Friday, December 24, 2010

Commercialism and Christmas

Let's face it. Ever since Santa Claus hired his very first elf at his castle in the North Pole, Christmas has been about presents. Yes, there is the religious connotation in the celebration of Christ's birth but there are few--Christian or not--who don't celebrate Christmas as a time of giving and receiving. With the exception of those who do not celebrate Christmas for religious reasons, the Christmas present is a universal gesture on December 25th. Nearly everyone at this time takes pleasure in sharing what they have with those who are closest to them.

Nevertheless, there is a backlash in contemporary culture against commercialism during Christmas time. Watch the Grinch become baffled as every resident of Whoville gathers in a circle and sings a song, ignoring the fact that everything they own has disappeared. Watch Charlie Brown lament over his sister's unending Christmas list and the fact that his friend Lucy is satisfied with no gift short of real estate. On one side of the coin, children and adults alike are prodded by marketers to indulge in the newest toys during the Christmas season. On the other hand, we as a culture seem to shame one another for making Christmas out to be a commerical Holiday.

But is commercialism so bad for Christmas? Think about all the Christmas gifts you've received throughout your life. There is probably something special that gave you some of your fondest memories. Think about all the Christmas gifts you've given. Chances are, there'll be something that truly expressed the depth of the love you had for the individual to whom the gift was given. Christmas is about giving and receiving. Even the wise men of the Bible gave Jesus gifts as a token of honor.

This Christmas, I challenge those who celebrate Christmas to embrace commercialism. I don't mean to turn into a selfish, miserly Ebenezer Scrooge. I mean the exact opposite. Give excessively. Receive excessively. A gift is a powerful thing. Christmas is the time to celebrate it.

Wednesday, December 22, 2010

Most Rewarding Education???

I recently read an article from CNBC on the top colleges of 2011 with respect to how much salary graduates earn in their first year of full employment. These colleges bring recent grads starting median incomes ranging from 48700 to 69900. My Alma mater didn't make the list and, in support of the statistics, my salary isn't quite up to par with the graduates of these colleges. Which colleges made the list? Well, there are no suprises.

Princeton, Dartmouth, Harvard, MIT, Stanford, just to name a few. So, although the acceptance rate is very low at these institutions, everyone should endeavor to get in to these schools, right? If you've made it into Princeton or Harvard, you're set for life! Not exactly. Although these schools bring in the biggest paychecks, they also have the highest tuitions. Darmouth's 2010-2011 tuition is 40437--more than I paid out in my entire undergraduate education!

So, let's say for the sake of argument that the cost of going to one of these schools is four times as much as a typical undergraduate education. To justify attending, non-monetary benefits aside, the median starting salary would have to be four times as much. 48700 is a lot, but I make well over one-fourth of that--12183 per year--from my run-of-the-mill education.

I'm not criticizing prestigious schools. (Maybe I'm just bitter because I didn't go to one). I'm merely saying that this is yet another example of how everything is a trade-off. If you spend more money for an education, it only stands to reason that your paycheck will be higher upon attaining your degree. If you spend less, your starting salary will be less. It's as simple as that.

Saturday, December 18, 2010

The Revolution in Renting

I recently read an article in Business Week about emerging markets online for consumer-t0-consumer rentals of everyday household items. Of course, there are people that rent out their automobiles, charging by the hour. But there are also people that rent out power tools, game systems, technology devices, and furniture. Websites such as RelayRides, SprideShare, Zilok, Airbnb, ZipCar, Share Some Sugar, and Snap-Goods are making a killing off of hosting such transactions. The questions is, "Why are so many people choosing to rent what they would have formerly opted to own?"

I think that, as the speed of technological change increases ever more rapidly, consumers are having a difficult time keeping up with experiencing the influx of good in the marketplace. Not everyone has the time or money to take ownership of every hot new item that comes to market. And the real reason I believe people buy things is not to own them but rather to use them--to experience them. It's the life experiences we have with products that make those products meaningful.

Why do people lease cars? True, there are some month-to-month cost savings, but a good car can last 10-15 years. Buying one car and using it for 10-15 years would cost signficantly less than leasing 4-8 cars within the same time frame. So why do people do it? Well, there are minor stylist redesigns in most cars every couple of years and there are always new comfort/convenience and digital technology items being added to the interior. Automobiles improve drastically every couple of years and people simply don't want to miss the experiences provided by those improvements. That is the benefit of leasing a car.

Will consumers in the future forsake the American dream of owning their own homes? Will renting even a place of residence become more attractive in order to experience new environments? Who knows if it will go this far? However, I will venture to say that renting is no longer a notion simply for those who can't afford to own. Renting is strategic. Renting allows you to get the most out of life for your money.

Tuesday, December 14, 2010

Tax Increases for the Wealthy: An Unintended Consequence

Political convictions aside, most of us average everyday Americans are repulsed by the idea of the rich getting tax breaks. Recently, I heard an angry pundit on the radio exclaim something along the lines of, "99% percent of the nation's wealth is owned by 1% of the population. How much more do they want? Do they want it all?" Most of us, I think, would echo this sentiment. The rich have plenty of money--more than they need. It makes sense for them to be taxed more heavily than the rest of us.

There are many directions this conversation could go, but I think one issue that often gets ignored is who is affected most by increasing taxes for the wealthy. Obviously, the 'middle class' (whatever that is) Americans are affected as they have to pay however much less in taxes that the wealthy are paying on their behalf. Also, the wealthy are affected because they are seeing less return for their labor. However, the biggest impact on increasing taxes for the wealthy will, ironically, fall upon the poor.

How is this possible? How can taxing the rich place a larger burden on those less fortunate? Because non-profit organizations that give aid to the poor rely heavily on the donations of the rich. If the rich have incrementally less money to give, those non-profit organizations set up for philanthropic purposes have less money to divvy out. The United Way, the Salvation Army, Food for the Poor--organizations such as these thrive on the wealthy benefactors and corporate donors who, incidentally, own 99% of the nations wealth. So, before we are so quick to tax the rich, we may want to stop a moment and ask ourselves who we are really taxing.

Friday, December 10, 2010

RFPs for Consumers

In the Business-to-Business world, companies will often issue a Request for Proposal (RFP) before starting a particular project. The RFP allows competing suppliers of the company to give their proposed solution to the problems needing resolution for the project. For example, if the company is building a facility, the RFP will go out to contractors with specific instructions on what dimensions the facilities needs to be and possibly what the facility will be used for. The contractor who offers the best solution will win the contract.

All too often, though, companies issuing RFPs focus solely on price. They view their projects as commodities that just about any supplier could handle, so they simply find the lowest price and go with that supplier. The problem is that, when price only is considered, the company often does not arrive at the solution it was looking for. The facility ends up not being conducive to the company's needs. You can always find someone who will do poorer work for a lower price. Price should be the last thing considered.

The same thing happens, though, with us as consumers. We see a similar product offered by two or three different companies and we immediately go with the lower price. We never stop to think whether or not the product bought at the lowest price really meets our needs. When I want a good cup of orange juice, not just any orange juice will do. I must have Simply Orange--which just happens to be the most expensive on the market. But you know what? I don't care. Because, to me, there is no other orange juice.

Is there anything more of a commodity than orange juice? How much more should we shop based on added value rather than price when it comes to products such as cars, TVs, or sofas? You can always find something cheaper that doesn't really do what you want it to. Remember, when we're sending out our RFPs as consumers--when we're shopping similar products or services--price is the last thing to be considered. We should always think first about whether or not the product or service truly solves our problems.

Wednesday, December 8, 2010

The Importance of Trust

Trust is typically an idea we associate with relationships. You are willing to share more information about yourself with a person if you trust them and less information if you do not. Trust is the expedient to forming closer relationships. Without it, no interaction can take place.

The same thing is true about trust in market interactions. Without trust, there can be no transaction--no purchase. Think about the last time you bought something from a salesperson. Did you find him trustworthy? If so, you probably made the purchase and the process was most likely very simple. On the other hand, were you supsicious of the salesman? In this case, you probably did not make the purchase and, if you did, you did so reluctantly. Think of the last time you bought any branded product. Did you trust the brand or did you question its integrity? The answer to this question probably determined whether or not you bought it or how much you were willing to pay for it.

Stephen MR Covey, son of Stephen Covey, talks in his book Speed of Trust about trust taxes and trust dividends. When companies, brands, or salesmen are not trusted, they pay a 'trust tax' in order to sell their products or services. They have to lower their prices significantly more to get customers to buy or perhaps, if the tax is too high, the customer won't buy anyway. On the other hand, trustworthy companies, brands, and salesmen create a 'trust dividend' in selling their products or services. They are able to resist lowering prices and bending over backwards to acquire customers because customers trust them.

How important is trust to you in making a purchase? If you don't think it is that important, think again. It's really no different than trust in a relationship. In one, you are trusting someone with your information and, in another, you are trusting someone with your money. Try making a purchasing decision without trusting the person or company you are buying from--it's a lot more difficult to justify giving up your hard-earned dollars.

Thursday, December 2, 2010

Marketing to Kids

I read an article in Business Week last week about German automakers designing toy cars for kids. BMW, Mercedes-Benz, and Audi have all jumped into competition in this market. The cars are small stock-car sleds meant for pre-teens and adolescents. The idea is to acquaint the children with the Brands early before they are of driving age. Therefore, when they are older, they will insist on getting the brand of the toy car they drove.

Marketing to children has been an ethical minefield for years. Children are very impressionable and we, as a society, have a certain revulsion to stuff being sold to them. They are easily persuaded, easily tricked, easily secured as customers. Marketers, of course, see it as bad business not to market to children. Children, after all, are simply future adults. What company shouldn't be concerned about its future? And what about companies that actually make products designed for children? Watch commericals on Nickelodeon or Cartoon Network for a bit. You'll see that marketers lay it on thick for kids.

But kids aren't really the customers, are they? It's the parents that spend the money. Marketers rely heavily, then, on the nag factor--the notion that children will pester their parents until they get what they want. Many people are disgusted by this tactic. They find it underhanded and manipulative of the children. Perhaps they are right. Kids would be better off without the surplus of toys and entertianment they have today. Or perhaps not.

I know that, on a personal level, my childhood would have been severely lacking were in not for the Teenage Mutant Ninja Turtles. I had toys, cartoons, movies, clothing, posters, books, costumes, everything. When I grew up, I wanted to be a Ninja Turtle. Were the marketers of the Ninja Turtles unethical in what they did to me? I would say no. I would say that they played a vital role in shaping my childhood experience.

I'm not going to pretend that all marketing to children is okay. However, I think it is grossly misunderstood. Marketing is a good thing by nature. It introduces us to new things. As a child, I think that I benefited greatly from marketing. I would have never become a crime-fighting superhero by night if it weren't for the Ninja Turles.