Confronting the mayhem in Media and Marketing

Slow growth ahead?

Cash is King

One of the biggest themes contained within the Societe Generale report in yesterday's post is that of debt. Debt levels are at historical highs for personal, private, and government sectors, in most developed countries particularly in the US. Paying our mortgages, credit cards, and car payments on a personal level can leave little or no wiggle room in our personal budgets. The same is true for governments as debt levels leave fewer, often unpopular, options of raising taxes, reducing expenditures, privatizing industries, devaluing of currency, or defaulting on the debt.

Total US consumer debt now stands at about 130% of disposable income (105% of GDP). Prior to the 20-some year long credit boom, it averaged 60%-70%. In order to get back to those levels – assuming they reflect some sort of equilibrium – consumers would have to pay down an amount of debt equal to 65% of disposable income. To achieve that in just two years would require a jump in the savings rate above 30%. That is close to impossible. What if the savings rate stabilizes at 7%, which is near current levels? Assuming that all the savings are used to pay down
debt, and that nominal income remains stagnant, it would take over nine years to reduce debt/income ratios to the levels seen in the 1980s. – Societe Generale

The Debt Hindrance

The rise in debt has caused systemic ripples throughout the graphic arts industry. The credit lenders were the first wave where only the most credit worthy could receive loans under less than ideal terms. The credit market has somewhat loosened but companies with substantial cash reserves can make acquisitions far easier than those without. This wave has had a crippling effect on shops, thus vendors, trying to make capital purchases in software, equipment, and infrastructure.

The reaction to higher debt levels is now causing the second wave. The reaction has been to save and pay down the debt levels. Although good for the future, the increased savings levels depresses a turnaround in growth. The cycle starts with consumers saving more and spending less, then revenues fall at companies who in turn implement cost control measures. Lastly, the decreased spending means less of a share for auxiliary businesses and supporting services until the whole equation is rebalanced.

Printing firms, with high capital expenditures, have also been keen to the issue of debt. Printers who do not mind their cash flow often find extreme difficulty in servicing their debts. Mounting debts can have catastrophic consequences if left unchecked up to the closing and dismantling of the business. The result is to keep an eye on managing debt loads while still planning for the future – a true balancing act.

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Do you have a economic crystal ball?

All businesses need to recalibrate. The conditions and forces that affect the markets that your business operate in change, causing the need to shift efforts to maintain set goals or improvements . Business owners and leaders  can easily run projections, under normal economic conditions, that calculate risks for 6 months to a year. Yet we have not been under normal conditions since late 2007.

A lot of businesses focus on leading indicators to guess at directional trends for the economy. Is the market going up or down? Are consumers spending their discretionary income? These types of questions are relatively predictable within a narrow time frame. For more long range projections, you might need to formulate a few different scenarios to use as contingency plans. These long range projections are more volatile, thus difficult to formulate. It is easier to grasp the near term than think years ahead. All businesses must look beyond the immediate for strategic planning (capital investments, etc.) which probably includes an evaluation of historical information (data from your MIS)  mixed with best faith projections.

Although most economic sentiment in the media, as I write this, points toward a bottoming out of the recession because of stabilization or modest growth in some economic indicators, this momentum may be a false blip. A recent report by Societe Generale, points toward a more cautious outlook. The report contains three scenarios from best case (bear) to worst case (bull) with the centrist, most likely central policy in the middle. Economic reports, like the one provided by Societe Generale, can provide further macroeconomic information to support or change your internal scenarios. In other words, the long term guidance from these reports can provide food for thought in making your own business projections.

Side note: Check out Planet Money from NPR which always brings an interesting economic perspective to various issues.

photo by: brooks elliott
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Brands are the repeated marketing efforts of a company to consumers that generate awareness and a host of other psychological responses if successful. Brands use words, logos, pictures, jingles, and more to create trust, loyalty, passion, and action. When kids see a clown with a red quaff, they know it is for McDonald's. Hear "snap, crackle, and pop" and we think of a particular breakfast cereal. Colors can also link to brands such as brown for UPS and orange for Home Depot.

Brand recognition can be so strong that it evokes conversation. Complete strangers have stopped me while loading groceries in the car, while in elevators, and most recently while at a Mac store, because of the company logo on my jacket. More amazingly, in each case they can recall, with excitement, exacting information about the products, the employees, and their experience with the brand.

Brands have a long shelf life. Brands, because they require a huge investment in time and money, are also difficult to quickly change. Some brands like Apple have successfully transitioned their brand from computers to consumer electronics. Other brands like Kodak are successfully transitioning, due in large part from social media, from analog irrelevance to the digital of now. Yet there are some brands that fell out of favor and into the history books like Plymouth and PanAm.

The point is, when starting a new company or transitioning an existing, put ample thought into what message your brand should portray. Graphic communication companies should not overlook the importance of creating and evolving their brand. After all, how many more registration or CMYK centric logos or uninspired company names do we need?

photo by: Gerald Patterson

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