Consumer behaviour is central to my role as an account planner and about how I look at the world.
Being from an Irish household growing up in the North West of England, everything was alien. I felt that I was interloping observer who was eternally curious.
The same traits stand today, I just get paid for them. Consumer behaviour and its interactions with the environment and societal structures are fascinating to me.
The hive mind of Wikipedia defines it as
‘the study of individuals, groups, or organizations and all the activities associated with the purchase, use and disposal of goods and services.’
It is considered to consist of how the consumer’s emotions, attitudes and preferences affect buying behaviour. Consumer behaviour emerged in the 1940–1950s as a distinct sub-discipline of marketing, but has become an interdisciplinary social science that blends elements from psychology, sociology, social anthropology, anthropology, ethnography, marketing and economics (especially behavioural economics or nudge theory as its often known).
I tend to store a mix of third party insights and links to research papers here. If you were to read one thing on this blog about consumer behaviour, I would recommend this post I wrote on generations. This points out different ways that consumer behaviour can be misattributed, missed or misinterpreted.
Often the devil is in the context, which goes back to the wide ranging nature of this blog hinted at by the ‘renaissance’ in renaissance chambara. Back then I knew that I needed to have wide interests but hadn’t worked on defining the ‘why’ of having spread such a wide net in terms of subject matter.
Porsche pronunciation – the iconic German car company want to stop the peculiarly British mangling of their name. The British tend to assume that the end e is silent, while the correct pronouncation is Porsch-e. More on the video below.
Creative agency ZAK created a parody of 1980s toy advert as a comment on the political upsets of 2016. The A.S.S. Squad features a parody version of Donald Trump and Kim Jung Un alongside Barbie.
A Polish ad, that schools John Lewis on how to make the signature Christmas ad. This advert manages to bring in great storytelling and emotion into play. The bit that most surprised me is that it was for language learning software. Rosetta Stone will need to improve the quality of their own advertising assets.
Japan’s love for acid house, from adverts to anime | Dazed Digital – some of this is nuts, but in a good way. Japanese producers have been mixing acid house elements into idol band productions. Imagine if Simon Cowell was producing X Factor artists using production elements found by rifling through the back catalogue of Detroit techno artists and managing to somehow not make a pigs ear of it all. They way that this is done is very clever and other worldly all at the same time.
FCB Seoul used ASMR (autonomous sensory meridian response) to emphasise the experience of eating the Ritz crackers. ASMR is becoming a well worn tool for marketers doing online video. But I thought Ritz’ particular execution was really well done in this advert. Korean society and culture has fads that ripples through it online and offline. Its one of the reasons why consumer boycotts get wide scale adoption there. Getting on board with ASMR was a smart move given this nature of Korean consumer behaviour.
What now for the working class? Following president Trump’s election and the British plebiscite on European Union membership there has been lots of hand wringing about workers who traditionally participated in legacy industries being outside society. Here is what we have to deal with:
The ‘traditional’ jobs aren’t coming back
Middle-class roles are already being disrupted
There is a declining return on investment in further education, yet lifelong learning is a compulsory requirement
Globalisation is working at an aggregate level, but isn’t working at a local level
Western society has fractured. It will become more fractious once the realisation takes hold that:
It can’t be resolved by simple measures, populists might listen – but can’t solve anything. Jobs are governed by a multiple factors that affect both cost and demand considerations
It can’t be solved in a relatively short time frame. You can’t build the necessary eco-system and supporting industries to bring the jobs back; even if the economics made sense
Governments don’t have their hands on the levers of control, the best governments can do is actively manage decline. Technological disruption puts the levers of control with a smaller group of people
There is a lack of willingness by those with the money and the power to solve it – primarily due to the pressures that drive their behaviour
Existing social welfare safety nets aren’t sustainable
The realisation that populism doesn’t deliver is likely to cause a further visible outburst of anger. Which should be good news for the private security industry. This could result in civil or international conflict. It has already happened. Factors that contributed to the Arab spring and the Syrian civil war included a large under-employed population living in stagnant economic conditions with no hope in sight. This probably sounds familiar.
I am ruling out some sort of positive ‘black swan’ event which changes the game completely and provides meaningful work with great wages across societal boundaries. If I could reliably predict these, I would be writing this from my private Airbus A380.
Instead I can see four broad categories of outcomes, all of which are ugly:
Carry on – carrying on isn’t likely to be sustainable as societal pressures go to breaking point
Managed decline – from a rational point-of-view the most ‘possible’ solution. Unpalatable from a voter perspective. It begs the question at what point would the UK economy bottom out? Managed decline makes the most sense as an interim measure whilst a country works out what its new place in the world is and charts a path towards it based on careful strategic investments with limited capital
Massive investment – presents a number of challenges that make it nearly impossible for western countries. It would require a long term view – unlikely without consensus driven politics with a high level of comity, huge access to credit – again unlikely with highly indebted economy and a slowly declining credit rating like the UK. Would take too long to satisfy angry voters
Massive disruption – the dice is thrown in the air as society tears itself apart and the strong gain control – think China’s Cultural Revolution. Wages and worker rights may drop to make them more cost competitive for low skilled manufacturing allowing for an employed but disgruntled workforce. Power is unlikely to shift too much, the corresponding upheaval in population numbers may provide some supply side pressure on wages when its all over. In all likelihood, it would just reduce pressure for change, increased willingness to work together on a longer term solution, but not provide much medium term economic benefit
Disruption
Here is a chart of numerous successful business, some of them are over a century old. AT&T and Verizon can trace their history back to 1877 and the Bell Telephone Company set up by Alexander Graham Bell’s father-in-law. General Electric goes back to work by Thomas Edison in 1880. These companies took from 117 – 137 years to become $200 billion businesses. Facebook took ten years requiring only 3% of the people AT&T needed.
It would be reasonable to assume that the future is going to create less jobs with given investments rather than more.
Company
#Employees
Year its market capitalisation became US$200 billion
Facebook
9,199
2014
Microsoft
27,000
1998
Apple
46,600
2010
Alphabet (Google)
46,600
2012
Amazon
165,000
2015
Verizon
176,800
2014
General Electric
239,000
1997
AT&T
302,000
2007
So large private enterprises will:
Employ less people which means less ancillary demand for services in the locale. Less restaurants, shops, artisanal coffee shops, micro breweries, nail bars, car valets, hotels and hair salons
Employ even less unskilled people – what unskilled labour is required will be employed on a flexible basis. Their roles will be competing on ‘total price’ with a global workforce and robotics
This hypothesis is supported by data from the MIT Technology review which showed that modern US manufacturing managed to increase productivity by 250% whilst reducing staff numbers by over 40%.
Win-Win to Winner Takes All
Technological progress and globalisation has resulted in a decline in the middle class in western countries. Pew Research claims that the US middle class declined from 61 per cent of the population in 1970 to 50 per cent by 2015.
Corresponding average ‘real wages’ for US ‘good producing’ workers peaked by the mid-1970s and have been broadly stagnant since. A pattern mirrored in other developed economies. Hong Kong saw a similar peak from 1967 riots through to the early 1990s until factories moved across the border.
Manufacturing productivity had grown steadily over that time. You can argue over the data points but the overall trend seems to hold true.
Owners of capital have enjoyed increased returns versus the providers of labour. Knowledge work, a key part of middle class roles could be easier to export than production lines. A classic example is the bank back office roles that have been exported to India.
Supply chain
At the moment UK manufacturing jobs operate as part of a complex supply chain that primarily addresses the European Union as a market. The supply chain is built around a number of factors:
The value of the product
The weight of the product
The volume of the product
The cost of shipping versus the cost of production
How well the product travels
Distribution of product demand
Proximity to suppliers
Proximity to talent
This is why companies may package a product in one country and manufacturer in others. Washing powder is a classic example of this. Chocolate travels well, so Cadbury could move production lines of internationally popular products to Poland. There is a greater incentive to move low skilled work out of areas that aren’t geographically central to a given supply chain. European freedom of movement may have kept jobs in the UK by allowing low and semi-skilled workers to move rather than the factories. This would be of little consolation to UK workers, but would benefit UK tax coffers.
This complex formula is the reason why jobs move in and out of the UK.
Cutting the UK out of this supply chain with a hard Brexit ensures that suppliers have to make complex choices. BMW will probably be wondering what UK presence it needs to maintain in order to keep the Mini brand values. It may decide its easier to evolve the quirky Britishness out of the brand over time and just keep it quirky. The Audi TT hasn’t been harmed by actually being assembled in Hungary.
The majority of components in the supply chain for the Mini production line is based in Germany.
A post-Brexit UK could be in the position of importing more rather than less products once companies take into account the bigger picture of the supply chains and the EU single market. This will lead to a net loss of working class livelihoods.
Role of eco-systems
Richard Florida is a Canadian professor who has spent much of his time looking at urban studies from the perspective of prosperity. He is known for is work around the creative class and urban regeneration (or gentrification). His work is controversial. One key concept he has of relevance to working-class communities is one of ‘clusters’ where eco-systems exist. When you apply it to traditional working class industries one can see how the jobs aren’t just going to come back. The UK has a series of traditional clusters that are in overall decline, this is best illustrated by the state of chemical, oil refinery and coal sectors which underpin a wide range of manufacturing industries.
Where new clusters spring up (Silicon Roundabout and the FinTech businesses within the Square Mile) they create employment that much of the UK population is ill-equipped to fulfil.
Let’s look in greater depth at traditional manufacturing industries that have provided the working class with good playing jobs.
Factories build on suppliers, who build on raw materials processors, who build on utilities and extractive industries. Take for example industrial revolution era Stoke-on-Trent which was close to high quality clay pits and coal that could be cheaply shipped in from mines in Lancashire or South Yorkshire. All of which required semi-skilled and unskilled jobs that gave the working class their livelihoods.
Unfortunately for Stoke-on-Trent; clay is readily available around the world, opening up the possibility of production in areas with cheap labour. Automation raised the quality of production and fashion can quickly dictate whether an ‘area’ brand is in demand.
If we look at the industrial landscape of the United Kingdom, the manufacturing industry has been hollowed away during the 1980s and 1990s. The UK lost 18% of its manufacturing capacity in the space of 18 months during the conservative government of Margaret Thatcher.
There has been a corresponding (likely terminal) decline in the necessary facilities to support an industrial economy. Now let’s look in-depth at three essential types of facilities that underpin manufacturing:
Oil refineries
Coal mines
Chemical plants
This base of the UK industrial eco-system is running on ‘life support’ in critical areas.
I was fortunate to have a great science teacher at school, he once said to me that you could measure the size and health of an industrial economy by the amount of sulphuric and hydrochloric acid it manufactured and consumed. In order to manufacture hydrochloric acid you need a chlorine gas plant – neither chemical is something you want to transport over long distances. The side effects of a leak would be catastrophic.
The UK currently has one plant to make chlorine gas that is government subsidised because there isn’t a sufficiently large industrial base to support continued profitable production. What industrial capacity is in the UK is perilously close to being snuffed out.
What is left of the UK chemical industry has consolidated in the North East of England Process Industry Cluster (NEEPIC). Some of the products created are intermediary chemicals for use elsewhere in the European Union. Brexit is likely to have a disruptive effect on some of these manufacturers. The cluster is a key reason why Nissan decided to build a manufacturing plant in Sunderland. NEEPIC is dependent on oil refining capacity for key chemical building blocks (feedstock).
Oil refineries
Oil refineries are considered by the public as providers of petrol (gasoline), diesel and jet fuel. The reality is that they provide feedstock (chemical building blocks) for most things in everyday life:
Foods
Medicines (or we can go back to leeches and blood letting)
Paints (containers, large manufactured goods, civil engineering)
Dyes to colour fabrics, plastics and other materials
Plastics (the modern world as we know it) – structural plastics, coatings, fibres including clothing textiles
As I write this is, it is easier to look around my desk and count the products that don’t have an oil-derived input – one item, the desk itself which is unpainted. Though I would put good money on it that the trees it was made from were felled with petrol chain saw and transported on a diesel-powered lorry to the saw mill.
Yet the UK has lost a huge amount of oil refining capacity. From 1974 – 2012 refining capacity almost halved from 148 million tonnes to 77 million tonnes (Energy Institute). This decline happened despite start of UK North sea oil production in 1975.
Peak production on North Sea oil occurring in 1985 and 1999 (two peaks due to technological innovation). There were 22 active oil refineries in 1974, at the time of writing there are now seven.
Part of this was driven by changing energy consumption such as the decline of home heating oil and more fuel efficient cars. But a good deal would be due to reduced ability to compete against foreign petro-chemical feedstocks and reduced industrial capacity.
Oil refining capacity has moved to closer to where the industry is.
Belgium and the Netherlands have oil refining capacity beyond their internal needs because of their ease of access to continental European markets. Germany as Europe’s industrial powerhouse has the largest refining capacity in the European Union – which matches its industrial economy.
Much of the capacity to provide chemical feedstocks for industrial use has moved to the Far East; notably Singapore, Japan, Korea, Jamnagar in India and China. Overall industrial production has moved to East and Southeast Asia.
Coal production
The working class found coal production as a source of working class jobs. Even coal production in the UK is roughly 10 percent of what it was in 1980. There are no deep coal mines active in the UK, only a handful of open cast mines. Coal is not only useful as a fuel but also a alternative supplier of feedstock for a diverse range of products including fertilisers, plastics and medicines. Even if coal comes back to prominence as oil reserves run out it would take a lot of effort to get UK production going again – perhaps too much effort.
Managed decline of traditional working class areas
The purpose of managed decline would be to concentrate efforts where they can make the most impact. London would draw in more people from the hinterlands. Cities like Liverpool would continue to decline in population. Low quality housing (think trailer parks or shanty towns) would cater for the internally displaced workers and there would be a likely increase in casual or gig economy roles in place of many working class roles.
So what would managed decline of working class areas look like? We have a clue from government discussions after the 1981 Toxteth riots. Lord Geoffrey Howe wrote a letter which was considered too controversial at the time
“I fear that Merseyside is going to be much the hardest nut to crack,”
“We do not want to find ourselves concentrating all the limited cash that may have to be made available into Liverpool and having nothing left for possibly more promising areas such as the West Midlands or, even, the North East.
“It would be even more regrettable if some of the brighter ideas for renewing economic activity were to be sown only on relatively stony ground on the banks of the Mersey.”
“I cannot help feeling that the option of managed decline is one which we should not forget altogether. We must not expend all our limited resources in trying to make water flow uphill.”
Howe realised that even discussing the concept at the time would be explosive.
Retrenchment to focus economically
In practical terms, it would mean:
Re-centralising government departments
Not spending on infrastructure beyond critical maintenance
Rationalising government support infrastructure: police, hospitals, social services
Re-zoning areas from a planning perspective to encourage development only in future clusters
Allowing local government to go into bankruptcy protection and under go US-style emergency management
Once population decline hits a critical mass, turning off the last services, rather like the city of Detroit has done
Focus infrastructure investment on ‘clusters’
Connecting benefits to re-location
This process would then give time for western countries; in particular the UK, to re-invent themselves and think about their economic purpose in the world beyond consumption.
The Chinese government have already started on this process whilst their economy is still in a high state of growth – looking to move up the manufacturing value chain, moving into the professional and financial services sectors that the west currently occupy. On the flip side they have not flinched from closing down excess capacity in the steel industry and low value industries. This is causing economic hardship amongst unskilled workers in Guongzhou and the steel towns of Hubei province.
Former clothing factories are being bulldozed to make way for corporate campuses. Small electronics factories in Shenzhen are making way for a financial services centre including a stock exchange.
If one thinks about the Chinese experience and their migration to higher value work, where would the UK go next and what does mean for the future of the British working class?
I slept a few naps before pulling together these thoughts on the new Apple MacBook Pro. I have been a Mac user since it was the mark of eccentricity. I am writing this post on a 13″ MacBook Pro and have a house of other Macs and peripherals.
Theatre
Apple launched a new range of Apple MacBook Pro’s on October 27, 2016. This was a day after Microsoft’s reinvigoration of its Surface franchise. Apple ignores timing and tries to plough its own furrow. But comparisons by journalists and market analysts are inevitable.
Microsoft has done a very good job at presenting a device that owes its build quality to the schooling that Apple has given to the Shenzhen eco-system over the past two decades.
The focus on touch computing feels like a step on a roadmap to Minority Report style computing interfaces. Microsoft has finally mastered the showmanship of Apple at its best.
Apple’s presentation trod a well-worn formula. Tim Cook acts as the ringmaster and provides a business update. Angela Ahrendts sits at a prominent place in the audience and appears on a few cut-in shots. Craig Federighi presented the first product setting a light self-depreciating humour with in-jokes that pull the Apple watchers through the fourth wall and draws them inside ‘Apple’. Eddy Cue plays a similar role for more content related products. In that respect they are interchangeable like pieces of Lego.
Phil Schiller came in to do the heavy lifting on the product. While the design had some points of interest including TouchID and the touchpad the ports on the machine are a major issue.
Given the Pro nature of the computer, Apple couldn’t completely hide behind ‘design’ like it has done with the MacBook. So Phil Schiller was given the job of doing the heavy lifting on the product introduction.
There was the usual Jonny Ive voiceover video on how the product was made with identikit superlatives from previous launches. It could almost be done by a bot with the voice of Jonny Ive, rather than disturbing his creative process.
It all felt like it was dialled in, there wasn’t the sense of occasion that Apple has managed in the past.
User experience
Many people have pointed out that Microsoft’s products looked more innovative and seemed to be actively courting the creatives that have been the core of Apple’s support. In reality much of it was smoke and mirrors. Yes Apple has lost some of the video market because its machines just aren’t powerful, in comparison to other workstations out there.
The touch interface is more of a red herring. Ever since the HP-150 – touch hasn’t played that well with desktop computers because content creators don’t like to take their hands too far from the keyboard when work. It ruins the flow if you can touch type; or have muscle memory for your PhotoShop shortcuts.
Apple didn’t invent the Surface Dial because it already had an equivalent made by Griffin Technology – the PowerMate. In fact the PowerMate had originally been available for Windows Vista and Linux as well, but for some reason the device software didn’t work well with Windows 7 & 8.
I can see why Apple has gravitated towards the touchpad instead. But it needed to do a better job telling the story.
Heat
Regardless of the wrong headedness of Microsoft’s announcements, the company has managed to get much of the heat that Apple used to bring to announcements. By comparison Apple ploughed exactly the same furrow as it has done for the past few years – the products themselves where interchangeable.
The design provided little enthusiasm amongst the creatives that I know, beyond agitation at the pointless port changes and inconvenience that conveyed.
While these people aren’t going to move to Microsoft, the Surface announcements provided them with a compare and contrast experience which agitated the situation further. To quote one friend
Apple doesn’t know who it is. It doesn’t know its customers and it no longer understands professionals.
Design
Apple’s design of the MacBook Pro shows a good deal of myopia. Yes, Apple saved weight in the laptops; but that doesn’t mean that the consumer saves weight. The move to USB C only has had a huge impact. A raft of new dongles, SD card readers and adaptors required. If like me you present to external parties, you will have a Thunderbolt to VGA dongle.
With the new laptop, you will need a new VGA dongle, and a new HDMI dongle. I have £2,000 of Thunderbolt displays that will need some way of connecting to Apple’s new USB C port. I replace my displays less often than my laptop. We have even earlier displays in the office.
Every so often I transfer files on to a disk for clients with locked down IT systems. Their IT department don’t like file transfer services like WeTransfer or FTP. They don’t like shared drives from Google or Box. I will need a USB C to USB adaptor to make this happen. Even the encrypted USB thumb drive on my ‘real life’ key chain will require an adaptor!
I will be swimming in a sea of extra cables and parts that will weigh more than the 1/2 pound that Apple managed to save. Thank you for nothing, Apple. Where interfaces have changed before there was a strong industry argument. Apple hit the curve at the right time for standards such as USB and dispensing with optical drives.
The move to USB C seems to be more about having a long thin slot instead of a slightly taller one. Getting rid of the MagSafe power connector has actually made the laptop less safe. MagSafe is a connector that is still superior to anything else on the market. Apple has moved from an obsession with ‘form and function’ to ‘form over function’.
The problem is one of Apple’s own making: it has obsessed about size zero design since Steve Jobs used to have a Motorola RAZR.
Price versus Value
So despite coming with a half pound less mass and a lot of inconvenience, the devices come in at $200 more expensive than their predecessors. It will be harder for Apple customers to upgrade to this device unless their current machine is at least five years old. I don’t think that this laptop will provide the injection in shipments that Apple believes it will.
A quick word on displays
Apple’s move away from external displays was an interesting one. There can’t be that much engineering difference between building the iMac and the Apple Display? Yet Apple seems to have abandoned the market. It gives some professionals a natural break point to review whether they should stay with Apple. Apple displays aren’t only a product line but a visible ambassador of Apple’s brand where you can see the sea of displays in agencies and know that they are an Apple shop. It is the classic ‘Carol Bartz’ school of technology product management. What do you think of the new Apple MacBook Pro?
It was a curious experience for me to be reading Democracy in Decline. When I was in college Philip Kotler was a constant part of my life. His Principles of Marketing was a core text for my degree. It is a bit weird reading another book by Professor Kotler; especially one on such a dramatically different topic.
In Democracy in Decline Kotler addresses what are commonly cited as weaknesses in the political system of the United States. He provides an easy to understand guide to the US political system. Kotler then gets into what he identifies as the key points of failure in the American political system.
Low voter literacy, turnout and engagement
Shortage of highly qualified and visionary candidates
Blind belief in American exceptionalism
Growing public antipathy towards government
Two-party gridlock preventing needed legislation
Growing role of money in politics
Gerrymandering empowering incumbents to get re-elected forever
Caucuses and primaries leading candidates to adopt more extreme positions
Continuous conflict between the President and Congress
Continuous conflict between the federal and state governments
The supreme court’s readiness to revise legislative actions
The difficulty of passing new amendments
The difficulty of developing a sound foreign policy
Making government agencies more accountable
Kotler’s viewpoint is unashamedly liberal and supportive of collegiate rivalry underpinned by compromise in politics. The White House he envisions is more like the Barlett administration in The West Wing or Star Trek’s United Federation of Planets rather than Hilary Clinton. The flaws he has identified are so big in scale that they would likely require a major re-engineering of American society. From the electoral system, the relationship between federal and state government, public policy and public service.
That kind of re-engineering would require widespread societal approval. That wouldn’t happen in the riven, polarised society of America today. The books measures would be completely against the interests of the conservative movement.
For the European reader, Kotler offers an interesting engaged analysis of the American condition, however there is little to no reflection on the commonalities of national populism in European politics. This book will only provide an understanding of the United States; and that’s ok.
Kotler has a sub-header in the tile of the book ‘Rebuilding the future‘. In reality Kotler provides an effective diagnosis, but an not anything that points to an effective solution beyond hoping for the best.
Google Canceled the Launch of a Robotic Arm After it Failed the ‘Toothbrush Test’ – Bloomberg – executives at Google parent Alphabet Inc. nixed the plan because it failed Chief Executive Officer Larry Page’s “toothbrush test,” a requirement that the company only ship products used daily by billions of people, according to people familiar with the situation. – Surely this would nix Google‘s enterprise products as well? The toothbrush test poses a serious problem to Alphabet. The business can no longer go after most business opportunities, due to the tyranny of large numbers involved in their earnings. Secondly, they may not get lucky twice, the only benefit of the toothbrush test is preventing the kind of problem that Yahoo! had with the Broadcast.com acquisition. The toothbrush test sounds like an innovation killer
Pound sterling could be worth less than a dollar within three years, investor Jim Rogers warns | The Independent – You’ve got a lot of debt, you’ve got a serious balance of trade problem which shows no signs of being corrected. I don’t see anything to make sterling go up – not terribly surprising conclusion. The only alternative would be massive cuts outside the South East including rural subsidies and infrastructure spending. The state pension would likely have to be means tested and cut. It would also make sense to up taxation on capital gains and death duty
Marketing
One on One – Edelman – Six of the top 10 PR firms did not grow or went backwards in 2015. This should be PR’s time, given the complexity of the environment (nationalism, populism, fear of pace of innovation) and the explosion of media options… I contended that the management of PR agencies has not sufficiently recognized the opportunity on the marketing side of the business. The emphasis on continued increase in profit margins has pushed our sector toward public affairs, crisis management and corporate reputation… – in addition PR is letting its top talent walk out the door, pay is below par for other disciplines and needs to get general managers that won’t have a rotating door on the new types of talent that they want to get in
Some Thoughts on Reuters, NY Times, and Yahoo – Lawfare – Benjamin Wittes flags that much of the Yahoo story is unclear, including legal arguments and the objective of the search, and further reporting from Motherboard and the Intercept
Building a Smart Home With Apple’s HomeKit | Wirecutter – shows how immature the smart house still is. That is if you’re not concerned about your IoS (internet of shit) devices being compromised and turned into a bot net for hire