Wednesday, October 12, 2016

How Might Millennials Force Americans to Export Global?

Millennials are staying home longer, spending less money, and have more aesthetic interests than the generations before them. As 70% of our economy is based on domestic spending it is beneficial to consider the impact of a new spend less but feel better generation. They are not as consumer oriented and don't find the same value in new products. This means they may be putting a dent in our economic foundation but can lead to a push to become a stronger export nation.

If domestic spending declines then the economy slows down. The Millennial are a large population and their habit of saving more and spending less can be a positive thing when we consider more people will be paying into the system even though they will spend less on discretionary items. Housing, restaurants, entertainment, the arts, travel and recreation will likely get a large bump.

It is also important to consider what savings mean. Unless they are putting this money under their mattresses, chances are it will be available for investment. More savings mean growing businesses, more jobs, and an expanding economy when that money is funneled as available investment capital. The products and services created from this money will need to be sold somewhere overseas to create a beneficial upswing for the country.

Expansion can be in the future even if Millennials spend less on retail products and cars. If the country orients toward selling in the global market and gearing its industries for long-term competitive advantages that move far beyond today' stock price and more toward savings and investment might be a winning strategy.

The trend toward greater globalization is moving at a rapid pace. Advances in telecommunications and travel is making it easier for people to act and interaction on a personal and professional level on a global arena. Businesses will need to switch to markets that are willing to purchase their products. If Millennials are not buying then they will need to transform themselves into producers and exporters to maintain the economic volume we have become accustomed.

Friday, October 7, 2016

Infrastructure, Clusters and Market Forces

Successful use of economic theory depends on the ability to make solid policies and actions that lead to beneficial results. Science has been pushing for integration of fields and more depth in theory that can comprehensively explain phenomenon in our environment.  Long standing discussions and disputes related to theories developed by Adam Smith, Joseph Schumpter and Keynes have led to political encampment and limited perspective on how these theories represent a piece of truth in the greater economic discussion.

While John Maynard Keynes brought forward the ideas that government should spend money during downswings to boost the economy his theories have been somewhat discredited while many governments still use his theories to justify poor fiscal policies. Economists like Milton Friedman moved forward in the field as their theories held more true. Despite this, some of Keynes concepts still maintain their validity when discussing infrastructure.

It isn't that his theories are all wrong it is that they only represent the economic phenomenon under limited conditions. For example, government investment in projects that don't produce a return lead to national debt while investment in infrastructure projects maximize growth opportunities. All theories are possible explanations that are adjusted as new knowledge and information is developed. Combined with entrepreneurship and the free market models it can be beneficial in explaining the need for future infrastructure investments.

Clusters build off of the efficient transactions in infrastructure.
Business is profit oriented and will do what it needs to earn revenue. However, they are not always collaborative beyond their short-term projects. Large scale investments and development is created by government to enhance quality of life and economic growth. Roads, Internet, sewers, sidewalks, etc... have an impact on multiple businesses at one time and when done well can produce greater tax revenue exceeding investment expenditures.

Beyond that which is necessary to maintain public interest, these expenditures should be based on long-term market and business trends that have the best chance of improving the economy and jobs. Infrastructure becomes a platform by which human ingenuity and ability create new products. Adam Smith understood the powerful effects of the free market and intellectual/human capital on economies.

As the invisible hand creates pressure on existing companies it is intellectual/human capital that helps these companies adapt and produce higher economic returns. This becomes increasingly difficult without appropriate infrastructure for the sharing of knowledge and resources in a way allows for the maximum freedom of development. Modern businesses need this infrastructure to develop and sell complex services and products.

Without electricity, shipping, telecommunications, etc.. all businesses within the locality will be limited. Businesses, ultimately made of people, live within a complex socio-economic system that need a solid infrastructure system in order to expand and develop. The infrastructure impacts just about everything from human capital to business investment. We are embedded in our infrastructure environment.

Market changes offer opportunities for companies to hedge skilled workers to create competitive advantages that lead to additional revenue and jobs. A change in market forces changes everything around it and how people approach the market. Maximizing opportunities to receive and share knowledge and innovation leads to higher levels of adaptation. Efficient infrastructure encourages the millions of transactions that result in growth.

Businesses function best within clusters that help them capitalize on infrastructure and work within socio-economic system that further cross feeds industries. People share knowledge and resources in their cycles of growth and further business interests. Joseph Schumpter believed these states of stagnated growth and entrepreneurial regeneration became a cyclical method of creative destruction whereby the old die and the new are created in a way that advances the entire system.

As products become stagnant and lose their market value people will shift to higher value alternatives. Companies that sell such products begin to decline and rejuvenate, shrink, close, or are bought out. When many companies and their products decline they go through a period of destruction that sometimes leads to rejuvenation. They can go again through an upswing if they reform and innovate with new products and services. The cycle of destruction and creation don't truly end but seek to adjust as resources are moved around to their most advantageous investments.

Keynes theory shows us the importance of infrastructure investment that leads to socio-economic development that helps communities and people.  As entrepreneurs start businesses using the existing infrastructure they act in a way that can better adjust to market forces and create the beneficial invisible hand Adam Smith discussed.   Schumpeter helps us understand that self-interest leads to innovative boom and bust cycles that keeps the economy growing. This innovation comes from sharing ideas and resources within efficient clusters that maximize the interactions of economic elements. Business can only be as strong as the socio-economic networks in which they exist that helps them build off of the infrastructure through the millions of transactions that leads to economic development.

Saturday, October 1, 2016

The Value of Marketing Channel Spill Over

Marketing is an essential component to business success because without marketing you don't have much of a revenue source. We sometimes erroneously assume that visitors are attracted from calculating the direct influence of each marketing channel. We don't often take into account the spillover effects of these channels together which could be much more influential than we thought.

Consider a study in the Journal of Marketing Research that shows online purchase channels often work in conversational manners and spill over influence on each other (Li & Kannan, 2014). One channel may lead to a purchase through a different channel at some later point. Simply calculating sales through each channel might not be enough without total sales.

Consider that some people see a product or service as some point in history and don't make a purchase on that day because they don't have money or time. A few weeks pass and they want to make the purchase but don't know where to look. This is where they use search engines and other channels to find the product.

If this multi-channel spill over is happening in one company it is also happening with others. In our example, the customers searching out a product they saw a few weeks ago would ultimately see similar type products while searching online that could lead to a loss of sales.

Understanding how spill over works with multiple channels helps us not evaluate channels only in isolation to determine their effectiveness. Sometimes a purchase is not made until later or the purchase is completed after multiple exposures. Evaluating channels individually and in a mix creates to points of viewing their effectiveness.

Li, H. & Kannan, P. (2014). Attributing Conversions in a Multichannel Online Marketing Environment: An Empirical Model and a Field Experiment. Journal of Marketing Research, 51 (1).

Thursday, September 29, 2016

Fishermen Holding The Spirit of an Entrepreneur

The Entrepreneur is one of the most fundamental and important catalysts to the American economy. Without them we would not invent new things, create jobs, or start new businesses. They have a particular view of the world that makes them unique from the general population. They are rational optimists that see opportunity where others see nothing.

Opportunity comes to those who can perceive it. I was on my morning walk and I watched a small fishing boat loading their fishing cages high onto the deck. A little boat and lots of cages? I was wondering how these lobster fisherman were making a living.

It struck me that they fish all different types of fish throughout different seasons and this shows an entrepreneurial spirit. Fishing for a living is a hard occupation. People must work day in and day out in order to squeeze out profits. They must also comply with regulations that may help the environment but also hurt them.

To succeed in this environment is nothing short of a miracle. You would have to find new ways of catching fish and go after as many profit bearing species as possible always on the look out for new fish, new markets, and new opportunities. This must happen while paying your bills and lower your expenses.

The fisherman is the natural entrepreneur working as a small businessman/woman and seeking greater profits when they can be found. They may spend hours working on their tasks and search out better fishing locations. Their profits are low and their overhead is sometimes high. Despite this they continue to row upstream and with rational optimism become successful.

Wednesday, September 28, 2016

Evaluating the Quality of Your Marketing Methods

Selecting appropriate marketing measurements can be difficult for any company. Sometimes they are so complex they waste a lot of time and effort while still not producing beneficial data. At other times, they may be so simple but miss appropriate objectives that would help the company incorporate the information into their strategic decision making. A study of a number of companies found that solid marketing metrics should fit within the type of information offered, liability of that information, channel method and period, the mediums used and who the information is being collected for (Milichovsky & Simberova, 2015).

Type of Information: It is beneficial to understand what type of information is being offered and why it is being offered. Each marketing campaign has their own messages. Careful selection of these methods can lead to greater response.

Liability of that Information: All information has benefits and risks. When companies begin to brand themselves down one path it is not always easy for them to return back to a previous pass. Know why the benefits and risks of the messages you have chosen.

Channel Method and Period: There are limited resources available to any company. Knowing how much money to spend on a particular channel and who that channel will reach is part of a greater marketing strategy.

Mediums: Different mediums will reach different kinds of customers. Marketing online is distinctly different than marketing in print media. Know your demographic and the mediums you need to reach.

Who is the Information For: When developing metrics it is beneficial to know who you are creating metrics for and how they will use them. Create metrics only for that which is needed and be valid and concise.

Milichovsky, F. & Simmberova, I. (2015). Marketing effectiveness: metrics for effective strategic marketing. Engineering Economics, 26 (2).