mgroves

Ah, that pesky, meddlesome government is at it again!

A recent law was passed in Ohio that all but makes payday lending illegal.

In case you aren't familiar with them, payday loans are short-term (15 days) loans. The way it works is that you go to one of the payday loan stores with a post-dated check for the amount you want plus a fee (around $10-$15 per $100 you want to borrow). They check your ID, ask for paycheck stubs to demonstrate that you are gainfully employed, and maybe some other things to verify your checking account and current address and such. They don't check your credit. They then give you the amount you want in cash. If you don't pay it back in 15 days, they will cash your check.

So what's the big deal? Critics (or as I like to call them: meddlers) say that these loans are irresponsible and predatory. The fees amount to 391% APR and many loans result in a downward spiral of borrowing to pay off borrowing.

Wow, that sounds horrible, doesn't it? Those poor, defenseless, stupid poor people who can't make good decisions and pay 300% on their loans! We know what's best for them! The government should do something! There oughta be a law! Yeah, that's the ticket!

But wait. There's already a law: it's illegal to pay off a payday loan with another payday loan. Makes sense, doesn't it? As so often is the case, why make new laws when you can just enforce the existing ones. But I digress...

Now we have a new law that restricts payday lending to 30% APR. Which means they can charge like $1.08 per $100. Which means they can't stay in business, and they have to fire 6000 people, and 1600 landlords have to find new tenants (and that's just one company).

Meanwhile, the banks can charge $30 for an overdraft fee, plus another amount every day the account is overdrawn, none of which is disclosed as "APR". Credit card companies charge 30% APR, fine, but these helpless, mouthbreathing poor people who can't be trusted to make their own decisions will, of course, only pay the minimum. On a $500 balance, they will pay $294 in interest over 3 years(*).

That's assuming they can even get a credit card in the first place. If they are going to Checksmart, they probably don't have very good credit.

So what are they supposed to do when it's time to take their kid to the doctor or get their car fixed? I guess they could just pay a late fee on their bills instead (also not disclosed as APR, oddly enough), go to a pawn shop, steal the money, suffer the embarrassment and relational strain of borrowing from friends and family, go on a welfare program, or just skip the doctor's appointment. Fantastic alternatives all.

Ohio politicians (both parties, now, this had very broad support) claim to want to bring jobs to Ohio and make it friendlier to business. So far, that's only been lip service. Color me shocked.

I've picked up a book called The 22 Immutable Laws of Marketing by Al Ries & Jack Trout, and I'm blogging a summary of each chapter.

Chapter 4. The Law of Focus

The most powerful concept in marketing is owning a word in the prospect's mind.

"Owning" a word like Xerox owns "copy", Kleenex owns "tissue", and Volvo owns "safety", is the most powerful concept in marketing. Just recently I linked to a site called Brand Tags (see also the Volvo and Xerox links) which might be a useful sort of word association tool to see if a brand has achieved the focus they are going for.

It should be a simple word, with a narrow focus. The word should also be benefit oriented.

Achieving this isn't simply a matter of advertising. If a firm want to obtain this kind of obiquity, it should reduce the scope of its offering(s) to narrow their focus instead of chasing after everything.

Also, it helps if the word is an "opposing" word. It's not a good idea to go after a word like "honesty" because no one is going after after "dishonesty". Words like "honesty" and "quality" are merely table stakes.

Now that I'm at #5, what do you think about this book? Should I continue summarizing the remaining 17 chapters?

I've picked up a book called The 22 Immutable Laws of Marketing by Al Ries & Jack Trout, and I'm blogging a summary of each chapter.

Chapter 4. The Law of Perception

Marketing is not a battle of products, it's a battle of perception.

This chapter is a bit existential, and at times it seemed rather silly to see in a marketing book. Points such as:

• There is no objective reality
• All truth is relative
• Most people think they are better perceivers than everyone else
• People project to cope with being alone in the universe

The basic point is this: purchasing decisions are not based entirely on objective facts. The reasons for this are rooted in psychology, but it boils down to people being unique, having unique opinions, and have unique perspectives. Slap different logos on the exact same product, and you won't necessarily get a 50-50 spread in choices. Put the same logo on two different flavors of soda and people will tell you there's a difference between the flavors.

But whether or not perception actually is reality, a marketer should behave as if it is.

What does a brand mean to you?

Look at a brand logo and think of the first word that comes to mind. Now have a hundred other people do the same thing.

That is what brand tags is.

"The basic idea of this site is that a brand exists entirely in people's heads. Therefore, whatever it is they say a brand is, is what it is."

Each brand has its own tag cloud. This site has potential to be gamed, of course, but I think the idea is pretty cool, and it doesn't really look like it's being gamed too much. Here are some examples of the biggest words in a tag cloud.

• NPR: boring, liberal, news, radio, smart
• Coke: classic, coke, drink, red, refreshing, soda, sugar, sweet
• Pepsi: coke, cola, drink, not coke, refreshing, soda, sugar, sweet
• GE: electric, electricity, light, lightbulb, old

I don't know about you, but I can see some validation for the laws of marketing in here.

I've picked up a book called The 22 Immutable Laws of Marketing by Al Ries & Jack Trout, and I'm blogging a summary of each chapter.

Chapter 3. The Law of Mind

It's better to be first in the mind than to be the first in the marketplace.

Being first to market doesn't really matter if you aren't first in the mind of the consumer. For instance, the Altair 8800 is largely considered the first mass market PC, but it was largely eclipsed by later PCs such as the Apple II.

The role of money in marketing is important, but this law shows that money isn't necesarily everying. It's hard to overcome first imprssions and well-formed opinions, no matter how much money is spent.

The law of leadership still matters, but only to the extent that it usually provides access to the mind of the consumer.

I've picked up a book called The 22 Immutable Laws of Marketing by Al Ries & Jack Trout, and I'm blogging a summary of each chapter.

Some commenters from chapter 1 were really chomping at the bit with counterexamples. There are 21 other laws, people!

Chapter 2. The Law of Category

If you can't be first in a category, set up a new category you can be first in.

This is really just a more specific application of the first law. If you can't be first in computers, be first in personal computers. If you can't be the first to fly solo over the Atlantic, be the first woman to fly solo over the Atlantic (Amelia Earhart).

Instead of being a "me too" or an "also ran" brand that gets lost in the shuffle, invent a new category and be first in it. Sometimes even a better product isn't the key. The question isn't "How is this brand better than the competition?", but "What is the brand first in?"

That's all there is to that law.

IDEO is a design consulting firm. They have designed many of the things you use today. Probably some of the things you are using right now.

They've designed the first Apple mouse, the Palm V, and the Oral-B toothbrush gripper. They also designed a revolutionary shopping cart in 5 days...

They are no doubt the best design firm in the world, receiving more Industrial Design Excellence Awards than any other firm.

They are also total hippies:

• Idealized egalitarian meritocratic work environment? Check.
• Sticking it to "corporate America"? Check.
• "The basket is tyranny"? Check (19:15).
• Patrons of Whole Foods? Check.
• Can you naturally concatenate every sentence with "maaaaan"? Check.

Also, what's the deal with Ted Koppel? His face looks like a hastily assembled Mr. Potatohead.

This is the start of a new series of posts here at mgroves.com.

I've picked up a book called The 22 Immutable Laws of Marketing by Al Ries & Jack Trout. It's a shortish book with 22 easy to digest chapters, and I think I can squeeze out 22 even shorter blog posts in summary.

Does this sound boring? We'll see how far this goes. I might not make it to 22.

Okay, on with the first chapter. If you're really impatient, you can get a full summary here, but it's much shorter.

Chapter 1. The Law of Leadership

It's better to be first than it is to be better.

Who remembers #2? Who was the second man to cross the Atlantic ocean by solo flight? Who was the second man on the moon? You get the picture.

People tend to stick with what they have. This is partly because people are somewhat risk averse and partly because there may be a switching cost involved (which may not even be monetary).

So, because of this law, the "first" brand becomes the "leading" brand, with corresponding shares of sales. This also might lead to brand names becoming generic names for a product category: It's not paper copying, it's "Xeroxing". It's not facial tissue, it's Kleenex. It's not soda, it's Coke. It's not plastic wrap, it's Saran Wrap. Etc.

One important thing to talk about, since this is the first of (maybe) 22 posts: this law isn't the only law of marketing, because I'm sure you can think of some counterexamples to this first law that are probably covered in the other 21. We'll see. I haven't read the whole book yet.

If you don't religiously watch the Cincinnati Reds on Fox Sports Net Ohio like I do, then you probably haven't seen these ridiculous JTM commercials.

JTM is a company that sells various pre-cooked "meat" products. The last time I had them (admittedly 15+ years ago), I about vomited.

Also in case you don't follow the Reds, this series of commercials features Chris Welsh (mustache), a former Reds pitcher and current Reds broadcaster along with Bronson Arroyo, the former Red Sox pitcher, current dog of the Reds rotation, and avid musician who plays local concerts for charity.

These commercials are bizarre in multiple ways.

Chris has hinted that more of these commercials will be coming forthwith.

I thought I'd also mention that Chris used to plug JTM products during the broadcast by saying, "Hey meat, looking for something to spice up your BBQ?" or something like that, which I always thought was weird. However, I later learned that "hey meat" is a reference to the movie Bull Durham, a.k.a. the other Costner baseball movie.

*Sigh*

Yet another lame chain-email, this time transformed into a Facebook group. The claim? Gas prices can be brought down by inciting a price war!

I think I've explained this about 400 times on this blog, but I will keep on explaining because currently the Facebook group has 284,613 members who I haven't reached yet.

Supply and demand. Where they meet is the equilibrium price:

The only way price changes is if there is a shift in demand or a shift in supply. That is, if demand goes down/up or supply goes down/up. Now, this assumes a well functioning, rational market. The oil market is not such a market (OPEC is a cartel, most countries have taxes, etc), but oil is a fungible commodity, so it's pretty darn close.

This Facebook group, which has 284,613 members let me remind you, contends that the way to incite a price war that will drive prices down is to simply not buy gas from Exxon and Mobil (the two biggest companies, and thus the most eeeevil). Note that this group doesn't call for consuming any less gas, but rather buying the same amount of gas from a different station.

So what does this mean? It means the demand curve doesn't shift. And since this call to action is based on consumer activity, the supply curve doesn't shift either.

What does this mean? The price will not change.

Even if everyone in the world stopped buying from Exxon and Mobil, all that would do is put Exxon and Mobil out of business. The price of oil would not change, and Johnny Bluecollar would lose his job at the Mobil station.

Want to make the price go down? Here are the three things you can do:

1. Use less gas. (Supply curve shifts left)
2. Make more gas. (Demand curve shifts right)
3. Elect people who will vote to cut the sales tax on gas. (It's complicated, but equilibrium price would probably go down)

That's it.