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Fridays with Dr. Joe: - Whining and Dining, or Something Like That… Dr. Joe on the Donnelley/Moore-Wallace Deal This week's acquisition of Moore Wallace by R. R. Donnelley is the first
of what I predict will be a number of big deals we'll be seeing in the
next 18 months. A rising stock market in a growing economy will give
companies a needed boost in capitalization that will allow them to use
their stock in mergers and acquisitions. | - | - | - |  Ask Dr. Joe a Question Dr. Joe's Bio Yes, Dr. Joe Has a Store Dr. Joe's web site |
No merger of this size will go smoothly, of course,
and historically most mergers fail to deliver the promised synergies in the
timeframe that they are promised, although Moore Wallace claims to have reached
its anticipated $50 million savings gate and is on its way to the second
$50 million. In this case, the market forces (and investment bankers)
compelling merger action are quite strong. I hope, though, that the mergers
that will undoubtedly follow will be for similar reasons and not be justified
because some banker's Excel spreadsheets “look good.” Other mergers are likely to get
more scrutiny than this one will because there are more likely to be overlapping
product lines. But this one looks good, though a defensive strategic move,
and should do just fine. Lack of Conviction About Variable Data Results? I had a conversation with someone recently who was having some dealings with a major producer of variable data pieces. The producer privately said that they had seen no major proof that variable data pieces generated increased response rates. Yet they would never admit that to their customers. Shocked, I am. To my knowledge, there have been no carefully controlled longitudinal studies about the impact of variable data (using the same methodology and the same participants carried out over a long period of time). The last study I know of is the one Frank Romano was involved in at RIT with an unidentified direct marketer which did show increased rates. But as I recall, a close second was a static process color piece with a price discount offering. That was only one study, and we do not know if the advantage of either changes over time, nor do we know if it can be affected by use of e-mail or other e-marketing techniques used simultaneously, the multi-channel method that many agencies are proposing to their clients. But of more concern to me is that the producer of personalized pieces is not doing its own research or participating in research that helps clients finely tune the conditions that make variable data printing more effective. Shame on them. A pox on their plant! A problem, of course, is that in a multi-channel campaign and in a complex consumer decision process that relies on the consumer being exposed to a wide variety of media, as well as word of mouth from family and reference groups, identifying one promotional initiative as the prime mover in a sale is not really possible, nor is it always worth pursuing. Consumer decisions are very complex, but the rule of thumb that the agencies use go something like this, and this is very general:
So the battle is not really one promotional method over another; it's which ones give you—the seller—the most bang for the buck in terms of the mix. You do have to use a mix of promotional methods. In recent years, public relations and event marketing have been getting more promotional dollars because they can be more measurable than general advertising in magazines and on TV or radio. The point is that except for direct mail campaigns or some catalog mailings, anyone who thinks that you can point to a particular medium as the sole generator of a sale should have their head examined. Everything has to work together. The program will be judged by its overall results, not just the results of the individual components. Like the title of a Jim Bouton book about baseball, " I Managed Good, But They Played Bad "—it all has to click and that's the media mix shake-up that's underway now. The bottom line is that we know that there are circumstances where personalization
(beyond just basic name and address and short messaging) works just fine
and is well worth the cost. I just wish the documentation of its long-term
benefits was better and more convincingly presented. There has been a lot of kibitzing of late about some of the business practices in our industry being the cause of so many of our problems. The truth is that everyone is entitled to make stupid management decisions. And I'm concerned that some of the blame is being placed on the wrong culprits, like a bad carpenter who blames his hammer for shoddy work. It's the managers, not the tools, that deserve criticism. The tools that are getting attention are things like aggressive leasing and customer loyalty programs that were practiced very effectively when the industry was growing and in the midst of a massive technology shift. Managers are the ones who eventually perverted them into grotesque use, and managers are the ones who kept applying them when the tools should have been put back in the shed. The availability of capital through leasing, especially leases with recourse, was the way companies helped small business people be more productive and increase their ability to expand. Would they have told farmers in the late 1800s not to lease the latest harvesting equipment? Farmers always had a reputation for being poor. But they could buy high productivity equipment with the monies earned from their new productivity, and hence the business leasing business was born. The use of leasing and financing was a great tool in the declining interest rate environment of the 1980s; it was even possible to get some printing equipment "for free" because press manufacturers would help orchestrate an entire refinancing of a print business' assets (buildings and all). Just because this was a good practice then doesn't make it good now, and that's where I fault managers and not the tools. This is a vastly different environment. Demand is not growing. Print product mixes are not changing in a way that are favorable in terms of profitability (like they did when the industry shifted from black & white to heavy use of process color). Interest rates are not precipitously dropping. Inflation is not high—high inflation encouraged borrowing and leasing because payments were made with cheaper dollars than the ones that were initially borrowed. The problem I see is one that is much worse: the inability—or worse, the lack of desire—of some suppliers to change their tactics in the face of obvious changes in the marketplace. Turning a blind eye to what is going on in an effort to "meet forecast" or "get quota" has been a serious problem. Some of the pain the industry results from the way a marketplace punishes consistently bad decisions. Unfortunately, the market punishes everyone, whether they were good or bad, naughty or nice. Unfortunately, that punishment can occur three to five years after the bad acts, long after everyone got their pats on the back and performance bonuses. Most companies offer no rewards for sales people who walk away from bad deals. There are few rewards for bringing back bad news from the marketplace. Those who pursue all deals aggressively, regardless of whether or not they make sense, are —unfortunately—the ones traditionally regarded as “stars.” Instead of blaming the tools, let's instead harp on bad business judgment, the acquisition of equipment based on flawed market assumptions, the sales management practices that reward sales people and their managers for closing deals at any cost, and the use of "equipment envy" in the sales process. I'll never forget hearing one sales rep talk about how he visited a plant with a new press that had just been installed. While he was on the phone with another prospect for the same press, he held the phone up to the new press, telling his prospect, "You hear that? That's the sound of you going out of business." He then chided the prospect for not closing the deal, I assume. Stop whining. Start adjusting to the times. Be more creative. Have the
fortitude to stick with the right decisions for their time. Stop blaming
the tools. Home Depot is adding itself to the list of catalog retailers, at least for the holidays. (Yes, nothing says "I love you" more than a chainsaw and a bucket of joint compound under the Christmas tree). The company is including this in its nearly $1 billion marketing budget for the first time. Obviously, print has value to this retailer. Yes, a changing media mix means that we win sometimes, too. Let's not get too crazy, though: Amazon.com has not repeated its catalog foray of three years ago, at least not to my knowledge. But let's bask in Home Depot's decision for now and score one for the "good guys," which I like to think is “us.” On the Web:
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