Desperation Marketing: Apple, Dell, HP, XM Sirius, and CES Just Examples
[UPDATED]
When an industry is feeling an economic pinch, you can feel it in the advertising. Yes, the amount of ad spending drops, as has been obvious in reports from those who track it. But the quality of the advertising itself begins to change, as companies try to close the business they need and fear won't appear. The signs are all over high tech at the moment, as all manner of organizations and companies wind up, trying to win over consumers by offering prices and terms that telegraph varying degrees of desperation.
Start with one of the high tech industry's bell weathers: the Consumer Electronics Show. Having long supplanted the business technology shows in importance (The mailing list sign-up for Interop, successor to Comdex, doesn't even work â€" but does anyone notice or care?) , CES is a canary in the broad buying public mineshaft. And that shaft is deep this year. Vegas hotels are offering CES discounts -- unheard of in the past, as they rightly judged that they could charge what they wanted. But many companies that have traditionally turned out in force are doing things differently -- or not doing them at all.
Reduced rooms and other incentives apparently aren't enough to attract some corporate regulars from year's past: Yahoo, Cisco, Seagate, Logitech, Belkin, Philips and others are either eliminating booths and tents all together, or drastically reducing their presence at the show.That is probably the reason that the sponsoring Consumer Electronics Association is trying hard to rally the faithful with its mass email touting "Ten Reasons CES is Set to Be Better Than Ever This Year," even though it has admitted that the show will be smaller than either of the last two years. Here are some of the reasons that CEA gives:
- 11,081,938 Blu-ray Discs -- the number of Blu-ray discs it would take, laid out side-by-side, to fill the exhibit space -- and, presumably, the number of Blu-ray discs that aren't selling the way the format's proponents had expected.
- One time you can actually keep money in your pockets in Vegas -- CEA tries to convince Las Vegas hotels to lower room rates, and the success is a likely indication of reduced advance booking.
- Disrupters -- those products that are supposed to change the face of industry. In reality, very few hit this status, and you're probably going to hear about it anyway.
- Keeps you from being "that guy" -- a use of the rhetorical trick called a bandwagon, otherwise known as "you should do it because everyone else is." But the ad copy can only bring itself to claim that "many of your peers" will be at the show, not even most.
CEA is hardly the only organization concerned about keeping an audience. Sirius XM is sending an email to at least the XM subscribers, offering a lifetime subscription plan (although it doesn't give many details, including price, and only offers a phone number answered during "business hours," with no back-up Web page. Any time a company offers a lifetime subscription, you can guess that they're desperate for cash and worried about losing customers. Why else would they trade ongoing revenue for a $400 single payment, which is under three years worth of subscription revenue? Of course, given the way XM Sirius is going, you have to wonder the company will last that long.
Dell is cutting some flat panel display prices by up to a third and, at least today, up to 25 percent off televisions, including a 46-inch Sony Bravia. There's up to half off electronics and accessories. Meanwhile, HP is offering up to 44 percent off printers and a 15-inch notebook for $550, including a 3GB memory upgrade, dual-core processor, and minimum 160GB hard drive. In the case of hardware vendors, they had probably already placed their components purchases by summer, so the steepening economic downturn means suddenly facing excess inventory in an industry where the shelf life of products is none too long. Better even to sell at a break-even price than not to sell at all and have all those parts that you now have to store and possibly write off.
Even Apple, which is noted for its historic adherence to pricing, is showing signs of the times. The Apple Store is offering six months of interest-free financing and iTunes reward points for using a Juniper-branded Visa card, as well as free overnight shipping on everything. It may not be lowering prices, but the moves indicate pressure to deliver enough sales through the end of the month -- and quarter.
So far, this year's death march selling season has indicated the people are buying less because they have less to spend. No surprise there. The question is how companies are going to reach come the first of next year. Odds are there will be a sales hangover that will make this quarter's results shine in comparison. And don't expect any relief in the near term. I was speaking with Mauro Guillen, a Wharton professor of management who said that the crisis could be "as short as a couple of years," which means at least another year or 18 months of turmoil, even if you take early 2008 as the beginning of the downturn. And on the pessimistic side? A decade. Expect fire sales to be the hot thing for some time to come.
[UPDATE: A representative from Sirius XM emailed to say that Sirius had offered lifetime subscriptions to its listeners "for years" and decided to also offer them to XM subscribers. Being an XM subscriber for a number of years, I had never before seen the practice and hadn't realized that it was established at Sirius. However, I still say that it's desperation marketing, as the company is on shaky ground and the auto industry, which had been a major outlet for it, make Sirius XM look as stable as IBM.
A reader also sent a snide "you don't know much about Sirius XM" note along with a link to what I can only guess was his/her blog post. Given that Sirius XM said that XM had not independently offered lifetime subscriptions before now, the sentence "Second, Sirius and XM have been offering Lifetime Subscription Plans for as long as I can remember" would seem to indicate very short term memory, indeed. Although the subscription can only be transferred three times, the assumption that people are buying new radios every two years is, I think, presumptive. I know that I've had one XM radio for probably three or four years at least. Even assuming a swap every two years, that would mean a total of eight years of subscription for the $400 price, which is still a pretty steep discount from the list price of $1,243.20 for that period. Actually, make that a dangerous and damaging discount that I'd guess was meant to boost cash on-hand.
As the person wrote, "Optimistically we could look at this as a clever marketing plan to say 'thank you' to their devoted customers." But I find that in business and marketing, optimism is generally another word for wishful thinking.]
Sale signs image via Flickr user timparkinson, CC 2.0.