Saturday, October 25, 2008

Nvidia laid off?

Having been in this industry almost as long as Gordon Moore and Jerry Sanders I have gotten to know a lot of people in it. And having known Nvidia since before it was Nvidia, I have gotten to know every single employee in the company and all who once worked for the company.  In fact, other than Jen Hsun Huang, I’m the only one who sends them all a Christmas AND birthday card every single year for the last fourteen years – do you have any idea what that costs me in postage?

And I get thank you notes back from almost all of them (you out there reading this know who you are who don’t send the thank you cards.)

I also have all their phone numbers, office, mobile, home, and favorite bar or hockey park.

So, yesterday, at great expense I called everyone one of them, using the excuse (for the US members) to encourage them to be sure to vote, and taking the opportunity to ask them how they were enjoying their job. And, most important, everyone one of them either answered my call or called me back immediately. (There were three exceptions — one birth and two dental surgeries — but they had someone else call me back.)

All of them, every last one of them told me they were pretty happy, even Derek Perez said he felt good now that scars from the whipping have pretty much healed over. In fact they said they were as happy as tree frogs, and then inexplicably began to whistle and sing.

But what about the layoffs, I persisted. I read somewhere that there is a new wave of layoffs. Surely those reporters can’t be wrong? Surely those reports must have worried you? No one knew what I was talking about. Layoffs? We’ve had a couple of sabbaticals, and a few have quit to go back to the farm and a simpler life, one left on a religious mission, and one left to pursue a political career, but there haven’t been any layoffs other than the few that were made redundant a few months ago.

So each and every 5,500 of you are safe, happy (as tree frogs) and not anticipating or worried about a layoff?

Not only were they not worried about layoffs but 16 of the managers (my best drinking buddies, but that’s just a coincidence) asked me if I could help them find some more people – seems Nvidia may be getting ready to ramp up.

I wished them all to have a great weekend, reminded a couple of their up-coming anniversary, and hung up the phone, it was pretty warm by now.

Maybe I’ll call AMD and hear what the barking moles have to say.

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Tuesday, October 14, 2008

In Prosperous Periods Promote Tactically, In Down Times Promote Strategically

The sudden realization that the emperor had no clothes and magnitude of the financial crisis is only now being fully addressed.. But, economists are unanimous that regardless of what governments do, it will take time, a lot of time, to rebuild faith in financial institutions and rejuvenate the economy.

In a knee jerk reaction management is moving to cut costs – circling the wagons – by reducing staff and marketing budgets.On the surface it appears logical. But if you look at downturns and recessions in the past it wasn’t financial institutions or governments that led the economy back. Recovery was developed and carried out by Silicon Valley (which is somewhat symbolic of the complete PC/CE industry). And it will do it again as consumers and partners come to realize that the intellect, credibility and creativity reside in the technology areas; not in the world’s financial centers and most assuredly not in our seats of governmental power.

So while Paring overhead and “discretionary expenses” would seem to be relatively simple it has always had a greater or lesser degree of negative impact. Keep in mind that NPD recently reinforced the strength of the industry by pointing out that in downturns and upswings consumer and computer technology has consistently beat the overall market’s averages. NPD’s June retail-tracking service showed a three percent dollar increase over June 2007. This was the second consecutive month of positive news, after May’s jump of over seven percent. And this is after five straight months of flat or negative results, stretching back to December.

Before you wade into your promotional budget with a massive red pencil, consider how much should you cut from the promotional (advertising, sales support and PR) budget? To answer this, ask yourself:

* What does advertising/PR do for us? Can we accomplish this with a smaller investment? How much smaller?

* What will happen next year or a couple of years out if we cut our promotional budget, keep it the same, or increase it?

* If our competition is in the same position, is there a way to use the short-term problem to our advantage?

Long Term Investment Advertising/public relations should be an investment in both immediate sales and long-term objectives. It helps retain your share of market/image among your customers and prospects. It reinforces customers’ commitment to do business with you. Some of the more successful (profitable) manufacturers and retailers in the PC/CE industry view communications not as an expense, but as an integral part of their total marketing mix. If at all possible, they maintain an aggressive promotional policy and program. They know their advertising and PR have a favorable effect on sales and income.

Today, there is a volume of data which indicates that during deep, long recessions or other “difficult” times, the firms that trim their communications budgets suffer—and suffer hardest.Other research found that companies that accelerate advertising/PR spending during market slumps perform better in both the short- and long-term.Researcher Vernon Van Diver studied over 10,000 companies in about 800 business media sources found a relationship between promotional activities and subsequent sales.

He found two interesting patterns: 1. Companies that invest in promotion above their industry norm invariably, in succeeding years, have rising sales curves. 2. Companies that promote below their industry norm invariably, in succeeding years, have declining sales curves.

Additional Research Researchers from the BPA and several communications firms have drawn conclusions similar to Van Diver’s. Relationships between advertising/PR and sales have been proven time and again:

* Sales increases follow promotional increases, but rarely in the same year

* Sales decline with increasing momentum after promotion is cut back

* To retain your share of sales, promotion must increase as much as the overall average

* To increase your share of sales faster, communications must be increased faster than the industry norm over a period of four years or more

* If a marketer increases or decreases his traditional share of promotion relative to his competitors, similar changes occur in his share of market

* It is now possible to predict—with a high degree of accuracy—what the volume of sales will be at some future date

* It is possible to set an attainable sales objective very near maximum

* It is possible to determine the change in sales volume that follows each change in the advertising/PR budget, up or down

* It is possible to figure how much to allow for increases or decreases in competitive promotion

Using these principles, Van Diver studied 100 businesses across all industry segments. He made predictions six months or more before earnings and sales were disclosed. On the average, his predictions were within one percent of the actual figures.

Pretty remarkable.

In a similar study, it was found that over a one year period organizations that did not cut back promotional spending enjoyed increases in both sales and net profits the next year. Sales were up an average of 55 percent and net profit was up 40 percent over the base year. Marketers who cut back expenditures experienced no real growth during the period. Their net profits did not keep pace with that of consistent promoters.

Do these types of results hold true in good times and bad? Are the same results achieved when the market is flat, down, booming?

The quick answer is yes!

NPD just reported that the industry experienced a three percent dollar increase after six months of flat or negative results. The challenge in the months ahead for the industry’s players will be to can grow during this down period or be drug down with it. Growth, stagnation or shrinkage is really in the hands of senior management.

A Competitive Edge Company management should exploit opportunities that deliver an ever-greater competitive edge. If you want to be an industry player, present yourself as one. Don’t wait on your promotion until all of the marketing variables are right. If the stars are in perfect alignment for you, you can be certain they are in line for your competition as well!

By waiting, everyone starts out on an even footing.

The best plan of action is to proceed with your promotion while the competition is pulling in their horns.

In good times and bad, make your choices based on:

* Long-range, progressive promotion is synonymous with company growth

* Company strengths that hold up in hard times can be permanently molded with steadily aggressive advertising/PR

* Keeping pace with or exceeding industry communications norms is a company’s insurance of increasing sales.

* A rise or fall in ad/PR spending is followed at some later date by an increase or decrease in sales

The more aggressive your promotion, the easier it is to meet and even exceed, energetic sales and profit projections. Today’s environment is going to put past research conducted in good times and bad to the test!

Andy Marken

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