Changing for the Better
Around 500 years ago Niccolo Machiavelli wrote ‘Whosoever desires constant success must change his conduct with the times’. The notion of ‘changing conduct’ to succeed is still true in the 21st Century. The rapid change that technology has created ensures that traditional market leaders who are unwilling to adapt become irrelevant to the customer. The most prominent example of this failure is in the entertainment industry. In the last 20 years, technology has rapidly redefined distribution, created new forms of competition and a ‘savvier’ customer. Yet, not a day goes bye without news of one of its traditional leaders (record label or movie studio) pursuing legal action because of their underlying unwillingness to adapt to the times. These companies continue to operate using a mantra of ‘what worked in the past will ensure our success in the future’. Evidently it will not. This issue of Spot is dedicated to proving that ‘tried and true’ methods do not work when the times change.
At the end of 2007 Madonna acknowledged the change in the music industry by leaving her record label and signing with content promoter ‘Live Nation’. She was quoted as saying: ‘The paradigm in the music business has shifted and as an artist and a business woman I have to move with that shift’. She was followed by Radiohead who in the same year decided not to renew their contract but rather DYI. Even 2 years later, record companies have done little to adapt or reinvent the way they go to market. In fact their increasingly litigious nature suggests they are hanging on to what they know for dear-life.
A more recent example has been with movie studios. Although these traditional market leaders haven’t been as newsworthy as record labels they are starting to act more and more alike. In the US, Universal, Warner and Fox have recently placed an embargo on distributor Redbox (similar to Australia’s Redroom DVD). This embargo prevents the Redbox from having access to new movies until a month after they are released. This is surprising given that kiosk DVD distribution is growing at around 30% p.a. and the overall DVD category has contracting by -14% 1st half 2009. Why? Because the studio’s want a high cut of the companies revenue. This move reeks of studios not understanding the changes in their category and trying to throw their weight around instead of adapting their offer. The need to change in order to maintain leadership will only increase if Redbox does what it did last time. In 2008, when Universal enforced a similar embargo on it, Redbox went over the studios head and bought the DVDs from other retailers continuing to rent them for $1.
The pace at which technology is changing holds many opportunities for business, but equally failure to acknowledge its affect on a category can result in a ‘slow-death’. If movie studios and record labels are anything to go by, attempting to change maybe a better option than enforcing ‘tried and true’ business measures. Basically, the risk in adapting is far less than that of doing nothing. So when change comes to a category market leaders should embrace it.
The New Normal
Currently people are adapting to the pressure of the economy. They are becoming savvier with their money. The amount of media dedicated to this topic has pushed it to the forefront of most marketers’ minds. Recently this conversation has started to change with subtle indications of economic recovery. The media is starting to ask what will the post-recession consumer look like?
For some the belief is that the recession is having a temporary impact on the consumer. The yearning for prosperity will force the customer to ‘snap back’ to normal. Although this sounds great for businesses who aren’t coping at the moment, it is flawed by the assumption that people learn nothing from experience. On the other end of the spectrum is the view that the recession will create a ‘new normal’. This is based on the fact that the consumers are not ‘weathering the storm’ but are actively adjusting. According to M&C Saatchi research 54% of the Australian population have experienced a reduction in the value of their superannuation and a further 39% in the value of their shares/investments. The perceived reduction in prosperity has lead people to changing where they buy, invest more time in research etc.
This is not a new phenomenon. If history is to be the judge of how the post-recession consumer will act it confirms the ‘new normal’ perspective. For example, the post 1940s depression consumer who taught themselves and the generation beneath them to not ‘squander’ – using leftovers, hand-me-downs, and only buying what was necessary etc.
Added to this shift is the immense influence of business. As the customer changes, businesses are reacting and restructuring. Companies looking to survive are trying to find a lower cost of doing business whilst increasing profit. This adaptation includes reducing pay/bonuses, rethinking their supply chain, squeezing vendors, reduction and redistribution of marketing budget etc. The measures being taken by business to survive are changes that cannot be undone overnight. In fact they are helping permanently change behaviour and create a ‘new normal’.
So what does this mean?
If consumers will be fundamentally changed by the current economic situation business decisions should always be made with the ‘long-term’ in view. This would suggest that companies should avoid recessionary tactics (ie. Price or continuous sales) in favor of those that will win customers during and beyond this phase.
Although the end of the recession is some time off the ‘New Normal’ is something to keep in mind now.
Growing Business with Mobile
Greater mobility is key to convenience. In order to satisfy an increasingly sophisticated consumer, companies (aside from Telco’s) are giving their product/service a competitive-edge through investment in mobility. The idea being that the easier a product makes a customers life, the harder it will be for them to substitute. In the past the move to mobility has been driven by media companies adapting their content to mobile handsets. For example, free-to-air TV streaming on mobiles in the US. Now this trend is at its ‘tipping point’ as non-media businesses increase the benefit of using their product/service by making it mobile. This is a fundamental shift away from ‘mobility’ as superficial platform to a core part of business operations – something which has been prophesized since the year dot.
An example of this shift to mobility is Orange UK and Barclaycard. At the beginning of this week Orange UK announced a long-term ‘strategic’ partnership with Barclaycard to create mobile payment solutions. With a combined customer base of 28 million, they are working together to make it easier for customer to make everyday payments. Through the process their brands will be harder for customers to substitute. The partnership is based on convergence. The mobile phone enables the credit card to be used in stores where contactless payment readers are installed. Currently over 10,000 retail outlets in the UK have the system installed. The maximum transaction would be £10 with payment taken from the connected card. They are aiming for ‘widespread adoption’ of their contactless mobile payment initiative by 2012.
The Orange and Barclaycard example shows how mobility is evolving. A telecommunication company can help business grow (through acquisition and retention of customers); by not just being a consumer touch point for a brand. A similar partnership has been tested in Australia through Telstra and the National Australia Bank. They tested their contactless mobile payment system in Melbourne in early 2008. At the beginning of 2009 they released the results, which were positive. They found that 78% of the participants preferred the system to cash and 90% of participants expecting that this would be the standard way of payment in the future. They are currently featuring the service on their Enterprise and Government site, with no news of its rollout.
Mobility is more than adding an iPhone application to enhance a brands experience. Rather, its role in creating greater convenience can be leveraged to help grow business. It seems that after years of prophesizing mobility as part of the future of business, this is finally coming to fruition; namely because consumers have become more comfortable (increased trust) with mobile.
Re-Thinking the Recession
Originally Published: Febuary 2009
The recession has become an unavoidable topic. Over the past few months analysts and business consultants have become more confident that the telecommunications industry will remain largely unscathed by the economic slowdown. So far this has been true for carriers but not so for handset manufacturers. Unlike a carrier’s service a new handset is not seen as a necessity. In a recent survey the US National Retailers Federation found that consumers believe that they cannot live without their internet service (81%), basic cell phone service (64%) and cable TV service (61). However 85% believe that upgrading their phone is not essential. This change in behaviour has been further exemplified through the Q4 sales results of Nokia and Motorola with declines of 12% and 51% respectively*.
Although this sounds like the regular bad ‘recession’ news, it is not all that bad.
Currently only two Telco are noticeably taking on the recession slump in handset upgrades – Orange (UK) and T-Mobile (USA). Both are creating opportunities for themselves by re-configuring how consumers buy handsets. For example, this week T-Mobile launched their ‘Equipment Installment Plan’. The plan allows customers to break up the cost of a phone across four months, instead of paying the full purchase price upfront. It is like lay-buy for handsets. In keeping with times there are no finance fees, interest or start-up fees. Another example is Orange UK, who launched their Blackberry Pearl 8120 on PAYG consumer plans. Unlike T-Mobile, the handset needs to be paid upfront (£145) but the ability to PAYG gives cost-cutting customers a reason to upgrade.
So, what exactly is the advantage of helping handset manufacturers move stock?
Orange and T-Mobile are trying to make it easier to put a handset within reach because giving the consumer what they want (but might not be able to afford under current category conditions) gives the Telco’s a competitive advantage. It allows them to up-sell existing customers but also attract new customers from other networks where they could not afford to upgrade.
This is an opportunity that could be applied to the Australian market. Although not officially in recession consumers are still feeling the financial a ‘pinch’ either first hand or through the media’s influence. Still consumers do not want to compromise their current lifestyle – handset upgrades included. So by helping customer maintain the way they live, a Telco is able to create a competitive advantage (and help themselves).
T-Mobile PAYG Blackberry
Free to Air Goes Mobile
Originally Published: January 2009
At the beginning of every year trend reports are released forecasting the year ahead. A frequent member of this list has been mobile TV. Again and again its rise and uptake by the middle market has been prophesized. Yet, at the beginning of the following year it appears back on a forecasting trend report ready for another try. Well this year looks to be the year to end this cycle. Mobile TV may finally become a viable option for the middle market (in the US, at least). So what changed?
Mobile TV became a collective goal.
At the International Consumer Electronics Show which ended last week in Las Vegas a group of American broadcasters announced that they would start broadcasting direct to cell phones. Among these content providers are major broadcasters like ABC, Fox, NBC and CBS. These companies have been joined by handset manufacturers: LG, Samsung, Zenith and Kenwood. All of whom are currently developing mobile receivers to pick up transmission from the stations. Rumor has it that AT&T is currently looking at selling the phones on their network. This initiative is due to launch at the end of this year in 22 cities across the US.
So, why will this work?
This will work because it is using the same business model as traditional free-to-air. The ad-supported business model is one most consumers understand. If they watch TV they live with it everyday. By simply mobilising TV directly the consumer can easily get their head around its use. The lure of it being apparently free (with advertising) will overcome one of mobile TV’s biggest obstacles in the past – cost. One of the biggest draw backs of content is the ‘unknown’ fee associated with viewing. Telco’s have tried to overcome this problem through snacking (Optus) or the leveraging internal assets (Telstra and free limited Bigpond/ Foxtel content). Yet, there are limitations to both these offers namely restricted access.
Mobilising the ad-supported model is the key to mobile TV’s success. It would be a win for the consumer who will not have to pay-to-view and for telco’s who can use it as an additional revenue stream through handsets or advertising. Hopefully, this year will move Mobile TV to the mainstream in the US and shortly to follow Australia.
Is there such as thing as ‘free’?
‘Free’ has become a catchword and all out killing ground for trend watchers; and so the question must be asked: is ‘free’ really what it promises? Or to answer the old adage in a post-modern world ‘Is there such a thing as a free lunch’?
In commercial terms the answer is ‘sort of’ or ‘yes with a catch’. As services like Blyk, Mosh Mobile, and Skype have popped up in the market, they have taken the concept of ‘free,’ in its illegal, ‘lime-wire-esque’ appeal, and given it new meaning. No longer is ‘free’ associated with counter-culture; now it is a word which businesses have appropriated to appeal to teir next generation of consumers. So far, ‘free’ as a generation niche has been successful.
For example, Blyk. A ‘free’ mobile service, which is ad-funded (the trade-off) aimed 16-24 year olds has hit its 100,000 user target 5 months a head of schedule. Furthermore, it is expected to hit 250,000 users by Christmas and break 1 million within 3 years.
‘Free’ has taken on a new meaning in business, where a product/service can be accessed through a trade-off by the consumer. However, just as there is a trade-off for the consumer there are repercussions for the business provider who is essentially reinforcing a new consumer behaviour by raising expectations of what should be free and creating an unwillingness, on the consumers behalf, to pay.
The Elusive Open Platform
Originally published: May 2008
With the building hype around Apple’s iPhone launching in Australia, it’s time to look at the other great mobile revolutionary – Google and their Android product. The question being asked in this issue is: ‘Could Android be a potential antagonist to Steve Jobs & Co?’ Could this be another nail in the coffin of closed source technology?
Android is not a ‘GPhone’ or Google branded hard wear as was initially anticipated in response to the iPhone. It is in fact an open source software and operating platform for mobile phones, created in conjunction with the Open Handset Alliance and cultivated through third party developers. Android is due to be launched at the end of 2008. Unlike Apple, which in markets aside from Australia have tied their product to just one carrier, Android is free and up for grabs to any member of this Alliance. So far Samsung, HTC, LG & T-Mobile have said ‘yes’.
This product is important for one primary reason – it is open source. Through collaborative effort it hopes to overcome current inherent problems within the mobile telecommunications industry. It hopes to do this through collaboration of developers, wireless operators and handset manufacturers ‘to bring to market innovative new products faster and at a much lower cost’. It is essentially changing the supply chain, with the result being a ubiquitous platform that enables the consumer to have a ‘better, more personal and flexible experience’. This is not an Apple one-size-fits all.
Android’s commitment to open collaboration is opening up a dialogue about the value of closed vs Open systems. If Android is a success it should be interesting to see how Apple react…or if they do.
Centralizing for Customer Service
Originally Published: July 2008
Even though it may seem counter-intuitive the question must be asked: Is decentralization right for a service-oriented business? Orange’s new business strategy in the UK provides an interesting case
Orange is breaking many of the rules established over the last few years by the Telco industry. Under the guidance of their new CEO Tom Alexander, Orange are centralizing their operations in an effort to become more consumer-centric. As part of this restructure, Orange are closing their Indian call centre and re-locating their customer service operations back to the UK, as well as opening 60 new retail stores. This may come as a surprise as it has become common practice to decentralize (in this case outsource) as a means of reducing costs, something which is particularly important in an era of greater accountability.
There is often a fine line between keeping the customer happy and a business operating profitably. The move to decentralize business operations embodies this thought. However, these two competing demands – customer satisfaction and profitability – should not be viewed in isolation, especially when one considers that the longer a customer is with your business the more profitable they are. Customer service therefore is key to profitability, cutting costs here may prove a false economy.
The UK market is similar to Australia, reaching saturation, therefore it makes sense to look after existing customers. When one focuses business costs on acquisition and cuts costs on retention the result is often increased churn; but by investing in a service offering (such as a domestic call centre) not only does one support the most profitable customers, but acquisition through word-of-mouth and during new product launches is enhanced.
Being firmly focused on the long term and the future value of their customers Orange see the cost of moving their call centers to the UK as necessary to the future success of the business.
Municipal WiFi (It’s Free)
Originally Published: July 2008
This is a continuation of the theme ‘free’, but from a different perspective. It raises some likely threats to big telecommunication companies about the future of WiFi (so pay attention). Currently, this is a phenomenon gaining prominence in the states, and it is gradually hitting Australia (see links).
Cities across the US (and world) are adding themselves to the list of places where anybody can access free WiFi (and I mean anybody, no catches). This is a new type of ‘free’, one not being instigated by a corporation looking to sell its wares for access (Starbucks) or funded by an ad supported business model (as with digital music). It is different because its primary focus is not on profit it is rather utilitarian: ‘(to make) high-speed internet access more available and affordable’. What is important is that places embracing this new model of wireless broadband aren’t little and obscure. For example, Texas (Corpus Christi), California (San Francisco), Massachusetts (Cambridge), the Government of Lebu, Chilli, and Pennsylvania (Philadelphia).
This is not something that any of the big service providers saw coming …
This is happening partially because the larger US companies have failed to convert their costly deals with cities into a live network; but mostly because they have not adapted to the ‘new world’ where everyone is a participant (whether they like it or not). For example, in San Francisco EarthLink’s internet deal would have cost the city in the vicinity of US$14-$17 million (this was a deal that failed and subsequently fell through). Frankly, the residents didn’t and still don’t care. Instead they are taking part in creating their own ‘wireless cloud’ for a quarter of the amount it would have cost with EarthLink.
The company which is making it work is a group of volunteers and a startup called Meraki. Meraki is a company set up by two MIT classmates (who also created their own wireless network in Cambridge, MA). How it works is that volunteers house Meraki Minis (or repeaters) that carry the wireless signal around the city. Therefore when someone joins, the network gets bigger (for free). This maybe how wireless broadband transcends to the masses. Interestingly, there is someone funding Meraki, but they are not passing the fee onto the users – probably not a big surprise that company is Google.
The Value of a Baby Boomer
Originally Published: July 2008
Baby Boomers are re-writing what it means to get old. Given that this generation has redefined every life stage as they have experienced it, this should come as no surprise. They are slowly shattering the ‘ageing stereotype’ of their parents as they enter their 50s and 60s through their sheer number and economic power. They are, in fact, becoming more valuable to the market as the rest Australian population starts to feel the effects of the ‘credit crises’. As consumer confidence has fallen and discretionary income put back into the mortgage, Baby Boomers have been an exception to the rule as they have kept spending regardless of the current collective ‘hardship’.
This is all very well and good, but what does it mean to the telecommunication industry?
Essentially it means that there is a core customer who will not be downgrading their spending in the coming months.
Although this industry has been somewhat resistant to the ‘recessionary trend’, this is gradually changing. As food and petrol prices continue to rise, people are being forced to re-evaluate the way they spend and what they are spending on. Although it is hard to specifically cut the price of one’s calls this can be done, through reduced frequency of calls or by changing carrier for perceived ‘better value’. This tightening of the belt has been best evidenced during the week as the Vodafone Group announced that they would be downgrading their forecasts for the coming year. Basically, this indicates that in the year to come the industry will encounter a more challenging operating environment and a less loyal customer.
So where do Baby Boomers fit in?
Although Baby Boomers are saturated in terms of usage in the mobile and broadband product segments, their retention will be important as the Australian market starts to become more volatile. As this generation is not experiencing the same problems as the rest of the population due to super, threshold of income and less probability of mortgage, it is important to treat them in a different way. They should become a core component in retention by learning how to add value to their current plan in a way that will benefit the business, such as selling-on content or up selling on an iPhone etc. If a service provider manages to do this successfully they will keep a customer who will help them in the months to come.
Beyond the Mobile Platform
Originally Published: August 2008
Amazon is an incredibly innovative company that tests waters that other companies are too scared to even touch. Starting out in 1995 as an online book retailer they have become a company that finds ‘gaps’ in the market and ‘fills them’. These ‘gaps’ are not wholly business-centric (or a result of internal politic) rather they are innovative choices only made if they benefit the customer. What’s so special about this company, and has made a lot of their ‘gap filling’ efforts successful, is a dedication to time. To quote Jeff Bezos the founder of Amazon, ‘(when we implement an idea or initiative) it tends to take 5 to 7 years before it has a meaningful impact on the economics of the company’. Of course, like every other company on the planet, they have had products and services that have failed such as their online auction format, so what should one make of their recent deal with TiVo.
After two years of waiting last month Amazon officially finished brokering a deal with cable provider TiVo to distribute on-demand products through a new sub-brand called Amazon Unbox. Unlike a previous version of the product they launched in March where users had to go to their computers to download a movie, music, or TV show to their TiVo box; the process is now fully automated through their TVs (with the TiVo remote control set up for direct navigation through the service). The content costs differ depending on whether the viewer wants to rent (US$2-$4) or buy (US$9-$15). Thus covering not only the domain of an offline retailer like Blockbuster but also developing their offering so it is more competitive than a movie e-tailer like Netflix.
So what does this mean to a telecommunication service provider?
At the current point in time, it looks as though this deal will help make cable what the mobile platform is now for multimedia distribution. Amazon is essentially developing cable’s capabilities to connect with the viewer through an obvious consumer ‘gap’ in the market (one which is existent in the Australian market through IPTV). What this means is that in the near future, and knowing that Amazon won’t abandon this project too soon, this may pose a threat to mobile media distribution. Of course mobile content distribution will always have mobility on its side but one thing it doesn’t have that TV does is environment and an existing frame-of-reference people already have around the technology.
The chance of success for this service has increased as movie and music sales continue to slide, and content providers (film studios, record companies etc) have become more anxious to make up loss of revenue. At the current point in time they are eager to reach the consumer through any new method of distribution that will make them money. This recent deal provides a new attractive outlet. This is definitely something to be wary of, although it does not provide a direct form of competition; it will most definitely refine the way people consumer content.
Mobilising Through Social Media
Originally Published: October 2008
There has been a huge amount written about Barack Obama, some of this has come from marketing journals and magazines. These aren’t political commentary or details on media spend, but rather articles written about Obama’s marketing strategy. Obama has made himself a brand and embraced a political candidate’s worst nightmare – social media. However, this is not about ‘Brand Obama’ (there are plenty of articles about this) instead it questions the underlying premise of Obama’s strategy: Can social media mobilise?
It doesn’t make sense to run a political campaign with a huge online component unless there is a guarantee that these virtual participants will enroll and vote (hopefully for said candidate). As it stands this form of logic holds true as there is not a motivating or self-serving factor making people vote (as nice as it would be to think that politics interests all). For example, ‘Obamagirl’, who caused quite a stir on YouTube with her ‘crush’ video, failed to vote in February’s primary in her home state of New Jersey; showing that virtual participation is not always equal to real life action. This problem is something that political candidate Obama has been quick to catch on to and so too should companies that use social media in a similar way, with hopes of a similar outcome.
A motivating factor in social networks such as MySpace, Facebook or for this example Mybarackobama.com is peer pressure and subsequent social embarrassment. With this in mind, Obama (more likely his marketing people) has set about creating greater transparency on his home social network. As part of a profile on Mybarackobama.com supporters are given an ‘activity index’ which measures their recent active involvement in Barack’s campaign. The index is ranked numerically from 1 to 10 (1 lowest and 10 highest) and is visible to friends and other members. Supporters can increase their activity index by: registering to vote, calling voter lists, hosting events, raising funds etc. The ‘activity index’ works on a peer pressure principle. For example, if a group of friends or family are members of Mybarackobama.com and they see that a member of their circle is only indexing 1, it’s likely the will give that person a hard time about their lack of involvement. Peer pressure (with its high school negative connotations) is a motivating social phenomenon that Obama is using to mobilise his online supporters.
This learning is important to any company marketing their service or product through a social network. If your call-to-action involves the consumer moving from the virtual environment to in store, telephone or even voting poll then creating transparency in the user experience is important. Allowing friends to see their group’s involvement or activity in a given area means that there will be a natural form of peer pressure – even if it is only a comment on their profile. Basically, social media mobilises only when it takes on characteristics and motivations inherent in the ‘real world’ such as peer pressure.
Microsoft?
Originally Published: September 2008
This week’s Spot is about Microsoft and making sense of their recent, publicity generating teaser campaign with Jerry Seinfeld and Bill Gates. After years of being the ‘PC guy’ on Apple’s ads and their disappointing $500 million Vista communications launch (part of Microsoft’s largest revenue generator – Windows) Microsoft have decided its time to accept defeat. This move is rare in the information technology market and more so for a leader to admit to how the public actually perceive them. The question for this issue is: Will this work (and what can we learn from this)?
The game has changed since Apple launched its Mac vs. PC ads two years ago, when it was a David and Goliath story. With less than half of Microsoft’s nearly $1billion budget, Apple managed to rebrand Microsoft as ‘a kind of self-conscious and self-absorbed nerd that is out of touch with the normal lives and needs of its users’. With no retort from Microsoft, Apple has made this a Goliath vs. Goliath issue, where they are just as bad as one another, until now. Microsoft is about to make it worse for Apple (and hopefully turn the whole situation around) by embracing the image that was assigned to them through the characters of Bill Gates and Jerry Seinfeld (others to follow).
Microsoft’s accepting direction is not just prevalent in its communications but is it part of a broader strategy. For example, they are training and creating ‘Window’s Gurus’, similar to ‘Mac Genius’’, in Best Buy dealer outlets in the US; a move almost mocking Apple and putting them in an uncomfortable position. They have reinvented their Vista website making it more usable, created an area where users can upload photos they have taken whilst using their PC’s, and ads through which you can email Bill Gates directly to talk. This shake up is important to watch and learn from, as Microsoft show how a market leader can turn around their image by accepting how they are perceived (not challenging it).
What can be learnt from this?
Basically, you don’t always have to challenge perceptions to win over the market. If a company starts by accepting what their consumers think about them (good or bad) and work to empathize and accept this they will automatically be in a more credible position.
Brand Equity in an Economic Depression
Originally Published: October 2008
Famed investor Warren Buffett understands the value of the brand. As a shareholder in Kraft, Coca-Cola, Anheuser-Busch, Wrigley’s etc, he sees these entities as ‘low risk’ for himself and his company, Berkshire Hathaway, because they have enormous brand equity. Buffett understands that brand equity is important as it means that his investment can sustain its pricing even when the economy goes into recession. To quote Kotler: ‘Great brands are the only route to sustained, above-average profitability’. So the question - if brand equity is a potential buffer to recessional effects, why would the marketing budget be the first place to cut costs?
Obviously in the age of short-term management and focus in delivering interim profit, cutting marketing costs makes the business look good (without creating any instant problems). Unfortunately, the positive impact on the bottom line doesn’t last as cutting marketing costs will eventually erode market share and thus ability to compete on more than price; this is especially true in mature markets where it is easy to be dragged into a price war. It seems that contrary to popular belief, a recession is the best time to invest in a brand. According to research in the UK, investing in brand during recessionary periods can help build market share and make traction against competitors (especially those following the ‘budget cutting’ philosophy).
When looking back on previous economic recessions, although contextually different to the current situation, many now well known brands (and products) chose to invest during a time of uncertainty with big payoff (CNN, MTV, Wikipedia, IBM etc). The most famous example would be Apple, who launched their first iPod in 2001 around 40 days after the September 11 attacks, when the economy and consumer confidence were down. The advantage of investing or maintaining marketing spend during a recession is that a company has the ability to build their brand (or product) in an environment where its competitor are most likely to be cutting costs. This point is especially important in the telecommunications market, where there is fierce competition but the market is so mature that it is a ‘zero-sum’ game. Investing during this current recession can help make traction against competition that a brand hasn’t been able to touch before.
To quote Sergio Zyman, former chief marketer of Coca-Cola: ‘Marketing money is like fuel in a car. You take the fuel out of the tank, the car stops. You take the marketing out of the brand, the brand stops’.
Source: NTC Publications for London Business School, 'Advertising in a Recession', 1999
Early Adopters and New Technologies
Originally Published: November 2008
‘If you please everyone you end up pleasing no-one’, and this couldn’t be truer for new ‘early adopter’ technologies. In marketing there is an acknowledged curve of innovation acceptance, it starts with the ‘early adopter’ and proceeds to ‘mainstream’. A fundamental problem when new technologies launch is that they focus their advertising on the mainstream in hopes of meeting unrealistic early targets. However by doing this they bypass the people that have the potential to be the brands biggest advocates (early adopters). This ultimately raises the question of long-term or short-term product success.
Looking back on now seemingly mainstream technology brands: Skype, Apple, Facebook; they all launched by focusing their attention on the early adopter. For Skype this was someone who was technologically savvy however for Facebook this was college students looking to keep in ‘social’ contact. These early adopters pushed these brands to mainstream through advocacy. Although in theory it is easy for companies to start by targeting the mainstream (dictated by unrealistic predictions of product sales), this group often isn’t ready for the product. They rely heavily on others opinion and the ‘all clear’.
A great example of the importance of early adopters for new technology product success is Amazon’s digital book reader Kindle. Launched in November 2007 with little mainstream communication, it only sold 240,000 units in 9 months (most of whom were early adopters). Through feedback they found that Kindle owners ‘love their Kindle and like to show it off’, essentially they were brand/technology advocates. With this under their belt they are now trying to break into the mainstream by using early adopters as the ultimate sales people. They have done this through a communications campaign called ‘See A Kindle in Your City’, allowing a member of the public (without a Kindle) to find the nearest user and arrange for the ‘early adopter’/advocate to talk to the potential buyer about the product. This has all been facilitated through Amazon’s Kindle website forum. Reflecting upon Amazon’s actions shows that to get a new technology launched takes time and once you have your early adopters working as brand advocates the cost of acquisition is a lot less than advertising directly to the masses.
Where a new technology is involved (such new software or interactive feature) it is important to remember that the best way to educate an audience and generate sales is to start with the early adopters. Although this plan of action doesn’t always fall into a sales plan (due to its long-term focus), its pay off is far greater than appealing to everyone and convincing no one.
Is Mobile Marketing Saving Christmas Sales?
Originally Published: December 2008
Traditionally Christmas has been a lucrative sales period. It allowed high profit margins because customers had to buy presents for their family and friends. In recent years this has all changed. Driven by discounting, Christmas is now a grab for short-term growth.
This year under unique economic circumstances no one is sure what to expect. There is ‘blind hope’ among some retailers that Christmas will give people a reason to pull out their wallets. Given last years growth (UK: +1.4%; US: +1.7%) this is unlikely.
Scattered throughout these ‘hopeful’ retailers are businesses that are taking action by investing in mobile marketing. They are using this platform to make it easier for people to shop their stores (online and offline). In return they expect a higher share of wallet and greater brand loyalty.
The perceptions of mobile marketing have changed overnight in the US. As retailers like Wal-Mart, Target (US), Sears and Amazon choose to leverage the platform and connect directly with customers during the Christmas period. Born from the realization that one of the hardest parts about Christmas is finding the right gift (at the right price), these retailers have created their own mobile tools to empower the customer. For example, Wal-Mart is currently using a text-messaging service where customers can receive information about store categories they are interested in. After signing-up customers receive weekly ‘Holiday Special’ alerts on the chosen category. These messages are linked to Wal-Marts mobile website which allows the customer to find additional information (as well as customer reviews). Another example is Amazon, who created an iPhone application that lets customers find the gift they want. Using their iPhone, customers can send a photograph of a product to Amazon and they will find if they have the item in stock and its price. All stock can be ordered through the mobile portal (unfortunately this is only available in the US).
