Reflections on a $1.6 million Weekend Sacrifice

Trees and vegetation are retained or planted by savvy commercial developers as a means of increasing the value of their property.  In Durham, NC where I live, certain standards must also be met to minimize the harmful effects of impervious surface such as parking lots.

It is all about safeguarding air and water quality, part of what economists measure as ecosystem services.  It is also about preserving sense of place which is crucial to leveraging economic development including tourism which in turn increases the value of commercial property.

Last weekend, on my way into a restaurant for breakfast, I noticed a crew in front of an Outback Steakhouse chopping down and grinding up 10 or more large trees between the roadway and the restaurant’s parking lot.

The trees had probably been planted when the property was first developed. From the location, it appeared this row of trees was being sacrificed to make the sign on the building more visible from a nearby highway.

All tolled, those trees represented $1.6 million dollars in ecosystem services such as absorbing, cleansing and slowly releasing storm water polluted by impervious surface.

Economists have also documented the tens of thousands of dollars that such trees each add to property values.  I wondered to myself if either the restaurant or the property owner had weighed these costs and benefits as part of the decision to butcher the trees.

Once the trees had been converted to chips and loaded for transport and disposal, the crews added insult by failing to be cover the trucks loaded with debris as required by law.  I doubt that particular driving hazard and the resulting roadside cleanup had been factored into the decision either.

Hopefully the owners will plant new trees that will grow to at least 50’ in height and canopy spread so they are able to replace the ecosystem services lost by those that were chopped down.

However, I won’t be surprised if they are replaced instead by smaller varieties that are neither native to this area, nor of the same value to the community.  The smaller varieties are not nearly as effective, if at all, at offsetting the impact of impervious surface.

Two new studies were released last year on the value of on-premise signs.  One was conducted on behalf of The Signage Foundation by researchers at the University of Cincinnati with a focus on economic value.

Another deeper analysis by researchers at Villanova University focused on the effectiveness of on-premise signs as marketing devices.

According to the first study, enhancing the visibility of on-premise signs is second only to redesign in popularly with business owners as a means of generating more revenue from a location.  Taken together, the various changes in on-premise signs result in an average increase of 12% in sales and transactions and 10% in operating profit.

So on average, making the sign for Outback Steakhouse more visible could mean an annual increase of $360,000 in sales or a tad more than 20% of the value of the trees that were sacrificed.

To put this in perspective, full-cost accounting could mean that the Outback Steakhouse in Durham would reinvest a little more than $53,000 each year from those sales for 30 years back into tree-planting that would balance impervious surface in that area.

The second study also found that on-premise signs are much more effective and two and a half times less expensive than outdoor billboard advertising.  They also outperform the use of television, radio, print or the Internet as market tools.

More revenue is critical to Outback Steakhouses, which under the newly created umbrella Bloomin’ Brands Inc. issued an IPO last year.  Now rated the #1 steakhouse in the nation, the chain was founded in Tampa, Florida in 1988 by four friends in the hospitality business.

A few months later I was recruited to jumpstart the community-destination marketing organization in Durham.  Back then, Wall Street was focused on overall company growth.

Today, Wall Street is more concerned about individual location revenue growth, leading Outback to permit managers, who also share in profits, for the first time to open for lunch.

Not opening for lunch had been one of the pillars for the company’s culture because profits for that time period are negligible and they wanted staff to have a life outside the restaurant.

Unfortunately, Wall Street hasn’t yet calibrated to full-cost, triple-bottom-line accounting and the no-lunch pillar was sacrificed for the same reason those trees were last weekend in front of the Outback in Durham.

Full-cost accounting would take into account the costs generated by impervious surface, which are pushed by developers and businesses off onto government and taxpayers.  Government tries to hold the line by requiring trees and vegetation to compensate but the ordinances are weak and not very well enforced.

Most areas where Outback Steakhouses are built are devoid of community sense of place.  I often found myself stopping for the night near one during my handful of 6,000-mile road-trips taken over the the past three years.

These commercial ghettos are new, but they nearly all look identical in design, layout and architecture as well as tenants.

It is too late to worry about the loss of sense-of-place that these areas create for communities but it is not too late to worry about requiring more of them to offset the costs of impervious surface they push off on the general public.

A recently released study for the National Forest Service by scientists David Nowak and Eric Greenfield, based in Syracuse, NY, has quantified both the amount of tree cover and the amount of impervious surface in each state of the United States as well as in urban and community areas overall.

In the urban/community areas where these cookie-cutter commercial ghettos are built, there is now 18 million acres of impervious surface, about 15% of land area, compared to the national average of 2.4%

In North Carolina, these areas have an even higher percentage of impervious surface.  Statewide the ratio of surface covered by trees compared to impervious surface has dropped to an alarming 3.3 to 1.

Even more alarming is how ineffectual local and state governments are.  Ordinances to bring balance to the marketplace are woefully inadequate and even more poorly enforced.  Pro-market enthusiasts such as me sense the playing field isn’t balanced nor inclusive of costs.

As our air and water quality and sense of place degrades, the electorate seems weary, burned out and seemingly detached.  Elected officials if they are aware or care at all, seem even more so.

All of this is to say that we are in desperate need of full-cost accounting.  Brands such as Outback are proud of their commitment to quality of life in the communities in which they are located.

What better way to demonstrate this than to dedicate that commitment to the fostering and preserving of sense of place as well as working to set an example for how businesses can incorporate full cost accounting and the triple bottom line.

Charlotte DNC Study Raises The Bar and A Few Questions

Charlotte, North Carolina, down-state from where I live and once practiced visitor-centric economic and cultural development has raised the bar for communities still obsessed with facilities and mega-events.

Independent economic assessments, some conducted over a period of more than 30 years and looking at 50 different host communities and areas have found no discernable net impact from mega-events.

So Charlotte followed the example of analysis released last summer for Indianapolis after hosting the Super Bowl and had a similar input-output analysis conducted of the impact of the Democratic National Convention (DNC) hosted there last September.

Though executed by extremely reputable companies using a well-proven methodology with which I am very familiar and have used for many years and executed by individuals I know and respect, neither micro-analysis is enough to refute the earlier longitudinal analysis.  These studies do, however, provide additional details.

While input-output is very reliable when measuring impact over time, such as the annual impact of tourism on a community, experts caution when applying it to events of very short duration.  Still Indianapolis and Charlotte are to be commended for raising the bar several notches for future hosts considering these and similar mega-events.

Released last week, the Charlotte analysis of the DNC also raises some questions that weren’t probed in news reports.  In fact, it took a little digging to find the actual report.  Answers to these questions can better illuminate future efforts by other destination communities.

But first an observation.

Charlotte has always benefited from superb community-destination marketing (DMO) professionals.  However, a seemingly odd kind of co-dependency with business and civic officials there has made the organization seem trapped in an old-school, sales-driven and facilities-obsessed model.

This is usually symptomatic of when a community becomes captive to downtown interests rather than left free to pursue the broader, community-wide objective of reaping a community’s full share of visitor-centric economic and cultural development through holistic marketing.

As noted by the nation’s preeminent expert in marketing, Dr. Philip Kotler, it is rare to find even business people who understand marketing, let alone civic officials.  So they often turn to sales instead of marketing or glitzy advertising campaigns, which are ironically sold by people working in sales.

There was some speculation that the joint study on the DNC was conducted because the DMO had used inflated estimates to secure the event but this seems unlikely.  The organization has long been familiar with the methodology used in the DNC study and has deployed it many times to measure the overall impact of visitors on that community.

However, sales-driven DMOs may feel the need to override their research departments to make a proposed event appear greater than unsubstantiated estimates made by past host communities.  However, more often than not, this is a result of pressure from business and government interests eager to host the event.

Sales-driven DMOs are also often guilty of failing to re-calibrate the formulas used to benchmark mega-events with local variables easily obtained from their marketing research arms and various secondary studies on length of stay and spending patterns.

In this day and age, there is simply no excuse for a significant gap between the pre-booking estimate of impact and the post-event analysis of a mega-event, but if there is a culprit it is most likely a combination of booster hubris and political pressure.

The DNC analysis recently conducted for Charlotte is excellent and much more intricate than what was trumpeted by the news media.  All but one business publication seemed to fall into the trap, possibly set by the news release, of leading with the combined figure of direct, indirect and induced impact rather than putting the focus on direct spending and noting the other impacts later in the coverage.

Here are a few questions the study raised in my mind:

• It is natural that the study tries to measure impact not on individual counties but by lumping six counties together.  Doing an analysis on each county would have been far more accurate but probably cost prohibitive.  This is important because there are no regional tax structures, only county and state.

The study makes a valiant attempt to estimate economic leakage and existing business dislocated by the huge event. It seems that lumping the counties made that task impossible.  Would it be far more revealing to conduct an analysis on each county and then add the impacts while fully accounting for leaking and dislocation?

• The study notes that lodging businesses benefit the most by far and deducts 15% of those revenues for the amount redistributed to non-resident owners and for various fees.

However, that is the average under normal circumstances.  The huge DNC event increased occupancy by 63% over those dates the previous year and expert yield management increased the average rate for a rented room by an exorbitant 180%.

According to my friends in that business, isn’t it far more likely that under those circumstances the 15% deduction from impact should be more like 30-40%?

Also, is it really realistic to assume that existing visitor and resident spending was merely postponed?  In my experience it is usually forgone.

• The estimate of direct spending includes $34.5 million in visitor-related spending and $42.2 million spent by three host organization to cover meals and upgrade facilities etc.

However, since a third or more of those donations were extracted from the local economy making them unavailable for other uses there, isn’t there a case to be made that this portion should be deducted from impact rather than added to it?

• It is noted that many services were provided to the event in-kind by local governments including not only security for increased solid waste removal etc.

Shouldn’t the dollar estimate for these services be deducted from the direct impact?

• Much was made by officials announcing the impact about the visibility generated by coverage of the event and the impression on delegates, news media and others attending.

However, shouldn’t the estimate of this impact be adjusted by estimating what the local private donations and in-kind public expenses could have generated if invested directly by the DMO into a longer-term, more sustainable earned media campaign?

There are many good reasons to host events, especially of the size that would be complimentary with existing business. But studies have long shown that mega-events themselves have little or no residual impact on community visibility and image, even if repeated every 18 months or so.

Sales/facilities-driven DMOs and communities are often not open to these questions. They seem locked in a perpetual and co-dependent dance - glorifying facilities, then subsidizing mega-events in hopes of masking performance gaps.

Then using these events as a rationale for an “arms race” with other communities for new or expanded facilities, all the while failing to fully exploit their community’s potential for visitor-centric cultural and economic development.

This is what makes these sales-driven DMOs highly vulnerable when in turn their communities try to passively-aggressively chain them to specific facilities rather than enabling fulfillment of their community’s broader tourism interests.

Once trapped in this cycle, it is very difficult to evolve instead to a far more productive market-driven approach but Indianapolis and Charlotte must still be commended for raising the bar.

If others follow and the measurement of impact becomes more and more strict, it will add greatly to the measurement of the one in ten visitors who attend events such as these.

When Does A Tipping Point Become A Topple Point?

I finally did it.  I am now officially a cord cutter.  I am not the first one in my family.  I was preceded by my daughter, my niece and my sister and brother-in-law but I am clearly a very early adopter among those of us approaching eligibility for Medicare this year.

Pay-TV subscriptions peaked two years ago at 100.9 million households and within the next give years they will fall to 94.6 million, when online advertising revenues are projected to pass advertising revenues for television.

However, as commentator Jeff John Roberts notes, this is a “tipping point, not a revolution.”  To me it seems to be tipping very rapidly.

The metric for for ratio of speed at which firms within an industry lose leadership positions is called the “topple rate.”  Between 1965 when I was mid-way through my last year in high school and 2010 when I retired, the topple rate for all companies in the economy increased 40%.

A just released survey of nine global nation/markets by KPMG reveals that in just two and a half years after Apple’s launch of the iPad, more than 1 in 4 US consumers have or plan to get a tablet this year, more than half already have smartphones.

One in seven prefer those devices for watching television.  More than half use them in a given month to access maps and directions, hastening the obsolescence of roadside billboards.

Some 42% of those who watch television are also accessing the internet via pc or laptop for purposes other than social networking.  Another 17% are doing so via a smartphone and 22% are social networking while watching television.

Most telling about the future of television as we know it is that smartphone adoption has already crested the 70% level for the generation of consumers 24-32 years old and the generation behind them is set to pass them.  Any projection of the topple rate for television as we have known it should focus there.

It isn’t easy for television-oriented businesses.  Most seem stunned and somewhat in denial.  But remember that Apple came dangerously close to extinction in the 1990s until reinventing itself with a revolutionary paradigm.  Borders was the second-largest retailer in the world in 2005 and bankrupt by 2011.

The topple rate is not only increasing but accelerating.  Just look at what hybrids have done to the automobile industry.

The first photograph was taken in 1826 but it took another 75 years for point and shoot photography to be mass-marketed with the introduction of the Brownie camera in 1900.

The Instamatic was introduced in 1963 but digital photography was invented six years prior, about the time patents also emerged that would eventually lead to convergence of photography with other technologies.

Photography was revolutionized again in the year 2000 when the first digital SLR was introduced and by 2003 more camera phones were sold than stand-alone digital cameras.

Sometimes a new technologies extend the life of another.  The tablet is doing that for the much maligned software PowerPoint.  According to Rick Enrico of SlideGenius, partly due to tablet adoption, worldwide there are 30 million presentations given daily by 500 million PowerPoint users.

A report by Forrester projects that almost as many tablets will be in business use by 2016 as The Diffusion Group (TDG) projects there will be households still using pay-TV services that year.

That seems like a revolution to me.

Infographic - What Is Native Advertising?

To view this infographic at its origin, click here or here.

Old-School Sales Isn’t Extinct, but it has Migrated

Studies show that on average half of every job is project management. Another 40% is sales if you define sales like Daniel Pink does in his new book entitled To Sell Is Human – The Surprising Truth About Moving Others. I guess that leaves 10% of the average job for getting coffee, water-cooler gossip and hopefully catching up on “best practices.”

Pink is defining “sales” as any action to move others to exchange resources such as money or time or behaviors such as attention or effort for something you have.

Doctors, for instance, are selling when they try to persuade us to eat right or exercise.  More than 1 out of 9 people still work in jobs defined as traditional sales.  However, Pink’s entertaining and fact-filled book makes an excellent case that the other 8 in 9 are still involved in some type of selling.

Customary sales is only one small slice of the pie when it comes to the full range of communication activities that fall under the umbrella of marketing.  However, in some ways, every element of marketing, especially advertising, fits Pink’s definition of sales as “moving others.”

In 1895, with only four motor vehicles registered in the entire United States, the first community-destination marketing organization (DMO) was organized.  However, in those days it was really only a sales organization, as far too many DMOs are still stuck today.

Within a year the first automobile dealership opened becoming the basis for a caricature of what many people have used to stereotype sales over the years.

However, today, the stereotypical sales-type is much more likely to work in politics including many working as lobbyists for special interests or on behalf of political action groups and some even in elected positions.

Many of the best examples of sales people working in politics are now found in traditional local downtown/economic development, particularly in communities where those organizations rely heavily on lobbying favorable treatment from local government.

Rather than becoming extinct, traditional sales people have found refuge in politics because that interplay between special interests, campaign donors, lobbyists and elected officials is one of the few areas still functioning as though access to information is still asymmetrical (where one party has more or better information than the others.)

This is why politicians and even some working in public agencies seem to prefer being spoon-fed rather than to read, eschewing data for anecdotal opinions and far too often for ego massage.

There too, these throw-back sales archetypes stand out because they specialize only in zero-sum, power-politics. To them, someone always has to lose if someone wins.

You are either on “their team” or you’re not.   For them, special interest is a calling card and conflict of interest a myth.

They are likely extreme extroverts, the kind who never listen because they dominate every conversation and stop only to think of what they will say next.

Nearly all are men, many thinly veil a disdain of women in power. They tolerate technology but almost exclusively prefer the telephone or face-to-face conversation.

When they get a response to a request via email, they almost always telephone back to have it repeated verbally. When they send emails, they almost always widely copy others. They practice cornering someone as an art form. Their expertise is self-proclaimed.

They can appear very successful but only in the absence of full-cost, triple-bottom-line accounting.  Many seek every means possible to handcuff community DMOs to facilities subverting their obligation to benefit the overall community.

Despite fitting a stereotype, these sales-types have always been rare but they will probably never be entirely extinct.

In his book The Honest Truth About Dishonesty, Duke behavioral economist Dr. Dan Ariely, while noting that we are all dishonest at some level, cites experiments revealing that those involved in jobs that require creativity, such as marketing where I spent my now-concluded career, are the most likely to be tempted to be dishonest because they are good at story-telling.

That being true, then the most tempted of the creatives are probably those in sales including many now working in politics because they are the most supreme of story-tellers, especially those who still mistakenly think of sales as synonymous with marketing.

According to experts such as Dr. Philip Kotler at Northwestern University, traditional sales is about unloading something you have while overall marketing involves “the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit.”

Professor Kotler also notes that marketing is “terribly misunderstood in business circles and in the public’s mind,” and nowhere is it more misunderstood than in political circles, making them even more susceptible to sales pitches from special interest lobbies.

The most effective community DMOs embraced holistic marketing long ago while a few merely changed words around to mask that at heart they remain primarily sales-driven and conspicuous because they are facility-obsessed.

Those that remain sales-driven lock their communities into a perpetual and co-dependent dance - glorifying facilities, then subsidizing mega-events in hope of masking performance gaps.

Then they use these events as a rationale for an “arms race” with other communities for new or expanded facilities, all the while failing to fully exploit their community’s potential for visitor-centric cultural and economic development.

This makes these sales-driven DMOs highly vulnerable when their communities try to passively-aggressively chain them to specific facilities rather than enabling fulfillment of their community’s broader tourism interests.

More in the future on how to discern sales-driven from marketing-driven communities.