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The Roundup July 20

Depression sign
I hear they’re hiring at CIT.

The good news first? The bad news isn’t as bad as we thought.

More plans to build homes, higher stock prices and fewer people filing first-time claims for jobless aid sent a private-sector forecast of American economic activity higher than expected in June.

It was the third consecutive monthly increase for the Conference Board’s index of leading economic indicators, and another sign pointing toward the recession ending later this year.

The index rose 0.7 percent last month. Wall Street analysts polled by Thomson Reuters expected a gain of 0.4 percent. . . .

If these conditions continue, “expect a slow recovery this autumn,” the Conference Board economist, Ken Goldstein, said.

Seven of the 10 indicators rose in June, including building permits, stock prices, manufacturers’ new orders for consumer goods and positive readings on jobs.

The biggest gainer was the interest rate spread. That’s the difference between yields on 10-year Treasuries and the federal funds rate, at which banks lend to one another, which is at a record low near zero. A big difference between the two is viewed as positive because investors are willing to lend for longer periods.

(“Economic Indicators Rose More Than Expected in June,” New York Times, July 20) On the other hand, the National Association for Business Economics net demand index came in at -5 this quarter (last quarter was -14, and the fourth quarter of 2008 was -28). Only financial services saw an increase in demand (+15), which explains those whopping profits at Goldman, Chase, and Citi. The trend is still down, but it seems that the brakes are starting to work.


Microsoft? Open source? Linux? Boy, I’ve got to get off this cannabis right now.

Microsoft, known for dominating the tech industry with its ubiquitous proprietary software, released 20,000 lines of device-driver code for the Linux community to use in customizing their operating systems, Microsoft announced today. The idea is that companies will be able to more easily virtualize a Linux computer on top of Windows.

(“Microsoft directly releases Linux code for first time,” Seattle Post-Intelligencer, July 20) Okay, I don’t know which is wackier. That Microsoft is releasing open-source Linux code. Or that Microsoft seriously expects people to run a virtual Linux system on top of Windows. And here, from Sam Ramji, senior director of platform strategy in Microsoft’s Server and Tools unit, is my business quote of the day: “Many companies are turning to Microsoft more frequently to help them succeed in a heterogeneous technology world because we understand that reducing complexity is a key factor to reducing cost.” How’s that for reducing complexity?


Please step forward to the rear.

Starbucks is going back to its premium-coffeehouse roots — by building premium coffeehouses. The chain, in the latest attempt to negotiate its turnaround, is focusing on stores with smaller-batch coffee, community involvement and entertainment.

The first location, opening next week, will be named “Fifteenth Avenue Coffee and Tea, Inspired by Starbucks.” Evening revelers can find beer, wine, new food choices, the occasional film screening and a variety of live entertainment, including music, acting and poetry reading. Bleary-eyed, breakfast-time folks can get a cup of coffee they may not be able to find anywhere else in Seattle.

(“Starbucks Goes Back to Its Roots With Cafe Concept,” Advertising Age, July 20) Starbucks finally does something right. First, the cafe concept is something that their hottest competitors will not be able to imitate. Second, it’s a return to the basic Starbucks customer experience. But what’s this “Inspired By Starbucks” garbage? We know feelingly what Al Ries would say about the brand extension, but the name has “not Starbucks” written all over it. Do they really want to put so much brand distance between the new concept and the old? In fact, I’m willing to bet that many people will guess that the Inspired By Starbucks Cafe has nothing at all to do with Starbucks beyond the inspiration, but is, in fact, some paler imitation (you know all those movie soundtracks that aren’t soundtracks at all, but music “inspired from the film” — kind of like that). And what, may I ask, in the name “Fifteenth Avenue Coffe and Tea Cafe” says beer and wine, which is the signal innovation in the concept? (And — it had to be asked — are we going to have Hefeweizen Frappucinos perchance?)


The Bentonville hole grows bigger.

Walmart has launched an aggressive push to have marketers divert their consumer media and marketing budgets into the giant retailer’s growing ad budget and in-store marketing programs, using a simultaneous push to clear underperforming brands off its shelves as extra leverage.

In recent months, the country’s largest retailer has been quietly rolling out a system — the cost-supplement initiative — that marketers and industry consultants say directs marketers to divert money proportionate to their share of sales to Walmart marketing programs. Walmart is looking for a share not just of trade-promotion funds but also consumer-ad dollars. The vehicles Walmart wants funded include co-branded TV and other media ads, in-store TV and banner ads on Walmart.com.

(“Walmart Browbeats Marketers for Bigger Slice of Their Ad Budgets,” Advertising Age, July 20) As Sam Walton envisioned it, Wal*Mart would function as a purely competitive merchandising meritocracy. The prize would go to the manufacturers and brand owners that could deliver consumer quality at the lowest possible price. Put buyers in our store, we put you on the shelf. The Wal*Mart I’ve dealt with as both a creative and a consultant is much different, as this entire article shows. It is now more powerful than the brands it carries. The message from Bentonville is, “we’re doing you a favor, not vice versa.” Now that contributing to Wal*Mart’s marketing budget is a big part of their “win-play-show” rankings of products and brands, expect it to be much, much harder to get your foot in the door. If you ever wanted it in that door in the first place.


You ever fake an online review of your company or product? Watch out . . .

Lifestyle Lift employees published positive reviews and comments about the company across various Web sites. According to a statement released by Cuomo’s office, “these tactics constitute deceptive commercial practices, false advertising and fraudulent and illegal conduct under New York and federal consumer protection law.“

Under the settlement, Lifestyle Lift will stop publishing anonymous positive reviews about the company to Internet message boards and other Web sites, and will pay $300,000 in penalties and costs to the State of New York.

(“Fake online reviews draw NY suit,” DM News, July 17) Nielsen Media’s recent report on consumer trust in marketing vehicles placed online reviews in the number two spot, with a whopping 72% of survey respondents placing a high level of trust in these online consumer reviews. But of every form of marketing out there, online reviews are probably the easiest to fake. For instance, your competitors will scour your TV and print ads, which consumers rank very low in trustworthiness, for exaggerations and lies; if they should find any, you’ll find yourself in court before the ink is even dry. But there’s no equivalent way to scrub online reviews of “astroturfing,” the posting of positive online reviews by employees or anyone else hired to pose as a happy customer. So the irony is this: print, radio, and TV ads are probably ten times more reliable than the online reviews.

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