Monday Mornings with Madison

Sometimes All That Is Needed Is A Fresh Start

Recently, the IRS rolled out a new “Fresh Start’ program offering to wave failure-to-pay tax penalties for those who have been unemployed. The idea was to give people who have fallen behind on their taxes the chance to get their financial house in order and start fresh. To qualify, the person must have:

  • been an employee who was unemployed for at least 30 consecutive days between January 1, 2011 and April 17, 2012,
  • been self-employed with a 25% or higher reduction in business income in 2011
  • had income that did not exceed $200,000 if filing jointly, or $100,000 for single or head of household, or
  • had 2011 taxes due not exceeding $50,000.

With this program, the IRS understood that a ‘fresh start’ can be an empowering, uplifting and engaging force in life. The opportunity to wipe the slate clean and start again can give those who are tired and forlorn a renewed sense of hope and energy. Moving to a new town. Going to a new school. Beginning a new job.  These events all inspire a feeling of ‘starting anew’ that can be invigorating. Underlying it all is the chance to do more… the possibility to be better… the prospect of improving in areas where one fell short in the past.

A fresh start can also mark the beginning of a new cycle of time. For example, the Siyum Hashas, which was celebrated last week, marked the end of the 12th cycle of Daf Yomi and provided the inspiration for beginning the 13th cycle. This system of studying one page of the Talmud a day takes seven and a half years to complete. Bible scholars often adopt a similar program of reading a portion daily in order to complete it in a calendar year. Having a defined starting and ending point helps define parameters and provide focus. And the cycle of starting again infuses a new vigor into what might otherwise become routine.

But the concept of a ‘fresh start’ is not limited to people, programs and time. Companies also understand the power of a ‘fresh start.’ Embracing the concept, businesses have used the notion of a ‘fresh start’ to jumpstart areas of business that have lost focus, pep, or luster. The ‘fresh start’ idea has been used in sales initiatives – such as a selling season or campaign — as a way to reinvigorate retail efforts. It has been used many times as a marketing tool to rebrand companies or products that are either forgotten or seem outdated. It is the proverbial fresh coat of paint on a marred but otherwise reliable fixture.

Case in Point

Consider how German auto manufacturer, Volkswagon, used the ‘fresh start’ strategy to rebrand Skoda, a Czech car company that VW purchased in the late 1990s, and breathed new life into a jaded but otherwise sound product. Here is the background. Skoda had a monopoly in car manufacturing in Czechoslovakia until the 1989 ‘Velvet Revolution’. After that, the Czech government sought a commercial partner to revitalize its Skoda factories. In 1991, Volkswagen took a 30% stake in Skoda and started work in training and educating the workforce to Western quality standards. Volkswagon invested over £2 billion in the plant, research, development and new models. By 2001, VW had taken total control of the business.

Skoda launched two new models in the 1990s. In, 1994, the Felicia was built as an old-style Skoda, but enjoyed the benefit of VW features. The 1998, the Octavia was built on the VW group platform. The costs of the improved VW car structure pushed up Skoda prices. The cars carried a higher price tag and Skoda needed to convince consumers that this price was worth paying. VW wanted to move away from being a cheap brand to being a value-for-money brand. At the same time, it needed to find its own positioning in the group, rather than just trading on being part of the VW Group. Otherwise, Skoda could just as well have been re-branded as a VW, with very little reason for Skoda’s existence.

The Octavia was launched in the UK with a £10m promotional campaign- Skoda’s highest-ever spend on a marketing campaign. Despite the push, the Octavia was a failure. Just 6,154 Octavia cars sold in the year following the launch, despite the fact that the car achieved almost unanimously good reviews. Market research indicated that 60% of people said they “would never buy a Skoda”. Only 20% of Octavia buyers were under the age of 45 and a third had previously owned Skoda cars. Consider the Skoda jokes. What do you call a Skoda with a sun-roof? Answer: A skip. Why does a Skoda have a heated rear windscreen? Answer: To keep your hands warm when you push it. What do you call a Skoda with twin exhaust pipes? Answer: A wheelbarrow. How do you double the value of a Škoda? Fill up the petrol tank! Yet, the Octavia was basically a VW car. The brand had an image problem. Skoda’s image was old, unfashionable and out of sync with its products.

VW wisely resisted the temptation to scrap the Skoda brand altogether. Despite its poor image in the UK, Skoda still commanded respect in Eastern Europe and held its own in other Western European countries. The Skoda brand also had high “brand awareness” in the UK – even if it was viewed in a negative way – and a reliable distribution channel through a network of independent car retailers. Skoda needed a fresh start.

The next product launch by Skoda was the Fabia in 2000. It was launched with a much smaller but more effective marketing campaign. The advertising message poked gentle fun at Skoda’s customer perception: “The Fabia is so good you won’t believe it’s a Skoda” and “It’s a Skoda, honest.” The Fabia’s marketing campaign included television, print and poster ads. The campaigns were supported by both PR and direct mail. The focus of PR was to get journalists to discuss Skoda in a positive light. Direct mail focused on loyalty levels among Skoda drivers and communicating the brand’s new image. A competition was launched to win a Skoda car that generated 27,000 responses. Respondents who didn’t win the car were profiled to check their similarity to the average Skoda driver. Hot prospects received a scale model as a consolation prize and an invitation to test drive a full-size model.

By the end of 2000, over 11,000 Fabias had been sold and even Octavia sales increased 29% from the previous year. By July 2001, the near impossible happened – Skoda had a waiting-list for its cars. There had been an important shift in the public’s perception of Skoda. After the campaign, 58% of those polled said they would consider buying a Skoda. Today, Skoda is one of the fastest-growing car brands in the UK motor industry. In 2011, Skoda sold a record number of 875,000 cars globally, and it stated that it aimed to double its sales by 2018, as part of the Volkswagen Group’s plan to become the largest car maker in the world. Amazing what a fresh start can do to revitalize a sound but lackluster and misunderstood brand.

A Fresh Start is not a Fix

While a fresh start can be a way for people and organizations to make minor course corrections or reignite the fire in their brand or refocus attention on old programs, it is not a fix for things that are broken. For example, while the IRS is offering a fresh start for those in financial distress, the concept is not equally effective when it comes to bankruptcy. The idea that Chapter 7 bankruptcy provides debtors with a fresh start toward financial success has been proven false. A study conducted by Katherine Porter, Associate Professor of Law, University of Iowa and Dr. Deborah Thorn, Assistant Professor of Sociology, Ohio University examined the ‘fresh start’ assumption against the realities of life after bankruptcy using original, longitudinal data. They found that just one year post-bankruptcy, one in four debtors was struggling to pay routine bills, and one in three debtors reported an overall financial situation similar to, or worse than, when that debtor filed bankruptcy. Factors that caused household income to decline — such as unemployment and underemployment, illness or injury, and old age — undermined the chances of financial recovery and showed that bankruptcy was an incomplete tool to provide consumers with a fresh start after financial failure. They confirmed that a proverbial fresh coat of paint does not fix a cracked foundation.

Indeed, while a fresh start can help reinvigorate energy or refocus attention, it is only a shot of adrenaline or a new take… not a fix for anything that is damaged or malfunctioning.  The next time an aspect of your business or department is lagging – sales are in a slump or a product is not doing as well as it should — consider if it just needs a boost or if something fundamental is wrong. If it’s determined that the area of concern is fundamentally sound but just needs a helping hand, consider ways to give it a fresh start. Sometimes a fresh start is all that is needed.

Quote of the Week

“You may have a fresh start any moment you choose, for this thing that we call “failure” is not the falling down, but the staying down.” Mary Pickford

© 2012, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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