US and EU trade places

For years the US has been the new kid.  Europeans have been quick to ridicule the gauche antics of Americans and demonstrate the value of experience and tradition.  It’s amusing therefore to watch as the Euro, a currency that would only be in middle school if it were a child, and the EU in general,  struggle to find their footing.  The Euro’s sudden demise has exposed the lack of union in the European Union and has put it at an awkward crossroads. European heads of state are quick to dismiss any talk of the unwinding of a single currency.  It is after all, the most tangible demonstration of the EU to the rest of the world, even if there are some European countries, like the UK, that have not signed up.  Yet the price of keeping the Euro could be one that Europeans in countries such as Greece, Spain and Ireland are not prepared to pay.  America has dealt with similar issues over its life.  Indeed there are often calls by small portions of the population for their state to secede from the Union.  Nobody takes such calls seriously though because the US is a truly integrated economic block unlike Europe.  Put another way, this is one of the rare occasions where the EU needs to look to the US for experience on how to handle the evolution of its political and societal future.

Q3 09 is the real test of price over value

Most US businesses wrote off the first quarter of ’09. For some it was weak, for others it was horrible. By comparison Q2 for many was better. Not much better but better nevertheless. The real test will come in Q3. By Q3 they will have sold all the discounted inventory and will be trying to sell full priced products. For this to succeed we are going to have to see a shift in buyer behavior. Right now buyers have got used to discounts both at the consumer and B2B level, to the point where they struggle to make purchases of products they actually need unless there is some steep discount applied. This won’t be helped by the fact that there will still be businesses in Q3 who are making sales just to keep themselves alive and not necessarily to make a profit. These businesses will continue to offer discounts even though it is only a matter of time before they go bankrupt. In the process they will create the impression that prices remain low. It is only once buyers start looking beyond price that things will really change. Price is after all a horrible metric for a product or service. We all know there is an implied link between price and quality. If high quality products continue to be sold at low prices it does lasting damage to markets. I read earlier in the week how high price hotel operators such as Four Seasons are keeping prices high so they don’t do lasting damage to their brand, even though bookings are way down. This requires a great deal of nerve. They are also hoping that people don’t try another chain that is offering discounts and end up staying with them. If high price products are heavily discounted it is hard to get people to pay a full price again. This is one reason the likes of Tiffanys don’t want to see their products on places like eBay even in the good times. Right now consumers and business decision makers are being surrounded by price driven messaging rather than value driven messaging. Of course most companies don’t want to play on price but once one significant player does, they all have to and then it’s a fight to the bottom. This is where PR can play a big role in helping the economy. Getting buyers to appreciate the full value of a product or service and its brand are central to any turnaround. I know some will argue that there are other major factors such as consumer confidence. They’d be right but I’d argue that consumer confidence isn’t something that even large companies can do a great deal to affect. The government has a huge role to play here and is why Obama has made such a big bet with his stimulus package. So when you are advising clients, do remember that campaigns that address the entire value proposition of a product, or service, is what this economy needs. That’s true whether you are trying to help a client sell a system that costs millions, or a $500 net book.
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America – a developing nation?

Silicon Valley is an odd part of America. For a start most of the people you tend to meet are transplants from either some other corner of the world or some other part of America. So when you live here you tend to get distorted view of what America is really like. I recently got a good chance to observe ‘real’ America. Not by visiting another part of it but by leaving it for a while. In the last month I did a trip to Europe and witnessed first hand how the Europeans view America. I think it would be fair to say that America is no longer viewed the way it was when I lived there. America used to be a super power with money to throw at any problem. America used to be a place where everyone had a great standard of living. America used to have people that travelled to Europe for a vacation. Instead, America is a place where the banking industry is in turmoil and the economy is ‘challenged.’ It is the place where people have suddenly realized that SUVs are a dumb idea for most average motorists. It is a place where tourists now go carrying an extra suitcase so they can restock their wardrobes at a fraction of the cost they would at home. Put simply America has become a place that is cheap to visit and yet has pretty impressive infrastructure. Indeed America is perhaps the first highly sophisticated third world country in the eyes of many. It seems hard to imagine that America has become this in such a short space of time. Ten years ago, the economy here was flying and Wall Street was in charge. Today Wall Street is in hiding and the economy is hardly firing on all cylinders. Indeed if it weren’t for the weak dollar then the US economy would likely be in a recession of some magnitude. As it is it is prompting people to buy product and services from here as if this were China or India. Only yesterday VW announced it is to open a manufacturing plant in Tennessee. It did this it was said, because of the weak dollar. All I can say is that they obviously assume America is set to have a weak dollar for some time to come as they are spending $1 Billion on this plant. So I return to my observation that America is perhaps becoming a new class of country. It is clearly ‘developed’ and yet thanks to a weak dollar is now competing for jobs and contracts shoulder to shoulder with the developing nations. Ten years ago, such a thought would have been impossible to imagine.

Following the money

It’s good to know that the tech criminals out there have not been targeting Microsoft simply because they have a grudge against the Redmond power house and that instead they were simply targetting the biggest opportunity to get at people’s credit card data etc. This was confirmed today by news that Apple’s iTunes is increasingly the target of such crime. Given iTunes and its hardware buddy the iPod have been the hottest pieces of technology in the consumer market in the last year it is no surprise that hackers, phishers and plain old bad guys would turn their attention to this market. Nevertheless I’m sure it will reassure the folk at Microsoft and perhaps even give them a valuable ally in the fight to protect us all from these crimes. After all, while Microsoft’s product may have been the target for criminals activities at one level, the real target is of course us the consumer and more importantly our money.