The survival of the Euro

The Economist published a thought-provoking editorial last week:

The Euro Zone: is this really the end (I have reproduced it full below for clarity).

Now, as much as I love The Economist, I don't read their editorials very often, as they tend to be a little too smug, and often treat opinions as fact, unlike the rest of the magazine. This is well-known and often pointed out by its reader mail.

This one, however, gets many things right, although several elements are lacking, in particular regarding how the public sees the crisis. This is a critical element from a political perspective, but also because politicians have done a very poor job of not only reacting to the crisis, as the editorial points out, but also of explaining it in simple, yet correct terms, and in marketing the solutions to the electorate.

It is difficult to argue against austerity measures at the moment. Want it or not, we do live in a market economy, and states do borrow routinely. however, excess debt is a huge risk for economic stability, growth, and future generations.

But politicians need to work much harder in making those measures palatable to the public, through the following points:
1-  clear explanation of the origins and effects of the crisis, and how it impacts everyone. While ratings agencies are convenient villains, the fact remains that most states have lived beyond their means for too long, and deficits matter, contrary to what Dick Cheney once famously said
2- explain that not only is everyone affected, but that in some measure, everyone is responsible for it, since either through lower taxes or higher redistribution, most of the population of a state benefited from its higher expenses fueled by excessive borrowing. An important longterm issue is to decide which category of the population is more deserving of the state largesse, but that is a matter for internal politics to settle, and elected politicians should not skirt the issue through increased debt
3- accept that some are more responsible than others. While the population benefited from state expenses, banks also made the choice to lend, without proper risk assessment, and it's normal that they would lose some of the money invested. If banks made bad choices and need to be rescued by the state, its managers and even workers should have a price to pay for that, since they failed at their job. However, it's also inappropriate that private creditors have to take on more blame than public creditors as that is counterproductive for future loaning, as was the case in Greece
4-Politicians must accept to take some of the blame. It may even turn out to be positive in elections, as voters are tired to see the crisis progress despite pronouncements that the last summit made everything all right. Decisive action was not taken for too long because of political dithering, making the crisis far worse than it had too

As of December 11, it seems that comprehensive change has at least been decided on, and that a page may be turned. However, the lack of proper communication to populations and voters remains endemic, and I wouldn't be surprised if popular support for attempts to save the Euro remains correspondingly low, hurting the chances of recovery.

The euro zone

Is this really the end?

Unless Germany and the ECB move quickly, the single currency’s collapse is looming

Nov 26th 2011 | from the print edition

EVEN as the euro zone hurtles towards a crash, most people are assuming that, in the end, European leaders will do whatever it takes to save the single currency. That is because the consequences of the euro’s destruction are so catastrophic that no sensible policymaker could stand by and let it happen.
A euro break-up would cause a global bust worse even than the one in 2008-09. The world’s most financially integrated region would be ripped apart by defaults, bank failures and the imposition of capital controls (see article). The euro zone could shatter into different pieces, or a large block in the north and a fragmented south. Amid the recriminations and broken treaties after the failure of the European Union’s biggest economic project, wild currency swings between those in the core and those in the periphery would almost certainly bring the single market to a shuddering halt. The survival of the EU itself would be in doubt.
Yet the threat of a disaster does not always stop it from happening. The chances of the euro zone being smashed apart have risen alarmingly, thanks to financial panic, a rapidly weakening economic outlook and pigheaded brinkmanship. The odds of a safe landing are dwindling fast.

Markets, manias and panics
Investors’ growing fears of a euro break-up have fed a run from the assets of weaker economies, a stampede that even strong actions by their governments cannot seem to stop. The latest example is Spain. Despite a sweeping election victory on November 20th for the People’s Party, committed to reform and austerity, the country’s borrowing costs have surged again. The government has just had to pay a 5.1% yield on three-month paper, more than twice as much as a month ago. Yields on ten-year bonds are above 6.5%. Italy’s new technocratic government under Mario Monti has not seen any relief either: ten-year yields remain well above 6%. Belgian and French borrowing costs are rising. And this week, an auction of German government Bunds flopped.
The panic engulfing Europe’s banks is no less alarming. Their access to wholesale funding markets has dried up, and the interbank market is increasingly stressed, as banks refuse to lend to each other. Firms are pulling deposits from peripheral countries’ banks. This backdoor run is forcing banks to sell assets and squeeze lending; the credit crunch could be deeper than the one Europe suffered after Lehman Brothers collapsed.
Add the ever greater fiscal austerity being imposed across Europe and a collapse in business and consumer confidence, and there is little doubt that the euro zone will see a deep recession in 2012—with a fall in output of perhaps as much as 2%. That will lead to a vicious feedback loop in which recession widens budget deficits, swells government debts and feeds popular opposition to austerity and reform. Fear of the consequences will then drive investors even faster towards the exits.
Past financial crises show that this downward spiral can be arrested only by bold policies to regain market confidence. But Europe’s policymakers seem unable or unwilling to be bold enough. The much-ballyhooed leveraging of the euro-zone rescue fund agreed on in October is going nowhere. Euro-zone leaders have become adept at talking up grand long-term plans to safeguard their currency—more intrusive fiscal supervision, new treaties to advance political integration. But they offer almost no ideas for containing today’s conflagration.

Germany’s cautious chancellor, Angela Merkel, can be ruthlessly efficient in politics: witness the way she helped to pull the rug from under Silvio Berlusconi. A credit crunch is harder to manipulate. Along with leaders of other creditor countries, she refuses to acknowledge the extent of the markets’ panic (see article). The European Central Bank (ECB) rejects the idea of acting as a lender of last resort to embattled, but solvent, governments. The fear of creating moral hazard, under which the offer of help eases the pressure on debtor countries to embrace reform, is seemingly enough to stop all rescue plans in their tracks. Yet that only reinforces investors’ nervousness about all euro-zone bonds, even Germany’s, and makes an eventual collapse of the currency more likely.
This cannot go on for much longer. Without a dramatic change of heart by the ECB and by European leaders, the single currency could break up within weeks. Any number of events, from the failure of a big bank to the collapse of a government to more dud bond auctions, could cause its demise. In the last week of January, Italy must refinance more than €30 billion ($40 billion) of bonds. If the markets balk, and the ECB refuses to blink, the world’s third-biggest sovereign borrower could be pushed into default.

The perils of brinkmanship
Can anything be done to avert disaster? The answer is still yes, but the scale of action needed is growing even as the time to act is running out. The only institution that can provide immediate relief is the ECB. As the lender of last resort, it must do more to save the banks by offering unlimited liquidity for longer duration against a broader range of collateral. Even if the ECB rejects this logic for governments—wrongly, in our view—large-scale bond-buying is surely now justified by the ECB’s own narrow interpretation of prudent central banking. That is because much looser monetary policy is necessary to stave off recession and deflation in the euro zone. If the ECB is to fulfil its mandate of price stability, it must prevent prices falling. That means cutting short-term rates and embarking on “quantitative easing” (buying government bonds) on a large scale. And since conditions are tightest in the peripheral economies, the ECB will have to buy their bonds disproportionately.
Vast monetary loosening should cushion the recession and buy time. Yet reviving confidence and luring investors back into sovereign bonds now needs more than ECB support, restructuring Greece’s debt and reforming Italy and Spain—ambitious though all this is. It also means creating a debt instrument that investors can believe in. And that requires a political bargain: financial support that peripheral countries need in exchange for rule changes that Germany and others demand.
This instrument must involve some joint liability for government debts. Unlimited Eurobonds have been ruled out by Mrs Merkel; they would probably fall foul of Germany’s constitutional court. But compromises exist, as suggested this week by the European Commission (see Charlemagne). One promising idea, from Germany’s Council of Economic Experts, is to mutualise all euro-zone debt above 60% of each country’s GDP, and to set aside a tranche of tax revenue to pay it off over the next 25 years. Yet Germany, still fretful about turning a currency union into a transfer union in which it forever supports the weaker members, has dismissed the idea.
This attitude has to change, or the euro will break up. Fears of moral hazard mean less now that all peripheral-country governments are committed to austerity and reform. Debt mutualisation can be devised to stop short of a permanent transfer union. Mrs Merkel and the ECB cannot continue to threaten feckless economies with exclusion from the euro in one breath and reassure markets by promising the euro’s salvation with the next. Unless she chooses soon, Germany’s chancellor will find that the choice has been made for her.

Terre d'Innovation

Afin de continuer sur le thème des nombreux participants à la culture blog sur internet, voici  Alsace Terre d'Innovation. Il s'agit d'un groupe de discussion LinkedIn permettant à ses membres d'échanger sur de nombreux sujets à la manière d'un forum, mais avec des thèmes précis, et modéré par le fait que les membres soient tous invités/co-optés par d'autres.

Parmi les discussions récentes, Où est passée la culture d'entreprendre en France? a réuni de nombreux commentaires. On y voit là l'intérêt d'avoir des sources d'opinions beaucoup plus variées que celles proposées par les médias classiques, tout en évitant les écueils de groupes trop peu modérés, qui dégénèrent souvent en guerres des mots.

Bien entendu, il n'y a là rien de nouveau, et les forums et réseaux sociaux sont maintenant fortement ancrés dans notre culture. Il me semble néanmoins qu'un thème spécifique, qu'il s'agisse d'affaires professionnelles ou de loisirs, permette d'avoir une communauté plus restreinte et "focussée" sur les sujets précis abordés dans ce réseau.
Je trouve très intéressant de voir les opinions des autres, et c'est là un point essentiel: s'il est bien sûr agréable d'exprimer son opinion, celle-ci ne peut avoir de valeur que si on prête une grande attention à celle des autres, créant ainsi une réciprocité permettant à chacun d'être entendu, mais surtout d'écouter les autres et par là-même d'enrichir ses opinions et connaissances.

L'internet, pour une fois, présente peut-être même un avantage de ce point de vue. S'il n'a pas la spontanéité et le plaisir du contact direct venant d'une conversation entre personnes physiques, il permet de lire à son rythme, en fonction des disponibilités temporelles et mentales de chacun, augmentant donc potentiellement notre capacité d'attention.

D'un point de vue marketing, il est non seulement utile aux professionnels de cette discipline de pouvoir lire des avis divers, des opinions pouvant mener à des processus d'achat, mais aussi d'établir des contacts potentiels. Dans la mesure où le BtoB autant que le BtoC ont énormément évolué avec les méthodes de contact internet, il est essentiel de rester d'actualité et de suivre les évolutions des processus d'achat et de décision. Suivre et lire blogs et réseaux sociaux est bien entendu une méthode efficace de prendre le pouls de la société de ce point de vue. Cela peut être fait empiriquement, par la lcture de blogs influents ou de commentaires de membres fortement connectés. D'autre part, les données chiffrées des actions des utilisateurs vendues par des réseaux comme Facebook valent bien souvent de l'or....

Quelques autres blogs- some other blogs

Pour les lecteurs intéressés par d'autres blogs fascinants sur des sujets proches, voici quelques uns de mes favoris.
Je n'ai pas privilégié les gros blogs ou ceux apparaissant facilement sur les moteurs de recherche, mais ceux de gens que je connais personnellement et dont jai pu apprécier l'esprit analytique et critique.

Blog de Philippe Chalmin: économiste et lettré spécialisant en marchés des matières premières, il a écrit de nombreux livres et a une perspective politiquement modérée alliant une vision à long terme et une claire prise en compte des défis économiques, avec une perspective humaniste et écologique.

Katharine Hadow's blog: Katharine is a marketing specialist in the US (NJ and Indiana), and her blog displays her writing abilities, wits, and sarcastic streak, Some posts are also wistful, and all display a keen interest for her fellow human beings, appropriate for a marketing specialist. 

Please do not hesitate to visit those blogs, one in French, one in English

Too good not to share

Nothing new, but a great summary of BtoC marketing by The Economist:

Schumpeter on marketing

BtoB industry can be glamour, despite the lack of “brand recognition”

Brands are often considered paramount in today's marketing, to the point that monetary values are often assigned to them. This is obviously exceedingly difficult, not only because the concept of brand and what it entails is very vague, but also because of the subjectivity and changing tastes and constraints. For example, being environmentally and socially conscious is pretty much a requisite for a modern brand. It also raises questions such as "is it better for a brand to be well-known, or to have a high percentage of positive opinions?" Furthermore, the brand is closely related to the product, but public perception for a brand can sometimes be quite different from the product itself.

An opinion pollster, Interbrand, publishes each year a survey of "the 100 best global brands" (see here: http://interbrand.com/en/best-global-brands/best-global-brands-2008/best-global-brands-2010.aspx), and has an solid methodology, but interestingly, most people I showed it to had widely divergent views. Obviously, the survey represents an aggregate of opinions leaning towards a mean, but it's interesting to see how individuals have a very strong sense of the hierarchy each of them attributes to brand, to a level that can be considered equal, if not superior, to political opinions. For that matter, I have already argued that politics now includes many elements of branding, sales, and marketing, for good or ill.

This is what makes it so fiendishly difficult for a company to maintain a good brand image, especially at a time when technology allows information and criticism to flow so much faster and at little cost. Although the power of the internet should not be overestimated, as advertising and marketing use many different media, it does allow entities with small budgets, such as NGOs or individuals, to strongly criticize brand and bring their message to mass media. An example of that is the Greenpeace spoof on Volkswagen Star Wars' ad. It is also tempting to use a brand power to expand it, bur at the risk of diminishing the brand's image. Apple has successfully taken this risk by going into mobile phones and music sales, as seen in previous blog entries, without alienating customers.

That said, the main point of today's blog entry is how little recognition industrial brands have, in particular BtoB. It makes sense for reasons seen below, but is still worth discussing, as it strongly alters marketing techniques.

When teaching marketing, I did ask students to pick and follow a brand, building it themselves as a marketing exercise, explicitly stating that they could take either BtoB or BtoC. I argued that BtoB is comparatively easier to start with as it involves fewer variables: no focus groups, more long-term customer contact, more faithful customers due to long-term relationships, little or no advertisement. And yet, all the students picked consumer brands, preferably luxury and high-tech brands. Similarly, the only industrial companies whose brands truly register with people are BtoC, consumer-oriented brands. That reflects not only the higher visibility of those brands, but also the fact that most people notice mostly what they pay for as direct customers. For example, Getrag or Bosch are huge industrial car part suppliers, yet less known than even small automakers such as Fiat. Veolia has some brand value, mostly because it puts its name on buses and containers, but since it does business mostly with public collectivities, people do not see themselves as consumers, even though they indirectly are through their taxes.

While we could argue that BtoB brands do not need the same level of name recognition than BtoC brands, since their customer relationships are different, it still matters. Recruitment is one example, since graduates and job seekers may prefer well-known companies. Generating public sympathy is also a plus, as it can influence public policies, such as supporting a certain type of industry. Obviously, that point also depends on many other factors.

That said, should BtoB companies invest more in public relations in order to enhance their brand image? Considered the cost and the incertitude of returns on investment, investing in R&D, training, recruitment, and other such elements is most likely a better option, one chosen by most companies.

At the same time, I am impressed to see the efforts of industrial companies to adapt a business that is not very glamour, overcoming and evolving to changing regulations and long-term trends. Consumer fads do not matter as much as underlying changes, such as the necessity to hedge for national sales evolutions, environmental and industrial regulations (themselves led by end consumers and politicians), and fickle public officials. And those changes have an influence on our daily lives that is just as great as consumer technology improvements such as WiFi, GPS, or ESP.

For example, I have recently researched several companies. One recycles food processing industry leftovers, and turns them into fully usable products for sectors as diverse as bio-fuels, lipochemistry, and animal nutrition. Another is a traditional company that creates insulation materials, evolving to reduce its environmental impact, using more natural materials, and building “green roof structures”. A third builds heating systems and a fourth, electrical systems.

All have poured money, time, and the motivation of their staff into many improvements. They not only make the company more competitive, reducing costs and improving margins, complying with new regulations, but also fulfill an important environmental role. This is achieved through improvements in products, production methods, in the building themselves. External factors are also looked at, often with the partners involved: fewer deliveries cut fuel consumption and expenses at little extra inventory cost, while packaging is minimized and production leftovers recycled and re-used. Those incremental improvements, aggregated, have arguably more impact than large-scale projects in transportation systems and infrastructure, and yet generates far less publicity and debate.

Large multinational companies have had to adapt for a long time, but the recent wave of globalization has meant that even small companies now function internationally, either exporting their production, importing parts, or opening plants abroad. They do not have the legal resources of larger companies, yet adapt remarkably well, hiring more international staff and local agents in order to penetrate foreign markets. This has become essential for companies to survive and grow, as it opens not only new markets, but also hedges risks, regardless of the size of the manufacturer.

Environmentally conscious, important R&D budgets, open to international markets, flexible? I call that glamour.

Future entries may develop some of the themes introduced here, such as

• the influence of state and public policies on regulations and markets. They also include the impact of institutions and custom systems such as the EU, Mercosur, NAFTA, and so on.
• How public mood and opinion affects those policies on national and international levels
• consequences of the increased globalization on sales, recruitment and production

Comments and suggestions welcome

"Partage de la culture" ou vol?

J'ai récemment vu sur Facebook une pétiion pour "la liberté du partage de la culture", c'est à dire contre la loi Hadopi.

C'est une belle formulation, certainement, et en tout cas un bel acte de "marketing" de ce qui est légalement un vol de propriété intellectuelle.
Ceci dit, il est intéressant de constater que nombre d'entre nous ne considèrent pas la propriété intellectuelle comme une propriété privée, au contraire d'objets physiques. Les sentiments varient énormément en fonction des pays et de leur culture, ainsi bien sûr que du PIB par habitant en PPP. Un pays pauvre constatera très logiquement plus de piratages.

La France et les USA sont des cas intéressants, car dans la moyenne. Des abonnements peu chers et un accès facile à la musique et vidéo augmentent le taux de piratage, tandis que des systèmes légaux bien établis viennent le contrecarrer.

L'aspect psychologique est probablement le plus intéressant, mais très difficile à catégoriser succinctement. De nombreuses personnes sont outrées par les actions du gouvernement et des entreprises privées pour "restreindre", c'est à dire monnayer, l'accès à la "culture" (si on peut appeler ainsi les séries TV et tubes musicaux).
Mais à moins que le possesseur de l'oeuvre ne décide de l'offrir gratuitement au public, il n'y a aucune raison objective pour que l'acquisition de cette propriété intellectuelle soit gratuite, et ce même si elle a déjà été diffusée gratuitement sur des supports tels que radio et TV, payée dans ce cas par un abonnement ou les recettes publicitaires.
Au final, la plupart des arguments en faveur de la gratuité relèvent soit de politique anti-capitaliste un peu fallacieuse (avis aux fans de Lady Gaga: elle est tout ce qu'il y a de capitaliste) soit de justification pour ce qu'il reste un vol.
Les majors du disque ont essuyé des pertes financières lourdes, et cherchent donc à rentabiliser leurs oeuvres. Madonna n'a certes pas besoin des 20€ de la vente d'un disque, mais les ingénieurs du son, camionneurs, comptables, et tous les employés du label, du magasin de vente, et des intermédiaires souffrent des baisses d'achat.

Pour les compagnies en question, il n'y a que peu d'issues, pouvant être menées parallèlement:
- un combat d'arrière-garde légal en faveur de la répression, ou des barrières technologiques. Dans les 2 cas, cette solution est peu efficace, le nombre de pirates faisant que la loi et dépassée et les protections vite battues
- la recherche de nouveaux modèles économiques dans la cadre de la gratuité de l'oeuvre. Downloaders, ne venez pas vous plaindre si les placements de produits dans les oeuvres se multiplient. A quand un coca-cola dans "La Guerre des Trônes"?
- une voie intermédiaire consistant à proposer le produit à un moindre coût. Si cette alternative semble attirante, elle comporte un risque majeur, qui est celui que les utilisateurs ne sont pas forcément prêts à payer du tout pour l'oeuvre. C'est particulièrement vrai si la baisse des prix entraîne une baisse des budgets et donc de la qualité

De façon intéressante, cette problématique s'inscrit dans le coeur des évolutions les plus importantes et constantes du monde moderne:
- globalisation: un pirate peut mettre un programme en download pour des utilisateurs du monde entier, la traduction étant rapidement effectuée par des groupes locaux
- régionalisation: malgré la globalisation, un des solutions proposées consiste à rendre les oeuvres plus locales, afin d'intéresser des publics spécifiques, plus susceptibles de payer pour une oeuvre
- décentralisation: des petits groupes ou personnes isolées peuvent maintenant accéder à de nombreuses oeuvres ou les pirater facilement
- développement technologique, de nombreux foyers regardant des vidéos sur ordinateur, ou smartphone, et les faisant passer à d'autres utilisateurs, d'où d'ailleurs la montée en puissance de la vidéo on demand (VoD) comme moyen de vente des oeuvres culturelles.

Apple without Steve Jobs

Apple, the company that probably had the best image and marketing in the entire world, has just seen its long-time CEO, Steve Jobs, resign due to health concerns.
Please note that I am not an "apple fanboy", and do consider that their products do have flaws, but I very much admire the way the company anticipates, generates, and maintains buzz, curiosity, and even worship for its products. It also maintains a very strong image, and nothing has gone wrong for it in recent years, as it expanded into digital music sales, mobile telephony, and even retail sales, none of which were its core business. It did that at a time when specialization had become the mantra of most companies, that were shedding non-core business. And it succeedeed spectacularly each time, often despite pundits and reviewers' opinions.
The company, and Steve Jobs in particular, has stayed ahead of rivals and mainstream so far. As Steve Jobs was known to be a micro-manager very much involved with product development, the question now is how will Apple evolve?
The next few months should not change much, as the pipeline of new products is well in place, but  further down the line, who knows?
What's your opinion about it?

Sept 4 edit: Here is a fairly interesting NYTimes op-ed about Steve Jobs and the influence he had on Apple, mainly due to its unusual personality: NYtimes op-ed Joe Nocera on Steve Jobs

Back on the board

Ce blog a été laissé cruellement vacant l'an dernier, du fait de nombreuses autres priorités personnelles et professionnelles, mais il va maintenant reprendre vie. Des commentaires ou suggestions de posts seront bien entendu les bienvenus, les posts actuellement prévus portant sur penser global/penser local en termes de marketing, et la fameuse "guerre pour le talent" vue du point de vue des Etats.

Affaires à suivre, et en attendant, rongeons-nous bien les ongles en attendant la réunion des ministres des finances de l'UE concernant les crises financières et en 1er lieu la grecque, et le duel américain concernant la dette publique. Même pour ceux parmi nous qui ne s'intéressent pas à la finance, ces 2 évènements vont être cruciaux, et leurs ramifications sur les dépenses publiques, mais aussi la santé économique mondiale risquent d'être énormes.