1066 Blog

Battelle on Product Development and Marketing

John Battelle's posted on the American Express Open Forum about the convergence of product development and marketing. This is a topic that drives our approach and it's great to see it being discussed.

Unfortunately most big companies are still stuck in a manufacturing-era paradigm: engineers build products and marketers advertise them. Breaking down the organizational boundaries and inertia that support this reality is a critical step for senior managers looking to take advantage for innovation opportunities in the market today. 

A New Definition of Services

In thinking about services marketing, I often return to this 2004 paper by Lovelock and Gummesson. It argues that we need a new definition of what a service is.

The old definition, found in most marketing texts, is that a service is an intangible good. It is consumed at the same time it is delivered. It is fleeting--remembered as an experience. It is different every time it is delivered. It is different from a physical product.

The new definition, the authors suggest, is that a service entitles the purchaser to access a particular physical resource for a period of time. So, Hertz hires out a car, Deloitte a partner, Verizon a piece of its network.

Today, manufacturers increasingly use services to differentiate their goods. Services companies launch products. It is often a challenge for a company culture built around building physical things to market intangible things (and vice versa). For this reason alone, perceiving service as "rental" can help to clarify relationships between what previously have been characterized as two ends of a spectrum: from tangible to intangible.

Later this week, I'll take a look at the implications of this way of thinking about services for services marketing and branding

Brands: A Shrinking Advantage or Shifting Advantage?

Umair Haque writes today about the Shrinking Advantage of Brands. Cheap interaction, he says, is "driving the strategy of branding into decay".

Huzzah! Haque echoes a number of the things that form the basis of our mission to remake the way marketers think about marketing. In doing so, however, he seems to throw the baby out with the bathwater. If the mechanisms for building a brand are changing, does the value and advantage of a strong brand necessarily implode as well? If consumers have more of a role in determining the relevance and meaning of the brands that they love (or hate), does the fundamental importance of these brands as repositories of perceived value go away?

With cheap interaction now available to all, isn't the need for a brand stronger than ever? With all of the market noise that accompanies cheap interaction, how else can a provider of goods and services identify the specific ways that they differentiate their value? How else can customers, partners, employees and other stakeholders identify and respond to the firms that they interact with? Brands today are more relevant than ever because they are more volatile. For the Googles out there that have built multi-billion dollar brands in breathtakingly short time periods, there are many others that have lost value due to a failure to live up to the promises made to their markets (think Kodak, GM, AOL, Motorola, Sears). This is less a failure of the brands than it is a failure to deliver on those brands.

Haque makes a fundamental error that most people (including many seasoned marketers) make; he conflates "branding" with "advertising". Yes, in the industrial era interaction was expensive, communications channels were limited and awareness of a product or company was the critical challenge facing marketers. However, in today's world of cheap interaction, mass media advertising is still the primary mode of brand-building. This has a lot to do with market inertia, the influence of major advertising conglomerates and fears about messing with the orthodoxy of the 30 second spot. No CMO wants to have to justify a reallocation of massive advertising budgets, even thought far more cost-effective brand-building channels now exist.

Marketers need to redefine their roles and the process of how they build brands. This will require moving away from the advertising-dominated paradigm that proven so difficult to shake. It will also mean breaking down the wall that currently exists between marketers and  product developers, so that together they can hear the marketplace and respond to its calls for new kinds of value. The most innovative leaders out their will be able to pull it off, the others can look forward to clever advertising campaigns which do nothing to bolster their weakening brands.

Let's Get Social

BusinessWeek recently ran an interesting article by authors Spender E. Ante and Catherine Holahan called "Generation MySpace is Getting Fed Up," which deals with the tenuous relationship between social networks and advertising. It focuses primarily on the uncertain nature of advertising in this environment and how advertising might affect (read: annoy) users. It's useful reading generally, but one thing in particular caught my attention. "The Myspace Generation," it reads, "may be getting annoyed with the ads and bored with profile pages."

This brings together two things I think are important to understand regarding social media. 1) Serving traditional online ads won't ever be very effective, and 2) the social network that brings utility to the social media sphere will win out.

Let's start with point 2 just to be contrarian. There's no question that social networks like MySpace and Facebook are initially a kick and kind of addicting. But the novelty wears thin quickly. How many vampire attacks can you send before you begin to question the nature of the vampire attack? The poking and gifting fast becomes a nuisance and masks the real value a social network can provide.

A social network like Facebook can serve as the ideal hub for communications and content - more fun than a Yahoo! homepage and more personally relevant than a Google search. The combination of having, in one place, all of your preferred content and quick access to what you're friends are reading and watching, where their eating and what products they're into, is a truly killer app. 

But for the benefit to be realized, the network needs to actually offer the capability to draw the necessary content and applications to create this personal hub. Currently, the social networks have little utilitarian content of this kind and what little there is tends to be incredibly hard to find. There need to be more applications like the ones created by NetFlix and GoodReads and the incredible new city guide UpNext (currently in beta). Have a friend whose tastes you share in movies, take a look at their queue. A friend who is particularly well-read, have a look at reviews of the books they've read. How about your friend who is really in the know. Check out what they think about a recent visit they had at one of Manhattan's hot spots. One can imagine a social network ultimately being a true content hub where friends can share immediately a television program they saw that might appeal to a friend of theirs, a news item directly related to their line of work, or their wedding gift registry. These are the kinds of useful tools that need to become more prevalent on social networks to combat the boredom that eventually comes from one to many "superpokes." And right now they're precious few.

Which brings us to point 1. Companies have to stop focusing on figuring out how to deliver ads to consumers on social networks and begin to actually use the medium to their advantage. An ad will always be passive and, as BusinessWeek notes, sometimes intrusive. Instead "advertisers" should be developing actual applications, as well, ones that are useful to consumers and can take advantage of the inherent viral nature of social networks.

Companies can learn from the likes of NetFlix. The app is, in effect, an ad as well as an extension of their service. But a straight promotion can be transformed in the social sphere, as well.

Why wouldn't a credit card company like MasterCard investigate creating promotional applications in Facebook? Something that extends their SoundStage promotion into the social media habitat, for example. Or take it a step further and allow social networkers to create and share their own "Priceless" campaigns.

Dominos is asking customers to create their own pizza recipes. Why not make this an OpenSocial application that can be used on any of a number of social networks? And why not let them order it right from their profile page?

These are just a couple of examples. Are these ads? Yes, in a sense. But they are neither passive or intrusive. They're instead interactive and self-selective. The promotion is essentially endorsed by whomever passes it along. A music lover might be drawn to the SoundStage promotion app and compelled to share it with a fellow music lover. You can imagine millions of people sharing the Dominos app and concocting the most preposterous (delicious?) recipes. But every person that downloads the app at the encouragement of a friend is a person exposed to the brand.

These sorts of promotions are everywhere but in the past getting them in front of people took major capital investment in advertising or hope that people would stumble upon them. Now the mechanism is there and companies are remiss if they don't take advantage of it.

New realities of branding

We attended Columbia University's BRITE Conference on branding, innovation and technology last week. Much of the discussion centered on the tech-inspired convergence of product development, brand and customer experience.

Speakers and attendees alike noted how the practice of branding is changing. It's moving from an approach focused on communications channels to one built around things customers are trying to accomplish. One example: getting more out of running with Nike Plus, the convergence of Nike shoes with Apple iPod that allows runners to share favorite jogging routes, measure their performance, and trash talk with their friends.

One of the open questions: How do you define a brand in a way that gets product developers, marketers and those in the field responsible for delivering on the brand promise to create an experience with which customers want to involve themselves?

We were struck by the extent to which the cases covered were examples of adding value through the addition of services to products and vice versa. This is one of the greatest opportunities for differentiation for both manufacturers and services companies. You can see some of our thinking on the topic here, here and here.

Disruptive Marketing: What not to do

 

Absence makes the heart grow fonder, and yet….

A Case in Point

Another example of Apple's disruptive marketing. The company's online store has gone down and intrepid bloggers are on the case. Apple's fanboy minions are rallying, effectively launching whatever new product has coming... for free.

Update: It's back up. And? How about a 16GB iPhone and a 32GB iPod Touch?

Corporate Image Conference

Last week we were at the Conference Board's Annual Corporate Image Conference. Both Thomas and I spoke; he was on a panel about customer experience, I talked about the ways innovative marketers are using the Internet to transform the practice of brand building.

Conferences like this one are a rare opportunity for people from both the agency and the client sides of the business to get together, take a hard look at trends and compare experiences.

Here are some of the key things that I heard during the two day event:

Brands are a conversation: It was interesting how many times this theme came up. Brand building today is about engaging in an open and authentic dialog with customers, partners and even competitors. This is a real evolution from the command and control brand world that was considered the norm until recently.   

Surrendering control: Brand managers are coming to the realization that "brand management" may be an oxymoron in a world where anyone can have an impact on the way that your brand is interpreted and experienced in the marketplace. This loss of control is a challenge to the brand managers ultimately  responsible for the strength of their brands. Many talked about changing the perception of their roles within their organizations...marketer market thyself.

Technology is no longer a channel: Marketers of all stripes have wrestled for years with the role that Internet technologies play in their brand building efforts. For most, this has meant treating the Internet as another channel, an alternative to television, newspapers, radio, etc. Social networks, UGC and other web 2.0 realties are demanding that marketers re-think this old media perspective. Allen Olivo from Yahoo! had a great insight on this...he said that people older than 35 talked about being "on the Internet" whereas those younger than 35 didn't make  a distinction between being online vs offline. Instead they just described what they were doing...talking to friends, catching up on news, etc.

Support from senior management is critical: Heard several people talking about the importance of direct senior management involvement for effective brand building. This was seen as a particular challenge for marketers looking to make a change in the way that their brands were perceived.

Swimming Against the Tide

I must confess that I find it hard to get excited about laundry detergent. I find it harder still to get excited about the marketing of laundry detergent. But there's little question that smart marketers ignore Proctor & Gamble at their own peril. This excerpt from Roger Martin's recent book The Opposable Mind: How Successful Leaders Win Through Integrated Thinking, featured in BusinessWeek , is a perfect example as to why. He offers an anecdote concerning A.G. Laffley, President & CEO of P&G, that offers some useful takeaways for marketers.

Lafley's originality came into play when he faced a big decision about compacting packaged laundry soap. Though P&G's research and development folks had devised a way to compact the big fluffy granules of powdered detergent into a form that was less than half the volume, consumer tests showed a lukewarm response and P&G mastery would have said that without a clear test win, the new product should not be launched.

But that verdict didn't sit right with Lafley.

With his carefully nurtured capacity for originality, though, Lafley focused on what was potentially unique about the situation that might call for a novel response from P&G. He saw that, unlike the majority of product upgrades, this one had the potential for massive cost savings for retailers since the smaller boxes would take up half the space in warehouses and on store shelves for the same dollar of sales. In addition, P&G's manufacturing and logistics operations would reap the same cost benefits as the retailers. And the voluntary comments that some of the consumers added to their quantitative research forms revealed that while consumers weren't wildly enthusiastic about compact detergents, few were actively hostile to the idea.

Lafley totted up the data points. Retailers saw compact detergent as a big win, and so did P&G manufacturing. Consumers were neutral at worst. So despite the lack of conclusive consumer evidence, Lafley argued for a huge investment to convert all powdered detergents to compact. It turned out to be a big win for P&G. "We ran and we won the race," Lafley says. "It was huge, absolutely huge."

A couple of things struck me here. First, Lafley trusted his instincts and was not blinded by the results from consumer research. Research is useful but too often substitutes for innovative thinking. Research participants, it should be noted, often don't know what they don't know. There's something to be said for gut instinct and common sense.

Second, Lafley considered the economic and strategic benefits of the new product to his company as well as the benefits at various points along the entire value chain. He then weighed the cumulative benefits against the research. In so doing, the new product launch seemed a no-brainer. As marketers become more and more active in product development, they need to understand the business they're in as much as the needs of the market.

 

Disruptive Marketing

Typically a service disruption is bad for business. For example, when an online store goes down it means lost revenue and aggravated customers, right? Well, Apple's turned what might be considered bad service into a marketing tactic. While most companies try to downplay technical difficulties, Apple hypes them. You might've noticed they even highlight their service disruptions with a cute "We'll be back soon" Post-It icon. It's not there to be condescending; it's actually a signal. As the BusinessWeek Apple blog notes, when the Apple Store is down, "that's often an indicator that a new product is about to be announced." Apple has turned an inconvenience into a positive newsworthy event. Now anytime the store is down, the likes of Engadget and Gizmodo, as well as the hundreds of Apple fanboy sites, report it and the speculation begins. When the store's back up what new product will be there? A Mac tablet? An ultraportable Macbook? A pink iPod Nano for Valentine's Day?

It's an unconventional and innovative approach to marketing - it fundamentally transforms a negative into a positive, it creates suspense, and it builds in viral marketing. But it can have its drawbacks. As BusinessWeek points out, that "We'll be back soon" icon doesn't always mean a new product is about to be revealed. Sometimes it means that the site is just down - you know, for maintenance or technical problems or some other nuisance. Has Apple, in using this marketing device, created unrealistic expectations? Probably. But as long as they don't suffer too many unwanted outages and regularly deliver on the promise of innovation, they'll continue to get invaluable free publicity.

Goes to show that virtually anything can be turned into advantage if you apply a little creative thinking.

Update: This blog entry has been recently published on both Chief Marketer and the U.K.-based uTalk Marketing.