Ninety-eight percent of American households have telephone access. Over the past 130 years, this once-revolutionary device has become so ubiquitous that we don’t realize how much of our modern lifestyle has been built around it, from ordering takeout to scheduling doctor appointments, from responding to polls to hanging up on telemarketers. The telephone is something that we–as consumers and as marketers–have always taken for granted.

Not so anymore. Research from the Centers for Disease Control and Prevention now says that for the first time ever, cellphone-only households (20%) outnumber those with landlines alone (17%). And the trend towards wireless is gaining momentum. Nearly one third of 18-24 year olds live in households with no landline whatsoever, and–in a finding that seems odd on the surface–wireless-only households are more likely to include the poor, many of whom made the choice to eliminate their landline bill during the current recession.

This is a radical change with significant implications, not only for pizza makers and Yellow Pages companies, but for all marketers. Among the new dynamics:

–The telephone is no longer a device tied to a household, but to an individual. That opens up a world of personalization, from packaging (my wife’s cell phone cover is pink) to performance (my daughter has a different ring-back tone for the weekend than the one she uses during the week) to pricing (there’s a payment plan to suit just about everyone’s needs).

–The telephone (and the telephone number) is no longer a place-based device. Marketers that once relied on area code information to determine the location from where a customer was calling now can’t be so sure, as members of our increasingly mobile society take their cell numbers with them wherever they relocate.

–The telephone is no longer just a telephone. Two-way voice communication has now given way to multiparty, multimedia (and even satellite) access, making the ability to speak to someone on the other end just one rather quaint feature. You may even be reading this blog on your phone.

Most of us are content to let the Apples, AT&Ts, Motorolas and Verizons of the world think about where this once single-purpose device should go next. But as my firm has discovered in working with clients in a variety of non-telecommunications categories, we can’t be content to let the future come to us.

With each technological advance comes new obstacles and new opportunities, and brands that pause to consider how they might leverage them are likely to find competitive advantage (and in some cases completely redefine the playing field).

Do you suppose there’s an iPhone app for that?

Last week the Wall Street Journal announced the news that Dell was looking to hire an M&A chief.

Now that’s scary. It’s one thing for companies to come across what they believe is a strategic opportunity and make a play for another organization. It’s quite another to pursue acquisitions as a growth strategy, which apparently the masters-of-the-universe investment analysts are pressuring Dell to do. According to the Journal, “Wall Street has been calling for Dell to spend some of its $9 billion in cash to buy its way into other businesses.”

I have just one question: Why? If Dell can’t achieve healthy, profitable growth via its core operations (see General Dell and Dell Revamping posts), why would any wise investor be fooled by tacked-on revenues?

I make the case in When Growth Stalls that acquisitions are often a form of denial; management of a struggling company convinces itself that everything is OK as long as the top line is growing. That may be understandable thinking on the inside, given the daily pressure company leaders face to outperform the previous quarter. But dispassionate external observers should know better.

Interestingly, one column away from the Dell piece was a story about the latest results of a merger that analysts also once thought was smart. The headline: “Alcatel Loss Widens as Sales Fall.” As I documented in the book, the Alcatel-Lucent merger was a longshot from the start. According to the report, the company is still struggling with “increased competition, tough regulatory pressure and the impact of the economic crunch.” That’s a market tectonics triple play, and it’s going to keep Alcatel from being scored as a success for some time–if at all.

Dell’s $9 billion war chest is a powerful asset, but it should be used to reward investors–through dividends, share buybacks, or innovation focused on organic growth. It’s always better to build the team than to buy it.

“If the airline were run solely by the financial people, we’d never spend a dime on advertising.”

Tad Hutcheson
Vice President of Marketing and Sales
AirTran Airways

Kraft’s first quarter profits were up 10%. Hershey’s rose nearly 3%. Kellogg’s earnings have risen as well, up 2% over 2008. All in a rotten economy.

Why? Price increases. Yep, price increases.

These companies understand what too few marketers do–they don’t have to succumb to the natural loss of nerve that results from economic uncertainty. While raising prices in a contracting economy can be risky, so can lowering them–or doing nothing. And when the additional margin is reinvested to protect or grow market share, the result is a win on all counts.

Chipotle Mexican Grill, which recently raised its prices 8.5%, understands that. The company will be launching a new marketing program later this month because, says Chipotle spokesman Chris Arnold, “we’re still focused on the long term vision for growth.”

So is Dr Pepper. The company already spends upwards of $350 million on marketing, and will be increasing that amount throughout 2009. Jim Trebilcock, executive VP of marketing at Dr Pepper, said in an Ad Age interview that the company went back in time to study what happened during the deep recession of the 1980s and found that the packaged goods brands that were most successful coming out of the downturn were those that invested in their brands throughout.

Says Trebilcock, “We have, in our portfolio, a host of brands that are very trusted, high-quality brands. And at times like these, we believe if we invest in them … we can make a pretty significant impact on our business moving forward and actually strengthen and position ourselves for consistent growth when we come out of this economic downturn.”

Unfortunately, companies like Kraft, Hershey, Kellogg, Chipotle and Dr Pepper are in the minority. In Spencer Stuart’s annual survey of some 300 senior marketing execs, more than half of them said that they were neglecting long-term strategy in order to focus on short term goals.

As When Growth Stalls demonstrates, it takes a stable head and steady hand to overcome a natural loss of nerve (and the three other internal dynamics) that threaten stalled companies.

This week McDonald’s launched its much-anticipated $100 million offensive onto Starbuck’s turf with it’s “McCafe Your Day” campaign. TV, radio, online, sponsorships, promotions, PR, and (of course) Twitter are among the tools McDonald’s is using to achieve its foothold.

While the creative is somewhat predictable and poorly executed, the McCafe campaign will work through sheer force of arms. It will run heavily throughout the summer and will ultimately extend into 2010 and beyond. After having successfully test-marketed the concept, McDonald’s is announcing in no small way that its cappuccinos and lattes are here to stay. With smoothies and frappes on the way.

What is Starbucks, the pioneer of “the third place,” to do in the face of this attack? Unfortunately, its first move was the wrong one. Starbucks has let McDonald’s determine the rules of engagement by responding in kind.

Launching a campaign of its own with full-page newspaper advertisements featuring long copy and headlines such as “It’s not just what you’re buying. It’s what you’re buying into,” Starbucks is assuming a defensive posture. That’s mistake No. 1.

Starbucks isn’t just a coffeehouse, it’s a concept. It’s not something to be explained, it’s something to experience. It’s not an argument, it’s an aesthetic. McDonald’s has a good case–”we’ve got fine products, reasonably priced, at really convenient locations”–and Starbucks shouldn’t attempt to compete at that level. Starbucks’ appeal has never been about the rational, and now is no time (in fact it’s the worst time) to try to make it so.

What, then, should Starbucks do? First, recognize that McDonald’s is going to take its share. There’s no way to avoid it. Starbucks mustn’t try to protect every last inch of ground at the cost of sacrificing the brand. Second, launch a counteroffensive–not into the teeth of McDonald’s strengths, but on its flank.

There’s a derisive saying in our business: “Excuse me, but your strategy is showing.” With its new tagline, “It’s not just coffee, it’s Starbucks,” the company’s strategy is as visible as a teenager’s boxer shorts. Don’t say it, Starbucks, show it. Don’t make your advertising about you, make it an extension of you. Leverage your emotional and aesthetic strengths–strengths that McDonald’s can’t touch without ceasing to be McDonald’s. Let the other guy do the boring, rational stuff, while you leverage the much more powerful emotional dimension.

Much in the same way that Target has found an emotional sweet spot that Wal-Mart can’t touch without ceasing to be Wal-Mart, Starbucks can occupy a place that McDonald’s is unable to. But the company isn’t going to get there through force of argument.

For years Starbucks had a sweet spot pretty much all to itself, but those days are over. The company must redefine (re-focus, actually) itself to compete in a world where monsters like McDonald’s and Dunkin’ Donuts want what it’s got. The other guys will take their share, but there’s no reason why Starbucks can’t continue to be the coffee king. As long as it acts like one.

Big numbers get thrown around a lot these days, especially in the context of bailouts, stimulus packages, financial institutions and automotive companies. In fact, the numbers are so big and so frequently in the news that we can easily become oblivious to them.

Senator Everett Dirksen famously said, “A billion here, a billion there, and pretty soon you’re talking about real money.” But that was a generation ago. Today, we talk in terms of trillions of dollars, making billions sound puny by comparison. But it’s instructive to consider exactly how much a billion dollars is.

There are roughly 110 million households in the U.S. Every time a figure of a billion dollars gets tossed out, it equates to a little over nine bucks per household. Doesn’t sound like much, does it? It’s only a small pizza. Or maybe a movie.

But think of it in terms of your household. It’s a little different when you consider it in those terms.

If the executives at GM asked you personally for $135 (your share of their $15+ billion bailout), would you hand it to them? How about the financial wizards at Citi, if they asked you for $405? Would you be willing to reward their mismanagement with your hard-earned dollars?

Add up all of the TARP funds approved thus far by the federal government and your household’s share comes to about $6,300. And that assumes that every U.S. household pays taxes, which isn’t the case.

One of the main tenets of When Growth Stalls is that regardless of what’s going on outside of an enterprise, it’s what’s inside that counts. The next time you hear big bailout numbers being thrown around, multiply whatever number of billions is mentioned by nine bucks. And then imagine that amount of money coming out of your pocket. You may feel differently about how they should get out of their mess.

It makes no sense to bail out a ship that the crew can’t keep from sinking.

MasterCard recently announced it was cutting advertising and marketing expenditures by 35% in order to increase its operating profit. While goosing short-term returns might impress investment analysts, MasterCard’s management–and its shareholders–might reflect differently on the decision later.

In a recent article, Advertising Age pointed out that companies that cut their marketing spending during economic downturns not only lose market share to private label brands, they often never recover it.

When times get tough and wallets get thin, it’s natural for price-sensitive consumers to trade down to private label brands. But research conducted by Jan-Benedict E.M. Steenkamp, a marketing professor at the University of North Carolina, shows that in recent downturns, advertisers that either maintained or increased their ad spending lost less market share (and also performed better in the stock market) than those that cut their spending. They also performed better during recoveries.

This is a great example of the loss of nerve principle at work. When growth stalls, the natural reaction is to pull in your horns, a fact Steenkamp recognizes. He says, “Companies and categories that are able to turn a recession into an advantage are [those] going against economic trends.” But his research–and mine–suggests that’s a temptation that should often be resisted.

“Ultimately, it takes courage,” Steenkamp says. “But it pays off in share and in terms of the stock market.” Are you listening, MasterCard?

Spotted on a Harley-Davidson t-shirt:

If I have to explain, you wouldn’t understand.

If I have to explain why that’s a branding lesson, well, you wouldn’t understand.