Tuesday, October 18, 2011 | Edited by Daniel Moores
||City Living: What 'Urban Boom' Means for Marketers
From Ikea to Zipcar to Walmart, Advertisers Follow Consumers into Metropolitan Areas
Decades ago, people left cities for the suburbs to raise families and to live the American dream. Now we're seeing "bright flight," younger, educated Americans reversing the trend seen in their parents' and grandparents' generations.
Consumers, from yuppies to artists to homeowners unable to sell homes to empty nesters, are clustering in urban areas more than ever before. And marketers stand to benefit from it.
"We're experiencing worldwide the fastest urban boom in history," said Ann Mack, director-trendspotting at WPP's JWT. "As the U.S. population gets more urbanized and cities boom, improving human environments will become a higher priority. We'll see a flourishing of opportunities for brands across multiple categories and initiatives aimed at improving local environments, adding beauty or helping to bring communities together."
According to the U.S. Census, from 2000 to 2010, the nation's 366 metropolitan areas picked up nearly all population growth: 92.4%. The overwhelming majority, 84%, choose to live either in or in the vicinity of a city of 50,000 people or more. In fact, almost 100 million Americans, 32%, choose to live in one of the 15 largest metro areas, each of which has more than 4 million residents. The 50 largest metro areas are home to 53% of the nation's residents, and all of them except five grew over the past decade.
The 2000 Census found 105.5 million occupied housing units, of which 32.8 million or 31% were in central cities. By 2010 that had crept up to 33%, despite the significant late-decade falloff in household creation. And even among first-time homebuyers, Ms. Mack said that 77% say they want to live in an urban area.
Among the sectors seeing opportunity in urbanization are furniture manufacturing, automotive and retail.
Ikea, long known for its apartment-friendly, affordable furniture, has of late been emphasizing its small-space furniture. "The small-space focus has been a global initiative within Ikea, as many Ikea customers worldwide live in smaller, urban areas" said Janice Simonsen, U.S. design spokeswoman for Ikea. She added that the focus on small also "resonates with U.S. customers. Although historically U.S. homes tend to be larger, our customers are looking to use these spaces smarter and more efficiently."
Even so, Ikea stands to benefit from an influx of urbanites in the rental market -- a healthy market in the wake of the housing crisis -- looking for apartments and affordable furniture. Walter Molony, spokesman at the National Association of Realtors, said that vacancy rates for rental units are declining as young people or people uncertain about home ownership rent more and seek roommates. According to the Census, 34.9% of occupied homes nationwide were rented in 2010, up from 33.8% in 2000.
Ikea's doing something right. Sales rose nearly 8% worldwide in fiscal 2010 and are similarly brisk this year.
And in cities, rentals have been going beyond homes and apartments to cars. "There's a trend of people leasing more than buying outright," said Stephen Hahn-Griffiths, chief strategy officer at Leo Burnett. Zipcar, which had its IPO earlier this year but was founded in 2000, is one of the bigger car-sharing services around. It posted a 34% gain in revenue to $61.6 million compared to $46.0 million in the prior year period, for second quarter 2011. During that time, membership increased 29%.
Although car sales in the U.S. were up 6% in the first nine months of 2011 over 2010, according to Automotive News, that doesn't mean car-sharing services, which are more popular in cities, are in trouble.
"In urban areas, people -- especially millennials -- want to find practical solutions that are affordable. They're more environmentally aware than previous generations and they're keen on saving money," said Ms. Mack. She added that if Zipcar is going to feel competition from anywhere, it'll feel heat from similar car-sharing companies, such as I-Go and rental companies like Hertz, which expanded to car-sharing in Manhattan.
Not wanting to miss out, some car manufacturers are taking a more proactive approach. General Motors in 2012 will team up with RelayRides, which lets car owners share their cars with neighbors. RelayRides will use GM's OnStar to allow borrowers to unlock the cars from their mobile phones.
Mr. Griffiths said he expects the rental trend to continue beyond cars and apartments. "I would even expect to see an increase in furniture rental."
Retailers typically known for massive stores are even rolling out smaller formats fit for urban areas. Walmart is rolling out dozens of smaller stores in an effort to fight lagging sales. The chain took its Neighborhood Market grocery format and renamed it Walmart Market and began opening the stores in denser urban areas like Chicago. As of this year, the smaller grocery outposts account for about 200 of Walmart's approximately 4,400 U.S. stores. At the same time, it's working on Walmart Express, a convenience-store format that's even smaller.
William S. Simon, exec VP, president and CEO for Walmart's U.S. division, in a recent earnings call said that the company's neighborhood markets have posted positive same-store sales for 15 consecutive months and that the "Neighborhood Market format is delivering a return at the same level as our Supercenters, which have the best ROI in the company." He added that 180 more are in the pipeline.
Other downsizing retailers include office-supply chain Staples, which this summer said it planned on opening new stores that were about 15,500 square feet, down from the current layout of 18,000 square feet. Best Buy is looking to downsize its current stores, subleasing parts of its space to other retailers.
(Source: Advertising Age, 10/17/11)
||Dentists' Treatment, Marketing Plans Change with the Times
Four years ago, twelve-year old Deamonte Driver died of a toothache. Extreme neglect had led to an abscess that spread to his brain and killed him.
The Drivers were a desperately poor family in Maryland that had trouble locating an oral surgeon who would work for Medicaid rates.
But rich, poor, or somewhere in between, regular dental care has declined as out-of- pocket costs have risen during the Great Recession.
But few people know that good dental care can be the key to good overall health.
According to the Mayo Clinic, a full menu of diseases can result from poor dental care, including endocarditis (an infection of the inner lining of the heart), cardiovascular disease (clogged arteries and stroke may be linked to oral bacteria), and premature birth and low birth weight babies, to name a few.
In the months after the Wall Street crash of 2008, Dr. Aziza Askari faced her own financial crisis.
Patients in her the Farmington Hills, Michigan, dental practice began to ask for refunds on pre-payments for planned dental work. Askari honored their requests but wondered what was going to happen to her practice. "It was hitting us from everywhere," she said.
To save the practice, she focused on holistic treatments and expanded into sedation dentistry -- in which anxious patients are relaxed before the drill begins to whirr.
Along with a hefty investment in laser technology and digital X-rays, this appealing change broadened her client base.
She advertised her new services, which grew to 10 percent of her practice's costs. Despite the expense, offering this mix of services without raising prices for customers was necessary to survive, she said. "It kept us afloat. If not, we could be down 50 percent or close to it."
There's no doubt that fewer Americans are choosing to go under the drill. A recent poll of 1,000 Americans conducted by Empirica Research for Brighter.com, a dental discounter, found that 74 percent of respondents said they only go to the dentist when there is a problem; nearly one-third who did not have dental coverage said they'd been to the dentist "only once" or "not at all" in the last 10 years; 73 percent without coverage said they had delayed care due to fear of costs.
For those who skip regular dental visits, like Deamonte, the long-term costs can be alarming. In his case, after two operations and six weeks in the hospital, the bill was more than $250,000. But even less dramatic dental neglect can cost a bundle: a $125 cavity filling can result in the need for a root canal or crown down the road, or even a dental implant, which can costs thousands.
Americans spent a total of $102.2 billion on dental care in 2009, down slightly from 2008 as patients pulled back. For those who do visit the dentist, costs are continuing to rise. Annual spending for dental care is expected to increase 58 percent in the next seven years, according to a 2010 Pew Center on the States report.
While dental care is only 4.3 percent of total health costs, consumers are paying more dental bills themselves.
A 2009 report in the New York State Dental Journal showed that while 10.3 percent of physician costs, 3.3 percent of hospital care, and 26.8 percent of nursing care expenses were paid out-of-pocket in 2007, 44.2 percent of dental bills were paid out-of-pocket.
In addition, the cost of dental insurance has risen annually over the last decade at a rate of 4 percent to 7 percent, depending on the level of coverage, according to consultancy Aon Hewitt. Yet the average annual dental benefit has remained capped at around $1,000-$1,500 for the last four decades.
This is also causing fewer Americans to buy dental insurance. The most recent report by the National Association of Dental Plans reveals that 166 million Americans were covered by some sort of dental plan at the end of 2009, down 10 million from the year before.
Even for Americans that are covered, many dentists have stopped taking state-provided insurance like Medicaid and some have stopped accepting insurance altogether. Dr. Robert Minch, a dentist in Lutherville, Maryland, said he does not take dental insurance to avoid dealing with low reimbursements. Instead, he said he's offering more elective procedures such as Invisalign braces and veneers because they are not covered by insurance and therefore more profitable.
An American Dental Association survey released in August underlines a struggling industry: nearly 39 percent of dentists saw their patient billings decrease in the first quarter of 2011. In addition, only 16 percent of dentists added to their patient base, while the rest stayed the same or had a decline.
There is also a huge variation in dental costs and access in the country. People in rural areas, the poor, and minority communities are suffering from a severe lack of dentists, said Cathy Dunham, the executive director of the Children's Dental Health Project, an advocacy organization. Costs for many procedures also vary greatly.
The cost of a dental crown can be anywhere from $600 to $1,800, depending on the type of material, where it's made, and the experience of the dentist. "We're talking apples and oranges," says Dan King, the marketing director of the Atlanta Center for Cosmetic Dentistry. "A lot of people think 'a crown is a crown is a crown,' but they're not...It's like comparing the Ritz-Carlton or the Hilton to the Motel 6."
To cope with the changing industry, many dentists are offering cosmetic procedures, but in the past few years, cosmetic dentists have been some of the hardest hit. "A few years ago, you had people taking second mortgages or using their credit cards to pay for procedures.
That easy credit has dried up, said Dr. John Sullivan, president of the American Academy of Cosmetic Dentistry. King said the flow of customers to his Atlanta practice had gone from a "fire hose" to a "garden hose," but that the practice held up its bottom line by halving its staff.
Askari faced the choice that confronts dentists around the country: either invest in expensive new equipment to expand the procedures offered or risk a "race to the bottom" on price for basic services such as teeth cleaning and cavity filling, which could lower the quality of service.
"It really is a tale of two cities," said Bassim Michael, a CPA who works with more than 30 dental practices across the country. "The practices that are doing well are the ones that are very growth oriented," Michael said. "They've put more money in marketing, and they're investing in new technology."
The low end of the dental market is served by discounters such as Brighter.com, a website that includes 25,000 dentists who offer reduced price services, such as crown work that would normally cost $1,340 for $595. Aziza Askari, the dentist from Michigan, said such "rock bottom" prices make it extremely hard to remain profitable and requires a practice to have very little overhead.
Robert Minch, the dentist in Maryland, said discounter services fill a niche, but it's also important to keep in mind that dentists are running businesses and have fixed costs they need to meet. The cheaper the care, the more likely some corners will be cut.
"Dentistry is a labor-intensive operation," he said. "It's hard to do it on a heavily discounted basis. You'll likely get heavily discounted work."
(Source: The Business Insider, 10/06/11)
||Spending on Pets Rises During Recession
Mary Louise Mills says her three dogs are spoiled rotten.
She has a 9-year-old shih tzu named Annie Lulu after Mills' grandmother, and two Pekingese -- 7-year-old Miss Daisy May and 4-year-old Elmer, whom she sometimes calls Fudd.
"They all think they're the boss," said Mills, 79, who lives in Annandale, Minn. "They've got me trained pretty well, I guess."
Mills enjoys their company; her husband died a few years ago. The dogs eat meals with her in the family room. They sleep with her in a king-sized bed and travel with her in the car whenever possible. They have a standing appointment about every eight weeks at Foxy's Pet Grooming and Boarding, which is one of the ways Mills tries to pamper her pets.
"My parents raised Dalmatians, and I've been a pet lover all my life," said Mills. "They're very important to me."
A lot of Americans feel the same way. According to the American Pet Products Association, people in the U.S. will spend more than $50 billion on their animals this year, a record. Spending in the pet economy has increased every year since 2001 and only once by less than 5 percent annually in that time.
Pet ownership is at an all-time high of 72.9 million households -- about two out of every three. About 78 million dogs and 86.4 million cats in the United States represent a 2.1 percent increase from 2010.
And those in pet-related industries in Central Minnesota say they've seen how animal lovers have made their business strong, if not recession-proof.
"I'm not surprised," said Valerie Muggli, who runs Tails of Gold, a golden retriever breeding operation. "I've found the same thing. The business really hasn't slumped. When the economy went bad, people started staying home more. They weren't taking as many vacations. They weren't gone as much. They started focusing on their home life and, for a lot of people, that includes a pet."
Muggli said she breeds about seven to 10 litters per year, depending on demand. Her puppies cost between $1,000 and $1,500, which she says is midrange for purebred golden retrievers.
"A lot of people ask 'Isn't it hard to send those puppies home with someone else?'" Muggli said. "It's a lot of work, but it's rewarding to see the joy they bring into people's homes. That's why I love doing this."
Muggli also is a dog trainer and has seen significant growth in interest in agility training.
Once you have a pet, the next object is to make it safe and secure at home.
Scott Potter has operated Invisible Fencing for 12 years in South Haven, Minn. A typical system from Invisible Fencing, which is a brand name and not to be confused with do-it-yourself pet containment systems, costs $1,500 to $2,000. Potter says his business isn't experiencing the record years it saw in 2006 and 2007, but it has rebounded through the recession.
"When the economy crashed, it affected our business," Potter said. "But we've been steadily gaining it back the last few years to the point where we're pretty busy now. People's pets are their family. They're like kids to some. Safety is a priority, and I see our systems save the lives of dogs and cats every day."
Potter said technological advances also have benefited the business.
"The collars pets wear with our systems now weigh less than an ounce," Potter said. "That's a lot lighter and less bulky than they used to be years ago. That's opened a lot of possibilities for different pets. Increasingly people realize it works well for cats."
Food accounts for a majority of spending in the pet economy -- an estimated $19.53 billion this year. The typical dog owner will spend $254 annually, not including treats. Average annual food spending by cat owners is $220.
Corporate representatives from PetSmart and Petco did not respond to inquiries for this story, but PetSmart recently reported second-quarter earnings were up 32 percent and net income was $61 million compared with $48 million in the second quarter of 2010.
The biggest increase in pet spending this year is expected to be for veterinary care -- with a total of more than $14 billion in spending.
The growth can be seen in some new pet hospitals, including Advanced Care Pet Hospital in Sartell, Minn. Tom and Pamela Gerds opened the operation in December 2009, although Pamela Gerds had been practicing as a veterinarian for 16 years in the Twin Cities.
"We did a lot of research and selected this market for a lot of reasons," said Tom Gerds, who runs the business operation of the animal hospital. "We looked at industry numbers and the number of pets and vets in the area. Based on those, we figured that the economy would bounce back and Sartell would be a good location."
Tom Gerds said pet owners mirror the bell curve of household demographics. Some people barely comply with license requirements for rabies shots. Others treat their pets as well as their own children. Different veterinarians have their niche, whether it's low-end vaccination clinics at big-box stores or full-service vets.
He said another reason vet care is accounting for a large slice of the pet economy is because pets are living longer through advanced medicine and technology.
"It's approaching the level you see for human care, compared with the days when you took your (sick) pet to the farm and then you never saw them again," Gerds said. "We can test for glaucoma and cataracts. There are a lot of things that can be treated now that people didn't run into when they put their pets down sooner. Of course, the equipment isn't cheap, and it's a significant investment for all involved. Sometimes when you tell someone who bought their cat from the humane society for $10, they look at you like you're kidding."
Veterinary care expenses this year are expected to increase more than a billion dollars from 2010. That's one reason pet health insurance has developed into a growing industry. Since 2007, it has grown by an average of about 10 percent annually -- though it's estimated only 800,000 pets in the nation are insured. Nonetheless, it is an option for pet owners who figure the luxury of such coverage is outweighed by the difficulty of a large, unwanted pet-care bill.
According to Reuters, more than 15 percent of dog owners said their pet's medical treatment would take priority over their own.
Some research shows, however, the two may go hand in hand.
A recent study from the State University of New York at Buffalo found pets help lower blood pressure. According to the Waltham Centre for Pet Nutrition, pets help reduce stress. And the National Institutes of Health Technology has research that shows pets provide their owners with greater psychological stability and a measure of protection from heart disease. The same organization says pet owners make fewer doctor visits and pay lower health care costs.
The fondness people feel for their pets, the increasing number of them and the growth in human population also have contributed to growth in the pet cremation business. Peggy McStott-Voigt operates Heavenly Paws south of St. Augusta, Minn. She said her 10-year-old business saw no dip during the recession.
"It's still a priority for pet owners," she said. "These are basically family members."
Cremation service depends on the size of the animal, but an average private cremation costs about $125. A garden cremation, where multiple pets are cremated at the same time, starts at $60. Urns made of plastic, wood or granite for the ashes run from $25 to $300. Owners can have a paw print made from their pet for $18.
McStott-Voigt says Heavenly Paws is one of four pet cremation services in the state, with the others in Minneapolis, St. Paul and Duluth. She offers a memorial garden for people who use her service to spread or bury their pet's ashes if they don't have private property on which to do so.
"When the floor dropped out of the economy, people stopped spending as much on their wants and focused on their needs," McStott-Voigt said. "But this is a need for many people. I've had people keep some of the ashes in a phial on a key-chain so they can keep their pet close to them. It's a personal thing."
Shelley Bunkholt has been grooming animals since she was a kid and dabbled in the business part-time for decades. Five years ago, however, she decided this was what she wanted to do. She ended a 27-year career as an insurance underwriter and opened Foxy's Pet Grooming and Boarding.
Her business has grown to the point where she's building a new facility this month. A new pole building will take pressure off the space she uses in the garage adjacent to the log house she and her husband have on a 40-acre property.
Bunkholt boards dogs and cats in what she describes as a relaxed atmosphere. The animals have real furniture on which to rest if they wish, including couches. Her grooming operation started in her basement and has continually picked up new business through vet referrals.
"Some people don't groom as often or they've got to plan for it in their budget, but business has held up well, and we're getting new clients all the time," Bunkholt said.
She also has three dogs -- a poodle, a golden retriever and a Jack Russell terrier. She says hygiene, including dental cleaning, has become more important to pet owners. She even works with a canine chiropractor.
"People who focus on their pets give them better care, and because of that they're going to live longer," Bunkholt said. "Making life better and easier for people and their pets is what it's all about."
(Source: USA Today, 10/10/11)
Daily Sales Tip: The Cold Call Relationship
Cold calling is a relationship like any other and should be treated that way. It requires an approach that anticipates multiple calls. Build scripts that address each call based on the previous call and the anticipated response. Develop the relationship through each call in a unique fashion. Be deliberate.
The most successful cold call approaches address the long term virtual relationship and respects the fact the target is busy. My favorite approach is to call once a week. Each time leaving a message building off of the last message, adding a bit more information.
Keep calling every week for at least two months. That's 8 calls. It's not a lot of calls, but it's a lot of time. The calls are spread out enough as not to bother or smother the prospect, yet close enough they will remember the last call. The messages should be short, sweet and capture the attention of the prospect.
Rarely is it the cold call that get's the prospect attention. It's the virtual relationship you create over time, through the calls, that gets the prospect.
Source: Sales consultant Jim Keenan