The Domestic Exchange Rate

As marketers and business leaders, we can't forget that our personal sense of value is typically NOT that of our customers.

Lots of ways to define middle class, here's a another one: One third of households make more than you, one third makes less than you. You're in the Middle Third.

In the US the middle third household makes between $27K and $69K annually. Typically these are the folks we serve. Business decision makers typically live in the upper third...which means they have household income above $69k.

Let's consider this. If you are smack dab in the middle of the middle class (50 percentile) you have household income of $43k annually. If you are in the middle of the upper third (83rd percentile) you have household income of $110k annually, more than double, almost triple the middle class example. Still with me?

In this example, if the upper class family buys an $11k car, it consumes 10% of their income. That's a large percent, but think about the middle class family. An $11k car consumes over 25% of their income. The price of the car is absolute, the "relative or perceived cost" of the car to the two families is significantly different.

In this manner, every purchase is relatively more costly to the middle class family.

So as we sit in the upper third and make pricing decisions for the middle third... we must do the "relative currency" translation. To understand the perception of the price increase by our customer, we must translate it into our value frame. In relative terms, adding $1 in price to a garment for the average middle class family has the relative cost effect (or perception) of increasing the price $2.50 for the average upper third family.

And the lower third? The middle of the lower third (17 percentile) has an average household income of $15k per year. That means the "middle of the upper third" identified above, makes over 7 times more per year. Adding $1 dollar in price to a garment for the average lower third family will feel like a $7 increase in upper class terms. Ouch.

As marketers and business leaders, we can't forget that our personal sense of value is typically NOT that of our customers. $1 is just not a $1.

Day Old News

What if you got your news twice a year? Four times? How about eight?
What if you hadn't heard the news in two years? What if you had never heard the news? How confident would you be about your knowledge of current events?

Then why do you think you can make intelligent business decisions if you rarely meet with distributors (customers) or consumers?

Go ahead, get out there. Recency matters in the news and in business.

If Not Us..

Below is a speech to Congress from then President Reagan.

All of us came here because we knew the country couldn’t go on the way it was going. So it falls to all of us to take action. We have to ask ourselves if we do nothing, where does all of this end. Can anyone here say that if we can’t do it, someone down the road can do it, and if no one does it, what happens to the country? All of us know the economy would face an eventual collapse. I know it’s a hell of a challenge, but ask yourselves if not us, who, if not now, when?

While President Reagan was addressing a separate issue, I suggest the logic holds for most businesses... everyday. We all face tough strategic choices that impact the history of our organizations ...everyday. It's just human nature to postpone those choices. To delay. To defer. To squeak by another quarter. To let someone else face the risk of an opinion; of making the wrong decision. Let someone else figure it out.

We act as if leadership is about "letting it ride" for another quarter without embarking on the journey of much needed change. You know what I'm talking about. Every business I have ever worked in was facing the need for significant change, yet delaying the inevitable. Delaying the future because they fear it will be worse than the present. I bet you can name one in your business. The elephant no one talks about.

Leaders lead, managers manage. Leaders take us somewhere, managers maintain.

Is your team dealing with one of those issues? Remember Reagan's challenge: If not us, who? If not now, when?

It's about courage, determination and faith. Ships are safe at harbor, but that's not what they are built for.

Getting off the soapbox now. Thanks for listening.

Things I Want To Learn About

This one's kind of random, but there is no cost of admission.

• Innovation. Not the why or what, but the how. How do I spur more innovation in my work, and across my organization. Focus on the skills, not the output.


• Design. Innovation is a tool of design, but design is the higher discipline. Design is the intersection of efficiency and desire. What's this all about? How can we leverage in our work?


• Sustainability. How do we turn the corner from idealism to realism in bringing sustainability into our workplace. Common sense, shareholder friendly sustainability at a corporate level.


• Economics. How can we use economic models and approaches to enhance strategy development. They get cause and effect, macro thinking.


• Insights. Beyond research and understanding. Consumer insights are the strategic nuggets, the intuitive leaps that enable us to step ahead. They are why we do research. Need innovation here, new approaches, techniques. Design thinking is an example, but I suspect it is no longer the edge.


• Collaboration. In highly specialized work environments it is essential. What do we know about current thinking on collaboration? What blocks it? What encourages it?


• Advocacy. Digital platforms are just that, platforms that enable new ways of interacting with current and potential consumers. Just like TV was in the 40's. I think we're past the "understand the platform stage"...we need to jump to the end game. What do we use them for? One key objective is to leverage the inherent viral nature of digital to drive brand advocacy. What do we know about advocacy in general, word of mouth theory, best in class examples. What can we learn from politics?


• Crowdsourcing. From product design to customer service to customer experience there are lots of applications, but how do we get there? Is this a tool for internal use also?


• Community Building. Building an authentic, brand-centric community is kind of the holy grail. Not talking about getting likes on facebook or follows on twitter. Talking about brand as the catalyst for user relationship, conversation, social interdependence, personal identity, brand as a movement. Apple, Starbucks, NFL, Tea Party. Can we bring any of this thinking to bear on our categories?

So what do you want to learn about?

Essential Work

Recently my boss asked me for my 2012 goals. I jotted down a long list and then set about some criteria for narrowing them down. Thought you might find helpful...

1. What Matters? Of all the things you could do to fill your calendar, what are the few things that truly matter. Things that will drive the business ahead when accomplished. (In my experience, these should be directly linked to growing revenue or profit.)


2. What Can Only I Do? What are the things that only I have sole responsibility for? If I don't do them, they won't get done. (Hey, do they matter?)


3. What Will Likely Not Happen Unless I Engage? What are the important initiatives in your organization that need leadership, need a champion, need someone to embrace and own. If you don't step up (or someone), they will likely still be stuck a year from now. (These will likely be a lot of work, I'd suggest you be passionate about them and don't take on too many)


4. What Can I Do That Will Make Me More Effective in 6 Months? A year from now is too far away, 90 days seems to short, but 6 months is enough time to make significant progress at some self improvement idea. (Time management skills? Digital competency? Education? Healthier lifestyle? Community involvement? Team building? Mentoring/coaching? Reading list?)


5. How Much Can I Reasonably Do and Still Find Some Balance? First, be realistic in what you can get done. Accomplishing things usually results from focus. That said, you also have to make time for a healthy life beyond work. Every study points to the reality that all work and no play leads to dull work and low pay. (In the long run, quality trumps quantity and you have to recharge to produce quality work. It's an age old trap for the ambitious.)

We all get distracted and pulled into non-essential work, but it's the essential work that defines our careers. What boss can argue with a focusing and accomplishing essential projects that move the business ahead in leaps?

What do you think?