practicality or right-brained dreaminess:  the message must be clearly defined.  If the purpose of the purchase is motivated by desire or a wish, the right brain is in charge, meaning that all messages, the presentation and the overall mood of the product need to be set and created with these needs in mind.  On the other hand, if we are hoping that the price is going to be the prime motivator leading the consumer from the initial proposition to the actual sale, technical characteristics and the real cost will be the keys to success.  Contradictory messages are counterproductive and will end up driving the client mad.  If the client doesn’t clearly understand the messages being sent, then they will stop listening to what we are trying to tell them. 

    Flexible pricing:  “from” and “up to”, in addition to being prepositions, are also part of the so-called “complementary budget”.  If an article can be purchased in two or more parts, it ceases to be just one product, but becomes various products.  In this respect, the final price may be deemed adequate, once, twice, three or even more times.  If the product is composed of various components which can be opened separately, the excitement can be multiplied and shared among the group.  It’s not the same to present something as “a present from the six of us” as it is to enable each member of the group to give their individual gift leading to a total of six lovely packages to open.  It makes no difference that they are components of the same gift, either as individual components or accessories.  For example, in the case of a gift of diving equipment (let’s say a mask, fins, snorkel, net and an underwater camera), opening one present is not the same as opening five, which represents five times as much excitement (although the order in which the gifts are opened it is important).  Toys and licensed products with accessories serve to raise the total sticker price and leave room for the possibility of “…and for just a bit more” or “if anyone else in the family wants to join in…” as well as leaving room for all budgets.  It’s like the joke about asking for “divorced Barbie” since she would come with more than your average Barbie- with Ken’s house, Ken’s car, Ken’s horse, etc.

    Additional use providing added value:  For example, a children’s video could be the perfect present for the youngest member of a household.  However, if that movie can be watched in other languages or has subtitles, it can also be an educational tool for an older sibling since children’s films are usually easy to follow and it gives the older sibling the chance to watch the movie as well while saving themselves from the embarrassment of watching something “for little kids”.  A videogame can become a tool to help with family life for parents and children while also being educational and awaking an urge for further investigation of a topic.  This is a prime example of where both parents and manufacturers play an essential role.  A video game based on car racing can serve as a vehicle for project-based learning.  For example, it could launch an investigation into what the various rules are around the world in order to make the races the most sporting and fairest possible, which could even turn out to be fun for everyone.  The key point is that it be designed to provoke a curiosity which goes beyond the actual video game.  I’m not referring to creating a long-winded lecture about automotive racing rules, but rather something which could lead to a child developing their knowledge beyond that of their playmates and noticing real life rules which could then transfer into knowledge about other sports or social relationships and allow them to further their life skills.  Looking to provide additional uses is essential in order to increase sales.

While we can’t truly imagine the current economic cycle changing based on our individualized actions, and the idea of altering our own country’s economy based on our lone actions is utopian, we do have the option of making a concerted effort to ensure that a consumer chooses a determined product over another by adapting our language and positioning to the consumer’s needs in the moment regarding their “investment”.  

Going back to our SWOT analysis, we can see that it is clear how to approach the perceived threats by adapting.  Now it is time to examine the opportunities and how to explore them.

Little by little we are realizing that there are some things which are simply better than others, that not everything traditional is worse than the modern equivalent, and that the traditional options are often the fruit of years of trial and error. This is what often leads us back to the tried and true.  The pendulum is swinging back and the values of saving, austerity, sensibleness, hard work, constancy and training are a reflection of the reality of what is truly worthwhile.

Social Networks
Social networks are our ally as well as being a channel of communication.  At the moment, the buzz is all around social networks as if they had never existed before (that’s marketing for you- they give it a new name and introduce a few minor changes and sell it as revolutionary!).  If Zara was able to create a following among young people in a world without cell phones (looking at their early success in Spain, back in the 1990s), using just word-of-mouth, it’s abundantly clear that social networks already existed although they were previously called fashions or trends.

The generation of cell phones and Facebook is nothing new, they are representative of improvements to our ability to spread the word about something among young people thanks to the use of advanced communication technologies.  Previously there were other technologies which allowed for speedy and widespread communication.  The so-called “opinion leaders” of today are the evolution of earlier decades’ teen idols.

Today’s reality is different and more difficult.  The overall collective mass of youth has been reduced (the baby boom is long over).  This fact coupled with the increasingly shortened lifespan of a product (they are introduced and die off so quickly due to our market being based on supply, where more is produced than consumed) brings us to the necessity of being able to reach the greatest number of consumers in the shortest time possible and ensuring that every launch is a success. There are no second chances and the days of long-lived products with ample time within which to produce a profit are over.  
Social networks are a type of communication system with a significantly lower cost per impact than any other type of media.  This is the root of their importance and the motivation behind trying to bestow them with the appearance of being able to bring us closer to the gurus who manage public opinion.

The consumer is actually much more savvy than that, but it would be ridiculous to minimize the importance of social media.  We need to accurately recognize its importance and place.  It is one more mode of communication which has a certain capacity for influence when used in the context of a well thought out idea.  And this is exactly where opportunity arises.
When a parent decides to purchase a product for their child based on more than pure trendiness, they take many additional things into consideration if it helps them to see the situation more clearly and justifiably.  The phrase “Well, if you want I can sell you this one, but if it were for my child, I would take this one because… and also… and furthermore…” can have a devastating effect causing the buyer to begin to question all of their previous notions.  If the rational behind the sale is coherent and it is clear how to pass this information along to the child, everything becomes easier and a responsible sale can be made.  This is how businesses last; it is the type of message that predisposes the client favorably toward the establishment and allows for the possibility of offering advice and guidance, which in turn creates a loyal network of clients who are willing to recommend the business to their friends.  And here is exactly where and how the business has developed its own social network.  Make no mistake, this is nothing new, but we seem to have stopped communicating this advice and applying it in the course of the day-to-day.  Among all the research, knowledge, information and education, we have lost site of what is truly important, that responsible, well-directed sales are what best allow us to guide our clients in the majority of cases.

If the purchase is being made based on something being considered fashionable, and the client is capable of reasoning (something that isn’t always guaranteed), we can talk to them about adding an additional touch of distinction or, on the contrary, steer them toward a carbon copy.  Being included in and belonging to a certain group doesn’t mean copying 100% but rather that within that group you can take advantage of chances to choose what suits and what you like without renouncing your own personality, because, after all, you are unique.

Social networks are key, but they are not a panacea.  Each and every one of us can create our own social network. “In this establishment, we not only sell toys, but help teach how to get along, developing young imaginations, minds and bodies through play.”

Manufacturers are managers of networks, opinion groups and promotion, but they could facilitate their sales if they used a similar tag as in advertisements for medications:  “Consult with your retailer or obtain the advice of your sales point”.   Taking advantage of the possibilities offered by social networks and really pushing them even further, the life cycle of products could be longer and manufacturers could obtain even better results while increasing their options for diversification.  The return on their investments would improve as the costs associated with production, launches and amortization would become much more profitable.  In the end, a business which only acts thinking in the moment will ultimately pay a high price.

As the pendulum swings back, new opportunities present themselves; society as a whole is reflecting on values and past mistakes.  Those who first realize that we are headed toward an age of reason and logic will already have gained ground.  The pat phrase “who can say no to a child?” may work for sales in the here and now, but by casting a shadow of doubt and asking a parent to reflect on whether they are making short or long term choices for their child, what do you think they will decide?
This is the moment where you must decide whether you are a manufacturer or business of the here and now, a shooting star so to speak, surviving only a few tenths of a second, or if you will choose a guaranteed future, shining like our own sun, lasting for thousands of years.

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