H&R Block should benefit from Intuit’s blunder

Know thy customer… and don’t mess up with him. Even less in the Web 2.0 era, in which news spread like wildfire and disgruntled customers can very quickly come together and turn into a virtual lynching mob against you. In this era, serious, organized, massive boycotts can happen, and can be triggered in a matter of days, if not hours, should consumers are outraged enough. It is a real threat, so companies cannot afford to fail in understanding their customers and taking them seriously.

Case in point: Intuit (INTU), the developer of the –until now- leading tax preparation software, Turbo Tax. Over the years, Intuit has been building a growing and profitable franchise of loyal Turbo Tax users who year after year would buy its new version at tax time. This has been a major undertaking for Intuit: most taxpayers are still skittish about leaving something as important as preparing their tax returns to a software application and are simply not comfortable working on something of this perceived complexity on their own computers. Nope. When dealing with the IRS, most still want to make sure an expert takes care of it and want to see a solid, tangible, black-and-white packet safely shipped to Uncle Sam in a totally certified, absolutely delivery-confirmed, personally-mailed-from-the-post-office parcel. But this of course is changing as computers become more pervasive and more and more people are perfectly comfortable with them. Once a customer overcomes his apprehensions and is persuaded to try doing his taxes by himself with the help of tax preparation software, chances are you got him for life. It is not only a superior and more effective way of doing the taxes, but as confidence and familiarity with the product is built in a process that by nature is always complicated and stressful, the users just don’t want to go out and experiment with a different application. In addition, a significant history of transferable data gets built into the software for future use, providing another strong reason to just stick to the application you’ve got to know over the years. So, for Intuit, this was a solid business model. In a society rapidly embracing the digital world as the norm in everything from the way you do your banking to how you find the love of your life, steady growth could only be expected.

But this year, Intuit screwed up. In an attempt to squeeze more money out of their customers, Intuit tried to change the rules of the game on them. In essence, Intuit tried to re-position its business as a provider of tax services rather than that of a software vendor. The first mistake was to significantly increase the price of Turbo Tax, trying to justify it by adding “free” federal e-filing to the package. This backfired badly. Many customers didn’t care about e-filing, so they perceived they were being charged for a feature they didn’t want to start with. Furthermore, realizing that a portion of their franchise used the software to prepare the taxes not only for themselves but also for other members of their family, Intuit thought they could create a new revenue stream from that. So they imposed a fee for each tax return printed through Turbo Tax. That was the straw that broke the camel back. Their former loyal customers were infuriated, and many clearly stated their intention to switch to Turbo Tax’s closest competitor, H&R Block’s (HRB) Tax Cut. Even though Intuit backtracked in their intentions, eliminating printing fees and slashing their price, the damage was done. See, as a marketer with a strong, loyal franchise, the most important thing you have to avoid is for your customers to have an excuse to go and try your competitor, lest they like it and leave your franchise for good. Intuit’s ill attempt to gouge its customers left the door wide open for that. And H&R Block aggressively took the opportunity. They positioned Tax Cut at a lower price point to Turbo Tax, including the free federal e-filing Intuit was hoping to use to justify their hike. In a brilliant, aggressive move, H&R Block even sent out their Premium Federal Tax Cut version for free to tens of thousands of consumers, pretty much eliminating a key barrier for disgruntled Turbo Tax users to try their product. And ultimately, taking advantage of its robust infrastructure as a true tax advisor, H&R Block is backing its software product with the promise of personal support to solve questions and, most importantly, to provide support and representation in case of being selected for an audit. H&R Block’s advertising campaign, “You’ve got people”, is a superb concept that goes to the heart of the emotional burden that preparing taxes means for most people. It’s a very complex and confusing process that generates a lot of anxiety and a dreadful feeling of cluelessness and vulnerability. “You’ve got people” is a comforting, reassuring message that humanizes the relationship with the company and creates in the target audience the comforting feeling of not being alone in the process.

Bottom line, I expect Intuit’s blunder to have a significant negative impact in its stock performance. For this tax season, the winner will be H&R Block; we should see a positive upside surprise in its tax software business. In an investment decision between these two companies, I bet for the people!

Google this investment!

It’s been several weeks since my last post. At that time, I was reeling from the beating we took during that dramatic first week of October. Little I knew of what was ahead. Paraphrasing myself: Gosh, what a month!

Encouraging performance today. The market was just following the free fall trend that has marked the whole week. At one point, it felt like we would finally close below 8,000 for the first time. And why not? There hasn’t been a single piece of good news in weeks. There is not a glimpse of hope in the horizon. And yet, out of nowhere, we had a tremendous rally. No apparent reason! Except for, indeed, the fact that enough is just enough. Yes, we are in an economic recession. But most stocks are priced as if the world was going out of business. There is value out there, folks. I guess a few shrewd investors brave enough to see the sun beyond the stormy clouds had the same thought.

When I am considering a stock for investment, I want to think I am not buying a company or even a product. What I am buying is positioning. One way of defining positioning is the space that the combination of functional and emotional values of a brand occupies in the perceptual map consumers have of any specific category. That perceptual space will sooner or later translate to sales. The bigger the space, the more sales that brand or product will generate, and for a longer time.

You want to look for brands that occupy a very big and/or growing space in a large and/or growing category. Also, the bigger the space the brand occupies, the less space is available for the competitors, therefore adding longevity to that brand’s business potential.

Now, let’s talk of a very specific example: Google (GOOG). Online search is a very big category. We all live around the Internet nowadays. From finding out about the weather today, to planning our next vacation, to –yikes!- checking the financial news every 20 minutes to try to make sense of the madness we are living in these days. Now, how do we say when we suggest someone to do a search in the Internet? I haven’t heard anyone telling me to “yahoo” something. Nobody has ever mentioned that they found their long-lost third cousin while “Microsoft-living” his or her name on the net. We all “google” our information. Google occupies a huge space in the mind of the consumers when they think of finding information in the web. Google is the positioning leader in the all-important online-search category and they keep working relentlessly to make that space even bigger. In the meantime, Yahoo (YHOO) is struggling for survival and trying to re-kindle their affair with Microsoft (MSFT), while the latter is still figuring out how to convince the world that Vista is not the dud it is.

Advertisers know that. Heck! So do you! I guess that’s the reason why Google was commanding such a rich P/E, right? And then the recession comes, and with all its doom and gloom, we assume advertisers will cut their budgets, people will stop searching, and then we send Google to its lowest price in three years. To that, I want to highlight a few things:

- In a tough economic situation, advertisers indeed cut their advertising budgets. But they don’t eliminate them. You can’t afford to. You need to keep selling! If any, you re-direct your reduced budget to the most effective touchpoint you have available. If you had campaigns going in Google, Yahoo and Microsoft, you cut the last two and put all your money behind Google. That is a fact.

- Consumers stop buying. But they keep shopping. It is part of the coping mechanism. More than half of the thrill of buying something is actually shopping for it. We all make hopeful plans of what is that we would like to buy once our portfolios rise again from the underworld. And Internet searching (with its payable clicks) will continue to be the prime means to do this.

- When the going gets tough, the tough get going. This economic crisis will only consolidate Google’s leadership in the web search space. It is the only company in the space with the resources and the strength to thrive in these conditions. You will see smaller rivals (including Yahoo) retrenching and cutting back in their investments. Google will keep plowing ahead, taking advantage of the situation to consolidate its dominance.

Today, Google dipped below $300. It got all the way down to $280 at the bottom before rebounding to close at $312 (encouraging!). When you consider that Google can only consolidate and strengthen its position as the absolute leader in a category with a double-digit compound growth in the foreseeable future, I would say that is a small price to pay for such a Company. It is not about what could happen in the next few months. It’s about owning the Internet for the next decade! And that is a very, very big space.

Disclosure: I own shares of GOOG

The glass is half-full

Gosh, what a week! Just last Sunday I wrote in a comment that I just hoped we hit Dow 10,000 this last week to get over with it. Right… be careful what you wish for!

I have no quantitative basis to say that the market couldn’t go any lower. But at Dow 8,500, a level not seen in six years –and hit first 10 years ago-, I can’t help but think this is a little overdone. Don’t get me wrong: I don’t think we are close to re-ignite a bull market. The economy is limping, and the prospects are not brilliant. We still need to see the credit mess solved, and the housing and jobs markets stabilized. But at this point, I can see the glass half-full:

a) The bail-out plan hasn’t even been activated yet. It should go great lengths in helping solve the fundamental issues in the financial system.
b) There is a coordinated international effort in facing the crisis.

c) The recent 50-basis points global rate cut should have a positive effect in the economy.
d) The Fed has been pumping tons of cash in the system for several months now. This cash is been hoarded due to lack of confidence and fear. It will have to be unleashed soon. Moving this cash is the essence of the banking business.
e) Commodity prices are falling, which should reduce pressure on the cost structure of manufacturers and help support profit levels.

f) There is significant consolidation taking place in the financial sector. The dead wood is being trimmed.

All the pieces are falling in place to finally put an end to this problem. Of course, we are not out of the woods. The measures the Government is taking are not without risk. On one hand, all this cash can have an inflationary effect when unleashed on the economy. On the other hand, funding the resources put by the Government behind trying to solve the crisis is likely to further weaken our fiscal situation. The Government doesn’t have access to unlimited resources, and there are only three ways it can finance this gigantic effort: printing money, borrowing or raising taxes. Of course, the healthier approach is to source the capital through taxation. It would have the double positive effect of addressing the crisis with organic resources and, at the same time, mopping up the excess cash injected in the economy, thus averting inflationary pressures. But higher taxes would put a drag on the economic recovery and therefore extend the recession. To partly address this issue, the Government needs to opt for the intervention mechanisms that imply no expense, but investment. The right approach therefore is to capitalize the banks through direct acquisition of equity. Some don’t like this approach because they argue this is equivalent to socialization and against the capitalist nature of our economic and political system. To those pundits I say: a) extraordinary problems require extraordinary solutions; b) the capitalist system just failed; if we are expecting the Government to solve the problem for us, we need to accept the consequences; c) the alternative is hypocritical capitalism: privatization of profits and socialization of losses. That just doesn’t fly. The fair course of action is to allow the taxpayers to partake in the profits if their action, through the Government intervention, helps the financial system to start generating wealth again.

There is simply no exit without pain. But from the two evils, I hope the Government chooses the one that at the end will result in a more solid and sustainable recovery, even if it takes longer. Therefore, this is what I’d like to see:
- I’d like to see the presidential candidates stop talking about tax cuts. We just can’t afford them.
- I’d like to see the bailout taking the shape of capital injections to the banking system as opposed to buying worthless assets. When the capital markets start working again, the Government stands to recover the resources invested this way.
- I’d like to see our political leaders proposing specific measures to reduce Government spend. There are no easy targets, but this needs to be done.
- I’d like to see leadership from the business community, also. The financial elite created this mess, and they should work together to propose and drive solutions to the crisis. Business leaders across the country should step up and help restore the broken confidence that is dragging the economy and markets down.

What does this post have to do with investing by advertising? Not much! But after this week, I just had to express my thoughts. It is usually easier to point out the negatives of a situation, but everything that has been done and will be done in the following weeks will have a positive effect that nobody seems to be acknowledging.

Hormel Foods looks appetizing

“From Your Desk Drawer to Delicious - in 90 Seconds. People on the go expect more from their meals. You want it fast, you want it tasty and you want the convenience of packaging that lets you eat without disrupting your busy schedule”

Hormel Foods (HRL) got that right! I discovered Hormel’s line of Compleats microwave meals while wandering in the supermarket a few days ago. I was very excited with the line. As reiterated in one of my last posts, “May you leave in interesting times”, you can bump into interesting investment opportunities by just paying attention to what you see while doing your personal shopping.

Compleats is a line of surprisingly, well, complete meals that do not require refrigeration and that are ready with just 90 seconds in the microwave. Clearly designed with the office dweller in mind, the excerpt of the Compleats web page I started this post with proves to be very insightful. Effectively, office workers who prefer to have launch at the office are always on the lookout for meals that are satisfying, hearty and yet convenient to carry, store and prepare. There are not that many options out there: if you want to remain in the office during lunch time, you have to either deal with frozen dinners –if there is a freezer anywhere near your cube- or some energy bars. That’s it. It is that or trying to make it through the day with a bag of Cheetos in your stomach. Now, there are some other options out there, aren’t they? What makes the Compleats proposition so compelling? I would summarize its competitive advantages as follows:

a) A fairly complete, hearty hot meal. All other non-frozen alternatives are mostly soups or very simple pasta-based meals that are not very satisfying or nutritious.

b) Extreme convenience: most of the microwavable alternative solid meals require some sort of preparation that can be messy and prone to embarrassing accidents in an office environment.

c) Easy storage: Meals with the same level of heartiness and sophistication can only be found in the frozen category, which require refrigerated storage and longer cooking times.

In researching this product, I found out that even though it is not really new, it was recently relaunched with the new name of “Compleats” and the new packaging, a simple sleeve that let the consumers understand tha revolutionary nature of the product. The introduction of the Compleats line couldn’t come at a better time. Adverse economic conditions mean that many office workers who used to go out for lunch are re-considering their options. Even the cheapest fast-food alternatives out there will make you spend $7-$10 for a lunch. A Compleats meal goes for around $3. Scratching eating out and replacing it with Compleats meals is a quick way to save more than $100 a month. Not too shabby.

In my opinion, the Compleats line will become one of Hormel Foods’ shining stars, with a great potential to beef up the Company’s bottom line. It comes at a great juncture as well. Hormel is not a particularly exciting company, but its share price shows the steady growth you’d look for in a keeper. Its margins, as with the rest of the processed food industry, have been under pressure due to the increasing costs in commodities experienced during the last couple of years. These cost pressures are subsiding, which means we could see interesting upward surprises in Hormel’s profits moving forward. At this point, Hormel is really looking like a tasty investment worth taking a bite out of.

Now, that's Progressive!

Amidst jittery financial markets and government bailouts, the average Joe is still facing tough economic times and looking for ways to save money. In continuing with the discussion initiated in my post “May you live in interesting times”, we are looking for the companies that are building on the opportunities presented by the economic crisis to attract savings-conscious customers.

In the competitive and very profitable auto insurance arena, one insurance company stands out : Progressive Corp. (PGR). I am quite impressed with Progressive’s marketing strategy:

a) In a time when most of its competitors have retrenched in their marketing efforts, Progressive has boldly followed the opposite trend: it has aggressively stepped up its advertising activity to a point where, right now, is perhaps the most visible insurance company out there. This is a very positive move. In hard times, most companies tend to cut back in marketing spend, which is an easy target because it is mostly variable by nature. Yet, although sometimes unavoidable, it is the wrong thing to do. When the going gets tough, the tough get going. It actually is in tough times when a company needs to redouble its efforts to gain new consumers and retain the ones they already have, because it is exactly in these type of conditions that consumers re-assess their own expenditure and start looking around for better options. For most consumers, insurance is low-hanging fruit, and one of the first expenses to be questioned.

b) Intensifying advertising presence is just half of the effort. In order to be effective, a good campaign needs to be in place. And it is here where I think Progressive shines. Progressive’s new advertising campaign is warm, colloquial and does a great job humanizing what is otherwise perceived as the dreadful process of shopping for insurance. It makes the concept of shopping car insurance look simple and friendly for consumers by equating it with the retail shopping experience they are very familiar with. By doing that, Progressive effectively addresses and neutralizes the anxiety that shopping for a highly technical financial product creates among consumers. The different spots address each of the issues related to the shopping process. They reassure consumers that it is OK to shop around, that they can customize their protection as they need it, that Progressive is a one-stop solution for all their vehicle insurance needs, and finally, that they can save money.

c) Shopping for car insurance can be particularly stressful because, as a technical product, it is usually time-consuming and confusing. A lot of data needs to be provided to each company you consider, and at the end, it is always hard to understand what the different companies are quoting for. Therefore, comparisons are complicated. In addition, consumers never have the time to go over the dozens of potential alternatives, so the process is always laden with cognitive dissonance that leads to the very uncomfortable feeling that they ultimately might not have made the right choice. Also know as buyer’s remorse, this emotion is so uncomfortable that, unconsciously, most consumers would rather put off making a change than enduring the anxiety. This is the third successful element in Progressive’s strategy: providing quotes for not only their own policy, but that of their competitors too. Although this might seem risky –a competitor’s quote might actually be lower than Progressive’s- , it is actually a brilliant move. Progressive’s best chance to get a new customer is by triggering the shopping process. And in order to do that, it needs to make it look simple and reduce the anxiety it creates in the consumer. In addition, by providing this service Progressive ensures that their website will be the first stop the consumer will make when he/she starts shopping. Having the first shot at the client further increases the chances of gaining his/her business.

Progressive’s insightful and bold marketing approach should ultimately pay off in terms of new customers and a more robust policy portfolio. The stock price has been beaten down along with the rest of the financial sector, and sat at $17.55 last Friday. But the company is doing what is required to emerge stronger from these difficult times. Taking advantage of the opportunity provided by the crisis; now, that’s progressive!

Bank on this opportunity

This has been a scary week indeed! It is in situations like this one that investors like you and me freeze and really don’t know what to do. Most of your investments are in deep red and you wonder whether to sell and cut your losses or just weather the storm and hope for better times. Anyway, how much lower can it go? Most likely, you asked yourself that same question a few months ago –heck, a few weeks ago!- and as it seems, they could go much, much lower.

Jim Cramer likes to repeat this phrase that makes much sense in these times: nobody ever made a penny by panicking. And what we are seeing this week is just that: sheer panic. A very justifiable panic perhaps, but panic nonetheless. What I love about these times is that the market throws the babies with the bathwater. And I am seeing stocks that have reached prices that make no sense. Let’s be clear, though: I am not saying that we’ve reached a bottom and that even those stocks could not go lower. Even though I’d really love to be wrong, I think there is still pain ahead of us. I wouldn’t be surprised anymore if we revisited a Dow 10,000. But then, we have to look around: oil prices falling, commodity prices falling, an election coming soon, and finally some consolidation in the financial sector. Weren’t the high oil and commodities prices what were driving potential inflation and a squeeze in margins across the economy in the first place?

The US economy fundamentals might not be strong at this point, but one thing is true: ours is a very resilient economy. Eventually, the economy will improve. And as I stated in my post “May you live in interesting times”, the true leaders will come out of these dark times stronger and more powerful.

In the financial sector, I am particularly excited about one strong, clever player: Bank of America (BAC). Exactly as described in the referred post, Bank of America has been pondering the opportunities generated by this crisis and, when the time came, moved to acquire the right companies to strategically complement and strengthen its business. First it was the acquisition of Countrywide, the largest retail mortgage lender in the country. And now, it acquires nothing less than Merrill Lynch (MER), the most recognized name in the world in brokerage services and wealth management. The latter was, in my view, a brilliant move. Before this acquisition, Bank of America had little real opportunities to grow in the US: it was already too big in this market. And yet, it didn’t have a strong international presence to look for growth overseas. In addition, it really was a non-player in the profitable wealth management and brokerage services field. These two weaknesses are instantly turned into strengths with the acquisition of Merrill Lynch.

For sure, many have criticized this acquisition as reckless and untimely. Is this acquisition risk-free? Of course not! It is a very risky undertaking! But it is this sort of bold, aggressive moves that differentiate leaders from followers. It is by taking decisive action with sound strategic vision that leadership is exerted and enhanced. Merrill Lynch is a prime franchise with global reach, and provides Bank of America with immediate access to a huge portfolio of wealthy customers and new businesses around the world at an opportunity price. It would have taken decades for Bank of America to build that infrastructure by itself.

I believe Bank of America will come out of this crisis as a financial powerhouse. Although bruised, the institution has been able to weather the crisis with relative success so far, and has taken advantage of the turmoil to gain strong footholds in areas in which it was not participating, thus creating new opportunities for growth. For the patient investor, Bank of America might really be the bank of opportunity.

Disclosure: I own shares of BAC

Wal-Mart: more than just low prices?

In the current economic situation, it was to be expected for Wal-Mart (WMT) to thrive. It has always offered the lowest prices in groceries and other basic goods. Yet, in the good times, many consumers would refuse to shop at Wal-Mart for issues ranging from convenience all the way to, very simply, status. In the face of rising prices and economic uncertainty, those issues are mostly gone for a good chunk of the population. Consumers will do whatever is necessary to stretch their paychecks. Consequently, Wal-Mart has been able to report sales growth quarter after quarter for over a year now. With it, we’ve also seen its stock price increase nicely, from the low 40’s back in October 2007 to $63 last week.

Now, this growth has not happened just out of pure inertia. Wal-Mart has been very conscious of the opportunity the economic downturn represented for the company. As a result, it very purposefully refocused its marketing efforts to attract a wider range of middle- and upper-middle-class embattled consumers by positioning itself as the best alternative to preserve the lifestyle they are clinging to.

Wal-Mart’s campaign “Save money. Live better” is an excellent effort in that direction. In the past, Wal-Mart's communication focus had always been around its low prices, under their “Always low prices. Always” creative platform. Their target audience was comprised fundamentally by cost-conscious, low-income consumers. Even though this was the promise that made it a retail giant, during the years of economic surge this approach was actually affecting Wal-Mart negatively. As consumers’ disposable income rose, Wal-Mart saw more and more consumers turning to retailers that offered not only good prices, but most importantly, emotional value: higher quality, better design and a more pleasant shopping experience. Target is the best representation of that trend. Wal-Mart was unable to reinvent itself in order to leverage that trend and stem the outflow of consumers. Even if it wanted to do it, its strongly cemented position as the value player meant it lacked the credibility to reposition itself. That just changed. As indicated, the economic downturn and the recalibration it has generated in the consumers’ priorities has provided Wal-Mart with the opportunity to re-build its image among an audience willing to listen, and the company is taking it.

Wal-Mart’s communications are not anymore just about price rollbacks. Instead, the “Save money. Live better” TV commercials are high-quality depictions of situations and events that consumers relate to high quality of life. Moreover, the campaign does a great job at going deeper and touching emotional chords in the consumers. It really appeals to the emotional drive of making the most of your money in order to take care of your loved ones. In that sense, the campaign is very insightful and goes beyond the rationality of low pricing. It is about providing what is necessary for those you care about to enjoy a better life. Very well done!

I am encouraged by this brilliant re-direction in Wal-Mart’s communications. I think they really found the right approach to re-define their business in a way that will make an ample segment of middle-class consumers to reconsider Wal-Mart.

Nevertheless, the communications platform is just half of the job. Indeed, Wal-Mart is doing a great job in leveraging the opportunity provided by the environment to drive new consumers to the stores. Wal-Mart has been able to appeal to a larger group of consumers and has gotten them to shop in their stores; they will continue doing so while the economic situation is still adverse. But in order to generate organic, sustainable growth, Wal-Mart must also be able to retain them when the situation improves. And here is where I remain skeptical. The Wal-Mart shopping experience is still sup-par, if not outright dreadful. Messy stores, out-of-stocks, apathetic, nowhere-to-be-seen and unhelpful associates, low-quality merchandise and unacceptable long lines at the few registers that are open at any given time still plague the experience at Wal-Mart. At Wal-Mart, you don’t enjoy the experience: you endure it. If this is not corrected, my view is that we’ve seen everything the stock has to offer in terms of returns. The new consumers Wal-Mart has been able to generate will flee once the economic pressure subsides.

Wal-Mart has a brilliant opportunity to re-invigorate its franchise. In terms of communications, they’ve done the right things. If they start addressing the issues in their consumer experience model, this power-house may once again become a prime core stock to hold in your long-term portfolio.

Follow this Instinct

Wireless must be the one of the most dynamic markets you could find. It is unique because success really depends on perfectly combining the strengths of the participants in two different yet intimately related industries: the carriers and the cell phone makers. Their destinies are irremediably intertwined. Consumers drool over having the latest almighty gadget that allows them to not only make phone calls -talking is so yesterday!-, but most importantly, remain plugged into the world through text messaging, picture taking, Internet access, TV on the go and all sort of cool functions. This is the realm of the so called smartphones. They really are command centers for the life on the move. Yet, the gadget is only half of the story. In order to be able to actually enjoy all those neat functions, consumers also have to select a carrier that provides all the services needed to get their cool devices going. They soon find out that having a sophisticated command center does not come cheap. The cooler the gadget, the more functions it has, the more services are needed from a wireless carrier in order to take full advantage of it. And of course, the carriers are all too happy to sell them to you. The tab adds up: minutes for talking (boring!), internet packages that charge by Kb, a quarter per picture sent over the network, GPS service, etc. Consumers have little choice but to pay. Reluctantly, perhaps, but then, what is the point of having the greatest smartphone is you are not getting the services it is designed to provide? Surely enough, this rich profit potential pushes wireless carriers to go to great lengths to ensure that they gain exclusive access to the hottest and more sophisticated smartphones the electronics industry can provide, because when consumers fall in love with a phone, they will take their accounts to whichever wireless company offers it in exclusivity… or will they?

The feeble economic situation is making consumers reconsider their priorities. And as much as they love their gadgets, many are starting to question their wireless bill. It doesn’t help that it is actually hard to figure out how much you are going to pay for the month. In general, wireless carriers are particularly good at creating complicated packages that are difficult to understand. As a consumer, you have two choices: either you pay small fortunes for unlimited packages –individually by service- or you assume the risk of paying a small fortune anyway because you exceeded the 25 pictures quota of the plan you chose thinking it would be enough.

Until now.

One of the most exciting introductions in the wireless industry since the advent of the iPhone is the launch of Samsung’s (SSNLF) Instinct phone by no other than Sprint (S). The Instinct is an exciting smartphone, clearly designed as an iPhone killer. The dedicated Instinct website features some brilliant, poignant videos that make direct comparisons between several of Instinct’s advanced functions and the equivalent ones from iPhone. In each of the features, the technical superiority of Instinct is demonstrated in a very convincing way. The creative platform for the launch campaign is also a major success. Samsung and Sprint launched the Instinct with a strong multi-media advertising campaign mimicking the introduction of a major motion picture. It borrows from the excitement, the drama and the bigger-than-life stature that a major movie launch generates, and the production quality of the communications is top of the line. OK, we have the gadget. But, in my view, what completes this brilliant introduction is the service package Sprint offers with it. Dubbed “Simply Everything”, the plan is exactly that: every single service you need to fully enjoy your Instinct, unlimited, for just $99.99 per month. No more counting text messages, no more controlling minutes. Just one very affordable, easy to understand monthly price, and you are able to enjoy the advanced functions of the Instinct without guilt or uncertainty.

This is a very encouraging initiative for Sprint. It is the right combination of a great gadget with a great plan, introduced at a time when consumers are the most receptive to propositions that will allow them to preserve their lifestyle while still reducing their spend. From a marketing perspective, it is a very sound move, and at the right time. The company has lost half of its value over the last year, and it just looked like they were unable to get anything right. The grandiose launch of Instinct in combination with an aggressive and attractive plan like “Simply Everything” is in my view a strong signal that the company is finally getting in control of their business once again. With Sprint’s share price slightly above $8, this is an Instinct you might want to follow.

May you live in interesting times...

OK, the summer is half gone, vacations are behind me now, and the strategic plan is moving along at work. It is hard to believe I have not been able to post anything in a little more than two months. Gosh! Well, is not like the market has been an inspiration either, right? We’ve had a very rough ride this summer, and even though we had a good rally today, I don’t feel very confident about the months to come. I mean, the economic situation is not looking exactly peachy, is it?

And yet, when you look at the big picture, one thing you know for sure: besides Bear Sterns and a handful of regional banks, the good companies will still be there when this thing gets better. Because it will get better; it always does. There is light at the end of the tunnel. It may take a while, but the good companies, those that are worthwhile investments, will not only survive, but they will thrive. You see, in every economic downturn, there are always opportunities. Consumers don’t stop consuming; they just change their behavior. Their needs and attention shift a bit, but that only means that there are emerging opportunities to profit by meeting those different needs. In addition, the true leaders take the opportunity to create and strengthen competitive advantages. They emerge from these challenging times as stronger, more successful enterprises while leaving their competition in the dust. What a better opportunity than seeing your competition retrench because of the economic difficulties? For the best companies, that is just a call to jump in and occupy the space their rivals are leaving wide open in their retreat. And it is exactly in these times when we have the opportunity to spot those leaders and scoop their shares up at bargain prices. Sure, don’t bet next month’s mortgage payment on a hot stock. But this is exactly the right time to fatten the down payment for that dream house you are planning to buy in a few years.

What do we have to look for? Don’t go too far. Think of yourself to start with. What has changed in your own behavior as a consumer? You might be thinking twice about buying things than just a year ago you wouldn’t have even bothered questioning. And now you are looking with renewed interesting at certain things or places that a year ago you wouldn’t have even entertained acquiring or visiting. Well, those things and places (and of course, the companies behind them) are a good place to start your exploration.

I’ve been paying a lot of attention to what companies are doing in these hard times to lure customers; which companies are focusing on the right things in their marketing approach. As I affirmed in my post “Cracking the consumer code”, it is possible to spot great opportunities when you stop for a minute and look around with your mind set in finding good investment opportunities. I don’t mean paying attention to Jim Cramer or Barron’s. I mean attentively watching the commercials on TV, carefully reviewing your junk mail, and walking the aisles of the supermarket with your eyes wide open checking out interesting promotions or daring displays. Pay attention at how the companies are trying to talk to you: if even for a moment you stopped and listened, then there is a chance you are uncovering a hidden –or not so hidden- gem.

I like what I am seeing in areas like insurance, retail, wireless and electronics to mention just a few. I will share my observations with you in my forthcoming posts, which I assure you, will not take two months to show up!

Signs of life at Motorola?

Last week I saw a TV ad that caught my attention. The ad was for Motorola ’s (MOT) player in the smartphone category: the Q. Even better, the commercial was supporting the Q 9c, their latest product in this competitive field.

The ad caught my attention because I had not seen Motorola supporting one of its products on TV in a long time. I think the last TV commercial I remember was for the launch of their PEBL model, which failed to create any ripples in the market. Not only that: the ad was quite refreshing, light-hearted and, in my view, quite successful in creating rapport with the audience. The ad shows a dude that hits his head and gets amnesia. In an entertaining way, the ad shows how this guy relies on the Q 9c’s advanced features to function throughout the day.

In a category where most of the advertising is directed to the enterprise market, and therefore very business oriented, Motorola retakes the past glories of its “Hello Moto” campaign -a hip, sound take on Motorola that, along with the launch of the RAZR, took the company to a leading position in the cell phone market several years ago-, and uses the platform to position the Q 9c as the smartphone to help the everyday crowd manage their life. To reinforce the cool, casual character of this model, it is referred to, in the best “Hello Moto” fashion, as the Moto Q 9c. Promising!

The same night I saw the Motorola TV commercial, I also caught a Verizon ad featuring the Q 9c as well. I found that encouraging. It seems that Motorola is launching an integrated effort behind this model, and was able to enlist the carriers to support the initiative, which is critical if they're to achieve any success.

The support behind the Moto Q 9c is certainly a step in the right direction for Motorola. If the company is to ever compete again in the mobile market, smartphones is the right place to focus the effort. Smartphones are where the market is going. They are the future of wireless communication. Conventional cell phones are quickly becoming a thing of the past.

Yet, I’d need to see more from Motorola in order to consider the company an investment worth the risk. Motorola’s execution has been extremely disappointing in the last couple of years, and consequently the stock has lost two-thirds of its value in the same timeframe. The share price closed today at $9.13, basically sitting where it was five years ago. These are very good reasons to be skeptical. Motorola still needs to prove that they can pull it off. And they are facing some formidable competition in this segment: Research in Motion’s (RIMM) Blackberry, and the hottest gadget in recent history, the ultra-cool Apple (AAPL) iPhone. Very tough nuts to crack! Nonetheless, it is encouraging to see Moto trying to get its mojo back. Keep an eye on the company. This might be the beginning of the long awaited turnaround for this stock.

Disclosure: I own shares of MOT