Vincent Writes

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Category: Marketing (page 1 of 3)

On Marketing: The business of loneliness

Perhaps it was in the late 60s that smart (M)admen decided that the next great thing is loneliness. Yes, probably before that, loneliness was a topic also, but it was different. The lonely were idealised (think lone cowboys in Westerns or James Dean). Perhaps at that time people wanted to be lonely.

After a certain point, let’s call it the rise of career-orientated male and female individuals and dual household incomes, loneliness became a pain rather than an ideal. Thus came the era of products and services targeted at this market: microwave dinners, TV, speed dating… and why do you think no one cares if you eat a McDonalds meal alone vs. at any other restaurant?

This hasn’t changed much, though we now have an abundance of services for single consumers, from content via your personal computer to couch-surfing. But there is another area that shouldn’t be ignored, that of the dual income market. Here we see the messaging shift from loneliness to making the best of the little time you have. Think luxury weekends, baby creches and other kid-orientated distractions, family-sized sports cars, and … robotic vacuum cleaners (my inspiration is slipping here).

With overpopulated now-not-so emerging economies like China and India, and the competitive pressures of a ‘flat’ global economy, this trend is not disappearing, rather we are moving towards less workers’ protection and a higher burden on and cost of services. Judging by what is happening around the globe, we could be heading one of two directions in the future: an acceptance to live with less on either a physical or spiritual level, or a war that temporarily reverses this trend, but only for the victors.

I’m sorry to head in both a geo-political and a Buddhist direction all at once. I choose to believe that, ignoring the many opportunities that life provides to crawl out from under the rock of humanity, most of us will have to become more efficient with what we have, and I will leave the reader to interpret that in either the spiritual or physical sense.

Taking a marketing stance may seem cynical, but not if you view business as the organisational connection between individuals, problems and solutions. We get into cars that get us to a destination quicker, but the car itself must be built with that purpose in mind. That requires a good understanding and appreciation of both sides of the equation: our consumer need and the services that can help us to reach it at a higher level.

So how can or are marketeers biting into this trend? Making more with less can mean spending less today and tomorrow and the day after, or it can mean spend more to have more, and both are viable perspectives. Spiritually, we are looking for both mind-strengthening activities and emotionally satisfying ones. Think sports and meditative services and on the emotional side, think family orientated services (from public spaces to family movies). Physically or materially, we are looking for one of two things: discounted pricing or getting more for your spend. In consumer electronics, these are the cheap netbooks vs. the more durable MacBooks; in food, these are the discounters like Aldi’s or Lidl’s vs. more energy-bringing “super” foods from (not necessarily) premium vendors.

In a perfect economy, there is perfect transparency and perfect pricing. Sadly, many of these services that I suggest are not perfectly understood and mis-priced. It shouldn’t be a premium service to go meditate somewhere and healthy food that gives you energy and makes you live longer, should not only be found in expensive stores. Conversely, short-term solutions shouldn’t be priced at a discount, because their ingredients are commodities (yes, I’m talking to the Samsung’s and McDonald’s of the world).

Both suffer from non-transparent because the cost or benefit to society is not included in the calculus. But that is a discussion for another day and perhaps someone else.

The new face of Publishing… through Facebook

(…and other visual social media platforms like LinkedIn)

I have long held a philosophical stance about Facebook, as the “social enabler,” or disabler in some cases. Many of its core audiences, me included, struggle with finding a good use case for the platform.

  • Regular users like me wonder what to share (especially in an environment where privacy is more and more valued) and whether your online friends aren’t over-/undersharing themselves.
  • Corporations struggle with integrating it into their marketing mix, especially if they are already engrained into other marketing channels.
  • News seems like the most logical use case for this platform, but comes with some problems as well.

There is a major risk with publishing on a social media platform: it positions regular users on the same level as corporations, publications, and advertising. Everyone becomes the competition.

My social media education happened on Twitter. It taught me to not confuse the newsfeed with an RSS feed, because you would soon lose oversight of the “real” people you were following. As a result, I was a slow adopter of Facebook as a newsreader and continue to be careful. Recently, as a fan of Harvard Business Review on a professional level, and inspired by a “social suggestion” from my friends, I decided to give it a shot after all, and subscribed to the HBR feed. The results were surprising.

It turns out the publication has figured out how to integrate Facebook as a publishing medium. HBR is a monthly periodical, as a print publication, and has both its website and mobile (iPad) apps as online alternatives. I was surprised at the content being shared via Facebook, which both felt relevant and premium (you can buy many of the articles as a PDF), and was infrequent enough not to bother. It takes a discerning editorial team to ensure that both the quality of the writing, the thematical content, and the mix are of a good quality to its audience. Somehow, likely to having a dedicated social media editorial team, HBR figured Facebook out.

It’s an encouraging development, but one positioned on brittle ground for the same risk factor I mentioned above. Facebook, its users and content providers are continually evolving and thus requires continuous attention to the engagement metrics and other qualitative aspects of each shared item. It is clear that social media is an investment, which is why so many companies fail at it. And, more importantly, the return on that investment must somehow be quantifiable also. It’s for every company or individual to figure out whether it is worth it.

What Facebook and other social media platforms must absolutely do is to make using their services more transparent. They cannot handhold publishers and marketeers as they publish on the platform, but they can provide accurate information about how they are positioned for each news item within the overal newsfeed. That, in combination with link tracking, and a both coherent marketing strategy and dedicated social media team, should make a big difference to social media success.

On that even-keeled conclusion, I am still happy to read HBR on Facebook, as well as a limited amount of other news publications (The Big Picture is a good one). I am very interested to see where social media and news reading continues to evolve to, as we are clearly not done.

On Business: The Short Lifespan of “Smart Marketing”

A couple of thing crossed my mind today that I’ll try to intermingle into the point I’m making here. One, a baker that overcharges for a bottle of water. Two, a HR recruitment blog that advises applicants to send a physical letter “to stand out.” All of this is a kind of marketing, at least in the sense of communication. And not all marketing is positive.

The letter definitely classifies as smart marketing. Of course, it’s not just spam. The advice says that the letter should contain a specific pain the applicant is addressing about the company, but the package is “smart,” because it’s different.

Smart marketing only stays smart until people catch on. Hiring managers will read this letter because it stands out, but they’ll get as tired of it quickly when the fifth letter starts rolling in. Smart marketing in this case is an unusual, interesting thing, but not a lasting one.

Back to the bakery. I didn’t go back to it, after the expensive bottle of water. Everything is marketing, pricing and the non-core products that you sell. I can see the rationale behind it: we don’t sell water, we sell bread, but if we do have to do it, let’s make a buck (or two).

The reasoning behind the scenes should really be as follows. We don’t want to be seen as relying on the sale of marginal products, but as standing behind the quality of our bread. We want bread to be the profit drivers because it will continuously push us to make a better product and sell more of it.

All of this ignores the marketing mix of course, in that a business can send out multiple messages in multiple ways. Just like the physical application letter contains consulting advice and is targeted at the right person, it uses many different ways to craft an effective message (maybe). And the baker can of course promote his business in positive ways as well, as this baker did, with 2 for 1 promotions pasted all across the window.

Smart marketing is somewhat broad a term, in that it can mean short-term smart or long-term smart. A short-term smart marketing strategies assumes a highly competitive market and a constant need for change. A long-term marketing strategy relies on sustainable values, such as core-quality, which is often hard to replicate.

 

 

The friendly new world of Publishing

Earlier this year, I visited a Nordic music festival, where I got to know some new artists that many people will probably never be aware of. It’s hard to break out in music, about as hard as writing, I imagine. I liked several of these artists on Facebook, just to be aware of new music releases and concerts. And last week, one of them published some news about a friend of her’s, that’s about to publish her first EP, and was giving one of her songs away for free to download. Of course, I listened to it, and noticed straight away a softness in the music that is so completely anti-pop, that you would never expect to see it published on a big music label.

The conversation has been happening for half a decade now, what social media represents within he cycle of pushing new items out to the public. I don’t think that these things can necessarily be put into a system, which is why the corporate approach of publish, measure, optimise, repeat, hasn’t worked quite so well. It’s just human voices, many of them, saying random things, some of which work better than others, and it’s the building of authority through consistency, boldness, and otherworldness that results in some being heard more than most.

After listening to this new artist’s single, which I like, I wanted more and turned to another artist that did get published more the traditional way. Why? Because I knew what I would get, which is the result of the predictability that comes out of such a system.

We are talking about an art form here, music, but this conversation could easily revolve around the difference between a bag bought on Etsy vs. one bought on Zappos. Do I want freshness and authenticity, or do I want reliability?

My view is that the corporate machine is best when working with existing creations, but not necessarily good at being responsible for creating them. The magic bright ideas that come to you in the shower, usually don’t appear while sitting behind your PC at the office. But the other side of the coin is that while a more bottom-up approach can be tremendously refreshing, innovating left and right, in the end there need to be systems in place that make these creations scale and sustain themselves. Which in turn results into a lessening of creativity or chaos (I write with a smile).

The difference between now and 30 years ago in publishing is that creativity can bubble up naturally, unimpeded by resource and time constraints. But to make it BIG, U2 big, it requires a machinery in place of many moving parts that allow fans around the world to experience what they love up close, whether it’s in the form of a professionally produced album or a sold out concert.  

Consumer insight and the writing process

Self publishing has become such a hip concept that you sometimes wonder why we need those stuffy institutions. Well, wonder no more, because they fulfill a real service by allowing you to focus on creating and they take over the nightmare of selling.
Why is it a nightmare? As I slave over my Nanowrimo work, I am filled with doubt. Am I writing the right things, who am I writing it for, is my work actually something others want to read? 
In a way, splitting the work into blogpost actually achieves a valuable goal. It allows you to split up, measure, and adjust your work to market demand. At the same time, long form storytelling cannot always be produced that way. Sometimes, as you write a chapter, you figure out that the order’s not quite right, perhaps the transition doesn’t make sense and something needs to be rewritten, etc. So perhaps serialised work is not the perfect antidote to the creation vs consumer insight problem. 
On the other hand there are two ways that may be. One may simply be the market effect of consumers choosing the strongest content and not choosing the weaker one. I compare this to the Amazon or Apple App Store market places and rankings, where customers vote with their dollars and reviews. A simple mechanism that costs 30 cent to the dollar as a standard fee.
The second would just be outsourcing to a publisher, who not only selects a book based on estimated market worthiness and then attempts to place the product in front of customers’ eyes. It is not an exact science either, but it often feels like the most viable one when it comes to publishing books that require a lot of time, cost, and uncertainty (risk) to produce. 
Maybe, by my way of reasoning, you can see that I derive much of my thinking from different sectors (high tech, space tech, medical), and try to apply it here. In the end, I just want to understand the raison d’être of the publishing industry and where creators fit into it. 

Structuring creativity for scale & scope

My other title to that would’ve been: “can magicians pull the same rabbit out of a hat twice?” Art, to many of us, feels a little like magic; there’s this uncertainty about what’s happening in the magician’s hat and mind. It’s hard to fathom how a writer transforms an idea into a written narrative, and, in my brief experiences in trying to write longform content, we don’t know whether this narrative was planned or improvised from page to page. 

Before I continue, what does scale and scope mean? It’s a measure of efficiency in production, allowing for both the wide roll out of single products at costs that remain constant or decrease per unit, as well as using synergies in production capabilities to make production of multiple products more efficient. Think of a printer producing a lot of posters without having to buy additional printers (scale) and think of an engineering team being reused to work on new products (scope).   
Writing, as mentioned, is often perceived as an artform, but the truth of it is that like magic, there’s a science and process behind it. Sure, any piece of writing will have unique elements, but the resources used (place, people, time, writing & research tools) do not change that much between different “production runs.” Similarly, capabilities used for distribution, marketing, and sales are also a constant to a great degree. That means that you can set a baseline for the cost of creativity and work at fine tuning that. 
If you read about the workflow of writers, you’ll notice that they build routines for themselves structured around time and place. If you expand that thinking a little, you can see networks of people that surround talented creatives enabling them to not only get out one creative product, but many. This is a comparable network to any creative in any industry, that has found these enablers to getting their content/product out there. 
Scale in writing can be achieved through maintaining a steady output with clear distribution and marketing channels. Scope in writing occurs from repurposing resources, like an idea or even a book into new stories and different media. And by using existing networks and a customer base to disseminate that new content out there, without having to reinvent those wheels. 
I know this all sounded very business like and perhaps generic, but it allowed me to put some of the thinking on this topic onto paper, and of course I hope it helps you too. 
As always, to be continued or TBC. 

Designing books for consumption

Product design should include a solid understanding of the consumer base from day 1, though often, in the creative industries especially, this is not the case. In writing, most people tend to start with the idea of a story (or they just start typing until it develops into one) and just write until the story is complete, before even thinking about who is going to read it. I know that publishers offer advances to some writers, so logically those writers do envision at least one particular customer, the publisher, and it’s the publisher’s job to understand what consumers want. 

But what when this model is uprooted? We all know that as the digital age progresses and the hardware and infrastructure catches up, it allows for the link between producer and consumer to be that much more direct, which allows for speedy and accurate information exchanges, as well as, potentially, direct monetary exchanges, bypassing many of the intermediaries that charge fees and make the feedback loop less efficient. 

Product design should also be flexible in what that product should be. My title of designing books is already misleading, because if your consumer doesn’t actually want a book, the product itself has to change in order to maximise its effectiveness. I mentioned some examples 3 or 4 posts ago, where books are for a particular demographic of consumers; other demographics may prefer shorted serialised content, content in audio or video format, etc. A direct link (or basically a sufficiently information rich one) allows for producers in designing products that consumers want, by engaging in the information exchanges necessary to create sustainable business. 

The next question that arises is that of usable workflows to manage both the creative process and marketing one, preferably without having one eclipse the other. 

TBC.

Minimum viable product in books

Yesterday, I finished my post with the below paragraph — I figure while I have this stream of consciousness, I might as well milk it…
Most writers see their market test as either a publisher or a publishing platform (self-publishing on Amazon or elsewhere). I am more and more of the opinion that this is wrong or at least an assumption (and you know what they say about those…), based on “what others are doing.” It says absolutely nothing about your invention if no one reads it on paper or as an ebook, if your product is placed amongst 100,000 other similar products or if your actual target audience is not targeted specifically. 

I have two experiences that I think relate directly to this. As well as a lot of experiences of failures that relate but perhaps don’t educate. 1. I’ve built a minimum viable product (MVP) in a different sector – hardware technology. 2. I used to blog, which I consider as an MVP product for writing. Both of these have exposed me to some of the complexities of MVPs, because it’s not so much about the minimum product, as it’s also about the minimum barrier to eyeballs.

Placing your “book” on a publisher’s desk (filled with piles of other manuscripts) or self-publishing to end up next to 1000s of other books, may represent your minimum viable product, but a product with a tough market is not necessary the most viable option.

As an aside, all of this made more complicated by the restriction placed upon all of us — the opportunity cost between producing actual content and disseminating that same content in an effective way. In other words, having successful marketing execution, alongside product development execution. If I study to be a writer/painter/engineer/creator, I do not necessarily have the time to study to be a marketeer. But my point is that product development does not exclude marketing, it should be part of that process. Much like a tree falling in an empty forest does not make a sound; it’s a non-event, just like a non-marketed book is a non-successful product.

But let’s go back to how your market, as a writer is developing: we are increasingly less inclined to invest time into consuming written content. We prefer shortform easy-to-digest content, which actually represents an opportunity for you. Instead of investing all of this effort into creating a super long book, why not put less effort into it and instead focus on making digestion easier? Much like the rise of the hamburger, make the bookburger a success. (P.S. replace book by any other media, because I think it applies broadly…)

Tbc.

Matching supply and demand in books

I have trouble both starting and finishing books these days. It’s entirely correlated with the time that I started using computers and smartphones. There’s just a big amount of competition for your time out there and I don’t really need to tell someone reading this blog that.

It’s tricky to find demand for your work and to tailor supply to that as well. Traditional books, if there is still such a thing, are ultra-longform content. But they are also designed to be consumed in various formats – paper, electronic, audio, apps, books-to-movies, books-to-plays. Each of those formats will appeal to a certain segment of your potential audience:

  • paper: the more traditional folk (sorry, traditional folk); 
  • electronic: slightly less traditional, but still not very progressive;
  • audio: niche;
  • apps: hipster or youngster;
  • books-to-movies: mainstream;
  • books-to-play: wealthier or better educated segment.
None of these are scientifically studied. Some or most of these are also segments of segments – the scifi crowd, the classic literature crowd, the vampire crowd, the magic crowd, etc.
For a creator or a creative enterprise, the question is: for my invention, what is the path that the market development needs to take to maximise the sales potential? What is going to attract the most eyeballs and generate the highest cash flow of the choices that I make? 
As with any invention for commercial purpose, you start with a  napkin of an idea, which develops into version 01, and so on, each time manifesting itself into something more tangible and more tailored. I have an idea for a story, I jot it down, I start writing, it turns into a book, and then comes the decision of how to publish it. 
Most writers see their market test as either a publisher or a publishing platform (self-publishing on Amazon or elsewhere). I am more and more of the opinion that this is wrong or at least an assumption (and you know what they say about those…), based on “what others are doing.” It says absolutely nothing about your invention if no one reads it on paper or as an ebook, if your product is placed amongst 100,000 other similar products or if your actual target audience is not targeted specifically. 
I know I need to expand on that last sentence more, but unfortunately I’m out of time and also I don’t yet know the perfect answer for it. Tbc…

Google’s NEW New Media Strategy

It came to my attention that Google is killing Feedburner (well, starting with Adsense for Feeds), which made me think about RSS, new media dissemination, and the role of new new media (yes, that’s two new’s) in Google’s and perhaps the media world’s thinking.

My ideas/hypotheses:

  1. RSS, while becoming more mainstream, never really bridged that gap
  2. RSS, which stands for Ridiculously Simple Syndication, enabled media to become free (in the locational sense), but it also represented a loss of control for its owners.
  3. Google Plus is Google’s way to increase engagement AND keep media entrenched within the Google ecosystem.

To me, hypotheses 1 and 2 are not proven at all. No. 3, closed platforms, is a controversial topic and will require a longer answer.

1. The acronym for RSS is a clear indication that it does not suffer from being too complex or irrelevant. Either in actual technological terms or in spiritual ones, it is engrained in most services we use today. Replace your favourite RSS reader by Facebook, LinkedIN, Twitter, Google Plus, and you get the same thing. However, as some of us early adopters found out the hard way, these services are not quite as good at managing your hundreds of syndicated feeds, as an RSS reader with categories/folders is.

2. To come back to control, syndication is  not a new term in terms of media, at least radio, TV, and newspapers have used it extensively, albeit under different commercial terms than RSS really allows. But the benefit of disseminating your content to an audience as wide as possible seems, to me, to outweigh the costs, particularly for advertising-based business models.

3. Google’s strategy, much like Microsoft’s, is by-and-large a me-too strategy. From Android / Windows (no longer) Metro vs. iPhone to Google Plus vs. Facebook / Twitter, Google seems to be chasing eyeballs and a closed platform is not a monetizable one. In terms of social media, Google failed to make its advertising deals with Facebook, and Twitter is more or less employing a different business tactic. So, Google Plus came to be, as a driver for richer interactions, longer attention-spans, and more ad-clicks.

What is Google Plus? It is definitely not Facebook or Twitter, but rather grown out of Google’s origins. Google needed an alternative value driver fast, and it thought to do so by simply integrating all of its services, as far as possible, into one. Which would be Search, Blogger, Google Reader + RSS, as far as I can see.

To a publisher, it represents more exposure, at least I noticed that my Google Plus appears prominently on the right of the Google Search when ego-searching for my name (though I believe it requires you to have a G+ account). And if that is the effect, why would you need to publish an RSS feed? The answer is, sadly, that you do not, though luckily it is so simple that many geek blogs will keep doing it.

My guess is that Google Plus is not so much about closed platforms, as it is a survival technique against other platforms which are by-and-large kept closed (Facebook, Twitter, LinkedIN). Google is in a good position to measure whether or not RSS plays a vital role in this process. It clearly isn’t enough to keep monetizing it, but my guess is that Google will keep it around because it doesn’t cost them any effort at all.

RSS has allowed websites to communicate with each other, sometimes in unexpected ways (think podcasts), and I certainly hope more innovation takes place in this area. A vanilla RSS feed may already be part of OLD New Media (Blogs, mainly), but its spiritual prevalence in what is happening on the Internet today is tremendously exciting. As such, I hope it sticks around!

Some initial impressions about Zara & H&M

Zara versus H&M.jpgTime for a wee break. In the last week, I’ve been researching Zara and H&M a little, to better understand the retail-sector and the fashion-segment. I’ll probably have to do a follow-up to this post, as there is lots to say about both businesses, but here’s some initial impressions, nevertheless.

First off, H&M appears a lot more clean in its approach. Judging by the annual reports alone, H&M not only has a 2007-edition (Zara is only up to 2006), but it is also only 85 pages long (presented in an eco-friendly 2-pages-per-side way), while for Zara, or actually Inditex, it’s mother-company, the annual report is a stunning 450 page long!

Now, that’s really not all that surprising, as Inditex is composed of a number of companies, and it is extremely vertically integrated, while H&M employs the Nike or Apple model—it designs and it retails, but it doesn’t produce.

Why this is so, I can only guess, is due to their origins. Inditex comes from Spain, traditionally a low-waged country, while H&M is Swedish, not a low-waged country. Similar to IKEA, I imagine it was an economical decision to outsource most of its supplies.

It’s very hard to separate Inditex from Zara, as both are founded and owned by the same person, Amancio Ortega Gaona, Spain’s richest man. Zara has been in existence since 1975. H&M was founded by a Swede, Erling Person, in 1947, who ran the company to ca. the mid-90s, but which has continued to be a family firm.

Their business-philosophies are fairly similar, a low-cost, high-quality approach to fashion, as opposed to traditional brands, where quality most often equals price.

Zara made lots of headlines with its extremely high turnover of products—it produces around 11,000 items annually (as oppsed to 2,000-4,000 for other retailers); 15-20% produced before, 50-60% at the start of the season, and the rest during. If a product fails to do well, it is usually removed after a week in stores.

H&M made headlines with its celebrity-marketing, which is noteworthy, as Zara has virtually no marketing. Instead, because it has such a high turn-over of goods, customers tend to visit it more often, expecting new things—an average of 17 times per year vs. 3 times for other stores!

Both employ mostly a wholly-owned retail-strategy, except in countries where this is not possible. And both are very advanced in their use of IT to manage logistics and production, which is definitely seems to be a key-characteristic of delivering fashion quickly and find ways to decrease costs.

H&M’s largest markets are Germany, Sweden, the USA, Spain, and the Netherlands (in terms of sales). For Zara it is Spain, France, Germany, and Mexico (in number of stores).

That’s all I can think of in 30 mins or less…

Interlude: Copyright or the *Right to Eat*

copyright right to eat.jpgRead it on Tech IT Easy!

Coke Zero no.1 in the Netherlands

According to Distrifood.nl (Dutch) the “ man’s cola” showed a nice profit this last year, making it the top new introduction to a brand in 2007.

Retail - Coca-Cola Zero beste introductie in super.jpg
(Source picture: Elsevier.nl (Dutch))

I only point this out, since Coke Zero is one of the first food-related topics I wrote about on Tech IT Easy; a, fairly clear, signal that it was time to “spin-off” to this blog.

Interlude: Top-bloggers’ competitive advantage

supergeek-1.jpgRead it on Tech IT Easy!

What a book on Ahold is teaching me

Albert Heijn AHOLD.jpgJust a short tweet.

I’m currently reading a Dutch book on the 2003 crisis at Ahold, but which is actually a historical account of how the corporation came to be. A couple of things I found interesting:

  • Ahold actually stands for AH (Albert Heijn) Holdings
  • We all know that things are cyclical, but it was interesting to read how a recession and high oil prices were a challenge that Ahold had to face in the 60s-70s, and how they managed to survive.
  • In order to inspire Dutch people to shop more, they introduced a financing scheme for fridges, which people couldn’t afford at that time. General Motors did a similar thing to help people afford their cars; seems like an interesting way to “upgrade” an economy.
  • The fear of a socialist government drove Albert Heijn to look outwards and form Ahold (similar to why IKEA decided to globalise also).
  • One of the consequences of politics at that time was the board of directors, meant to provide impartial guidance and represent the workers.
  • They made extensive use of consultancies (often McKinsey) whenever they decided on a strategic trajectory.
  • One of the directors was a big fan of Harvard Business Review 🙂
  • They use the US as a source of knowledge on how to design their supermarkets. Later on, moving to the US was also seen as a way to increase that learning, as well as a new revenue-source.
  • When AH moved to the US, they also brought their own ideas, like, eh, advertising (a terrible, terrible idea).

That’s it for now! I’ll go into greater detail at a later date.

Tasteless T-Mobile

It’s about a week before my birthday, and (Dutch) T-Mobile, as they do every year, decided to send me a gift. And, just like every year, I pretty much throw it out a minute after opening it. This year it was a pink tablecloth with joyful crap written all over it, last year I think it was an inflatable window-decoration, pink also, and I don’t remember what it was before.

There’s two reasons, why I respect T-Mobile’s gesture: one, they make an effort and I appreciate the gesture; and two, they combine their gesture with marketing, which I respect from a business-standpoint.

That said, everything else about it is idiotic. I’m 30 years old, they know this, and I’m seriously not considering using a pink table-cloth. From my phone-patterns, they should also know that I’m not planning on throwing a big party. Had they bothered to do a simple Google-search, they would have known I run a few blogs and decided that this would be a better way to reach me.

They should have given me free cinema-tickets instead. Their marketing-value from the table-cloth is zero because I won’t show it to anyone, and am instead calling them tasteless.

If they had given me a cinema-ticket, I would have maybe scanned and pasted it all over this blog, thanking them. At least a 100 people would’ve read about it and thought about subscribing to T-Mobile. Instead all they now see is this:

Welcome to the internet, T-Mobile.

Should the platform for interacting with your customers be "open" both ways?

These next few weeks, my posting-rhythm will slow down due to personal issues, sorry about that. It does however feed into this topic here.

Premise: A couple of things happened these last few days, which I think are noteworthy. The Zuckerberg-interview on SXSW got slaughtered by the twitter-crowd (though there’s a human behind every trigger), and which is an example of a BAD interview. There’s Steve Balmer, who came across as both human (sympathetic) and capable, an example of a GOOD interview. And there’s John Battelle, who wrote two good posts on that every business is a media-business and every business should find a way to engage with its customers.

It’s all about PR of course, and somehow some people got it into their head that social media—blogs, social networks, web-sms (my term for Twitter, Pounce, Jaiku,etc.)—is a good way to relate to the public. The problem, if I may call it that, is that these are two-way conversations between people that are essentially observers: users + media. And that, as the Zuckerberg-interview shows, when users + media get angry, they get ANGRY. Now, you could argue, bad publicity is still publicity, I just consider it disruptive.

skynet.jpgBusiness, in my opinion, is two things: a machine that produces output, and engineers that seek to optimise the machine and increase its output. Arguably, user-feedback is useful for tweaking the machine to perform better, and optimally get more users to purchase its output. And outward PR (marketing) also means that more people are aware of your great machine and want the output. Ah, machine-analogies, gotta love them.

Just like the life-cycle-model of a product, which evolves from slow to strong growth, to maturity, and ultimately decline, our machine is very susceptible to tweaking at the early stages, can produce extra output, etc., but ultimately reaches a saturation-point. The same, I believe applies to user-feedback and marketing. The return on investment levels off after a while.

You have the PR, which is the interviews and other kinds of marketing, and there’s the user-feedback, which should be restricted to the product-level. And, aside from the life-cycle-model, there is general a limit to the value of both. You don’t want a mob disrupting your interviews, no matter how bad they go. You don’t want a mob disrupting your business, period, unless you’re developing something like a nuclear weapon.

What I’m essentially arguing against is that companies should be 100% social. They should be social enough in order to improve their products and let the people know about them. Should they engage in a two-way conversation? Only if it’s directly product-related or your business is bad for the environment (arguably a government-issue), should you engage and customers should vote with their wallets. Note that I’m referring to business-PR here; individuals can blog about whatever they want, if you ask me.

There will always be the “backroom-talk,” the social-media people who have opinions on anything, from using Plaxo-scripts to milk Facebook-data, to 17+ ways on how you should (not) run your start-up. And there will always be “Skynet“—the realm of the machines—which have to keep running because social media will not put that food on your table, the farmer will.

This somewhat-cynical article will NOT be mirror-posted on Tech IT Easy tomorrow

When new business devopment is logical and when it isn’t

new business development retail.jpgWhen I first wrote this post this afternoon, it was really long. After cutting it a little it’s still really long. Sorry about that.

A lot of people I know from uni are into this thing called New Business Development (NBD). It makes sense, since it’s the title of a course we studied together and it was absolutely the best course I’ve had in my life. Around 60 hours of hell per week for 2-3 months, but one hell of a ride too.

NBD is a necessary mechanism for when your core-business is stagnating. Let’s say you have a good high-volume business, but competition is hammering you with low prices. If you can find a new business opportunity that allows you to make money differently, preferably at high margins, it’s a good business opportunity. If it’s synergetic with your core-focus, then it’s an excellent business opportunity. Three small examples I stumbled across these last few days come to mind.

1. Bookstore + café. Verdict: logical
Buying books is a luxury. They serve no real purpose (unless you want them to) and are generally aimed at price-insensitive people. It is also a fairly slow sale. You are selling information, people are swamped with information, and it takes them time to make a decision. Sometimes… not always. I think time + the amount spent on an item also correlates positively, up to a limit.

That combines well with a café. The luxury-aspect allows you to charge more in cafés as well, meaning higher profit margins. Cafés lead people to relax and spend more time in bookstores, meaning they will likely purchase more books too. Combining the high traffic of price-insensitive consumers together with high profit margins and you have a good business. Also, it’s a great way to compete against online-retailers, who are not able to add the atmospheric value.

2. Fruit-vendor + fruit-shake stand. Verdict: logical
Fruit is generally a low-margin product. The fruit-vendor in question sells 5 KG of Spanish oranges for €2. You can charge more for fruit-shakes; To the consumer, they taste good, represent health, and require very little in work (all emotional values = higher price-insensitivity). The fruit-retailer sells an orange fruit-shake of 0.5 litres for €2.50. Assuming that’s about 1 KG of Spanish oranges, that’s quite a lot more profit than €0.40 would give you. But of course there are other considerations.

The fruit-vendor is located right in the centre of Rotterdam on the busiest street. Likely the cost of renting a place is expensive, so is the added cost of producing the shake. The fruit-vendor also competes with a fruit and vegetable market, located a few hundred metres away, and a supermarket, 50 metres away. And his new business competes with other fruit-shake stands. What makes this combination work?

The higher profit margins for convenience-fruit-products, combined with high volume of people passing by is good. It also persuades investors to loan the money for the fruit-shake machinery, which they would probably not do for a low-margin business in a less favourable location. There’s a lot of efficiency also; fruit is sourced from the same suppliers, so are packaging-materials, and the retail-space acts as a warehouse. Because fruit is cheap and the retailer has a large selection, he can charge lower prices than the competition and offer more variety. And he enjoys high profit margins even if the volume of fruit-purchases is lower because of the price-competition from the (super-)markets.

3. A eurostore + scooters. Verdict: illogical
This case is a little more complex and contextual. A year ago a eurostore, which is like a dollarstore—a shop offering a great variety of goods at low prices—started offering scooters alongside their regular products. They quickly abandoned the experiment and I have a theory why.

Likely this deal came out of partnership with scooter-retailer/-importer. The eurostore was in a good location with lots of traffic (good for the scooters) and the scooters would give it much higher margins than their regular products. Seems like a win-win.

Consumption of “euro-“goods is different from that of scooters, however. With the first, people expect stuff to break and don’t come asking for a warranty. They just buy another. Buying a scooter or anything over a certain amount is very different. People expect extensive information, they may want a test-drive, they certainly want a warranty, and after-sale support.

Since the eurostore is what it is, a store with low margins, this kind of service is out of its realm. It ends up referring customers to the actual scooter-retailer, and very likely the purchase happens there also. Unless you have a contract that specifies this eventuality, gone is the alluring profit-margin. And that, as they say, is that.

Final thoughts
High traffic of goods is a good basis for new business development. It means you have a customer-base to which you can try and sell other products and services, hopefully at a good margin. Location and demographics are important also. Both the book- and the fruit-retailer were well-located and had access to a good demographic, allowing them to sell at high margins and high volume. The eurostore was only well-located. Synergies are vital. For the bookstore it was consumption-pattern and price-insensitivity; for the fruit-vendor it was offering essentially the same product in different packaging; for the eurostore there was little, or rather, none.

Isn’t new business development fun? And was my analysis correct?

Direct marketing value vs. referential marketing value

As some readers may know, I’ve both read and commented on Malcolm Gladwell’s Tipping Point, and found it an interesting book to think about the nature of communities and how certain individuals or groups of them are more influential in passing on ideas than others. That said, while I believe that such “influencers” exist, also from personal experience, I know fairly little about the science of it.

Similarly, Duncan Watts a research scientist at Columbia, working at Yahoo, questioned that principle, asserting that news travels fast, through whatever type of individual. I have no doubt that Yahoo has amassed vast amount of data on what source of del.icio.us bookmarks receive the most clicks, etc., and that the nature of the internet allows even the lowest of the lowest content-provider or -mediator (e.g. yours truly) to lead people to news.

A recent HBR-article gave me some insight into the complexities for companies to measure the value of such referential actions, something they call Customer Referral Value (CRV). It is calculated by estimating the number of successful referrals made by a customer, but differentiating between new customers that came because of his/her referral, and those that would have come anyway. It’s a fairly complex formula and requires some extensive market-research, but you can find a good overview in the HBR-article.

This is opposed to a customer’s lifetime value (CLV), the traditional way of measuring the value of customers, which looks at the amount that the customer’s purchases contribute to the companies operating margin, less the marketing costs to him or her, and projected over a certain period of time.

Using this methodology, the authors of the article measured both the CLV and the CRV of 9,900 customers at a telecom-company and came up with following results:

customer lifetime and referral value HBR.jpg

I added the totals myself, because I thought those would also be interesting. What you can see here is that those with the highest CLV also presented the highest total value to the business, though CRV added considerable value also. What’s also interesting is how these are distributed. The high value shoppers added relatively little in referential value, and only in the medium-levels do we see a high amount of CRV.

Through three one-year marketing-campaigns aimed at the high shoppers with low referential value, the medium CLVs with high CRVs, and the low of both, the company tried to stimulate the customers with lower values in either segment to do more, either by spending more or by referring more. The result was a 15.4 return on investment on the marketing-campaign, meaning that for each dollar spent on marketing to customers, $15.4 was gained in revenue.

Clearly, I could say more about how the authors went about it to make these kinds of gains in both CLV and CRV, however that’s why this nice article was written about it and I encourage people to check it out if they’re interested.

Are there implications for the Gladwell vs. Watts fight? In my opinion, either could be right. What Gladwell has merely done is open our eyes a little towards this whole viral marketing-thing, though certainly some companies were already busy with it. And what Watts is pointing out is that there is great value in building on top of existing networks, something I’m sure the telecom-company benefited from also. The greater lesson here is to look beyond the CLV of a customer, though that already brings a high value to companies, and focus on methods of stimulating word of mouth in innovative ways. How that is achieved depends on the type of business and the networks that it can use to communicate with its customers. Certainly, Milner cheese, which I wrote about a few weeks ago, offers one possible answer. Update: and so does the recent marketing-move by Etsy on Twitter.

This article is mirror-posted on Tech IT Easy.

The role of the internet for the retail of *physical* goods.

One of the stories, I covered last week in my links, uncovered an interesting statistic. Only about 3% of retail sales in the US happens online. I don’t think these stats are at all coincidental. While I see a bright future ahead for the online retail of media-products, I find that what the internet cannot provide, is the “closeness,” that is sometimes needed for evaluating certain types of goods, like food and clothing. I have commented on this before, implicitly, with a post on the web as a third place, and about the lack of cohesion that Facebook provides.

At the same time, as The New Yorker story reports, what the internet has changed is how we shop; it is much easier to research and comparison-shop than it was before the internet-days. A survey by Accenture found that ca. 66% of those surveyed compared products online, and another study showed that the internet played a significant role with ca. 75% of electronics purchases.

IInnovate has an interesting podcast interview with Scott Dunlap, CEO of NearbyNow, which has come up with an interesting way to exploit the informational advantages of the internet and mash that with the qualities of physical shopping. Following short video shows how their service works:

Clearly technology has evolved a lot in the last few years, making this possible. NearbyNow works via the web and via mobile. I’m not sure if they are using any location-tracking & matching services, but certainly they are heading in that direction. On the retailers’ side, there is plenty of technology that makes this possible also. Electronic inventory and point of sale systems allow both for the checking of stock-levels and for consumers to reserve items to be picked up and tried on at a later date.

One issue that entered my mind, is that of efficiency. The way NearbyNow operates is through malls in the US, most of which are, as I found out, owned by 6 major companies across the nation. US’s scale-economies win again! In Europe, the situation appears a little different. Culturally, linguistically, technologically, and legally, it is a much more fragmented market, with far fewer malls also, and that may make it difficult for a unified service like this to operate as efficiently as it would in the US.

There is also the issue of too much transparency, which is worrying to some retailers, and addressed in the podcast-interview. But what does seem certain is that this is exactly the type of service that consumers value, and as such one that any consumer-centric business should encourage.

Will a service like this ever replace shopping in its entirety? No, I’m essentially betting my future that there are plenty of qualities *real* environments will continue to offer over virtual ones. But there is no reason, none at all, to try to integrate the good qualities that the web does possess—information at your fingertips—as elegantly and effectively as possible into those experiences.

This article is mirror-posted on Tech IT Easy.
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