FYI - New theater seats range from $125 - $400. You can get some decent / durable reclining stuff for $250 - $300.
Okay - so I buy the theater for $900k. I reconfigure it and rehab it for another $500k and end up with what I want for 1.4m. I'm doing for it, what Henry and Luchino did for Fenway.
Can I get people to contribute? Is this whole Aura thing a real thing?
Monday, May 19, 2008
Saturday, April 19, 2008
Permission Based marketing Partnership
Find the best permission based marketing system partner I can find who is willing to throw together a partnership and go after a few defined markets. Live Music consumers, Car buyers / owners.
It was true
We like this old woman. She's good to cats and she is otherwise, okay. However, she claims people are watching her and talking to her. Things are moved or missing in her home and she is upset about it. She complains to her grown children who - at first - investigate her situation - albeit skeptically. After a while they are convinced she's nuts. Her Doctor becomes convinced she's nuts. Things get odd...
In then end - all her claims were true and some of the people who behaved badly are pained by the "people".
In then end - all her claims were true and some of the people who behaved badly are pained by the "people".
Wednesday, March 5, 2008
Worthy?
There's a myth that all you need to do is outline your vision and prove it's right—then, quite suddenly, people will line up and support you.
In fact, the opposite is true. Remarkable visions and genuine insight are always met with resistance. And when you start to make progress, your efforts are met with even more resistance. Products, services, career paths... whatever it is, the forces for mediocrity will align to stop you, forgiving no errors and never backing down until it's over.
If it were any other way, it would be easy. And if it were any other way, everyone would do it and your work would ultimately be devalued. The yin and yang are clear: without people pushing against your quest to do something worth talking about, it's unlikely it would be worth the journey. Persist.
In fact, the opposite is true. Remarkable visions and genuine insight are always met with resistance. And when you start to make progress, your efforts are met with even more resistance. Products, services, career paths... whatever it is, the forces for mediocrity will align to stop you, forgiving no errors and never backing down until it's over.
If it were any other way, it would be easy. And if it were any other way, everyone would do it and your work would ultimately be devalued. The yin and yang are clear: without people pushing against your quest to do something worth talking about, it's unlikely it would be worth the journey. Persist.
Monday, March 3, 2008
On the future of the music business - Godin Writes
...I keep writing books, and writing books about this industry and the industry has never invited me over, so thank you.
So, I’m going to start by pointing out that for the period I’m talking about, which is my entire youth, not ill-spent enough, but my entire youth, the record business was perfect. It was a perfect industry. And I want to tell you why. Each one of these factors is important.
Number one: An entire medium and entire section of the spectrum devoted to promoting the stuff you make...thats great right...for free! An entire thing built around helping you sell more stuff.
Number two: An oligopoly. For those who didn’t grab an MBA [an oligopoly] is where there is a small number of people competing against each other. If you are a band hoping to break out in 1974, 1984, 1993, you didn’t have a lot of choices, and since you didn’t have a lot of choices guess who had a lot of power, a few companies. And, those companies could demand certain things that they needed from the world.
The third thing that made it perfect is it was a key part of out lives. Look up senior prom on the internet and all you’ll see are stupid pictures, ugly dresses, and people remembering the songs they were listening to. It was the soundtrack for generation after generation. The people in the shoe business don’t have this advantage. The people at almost every business aren’t featured on the prom pages, you guys are.
The next thing, entire chains of retailers devoted to selling your product. In malls they’re paying the rent, not you, Sure they’re extracting shelf space allowances from you, but isn’t that really cool? Whole stores you don’t even have to own, devoted to promoting what you sell.
Next thing, you have God on your side. (slide of “Clapton is god”) Where was the last time you saw a piece of graffiti that said Starbucks is God. This is really good times.
The next thing, one of my favorites, this piece of technology is so cool, it is really cheap to make. You can sell it for a fair amount of money. You can’t copy it, you wear it out and then you need another one. Its pretty, other people can see you own it, and they want one too. And once I don’t have it anymore and give it to you, I don’t have it anymore. This was a really cool thing, bad idea to get rid of this. (audience clapping)
Alright, I’m on a roll here. The next thing, a magazine, not one magazine, several magazine devoted to promoting the product you sell. Again, no magazines about coffee, plenty of magazines about music. And, a whole cable TV channel about it. Lets see if I understand this. Everyone else has to buy TV commercials, you guys get your own channel...and you’re allowed to put scantily clad women on it. (laughter) This is amazing. I’m almost done-almost done with all the good news.
It used to cost a wicked lot of money to make a record. (laughter) Thats good for you because that means the artists need you. Because you’re the ones who pay all the money it costs to make a record.
And the last amazing piece of news is this guy. The voice of Scooby Doo (slide of Casey Kasem). Because, if you made it to the top 40, you made it! There is really something special about best seller lists. Something magic happens when you make the best seller list. What happens is people buy your stuff because other people are buying it. Think about that. You’re popular because you’re popular. And it’s an ever going cycle. And that is underlying a lot of what is going on. So! We can look at this and say, “this was good”, and I’ll grant you, it was good. But that doesn’t mean it’s going to last forever. Just because all of those things lined up to make this the greatest business in history, thats legal, doesn’t mean that you should assume it’s all gonna stay. So, rather than me going through each one of those and bumming you out I’m just going to pick a couple of them and remind you of how the dynamic changed.
Obviously, it’s really hard to make money doing that. Also, remember those guys who bought Beach Boys records? This is what they look like now. (slide of aging couple) (laughter) Now this is really important to understand because when the typical person is a teenager, they’re spending a lot of time looking for more. “What’s the new thing, what’s the next thing, what’s the new thing?” But these guys don’t want that. They want to remember THEN, they don’t go looking for the new thing. And, it’s not your fault they were baby boomers, it’s not your fault the baby boomers are getting old. It’s just true.
The next thing we talked about, this technology wasn’t as good as we hoped when we started. And it’s had a lot of side effects, the biggest one of course being it’s digital. And once you make it digital, all of a sudden the math changes. Because, it used to be if I gave you my record, I didn’t have my record anymore. And now, it’s if I give you my record, I still have my record. And that’s different. I’m not saying it’s better, I’m not saying it’s worse. I’m not saying it’s moral, or immoral, I’m just saying it’s different and we got to accept that. And, one of the side effects of that is that something has fundamentally shifted here. Now, I’m going to give you a little bit of a preview which is, I think the internet is the new radio. And I think we’re needing, in the record business, people in the record business are going to have to think about the fact that, that might be a really good thing, not a really bad thing. And, we’ll come back to that in a minute.
The next idea is this idea that American Top 40, Casey, I don’t even know if he is still alive but its doesn’t matter so much anymore. And the reason it doesn’t matter is because of something called the long tail. I don’t know if you’ve read this book, you should go out and read it right now, you can read it in 45 minutes. And what Chris Anderson [author of The Long Tail] pointed out is this, if I look at Netflix, what I see is that Netflix rentals, half of them are products Blockbuster doesn’t even carry. If I look at Amazon sales, half of Amazon sales are products that are unavailable in any Barnes & Noble store. If I look at the iTunes music store, half of iTunes sales are titles that you could not buy if you went into any record store. What happens when you give people an infinite number of choices in any genre, polka, doesn’t matter, they spread out. And two things occur. One, they go down the tail and start finding what’s just right for them, and two, sales go up. And so what this means is that the very structure of “how do we force as much attention as we can to the top 40” is actually the opposite of what leads to more consumption.
And then the last one, you’ve seen it before, is this idea of suing the very people you’re trying to talk to is unfortunate.
So, what’s next? And where do we go from here? I want to start by saying this really clearly. Music is not in trouble. I believe more people are listening to more music now than any time in the history of the world. Probably five times more than twenty years ago...that much! But, the music business is in trouble. And the reason the music business is in trouble is because remember all those pieces of good news?...every single one of them is not true anymore. Every. One. Now, if you want to, you can curse the fact the Solomon’s couldn’t figure out how to keep the tower going. You can curse the fact that it’s really easy to copy a CD. You can curse the fact that we don’t care about the American top 40. You can curse the fact that there isn’t top 40 radio that matters. What good is that going to do? Or, we could think about the fact that you have more momentum and more assets and more talented people than any body else. [And], at the very same time that people are listening to more music than ever before. Thats really cool. And, so when we think about transitions what we know is that timid trapeze artists are dead trapeze artists. And, that the only way you get from here to there is to just do it. Now, you might be wrong but the alternative is you WILL be wrong. There is no way to go from the perfect music business to the new music business with guaranteed ROI and written assurances-it doesn’t exist. So what will happen, I will guarantee this to you, is that 90% of the people in this industry will timidly start walking their way over and they will all fail. Thats why when you go to look up something online, you don’t go to RandomHouse.com, you go to Google.com. Thats why when you go to buy something on auction online you don’t do to Sothebys.com, you go to Ebay.com. Go down the list, what happened was AOL lost their nerve and didn’t start AOL Book where you could meet friends. They forgot. They were too busy trying to get people to buy a CD and start joining a membership internet service because they weren’t willing to do this. So it’s a little quixotic on my part but I’ve devoted my career to try and get people to do this. So, I think there is a new business here that might even be more perfect than the last one. It’s not the same business, the waves are shaped differently, and you need different skills but someone is going to win big in this business. So, what I want to do, and I’m excited-I’m talking too fast, we don’t have a lot of time here and thats fine with me, is tell you some of the tactics that I would use if I were in your shoes. But I don’t think I’m necessarily right. And if Berry Gordy had called me on the phone in 1964, I would have given him bad advice too. But, I hope what you’ll see in this is the thinking process about some of the realities of what really “is” in the world because you guys are much better than I am at turning those realities into an actual business. So let me try.
The first one is that people don’t listen to companies, they listen to people. And what is unique, almost entirely, compared to the movie business, the book business, whatever, is that you sell people. And, there is something magical about the connection between one person and another person. There is something magical about the way we treat celebrities. And so part of the thing that is out there is that there is a large number of people who want to be led. There is a large number of people who want to connect. There is a large number of people who want to join a tribe. And you have the ability, from where you stand, to make some of those connections happen. What’s really neat is...my friend gets all excited because he needs to score some Bruce Springsteen tickets. Isn’t that interesting, right, because he’s using Greg to get to this tribe of people. That’s really valuable. He doesn’t need to have somebody get a copy of an album, he can just get that, you know, from Amazon for ten bucks, or for free. But the tickets, the connection, the insider, the handshake to one handshake-thats worth a lot! And so far you guys have been treating it like an interesting side effect. But it might be something right at the core of what you do every day.
The next one is my biggest one, and what started me down this whole path which is, if I asked you for the name and address of your 50,000 best customers, could you give it to me? Do you have any clue? Then what happens every day is you guys go to a singles bar and you walk up to the first person you meet and propose marriage and if that person won’t marry you, you walk down the singles bar to every single person until someone says I do. Thats a stupid way to get married. A better way to get married is to go on a date. If it goes well, go on another date. Wait to tell them on the third before you tell them you’re out on parole. (laughter) Then you meet their parents, they me your parents, you get engage, you get married. Permission is the act of delivery. Anticipated, personal, and relevant messages to people who want to get them. I have every record Ricky Lee Jones has ever made including the boot legs that she sells. Rick Lee Jones should know who I am! (laughter) I have bought many of them (pause) well her agents, her people [should know who I am]. I’ve bought many of them directly from her site. I desperately want Ricky Lee to drop me a note telling me when she is going to be in town. I want her to ask me, “should I do a duets album with Willie Nelson, or should I do one with Bruce Springsteen?”. I want to have these interactions. And I want her to say, “I’m making another bootleg, but not until I get 10,000 people to buy it as patrons before I make it”. Because I’d sign up. I’d buy five if it would help, but she doesn’t know who I am. She doesn’t know who I am, she never talks to me. And then every once in a while her record label tries to yell at me, but I’m not listening because they’re yelling at me in a place where I’m not paying attention. And so we look at these phrases, “paying attention”. That’s what you’ve wanted people to do all along. “Pay attention to this artist”. Paying is a weird word isn’t it? You want me to pay you something-my attention. And if you’re wrong, I get nothing back. I had to listen to the Backstreet Boys...AHH! I want those three minutes back. So, it’s a weird relationship.
The next thing is this idea that people care very much about who is sitting next to them at the concert. They care very much about the secret handshake. They care very much about the tribal identification. “Oh you like them, I like them”. The Grateful Dead is an amazingly successful paradigm for many of the things I’m talking about. They didn’t make any money selling records compared to the way they made money doing everything else. Part of it was, you knew if you met someone at a dead concert, they had some things in common with you. The secret handshake, the clothes, whatever it was. And that was important and you were willing to pay money to be with those people. And after Jerry died it was very interesting. Because obviously there was thousands of hours to listen to but that’s not what the people missed. The people missed the place they could go to meet the people like them. At Facebook, it’s all about that. 64 million people who go there every day so they can meet people like them because [Facebook] is very good at dividing people up.
The next thing is what I call the Seinfeld curve. The Seinfeld curve shows us Jerry’s life. If you like Jerry Seinfeld you can watch him on television, for free, in any city in the world two or three times a day. Or, you could pay $200 to go see him in Vegas. But there is no $4 option for Jerry Seinfeld. This is death. You can’t make any money in here. Because if you’re not scarce I’m not going to pay for it because I can get if for free. And one of the realities that the music industry is going to have to accept is this curve now exists for you. That for everybody under eighteen years old, it’s either free or it’s something I really want and I’m willing to pay for it. There is nothing in the center-it’s going away really fast.
The next one is back to this long tail model. The magazine business imploded a long time ago. Saturday Evening Post, Time Magazine, they’re all irrelevant. But you can make a fortune with Playstation magazines, PC gaming [magazines], Game Informer, because there are silos of people who care a great deal. And if you know who those people are, if you have permission to talk to them, ready for this, if you stop looking for listeners for your music, and start looking for music for your listeners instead, the economics of your business totally changes. Magazines make 10x return on equity of books, you know why? Because magazines have subscribers and books don’t. So every time a book comes out they gotta run around looking for someone to buy it. Where as the magazine people just look for the next author to write the next article in the next magazine.
The next idea is this idea of liking. There is a lot of music I like. There is not so much music I love. They didn’t call the show, “I Like Lucy”, they called it “I Love Lucy”. And the reason is you only talk about stuff you love, you only spread stuff you love. You find a band you really love, you’re forcing the CD on other people, “you gotta hear this!”. We gotta stop making music people like. There is an infinite amount of music people like. No one will ever go out of the way to hear, to pay for, music they like.
And the last one is back to this tribal thing. It’s really important to people to feel like they are part of that tribe, to feel that adrenaline. We are willing to pay money, we’re willing to go through huge hoops, trampled to death in Cincinnati if necessary, in order to be in the environment where we feel that’s going on.
So if I put all this together I’m going to come up with what I call the Merchant Solution. It has nothing to do with stores, it has to do with Natalie Merchant. (laughter) So, Natalie Merchant shows up in the New York Times last week saying not only do I not have a record label, I’m not going to make records anymore because I just figure out how to do it. And that is the biggest opportunity times 10,000 because Natalie doesn’t want to be in business, Natalie wants to make records. Thirty years ago Natalie couldn’t put together the scratch to record an album because she couldn’t afford a recording studio. Thats what you guys did for her. She couldn’t come up with the time and energy to go out to California to sell and pay for shelf space at Tower, thats what you guys did for her. The point is, now she needs somebody to say “let us take care of your tribe”. Let us figure out the business model that says you get to do what you’re great at, write songs, perform them, find people who love you, not like you, and they are A LOT in the case of Natalie Merchant, and we will figure out not how to exploit that, not how to write a contract that you’re going to regret for the rest of your life, but to sit next to you and say guess what, there are all these people in the tribe [and] we need to figure out how to make stuff for them. And, because we have three other artists that are just like you, Cowboy Junkies, we can start mixing tribes together in appropriate ways that makes everybody happy. Because you [record label] could go to the Cowboy Junkies tribe and say Natalie Merchant is coming to town and they’ll all go. Because they love her and they love each other and they want to see each other again because they can’t wait a whole year till the [Cowboy] Junkies come back.
So if the model that we loved about the record business in 1968 was A&R, taking care of artists, finding artists who people will love, and the model that we hated was brand management, I want to argue that the next model is tribal management. That the next model is to say, what you do for a living is manage a tribe...many tribes...silos of tribes. That your job is to make the people in that tribe delighted to know each other and trust you to go find music for them. And, in exchange, it could be way out on the long tail, no one wants to be on the long tail by themselves, the polka lovers like the polka lovers, they want to be together. But that you, maybe it is only one person, technology makes this really easy, your job is to curate for that tribe, like the curators upstairs [at the museum]. There is a museum of modern art tribe, you can see them here every Thursday. And if you can curate for them guess what the [musical] artists need...you! Guess what the tribe needs...you! You add an enormous amount of value by becoming a new kind of middleman.
So let me go through, real quick, a bunch of tactics and we can come back to these after I’m done if you want. So, old world, new world. Old world: it mattered who you knew. You know Jan Wenner...thats a good thing. Now it doesn’t matter because there’s an infinite number of outlets-you can have your own channel.
Number two: limited number of physical outlets, now there’s an infinite number of online outlets. An infinite number of places where I can find music.
Number three: an emphasis on hits because you didn’t have a lot of channels, you had to own the ones you had. Now, it’s about niches. I write the number one marketing blog in the world. Who cares. Well not many people here care, but lucky for me that niche has a bunch of people in it who care. And so I enjoy my day writing that blog, I could never write a blog that appealed to everybody. I couldn’t write a Boing Boing blog or a blog about popular culture, but because I get to be the king of this little silo I get benefits out of it.
Number [four]: you yelled at the consumer. You talked directly to the user. Now it’s about two things. One, consumers talking to each other and two, consumers talking to you. How easy is it for a fan to talk to you? Almost impossible because you’re not organized for that and because you didn’t see that there was a benefit. But if you’re in tribal management thats the number one best thing that could happen to you all day is that you get an email or a phone call. Alright? Back to the barrier between the consumer and the permeability.
The next one: your whole life was about interrupting people with messages they didn’t want to get. Fortunately radio made that socially acceptable. Unfortunately the government made it against the law for you to pay for that to occur but you still managed to pull it off. I could get in the car, turn on the radio and hear a song I wasn’t expecting and maybe I would like it. If I didn’t like it, it didn’t cost you anything anyway. Now it’s about permission. Now I get on the radio and in my car I have either my mp3s in there or I have satellite in there, I don’t hear anything i don’t want to hear. So, the model has totally changed.
Next one: you used to have a factory. The factory is the recording studio, you know, the ability to get the number of things on the shelf space at Tower. You built everything around that factory. There’s no factory anymore! If you guys put up one ad on Craigslist you’d have records here tomorrow, done, finished, by email. Because everyone has the ability to make a record now. It used to take a long time. Someone would go to the studio, Boston, and we’d hear from them three or four years later. Now you can put a State of the Union speech out as a hip-hop record one day after he gives his speech and you could sell a bunch on iTunes. It used to be “how big a share of the market can we have?” Now it’s about “how do we touch a tribe, just for a minute?” As long as the tribe is happy, we’re happy. It used to be about what features, checklist stuff, now it’s “is there a story behind this artist, is there a story behind the person?”. Advertising, promotion, shelf space, that used to be what you paid cash money for. Now you’re going to have to figure out how to innovate in the way you interact with people.
And I think this is my last one: stability used to be “we’re big, you can trust us.”. Now small overhead, we own the polka silo, we only need one person to take care of it, gives you the ability to have low risk when taking care of the long tail.
Customer support isn’t as important as consumer support. How do you get people to help each other?
So, if I had to show you one slide again, it would be this one. It would be, “I really want to hear from you”. Ricky Lee. Please! write to me, I want to be part of the tribe, I want you to talk. It’s not about, anymore, how many people can you reach. Super Bowl, doesn’t matter. it’s irrelevant. The internet is the new radio. What that means is this you’ve been arguing and hassling and yelling and pushing for 40 years to get more air time. Now you have infinite air time. That’s what the internet is for you. The internet is the ability to get any song you want in front of the people who want to hear it with huge reach and no barriers. What matters isn’t how many, it’s who. Who are you reaching, who are the thought leaders, who are the people who are going to tell other people? Who are the people who are out there trying to find the next big thing because those people are going to influence what the next trend is, and if you’re in the middle of that trend, because you’ve used this new medium to spread the ideas, you’re going to start paying for internet airtime soon because it’s worth it. It’s not that you need to say “no, no, no, I can’t let you hear this” it’s “I want you to hear this”. Because if you hear it you might join the tribe, and if you join the tribe then over time I’ll take care of you so well you’ll want to pay me. And then people will be passionate when they hear what you do for a living, they’re going to die to have you help them meet other people in the tribe.
So, I’m going to start by pointing out that for the period I’m talking about, which is my entire youth, not ill-spent enough, but my entire youth, the record business was perfect. It was a perfect industry. And I want to tell you why. Each one of these factors is important.
Number one: An entire medium and entire section of the spectrum devoted to promoting the stuff you make...thats great right...for free! An entire thing built around helping you sell more stuff.
Number two: An oligopoly. For those who didn’t grab an MBA [an oligopoly] is where there is a small number of people competing against each other. If you are a band hoping to break out in 1974, 1984, 1993, you didn’t have a lot of choices, and since you didn’t have a lot of choices guess who had a lot of power, a few companies. And, those companies could demand certain things that they needed from the world.
The third thing that made it perfect is it was a key part of out lives. Look up senior prom on the internet and all you’ll see are stupid pictures, ugly dresses, and people remembering the songs they were listening to. It was the soundtrack for generation after generation. The people in the shoe business don’t have this advantage. The people at almost every business aren’t featured on the prom pages, you guys are.
The next thing, entire chains of retailers devoted to selling your product. In malls they’re paying the rent, not you, Sure they’re extracting shelf space allowances from you, but isn’t that really cool? Whole stores you don’t even have to own, devoted to promoting what you sell.
Next thing, you have God on your side. (slide of “Clapton is god”) Where was the last time you saw a piece of graffiti that said Starbucks is God. This is really good times.
The next thing, one of my favorites, this piece of technology is so cool, it is really cheap to make. You can sell it for a fair amount of money. You can’t copy it, you wear it out and then you need another one. Its pretty, other people can see you own it, and they want one too. And once I don’t have it anymore and give it to you, I don’t have it anymore. This was a really cool thing, bad idea to get rid of this. (audience clapping)
Alright, I’m on a roll here. The next thing, a magazine, not one magazine, several magazine devoted to promoting the product you sell. Again, no magazines about coffee, plenty of magazines about music. And, a whole cable TV channel about it. Lets see if I understand this. Everyone else has to buy TV commercials, you guys get your own channel...and you’re allowed to put scantily clad women on it. (laughter) This is amazing. I’m almost done-almost done with all the good news.
It used to cost a wicked lot of money to make a record. (laughter) Thats good for you because that means the artists need you. Because you’re the ones who pay all the money it costs to make a record.
And the last amazing piece of news is this guy. The voice of Scooby Doo (slide of Casey Kasem). Because, if you made it to the top 40, you made it! There is really something special about best seller lists. Something magic happens when you make the best seller list. What happens is people buy your stuff because other people are buying it. Think about that. You’re popular because you’re popular. And it’s an ever going cycle. And that is underlying a lot of what is going on. So! We can look at this and say, “this was good”, and I’ll grant you, it was good. But that doesn’t mean it’s going to last forever. Just because all of those things lined up to make this the greatest business in history, thats legal, doesn’t mean that you should assume it’s all gonna stay. So, rather than me going through each one of those and bumming you out I’m just going to pick a couple of them and remind you of how the dynamic changed.
Obviously, it’s really hard to make money doing that. Also, remember those guys who bought Beach Boys records? This is what they look like now. (slide of aging couple) (laughter) Now this is really important to understand because when the typical person is a teenager, they’re spending a lot of time looking for more. “What’s the new thing, what’s the next thing, what’s the new thing?” But these guys don’t want that. They want to remember THEN, they don’t go looking for the new thing. And, it’s not your fault they were baby boomers, it’s not your fault the baby boomers are getting old. It’s just true.
The next thing we talked about, this technology wasn’t as good as we hoped when we started. And it’s had a lot of side effects, the biggest one of course being it’s digital. And once you make it digital, all of a sudden the math changes. Because, it used to be if I gave you my record, I didn’t have my record anymore. And now, it’s if I give you my record, I still have my record. And that’s different. I’m not saying it’s better, I’m not saying it’s worse. I’m not saying it’s moral, or immoral, I’m just saying it’s different and we got to accept that. And, one of the side effects of that is that something has fundamentally shifted here. Now, I’m going to give you a little bit of a preview which is, I think the internet is the new radio. And I think we’re needing, in the record business, people in the record business are going to have to think about the fact that, that might be a really good thing, not a really bad thing. And, we’ll come back to that in a minute.
The next idea is this idea that American Top 40, Casey, I don’t even know if he is still alive but its doesn’t matter so much anymore. And the reason it doesn’t matter is because of something called the long tail. I don’t know if you’ve read this book, you should go out and read it right now, you can read it in 45 minutes. And what Chris Anderson [author of The Long Tail] pointed out is this, if I look at Netflix, what I see is that Netflix rentals, half of them are products Blockbuster doesn’t even carry. If I look at Amazon sales, half of Amazon sales are products that are unavailable in any Barnes & Noble store. If I look at the iTunes music store, half of iTunes sales are titles that you could not buy if you went into any record store. What happens when you give people an infinite number of choices in any genre, polka, doesn’t matter, they spread out. And two things occur. One, they go down the tail and start finding what’s just right for them, and two, sales go up. And so what this means is that the very structure of “how do we force as much attention as we can to the top 40” is actually the opposite of what leads to more consumption.
And then the last one, you’ve seen it before, is this idea of suing the very people you’re trying to talk to is unfortunate.
So, what’s next? And where do we go from here? I want to start by saying this really clearly. Music is not in trouble. I believe more people are listening to more music now than any time in the history of the world. Probably five times more than twenty years ago...that much! But, the music business is in trouble. And the reason the music business is in trouble is because remember all those pieces of good news?...every single one of them is not true anymore. Every. One. Now, if you want to, you can curse the fact the Solomon’s couldn’t figure out how to keep the tower going. You can curse the fact that it’s really easy to copy a CD. You can curse the fact that we don’t care about the American top 40. You can curse the fact that there isn’t top 40 radio that matters. What good is that going to do? Or, we could think about the fact that you have more momentum and more assets and more talented people than any body else. [And], at the very same time that people are listening to more music than ever before. Thats really cool. And, so when we think about transitions what we know is that timid trapeze artists are dead trapeze artists. And, that the only way you get from here to there is to just do it. Now, you might be wrong but the alternative is you WILL be wrong. There is no way to go from the perfect music business to the new music business with guaranteed ROI and written assurances-it doesn’t exist. So what will happen, I will guarantee this to you, is that 90% of the people in this industry will timidly start walking their way over and they will all fail. Thats why when you go to look up something online, you don’t go to RandomHouse.com, you go to Google.com. Thats why when you go to buy something on auction online you don’t do to Sothebys.com, you go to Ebay.com. Go down the list, what happened was AOL lost their nerve and didn’t start AOL Book where you could meet friends. They forgot. They were too busy trying to get people to buy a CD and start joining a membership internet service because they weren’t willing to do this. So it’s a little quixotic on my part but I’ve devoted my career to try and get people to do this. So, I think there is a new business here that might even be more perfect than the last one. It’s not the same business, the waves are shaped differently, and you need different skills but someone is going to win big in this business. So, what I want to do, and I’m excited-I’m talking too fast, we don’t have a lot of time here and thats fine with me, is tell you some of the tactics that I would use if I were in your shoes. But I don’t think I’m necessarily right. And if Berry Gordy had called me on the phone in 1964, I would have given him bad advice too. But, I hope what you’ll see in this is the thinking process about some of the realities of what really “is” in the world because you guys are much better than I am at turning those realities into an actual business. So let me try.
The first one is that people don’t listen to companies, they listen to people. And what is unique, almost entirely, compared to the movie business, the book business, whatever, is that you sell people. And, there is something magical about the connection between one person and another person. There is something magical about the way we treat celebrities. And so part of the thing that is out there is that there is a large number of people who want to be led. There is a large number of people who want to connect. There is a large number of people who want to join a tribe. And you have the ability, from where you stand, to make some of those connections happen. What’s really neat is...my friend gets all excited because he needs to score some Bruce Springsteen tickets. Isn’t that interesting, right, because he’s using Greg to get to this tribe of people. That’s really valuable. He doesn’t need to have somebody get a copy of an album, he can just get that, you know, from Amazon for ten bucks, or for free. But the tickets, the connection, the insider, the handshake to one handshake-thats worth a lot! And so far you guys have been treating it like an interesting side effect. But it might be something right at the core of what you do every day.
The next one is my biggest one, and what started me down this whole path which is, if I asked you for the name and address of your 50,000 best customers, could you give it to me? Do you have any clue? Then what happens every day is you guys go to a singles bar and you walk up to the first person you meet and propose marriage and if that person won’t marry you, you walk down the singles bar to every single person until someone says I do. Thats a stupid way to get married. A better way to get married is to go on a date. If it goes well, go on another date. Wait to tell them on the third before you tell them you’re out on parole. (laughter) Then you meet their parents, they me your parents, you get engage, you get married. Permission is the act of delivery. Anticipated, personal, and relevant messages to people who want to get them. I have every record Ricky Lee Jones has ever made including the boot legs that she sells. Rick Lee Jones should know who I am! (laughter) I have bought many of them (pause) well her agents, her people [should know who I am]. I’ve bought many of them directly from her site. I desperately want Ricky Lee to drop me a note telling me when she is going to be in town. I want her to ask me, “should I do a duets album with Willie Nelson, or should I do one with Bruce Springsteen?”. I want to have these interactions. And I want her to say, “I’m making another bootleg, but not until I get 10,000 people to buy it as patrons before I make it”. Because I’d sign up. I’d buy five if it would help, but she doesn’t know who I am. She doesn’t know who I am, she never talks to me. And then every once in a while her record label tries to yell at me, but I’m not listening because they’re yelling at me in a place where I’m not paying attention. And so we look at these phrases, “paying attention”. That’s what you’ve wanted people to do all along. “Pay attention to this artist”. Paying is a weird word isn’t it? You want me to pay you something-my attention. And if you’re wrong, I get nothing back. I had to listen to the Backstreet Boys...AHH! I want those three minutes back. So, it’s a weird relationship.
The next thing is this idea that people care very much about who is sitting next to them at the concert. They care very much about the secret handshake. They care very much about the tribal identification. “Oh you like them, I like them”. The Grateful Dead is an amazingly successful paradigm for many of the things I’m talking about. They didn’t make any money selling records compared to the way they made money doing everything else. Part of it was, you knew if you met someone at a dead concert, they had some things in common with you. The secret handshake, the clothes, whatever it was. And that was important and you were willing to pay money to be with those people. And after Jerry died it was very interesting. Because obviously there was thousands of hours to listen to but that’s not what the people missed. The people missed the place they could go to meet the people like them. At Facebook, it’s all about that. 64 million people who go there every day so they can meet people like them because [Facebook] is very good at dividing people up.
The next thing is what I call the Seinfeld curve. The Seinfeld curve shows us Jerry’s life. If you like Jerry Seinfeld you can watch him on television, for free, in any city in the world two or three times a day. Or, you could pay $200 to go see him in Vegas. But there is no $4 option for Jerry Seinfeld. This is death. You can’t make any money in here. Because if you’re not scarce I’m not going to pay for it because I can get if for free. And one of the realities that the music industry is going to have to accept is this curve now exists for you. That for everybody under eighteen years old, it’s either free or it’s something I really want and I’m willing to pay for it. There is nothing in the center-it’s going away really fast.
The next one is back to this long tail model. The magazine business imploded a long time ago. Saturday Evening Post, Time Magazine, they’re all irrelevant. But you can make a fortune with Playstation magazines, PC gaming [magazines], Game Informer, because there are silos of people who care a great deal. And if you know who those people are, if you have permission to talk to them, ready for this, if you stop looking for listeners for your music, and start looking for music for your listeners instead, the economics of your business totally changes. Magazines make 10x return on equity of books, you know why? Because magazines have subscribers and books don’t. So every time a book comes out they gotta run around looking for someone to buy it. Where as the magazine people just look for the next author to write the next article in the next magazine.
The next idea is this idea of liking. There is a lot of music I like. There is not so much music I love. They didn’t call the show, “I Like Lucy”, they called it “I Love Lucy”. And the reason is you only talk about stuff you love, you only spread stuff you love. You find a band you really love, you’re forcing the CD on other people, “you gotta hear this!”. We gotta stop making music people like. There is an infinite amount of music people like. No one will ever go out of the way to hear, to pay for, music they like.
And the last one is back to this tribal thing. It’s really important to people to feel like they are part of that tribe, to feel that adrenaline. We are willing to pay money, we’re willing to go through huge hoops, trampled to death in Cincinnati if necessary, in order to be in the environment where we feel that’s going on.
So if I put all this together I’m going to come up with what I call the Merchant Solution. It has nothing to do with stores, it has to do with Natalie Merchant. (laughter) So, Natalie Merchant shows up in the New York Times last week saying not only do I not have a record label, I’m not going to make records anymore because I just figure out how to do it. And that is the biggest opportunity times 10,000 because Natalie doesn’t want to be in business, Natalie wants to make records. Thirty years ago Natalie couldn’t put together the scratch to record an album because she couldn’t afford a recording studio. Thats what you guys did for her. She couldn’t come up with the time and energy to go out to California to sell and pay for shelf space at Tower, thats what you guys did for her. The point is, now she needs somebody to say “let us take care of your tribe”. Let us figure out the business model that says you get to do what you’re great at, write songs, perform them, find people who love you, not like you, and they are A LOT in the case of Natalie Merchant, and we will figure out not how to exploit that, not how to write a contract that you’re going to regret for the rest of your life, but to sit next to you and say guess what, there are all these people in the tribe [and] we need to figure out how to make stuff for them. And, because we have three other artists that are just like you, Cowboy Junkies, we can start mixing tribes together in appropriate ways that makes everybody happy. Because you [record label] could go to the Cowboy Junkies tribe and say Natalie Merchant is coming to town and they’ll all go. Because they love her and they love each other and they want to see each other again because they can’t wait a whole year till the [Cowboy] Junkies come back.
So if the model that we loved about the record business in 1968 was A&R, taking care of artists, finding artists who people will love, and the model that we hated was brand management, I want to argue that the next model is tribal management. That the next model is to say, what you do for a living is manage a tribe...many tribes...silos of tribes. That your job is to make the people in that tribe delighted to know each other and trust you to go find music for them. And, in exchange, it could be way out on the long tail, no one wants to be on the long tail by themselves, the polka lovers like the polka lovers, they want to be together. But that you, maybe it is only one person, technology makes this really easy, your job is to curate for that tribe, like the curators upstairs [at the museum]. There is a museum of modern art tribe, you can see them here every Thursday. And if you can curate for them guess what the [musical] artists need...you! Guess what the tribe needs...you! You add an enormous amount of value by becoming a new kind of middleman.
So let me go through, real quick, a bunch of tactics and we can come back to these after I’m done if you want. So, old world, new world. Old world: it mattered who you knew. You know Jan Wenner...thats a good thing. Now it doesn’t matter because there’s an infinite number of outlets-you can have your own channel.
Number two: limited number of physical outlets, now there’s an infinite number of online outlets. An infinite number of places where I can find music.
Number three: an emphasis on hits because you didn’t have a lot of channels, you had to own the ones you had. Now, it’s about niches. I write the number one marketing blog in the world. Who cares. Well not many people here care, but lucky for me that niche has a bunch of people in it who care. And so I enjoy my day writing that blog, I could never write a blog that appealed to everybody. I couldn’t write a Boing Boing blog or a blog about popular culture, but because I get to be the king of this little silo I get benefits out of it.
Number [four]: you yelled at the consumer. You talked directly to the user. Now it’s about two things. One, consumers talking to each other and two, consumers talking to you. How easy is it for a fan to talk to you? Almost impossible because you’re not organized for that and because you didn’t see that there was a benefit. But if you’re in tribal management thats the number one best thing that could happen to you all day is that you get an email or a phone call. Alright? Back to the barrier between the consumer and the permeability.
The next one: your whole life was about interrupting people with messages they didn’t want to get. Fortunately radio made that socially acceptable. Unfortunately the government made it against the law for you to pay for that to occur but you still managed to pull it off. I could get in the car, turn on the radio and hear a song I wasn’t expecting and maybe I would like it. If I didn’t like it, it didn’t cost you anything anyway. Now it’s about permission. Now I get on the radio and in my car I have either my mp3s in there or I have satellite in there, I don’t hear anything i don’t want to hear. So, the model has totally changed.
Next one: you used to have a factory. The factory is the recording studio, you know, the ability to get the number of things on the shelf space at Tower. You built everything around that factory. There’s no factory anymore! If you guys put up one ad on Craigslist you’d have records here tomorrow, done, finished, by email. Because everyone has the ability to make a record now. It used to take a long time. Someone would go to the studio, Boston, and we’d hear from them three or four years later. Now you can put a State of the Union speech out as a hip-hop record one day after he gives his speech and you could sell a bunch on iTunes. It used to be “how big a share of the market can we have?” Now it’s about “how do we touch a tribe, just for a minute?” As long as the tribe is happy, we’re happy. It used to be about what features, checklist stuff, now it’s “is there a story behind this artist, is there a story behind the person?”. Advertising, promotion, shelf space, that used to be what you paid cash money for. Now you’re going to have to figure out how to innovate in the way you interact with people.
And I think this is my last one: stability used to be “we’re big, you can trust us.”. Now small overhead, we own the polka silo, we only need one person to take care of it, gives you the ability to have low risk when taking care of the long tail.
Customer support isn’t as important as consumer support. How do you get people to help each other?
So, if I had to show you one slide again, it would be this one. It would be, “I really want to hear from you”. Ricky Lee. Please! write to me, I want to be part of the tribe, I want you to talk. It’s not about, anymore, how many people can you reach. Super Bowl, doesn’t matter. it’s irrelevant. The internet is the new radio. What that means is this you’ve been arguing and hassling and yelling and pushing for 40 years to get more air time. Now you have infinite air time. That’s what the internet is for you. The internet is the ability to get any song you want in front of the people who want to hear it with huge reach and no barriers. What matters isn’t how many, it’s who. Who are you reaching, who are the thought leaders, who are the people who are going to tell other people? Who are the people who are out there trying to find the next big thing because those people are going to influence what the next trend is, and if you’re in the middle of that trend, because you’ve used this new medium to spread the ideas, you’re going to start paying for internet airtime soon because it’s worth it. It’s not that you need to say “no, no, no, I can’t let you hear this” it’s “I want you to hear this”. Because if you hear it you might join the tribe, and if you join the tribe then over time I’ll take care of you so well you’ll want to pay me. And then people will be passionate when they hear what you do for a living, they’re going to die to have you help them meet other people in the tribe.
Lithia Stumbles
Lithia Motors Inc. is losing money for the first time since the dealership group went public in 1996. The losses raise questions about the company's unorthodox business model and sales practices.
Lithia, the nation's seventh-largest auto retailer, faces other problems. The Medford, Ore., company fired a top sales executive last week. And it acknowledges what it calls "potential reporting irregularities" related to sales at three of its 110 dealerships.
Reached last week by Automotive News, Lithia CEO Sid DeBoer declined an interview request.
Industry analysts say they expect Lithia to survive the turmoil. Some believe the company ultimately will thrive as an innovator. But in the short term, they warn, a weak economy, Lithia's heavy reliance on Detroit 3 franchises and its sales policies such as no-haggle pricing likely will mean a bumpy ride.
"There's a lot of change occurring at Lithia," says Rick Nelson, an analyst for Stephens Inc. in Chicago. "Lithia is going the way the industry is heading. They're just moving faster, which causes disruptions."
In the fourth quarter of 2007, Lithia reported a net loss of $5.1 million on revenue of $705.8 million — its first quarterly loss as a public company. In the year-ago quarter, Lithia had net income of $5.5 million on revenue of $709.0 million.
'Franchise impairments'
Lithia took a $1.8 million charge against earnings to reflect "franchise impairments" related to possible misreporting of retail sales. The company did not identify the three dealerships it is investigating, other than to say they sell Ford, Chevrolet and Hyundai vehicles.
DeBoer told analysts Feb. 20 he did not expect the company's review of the sales reporting to result in a substantial added charge.
But the incident "has to be embarrassing for Lithia," says Sheldon Sandler, managing partner of Bel Air Partners LLC, a Skillman, N.J., investment firm that specializes in auto retail.
Lithia is known for its standardized procedures and operating efficiency, Sandler says.
In a Feb. 21 research report on Lithia, Wachovia auto analyst Richard Kwas asked: "What's really going on here? The substantial loss was a big surprise."
Last week, Lithia told the Securities and Exchange Commission it had fired Don Jones Jr., formerly its senior vice president of retail operations. Lithia President Bryan DeBoer, a son of Sid DeBoer, has assumed Jones' duties, the company said.
In response to an Automotive News inquiry, Sid DeBoer refused to say whether Jones' departure was related to the sales reporting problem.
Alex Hart, Lithia's former director of Internet operations, says Jones' exit had been in the works for a long time. Hart says the company's shift to centralized operations, online sales and no-haggle pricing were a culture shock for Jones, who joined Lithia in 1989 as general sales manager of a Dodge dealership.
Jones could not be reached for comment last week.
Lithia is the only public auto retailer that operates largely in small markets. The subprime housing mess and credit crunch have taken a toll on many of the 15 states in which the company does business — notably California, Nevada, Oregon and Colorado.
Different vision
Lithia also has a high concentration of domestic dealerships, while its competitors have shifted their product mix to emphasize import-brand and luxury franchises. Nearly half of Lithia's 193 franchises are Chrysler, Dodge or Jeep.
"We see Lithia to a certain extent reflecting Chrysler's problems," Sandler says.
DeBoer told analysts during last month's conference call that he has faith in Chrysler LLC's turnaround strategy. He conceded that Lithia needs to add higher-volume import brands but said Toyota and Honda dealerships remain expensive.
He said he hopes the slumping economy will drive down acquisition costs.
At the same time, Lithia is rolling out its "Assured Pricing" strategy companywide. The program, based on no-haggle pricing, is requiring Lithia to change how it pays salespeople, from traditional commissions to compensation based on sales volume, DeBoer said.
DeBoer told analysts Lithia continues to centralize operations and streamline its staffing to improve productivity. Those changes have an immediate cost, he said.
"Our change to a new way of serving our customers is a cultural change that is also having an impact on our short-term results," DeBoer said. "These changes are critical to our long-term success."
Lithia, the nation's seventh-largest auto retailer, faces other problems. The Medford, Ore., company fired a top sales executive last week. And it acknowledges what it calls "potential reporting irregularities" related to sales at three of its 110 dealerships.
Reached last week by Automotive News, Lithia CEO Sid DeBoer declined an interview request.
Industry analysts say they expect Lithia to survive the turmoil. Some believe the company ultimately will thrive as an innovator. But in the short term, they warn, a weak economy, Lithia's heavy reliance on Detroit 3 franchises and its sales policies such as no-haggle pricing likely will mean a bumpy ride.
"There's a lot of change occurring at Lithia," says Rick Nelson, an analyst for Stephens Inc. in Chicago. "Lithia is going the way the industry is heading. They're just moving faster, which causes disruptions."
In the fourth quarter of 2007, Lithia reported a net loss of $5.1 million on revenue of $705.8 million — its first quarterly loss as a public company. In the year-ago quarter, Lithia had net income of $5.5 million on revenue of $709.0 million.
'Franchise impairments'
Lithia took a $1.8 million charge against earnings to reflect "franchise impairments" related to possible misreporting of retail sales. The company did not identify the three dealerships it is investigating, other than to say they sell Ford, Chevrolet and Hyundai vehicles.
DeBoer told analysts Feb. 20 he did not expect the company's review of the sales reporting to result in a substantial added charge.
But the incident "has to be embarrassing for Lithia," says Sheldon Sandler, managing partner of Bel Air Partners LLC, a Skillman, N.J., investment firm that specializes in auto retail.
Lithia is known for its standardized procedures and operating efficiency, Sandler says.
In a Feb. 21 research report on Lithia, Wachovia auto analyst Richard Kwas asked: "What's really going on here? The substantial loss was a big surprise."
Last week, Lithia told the Securities and Exchange Commission it had fired Don Jones Jr., formerly its senior vice president of retail operations. Lithia President Bryan DeBoer, a son of Sid DeBoer, has assumed Jones' duties, the company said.
In response to an Automotive News inquiry, Sid DeBoer refused to say whether Jones' departure was related to the sales reporting problem.
Alex Hart, Lithia's former director of Internet operations, says Jones' exit had been in the works for a long time. Hart says the company's shift to centralized operations, online sales and no-haggle pricing were a culture shock for Jones, who joined Lithia in 1989 as general sales manager of a Dodge dealership.
Jones could not be reached for comment last week.
Lithia is the only public auto retailer that operates largely in small markets. The subprime housing mess and credit crunch have taken a toll on many of the 15 states in which the company does business — notably California, Nevada, Oregon and Colorado.
Different vision
Lithia also has a high concentration of domestic dealerships, while its competitors have shifted their product mix to emphasize import-brand and luxury franchises. Nearly half of Lithia's 193 franchises are Chrysler, Dodge or Jeep.
"We see Lithia to a certain extent reflecting Chrysler's problems," Sandler says.
DeBoer told analysts during last month's conference call that he has faith in Chrysler LLC's turnaround strategy. He conceded that Lithia needs to add higher-volume import brands but said Toyota and Honda dealerships remain expensive.
He said he hopes the slumping economy will drive down acquisition costs.
At the same time, Lithia is rolling out its "Assured Pricing" strategy companywide. The program, based on no-haggle pricing, is requiring Lithia to change how it pays salespeople, from traditional commissions to compensation based on sales volume, DeBoer said.
DeBoer told analysts Lithia continues to centralize operations and streamline its staffing to improve productivity. Those changes have an immediate cost, he said.
"Our change to a new way of serving our customers is a cultural change that is also having an impact on our short-term results," DeBoer said. "These changes are critical to our long-term success."
Friday, February 29, 2008
A story
A fellow has it rough. In spite of his situation, he sees others that have it worse. He treats the disadvantaged well. The fellow's situation deteriorates from there and he suffers. He looks to those with more (swallows his pride), for help - as he would have given willingly to others previously. He is denied. He shakes his head. He fights on.
One of his kids / girlfriend / wife / friend / coworker / some one else has a problem that requires his help and he has to find a way to get it done.
After several attempts, he is further away form what he hopes to do.
There is a moment (this moment lasts a long time - because it's the good part), when he figures out what to do and simultaneously gets the will to do it.
He goes about his business - just as he had imagined. There are a couple of small unexpected obstacles along the way, but he gets clever in one instance and lucky in another.
Tension, yada... Almost blew it yada... The kid's expectations fall (he has no idea what's going on)
Our guy wins (what a surprise) in the end. There is a moment when everyone sees him as the hero. All the good guys are impressed. The bad guys are taught a lesson. The innocent are rescued.
Our guy lives happily ever after, or he died when he did his hero thing.
The end.
One of his kids / girlfriend / wife / friend / coworker / some one else has a problem that requires his help and he has to find a way to get it done.
After several attempts, he is further away form what he hopes to do.
There is a moment (this moment lasts a long time - because it's the good part), when he figures out what to do and simultaneously gets the will to do it.
He goes about his business - just as he had imagined. There are a couple of small unexpected obstacles along the way, but he gets clever in one instance and lucky in another.
Tension, yada... Almost blew it yada... The kid's expectations fall (he has no idea what's going on)
Our guy wins (what a surprise) in the end. There is a moment when everyone sees him as the hero. All the good guys are impressed. The bad guys are taught a lesson. The innocent are rescued.
Our guy lives happily ever after, or he died when he did his hero thing.
The end.
Tuesday, February 26, 2008
used net
There are a several ways that you can accomplish this, and here are a few basic things that you can do.
One of the most basic practices that will help you is to make sure that you have good quality photos on each vehicle.
Prospective customers like to see the details on the vehicle and the condition of the vehicle before they come in. Having photos on your pre-owned vehicles really helps build the trust with your customer and builds value into the vehicle.
The only thing that is worse than not having pictures on the vehicles is having poor photos on your vehicles. Here are a few tips that you can use to improve your online photos:
—Be mindful of your background. I would suggest using the same background for all of your pictures. It doesn't take that much more effort to pull the vehicles to a common point to take pictures of it. Some dealerships have actually set up a "studio" to take their pictures.
This is as simple as hanging a curtain in the background so the focus is on the vehicle. You can also take the pictures that will be positioned so that your dealership name is in the background. This will help them remember your dealership name and will keep another dealer from trying to sell your vehicle to their customer.
—I tried to make sure that the pictures were in the same basic order for each vehicle as well. This will give the customer consistency and will give them a sense that you genuinely care about earning their business.
—Take your exterior pictures from the corners of the vehicle. Taking these angles gets two sides of the vehicle and shows the customer more than pictures straight on from the back and the front.
—Take a picture of the odometer, this verifies the information that you have listed with the vehicle. Customers do not like it when they come in and the mileage is a misprint on the Web.
—Make sure that you have pictures of the seat condition, especially the driver's seat. This is one of the first things that customers look at because comfort is so important.
The other big factor is something that most dealerships don't take the time to bother with. Take the time to write a description for your pre-owned vehicles. It doesn't need to very elaborate, but having a paragraph about the vehicle does build value into the vehicle and shows the customer that you don't have anything to hide.
Here are a few tips that will help you with your descriptions:
—Make sure that whoever is writing them knows how to write with good grammar and that the spelling is checked and double-checked.
—The best way to write a description is to write what you think that you would tell a customer if they were in front of you. What qualities of the vehicle would you most want to deliver to your customer?
Here are a few items that you will want to include in your description:
—Let them know if the vehicle was a trade-in or not. Also include anything that you learned from the previous owners (i.e., one owner, mostly highway miles, traded for a newer model, needed a larger vehicle, etc.).
—Let them know about any certifications the vehicle has gone through in your service department.
—Let them know if there is still a manufacturer's warranty left on the vehicle or if your dealership has put a warranty on it.
—Mention any equipment the vehicle has that will add value to the vehicle.
—I also added a sentence letting them know that we had checked the Carfax history and that they would be eligible for the Carfax money-back guarantee.
These ideas seem very simple, but many dealerships do not pay attention to these details and will give the customer a reason to eliminate you from their search.
For more information, visit www.kainautomotive.com.
One of the most basic practices that will help you is to make sure that you have good quality photos on each vehicle.
Prospective customers like to see the details on the vehicle and the condition of the vehicle before they come in. Having photos on your pre-owned vehicles really helps build the trust with your customer and builds value into the vehicle.
The only thing that is worse than not having pictures on the vehicles is having poor photos on your vehicles. Here are a few tips that you can use to improve your online photos:
—Be mindful of your background. I would suggest using the same background for all of your pictures. It doesn't take that much more effort to pull the vehicles to a common point to take pictures of it. Some dealerships have actually set up a "studio" to take their pictures.
This is as simple as hanging a curtain in the background so the focus is on the vehicle. You can also take the pictures that will be positioned so that your dealership name is in the background. This will help them remember your dealership name and will keep another dealer from trying to sell your vehicle to their customer.
—I tried to make sure that the pictures were in the same basic order for each vehicle as well. This will give the customer consistency and will give them a sense that you genuinely care about earning their business.
—Take your exterior pictures from the corners of the vehicle. Taking these angles gets two sides of the vehicle and shows the customer more than pictures straight on from the back and the front.
—Take a picture of the odometer, this verifies the information that you have listed with the vehicle. Customers do not like it when they come in and the mileage is a misprint on the Web.
—Make sure that you have pictures of the seat condition, especially the driver's seat. This is one of the first things that customers look at because comfort is so important.
The other big factor is something that most dealerships don't take the time to bother with. Take the time to write a description for your pre-owned vehicles. It doesn't need to very elaborate, but having a paragraph about the vehicle does build value into the vehicle and shows the customer that you don't have anything to hide.
Here are a few tips that will help you with your descriptions:
—Make sure that whoever is writing them knows how to write with good grammar and that the spelling is checked and double-checked.
—The best way to write a description is to write what you think that you would tell a customer if they were in front of you. What qualities of the vehicle would you most want to deliver to your customer?
Here are a few items that you will want to include in your description:
—Let them know if the vehicle was a trade-in or not. Also include anything that you learned from the previous owners (i.e., one owner, mostly highway miles, traded for a newer model, needed a larger vehicle, etc.).
—Let them know about any certifications the vehicle has gone through in your service department.
—Let them know if there is still a manufacturer's warranty left on the vehicle or if your dealership has put a warranty on it.
—Mention any equipment the vehicle has that will add value to the vehicle.
—I also added a sentence letting them know that we had checked the Carfax history and that they would be eligible for the Carfax money-back guarantee.
These ideas seem very simple, but many dealerships do not pay attention to these details and will give the customer a reason to eliminate you from their search.
For more information, visit www.kainautomotive.com.
Sunday, February 24, 2008
RE Agents should Quit
Advice for real estate agents (quit now!)
Seth Godin
Plan A: You should quit selling real estate.
I’m serious.
Quit being an agent. Get a job doing something else.
Some of you have been waiting to hear that. My pleasure.
...
Now, if you’re still with me, you’ll be glad to know that the competition for attention just got smaller. The agents who built their business on low interest rates, easy money and speculation (the order takers) have left the building.
The ones that are left, that’s you, can consider Plan B:
If you’re not going to be able to make a living by taking orders, by selling houses the way everyone else does, by using the never-ending rise in real estate prices to make sales, then what are you going to do? Whining is not an option.
In fact, I think this is an extraordinary opportunity for you.
Without a frenzy, without short-term competition, you can actually build assets that will pay off for the long run. I have two in mind:
The first is to become the expert in what you do. Which means micro-specialization. Who is the single-best agent for condos in your zip code? Or for single family homes for large families? Who is the one and the only best person to turn to if you’re looking for investment property in this part of town?
As I wrote in The Dip, you’re either the best in the world (where ‘world’ can be a tiny slice of the environment) or you’re invisible.
This means being Draconian in your choices. No, you can’t also do a little of this or a little of that. Best in your world means burning your other bridges and obsessing.
The kids at Squidoo just built a promotional tool that lets you get started. Mayor of your zip code is a way to start a discussion group/info page about what’s happening in your slice of the world. You become the source of information, the watercooler, the person to turn to. Of course, if you spend ten minutes on it and then move on, it'll fail. But, if you spent 30% of your time working on your page (building it, curating it, promoting it), what do you think would show up in Google searches? What sort of interactions would you start having with people thinking about your little part of the world? Even better, what if you built a blog about your town, as good as any local paper, with high school sports and tax controversies and everything... don't you think the right people would read it?
"I have no time!"
Of course you have that time available. Remember nine months ago when you were three times as busy with incoming calls as you are now? Invest that time in building up your expertise and becoming the person people who don't even like you turn to for insight.
Or, consider this: Take half your office (the half made vacant by the people following Plan A) and turn it over to local groups. Let the active (and nascent) clubs and organizations meet in your office. Not once in a while. Regularly. All the time. Become the hub. Because, after all, you’re the mayor.
The second asset to build is permission. It turns out (according to the NAR) that 91% of all Realtors never contact the buyer or the seller of a home after the closing. Not once. Wow. Someone just spent a million dollars with you and you don’t bother to call or write?
The opportunity during the current pause (and yes, it's a pause) is to find, one by one, the people who would benefit from hearing from you and then earn the right to talk to them. Earn the right to send them a newsletter or a regular update or a subscription to your blog. NOT to talk about what matters to you, but to give them information (real information, not just data) that matters to them. Visit dailycandy.com to see an example of what people like to hear.
The opportunity is to reinvent the way you interact with citizens, with prospects, with the mildly interested and with your past clients. The opportunity, in other words, is to stop waiting around for the phone to ring and instead figure out how to do what you do best... connect buyers and sellers in a way that makes them both confident.
Some of you will stick with the standard business card with the standard photo, the standard office and the standard ad strategy and the standard approach to making the phone ring. It's going to be a long haul if that's your route.
I'm betting, though, that the best of you will end up with a business model that will survive, thrive and prosper. Best time to start is right now.
Seth Godin
Plan A: You should quit selling real estate.
I’m serious.
Quit being an agent. Get a job doing something else.
Some of you have been waiting to hear that. My pleasure.
...
Now, if you’re still with me, you’ll be glad to know that the competition for attention just got smaller. The agents who built their business on low interest rates, easy money and speculation (the order takers) have left the building.
The ones that are left, that’s you, can consider Plan B:
If you’re not going to be able to make a living by taking orders, by selling houses the way everyone else does, by using the never-ending rise in real estate prices to make sales, then what are you going to do? Whining is not an option.
In fact, I think this is an extraordinary opportunity for you.
Without a frenzy, without short-term competition, you can actually build assets that will pay off for the long run. I have two in mind:
The first is to become the expert in what you do. Which means micro-specialization. Who is the single-best agent for condos in your zip code? Or for single family homes for large families? Who is the one and the only best person to turn to if you’re looking for investment property in this part of town?
As I wrote in The Dip, you’re either the best in the world (where ‘world’ can be a tiny slice of the environment) or you’re invisible.
This means being Draconian in your choices. No, you can’t also do a little of this or a little of that. Best in your world means burning your other bridges and obsessing.
The kids at Squidoo just built a promotional tool that lets you get started. Mayor of your zip code is a way to start a discussion group/info page about what’s happening in your slice of the world. You become the source of information, the watercooler, the person to turn to. Of course, if you spend ten minutes on it and then move on, it'll fail. But, if you spent 30% of your time working on your page (building it, curating it, promoting it), what do you think would show up in Google searches? What sort of interactions would you start having with people thinking about your little part of the world? Even better, what if you built a blog about your town, as good as any local paper, with high school sports and tax controversies and everything... don't you think the right people would read it?
"I have no time!"
Of course you have that time available. Remember nine months ago when you were three times as busy with incoming calls as you are now? Invest that time in building up your expertise and becoming the person people who don't even like you turn to for insight.
Or, consider this: Take half your office (the half made vacant by the people following Plan A) and turn it over to local groups. Let the active (and nascent) clubs and organizations meet in your office. Not once in a while. Regularly. All the time. Become the hub. Because, after all, you’re the mayor.
The second asset to build is permission. It turns out (according to the NAR) that 91% of all Realtors never contact the buyer or the seller of a home after the closing. Not once. Wow. Someone just spent a million dollars with you and you don’t bother to call or write?
The opportunity during the current pause (and yes, it's a pause) is to find, one by one, the people who would benefit from hearing from you and then earn the right to talk to them. Earn the right to send them a newsletter or a regular update or a subscription to your blog. NOT to talk about what matters to you, but to give them information (real information, not just data) that matters to them. Visit dailycandy.com to see an example of what people like to hear.
The opportunity is to reinvent the way you interact with citizens, with prospects, with the mildly interested and with your past clients. The opportunity, in other words, is to stop waiting around for the phone to ring and instead figure out how to do what you do best... connect buyers and sellers in a way that makes them both confident.
Some of you will stick with the standard business card with the standard photo, the standard office and the standard ad strategy and the standard approach to making the phone ring. It's going to be a long haul if that's your route.
I'm betting, though, that the best of you will end up with a business model that will survive, thrive and prosper. Best time to start is right now.
Thursday, February 21, 2008
Golf is pooped
February 21, 2008
More Americans Are Giving Up Golf
By PAUL VITELLO
HAUPPAUGE, N.Y. — The men gathered in a new golf clubhouse here a couple of weeks ago circled the problem from every angle, like caddies lining up a shot out of the rough.
“We have to change our mentality,” said Richard Rocchio, a public relations consultant.
“The problem is time,” offered Walter Hurney, a real estate developer. “There just isn’t enough time. Men won’t spend a whole day away from their family anymore.”
William A. Gatz, owner of the Long Island National Golf Club in Riverhead, said the problem was fundamental economics: too much supply, not enough demand.
The problem was not a game of golf. It was the game of golf itself.
Over the past decade, the leisure activity most closely associated with corporate success in America has been in a kind of recession.
The total number of people who play has declined or remained flat each year since 2000, dropping to about 26 million from 30 million, according to the National Golf Foundation and the Sporting Goods Manufacturers Association.
More troubling to golf boosters, the number of people who play 25 times a year or more fell to 4.6 million in 2005 from 6.9 million in 2000, a loss of about a third.
The industry now counts its core players as those who golf eight or more times a year. That number, too, has fallen, but more slowly: to 15 million in 2006 from 17.7 million in 2000, according to the National Golf Foundation.
The five men who met here at the Wind Watch Golf Club a couple of weeks ago, golf aficionados all, wondered out loud about the reasons. Was it the economy? Changing family dynamics? A glut of golf courses? A surfeit of etiquette rules — like not letting people use their cellphones for the four hours it typically takes to play a round of 18 holes?
Or was it just the four hours?
Here on Long Island, where there are more than 100 private courses, golf course owners have tried various strategies: coupons and trial memberships, aggressive marketing for corporate and charity tournaments, and even some forays into the wedding business.
Over coffee with a representative of the National Golf Course Owners Association, the owners of four golf courses discussed forming an owners’ cooperative to market golf on Long Island and, perhaps, to purchase staples like golf carts and fertilizer more cheaply.
They strategized about marketing to women, who make up about 25 percent of golfers nationally; recruiting young players with a high school tournament; attracting families with special rates; realigning courses to 6-hole rounds, instead of 9 or 18; and seeking tax breaks, on the premise that golf courses, even private ones, provide publicly beneficial open space.
“When the ship is sinking, it’s time to get creative,” said Mr. Hurney, a principal owner of the Great Rock Golf Club in Wading River, which last summer erected a 4,000-square-foot tent for social events, including weddings, christenings and communions.
The disappearance of golfers over the past several years is part of a broader decline in outdoor activities — including tennis, swimming, hiking, biking and downhill skiing — according to a number of academic and recreation industry studies.
A 2006 study by the United States Tennis Association, which has battled the trend somewhat successfully with a forceful campaign to recruit young players, found that punishing hurricane seasons factored into the decline of play in the South, while the soaring popularity of electronic games and newer sports like skateboarding was diminishing the number of new tennis players everywhere.
Rodney B. Warnick, a professor of recreation studies and tourism at the University of Massachusetts, said that the aging population of the United States was probably a part of the problem, too, and that “there is a younger generation that is just not as active.”
But golf, a sport of long-term investors — both those who buy the expensive equipment and those who build the princely estates on which it is played — has always seemed to exist in a world above the fray of shifting demographics. Not anymore.
Jim Kass, the research director of the National Golf Foundation, an industry group, said the gradual but prolonged slump in golf has defied the adage, “Once a golfer, always a golfer.” About three million golfers quit playing each year, and slightly fewer than that have been picking it up. A two-year campaign by the foundation to bring new players into the game, he said, “hasn’t shown much in the way of results.”
“The man in the street will tell you that golf is booming because he sees Tiger Woods on TV,” Mr. Kass said. “But we track the reality. The reality is, while we haven’t exactly tanked, the numbers have been disappointing for some time.”
Surveys sponsored by the foundation have asked players what keeps them away. “The answer is usually economic,” Mr. Kass said. “No time. Two jobs. Real wages not going up. Pensions going away. Corporate cutbacks in country club memberships — all that doom and gloom stuff.”
In many parts of the country, high expectations for a golf bonanza paralleling baby boomer retirements led to what is now considered a vast overbuilding of golf courses.
Between 1990 and 2003, developers built more than 3,000 new golf courses in the United States, bringing the total to about 16,000. Several hundred have closed in the last few years, most of them in Arizona, Florida, Michigan and South Carolina, according to the foundation.
(Scores more courses are listed for sale on the Web site of the National Golf Course Owners Association, which lists, for example, a North Carolina property described as “two 18-hole championship courses, great mountain locations, profitable, $1.5 million revenues, Bermuda fairways, bent grass, nice clubhouses, one at $5.5 million, other at $2.5 million — possible some owner financing.”)
At the meeting here, there was a consensus that changing family dynamics have had a profound effect on the sport.
“Years ago, men thought nothing of spending the whole day playing golf — maybe Saturday and Sunday both,” said Mr. Rocchio, the public relations consultant, who is also the New York regional director of the National Golf Course Owners Association. “Today, he is driving his kids to their soccer games. Maybe he’s playing a round early in the morning. But he has to get back home in time for lunch.”
Mr. Hurney, the real estate developer, chimed in, “Which is why if we don’t repackage our facilities to a more family orientation, we’re dead.”
To help keep the Great Rock Golf Club afloat, owners erected their large climate-controlled tent near the 18th green last summer. It sat next to the restaurant, Blackwell’s, already operating there. By most accounts, it has been a boon to the club — though perhaps not a hole in one.
Residents of the surrounding neighborhood have complained about party noise, and last year more than 40 signed a petition asking the town of Riverhead to intervene. Town officials are reviewing whether the tent meets local zoning regulations, but have not issued any noise summonses. Mr. Hurney told them he had purchased a decibel meter and would try to hire quieter entertainment.
One neighbor, Dominique Mendez, whose home is about 600 feet from the 18th hole, said, “We bought our house here because we wanted to live in a quiet place, and we thought a golf course would be nice to see from the window. Instead, people have to turn up their air conditioners or wear earplugs at night because of the music thumping.”
During weddings, she said: “you can hear the D.J., ‘We’re gonna do the garter!’ It’s a little much.”
More Americans Are Giving Up Golf
By PAUL VITELLO
HAUPPAUGE, N.Y. — The men gathered in a new golf clubhouse here a couple of weeks ago circled the problem from every angle, like caddies lining up a shot out of the rough.
“We have to change our mentality,” said Richard Rocchio, a public relations consultant.
“The problem is time,” offered Walter Hurney, a real estate developer. “There just isn’t enough time. Men won’t spend a whole day away from their family anymore.”
William A. Gatz, owner of the Long Island National Golf Club in Riverhead, said the problem was fundamental economics: too much supply, not enough demand.
The problem was not a game of golf. It was the game of golf itself.
Over the past decade, the leisure activity most closely associated with corporate success in America has been in a kind of recession.
The total number of people who play has declined or remained flat each year since 2000, dropping to about 26 million from 30 million, according to the National Golf Foundation and the Sporting Goods Manufacturers Association.
More troubling to golf boosters, the number of people who play 25 times a year or more fell to 4.6 million in 2005 from 6.9 million in 2000, a loss of about a third.
The industry now counts its core players as those who golf eight or more times a year. That number, too, has fallen, but more slowly: to 15 million in 2006 from 17.7 million in 2000, according to the National Golf Foundation.
The five men who met here at the Wind Watch Golf Club a couple of weeks ago, golf aficionados all, wondered out loud about the reasons. Was it the economy? Changing family dynamics? A glut of golf courses? A surfeit of etiquette rules — like not letting people use their cellphones for the four hours it typically takes to play a round of 18 holes?
Or was it just the four hours?
Here on Long Island, where there are more than 100 private courses, golf course owners have tried various strategies: coupons and trial memberships, aggressive marketing for corporate and charity tournaments, and even some forays into the wedding business.
Over coffee with a representative of the National Golf Course Owners Association, the owners of four golf courses discussed forming an owners’ cooperative to market golf on Long Island and, perhaps, to purchase staples like golf carts and fertilizer more cheaply.
They strategized about marketing to women, who make up about 25 percent of golfers nationally; recruiting young players with a high school tournament; attracting families with special rates; realigning courses to 6-hole rounds, instead of 9 or 18; and seeking tax breaks, on the premise that golf courses, even private ones, provide publicly beneficial open space.
“When the ship is sinking, it’s time to get creative,” said Mr. Hurney, a principal owner of the Great Rock Golf Club in Wading River, which last summer erected a 4,000-square-foot tent for social events, including weddings, christenings and communions.
The disappearance of golfers over the past several years is part of a broader decline in outdoor activities — including tennis, swimming, hiking, biking and downhill skiing — according to a number of academic and recreation industry studies.
A 2006 study by the United States Tennis Association, which has battled the trend somewhat successfully with a forceful campaign to recruit young players, found that punishing hurricane seasons factored into the decline of play in the South, while the soaring popularity of electronic games and newer sports like skateboarding was diminishing the number of new tennis players everywhere.
Rodney B. Warnick, a professor of recreation studies and tourism at the University of Massachusetts, said that the aging population of the United States was probably a part of the problem, too, and that “there is a younger generation that is just not as active.”
But golf, a sport of long-term investors — both those who buy the expensive equipment and those who build the princely estates on which it is played — has always seemed to exist in a world above the fray of shifting demographics. Not anymore.
Jim Kass, the research director of the National Golf Foundation, an industry group, said the gradual but prolonged slump in golf has defied the adage, “Once a golfer, always a golfer.” About three million golfers quit playing each year, and slightly fewer than that have been picking it up. A two-year campaign by the foundation to bring new players into the game, he said, “hasn’t shown much in the way of results.”
“The man in the street will tell you that golf is booming because he sees Tiger Woods on TV,” Mr. Kass said. “But we track the reality. The reality is, while we haven’t exactly tanked, the numbers have been disappointing for some time.”
Surveys sponsored by the foundation have asked players what keeps them away. “The answer is usually economic,” Mr. Kass said. “No time. Two jobs. Real wages not going up. Pensions going away. Corporate cutbacks in country club memberships — all that doom and gloom stuff.”
In many parts of the country, high expectations for a golf bonanza paralleling baby boomer retirements led to what is now considered a vast overbuilding of golf courses.
Between 1990 and 2003, developers built more than 3,000 new golf courses in the United States, bringing the total to about 16,000. Several hundred have closed in the last few years, most of them in Arizona, Florida, Michigan and South Carolina, according to the foundation.
(Scores more courses are listed for sale on the Web site of the National Golf Course Owners Association, which lists, for example, a North Carolina property described as “two 18-hole championship courses, great mountain locations, profitable, $1.5 million revenues, Bermuda fairways, bent grass, nice clubhouses, one at $5.5 million, other at $2.5 million — possible some owner financing.”)
At the meeting here, there was a consensus that changing family dynamics have had a profound effect on the sport.
“Years ago, men thought nothing of spending the whole day playing golf — maybe Saturday and Sunday both,” said Mr. Rocchio, the public relations consultant, who is also the New York regional director of the National Golf Course Owners Association. “Today, he is driving his kids to their soccer games. Maybe he’s playing a round early in the morning. But he has to get back home in time for lunch.”
Mr. Hurney, the real estate developer, chimed in, “Which is why if we don’t repackage our facilities to a more family orientation, we’re dead.”
To help keep the Great Rock Golf Club afloat, owners erected their large climate-controlled tent near the 18th green last summer. It sat next to the restaurant, Blackwell’s, already operating there. By most accounts, it has been a boon to the club — though perhaps not a hole in one.
Residents of the surrounding neighborhood have complained about party noise, and last year more than 40 signed a petition asking the town of Riverhead to intervene. Town officials are reviewing whether the tent meets local zoning regulations, but have not issued any noise summonses. Mr. Hurney told them he had purchased a decibel meter and would try to hire quieter entertainment.
One neighbor, Dominique Mendez, whose home is about 600 feet from the 18th hole, said, “We bought our house here because we wanted to live in a quiet place, and we thought a golf course would be nice to see from the window. Instead, people have to turn up their air conditioners or wear earplugs at night because of the music thumping.”
During weddings, she said: “you can hear the D.J., ‘We’re gonna do the garter!’ It’s a little much.”
Wednesday, February 20, 2008
Sell / buy biz article - From WSJ
“As Buyers Get Pickier, Owners Must Do More to Spiff Up Companies”
by Arden Dale of the Wall Street Journal
A lot of entrepreneurs think they have the perfect retirement plan: They'll sell the business for a bundle and live off the proceeds. But many of them may be in for an unpleasant surprise when they're ready to sell: They haven't done the work they need to do to get the company ready for a buyer.
Small businesses often lack key elements that buyers look for -- such as proper financial records or detailed documentation about how the business runs. Moreover, lots of owners go into the selling process without researching the market, so they have unrealistic ideas about the price their business will fetch. The result: It can take much longer than expected to close a sale -- sometimes years.
• The Hope: Many entrepreneurs figure they'll sell their business and retire on the proceeds.
• The Problem: Most of them don't take steps to ready the company for a buyer.
• The Solution: Several years before an anticipated sale, entrepreneurs should start keeping audited financial records and cutting expenses to improve operating profitability and cash flow, among other steps.
In fact, a recent study by the Alliance of Merger and Acquisition Advisors found that many advisers believe seven of 10 midsize businesses will transfer ownership during the next decade, and that at least 90% are now ill-prepared. In many cases, the problem is that small companies, with limited resources, haven't kept up on the record-keeping and documentation that buyers demand.
A Tough Market
For their part, buyers are getting more demanding than ever. Faced with increasing competition in all industries, and the threat of an economic slowdown, they're doing exhaustive research on acquisition candidates, trying to catch potential problems.
"What Wall Street has been used to is now coming to Main Street, in that the same type of care is taken with these transactions. Now to do a $5 million transaction requires due diligence similar to larger public companies. It's the same questions, they're just stripped down to a simpler level.” says Michael Hoesly, a small business owner.
So, where should a small business start?
Experts suggest that small firms get organized three to five years before they start to think about exiting the business. Some experts recommend a longer period -- say, seven years before. Why the long lead time? Prospective buyers often look for a long history on the business, including financial records, business plans and other documentation. It can take years to make sure a small business is leaving the right kind of paper trail.
Financial statements are a good place to start. Small businesses take a range of approaches to keeping financial records. Those with $20 million or more in sales are likely to have some form of audited review; some smaller ones keep records that don't even conform to generally accepted accounting principles.
"My sense of the value of the company will go up if I have confidence that the statements have been done by a well-known accounting firm, rather than your brother-in-law, and that they preferably are audited," says Mr. Hoesly.
What's in those statements is just as important. Records should show the best operating profitability and cash flow possible -- so small-business owners should cut back on unnecessary expenses if they expect a sale in the next few years.
"If personal expenses are a little on the generous side -- trade shows in more exotic places, the number of vehicles for business use, for example -- you might want to see if you could scale those back," says Neil Lerner, director of the Small Business Development Center at the business school at the University of Wisconsin in Madison. "You also want to make sure that the owner's compensation was realistic."
A Hard Look
Moreover, small firms should take a tough look at manufacturing, safety or other processes essentials to the business, and clean them up as much as possible.
"A board of directors can help you do this," says Andrew D. Keyt, executive director of the Family Business Center at Loyola University Chicago. "A lot of small businesses don't have one, but they should think about it. A board can be an umbrella that continues to look out for you." He advises that board members must have solid knowledge of business in general and be independent enough to naysay the owner at times.
"I wanted to retire when I was 60, and now I'm 66," says Mr. Norb Kaiser when discussing the sale of his plastics business: "It took longer than I thought; everyone thinks it will be quicker than it is."
Finally, when entrepreneurs are ready to sell, they should get professional help to figure out how much the business is worth and how to handle the sale. Owners often think the company is worth more than it will really fetch in the market, which makes them ill-prepared to sell.
"Business owners have a terrible problem there; it's not their forte," says Mr. Hoesly. "The question is, who do they trust?"
by Arden Dale of the Wall Street Journal
A lot of entrepreneurs think they have the perfect retirement plan: They'll sell the business for a bundle and live off the proceeds. But many of them may be in for an unpleasant surprise when they're ready to sell: They haven't done the work they need to do to get the company ready for a buyer.
Small businesses often lack key elements that buyers look for -- such as proper financial records or detailed documentation about how the business runs. Moreover, lots of owners go into the selling process without researching the market, so they have unrealistic ideas about the price their business will fetch. The result: It can take much longer than expected to close a sale -- sometimes years.
• The Hope: Many entrepreneurs figure they'll sell their business and retire on the proceeds.
• The Problem: Most of them don't take steps to ready the company for a buyer.
• The Solution: Several years before an anticipated sale, entrepreneurs should start keeping audited financial records and cutting expenses to improve operating profitability and cash flow, among other steps.
In fact, a recent study by the Alliance of Merger and Acquisition Advisors found that many advisers believe seven of 10 midsize businesses will transfer ownership during the next decade, and that at least 90% are now ill-prepared. In many cases, the problem is that small companies, with limited resources, haven't kept up on the record-keeping and documentation that buyers demand.
A Tough Market
For their part, buyers are getting more demanding than ever. Faced with increasing competition in all industries, and the threat of an economic slowdown, they're doing exhaustive research on acquisition candidates, trying to catch potential problems.
"What Wall Street has been used to is now coming to Main Street, in that the same type of care is taken with these transactions. Now to do a $5 million transaction requires due diligence similar to larger public companies. It's the same questions, they're just stripped down to a simpler level.” says Michael Hoesly, a small business owner.
So, where should a small business start?
Experts suggest that small firms get organized three to five years before they start to think about exiting the business. Some experts recommend a longer period -- say, seven years before. Why the long lead time? Prospective buyers often look for a long history on the business, including financial records, business plans and other documentation. It can take years to make sure a small business is leaving the right kind of paper trail.
Financial statements are a good place to start. Small businesses take a range of approaches to keeping financial records. Those with $20 million or more in sales are likely to have some form of audited review; some smaller ones keep records that don't even conform to generally accepted accounting principles.
"My sense of the value of the company will go up if I have confidence that the statements have been done by a well-known accounting firm, rather than your brother-in-law, and that they preferably are audited," says Mr. Hoesly.
What's in those statements is just as important. Records should show the best operating profitability and cash flow possible -- so small-business owners should cut back on unnecessary expenses if they expect a sale in the next few years.
"If personal expenses are a little on the generous side -- trade shows in more exotic places, the number of vehicles for business use, for example -- you might want to see if you could scale those back," says Neil Lerner, director of the Small Business Development Center at the business school at the University of Wisconsin in Madison. "You also want to make sure that the owner's compensation was realistic."
A Hard Look
Moreover, small firms should take a tough look at manufacturing, safety or other processes essentials to the business, and clean them up as much as possible.
"A board of directors can help you do this," says Andrew D. Keyt, executive director of the Family Business Center at Loyola University Chicago. "A lot of small businesses don't have one, but they should think about it. A board can be an umbrella that continues to look out for you." He advises that board members must have solid knowledge of business in general and be independent enough to naysay the owner at times.
"I wanted to retire when I was 60, and now I'm 66," says Mr. Norb Kaiser when discussing the sale of his plastics business: "It took longer than I thought; everyone thinks it will be quicker than it is."
Finally, when entrepreneurs are ready to sell, they should get professional help to figure out how much the business is worth and how to handle the sale. Owners often think the company is worth more than it will really fetch in the market, which makes them ill-prepared to sell.
"Business owners have a terrible problem there; it's not their forte," says Mr. Hoesly. "The question is, who do they trust?"
Friday, February 15, 2008
The posture of a communicator
If you buy my product but don't read the instructions, that's not your fault, it's mine.
If you read a blog post and misinterpret what I said, that's my choice, not your error.
If you attend my presentation and you're bored, that's my failure.
If you are a student in my class and you don't learn what I'm teaching, I've let you down.
It's really easy to insist that people read the friggin manual. It's really easy to blame the user/student/prospect/customer for not trying hard, for being too stupid to get it or for not caring enough to pay attention. Sometimes (often) that might even be a valid complaint. But it's not helpful.
What's helpful is to realize that you have a choice when you communicate. You can design your products to be easy to use. You can write so your audience hears you. You can present in a place and in a way that guarantees that the people you want to listen will hear you. Most of all, you get to choose who will understand (and who won't).
If you read a blog post and misinterpret what I said, that's my choice, not your error.
If you attend my presentation and you're bored, that's my failure.
If you are a student in my class and you don't learn what I'm teaching, I've let you down.
It's really easy to insist that people read the friggin manual. It's really easy to blame the user/student/prospect/customer for not trying hard, for being too stupid to get it or for not caring enough to pay attention. Sometimes (often) that might even be a valid complaint. But it's not helpful.
What's helpful is to realize that you have a choice when you communicate. You can design your products to be easy to use. You can write so your audience hears you. You can present in a place and in a way that guarantees that the people you want to listen will hear you. Most of all, you get to choose who will understand (and who won't).
Monday, February 11, 2008
Buy-here, pay-here plans may attract more dealers
Growing customer base, higher standards may outweigh risks
Rosland Briggs Gammon
Automotive News | February 11, 2008 - 12:01 am EST
At the 103 DriveTime used-vehicle dealerships across the United States, buyers with less than stellar credit scores still have an opportunity to drive away with a used vehicle.
That's because DriveTime finances 99 percent of its car sales itself. With about 65,000 cars and trucks sold in 2007, it's the largest buy-here, pay-here dealership group in the United States, according to the National Alliance of Buy Here, Pay Here Dealers.
Buy-here, pay-here dealerships specialize in selling older vehicles to consumers with bad credit. The dealerships finance the loans in-house instead of turning them over to outside lenders. Because the loans are riskier, the dealerships charge higher interest rates than other stores. Rates average between 12 and 25 percent to people whose credit scores don't qualify them for traditional financing.
As lenders tighten their credit standards and the subprime mortgage industry fallout increases the number of people with blemished credit, more buyers may be headed to buy-here, pay-here dealerships to purchase cars.
And with average profit margins of 15 percent compared to 2 percent for new cars, according to the alliance, the buy-here, pay-here model may become a more attractive option for dealers.
Used-car dealership Credit Country Motors in Summerville, S.C., launched a buy-here, pay-here operation about a year ago, says Stan Borkowski, the dealership's treasurer. Buy-here, pay-here now represents about 20 percent of total sales.
"We were looking to generate another stream of revenue," he says. "We're taking a risk, but we want them (customers) to grow and get into our new-car franchises down the road."
Credit Country operates three new-car dealerships in South Carolina: McElveen Pontiac-Buick-GMC-Hummer in Summerville, McElveen Chevrolet in Mount Pleasant and McElveen Hyundai in Charleston.
Franchised and independent dealers are turning to buy-here, pay-here to offer customers more options, says Mike Sheridan, president of Global Debt Exchange Automotive. The company is an online marketplace that allows dealers and finance companies to buy and sell auto loan portfolios.
"It's just like when franchises started to get into used cars," Sheridan says. "The burden is falling to dealerships when traditional lenders tighten the lending criteria."
Higher standards
Industry professionals say the old buy-here, pay-here model associated with predatory lending has gone by the wayside. The industry previously lacked consistent accounting, reporting and analytical tools, says Kenneth Shilson, founder and president of the National Alliance of Buy Here, Pay Here Dealers. Lawsuits against dealers accused of selling overpriced, faulty cars also didn't help the industry.
Gerry Parker is COO of Integrity Capital Management in Alamo, Calif., which purchases loans from buy-here, pay-here dealerships. He says: "The traditional BHPH I grew up with 20 years ago — short-term, low-balance, high-interest notes with biweekly payments — has gone by the wayside. Changes in technology made a significant impact.
"Along the same lines, the years of the $3,000 automobile are gone. Used cars are more expensive than they used to be."
Also, Sheridan says, buy-here, pay-here dealers act in better faith because they realize illegal loans will raise the eyebrows of attorneys general and put the dealers out of business.
The industry also has come back into favor with financial institutions that lost money in the 1990s because of high-growth-rate requirements, Shilson adds.
"In 1999, the quickest way to end a conversation with a banker was to say 'buy-here pay-here,' " he says. "There was a tremendous credibility gap."
Better training
Today, established auditing standards and educational options for dealers have helped turn the industry around. The National Alliance of Buy Here, Pay Here Dealers and other companies offer educational conferences covering underwriting and collection tips. The alliance's annual conference typically draws about 2,000 people who come to learn about the latest regulatory and legal changes, Shilson says.
"There's more training because dealers realize the mistakes are better made by their competitors than themselves," he says. "If you make a lot of mistakes, it will cost you millions of dollars."
J.D. Byrider, which has 130 franchise and company-owned buy-here, pay-here stores across the United States, last year released an advertising standards manual that provides legal guidelines, spokesman Jim England says.
J.D. Byrider has had some legal problems. It was sued by the Kentucky attorney general and by the Ohio attorney general when those states received numerous consumer complaints, including grievances about pricing and condition of vehicles. Both suits were settled with terms that included the company reimbursing customers.
"We're focused on making sure our franchisees and company-owned stores adhere to strict standards on how to be effective operators," England says. "We're in a business that is extremely competitive and need to make sure is built on consumer trust because of so many operators who may have not dealt fairly in the past."
J.D. Byrider, which plans to open 15 locations this year including its first in California, also launched a Web site, www.jdbfacts.com, that provides daily customer feedback based on calls to 400 customers. As of Feb. 4, its 313,310 surveys resulted in an average customer satisfaction sales rating of 95 percent and service rating of 88 percent.
Still risky
But even with the return of investors, more standards and a growing customer base, the industry still faces challenges.
Today's vehicles are more expensive, and down payments have dropped. That means dealers who previously risked only $300 to $500 when the car drove off the lot now have $5,000 on the street, Shilson says.
Benchmarks compiled by the National Alliance of Buy Here Pay Here Dealers show the average default rate was 26 percent in 2007 compared with 26.2 percent in 2006. While unpaid loans remained steady at 17 percent from 2000 to 2002, they rose to 20 percent in 2007.
"It takes a tremendous amount of capital and an infrastructure with good systems to control it and make sure you don't get into financial trouble," Shilson says.
Some dealerships use starter-interruption devices to encourage their customers to pay. The devices allow the dealerships to disable the cars remotely if payments haven't been received.
But they don't always work. Credit Country Motors installs the devices in its cars, but in one week it lost three vehicles when customers disabled the devices, Borkowski says. The loss cost about $22,000, he says.
Buy-here, pay-here dealers also could face credit tightening, which would affect their sales, says Jon Ehlinger, a spokesman for DriveTime, of Phoenix. DriveTime finances its sales by pooling its loans and having bonds issued that are backed by those loans, he says. The loans are purchased by banks and companies such as Integrity Capital Management.
"If you don't have credit available, you're unable to sell a car," Ehlinger says. "As we go into 2008, how much will lenders pull back?"
Rosland Briggs Gammon
Automotive News | February 11, 2008 - 12:01 am EST
At the 103 DriveTime used-vehicle dealerships across the United States, buyers with less than stellar credit scores still have an opportunity to drive away with a used vehicle.
That's because DriveTime finances 99 percent of its car sales itself. With about 65,000 cars and trucks sold in 2007, it's the largest buy-here, pay-here dealership group in the United States, according to the National Alliance of Buy Here, Pay Here Dealers.
Buy-here, pay-here dealerships specialize in selling older vehicles to consumers with bad credit. The dealerships finance the loans in-house instead of turning them over to outside lenders. Because the loans are riskier, the dealerships charge higher interest rates than other stores. Rates average between 12 and 25 percent to people whose credit scores don't qualify them for traditional financing.
As lenders tighten their credit standards and the subprime mortgage industry fallout increases the number of people with blemished credit, more buyers may be headed to buy-here, pay-here dealerships to purchase cars.
And with average profit margins of 15 percent compared to 2 percent for new cars, according to the alliance, the buy-here, pay-here model may become a more attractive option for dealers.
Used-car dealership Credit Country Motors in Summerville, S.C., launched a buy-here, pay-here operation about a year ago, says Stan Borkowski, the dealership's treasurer. Buy-here, pay-here now represents about 20 percent of total sales.
"We were looking to generate another stream of revenue," he says. "We're taking a risk, but we want them (customers) to grow and get into our new-car franchises down the road."
Credit Country operates three new-car dealerships in South Carolina: McElveen Pontiac-Buick-GMC-Hummer in Summerville, McElveen Chevrolet in Mount Pleasant and McElveen Hyundai in Charleston.
Franchised and independent dealers are turning to buy-here, pay-here to offer customers more options, says Mike Sheridan, president of Global Debt Exchange Automotive. The company is an online marketplace that allows dealers and finance companies to buy and sell auto loan portfolios.
"It's just like when franchises started to get into used cars," Sheridan says. "The burden is falling to dealerships when traditional lenders tighten the lending criteria."
Higher standards
Industry professionals say the old buy-here, pay-here model associated with predatory lending has gone by the wayside. The industry previously lacked consistent accounting, reporting and analytical tools, says Kenneth Shilson, founder and president of the National Alliance of Buy Here, Pay Here Dealers. Lawsuits against dealers accused of selling overpriced, faulty cars also didn't help the industry.
Gerry Parker is COO of Integrity Capital Management in Alamo, Calif., which purchases loans from buy-here, pay-here dealerships. He says: "The traditional BHPH I grew up with 20 years ago — short-term, low-balance, high-interest notes with biweekly payments — has gone by the wayside. Changes in technology made a significant impact.
"Along the same lines, the years of the $3,000 automobile are gone. Used cars are more expensive than they used to be."
Also, Sheridan says, buy-here, pay-here dealers act in better faith because they realize illegal loans will raise the eyebrows of attorneys general and put the dealers out of business.
The industry also has come back into favor with financial institutions that lost money in the 1990s because of high-growth-rate requirements, Shilson adds.
"In 1999, the quickest way to end a conversation with a banker was to say 'buy-here pay-here,' " he says. "There was a tremendous credibility gap."
Better training
Today, established auditing standards and educational options for dealers have helped turn the industry around. The National Alliance of Buy Here, Pay Here Dealers and other companies offer educational conferences covering underwriting and collection tips. The alliance's annual conference typically draws about 2,000 people who come to learn about the latest regulatory and legal changes, Shilson says.
"There's more training because dealers realize the mistakes are better made by their competitors than themselves," he says. "If you make a lot of mistakes, it will cost you millions of dollars."
J.D. Byrider, which has 130 franchise and company-owned buy-here, pay-here stores across the United States, last year released an advertising standards manual that provides legal guidelines, spokesman Jim England says.
J.D. Byrider has had some legal problems. It was sued by the Kentucky attorney general and by the Ohio attorney general when those states received numerous consumer complaints, including grievances about pricing and condition of vehicles. Both suits were settled with terms that included the company reimbursing customers.
"We're focused on making sure our franchisees and company-owned stores adhere to strict standards on how to be effective operators," England says. "We're in a business that is extremely competitive and need to make sure is built on consumer trust because of so many operators who may have not dealt fairly in the past."
J.D. Byrider, which plans to open 15 locations this year including its first in California, also launched a Web site, www.jdbfacts.com, that provides daily customer feedback based on calls to 400 customers. As of Feb. 4, its 313,310 surveys resulted in an average customer satisfaction sales rating of 95 percent and service rating of 88 percent.
Still risky
But even with the return of investors, more standards and a growing customer base, the industry still faces challenges.
Today's vehicles are more expensive, and down payments have dropped. That means dealers who previously risked only $300 to $500 when the car drove off the lot now have $5,000 on the street, Shilson says.
Benchmarks compiled by the National Alliance of Buy Here Pay Here Dealers show the average default rate was 26 percent in 2007 compared with 26.2 percent in 2006. While unpaid loans remained steady at 17 percent from 2000 to 2002, they rose to 20 percent in 2007.
"It takes a tremendous amount of capital and an infrastructure with good systems to control it and make sure you don't get into financial trouble," Shilson says.
Some dealerships use starter-interruption devices to encourage their customers to pay. The devices allow the dealerships to disable the cars remotely if payments haven't been received.
But they don't always work. Credit Country Motors installs the devices in its cars, but in one week it lost three vehicles when customers disabled the devices, Borkowski says. The loss cost about $22,000, he says.
Buy-here, pay-here dealers also could face credit tightening, which would affect their sales, says Jon Ehlinger, a spokesman for DriveTime, of Phoenix. DriveTime finances its sales by pooling its loans and having bonds issued that are backed by those loans, he says. The loans are purchased by banks and companies such as Integrity Capital Management.
"If you don't have credit available, you're unable to sell a car," Ehlinger says. "As we go into 2008, how much will lenders pull back?"
Thursday, February 7, 2008
Soggy - More Godin stuff
New organizations and new projects are so crisp.
Things happen with alacrity. Decisions get made. Stuff gets done.
Then, over time, things get soggy. They slow down. Decisions aren't so black and white any more.
Why?
Here are some things that happen:
1. Every initiative, post launch, still has a tail of activity associated with it. Launch enough things and over time, that tail gets bigger and bigger.
2. Most projects either succeed or fail. Successful projects raise the stakes, because the team doesn't want to blow it. There are more people watching, more dollars at stake, things matter more. So things inevitably get more review, more analysis and slow down. Projects that fail sap the confidence of the group. They want to be extra sure that they're right this time, so, ironically, they slow down and end up sabotaging the new work.
3. The paper isn't blank any more. Which means that new decisions often mean overturning old decisions, which means you need to acknowledge that it didn't used to be as good as it was.
4. And the biggest thing is that there is a status quo. Something to compare everything to.
I'm not sure you can eliminate any of these issues. But, you can realize that they're there. And you can be really strict about priorities and deadlines... it's so easy to let things slip, rather than confronting the fact that you're stuck and probably afraid. Speak up, call it out... and ship!
Things happen with alacrity. Decisions get made. Stuff gets done.
Then, over time, things get soggy. They slow down. Decisions aren't so black and white any more.
Why?
Here are some things that happen:
1. Every initiative, post launch, still has a tail of activity associated with it. Launch enough things and over time, that tail gets bigger and bigger.
2. Most projects either succeed or fail. Successful projects raise the stakes, because the team doesn't want to blow it. There are more people watching, more dollars at stake, things matter more. So things inevitably get more review, more analysis and slow down. Projects that fail sap the confidence of the group. They want to be extra sure that they're right this time, so, ironically, they slow down and end up sabotaging the new work.
3. The paper isn't blank any more. Which means that new decisions often mean overturning old decisions, which means you need to acknowledge that it didn't used to be as good as it was.
4. And the biggest thing is that there is a status quo. Something to compare everything to.
I'm not sure you can eliminate any of these issues. But, you can realize that they're there. And you can be really strict about priorities and deadlines... it's so easy to let things slip, rather than confronting the fact that you're stuck and probably afraid. Speak up, call it out... and ship!
How do you decide what to make / do next?
Seth Godin writes:
Over the last few decades, I've probably launched 500 products and services. And I don't think I've ever seen anyone talk about how organizations go about deciding what to make and what to shelve. How do you decide where to invest your scarce people and promotional resources?
If there’s anything that can have a significant impact on you and your team, it’s this decision. If marketing is the product, then choosing which product to market is your most important moment. Here are some of the reasons I’ve used (and have seen others use) to make this decision:
It’s something a major customer wants
It’s something our technology can do easily
Someone with a lot of power and authority in the organization really wants it
It’ll be fun
If we don’t do it, our competition will
It’s important to our community or society
It's cheap
It's easy
It will increase our margins
It appeals to our competition’s base, thus growing our market share
It's Bob's turn
It locks in our base, making it less likely they'll be stolen by the competition
We didn’t launch this one last time, so its turn has come around
It will make us look smart
It’s the next logical item
I love it
It responds to an RFP
It will burnish our reputation
It adds a feature that our CEO really, really wants
We have a salesforce to support, and this fills in their grid
Our investors tell us that this is a must-have
It will increase traffic to our site
I can sell it to customer X
It’s a copy/improvement over something our competition is doing
Our current stuff doesn’t meet regulations and this does
The critics will respect us
We've come this far and quitting now costs too much
A huge market dominator promises to promote it if we build it
A big retailer says they'll carry it
A key employee is bored and this will keep them busy
We have unused capacity in the plant
There are legendary stories about how Lorne Michaels made decisions about this on Saturday Night Live, about how Microsoft and AOL picked their future by doing (and not doing) certain launches and of course, how our political parties do it. It's almost always done poorly and it's almost always important.
Over the last few decades, I've probably launched 500 products and services. And I don't think I've ever seen anyone talk about how organizations go about deciding what to make and what to shelve. How do you decide where to invest your scarce people and promotional resources?
If there’s anything that can have a significant impact on you and your team, it’s this decision. If marketing is the product, then choosing which product to market is your most important moment. Here are some of the reasons I’ve used (and have seen others use) to make this decision:
It’s something a major customer wants
It’s something our technology can do easily
Someone with a lot of power and authority in the organization really wants it
It’ll be fun
If we don’t do it, our competition will
It’s important to our community or society
It's cheap
It's easy
It will increase our margins
It appeals to our competition’s base, thus growing our market share
It's Bob's turn
It locks in our base, making it less likely they'll be stolen by the competition
We didn’t launch this one last time, so its turn has come around
It will make us look smart
It’s the next logical item
I love it
It responds to an RFP
It will burnish our reputation
It adds a feature that our CEO really, really wants
We have a salesforce to support, and this fills in their grid
Our investors tell us that this is a must-have
It will increase traffic to our site
I can sell it to customer X
It’s a copy/improvement over something our competition is doing
Our current stuff doesn’t meet regulations and this does
The critics will respect us
We've come this far and quitting now costs too much
A huge market dominator promises to promote it if we build it
A big retailer says they'll carry it
A key employee is bored and this will keep them busy
We have unused capacity in the plant
There are legendary stories about how Lorne Michaels made decisions about this on Saturday Night Live, about how Microsoft and AOL picked their future by doing (and not doing) certain launches and of course, how our political parties do it. It's almost always done poorly and it's almost always important.
Saturday, February 2, 2008
When there are infinite copies
When there are infinite copies of something, charging for one is almost impossible.
Here are his eight ways of making something worth charging for:
Immediacy -- Sooner or later you can find a free copy of whatever you want, but getting a copy delivered to your inbox the moment it is released -- or even better, produced -- by its creators is a generative asset. Many people go to movie theaters to see films on the opening night, where they will pay a hefty price to see a film that later will be available for free, or almost free, via rental or download. Hardcover books command a premium for their immediacy, disguised as a harder cover. First in line often commands an extra price for the same good. As a sellable quality, immediacy has many levels, including access to beta versions. Fans are brought into the generative process itself. Beta versions are often de-valued because they are incomplete, but they also possess generative qualities that can be sold. Immediacy is a relative term, which is why it is generative. It has to fit with the product and the audience. A blog has a different sense of time than a movie, or a car. But immediacy can be found in any media.
Personalization -- A generic version of a concert recording may be free, but if you want a copy that has been tweaked to sound perfect in your particular living room -- as if it were preformed in your room -- you may be willing to pay a lot. The free copy of a book can be custom edited by the publishers to reflect your own previous reading background. A free movie you buy may be cut to reflect the rating you desire (no violence, dirty language okay). Aspirin is free, but aspirin tailored to your DNA is very expensive. As many have noted, personalization requires an ongoing conversation between the creator and consumer, artist and fan, producer and user. It is deeply generative because it is iterative and time consuming. You can't copy the personalization that a relationship represents. Marketers call that "stickiness" because it means both sides of the relationship are stuck (invested) in this generative asset, and will be reluctant to switch and start over.
Interpretation -- As the old joke goes: software, free. The manual, $10,000. But it's no joke. A couple of high profile companies, like Red Hat, Apache, and others make their living doing exactly that. They provide paid support for free software. The copy of code, being mere bits, is free -- and becomes valuable to you only through the support and guidance. I suspect a lot of genetic information will go this route. Right now getting your copy of your DNA is very expensive, but soon it won't be. In fact, soon pharmaceutical companies will PAY you to get your genes sequence. So the copy of your sequence will be free, but the interpretation of what it means, what you can do about it, and how to use it -- the manual for your genes so to speak -- will be expensive.
Authenticity -- You might be able to grab a key software application for free, but even if you don't need a manual, you might like to be sure it is bug free, reliable, and warranted. You'll pay for authenticity. There are nearly an infinite number of variations of the Grateful Dead jams around; buying an authentic version from the band itself will ensure you get the one you wanted. Or that it was indeed actually performed by the Dead. Artists have dealt with this problem for a long time. Graphic reproductions such as photographs and lithographs often come with the artist's stamp of authenticity -- a signature -- to raise the price of the copy. Digital watermarks and other signature technology will not work as copy-protection schemes (copies are super-conducting liquids, remember?) but they can serve up the generative quality of authenticity for those who care.
Accessibility -- Ownership often sucks. You have to keep your things tidy, up-to-date, and in the case of digital material, backed up. And in this mobile world, you have to carry it along with you. Many people, me included, will be happy to have others tend our "possessions" by subscribing to them. We'll pay Acme Digital Warehouse to serve us any musical tune in the world, when and where we want it, as well as any movie, photo (ours or other photographers). Ditto for books and blogs. Acme backs everything up, pays the creators, and delivers us our desires. We can sip it from our phones, PDAs, laptops, big screens from where-ever. The fact that most of this material will be available free, if we want to tend it, back it up, keep adding to it, and organize it, will be less and less appealing as time goes on.
Embodiment -- At its core the digital copy is without a body. You can take a free copy of a work and throw it on a screen. But perhaps you'd like to see it in hi-res on a huge screen? Maybe in 3D? PDFs are fine, but sometimes it is delicious to have the same words printed on bright white cottony paper, bound in leather. Feels so good. What about dwelling in your favorite (free) game with 35 others in the same room? There is no end to greater embodiment. Sure, the hi-res of today -- which may draw ticket holders to a big theater -- may migrate to your home theater tomorrow, but there will always be new insanely great display technology that consumers won't have. Laser projection, holographic display, the holodeck itself! And nothing gets embodied as much as music in a live performance, with real bodies. The music is free; the bodily performance expensive. This formula is quickly becoming a common one for not only musicians, but even authors. The book is free; the bodily talk is expensive.
Patronage -- It is my belief that audiences WANT to pay creators. Fans like to reward artists, musicians, authors and the like with the tokens of their appreciation, because it allows them to connect. But they will only pay if it is very easy to do, a reasonable amount, and they feel certain the money will directly benefit the creators. Radiohead's recent high-profile experiment in letting fans pay them whatever they wished for a free copy is an excellent illustration of the power of patronage. The elusive, intangible connection that flows between appreciative fans and the artist is worth something. In Radiohead's case it was about $5 per download. There are many other examples of the audience paying simply because it feels good.
Findability -- Where as the previous generative qualities reside within creative digital works, findability is an asset that occurs at a higher level in the aggregate of many works. A zero price does not help direct attention to a work, and in fact may sometimes hinder it. But no matter what its price, a work has no value unless it is seen; unfound masterpieces are worthless. When there are millions of books, millions of songs, millions of films, millions of applications, millions of everything requesting our attention -- and most of it free -- being found is valuable.
The giant aggregators such as Amazon and Netflix make their living in part by helping the audience find works they love. They bring out the good news of the "long tail" phenomenon, which we all know, connects niche audiences with niche productions. But sadly, the long tail is only good news for the giant aggregators, and larger mid-level aggregators such as publishers, studios, and labels. The "long tail" is only lukewarm news to creators themselves. But since findability can really only happen at the systems level, creators need aggregators. This is why publishers, studios, and labels (PSL)will never disappear. They are not needed for distribution of the copies (the internet machine does that). Rather the PSL are needed for the distribution of the users' attention back to the works. From an ocean of possibilities the PSL find, nurture and refine the work of creators that they believe fans will connect with. Other intermediates such as critics and reviewers also channel attention. Fans rely on this multi-level apparatus of findability to discover the works of worth out of the zillions produced. There is money to be made (indirectly for the creatives) by finding talent. For many years the paper publication TV Guide made more money than all of the 3 major TV networks it "guided" combined. The magazine guided and pointed viewers to the good stuff on the tube that week. Stuff, it is worth noting, that was free to the viewers. There is little doubt that besides the mega-aggregators, in the world of the free many PDLs will make money selling findability -- in addition to the other generative qualities.
Here are his eight ways of making something worth charging for:
Immediacy -- Sooner or later you can find a free copy of whatever you want, but getting a copy delivered to your inbox the moment it is released -- or even better, produced -- by its creators is a generative asset. Many people go to movie theaters to see films on the opening night, where they will pay a hefty price to see a film that later will be available for free, or almost free, via rental or download. Hardcover books command a premium for their immediacy, disguised as a harder cover. First in line often commands an extra price for the same good. As a sellable quality, immediacy has many levels, including access to beta versions. Fans are brought into the generative process itself. Beta versions are often de-valued because they are incomplete, but they also possess generative qualities that can be sold. Immediacy is a relative term, which is why it is generative. It has to fit with the product and the audience. A blog has a different sense of time than a movie, or a car. But immediacy can be found in any media.
Personalization -- A generic version of a concert recording may be free, but if you want a copy that has been tweaked to sound perfect in your particular living room -- as if it were preformed in your room -- you may be willing to pay a lot. The free copy of a book can be custom edited by the publishers to reflect your own previous reading background. A free movie you buy may be cut to reflect the rating you desire (no violence, dirty language okay). Aspirin is free, but aspirin tailored to your DNA is very expensive. As many have noted, personalization requires an ongoing conversation between the creator and consumer, artist and fan, producer and user. It is deeply generative because it is iterative and time consuming. You can't copy the personalization that a relationship represents. Marketers call that "stickiness" because it means both sides of the relationship are stuck (invested) in this generative asset, and will be reluctant to switch and start over.
Interpretation -- As the old joke goes: software, free. The manual, $10,000. But it's no joke. A couple of high profile companies, like Red Hat, Apache, and others make their living doing exactly that. They provide paid support for free software. The copy of code, being mere bits, is free -- and becomes valuable to you only through the support and guidance. I suspect a lot of genetic information will go this route. Right now getting your copy of your DNA is very expensive, but soon it won't be. In fact, soon pharmaceutical companies will PAY you to get your genes sequence. So the copy of your sequence will be free, but the interpretation of what it means, what you can do about it, and how to use it -- the manual for your genes so to speak -- will be expensive.
Authenticity -- You might be able to grab a key software application for free, but even if you don't need a manual, you might like to be sure it is bug free, reliable, and warranted. You'll pay for authenticity. There are nearly an infinite number of variations of the Grateful Dead jams around; buying an authentic version from the band itself will ensure you get the one you wanted. Or that it was indeed actually performed by the Dead. Artists have dealt with this problem for a long time. Graphic reproductions such as photographs and lithographs often come with the artist's stamp of authenticity -- a signature -- to raise the price of the copy. Digital watermarks and other signature technology will not work as copy-protection schemes (copies are super-conducting liquids, remember?) but they can serve up the generative quality of authenticity for those who care.
Accessibility -- Ownership often sucks. You have to keep your things tidy, up-to-date, and in the case of digital material, backed up. And in this mobile world, you have to carry it along with you. Many people, me included, will be happy to have others tend our "possessions" by subscribing to them. We'll pay Acme Digital Warehouse to serve us any musical tune in the world, when and where we want it, as well as any movie, photo (ours or other photographers). Ditto for books and blogs. Acme backs everything up, pays the creators, and delivers us our desires. We can sip it from our phones, PDAs, laptops, big screens from where-ever. The fact that most of this material will be available free, if we want to tend it, back it up, keep adding to it, and organize it, will be less and less appealing as time goes on.
Embodiment -- At its core the digital copy is without a body. You can take a free copy of a work and throw it on a screen. But perhaps you'd like to see it in hi-res on a huge screen? Maybe in 3D? PDFs are fine, but sometimes it is delicious to have the same words printed on bright white cottony paper, bound in leather. Feels so good. What about dwelling in your favorite (free) game with 35 others in the same room? There is no end to greater embodiment. Sure, the hi-res of today -- which may draw ticket holders to a big theater -- may migrate to your home theater tomorrow, but there will always be new insanely great display technology that consumers won't have. Laser projection, holographic display, the holodeck itself! And nothing gets embodied as much as music in a live performance, with real bodies. The music is free; the bodily performance expensive. This formula is quickly becoming a common one for not only musicians, but even authors. The book is free; the bodily talk is expensive.
Patronage -- It is my belief that audiences WANT to pay creators. Fans like to reward artists, musicians, authors and the like with the tokens of their appreciation, because it allows them to connect. But they will only pay if it is very easy to do, a reasonable amount, and they feel certain the money will directly benefit the creators. Radiohead's recent high-profile experiment in letting fans pay them whatever they wished for a free copy is an excellent illustration of the power of patronage. The elusive, intangible connection that flows between appreciative fans and the artist is worth something. In Radiohead's case it was about $5 per download. There are many other examples of the audience paying simply because it feels good.
Findability -- Where as the previous generative qualities reside within creative digital works, findability is an asset that occurs at a higher level in the aggregate of many works. A zero price does not help direct attention to a work, and in fact may sometimes hinder it. But no matter what its price, a work has no value unless it is seen; unfound masterpieces are worthless. When there are millions of books, millions of songs, millions of films, millions of applications, millions of everything requesting our attention -- and most of it free -- being found is valuable.
The giant aggregators such as Amazon and Netflix make their living in part by helping the audience find works they love. They bring out the good news of the "long tail" phenomenon, which we all know, connects niche audiences with niche productions. But sadly, the long tail is only good news for the giant aggregators, and larger mid-level aggregators such as publishers, studios, and labels. The "long tail" is only lukewarm news to creators themselves. But since findability can really only happen at the systems level, creators need aggregators. This is why publishers, studios, and labels (PSL)will never disappear. They are not needed for distribution of the copies (the internet machine does that). Rather the PSL are needed for the distribution of the users' attention back to the works. From an ocean of possibilities the PSL find, nurture and refine the work of creators that they believe fans will connect with. Other intermediates such as critics and reviewers also channel attention. Fans rely on this multi-level apparatus of findability to discover the works of worth out of the zillions produced. There is money to be made (indirectly for the creatives) by finding talent. For many years the paper publication TV Guide made more money than all of the 3 major TV networks it "guided" combined. The magazine guided and pointed viewers to the good stuff on the tube that week. Stuff, it is worth noting, that was free to the viewers. There is little doubt that besides the mega-aggregators, in the world of the free many PDLs will make money selling findability -- in addition to the other generative qualities.
Tuesday, January 22, 2008
The package
Get / Find the best Internet software business tools and business process. This will likely include a "here's the price" position. Find the strategy that lets any "style" dealer (price policy) use it. This will sell. Yes it will.
Monday, January 21, 2008
Used Intenders drop in 2008
CNW Discusses Used- and New-Vehicle Marketplace
By Jennifer Reed, SubPrime Auto Finance News Editor
January 21, 2008
BANDON, Ore. — The used-vehicle industry will receive a "shock" this year, according to Art Spinella, of CNW Research.
Why? CNW Research is forecasting a 9-percent decline in used-vehicle purchasing intentions. Only 15.6 percent of consumers questioned indicated that buying a used model is on their to-do list this year.
"That compares with 17.2 percent of respondents a year ago," Spinella said. "Like the new-car side, used-car intenders are planning to spend 3.3 percent less on major acquisitions in 2008 than they did in 2007, which is even further support for the notion the country is entering a recession that could last at least through this year."
"Anticipated budgets for other goods and services, such as new or used cars, vacations, both foreign and in the U.S., are being slashed," he continued.
In fact, according to Spinella, the only positive note of the coming year is that consumers have moved new-vehicle purchases higher on their wish lists than last year.
"Why is this important? Generally, like to-do list, previous wish list studies have shown the top eight to 10 items actually get done while the rest of the list languishes and is postponed or the order is shuffled," he said. "Buying a new vehicle placed 10, up from a year ago."
In another interesting analysis, CNW discovered that the average age of new-vehicle buyers has been increasing throughout 2007, coming in at almost 48 years old. This is the highest average since October 2002, executives indicated.
"The increase reflects fewer consumers under age 40 making a new-vehicle acquisition rather than older consumers buying an increased number of cars and trucks," Spinella said.
"The good news is that these younger consumers continue to shop for a vehicle as seen in the average of new-vehicle floor traffic remaining unchanged in the last quarter of 2007 versus the final quarter of 2006. They simply aren't buying," he pointed out.
Moreover, CNW found that the average income of new-vehicle buyers grew to $64,000 in December, compared with $60,000 in January of last year, which also indicates an older buying demographic.
"Home equity contraction, personal debt issues and concerns about the overall economy impact younger consumers more than older ones," Spinella explained.
"From an advertising and marketing standpoint, however, continuing to focus attention on these consumers is a good strategy," he reported. "They continue shopping and eventually all will come back to the market."
Further reviewing the reasons why younger consumers may not be as interested in new or used vehicles as in past years, Spinella boiled it down to one trend — the evolution of communication.
"In the follow-up survey, the reason for autos' decline in the youngest data cut can be found in the group's changing method of social networking," Spinella said. "In the past, a car — new or used — was the primary way of hooking up with friends whether at a mall or other meeting places, excluding school events.
"Today, text and photo messaging via cell phone has replaced face-to-face interaction as a primary source of communication," he highlighted.
More specifically, here's the list of what young consumers see as items that will impress their friends:
Cell phone: first in 2007; third in 2000
Game system: second; seventh in 2000
iPod/MP3 Player: third; second
Footwear: fourth; fifth
Computer system: fifth; fourth in 2000
Apple/Mac: 5-b in 2007; 4-b
Other specialty system: 5-c; 4-c
Alienware: 5-a; 4-a
New vehicle: sixth; first in 2000
Clothes: seventh; eighth
Digital cameras: eighth in 2007; sixth
Used vehicle: ninth; ninth
Furnishings: 10th; 10th in 2000
"In the calendar year 2000 youth study, a new vehicle was listed by 34 percent of 16- to 29-year-olds as a way to impress a friend," Spinella said. "That fell to under 20 percent in the 2007 study.
"A cell phone jumped from third to first in the rankings, while a new vehicle dropped from first to sixth," he added. "Among 16- to 22-year-olds, the decline is even more dramatic with new vehicle falling to 13 percent and ninth position. A used vehicle didn't even make the top 10."
Continuing on, CNW reported that for the first time since 1999, combined new- and used-vehicle sales dropped to less than 58 million units in 2007. This was even as the U.S. population climbed by more than 30 million individuals and 10 million households.
Over the years, Spinella said usually new-car intenders will switch to used cars when the economy struggles and prices increase. With this shift taken into account over years past, combined new- and used-vehicle sales generally came in at 59 to 61 million.
"The 2.2 percent drop in 2007 versus 2006 is the first year since 1999 to be directly impacted by a weak economy keeping both new- and used-car intenders away from showrooms and lots," Spinella said.
Looking ahead, he indicated, "New-car sales may well exceed 2007, if only by a fraction of a percentage point, but used sales are the wild card. With the decline of intentions, it is possible the used-car business will see a significant contraction that would keep total vehicle sales in the 57.9 million to 58 million range," he continued.
Finally, if combined sales do remain below the historical norm since 1999, Spinella said, "Hardest hit? Stage budgets. In most states, upwards of 20 percent of all tax revenue comes from the sale of new and used cars. Any significant decline in unit volume directly impacts income and puts most states into the red.
"A key reason California is suffering a budget crisis — again — is because auto sales have dramatically dropped on the back of a poor housing market," Spinella concluded.
By Jennifer Reed, SubPrime Auto Finance News Editor
January 21, 2008
BANDON, Ore. — The used-vehicle industry will receive a "shock" this year, according to Art Spinella, of CNW Research.
Why? CNW Research is forecasting a 9-percent decline in used-vehicle purchasing intentions. Only 15.6 percent of consumers questioned indicated that buying a used model is on their to-do list this year.
"That compares with 17.2 percent of respondents a year ago," Spinella said. "Like the new-car side, used-car intenders are planning to spend 3.3 percent less on major acquisitions in 2008 than they did in 2007, which is even further support for the notion the country is entering a recession that could last at least through this year."
"Anticipated budgets for other goods and services, such as new or used cars, vacations, both foreign and in the U.S., are being slashed," he continued.
In fact, according to Spinella, the only positive note of the coming year is that consumers have moved new-vehicle purchases higher on their wish lists than last year.
"Why is this important? Generally, like to-do list, previous wish list studies have shown the top eight to 10 items actually get done while the rest of the list languishes and is postponed or the order is shuffled," he said. "Buying a new vehicle placed 10, up from a year ago."
In another interesting analysis, CNW discovered that the average age of new-vehicle buyers has been increasing throughout 2007, coming in at almost 48 years old. This is the highest average since October 2002, executives indicated.
"The increase reflects fewer consumers under age 40 making a new-vehicle acquisition rather than older consumers buying an increased number of cars and trucks," Spinella said.
"The good news is that these younger consumers continue to shop for a vehicle as seen in the average of new-vehicle floor traffic remaining unchanged in the last quarter of 2007 versus the final quarter of 2006. They simply aren't buying," he pointed out.
Moreover, CNW found that the average income of new-vehicle buyers grew to $64,000 in December, compared with $60,000 in January of last year, which also indicates an older buying demographic.
"Home equity contraction, personal debt issues and concerns about the overall economy impact younger consumers more than older ones," Spinella explained.
"From an advertising and marketing standpoint, however, continuing to focus attention on these consumers is a good strategy," he reported. "They continue shopping and eventually all will come back to the market."
Further reviewing the reasons why younger consumers may not be as interested in new or used vehicles as in past years, Spinella boiled it down to one trend — the evolution of communication.
"In the follow-up survey, the reason for autos' decline in the youngest data cut can be found in the group's changing method of social networking," Spinella said. "In the past, a car — new or used — was the primary way of hooking up with friends whether at a mall or other meeting places, excluding school events.
"Today, text and photo messaging via cell phone has replaced face-to-face interaction as a primary source of communication," he highlighted.
More specifically, here's the list of what young consumers see as items that will impress their friends:
Cell phone: first in 2007; third in 2000
Game system: second; seventh in 2000
iPod/MP3 Player: third; second
Footwear: fourth; fifth
Computer system: fifth; fourth in 2000
Apple/Mac: 5-b in 2007; 4-b
Other specialty system: 5-c; 4-c
Alienware: 5-a; 4-a
New vehicle: sixth; first in 2000
Clothes: seventh; eighth
Digital cameras: eighth in 2007; sixth
Used vehicle: ninth; ninth
Furnishings: 10th; 10th in 2000
"In the calendar year 2000 youth study, a new vehicle was listed by 34 percent of 16- to 29-year-olds as a way to impress a friend," Spinella said. "That fell to under 20 percent in the 2007 study.
"A cell phone jumped from third to first in the rankings, while a new vehicle dropped from first to sixth," he added. "Among 16- to 22-year-olds, the decline is even more dramatic with new vehicle falling to 13 percent and ninth position. A used vehicle didn't even make the top 10."
Continuing on, CNW reported that for the first time since 1999, combined new- and used-vehicle sales dropped to less than 58 million units in 2007. This was even as the U.S. population climbed by more than 30 million individuals and 10 million households.
Over the years, Spinella said usually new-car intenders will switch to used cars when the economy struggles and prices increase. With this shift taken into account over years past, combined new- and used-vehicle sales generally came in at 59 to 61 million.
"The 2.2 percent drop in 2007 versus 2006 is the first year since 1999 to be directly impacted by a weak economy keeping both new- and used-car intenders away from showrooms and lots," Spinella said.
Looking ahead, he indicated, "New-car sales may well exceed 2007, if only by a fraction of a percentage point, but used sales are the wild card. With the decline of intentions, it is possible the used-car business will see a significant contraction that would keep total vehicle sales in the 57.9 million to 58 million range," he continued.
Finally, if combined sales do remain below the historical norm since 1999, Spinella said, "Hardest hit? Stage budgets. In most states, upwards of 20 percent of all tax revenue comes from the sale of new and used cars. Any significant decline in unit volume directly impacts income and puts most states into the red.
"A key reason California is suffering a budget crisis — again — is because auto sales have dramatically dropped on the back of a poor housing market," Spinella concluded.
Used Intenders drop in 2008
CNW Discusses Used- and New-Vehicle Marketplace
By Jennifer Reed, SubPrime Auto Finance News Editor
January 21, 2008
BANDON, Ore. — The used-vehicle industry will receive a "shock" this year, according to Art Spinella, of CNW Research.
Why? CNW Research is forecasting a 9-percent decline in used-vehicle purchasing intentions. Only 15.6 percent of consumers questioned indicated that buying a used model is on their to-do list this year.
"That compares with 17.2 percent of respondents a year ago," Spinella said. "Like the new-car side, used-car intenders are planning to spend 3.3 percent less on major acquisitions in 2008 than they did in 2007, which is even further support for the notion the country is entering a recession that could last at least through this year."
"Anticipated budgets for other goods and services, such as new or used cars, vacations, both foreign and in the U.S., are being slashed," he continued.
In fact, according to Spinella, the only positive note of the coming year is that consumers have moved new-vehicle purchases higher on their wish lists than last year.
"Why is this important? Generally, like to-do list, previous wish list studies have shown the top eight to 10 items actually get done while the rest of the list languishes and is postponed or the order is shuffled," he said. "Buying a new vehicle placed 10, up from a year ago."
In another interesting analysis, CNW discovered that the average age of new-vehicle buyers has been increasing throughout 2007, coming in at almost 48 years old. This is the highest average since October 2002, executives indicated.
"The increase reflects fewer consumers under age 40 making a new-vehicle acquisition rather than older consumers buying an increased number of cars and trucks," Spinella said.
"The good news is that these younger consumers continue to shop for a vehicle as seen in the average of new-vehicle floor traffic remaining unchanged in the last quarter of 2007 versus the final quarter of 2006. They simply aren't buying," he pointed out.
Moreover, CNW found that the average income of new-vehicle buyers grew to $64,000 in December, compared with $60,000 in January of last year, which also indicates an older buying demographic.
"Home equity contraction, personal debt issues and concerns about the overall economy impact younger consumers more than older ones," Spinella explained.
"From an advertising and marketing standpoint, however, continuing to focus attention on these consumers is a good strategy," he reported. "They continue shopping and eventually all will come back to the market."
Further reviewing the reasons why younger consumers may not be as interested in new or used vehicles as in past years, Spinella boiled it down to one trend — the evolution of communication.
"In the follow-up survey, the reason for autos' decline in the youngest data cut can be found in the group's changing method of social networking," Spinella said. "In the past, a car — new or used — was the primary way of hooking up with friends whether at a mall or other meeting places, excluding school events.
"Today, text and photo messaging via cell phone has replaced face-to-face interaction as a primary source of communication," he highlighted.
More specifically, here's the list of what young consumers see as items that will impress their friends:
Cell phone: first in 2007; third in 2000
Game system: second; seventh in 2000
iPod/MP3 Player: third; second
Footwear: fourth; fifth
Computer system: fifth; fourth in 2000
Apple/Mac: 5-b in 2007; 4-b
Other specialty system: 5-c; 4-c
Alienware: 5-a; 4-a
New vehicle: sixth; first in 2000
Clothes: seventh; eighth
Digital cameras: eighth in 2007; sixth
Used vehicle: ninth; ninth
Furnishings: 10th; 10th in 2000
"In the calendar year 2000 youth study, a new vehicle was listed by 34 percent of 16- to 29-year-olds as a way to impress a friend," Spinella said. "That fell to under 20 percent in the 2007 study.
"A cell phone jumped from third to first in the rankings, while a new vehicle dropped from first to sixth," he added. "Among 16- to 22-year-olds, the decline is even more dramatic with new vehicle falling to 13 percent and ninth position. A used vehicle didn't even make the top 10."
Continuing on, CNW reported that for the first time since 1999, combined new- and used-vehicle sales dropped to less than 58 million units in 2007. This was even as the U.S. population climbed by more than 30 million individuals and 10 million households.
Over the years, Spinella said usually new-car intenders will switch to used cars when the economy struggles and prices increase. With this shift taken into account over years past, combined new- and used-vehicle sales generally came in at 59 to 61 million.
"The 2.2 percent drop in 2007 versus 2006 is the first year since 1999 to be directly impacted by a weak economy keeping both new- and used-car intenders away from showrooms and lots," Spinella said.
Looking ahead, he indicated, "New-car sales may well exceed 2007, if only by a fraction of a percentage point, but used sales are the wild card. With the decline of intentions, it is possible the used-car business will see a significant contraction that would keep total vehicle sales in the 57.9 million to 58 million range," he continued.
Finally, if combined sales do remain below the historical norm since 1999, Spinella said, "Hardest hit? Stage budgets. In most states, upwards of 20 percent of all tax revenue comes from the sale of new and used cars. Any significant decline in unit volume directly impacts income and puts most states into the red.
"A key reason California is suffering a budget crisis — again — is because auto sales have dramatically dropped on the back of a poor housing market," Spinella concluded.
By Jennifer Reed, SubPrime Auto Finance News Editor
January 21, 2008
BANDON, Ore. — The used-vehicle industry will receive a "shock" this year, according to Art Spinella, of CNW Research.
Why? CNW Research is forecasting a 9-percent decline in used-vehicle purchasing intentions. Only 15.6 percent of consumers questioned indicated that buying a used model is on their to-do list this year.
"That compares with 17.2 percent of respondents a year ago," Spinella said. "Like the new-car side, used-car intenders are planning to spend 3.3 percent less on major acquisitions in 2008 than they did in 2007, which is even further support for the notion the country is entering a recession that could last at least through this year."
"Anticipated budgets for other goods and services, such as new or used cars, vacations, both foreign and in the U.S., are being slashed," he continued.
In fact, according to Spinella, the only positive note of the coming year is that consumers have moved new-vehicle purchases higher on their wish lists than last year.
"Why is this important? Generally, like to-do list, previous wish list studies have shown the top eight to 10 items actually get done while the rest of the list languishes and is postponed or the order is shuffled," he said. "Buying a new vehicle placed 10, up from a year ago."
In another interesting analysis, CNW discovered that the average age of new-vehicle buyers has been increasing throughout 2007, coming in at almost 48 years old. This is the highest average since October 2002, executives indicated.
"The increase reflects fewer consumers under age 40 making a new-vehicle acquisition rather than older consumers buying an increased number of cars and trucks," Spinella said.
"The good news is that these younger consumers continue to shop for a vehicle as seen in the average of new-vehicle floor traffic remaining unchanged in the last quarter of 2007 versus the final quarter of 2006. They simply aren't buying," he pointed out.
Moreover, CNW found that the average income of new-vehicle buyers grew to $64,000 in December, compared with $60,000 in January of last year, which also indicates an older buying demographic.
"Home equity contraction, personal debt issues and concerns about the overall economy impact younger consumers more than older ones," Spinella explained.
"From an advertising and marketing standpoint, however, continuing to focus attention on these consumers is a good strategy," he reported. "They continue shopping and eventually all will come back to the market."
Further reviewing the reasons why younger consumers may not be as interested in new or used vehicles as in past years, Spinella boiled it down to one trend — the evolution of communication.
"In the follow-up survey, the reason for autos' decline in the youngest data cut can be found in the group's changing method of social networking," Spinella said. "In the past, a car — new or used — was the primary way of hooking up with friends whether at a mall or other meeting places, excluding school events.
"Today, text and photo messaging via cell phone has replaced face-to-face interaction as a primary source of communication," he highlighted.
More specifically, here's the list of what young consumers see as items that will impress their friends:
Cell phone: first in 2007; third in 2000
Game system: second; seventh in 2000
iPod/MP3 Player: third; second
Footwear: fourth; fifth
Computer system: fifth; fourth in 2000
Apple/Mac: 5-b in 2007; 4-b
Other specialty system: 5-c; 4-c
Alienware: 5-a; 4-a
New vehicle: sixth; first in 2000
Clothes: seventh; eighth
Digital cameras: eighth in 2007; sixth
Used vehicle: ninth; ninth
Furnishings: 10th; 10th in 2000
"In the calendar year 2000 youth study, a new vehicle was listed by 34 percent of 16- to 29-year-olds as a way to impress a friend," Spinella said. "That fell to under 20 percent in the 2007 study.
"A cell phone jumped from third to first in the rankings, while a new vehicle dropped from first to sixth," he added. "Among 16- to 22-year-olds, the decline is even more dramatic with new vehicle falling to 13 percent and ninth position. A used vehicle didn't even make the top 10."
Continuing on, CNW reported that for the first time since 1999, combined new- and used-vehicle sales dropped to less than 58 million units in 2007. This was even as the U.S. population climbed by more than 30 million individuals and 10 million households.
Over the years, Spinella said usually new-car intenders will switch to used cars when the economy struggles and prices increase. With this shift taken into account over years past, combined new- and used-vehicle sales generally came in at 59 to 61 million.
"The 2.2 percent drop in 2007 versus 2006 is the first year since 1999 to be directly impacted by a weak economy keeping both new- and used-car intenders away from showrooms and lots," Spinella said.
Looking ahead, he indicated, "New-car sales may well exceed 2007, if only by a fraction of a percentage point, but used sales are the wild card. With the decline of intentions, it is possible the used-car business will see a significant contraction that would keep total vehicle sales in the 57.9 million to 58 million range," he continued.
Finally, if combined sales do remain below the historical norm since 1999, Spinella said, "Hardest hit? Stage budgets. In most states, upwards of 20 percent of all tax revenue comes from the sale of new and used cars. Any significant decline in unit volume directly impacts income and puts most states into the red.
"A key reason California is suffering a budget crisis — again — is because auto sales have dramatically dropped on the back of a poor housing market," Spinella concluded.
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