Buy American Act and campaigns

The Buy American Act (1933) and traditions favor the pur­chase of goods and services from domestic suppliers. Almost every time the U.S. economy begins to decline, local and national politicians, supported by business lead­ers, develop campaigns promoting the purchase of Ameri­can-made products. The Buy American Act requires the federal government to purchase American products unless

(a) the purchase is for use outside the United States (such as U.S. military bases abroad),

(b) there are insufficient quantities of acceptable quality products available domes­tically, or

(c) it results in unreasonable costs.

As currently applied, the act requires federal agencies to purchase domestic goods unless the domestic bids are more than 6 percent higher than bids from foreign pro­ducers. Bids from U.S. companies must contain 50-percent or more American materials to be considered domestic. These rules apply to civil purchases made by the U.S. gov­ernment but are suspended for purchasing subject to WORLD TRADE ORGANIZATION rules.

The U.S. Department of Defense has its own Buy Amer­ican rules giving preference to domestic suppliers. In addi­tion, under the Small Business Act of 1953, federal agencies set aside 30 percent of their procurement for socially and economically disadvantaged businesses.

Many state and local purchasing requirements also sup­port preferences for American producers. For example, California once had a regulation mandating purchase of American products, and cities in Massachusetts banned purchases from Myanmar (formerly Burma). These laws were declared unconstitutional on the grounds that they encroached on the federal power to conduct foreign affairs. State laws that copy the federal Buy American Act incor­porating public interest and unreasonable cost exceptions have generally withstood legal challenges. Many countries around the world have preferential buy­ing laws similar to those of the United States. American laws can be used to deny procurement contracts to suppli­ers from countries that “maintain . . . a significant and per­sistent pattern of practice or discrimination against U.S. products or services which results in identifiable harm to

U.S. businesses.”

“Buy American” campaigns—business/political initia­tives to encourage the purchase of American-made prod-ucts—typically arise during downturns in the domestic economy. In the mid-1980s, Wal-Mart, the largest retail chain in the United States, initiated its “Keeping America Working and Strong” campaign. Led by founder Sam Wal­ton, Wal-Mart directed buyers to seek out U.S.-made prod­ucts and encouraged vendors to do business with U.S. manufacturers.

“Buy American” campaigns generate favorable publicity and are good PUBLIC RELATIONS strategies. The federal govern­ment estimates that each additional $1 million spent on U.S. products results in 23 additional jobs in the country. “Buy American” campaigns are frequently associated with trade deficits and efforts to increase protectionism in the country. Economists have conducted numerous studies showing the huge cost to consumers for each job saved through TARIFFs and other competition-reducing trade legislation.

Studies also show that, while Americans prefer U.S.­made products, they tend to purchase the best price/value products available regardless of where they are made. A frequent problem is determining what is American-made. For example, approximately half of the Japanese-brand cars sold in the United States are produced in this country. Similarly, many American-brand cars are produced else­where. Often consumers have to look on the inside pas­senger door to determine where their car was manufactured. In a controversial Harvard Business Review article entitled “Who Are US?,” former Secretary of Com­merce Robert Reich argued that if the goal is to create and maintain jobs in the United States, Americans should also support the many foreign companies producing products and employing workers in the country regardless of where the company is headquartered.

Improve Customer Intent to Purchase

Marketing communications can affect your target market’s intent to purchase. That’s the degree to which a customer intends to buy your product or service or the number of customers who intend to buy. The greater the intent to purchase, the greater the likelihood of sales.

Create a Legal Monopoly

A powerful and well-known brand can even create a perfectly legal perceptual monopoly. There is evidence that the better a brand is known and the better it’s distributed, the more a new competitor must spend just to be noticed, let alone tried. For example, anyone starting a fast food restaurant and trying to compete with McDonald’s or Burger King would have to spend a lot of media dollars just to get its name out there. As a result of decades of consistent investment in marketing communications, McDonald’s has a strong competitive advantage. This is one legal way to minimize the number of serious competitors.

Resist Becoming a Commodity

There is increasing evidence that brands are being driven out of the middle and into two categories: either you are a discount brand competing on price or you are a premium brand competing on quality and brand loyalty. For example, Wal-Mart competes on price, and Neiman Marcus competes on quality. The big losers are the brands that attempt to stay in the middle of the road, neither premium brand nor discount brand. They become a commodity, which means customers will jump if a competitor offers a lower price or a better product. It is a hard place to be. A sure sign is that your salespeople keep requesting lower and lower prices in order to make a sale. Building a brand can help keep you from being a commodity.

What About Your Competitors?

We live in an era where customers can instantly find many alternative products and services to meet the same need. Sometimes your copetition can even be your otherwise potential customers. For example, for businesses that sell fast oil changes for cars, one competitor is the do-ityourself oil changer. Sometimes your competition can come from completely different business categories or technologies. To clean my house, do I buy your vacuum cleaner, or do I hire a housekeeper, or do I invest in materials with easy-to-clean surfaces? To get in touch with my friend overseas, do I mail a letter, send an e-mail, call on a cell phone, fax a document, connect face to face via computer, or fly over and meet face to face?

In general, consumers tend to choose from among a small set of products or services and similar brands or suppliers to meet their needs. This is called the considered set. It is very telling which of your competitors your customers lump you in with. You may be very surprised at both how customers categorize their choices and who or what your competitors really are. Needless to say, knowing this can have a large effect on your marketing communications.

Assembly plants

Assembly plants are factories located all over the world that bring together materials and machines to produce PRODUCTs. They are typically located where there is access to large numbers of low-cost workers. MAQUILADORAS, assembly plants located in the northern part of Mexico, take materials and parts produced around the world and produce components and final goods primarily destined for the North American marketplace. The primary manufacturer or a local production management company that agrees to manage PRODUCTION for another firm may own assembly plants.

Textile factories are another typical example of assembly plants. Textile equipment is relatively easily shipped and assembled anywhere in the world. Examination of labels in almost any U.S. clothing store will show that the clothes are made in Mauritius, Mongolia, Mexico, or the Northern Marianas. Entrepreneurs shift assembly-plant textile production based on cheap labor, transportation, and TARIFFs. Changes in international trade laws and regional ECONOMIC CONDITIONS frequently result in new, low-cost centers of assembly-plant production. Often developing countries initially expand their export production based on assembly plants. As market opportunities and workers’ skills improve, they move into higher, valueadded products for global markets.

What Is a Target Market?

While it is tempting to try and sell your product or service to everyone in the world, it is not cost effective. You might convince adult men to buy women’s makeup, but it’s likely that the return on your investment would be negative. You are much better off selling makeup to women or, better still, selling makeup to young adult women who are fashionistas.

To profit from your marketing, you must have a target market—a primary group of people you serve. Your primary market is the group of customers who account for a disproportionate share of your sales and profits. They are the ones you can’t afford to do without. You may also have secondary and tertiary markets, customers who are important, but not as important. For example, in the U.S., women buy most of the men’s underwear, usually for their husbands and sons. Wives and mothers are the primary target market for men’s underwear. But younger single men and divorced men also purchase their own underwear. They are a secondary target market. This is important to understand because they have different motives and beliefs, they need different messages, and they are reached through different media.

One of the most important marketing decisions you will ever make is to decide which group of people is your primary target market. You can’t pursue all markets or even just two markets if they are incompatible. For example, if moms like something, teen boys distrust it; and if amateurs like something, professionals are embarrassed to use it. Sometimes you just have to choose—you can’t please everyone. More about this in later chapters.

Marketing Communications and Your Brand

A brand is perception, and perception is reality for customers. The total of all the customer impressions of your product or service is your brand. Your brand is not the buildings, equipment, boxes, objects, or people you manage. Your brand is a perception that lives in your customers’ minds.

One of the most frustrating experiences for a company is to create a technically superior product that is not perceived as a superior brand by prospective customers. That is one problem that superior marketing communications can help resolve. In fact, any marketing communications on which you spend time or money that doesn’t improve perception is pure non-value-added overhead.

Amortized loan

An amortized loan is one in which the principal and interest are repaid over time via a series of equal payments made over regular intervals of time. Because all the payments are equal in value and are due on the same day of each month over the DURATION of the loan, the stream of payments is considered an ANNUITY. The most common amortized loans are those for car and home purchases.

The payment schedule for an amortized loan typically includes a listing of each payment, indicating how much of each payment goes toward the repayment of principal, how much is interest expense, and the remaining principal. Especially for long-term loans such as 30-year home mortgages, most of each monthly payment for the first couple of years is interest expense, with very little of the payment remaining for the repayment of principal. However, with each successive payment, increasingly less of it is interest expense, leaving more for the repayment of principal. This pattern continues over the life of the loan, and as the end of the loan period approaches, most of each payment goes to the repayment of principal.

The majority of amortized loans are MORTGAGEs (secured loans). Mortgages are backed by collateral, pledge ASSETS, titles, or deeds. With auto loans the lender retains title to the automobile until the last payment of the AMORTIZATION schedule is made. With the purchase of real property, the lender holds the deed to the real estate until the mortgage has been fully amortized (paid off ).

Marketing Communications Multiplies Word-of-Mouth

If your marketing communications claims are supported by word-ofmouth and direct experience, your advertising acts as a multiplier.

It can actually improve the amount of positive word of mouth (how often and how many people say good things about you), and it can even improve and reinforce your customer’s direct experience of your product.

Be Authentic

“Everything you do” includes product development, price, locations, hours, placement and distribution, hiring, listening, promotion, design, contact points, news quotes, mistakes, and word of mouth, as well as classic advertising media communications. In general, direct experience trumps word of mouth, which trumps sales communications.

If your sales communications are making claims that are not supported by word of mouth or, worse, not supported by direct experience, you are better off adjusting your communications downward to fit reality. Otherwise, you are teaching people not to believe your communications. You are teaching them that your brand is a liar. Unless your product or service is a once-in-a-lifetime purchase (such as a presidential election!), it is always better to underpromise and overdeliver, even if your competition is making exaggerated claims.

Most people distrust corporations, sales, salespeople, and marketing communications. One way to stand out from the competition is to always tell the truth.

Increase Sales

Most marketing communications neither dramatically increase nor decrease sales. But there is evidence that the most effective marketing communications help companies outsell the least effective by 600-900 percent! A little-known fact is that the worst marketing communications can even drive sales down by as much as 50 percent every time they run. Part of the purpose of this book is to help you avoid being on the low side of that bell curve and instead move toward that 600 percent elite.

What Is Marketing Communications?

Marketing communications is anything your organization does that affects the behavior or perception of your customers. The marketing communications process is a conversation between you and your customers that is as much about listening to your customers as it is about sending them messages. It is not a one-way street.

It doesn’t matter who your customers are or what you are selling or promoting. Every decision you make and everything you do influences what your customers hear, see, or experience and will affect how they think and feel about your company and your product and/or service. This, in turn, influences what they do. Perception always precedes behavior.

The Importance of Good Marketing Communications

The scarcest resource on the planet is no longer money or diamonds or oil. The scarcest resource is attention. The demand for attention today far exceeds the supply. The resulting scarcity of attention is the greatest problem facing any marketing communicator.

By almost any measure, the noise level or clutter in media has gotten so overwhelming that it is difficult for any one message to stand out and be noticed. Estimates vary depending on the study and the group studied, but the average American is exposed to somewhere between 200 and 5,000 commercial messages a day. We have more demands on our attention in just one day than our great-grandparents had in an entire year. By the time you die, you will have spent years of your life watching commercials and seeing ads.

The vast majority of these messages are ignored, a few are hated, and a tiny percentage are noticed and appreciated. And even if a marketing communication manages to penetrate your consciousness, it must compete with the estimated 45,000 to 50,000 thoughts a day inside your brain.