A lot of people blame the financial crisis on the financial system being loosely regulated, which led to banks and other financial institutions taking on too much risk that they couldn’t afford. However, that couldn’t be further from the truth. What really happened was that the US government created a set of policies that encouraged financial institutions to lend to homebuyers who were in no position to pay back what they borrowed. Financial institutions, with maximizing profit as their goal, didn’t really want to enter the sub-prime mortgage market until the Federal Reserve lowered the interest rates to an artificially low level in 2001. The low interest rate environment created the housing boom, which propelled the subprime mortgage market to grow rapidly. We all know what happened after.

Then why do so many people believe that it’s the free market that caused this crisis, especially in the early stage of this recession?

Right after subprime crisis began to have a sensible impact on the economy, the government and some news media initiated a hidden marketing scheme that directed people’s attention to the flaws of a free market economy and made people believe that more regulations are necessary. By imposing more financial regulations, the government can effectively increase its role in the economy, so people who favor Big Government would definitely support this. They wrote blogs and op-eds, uploaded relevant videos supporting their claim, and advocated publicly for more government intervention. They put their arguments in a logically coherent manner, leaving out the important facts, thereby misleading the general public.

An example: Origins of the Crisis, Fake and Real by Paul Krugman

A blog post by the Canadian Marketing Association (CMA), titled Mobile Ads in Video and Entertainment Solutions, points out several advantages of advertising on mobile phones and encourages businesses to advertise on mobile platforms. CMA believes that mobile advertising will be the reigning promoting tool in the future because of its flexibility and the growing popularity of the use of mobile phone. The graph below shows the upward trend in people choosing mobile phones to watch online videos. And that number is growing fast; mobile share of online video time watched, as shown below, almost doubled in the second quarter of 2012. Indeed, mobile advertising presents a formidable potential for marketers to promote their products as well as for companies, such as Facebook and Google, to generate revenue.

The effectiveness of mobile advertising can be illustrated through an example in this article:

“Scott Nordby, president of Innovative Real Estate Group in Colorado, said he pays online-real estate company Zillow Inc. about $340 a month to ensure his thumbnail photo and contact information show up on 10,000 Zillow-powered home listings in a single Denver Zip code. With a few taps on the smartphone screen, a would-be home buyer can call or email Mr. Nordby and his team. Mr. Nordby said he receives about 150 to 180 inquiries a month—or more than half his total referrals—from would-be home buyers who found him on Zillow. Roughly one in 10 referrals from Zillow come through calls from would-be buyers’ smartphones. He adds he’s “thrilled” with the results. Zillow Chief Executive Spencer Rascoff said people who use Zillow on mobile devices are three times more likely to contact agents like Mr. Nordby than people who surf Zillow on a traditional computer.”

Sometimes it’s easy for people to ignore the mobile ads since smartphone screens are typically small, but the average cost of mobile ads is only about 3-5% of advertising in a national newspaper, making mobile advertising still a very attractive opportunity.

Between September 1999 and February 2000, when Jonathan Lebed was 15 years old, he used the internet to promote stocks by creating numerous accounts and posting hundreds of recommendations on different forums to encourage people to buy the stocks he had already owned. And as a result, on the next day, the trading volume of those stocks surged and their prices jumped, but subsequently, their prices fell since the fundamentals of the companies couldn’t support their prices. In this period, Jonathan made hundreds of thousands of dollars and became the first and only minor in history to be prosecuted by the SEC. Many regards what Jonathan did as unethical. Not only did Jonathan post fallacious statements regarding the growth prospects of the companies he was recommending, but also he profited from his trades at the expense of the investors who made decisions based on his recommendations.

Currently, Jonathan was working at Lebed.biz, a company founded by himself. He sent out a newsletter on a daily basis recommending a stock. The newsletter typically looks like this:

On the company’s website, it documents the successes of its past recommendations but leaves out the failures, creating an illusion that Lebed’s predictions are accurate and reliable. His marketing tactics are therefore deceptive and target especially the gullible investors.

Here’s an interview with Jonathan Lebed:

Jonathan Lebed

Brantford’s post on Dollar Shave Club makes me think about that, even in a saturated and mature industry such as the shaving industry, there is still space for creative marketing and business ideas that can bring a no name brand into the public eye, thus enabling the business to effectively obtain a market share of a gigantic industry.

Generally the razors market is dominated by a few big companies, whose brand names are very well-known, including Gillette, Braun, Panasonic and Merkur, whose products consist of either razor blades or electric shavers. The prices and the qualities of their products vary due to their differentiated segmentation strategy in an effort to target different consumer/product segments. However, the one segment all of these companies didn’t target is the bargain segment of this market, where products are sufficiently functional and are sold at a significant discount relative to similar products in the market.

This segment has of course been attempted by others before, but only Dollar Shave Club successfully captures this market and positions itself as a valuable brand, as a result of its creative marketing video and its understanding of the use of social media. Also, in a recessionary economy, although razors and shaving items are not luxury products, the psychological impact of lower income would push people to buy cheaper products with less brand recognition and potentially worse quality more willingly than before. This certainly gives Dollar Shave Club an extra edge.

According to 2012 Movers Report published by Epsilon, consumers tend to change their existing service providers when they move to another place. The exhibit below compares the percentages of movers and non-movers who switched brands during the year.

Overall, movers tend to be twice as likely to change brands as non-movers. Professional services and home services experienced the least brand loyalty.

It’s understandable that consumers would change brands/service providers after they move to a place where the brands/service providers are no longer available or there are cheaper alternatives. However, the top reason for movers to change brands/service providers, according to the exhibits below, is simply that they “recently moved”. This could suggest that consumers sometimes are indifferent between the products they get, due to the similar pricing and quality of the same product.

This presents both a threat and an opportunity for businesses. Though businesses could potentially lose customers who move to another place, they could also gain new customers by targeting movers.

Facebook’s botched IPO has been a heated discussion lately. A lot of people are blaming the investment banks for deceiving their investors and offering its shares at such a high price. This is a big hit on the reputation of those investment banks who underwrote Facebook, and if they had anticipated that the stock would be performing so poorly, they most likely would not have done so.

Of course, a deal with the scale of Facebook’s IPO often is very complicated and possibly involves conspiracies and violations of securities regulation. My focus wouldn’t be on those because they are mostly speculations due to lack of solid evidence. I would like to offer an explanation for Facebook’s IPO failure from a marketing perspective with a very simple framework, the 4Ps.

The product here is Facebook’s stock or basically a portion of ownership of Facebook. Based on the public perception of the future growth potential of Facebook, this is a highly sought-after product, so there’s no problem with the product itself. Place or distribution doesn’t have much relevance here in this context. The two components I would like to focus on are promotion and price. These two things are closely related. Since the value of this product is for investors (consumers) to have a decent return on their investment, the higher the price is, the lower the value is to consumers (investors). In order to maintain the value of this product while selling at a high price, the investment banks, or the marketers, have to do a very good job in promoting this product and this is a very difficult task. The two most common ways to promote Facebook’s stock are publishing stock research reports and discussing the stock on talk shows. Research reports are generally published by the research divisions of investment banks, so the opinions expressed by those reports can be heavily influenced by their respective affiliates. Research reports contain a rating on the stock based on a price target and it tells you whether to buy, hold or sell the stock. It’s a great way to market the stock if you can write a convincing argument for why it should be valued so highly. The other promotional scheme is to appear on television shows.

Here’s an example: http://video.cnbc.com/gallery/?video=3000099225

The difficulty with these two methods is that not everyone will help you promote the stock. There are always people going against you. The dubious argument presented by Gene Munster in the video link above is not going to convince everyone. Therefore, marketers have to achieve a balance between price and promotion, since the higher the price, the more difficult it is to successfully promote the product. In the case of Facebook’s IPO, its overvaluation is already cliché, but if investment banks can successfully pull off the promotion part, though very difficult and in this market environment nearly impossible, it can still be a very successful deal.