The world’s largest relationships platform

The funny thing about all the talk about the revolution in marketing is that it generally hasn’t taken into account that every major marketing communications channel that has ever existed has basically been a broadcast channel. Even on the Internet.

The implications of this are pretty straightforward. It’s hard to shift from a broadcast mentality to something else if the opportunities to do so are limited.

Facebook, on the other hand, represents (for all it’s recent travails) the world’s first mass relationships medium. The problem is that from a marketing communications perspective I’m not entirely sure they’ve figured out what to do with this yet.

Advertising on Facebook today is a surprisingly weak proposition. I’m not really surprised that GM decided to pull theirs.

You have essentially two choices:

  1. You pay for display ads that live off to the side and that few, if anyone ever click on. Supposedly highly targeted to people’s preferences, I’ve yet to see one of these that made any sense whatsoever to me.
  2. You piggyback on an individual’s “like” of your brand, message or product and this becomes a sponsored “story” which in effect becomes the ad creative. This is very innovative, and Facebook claim a much higher recall rate for this kind of messaging because it comes from a “friend”. My belief, however, is that this recall will rapidly decline as people begin to realize that their ‘likes’ are being used for this purpose.

The problem with both of these approaches, however, is that they do little or nothing to reinforce the relationships strength of the platform. Ironically, both methods are locked into a broadcast mindset. And worse, neither of them add any real value to the consumer. (And arguably the newer ‘sponsored stories’ approach does the opposite)

As a direct comparator, the reason Google Ad-Words is so effective, so popular and such a huge revenue driver for Google is that it absolutely leverages the underlying strengths of the platform. When I am doing a search, I am specifically interested in a topic. To have targeted advertising based on what I’m looking for makes perfect sense. To have these ads appear as innocuously and helpfully as they do is possible the smartest UI decision Google ever got right.

Facebook today is nowhere near having their equivalent of Google Ad-Words.

On Facebook, the most impressive marketing R&D is actually being done by the brands themselves and not by Facebook as such. To take just a single example, I’m particularly impressed by what Ticketmaster launched in January.

Essentially they are connecting the relationship dots. They recommend upcoming shows based upon your Spotify listening habits, they allow you to share shows you want to go and see, as well as shows where you’ve already bought tickets. If you’ve bought tickets, your friends can see where your seats are and buy their own tickets for seats nearby. And vice versa. All from within the Facebook platform.

Not surprisingly, Ticketmaster state that this has become an incredibly powerful platform for them, with significant ROI.

This is just a single example, but a very good one, of a brand leveraging the underlying relationships strength of the Facebook platform in a much more effective and consumer friendly way than Facebook itself has.

Worryingly for Facebook, the tools Ticketmaster use to do this are currently given away for free. Their income only coming from a percentage of the on-platform sales.

The joy of this approach is that for the first time we are creating advertising that gets close to Peter Drucker’s ideal of marketing that gets a customer ready to buy, rather than marketing designed to sell.

And this is the crux. Rather than the broadcast mentality, what brands increasingly need is the ability to leverage the relationships potential of Facebook in ways that add value to their customers and that makes relevant purchasing behavior more convenient. Do this well and everyone wins.

This would suggest that the future of advertising on Facebook should lie less in solutions rooted in a broadcast philosophy, and more in solutions rooted in a relationships driven one.

The great thing for them, of course, is how many brands are already building on their platform and essentially engaging in R&D behavior on their behalf.

Of course, the need to do this is not just because the existing advertising approach has limited potential, but because the existing advertising approach doesn’t work at all on mobile. And mobile is increasingly where people are choosing to access the Facebook platform.

Put simply, the mobile environment demands a shift in mindset. And while the details are a topic for a different day, I’d argue that the mobile environment should accelerate the shift from a broadcast to a relationships mentality, rather than slow it down.

But we’ll see where it all ends up. I’m pretty bullish on Facebook to succeed. They’ve overcome every previous obstacle, so I hope their current troubles don’t lead them down a more short-sighted path.


Why Marketing Should Be Your Friend

I have a soft-spot for Box. I think Aaron Levie and his team are building a really interesting and valuable business. One with a simple proposition that is succeeding against multiple 800lb gorillas in an increasingly competitive cloud storage and sharing environment. Impressive stuff.

One of the major reasons they’re succeeding is that they’re really smart marketers.

Now, I know this statement is going to be about as popular as passing gas in an elevator for some people, but please bear with me for a second.

Lets start by heading back around 50 years to quote the late, great, Peter Drucker:

“The aim of marketing is to make selling superfluous. [It] … is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy.”

The final sentence here is key. What Box have been so good at is creating customers who are ready to buy.

They do this by getting individuals to sign up for a free Box account, thereby familiarizing themselves with a product type they’d never considered they needed before. Once there is a large enough set of individuals from any one organization using (and demanding) the product, the Box sell to the enterprise buyer for that organization becomes as easy as saying “why not buy a license so that you control the use of the product your people are already using anyway? Secure and managed for you, no change in behavior for them.”

While the Box product is great, the above approach has nothing to do with product and everything to do with marketing. In Drucker’s words, they’re creating a customer who is ready to buy. And if you consider how conservative enterprise IT buyers have traditionally been, this approach is pure genious. In fact, in hindsight, it may have been the only way for them to succeed in the enterprise space.

Of course, I recently saw an article with the following headline: “How Box built a multi-million dollar business without spending a dime on marketing”.

The truth is that of course Box spent money on marketing. What they didn’t spend money on is advertising. Instead of going out there and spending on media placement, they gave the product away for free. Giving the product away for free is in fact a marketing cost. The revenue you forgo up by giving the product away for free is a pure cost of customer acquisition.

The difference, and why this really matters for startups, is that money foregone is very different from money spent. If you have $10m to spend building a product (and a business) you’d obviuously be foolish to spend that $10m on advertising. You probably can, however, afford to give away $10m worth of free product (particularly since the marginal cost per unit in the digital environment is generally very low). In effect doubling the available budget for your business. $10m on the product, $10m on customer acquisition. Navigating this course is exactly what Box have done so well.

Looking forwards, we can look again at Drucker to find another nugget of marketing wisdom:

“Because the purpose of business is to create a customer, the business enterprise has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

This quote is again important when we look at the direction Box are innovating in. A recent article stated that they are working with their clients to create cross-platform solutions. The unmet need is simple. The modern day enterprise environment is multi-platform (particularly when we take mobile into account). However, the major cloud competitors all have their own platforms they want you to use exclusively, meaning little or no interest in building cross-platform solutions. (As cross-platform solutions mean lost revenue for them)

By working with their clients to innovate cross-platform, marketing is in fact driving product innovation for Box. Not marketing as advertising. But marketing as value creation. Marketing designed to create a customer by creating a product that will, in effect, sell itself.

Unfortunately, a fundamental misunderstanding of what marketing is has become pervasive today, particularly in this startup space. Instead of value creation (creating a customer) many people see marketing as a pure cost (selling me crap products I don’t want). And while this may be true for some, particularly some of the biggest advertisers, the advantages of marketing as value creation are so strong that we should be careful not to fall into this mental trap.

My advice for anyone who wants to replicate some of the success of Box is simple. Get past the idea that marketing is your enemy. Instead focus on how you will create a customer, how deeply you can understand this customer and how you can create a product that meets their needs so well that it makes selling unnecessary.

Get this right and you too will be a great marketer.

Oh, and everyone should try to read Peter Drucker if they can. He said it better than I ever could a very long time ago.

Collaboration. It’s like Prozac for corporations

The overwhelming meme of the moment is that collaboration is the new key to value. It will cure us of our sins. It will change the world.

All the challenges of innovation, marketing, brand, agencies and of business in general will be solved if we can all be just be that-little-bit-more-collaborative.

The problem is that it won’t work. Collaboration creates compromise and compromise blunts the edges of the brilliant.

Collaboration is the corporate equivalent of Prozac. By eliminating the extreme lows, you also eliminate the extreme highs. Which is a really big problem if you rely on those highs to cut through and make a difference.

There are two aspects of the idea that collaboration is the answer which are flat out dangerous:

  1. Collaboration will spare us the need for more radical organizational surgery. I’m sorry, but that’s a pretty wrong-headed way to think. A business landscape that has shifted radically doesn’t need collaboration between the now-defunct structures of the past. What it needs are new structures that adequately meet the new needs of the market and correctly align the incentives of all participants.
  2. Collaboration will spare us the need for real expertise. This reinforces today’s dangerously populist view that expertise is no longer necessary. That in a world where everyone can invent and create, that we no longer need experts in invention or creation. Yet look at the fruits of this. Have we seen greater creativity or invention from the explosion in crowdsourced advertising? In a single word, no. Have we seen an amazing product created by a crowdsourced team of consumer advocates. Again, no.

In fact, what we tend to see are pretty basic derivations of existing themes rather than brilliant departures.

While might be an interesting example of collaboration, it isn’t because it will change the world. Rather it’s because it gives Starbucks a roadmap for incremental improvement. This fundamentally isn’t invention, it’s a beautiful new form of customer driven TQM.

Of course, this shouldn’t surprise us. After all most of the world’s most amazing inventions and inventors were written off as crazy before they became successful. And let’s not forget that a hell of a lot of them didn’t play well with others.

Call me old fashioned, but I actually think expertise still matters, vision still matters, leadership still matters, risk taking still matters and brilliant individuals and their brilliant ideas fundamentally still matter.

Now, of course collaboration is necessary to get things done. I’m not advocating on behalf of the brilliant asshole here. Instead, what I’m saying is that collaboration alone is not enough, it’s not everything. While collaborating nicely with each other might feel good at the time, like Prozac it won’t fundamentally solve any of the tough problems on it’s own. That still requires vision, guts and brilliant people.

Let’s face it, the iPhone, so ironically beloved of the advocates of collaboration-as-the-answer is patently not the fruit of collaboration. (That would actually be an Android phone. Probably running Cyanogen Mod) No, the iPhone is the fruit of single minded leadership and a highly performing organization clearly focused on an uncompromised end goal.

And that’s what it would be great to see more of out there. More people prepared to get off the corporate Prozac, admit that the benefits of collaboration might in fact be limited, and instead choose to focus their energies on coming up with things that are truly brilliant.

If only I could do it myself. Unfortunately, I’m stuck with trying to be a good collaborator…



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Branding In An Inverted World

Thinking about the landscape for brand building today is a bit like looking at an upside down map of the world. There are lots of things you already know about it. Countries, continents, oceans and seas, but at the same time everything looks quite unfamiliar.

Navigating this new and inverted world means you have to look at things very differently and try to understand the forces that are driving the change.

One of these forces is so fundamental that it actually enables many others. I describe it as being where the traditional information asymmetries have been inverted.

Put more simply, while we as individuals used to have less information than brand owners, today we often have more.

Intuitively we all know the truth in this. For an easy example, just think about how buying a car has been transformed in recent years. Most car buyers today walk into the car dealership with more knowledge of the car they are considering than the dealer does – from how powerful the engine is, to how reliable it should be, to the best pricing deals within a 20 mile radius, to how many of their friends think it’s a great car.

What is less understood is that this traditional information asymmetry has in fact been the foundation of the past 50 years or so of marketing activity and brand thinking.

In the past, the cost of information was high in terms of both time and money. Today it is free. When the cost of information is high, you’re not likely to search it out very often. This reality created the concept of the sales funnel. This foundational assumption holds that a consumer has only a limited number of brands they are likely to consider for any purchase. Depending on the value and emotional significance of said purchase, they will only conduct deeper information searches within this pre-existing consideration set. If we use our car example, the assumption would be that a consumer might only consider from within a subset of the total choices on offer at their price-point and car type, for example Chevy, Dodge, Ford, Chrysler and Toyota and as a result, exclude such brands as Honda, Hyundai, Volkswagon or BMW.

In this world the use of advertising spend and promotion creates a barrier to entry and an exclusionary force preventing new brands from entering the consideration set. Historically, having this power has at times allowed inferior products from better known (and hence considered) brands to triumph over superior products from lesser known (and hence not considered) brands.

However, as David Edelman noted in the Harvard Business Review the assumed funnel no longer exists. Instead the consumer today is constantly flexing their consideration choices throughout the purchase process, sometimes increasing the number of considered brands, sometimes decreasing them, and sometimes changing their minds at the very last minute. He calls this new mode of purchase the Consumer Decision Journey, and the article is well worth a read.

When Fred Wilson of Union Square Ventures stated that “I believe that marketing is what you do when your product or service sucks” I’d say it was this old world that is currently breaking down that he was describing.

Living in an inverted world where the information search is free and the traditional sales funnel no longer exists means brands now need to consider some very different things:

1. That loyalty is something to be earned daily
It isn’t that consumers have intrinsically become less loyal. Instead, the elimination of cost (in money and time) from the information search has increased their consideration of other brands with potentially superior products. In this world a brand owner needs to consider what they can do for that customer to earn their loyalty on a daily basis, and not simply assume that past purchase behavior will translate into the future.

It’s no surprise that Apple, Amazon and Zappo’s (who Amazon purchased) have created rabidly loyal customers at exactly the same time as other have bemoaned the decline in loyalty. In each case, their strategies for earning loyalty have focused on consistently delighting their customer. For Apple, this is through building innovative and desirable new products supported by Applecare,  iTunes and the App Store. For Amazon and Zappo’s, this has been through superior customer service and customer relationship management.

2. That inferior products, no matter how strong the brand, won’t succeed
Just ask GM and Chrysler. The days when an inferior product from a better known brand could win over a potentially superior product from a lesser known brand are over forever. Without the Internet, it’s unlikely that brands such as Vizio or Hyundai could have so radically and quickly disrupted existing markets and consumer considerations sets. But they did, and it will happen again to anyone who isn’t focused intently on continuous product and service innovation.

3. That you need to consider the entirity of an increasingly non-linear sales path
The days of the sales funnel were relatively straightforward, and easy to map, particularly in terms of when and where people fell out of the funnel and what you needed to do to become more relavent relative to your competition. In fact sales funnel analysis was (and still is) a staple offer from many marketing consultancies.

Today, we’ve swapped a linear funnel for an often highly non-linear ( and sometimes seemingly completely irrational) decision making journey.

In this world, all channels of communication and of information search, particularly the explosion of digital one’s that exist around the brand become incredibly important.

Today, for example, it may be that having someone providing customer service on a major 3rd party product-category forum be a more important driver of final sale than any of your traditional marketing communications.

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Why Positioning Must Evolve

Positioning has had a long and storied history. The original concept, like much strategic thinking (including the word strategy) came from the world of the military where armies would quite literally seek to take defensible positions from which to fight. The origins of modern positioning came from Jack Trout in the late 1960’s. And as Vijay Govindarajan and Chris Trimble note in their book “The Other Side of Innovation: Solving The Execution Challenge” the height of positioning as a business strategy came in the 1980’s, when businesses sought the creation of defensible positions from which to compete.

However, as they go on to note, strategic positioning started to unravel when it became apparent that no position is defensible in the long run. There will always be a competitor or substitute that will come along and destroy value. It is this fact that leads them to observe that modern day business strategies have increasingly moved from defense to offense, and in specific terms toward a dynamic approach focused on constantly innovating new sources of value. For two very successful proponents of exactly this approach just think Apple or Google.

However, while the thinking on business strategy has clearly evolved over time, it isn’t clear that the thinking on brand strategy has kept up. Instead of constant innovation, the idea of  how you “position” a brand has instead become locked into various static models that aren’t taking account of the same shifts.

Unfortunately, this means the way positioning is thought about today has three potentially fatal flaws:

  1. The positioning is almost always arrived at in the context of the existing competitive set
  2. The positioning almost always focuses on something that is “defensible” relative to this competitive set
  3. The positioning is almost always a static statement rather than a dynamic concept

The flaw is not only that nothing is defensible in the long run, but increasingly that businesses do not know who their competitors will be from one year to the next. As the business cycle has sped up and technology has massively decreased the costs of entry across many industries, new competitors are today springing up overnight.

If positioning is to survive as a strategic concept (and I believe that it should) then it needs to evolve beyond these three constraints. Instead of focusing around the competition, it should instead become much more focused on the customer. And beyond focusing on what the brand can defend, it should instead focus on what the brand can create. In order to achieve both of these things, the positioning should also be focused much more closely on the real underlying strengths of the business than is often the case.

In working with brands in the technology space who face radical, sometimes tectonic competitive shifts both faster and more regularly than other industries, I’ve found the following three things to be really helpful when considering a positioning (or re-positioning)

1. Define the role that the brand intends to play in the lives of its customer. Focus this more on relevance to the customer than differentiation from the existing competitive set. What is it about this brand that customers will find both enticing and energizing? Within this, think through the problems you will be solving for the customer and the pain points you will be taking away, and consider bringing the positioning much closer to a value proposition.

2. Define the experience the brand wishes to create. Beyond a product or a way of communicating, what will the experience of being a customer of this brand be like? What are the businesses own strengths and capabilities that will translate into experience innovation over time? Think of this experience less as a statement and more as a narrative.

3. Think of the positioning as a journey and not a destination. Rather than a static thought, work on what the narrative might become over time. Consider the direction the positioning suggests and the journey the brand will need to be on moving forwards. Think through the kinds of things a business like this might do in the future, and how the positioning will become a platform for this kind of change.

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Building Marketing Products (Redux)

Henrik asked yesterday about my post on building marketing products. He asked the simple question of when a marketing product is valuable and when you might use one? And it’s a fair question to ask.

Where this approach seems to work best are where three things are happening:

  1. The market you’re in is intensely competitive
  2. There are many available substitutes and core product performance is commoditized
  3. Where loyalty is declining, and meaningful differentiation through traditional means is harder and harder to achieve

By imbuing the marketing of the brand with an additional layer of utility, you bring the product and the marketing of the product together in a way that has not previously been possible. Arguably, Pepsi Refresh is another example where a new form of emotional differentiation is being created within an intensely competitive environment.

So what is the value and who should be doing this?

I think the value, very simply, is in a new ability to make the core product more desirable than that of a competitor. Essentially by creating an additional layer of customer focused usefulness within the brand that is designed to complement and enhance the utility of the product (rather than the brand disconnecting from the product as sometimes happens).

Who should be doing this? Probably any marketer whose category dynamics are intensely competitive, increasingly commoditized and where loyalty and meaningful brand differentiation are either in decline or not where they need to be.

With so many categories facing exactly these challenges, I’d be surprised if we didn’t see an explosion of marketing products in 2011. Some of which might even become amazingly successful in their own right.

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Building Marketing Products

There is no doubt that the world of marketing is changing fast.

One observation I’m fascinated by is the incredible rise in what I would describe as “Marketing Products” such as Nike+ or the Geico Glovebox app.

While R/GA would prefer to describe Nike+ as a platform, I think the product analogy is both more accurate and possibly more interesting.

Traditional marketing communications has borrowed the mindset, metaphors and ideas of the entertainment industry. Seeking to create advertising and marketing programs that entertain their audiences as much as selling to them. Just think of all the ‘funny’ superbowl spots or all of the ‘sticky’ online games that brands have created.

Now, however, the possibilities enabled by connected technologies mean that marketing can instead borrow from a different set of metaphors, those of product development. Instead of being concerned primarily with entertainment and amusement, marketing products can be created that are more focused on solving customer needs and creating utility. In essence giving marketing itself a value proposition to the customer.

And this, of course, fits much more with what consumers say they actually want. A recent Harris Interactive study for EffectiveUI found that consumers primarily want branded apps that make it easier or more convenient to do business with that brand, with almost 40% being unhappy with current branded apps and 75% feeling that an app should “do exactly what I want it to do”.

This data suggests that the many brands out there who look at apps as nothing more than mobile microsites are probably doing their brand harm, and certainly aren’t adding value. It seems that when people are aware of what is possible from technology, the underlying entertainment metaphor so beloved of traditional marketing communications begins to lose steam. And while not all marketing products will be delivered as apps I think the example holds true.

What is key is that marketing products be inherently useful, as opposed to simply marketing communications which are often seen as wasteful. This has the potential to radically change how people view marketing. Instead of “it’s just marketing” meaning something is essentially untrue and irrelevant, the marketing proposition itself begins to inherently add value by layering utility on top of the actual product. A product that may in fact be quite commoditized, such as car insurance.

In an effort to distil what I think constitutes a marketing product (and this is by no means the final word, so please feel free to make suggestions) I’ve observed the following 5 principles:

– works against a real customer need and addresses real pain points that exist

– something people would pay for (even if they’re not asked to)
– something that ideally is cost neutral in terms of operating expenses

– data can be parsed to generate usable customer insights
– drives user data back to marketers

– creates a story about the brand through the experience
– encourages brand recommendations
– builds on the core, creates loyalty by providing utility competitors don’t have

– deliver within existing budgets
– replace media spend to create marketing product as owned media

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