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Divining consumer intent: reading tea leaves?

August 29, 2011

Major property damage, thousands of canceled flights and some opportunistic price-gouging by a few merchants including hotels in the wake of Hurricane Irene all likely did nothing for consumer confidence. Yesterday's Wall Street Journal report noted that "on Friday, a monthly survey of consumer sentiment put out by the University of Michigan showed confidence among consumers is at its lowest point since November 2008—the depths of the recent recession."  

The Journal article goes on to grimly note that "two-thirds of those surveyed said the economy is deteriorating; many were putting off plans to buy cars and other big-ticket items." Also being shafted are discretionary expenses like cruise trips and hotel stays with one interviewee in the article choosing to stage a large family reunion at home instead instead of a cruise.

Nevertheless, the WSJ article does quote economists as saying that many of those "fears are overblown and note that how consumers actually behave doesn't always match how they say they feel. Employers have added workers for 10 consecutive months through July and wages have been rising gradually. (Further) orders for long-lasting goods such as cars and airplanes have been picking up. The recent drop in oil prices should provide a boost to both consumers and businesses."

Along those lines another report  quotes the Direct Marketing Association (DMA) which recently released its Quarterly Business Review (QBR) for the second quarter of 2011. DMA partnered with Winterberry Group on the report, a leading strategic management consulting firm that helps advertising and marketing companies build shareholder value.  econd quarter of 2011, marketers reported moderate growth in spending, sales, profits and staffing, compared with the previous quarter (Q1 2011) and same quarter last year (Q2 2010).

Among the positive signals to be gleaned from the DMA's quarterly review is news of investment in direct/digital marketing activity growing or remaining steady compared to the previous quarter and over one third of marketers surveyed (35.6 percent) indicated that profitability increased as compared to the last quarter. Regardless, the semiotics (study of signs) of consumer behavior is one thing but inferring economic intent from that is quite another particularly in a see-saw post-08 economy. All of wihch makes setting '12 budgets a daunting task.

Cookies on steroids: Caveat emptor for consumers?

August 21, 2011

A recent Wall Street Journal report about "stealthy super-cookies" has expectedly alarmed privacy advocates and consumers. The Journal article citing research findings from Stanford and UC Berkeley says these cookies on steroid "are capable of re-creating users' profiles after people deleted regular cookies". The supercookies not only resurrect deleted data but ensure their presence goes undetected.

Somewhat astonishingly the patrons of these phoenix like appartitions were major websites such as msn and Hulu both of whom promptly promised to take action to investigate and remedy the situation. The Journal article noted that these souped-up methods were not in such "wide use" a year ago when the paper first reported on privacy issues stemming from online tracking.

In a bid to pre-empt regulation, the online ad industry claims that they have initiated several voluntary measures to address privacy issues with representatives like the Digital Advertising Alliance stating that there has been "tremendous progress." Validating that thesis was a recent poll by TRUSTe, an online privacy solutions provider,  which revealed a need for increased, proactive measures to build consumer trust and understanding about online behavioral advertising (OBA) by providing enhanced notice and consumer choice outside a typical privacy policy.

A supposedly common "misconception" that leads to privacy concerns among conserns is that personally identifiable information (PII) is widely shared. TRUSTe also noted that consumers "are becoming more comfortable with OBAs "as they learn that this advertising technology does not use PII to deliver relevant advertisements." Maybe so. Some real-time targeting companies claim to have a "secret sauce" that focuses on finding desirable audience characteristics via "rapid automated testing and user-level targeting" to "find the individuals that matter". The successful campaigns run the gamut of industries including hospitality where they boosted business travel by drilling down to business travelers and owners.

It is assumed that the algorithms that underlie the "sauces" for the campaigns do not make use of, much less retain, PII. Nevertheless, it would behoove the companies who employ these "wonder kids" who devise these campaigns to take note of Truste's findings that "clear and open communications about OBA can build a foundation of trust where consumers will engage more frequently."  To qouote a trite but true saying; perception is reality. Consumer privacy seems a chimera to many even though the reality is that most, though not all, marketers do not deliberately seek to infringe on consumer privacy.






Crisis PR: why the turtle approach won't work

August 13, 2011

The social paroxysms roiling Britain seem to have upended the country's tourism czars historically cool-under-fire response mechanism. Visit Britain, the country's official tourism promotion agency, has unfortunately suspended digital activity on the BBC's international news site. The program is a part of its £100m 'You're Invited' campaign and the mandarins at Visit Britian have decided that the ads are "no longer appropriate". With enormous sums at stake (London is expecting 400,000 visitors for the 2012 Olympics in August while Britain's annual overseas visitation is at about 30 million and the tourism industry contributes nearly 9 per cent of its GDP).

Not disseminating information is akin to pulling back into a shell and is arguably one of the worst responses to a major crisis. Efective and continual communications across multiple channels ought to be de-rigueur. The playbook to use should have been from the responses to past crises such as the (somewhat overstated) fear of foot-and-mouth disease in early 2001 and mad cow disease a couple of decades ago. In the case of the former, the country pulled out all stops and citizens (royal and plebeian) in an effort to project an image of business as usual including visits by members of the royal family around the country.

The 9/11 terrorist attacks showcased the US and New York's handling of the crisis when tourism numbers rebounded within a matter of weeks. More recently, the environmental disaster brought about by the BP oil spill was countered effectively by regional and federal responses including a public swim by the US president last year in the Gulf of Mexico with the implicit message that the waters were safe again for holiday frolicking. Whether that effort inspired regular tourists to return or not may be a matter of political debate but, a year later, the numbers unambiguously point to public confidence in the viability of tourism infrastructure off the gulf coast.

The 21st century is proving to be no less, if not worse, than the last one in terms of unrelenting crises. The responses of jurisdictions like corporations can make or break the finances of businesses, small and large with effects that reverberate across borders. A decline in tourism to Britain will, without doubt, redound negatively to the US and many other countries as the UK consumer pulls back in response to a straitened wallet brought on by a decline in spending by tourists. It can't hurt for others to pitch in and visit the UK now when it matters most. Visit Britain too ought to spread the message that the disruption brought about by vandals does not diminsh the many attractions that remain safely open for tourists.

Event driven rate hikes: price gouging?

August 07, 2011

Most summers result in high gasoline prices which not infrequently  brings out that old chestnut: "price gouging". Hotels worldwide practice dynamic hotel pricing but when a concentrated spike in demand occurs due to specific events, anticipated or not, hotels tend to raise rates, sometimes by orders of magnitude. As is the case with gasoline, those rate spikes, rightly or wrongly, inflame consumers and, sometimes, attracts regulatory attention with the incendiary and actionable charge of price gouging.

The tenth anniversary of September 11th in New York is around the corner but it is unlikely the city will see any astronomical price increases as was the case when the terror strikes happened ten years ago. At that time, more than a few hoteliers sought to capitalize on the inability of out-of-towners to leave the area and jacked up rates in violation of New York's anti-price gouging laws which specifically prohibits "unconscionably excessive" prices during an abnormal disruption of the market resulting in a state of emergency. An exponential growth in hotel inventory since the attacks which combined with the fact that the anniversary is an anticipated event has resulted in no noticeable price hikes.

The foregoing is not the case with the Rugby World Cup 2011 in New Zealand next month or next year's 2012 Olympics starting July 27 in London. The international rugby board has already "warned" New Zealanders against gouging whether it cames to hoarded tickets or hotel rooms. While larger hotel chains are reportedly holding prices within the range of similar periods in prior years some others have chosen not to hew to the idea that keeping prices steady may result in repeat visits. Some London hotels, however, seem to have priced themselves off the charts with room rates reaching stratospheric levels past the £5,000 ($8,150)per night mark. And that is for a rather unpretentious Jury's Inn near an olympics site.

Nevertheless, the heated rhetoric about price gouging begs the question as many economists posit that price gouging actually serves customers well. A Washington Times op-ed on gasoline pricing notes that the "US's Federal Trade Commission  has found that public concerns over price gouging usually are misplaced. No matter that the FTC has repeatedly told Congress a federal price-gouging law would cause more problems than it solves." The author of that article contends that even in a dire emergency "consumers are better off with goods available. Merchants who keep their shelves restocked - even if at a higher price - do more for the community than the merchant unable or unwilling to restock." Similarly, a detailed study on price gouging published by the libertarian think-tank CATO entitled "The problem with price gouging laws" concluded that the evidence against price gouging both on the moral and economic spheres to be weak.

In the case of hotel prices, it is more than likely that the £5,000 is unsustainable as was the case with those who ratcheted up prices in anticipation of large tourist inflows for the recent royal wedding only to find few takers. The turn of the century eleven years ago so similar outcomes for New York hotels with many raising rates only to find themselves with unsold inventory as the milleniumnew year approached. Ultimately, consumers do make conscious and voluntary decisions with regard to purchasing a product or service and while they may be unhappy with pricing for a variety of reasons it is hard to argue against the idea of a supply-demand driven price outcome.

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  • President of Apple Core Hotels, a chain of 5 midtown Manhattan hotels offering value and comfort in the heart of the city.

    Member of the board of Directors - Hotel Association of New York.



  • The views expressed in this blog are my own and not that of any company, association or organization.