The hunt for income dollars are coming in all areas. As we’ve covered, distressing times are when business models are broken [Hint: Amazon quietly gets into private labels after buying and selling, then charging a commission for its marketplace, now house brands...]

Here’s my bet: Stock market lifts and better #s compared to LY’s melt down will lead to a slightly positive holiday, but capped by unemployment and the lack of credit.

In a product marketing class we took in undergrad, we played a simulation game each week that was supposed to replicate a market with consumers that had shifting preferences over time. All of our teams were given comparative advantages and then had to determine where we fit today in the market, and had to read the tea leaves of only a handful of data points to understand where consumers’ interest would be for the future weeks and make changes accordingly. The game proved to be educational in its interactivity as well as the point it relayed: things change and companies have to think ahead to be where consumers shifting preferences will be. Sort of throwing the ball to where the receiver will be, not where he is.

A great example was Porsche’s choice of getting into the SUV market with its Cayenne. Generally regarded as a huge bet on the company’s future, the Cayenne has been a very profitable move by a savvy company in touch with what its clientele wanted. While its 911 sports car was a icon, it had spent too many years trying to create a ‘mini-911′ which never seemed to carry the same weight. In the past 15 years, the company saw SUV’s grow wildly and put its own spin on one. While not revolutionary in design, it offered those interested in a Porsche a chance to get one in the right flavor.

What happens to the other SUV manufacturers as Porsche enters is where the real problem develops. Customers’ choices increase, volume at each legacy player decreases and old less desirable lines die. Chrysler started the minivan category and Ford owns the truck category with its F-series yet both companies are not profitable. In time, competitors new and old can shift to meet consumers’ preferences and hone offerings.  In fact, automobiles are no different than any category in Wal*Mart. Why are so many auto companies in trouble? Over time other players targeted all the right features of the best products while very little new technology (read: alt energy vehicles) emerged.

Avoiding strategy decay requires looking through the crystal ball and charting a course. Here are some general areas to consider when placing time into the marketing strategy mix:

1. Innovation over time is unpredictable, but measuring innovative successes has greatly improved making ‘fast following’ or copying features/products a profitable venture with a far lower cost structure. Additionally, as fast following becomes a norm in society, rules protecting unique properties have been weakened to allow consumers access to more manufacturer options.

2. Optimized business models for fast following strip away needless innovation and hone product offerings by all companies to the most successful options. Value chain leaders integrate or contractually lock up fast followers stripping costs out of identifying consumer preferences and integrating them into the product mix.

3. Traditional innovators unable to sustain multi-year investments must move downstream into being fast followers (being locked up or bought) or upstream into core technology developers that are harder to replicate. [Note that Apple continues to buy small technology companies to ensure its edge on core technologies over its suppliers.]

4. Supply chains are adapting into mass market, large scale ‘best product mix at lowest cost’ v. ‘newest technology / design at premium or value-for-features price’. In automobiles, think BMW and Porsche v. GM and Kia. In grocery, think Whole Foods and Harris Teeter v. Wal*Mart and Kroger. [Along this case, I'd note that Hulu v. YouTube is sorting this out where Hulu is the lowest cost distribution point for content producers like NBC while YouTube will need to differentiate by being a value-for-features option (begs the question: what are those features?)]

The next two years will mark a very difficult time across the board. Consumers will push for value and a purpose forcing companies to think about where they fit. Only a few like Apple are lucky enough to have its consumers next gen versions of its products for them.

As people hunker down, lose their jobs, see iconic corporations change dramatically, and face a new reality of a more fundamental lifestyle, we’re going to see a shift of importance in creating value. Value in 2007 was about trading up the ladder by adding features that offered more for slightly less more money.

If you’ve got a brand that’s about creating something of value, then you better focus on it. If you’ve got a brand that has lived on being a lifestyle, then you better find a meaning or plan on being smaller for quite a while. Brands that were making money by being slightly better for slightly less, be aware of the old strategic phrase: getting stuck in the middle.

Brands and companies in the middle will shrink in 2009 and companies that aren’t able to shift down, or hone a premium message, shrink and stay on the top (of mind) will not fair well.

No doubt, these times are increasing the focus on value marketing. What is becoming more obvious is the need to increase the focus on ensuring that a company’s strategy has meaningful purpose beyond the financial statements.

What do I mean by purpose? Umair finally kicked me in the head on this one last week with his post on the 7 ways P.E. Obama has confirmed a real shift in strategy. If Google wants to organize the world’s information, then what is it that your company is going to do? Regardless of profit, Google can point to its successes in healthcare, government data and small business services and show an increase in user value. At a time when all businesses will shrink in some way or another next year, having non-growth measurements become critically important for morale.

Some non-growth strategic measurements: new product vitality, value creation v. substitutes, new product profits as a ratio of R&D, unaided brand awareness, customer service levels, and so many more.

If times are hard now, being motivated to do something great while hitting specific targets will at least mean feeling like we all have a worthwhile jobs to do. Honestly, the folks working in the mortgage and auto industries have to turn the corner here – they are not just salvaging shareholder profits, they are also restabilizing the financial base of our country and leaders in those companies need to offer reasons on why their people need to dig in and put in the extra effort.

Trust me, staring at all those red numbers in my 401K and IRA accounts isn’t getting anything productive done.

To appreciate our situation, consumer sentiment is reaching long time lows (source: St. Louis Fed):

Value marketing isn’t about going for cheap, it is about getting more for less = benefits / price. Wal-Mart forged value merchandising into almost every consumer category they served in the last 15 years to the point where we can find a value proposition easily. In fact, Ikea’s entire marketing strategy is built on value propositions as opposed to cheap or luxury.

What happens when value consumers start to face headwind? A NYT article today on the Recession Diet provides MasterCard spending data on how people are narrowing ‘nice to have’ purchases back to smarter everyday purchases.

When looking at the drops in consumer sentiment, people’s lost confidence takes a couple years to recover. During times like these, people change behavior as a result of economics. These large macro shifts in behavior become prime times for new ideas and brands to take hold, especially in categories that have been over-innovated, or have been incrementally improved beyond consumer need (e.g. Honda in the 70’s v. the Big 3 auto makers).

With continued growth in consumer electronics, has the tech arena been over-innovating, or striving to meet mass consumer needs?