It’s Official: Older Cities Take a Beating in the Latest U.S. Census

Abandoned housing stock in Flint, MI
2009 street scene in Flint, Michigan.

While there’s been evidence of significant shifts in U.S. population growth over the past decade, the decennial census performed earlier this year gives us an opportunity to learn precisely what’s been happening and end some of the “speculation.”

And now, with the U.S. Census Bureau releasing its preliminary population reports, we’re seeing how this has played out in cities across the country. While it’s true that the American population has grown pretty steadily at about 2.5 million people per year, some areas have grown much faster than others as a result of being better positioned through the education of their workforce and/or their business- and technology-friendly environments.

Alas, other areas haven’t merely stagnated, but actually lost residents because of failing industries and unattractive business climates, sparking net out-migration of their residents.

Interestingly, many of the cities in the “industrial heartland” of America have managed to stay on the positive side of population growth – even if just barely. But some cities have experienced such hardship that their populations have dropped dramatically in the past decade.

New Orleans tops the list … and who’s surprised about that? After all, Hurricane Katrina effectively robbed the city of one-third of its residents – with most of them electing not to return after establishing new livelihoods in Houston, Shreveport, and other localities further yon.

But New Orleans surely represents a “special case” if ever there was one. Other cities have suffered greatly due to their dependence on industries that took a beating over the past decade. And really, any city with a major focus on traditional manufacturing saw thousands of jobs disappear.

According to the U.S. Bureau of Census report on the nation’s largest cities — ones with 100,000+ population — the seven experiencing the biggest percentage declines in population over the past decade are:

1. New Orleans, LA – Dropped by ~129,000 to ~355,000 (-27%)
2. Flint, MI – Declined by ~13,000 to ~112,000 (-11%)
3. Cleveland, OH – Fell by ~45,000 to ~431,000 (-10%)
4. Buffalo, NY – Dropped by ~22,000 to ~270,000 (-8%)
5. Dayton, OH – Declined by ~12,000 to ~154,000 (-7%)
6. Pittsburgh, PA – Dropped by ~22,000 to ~312,000 (-7%)
7. Rochester, NY – Declined by ~12,000 to ~207,000 (-6%)

[I was a bit surprised to see Detroit missing from this list. After all, it’s the poster child for urban decay and depopulation. But Detroit’s population percentage decline was actually smaller than the cities above, and it remains the nation’s 11th largest city. However, the 2010 census will likely show that its population has fallen below 800,000 for the first time in nearly a century – and the figure is even more startling when you realize the city’s population was nearly 2 million as late as the 1950 census.]

Unfortunately, the negative implication of population declines in these proud American cities go far beyond the loss of social prestige and political clout.

Once decline sets in, it can go on for years. The loss of residents contributes to a drop in tax receipts and the subsequent curtailing of social services ranging from police and sanitation to schools and recreation. Home vacancy rates say volumes about the precarious position in which the cities above find themselves – they’re above 15% in every single case (and sometimes dramatically higher).

Confronted with such a reality, too often the result is more people fleeing the urban core, creating a continuing downward spiral that seemingly has no bottom. Representative examples of where this sorry state of affairs can end up can be found in two smaller but particularly grim urban communities: Camden, NJ and Chester, PA.

From the outside looking in, it’s difficult to accept these population reports … and it seems like people should step in and do something – anything – to arrest the decline.

And in the abstract, it’s only natural to feel that this is what should happen. But in the “real world,” who are going to be the ones to step up to the plate and expose themselves (and their families) to the harsh reality of urban pioneering?

Would I do it? Would you?

For most of us, the answer to that question falls into the “life’s too short” category.

The Discover Card Discovers … Minnesota’s No Pushover

Discover cardAs someone who lived in the state of Minnesota for years, long ago I came to the understanding that many people there view themselves as the ethical if not intellectual “umbilical cord” for the nation.

And why not? Minnesota has long been the font of “good government” initiatives many other states have sought to emulate. It’s the state that routinely leads all others in voter turnout, not to mention being the springboard of reformist politicians such as Eugene McCarthy, Hubert Humphrey and Walter Mondale.

So I wasn’t surprised to read last week that Minnesota’s Attorney General Office has filed a lawsuit against the Discover card for “deceptive marketing” practices. Discover is accused of making “aggressive, misleading and deceptive” telemarketing contacts in an attempt to lure customers into signing up for additional services that they didn’t realize carried a charge.

According to the complaint, customers were ostensibly being informed of Discover’s well-known “cash-back rewards” program, but then were told of the fee-based services as if those were regular features of the card’s benefits.

“Discover’s telemarketers employ an array of deceptive tactics to elicit an affirmative response from the cardholder without the cardholder actually understanding that they are supposedly aggreeing to purchase an optional product for a monthly fee,” the lawsuit contends.

According to the suit, Discover allegedly enrolled “tens of thousands of Minnesotans and charged them millions of dollars for enrollment in the plans” which include a “payment protection plan” that allows unemployed or disabled customers to suspend making credit card payments without penalty, an identity theft protection plan that costs ~$13 per month, and a credit-score tracking service that bills at ~$8 per month.

I love the way Lori Swanson, Minnesota’s attorney general, put it. “People expect their credit card company to stop and prevent these fraudulent charges – not be the ones making them.”

Or course, it’s not surprising that credit card companies are attempting to sell customers on fee-based services; the lawsuit claims that Discover earned over $295 million on these optional products during 2009 alone.

But the fact is, consumers are paying for additional services they don’t really need, as much if not all of their risk exposure is covered by other laws on the books. Of course, Discover conveniently left out that bit of information in their sales pitch to consumers.

“The biggest credit card companies make huge amounts of money by getting their customers to sign up for add-ons that are useless,” says Edmund Mierzwinski, a consumer program director at the U.S. Public Interest Research Group.

The Minnesota lawsuit seeks to order Discover not only to cease its aggressive marketing of these services, but also to reimburse customers who signed up for services they no longer want.

Based on how earlier cases of a similar nature against Experian and Providian have turned out … my guess is that Minnesota is going to be successful.

The Limits of Delivering “Cheaper Value”

Nano vehicle

Tata Nano car on fire
Tata Nano ... Tata "No-No"?
About a year ago, the international press was abuzz about the latest new “value” entry in the automobile business. Amid great fanfare, Tata Motors, part of India’s largest corporate conglomerate, was introducing the “Nano,” a car designed to appeal to India’s mass market.

The Nano, which can seat five people and has a surprisingly roomy interior for its size, carries a base price of only ~$2,200 — lower than any other car in the world — which proved irresistible to families of modest means whose finances had required that they make do with motorcycles or scooters before.

Some 9,000 Nano vehicles were delivered in July, but since then, sales have slowed dramatically – to just around 500 shipments to dealers in November.

How did Nano’s star fall so far, so fast – especially for a vehicle which Tata Motors thought was impressive enough that it planned to introduce it in other developing markets … then Europe … and finally to the United States?

Production delays have something to do with it. But the real problem is the performance of the car. Most alarming are reports that the vehicle can catch on fire, with one widely broadcast incident where a Nano caught on fire and was engulfed by flames on the way home from the auto showroom!

In response, Tata, while denying anything is wrong with the design of the Nano and studiously avoiding any language of “recall,” is offering to retrofit the automobile with extra safety features. It’s also extending the warranty on the car from 18 months to a solid four years.

Will these moves change the impression that the car is more of a “No-No” rather than a “Nano” and move its sales trajectory back into positive territory? Perhaps. But it’s interesting to note that sales of a rival “value” car made by Suzuki – the “Alto” – have now overtaken those of the Nano. The Alto carries a higher base price of $6,200, and yet it posted unit sales of ~30,000 in November, making it India’s best-selling car that month.

[The success of the Suzuki Alto in India is nice news for a company whose cars in the U.S. have been on a downward plunge all this year – with sales off ~42% in 2010 compared to 2009.]

The experience of the Nano and the Alto in India brings up an interesting question: Is it possible to make small, cheap version of products that are significant purchase items and win the confidence of a broad customer base?

To a degree, yes. But there are limits to “how low you can go” in value-engineering a product for performance and safety, below which customers just turn and walk away. (Or, in this case, drive away.)

Moreover, just like the experience of the Yugo or the Trabant, there’s a risk of forming a poor market image that’s impossible to shake off.

And in this particular case, the brand names don’t help at all. It’s just too easy for disgusted consumers to say “Ta-Ta” to Tata Motors and “No-No” to the Nano.

Pew Chronicles the Public’s Knowledge of Current Events: A Mile Wide and an Inch Deep

NewsIQ Research from the Pew Research CenterAll right, folks. Are you prepared to be depressed?

The Pew Research Center for People and the Press has just published the results of its annual News IQ survey in which it asks members of the U.S. public a baker’s dozen questions about current events.

A total of ~1,000 people were surveyed by the Pew Research Center in mid-November. The multiple choice survey covered a mix of political, economic and business issues and included the questions shown below. (The percentages refer to how many answered each multiple choice question correctly).

 The company running the oil well that exploded in the Gulf of Mexico (BP) … 88% answered correctly
 The U.S. deficit compared to the 1990s (larger) … 77% correct
 The political party that won the 2010 midterm elections (Republicans) … 75% correct
 The international trade balance (U.S. buys more than it sells) … 64% correct
 The current U.S. unemployment rate (10%) … 53% correct

 The political party that will control the House of Representatives in 2011 (Republicans) … 46% correct
 The state of Indian/Pakistani relations (unfriendly) … 41% correct
 The category on which the U.S. Government spends the most dollars (defense) … 39% correct
 The name of the new Speaker of the House (John Boehner) … 38% correct
 The name of Google’s mobile phone software (Android) … 26% correct

 The amount of TARP loans repaid (more than 50%) … 16% correct
 The name of the new Prime Minister of Great Britain (David Cameron) … 15% correct
 The current U.S. annual inflation rate (1%) … 14% correct

The percentage of respondents who answered all questions correctly was … fewer than 1%. Ten questions? … just 6% answered correctly. Eight of the questions? … only 22%.

On average, respondents answered just five of the 13 questions correctly. Even college graduates scored relatively weak, with an average of just seven questions answered correctly.

The public appears to be best informed on basic economic issues such as the unemployment rate and the budget deficit, while nine in ten respondents correctly identified BP as the corporate culprit in the Gulf of Mexico oil spill event. Not surprisingly, these were among the biggest news stories of the past several quarterly news cycles.

The worst scores were recorded on the TARP program and the current inflation rate, which fewer than one in five respondents answered correctly (about the same as the David Cameron/UK question which people could be forgiven for answering incorrectly).

You can view detailed results from the survey, including breakouts by age, gender, race and political party affiliation. Not wishing to step into a thicket by editorializing on these differences, I’ll leave it to you to see for yourself by clicking through to the Pew findings on your own.

Pew concludes that while Americans are aware of “basic facts” regarding current events, they struggle with getting a good handle on the specifics.

Might this be a byproduct of how people are consuming news these days? After all, there’s far less reliance on newspapers or news magazine articles … and more emphasis on “headline news” and short sound bites.

That’s the sort of recipe that results in people knowing the gist of a story without gaining any particular depth of understanding beyond the headlines.

Now that you’ve seen the correct answers to the questions, you won’t be able to test yourself against the public at large, so I’ve kind of spoiled the fun. But a little honesty here: how well do you think you would have scored?

A Game-Changer for Charitable Organizations and Causes?

Jumo, a social network focused on charities.Chris Hughes
Jumo, the newest social network focused on charities and social activism.
There’s a new international social media resource being launched. Jumo, which was unveiled this past week in a beta test version, aims to connect people with not-for-profit causes and charitable organizations.

Established in February 2010, Jumo describes itself as “a social network connecting individuals and organizations who want to change the world.”

The founder of Jumo is Chris Hughes, a co-founder of Facebook who more recently served as director of online organizing for Barack Obama’s presidential campaign in 2008. He sees Jumo as a way for people to find and evaluate organizations that focus on the causes that interest them. Such organizations can range all the way from health and educational initiatives to ones dealing with advocacy issues such as gay rights.

News articles, YouTube videos, Twitter posts and other content will be added to Jumo pages, and users can also add their own comments and feedback.

What’s the inspiration behind Jumo? It’s to establish a social platform focusing on issues, advocacy and not-for-profit organizations rather than on personalities or branded products. “The more connected [an] individual is to an issue they care about, the higher probability there is they will stay involved over a longer period of time,” Hughes has stated.

As part of establishing its mission, Jumo has outlined the following three key factors:

 Millions of people are working to improve the lives of others, many of whom lack the resources to have major impact.

 There are millions of other people who would want to help, but don’t know how.

 Despite where we are with technology, it’s still difficult to find meaningful opportunities to get involved.

Jumo provides a platform wherein people can discover the type of causes and organizations they care about, follow the latest news and updates in those fields, and support the work of these organizations through the donation of skills, time or financial support.

In Hughes’ view, this is what differentiates Jumo from social media platforms such as Facebook, which also allows the creation of pages for non-profit groups. Facebook’s groups tend to be passive, with many an individual’s interaction going little beyond “following” or “liking” them.

Hughes believes there will be significantly more volunteering and giving associated with the people who interact with organizations on Jumo. And if that happens, it may finally fulfill the promise of online platforms enabling not-for-profits to raise money more efficiently and less expensively than via traditional means.

That’s a goal that has been stubbornly elusive to date, as only about 5% of all U.S. donations come from online giving, according to the Blackbaud Index of Online Giving.

How does Jumo intend to grow and thrive in the online world? As a not-for-profit initiative itself, it plans to rely on payments from users and sponsorships from groups that would like to receive more highly visible promotion on the site.

Jumo already contains ~3,000 charitable organizations and issues-oriented groups which have been “seeded” on the site. But any organization that is certified as “tax exempt” is eligible to set up a page on Jumo.

Is Jumo destined to transform social activism? Only time will tell … but it will be interesting to see how this interesting new venture evolves and grows in the coming months.

More Insights on Online Display Ad Effectiveness

Ad clickthrough rates
Clickthrough rates are only part of the story in online display advertising.
Last week, I blogged about the low level of clickthroughs on online display ads – basically a cipher at 0.09%.

In a conversation with a business colleague of mine who is with one of our healthcare client accounts, she mentioned that it’s also important to consider the branding aspects of online display advertising. The idea that people may not click through at that precise moment in time, but are favorably disposed to pay a visit later on.

This got me to looking for additional research into the matter. What I found from several advertising digital media marketing and data reporting companies – MediaMind (Eyeblaster) and comScore – confirms this impression.

An analysis by comScore of consumer clickthrough behavior covering ~140 online display ad campaigns found that only about 20% of the conversions came after clicking on a banner ad. The remaining 80% of conversions happened among those who had seen the ad but not clicked through at the time. Instead, they converted at a later date.

Other interesting points from comScore’s analysis include:

 Online display ad campaigns yielded nearly 50% improvement in advertiser website visits as measured over a 30-day period.

 Users who were exposed to the online advertising were ~38% more likely to conduct an advertiser-related “branded” keyword search in the subsequent 30-day period.

 Users who were exposed to the online advertising were ~17% more likely to make a purchase at the advertiser’s retail store.

Similarly, MediaMind’s analysis of ~100 million conversions from thousands of online ad campaigns has found concurring results – namely, that only ~20% of conversions are the result of a clickthrough, while the vast majority of the conversions happen at some point after viewing the banner ad without clicking on it at that moment.

The takeaway from all this: It’s a mistake to consider online advertising clickthrough rates in a vacuum. Because at best, it’s only a partial measure of the effectiveness of an online ad program.

The “Skinny” on 2010 Holiday Spending

Consumer Holiday Spending
Holiday spending on the rise? Yes, but ...
The “early returns” from this year’s Black Friday retail sales are quite encouraging. Online retail sales are experiencing an even bigger bump in activity. The question is, do these positive early results foreshadow a strong holiday season overall?

Each year, Gallup attempts to answer that question in advance by conducting a poll every November in which it asks U.S. consumers for a prediction of the total amount of money they plan to spend on holiday gifts. This year’s poll findings were published this past week.

And the results? The good news from the consumer economy’s standpoint is that the average personal spending expectation has risen to $714 for 2010, which is ~12% higher than last year’s $638.

The not-so-good news is that we’re still in the doldrums when measured against most of the previous decade. In fact, only in the years of 2009, 2008 and 2002 has expected personal spending been lower than it is this year.

If we take an average of the ten years covering 2000-2009, the expected personal spending found by Gallup’s survey is $747, which means that 2010’s dollar amount doesn’t even come up to the average of the past decade.

Here’s another interesting finding from the survey: Evidently, the increase in expected holiday spending compared to last year is being driven by only a small percentage of consumers. Half of the Gallup respondents reported they would be spending “about the same” this year, whereas one third reported they would actually be spending less.

The remainder – fewer than 15% — reported they would be spending more.

And all of that activity on the Internet? We can be sure a goodly amount of it is driven by the desire to find the very best price available. And to prove that out, the latest online holiday shopping report survey from rich media firm Unicast finds that more than half of consumers are using the Web to research and compare deals between online stores and retail outlets.

The bottom line on all this: It’s a mixed picture with a slight lean on the scale in favor of optimism. Which is a darn sight more positive than what we saw in 2008 and 2009.

Happy Chris-kwanz-ukah, everyone.

Insurance Fraud: The $80-billion Elephant in the Room

Insurance FraudIn all the debating about health insurance over the past two years, issues of consumer access and allowing pre-existing conditions have been at the forefront of the discussion.

One aspect that’s been much less reported is the issue of insurance fraud. Recently, I read some eye-popping statistics from the Coalition Against Insurance Fraud (CAIF). This not-for-profit organization estimates that the level of annual insurance fraud amounts to the equivalent of ~$950 for each household in the United States.

Moreover, the Insurance Information Institute estimates that fraud accounts for ~10% of the losses in the property and casualty insurance segments, while the National Health Care Anti-Fraud Association reports that ~3% of the U.S. health care industry’s expenditures are due to fraudulent activities.

So we’re not talking chump change.

Insurance fraud to the tune of $80 billion per year doesn’t happen just because of a few bad apples out there. What’s happening is far more serious than that. Indeed, there are highly organized fraud rings operating throughout the country engaging in everything from staging dangerous accidents to setting up bogus medical services.

The problem goes beyond merely the added cost being borne by consumers. CAIF contends that lives can be endangered, too, due to staged auto accidents, arson incidences, and “medical procedures” being performed by phony physicians.

Is it any wonder that insurance companies like GEICO have well-staffed special investigations units devoted to ferreting out illegal insurance activities wherever they can find them.

Insurance fraud has surely been a problem since the dawn of time, because at its heart is the opportunity for financial profit. In response, a plethora of national and state laws aimed at controlling fraudulent activities have been on the books for years (although surprisingly, insurance fraud is a crime in just 48 of the 50 states – what is it about Virginia and Oregon, I wonder?). Most states maintain their own fraud bureaus as well.

But like so much else the government tries to control or influence, all of these earnest efforts to stem fraudulent activities don’t seem to be adding up to much or getting us closer to a fraud-free world.

Now here’s an idea: Let’s pass some more anti-fraud laws!

Online Display Ad Clickthrough Rates Finally Bottom Out … Near the Bottom

Online Display Ad Clickthrough Rates Bottoming Out
Online display ad clickthrough rates have stopped declining ... bottoming out at 0.09%.
The latest news in online display advertising is that ad clickthrough rates have now leveled off after an extended period of decline – one that was exacerbated by the economic downturn.

So reports digital media marketing firm MediaMind (Eyeblaster). According to a report released this past week, one key reason for the decline being arrested is the greater sophistication of advertisers in targeting online advertising to audiences and groups that are more likely to be interested in them.

That being said, the overall clickthrough rate has leveled off at an abysmal 0.09%.

That is correct: less than one tenth of one percent. In any other business, this would be a rounding error.

If that statistic seems difficult to believe, consider this factoid: The average Internet user in America is delivered more than 2,000 display ads over the course of a single month. We might think that users would be inclined to click on more than just two or three of these ads during a month’s time.

But it’s important to realize that when users are in the mood to shop and buy, they’re typically going straight to the sites they like … or they’re using Google, Bing or some other search engine to find their way.

And it turns out there’s really no such thing as an “average” Internet user, anyway. Research conducted by digital marketing auditing and intelligence firm comScore, Inc. has found that around two-thirds of people on the Internet never click on any display ads during the course of a month. Moreover, only 16% of Internet users are responsible for around 80% of all clicks on display ads.

All the more reason why search marketing continues to be the online advertising powerhouse that it is. And why not? It’s putting your business in front of the customer when s/he is in “search-and-buy” mode … not when s/he’s doing something else.

Is Green No Longer Golden?

Green Marketing HypeA funny thing’s happening on the way to nirvana in the environmental world. Consumers are balking.

That’s the conclusion drawn by several articles appearing recently in The Wall Street Journal and Advertising Age.

The Wall Street Journal article, written by Stephanie Simon and published in October 2010, focuses on what motivates consumers to “turn green.” Is it the strength of the environmental message? Appealing to our better nature? A feeling of affinity with nature?

Hardly. It turns out it’s good old fashioned guilt. In particular, if people are aware that their colleagues or neighbors are doing a better job than they are on the green scene, they’re more likely to respond to the peer pressure.

Simon references two recent studies to illustrate the point. In the first, a mid-size hotel attempted to promote towel reuse by placing placards in guest rooms. One placard was headlined “Help Save the Environment,” while another one trumpeted, “Join Your Fellow Guests in Helping to Save the Environment.”

Guests who saw the second placard were 25% more likely to reuse their towels. And in a follow-up to the initial experiment, guests who were informed what percent of past guests in their room had reused towels, the compliance rate went even higher.

In the other study, middle-income residential utility customers in San Marcos, CA were given one of four doorknob hangers that promoted the use of fans instead of air conditioning, each touting a different message:

Hang-tag #1: Save $54 a month on your utility bill!
Hang-tag #2: Prevent the release of 262 pounds of greenhouse gases per month!
Hang-tag #3: Conservation: It’s the socially responsible thing to do!
Hang-tag #4: 77% of your neighbors already use fans instead of air conditioning – it’s your community’s popular choice!

The result? Consumers presented with the fourth hang-tag reduced their energy consumption by an average of ~10% … compared to 3% or less reduction in energy consumption for any of the other hang-tags.

But peer pressure lasts only so long, as the study found that all four groups slipped in their conservation as time went on.

If the Wall Street Journal article poses some interesting perspectives regarding motivational factors, a November 2010 Advertising Age article by Jack Neff claims that a quiet backlash may be growing against green products and green marketing. Neff reports slowing sales in key green categories such as cleaning products and water filtration devices.

Timothy Kenyon, a senior marketing analyst at GfK Roper Consulting and author of the 2010 Green Gauge® study, dubs the slowdown “green fatigue.” But the phenomenon may be more than simply fatigue, because greater numbers of people are exhibiting outright disbelief in claims that up until now have gone essentially unchallenged.

In fact, 61% of the respondents in that Green Gauge® study believe that green products are too expensive, up significantly from the 53% who held this view in 2008. One-third of respondents think that green products “don’t work as well” (the figure was closer to 25% in 2008). Most startlingly, nearly 40% of the respondents feel that “green products aren’t really better for the environment” – again, up from 30% two years earlier.

With this degree of environmental skepticism now charting with American consumers, the Advertising Age article suggests several ways for companies to keep green marketing relevant and worthwhile as a message platform:

Don’t expect any real sacrifice from consumers – whether it’s paying more, accepting lower performance or sacrificing convenience, it’s likely to be a non-starter.

Don’t overstate the case – many people already think green products don’t work as well as their conventional counterparts, and they will punish brands that purport to perform better but fail to live up to the claim.

Promote product benefits that go beyond “green” – green features are really just tie-breakers in the decision to purchase a product, so it’s better to have something else to talk about as well.

The bottom line these days: Green is no longer gold, and consumers have moved well beyond the siren call of “green for green’s sake.”

The novelty has worn off … and the skepticism has set in.