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FT: Book extract - Viral Loop

Book extract: Viral Loop

By Adam L Penenberg

Published: November 6 2009 14:24 | Last updated: November 6 2009 14:24

Businesses are keen to harness the digital world to extend their brands and increase sales

It was the autumn of 2005 when Fritz Grobe, a professional juggler, and Stephen Voltz, a trial lawyer, first heard from a friend the amusing revelation that if you dropped Mentos into a bottle of Diet Coke, it would explode. Performers at heart – the two were members of a regional theatre company in Buckfield, Maine – Grobe and Voltz went out to the backyard to try it. After the pyrotechnics, their first thought was: how far could they take it?

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They weren’t the first. For decades, high school students had mixed vinegar and baking soda to make volcanoes erupt at science fairs and, since the early 1990s, the people at Mentos had been aware of the geyser phenomenon, which would come and go in popularity. Then, in September 2005, science educator Steve Spangler demonstrated the Mentos-Diet Coke effect on a news programme in Denver, Colorado, with the anchor Kim Christiansen getting soaked in the process. The online video became a minor hit.

In Buckfield, Grobe and Voltz spent a morning playing around with the idea. After corralling as many bottles of Diet Coke and Mentos as they could, they constructed a 10-bottle fountain with the aid of some cement blocks and put on a show at the nearby Oddfellows Theatre for other members of their troupe. The response urged them to greater heights and they spent about five months experimenting – cutting slits in bottles, drilling holes, adding screens.

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After settling on the idea of recreating the Bellagio Fountain in Las Vegas, the two drafted blueprints and carefully choreographed their effects to match those of their glitzy muse. On April 29 2006, they laid out 200 bottles of Diet Coke in an intricate design and prepped more than 500 Mentos mints (total cost: $300), then spent eight hours doing walk-throughs. “It felt like blowing up a building,” Grobe says. “We had one chance. We had never done more than 20 bottles at a time before that.”

While a friend with a digital video camera recorded the action, the two, dressed in white lab coats, crossed their fingers and let it fly. Amazingly, it all went off without a hitch. It was an unseasonably warm day, so the effects were even more spectacular, especially at the end when the grand crown shot out in different directions and spun. They got soaked, puddles of Diet Coke gathering in their goggles.

On the first Saturday in June they posted the experiment to their website. Voltz told one person about it: his brother. Within hours, thousands of visitors were viewing “Experiment #137”. By the end of the first day, they counted 14,000 downloads. Two days later, The Late Show with David Letterman called. Grobe told producers they had only done the fountain once and would need a chance to rehearse. Over the next few weeks, Grobe and Voltz grew confident they could perform the Mentos geyser live. Meanwhile, the video became a runaway hit. Over nine days, more than 2m people logged on to their site.

The concept of collective curation has been around for thousands of years; it just didn’t have as sophisticated a propulsion system as it does today. At first it was verbal, with gossip and information spreading from person to person. Chain letters mailed through the nation’s postal system urged recipients to make copies and send to 10 other people, or suffer the consequences. Then there was the telephone, the first efficient person-to-person mode of communication, which, before the rise of the internet, offered an unprecedented level of virality.

Once Mosaic and Netscape seeded the viral plain, though, jokes, memes and information that touched someone’s heart or funny bone – or both – could be dispatched to dozens, if not hundreds of people in an instant. It was only a matter of time before businesses began to recognise the benefits of viral campaigns to extend their brands and, in the process, increase sales. They just had to figure out how.

The answer came from Burger King in the form of a guy dressed up as a chicken willing to do whatever you wanted. The brainchild of ad agency Crispin Porter and Bogusky in 2004, the “subservient chicken” was one of the first mega-successful corporate viral campaigns. There were some wacky television spots, but it was the ensuing interactive web campaign that turned it from idle curiosity into a phenomenon.

Crispin launched a website with the chicken in a living room, encouraging visitors to type commands and watch him perform them, as long as they corresponded to one of more than 300 pre-recorded moves – from a cartwheel to a Michael Jackson moonwalk. But the chicken would draw the line at anything obscene (such as a sex act), approaching the camera to wag his finger in disapproval.

Within a week, the chicken hosted more than 20m visits, with the average user spending an astonishing 5 minutes and 44 seconds on the site. More to the point, sales of Burger King chicken sandwiches increased 9 per cent a week in the month following the site’s launch.

. . . .

Pete Healy, vice-president of marketing at Mentos, heard about the geyser phenomenon on radio. He told a reporter that Mentos was “tickled” by the video. He called Grobe and asked if there was anything the company could do to help.

“Send Mentos,” Grobe replied.

Healy did more than that. What followed was a marketing coup that has become a textbook example of how a company can harness the power of viral video, where the 30-second TV ad, which is waning in influence, is replaced by the audience. Because collective curation means the audience alone decides what’s good and what should be watched while the traditional gatekeepers – TV networks, movie studios, news media – are pushed to the sidelines.

Although Healy knew there would be risks to involving Mentos in this type of new-media campaign, in the end Mentos was candy, not a cure for cancer. How much effort would people put into ridiculing it? “As long as we maintained a light touch and were authentic, we figured we would probably be OK,” he says.

When Grobe and Voltz appeared on Letterman’s show, Healy dispatched the Mentos-mobile, a Pontiac Solstice wrapped in Mentos graphics, which was parked outside the theatre, while street marketers toting six-foot rolls of Mentos gave out sweets to passers-by.

Unlike Healy, the people at the Coca-Cola Company didn’t know what to think. A Coke spokeswoman said: “We would hope people want to drink [Diet Coke] more than try experiments with it.” She added that the “craziness with Mentos” didn’t “fit” Diet Coke’s “brand personality”.

Michael Donnelly, the company’s interactive director, admitted that Coke wasn’t prepared for this. But in July 2006 the soft- drink maker relaunched Coke.com with a new focus: consumer-generated media that celebrates creativity and self-expression. Within days of starting his job at Coke, Donnelly contacted Voltz and Grobe. This led to a meeting between Coke, Mentos, Grobe, Voltz and Google, which also wanted in on the action.

Fritz Grobe and Stephen Voltz told one person about ‘Experiment #137’; after nine days, 2m had downloaded it

The companies agreed to work together to support the performers in a second Mentos-Coke sprinkler video, which Grobe and Voltz dubbed “The Domino Effect”. At the end, there was an advertisement that linked to Coke.com or cocacola.com, announcing a contest. For three months, people could submit videos of ordinary objects doing extraordinary things, with Grobe and Voltz judging. Coke supported the campaign by buying up hundreds of search keywords on Google, MSN and Yahoo, anything relating to Coke, Mentos and explosions, and counted 1.5bn ad impressions.

This democratisation of content is made possible by cheap video cameras, camcorders and mobile phones that capture user-generated infotainment, aided by powerful software like Final Cut Pro and iMovie to shape it, and distributed via a massive digital infrastructure with ample bandwidth. The technological zeitgeist is, however, equal parts human, as online communities blog about what interests them or disseminate links to everyone in their e-mail address books. Meanwhile, user communities have sprouted up on people portals such as MySpace, Flickr, YouTube and Digg. There, people share everything from blog posts to news articles, pictures, audio podcasts and videos in a quest for their own 15 megabytes of fame.

“It’s all about the combination of next-generation content creation and distribution coupled to instant access to your social network community,” says Adam Lavelle, vice-president of strategy for iCrossing, a digital marketing agency. “Because distribution is so huge and fluid and easy, your community connects to other communities, which fosters this distribution. If I know you, then I know everyone you know.”

As for companies caught up in a viral loop, they have little choice but to let go of their brand. As AG Lafley, chief executive of Procter & Gamble, once told the US Association of National Advertisers, “The more in control we are, the more out of touch we become. But the more willing we are to let go a little, the more we’re finding we get in touch with consumers.”

A company willing to let go of its brand can find untapped riches, as Mentos did. The Bellagio Fountain video was downloaded 20m times and more than 10,000 copycat videos were posted online, which created a multiplier effect: Mentos tallied a staggering 215m mentions of its product in TV, print or radio stories over nine months, and estimates the free publicity was worth $10m to the company, half its annual marketing budget. Sales climbed 20 per cent during the first viral wave and, even after the commotion died down, they remained 15 per cent higher than they had been. Mentos made a mint.

Before the video, Diet Coke’s sales had been flat, while the company as a whole was losing market share. But Donnelly reports that after it went viral there was a “significant spike” in sales of two-litre bottles of Diet Coke, the ones used on camera. He wouldn’t give exact numbers but confirmed it was between 5 and 10 per cent.

On YouTube some videos have been downloaded tens of millions of times. There is a cat playing the piano , a music video set on treadmills at a gym, a cackling baby. At first there may not seem any rhyme or reason behind their appeal. Yet there are shared characteristics to some viral videos, and companies seeking to advertise their products are keen to decipher these.

A series created for the Sony Bravia HDTV featured explosions of paint covering whole buildings, thousands of bouncing balls and giant clay rabbits, all in vivid colour; a Dove Evolution ad showed a normal-looking woman instantly transformed into a supermodel before our very eyes. The tagline read: “No wonder our image of beauty is distorted.”

These are the antithesis of the hard sell. In exchange for entertaining us, the companies are afforded the privilege of mentioning their product. The narrative of each video is woven tightly into the brand’s message. Sony’s ad played up the Bravia’s colour and image clarity. Dove’s idea expanded the idea of beauty to encompass more than twiggy supermodels. On YouTube alone, several parodies were viewed a total of 5m times. (“Slob Evolution”, in which a male model eats, drinks and smokes himself into someone who resembles Christopher Hitchens, is a personal favourite.)

Plenty of others have played the system, with decidedly mixed results. Samsung released a series of videos on YouTube featuring a Saint Bernard named Sam on an aeroplane. The few who actually watched characterised these ads as “lame”, “a stinker” and “zzzzzz”. And though Dove scored big with Evolution, another promo for Dove Cream Oil Body Wash received more than 10,000 comments on YouTube, almost universally negative.

What’s the secret of a campaign like this? “You have to have a light touch and be careful not to act like a guy in his mid-40s trying to be a hipster,” says Pete Healy, the fifty-something Mentos marketer. “It doesn’t smell right.”

This is an edited extract from ‘Viral Loop’ by Adam L Penenberg, (Hodder & Stoughton, £12.99). © 2009 Adam Penenberg.

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Adam L Penenberg on what’s next for the virtual economy

One need not be fluent in the lingua franca of social media to realise that Facebook is viral through and through. From the start it grew because each new user begat others, for what’s the sense of being on Facebook if none of your friends are? Today there are more than 300m Facebookers and it is en route to half a billion.

Facebook not only constantly expands, stacked atop it is a teeming ecosystem of thousands of social networking applications: games, horoscopes and quizzes, apps for business and charity, all of them also viral in nature. With 25m users, one notable Facebook app is the gruesome game Mafia Wars. Users start their own mafia family with their friends, operate crime syndicates and shoot to be the next Godfather.

While the script isn’t all that interesting, the gamemaker Zynga’s revenue scheme is, because it turns bits and bytes into cold hard cash by trading in virtual goods, which yield about half the company’s revenue (advertising is responsible for the other half). Zynga combines free-market capitalism with high-tech killing hardware. Need an assault rifle for your arsenal? Pay Zynga real money and it’s yours. How about a “meat grinder” machine gun, an Easter egg bomb or napalm? Yours, for your next ambush, at a price.

Even more popular is Farmville, enabling its 60m users to buy digital representations of seeds, chickens, eggs, tools and plots of land. (While neither game runs exclusively on Facebook – they are also available on MySpace, Yahoo and over the iPhone – Facebookers form the biggest base of users.)

Don’t laugh. The market for virtual goods is estimated to be about $1bn in the US. It is spawning entire virtual economies, even being funnelled into charitable causes. Zynga released a special “sweet seed” it sold for the equivalent of $5 each, promising to donate half the proceeds to two non-profits in Haiti. Farmville players generated $640,000, with $320,000 going to charity.

These games, like the social networks they sit on, are viral, with each user attracting others to play. They will not only continue to spread, they will become more realistic and it’s not far-fetched to think that one day an alternate economy could arise.

Copyright The Financial Times Limited 2009.

Search Insider: The Meeting of Mind and Marketing - 11 Books To Read

The Meeting Of Mind And Marketing: 11 Books To Read  by Gord Hotchkiss , Thursday, October 15, 2009 It's official! With this column, I break David Berkowitz's Search Insider column count record, with 225 of my own. And to commemorate the occasion, I wanted to follow up on a request that came in response to my column two weeks ago. I had warned any would-be students of human nature that this wasn't a quest to be taken lightly. A few readers responded by asking for a recommended reading list. So this week, I went through my bookshelf at home and jotted down a list of titles that I found particularly insightful or interesting in understanding the human condition. Today, I offer them as suggestions for some fall or winter reading. I came up with 22 titles, so I've broken them into two groups. This week, all the titles are specifically for those who want to explore the intersection between marketing and the way our minds work. "How Customers Think" -- Gerald Zaltman. Harvard professor Gerald Zaltman has carved out a nice little career by exploring the psychology of consumerism. The foundation of Zaltman's approach is his metaphor elicitation technique. Metaphors are linguistic keys to some of the darker workings of our mind, and Zaltman shows how these can be used as a Rosetta stone to unlock consumers' true feelings towards brands and products. A fascinating approach suffers a little from Zaltman's dry and overly academic writing style, but it's a very worthy candidate for the list. "The Culture Code" -- Clotaire Rapaille. If Zaltman is a little stodgy and academic, Rapaille is an unabashed French nouveau-riche pop psychologist who has used his decidedly qualitative approach to dig down to the cultural common denominators behind our brand relationships. This book looks for those labels cultures apply to some of the best-known brands in the world. Being French, Rapaille brings an occasionally charming European cultural arrogance to his subject (i.e. in France, the culture code for cheese is "alive", but in the U.S. it's "dead"). This is  an easy and interesting read; while you might have some quibbles with Rapaille's findings, he has plenty of willing customers among the Fortune 500. "Buy-ology" -- Martin Lindstrom. Lindstrom's ego is almost matched by the insight he brings in his latest book. Lindstrom is the self-styled guru of brand perception and has written before on how our senses interpret brands. In "Buy-ology," he goes one step further and launches an extensive brain scanning research project to see exactly what happens in our brains when we think about brands. For example, do the warning labels on a pack of cigarettes have any impact on our desire for a smoke? Does product placement really work? (The answer, in both cases, is no, according to Lindstrom) Don't worry about getting caught in academic jargon here. Lindstrom keeps it light and readable. "Why Choose This Book?" -- Read Montague. Baylor University neurologist Montague was behind the original Pepsi Challenge fMRI test -- and in this book, he takes on no less a challenge than explaining how we make decisions. The writing style's a little uneven, as Montague tries to balance his academic background with a style overly determined to appeal to a wider audience. That said, Montague knows his stuff and the insights here are solid, supported by both his own and others' research. "Predictably Irrational" -- Dan Ariely.  Ariely follows in the footsteps of behavioral economists Daniel Kahneman and Amos Tversky by looking at some of the common irrational biases of humans. For example, why does a 50-cent aspirin eliminate a headache better than a 5-cent generic brand, even though the pills are identical? And why would offering your mother-in-law $300 for a fabulous meal be an unforgivable social transgression, yet be expected in a restaurant? The territory has been covered before, but Ariely deals with a highly interesting topic with a nice, light touch. "The Mind of the Market" -- Michael Shermer. Last but not least, Michael Shermer delivers what I consider to be a tour-de-force on this topic. Shermer's approach is well-grounded in evolutionary psychology (he labels it evolutionary economics), so he and I share a common approach to understanding consumer behavior. He strikes the right balance in his writing, delivering solid information without worrying too much about how it might play for a wider audience. This is probably my favorite on this list. If these six titles whet your appetite, here are some other titles you might consider: "Driven" by Paul Lawrence and Nitin Nohria "Why We Buy" by Paco Underhill "The Paradox of Choice" by Barry Schwartz "The Advertised Mind" by Erik Du Plessis "Brain Rules' by John Medina Next week I'll share another 11 books, as well as some reader suggestions. Feel free to keep the suggestions coming!

NY Times: Michelin Builds a Campaign Around Its Secret Reviewers

September 17, 2009

Advertising

Michelin Builds a Campaign Around Its Secret Reviewers

By STEPHANIE CLIFFORD

HERE’S a piece of advance information from the Michelin guide for New York City 2010: 18 new stars will be awarded to restaurants. Michelin is rigorously tight-lipped about the information in its guides until they arrive in stores, and requires similar discretion from its reviewers, who are anonymous.

But in this Facebook era, when privacy and anonymity seem like vestiges of a bygone time, Michelin is making itself a bit more accessible as it prepares for the New York guide’s fifth edition, scheduled to be in stores on Oct. 6, and San Francisco’s fourth edition, scheduled for Oct. 20.

It is running an ad campaign for the guides highlighting its “famously anonymous” professional reviewers. Michelin protects the identities of its reviewers to the point that they generally are not allowed to do interviews with the press, and must invent cover stories about their profession so that even friends and family don’t know what they do.

Despite those precautions, with this campaign, Michelin is peeling back the mask of its reviewers. They will post items on Twitter at @MichelinGuideNY and @MichelinGuideSF, including items about places they are dining, advance critiques of chefs and complaints about service.

•

“One of the things we realized when we started to question people in New York, they realized what Michelin was about, but they didn’t realize that this was about a team of professionals,” said Jean-Luc Naret, director of the Michelin guides. “We’re trying, really, to make sure that people understand they are on the road, they are out there and maybe they could spot them.”

The Michelin guide was first published in France in 1900 as a free directory that offered listings of hotels to promote road travel, which would in turn help sales of Michelin brand tires.

It was distributed at garages and tire dealerships until 1920, when, according to company lore, a co-founder of the guide, André Michelin, noticed stacks of the guides piled up under a garage workbench, and decided that people respected only what they paid for. He began charging for the guide and added restaurant coverage around the same time. By 1931, Michelin was using the three-star system for its restaurants that it still uses today.

Michelin entered the United States with the 2006 New York edition. But New York already had its own restaurant guide. The Zagat Survey was founded in New York City 30 years ago, and surveys regular customers to compile its ratings and reviews.

That is one reason Michelin is emphasizing its professional restaurant and hotel inspectors this year, to differentiate itself from Zagat. Ryan Lynch, senior brand strategist at the advertising agency Cliff Freeman & Partners, which worked on the campaign, said he was also fascinated with the secret life of inspectors.

For instance, inspectors book reservations under fake names, Mr. Naret said. They surreptitiously scribble notes while they are in the bathroom or type them on their BlackBerrys. And they take pains to blend in, even recruiting people to pose as paramours when reviewing certain romantic restaurants.

“They are not going to go by themselves to a restaurant where everyone looks like a couple,” Mr. Naret said. “They have to be a chameleon.”

That got Mr. Lynch thinking that Twitter clues about where the reviewers were eating would intrigue food enthusiasts.

“There’s kind of a ‘Da Vinci Code,’ a little James Bond feel, to who they are and how they go about working and your imagination tends to run wild with it,” Mr. Lynch said. Knowing something about inspectors — from what standards Michelin sets for them to more specific details like where they have been eating — could be a nice piece of trivia for diners, he said.

The Twitter posts from the reviewers so far are along the lines of, “Lunch at Jaiya, renovations still under way but lookin’ good. Yummy spring roll.” But Michelin does not want the Twitter element to be too successful. Crowds are notoriously good at solving online puzzles: people who commented at the site Consumerist.com tracked down the makers of a Domino’s Pizza gross-out video earlier this year, and brands like McDonald’s and Wired magazine have set up online mysteries that crowds solve together. If readers figured out who an inspector was, the inspector would be out of a job.

•

Michelin is taking the precaution of having inspectors send Twitter updates to an editor who posts them, but Mr. Lynch said there were still some worries.

“With technology being what it is, and the advancements in being able to locate people, we open ourselves up for a potential chance of that anonymity being broken, and at the end of the day that can’t happen — it’s got to be a very slow and steady process to find how much these people give away,” he said.

The print ads accompanying the Michelin guide are running in the October editions in San Francisco and New York-area issues of magazines like Bon Appétit, Time Out New York and Architectural Digest. The ads show a handful of urbane young people in a restaurant, watching and being watched, and asks, “Who’s the famously anonymous inspector?” Below, smaller print gives the answer: “You’ll never know, because Michelin inspectors visit restaurants without revealing their identity.”

Michelin is also running the Web site FamouslyAnonymous.com, which includes information about the jobs of reviewers.

“This whole idea of anonymity is the end-all, be-all for what this guide is,” Mr. Lynch said. “To finally start to open up these inspectors to the world is going to be a minute-by-minute learning experience.”

Copyright 2009 The New York Times Company

FT: Views you can use

Views you can use

By Jonathan Birchall

Published: September 2 2009 22:51 | Last updated: September 2 2009 22:51

The schoolteacher was not happy with the inflatable solar system set that was meant to be engaging and educating children in the classroom, and went on the supplier’s website to say so. “I opened the package, blew up the planets, hung them in my classroom, and came in the next day to find three blobs of rubber hanging from the ceiling,” complained the teacher last September. “Totally disappointed!!!!”

The blow-up solar system had been bought from Oriental Trading Company, a US catalogue and internet retailer, for about $18. The teacher was not alone: at the end of last year, other customers buying the set from Oriental were just as unhappy – and were going online to say so.

They complained in reviews on the company’s website that the sun, the eight planets and Pluto would often just not stay inflated.

With customers regularly giving the product low scores on its site, Oriental contacted the manufacturer. By January, its customer service team was able to an­nounce that it had worked with the makers to make sure the planets stayed inflated. A series of five-star reviews suggests the deflation problem is over.

The experience illustrates the evolution of a feature that is increasingly familiar in online transactions: originally seen as an aid to other potential buyers, on­line reviews are becoming a valued source of direct customer feedback for retailers and manufacturers.

Samsung Electronics started hosting reviews on its US website last year, using technology and processing provided by Bazaarvoice, which has become the dominant provider of third-party review services in the US since it started in 2005 in a single office in Austin, Texas.

Bazaarvoice now works with more than 500 brands belonging to companies including Wal-Mart, Home Depot, Boots, Argos, Lego and Procter & Gamble. It has 400 employees providing services in 25 languages, and offices in London, Paris and Singapore, says Brett Hurt, co-founder and chief executive.

At Samsung, using reviews as a source of feedback “has changed some aspects of the way we work, primarily because of the speed with which information comes in”, says Kris Narayanan, Samsung’s director of marketing. “It helps us look at issues as they arise. If there is a malfunction or a problem then we identify it very early.”

Honest and uncensored comments are key

Customers value reviews by other shoppers. Third-party services, which organise reviews on behalf of customers, monitor and analyse what purchasers are saying on brand websites, but insist that the credibility of the reviews and other user-generated content depends on their being uncensored. Rob Harles, head of Sears’s online community activities, says the retailer “really pushed customers to say if something is good or if it is bad ... it is really important to have honest reviews”.

However, Kris Narayanan at Samsung Electronics, notes that reviews of products on manufacturers’ own websites tend on average to be more positive than those of the same product on retailers’ sites – suggesting that manufacturers’ sites tend to attract more brand loyalists.

He also argues that customer- generated content about products tends overall to be balanced because manifestly unfair opinions on sites provoke a corrective response from other, better- informed and sometimes more sympathetic customers.

“The predominant type of discussion is reasonably informed people answering the questions of people who are not so informed,” he says.

The company has used reviews in this way for less than a year, but Mr Narayanan says Samsung has already changed products in response to the new kind of feedback. For instance, large flat-panel televisions were initially produced with speakers on the side. When customers pointed out in their reviews that the units were too wide to fit into conventional cabinets, Samsung put the speakers below the screen.

“It was certainly the product reviews that clinched the issue,” Mr Narayanan says.

The Container Store, a US home storage retailer, plans to introduce customer reviews on its website this year to help shape product development. Using customer feedback is not new, says Casey Priest, marketing communications vice-president. “But that was based on people writing on customer comments sheets. This will take it to a whole new level.”

Sears Holdings, which owns retailers Kmart and Sears, says it is increasingly passing on information from its online reviews to suppliers, says Rob Harles, head of Sears’s online community activities.

For Samsung, reviews are just one of several sources of consumer input it monitors, including specialised discussion boards on consumer electronics websites such as CNet, as well as the less structured discussions on social media sites such as Facebook, MySpace and Twitter.

With so much opinion to keep an eye on, the company tries to focus on analysing “qualified” input – opinions from customers who know what they are talking about. “We spend a tremendous amount of resources trying to parse through the qualified brand opinion,” says Mr Narayanan, rather than a spurious mention that does not truly represent meaningful input or opinion about the brand.

Sam Decker, chief marketing officer at Bazaarvoice, says brands’ interest in such “social commerce”, as he calls it, has ballooned because it is more measurable, in contrast to the efforts of brands to analyse the less focused input from open social sites. “For all the hype and impact social networks make, it is a really thin bridge to what a company cares about, which is bottom line impact. We are trying to make this a very broad bridge. Not only is it measurable with the same measures that you use today, but the contacts with the customers are going to endure.”

Internet shoppers are increasingly turning to reviews on websites. Nielsen, the marketing re­search group, says its twice-yearly global survey of more than 25,000 online consumers found in April that 70 per cent trusted product reviews posted online, an increase of 9 percentage points on April 2007.

Bazaarvoice says it is seeing interest from manufacturers in putting its review service on their websites and then “syndicating” the reviews to retail sites such as Walmart.com.

Brands have also begun using their most positive reviews in other marketing channels such as catalogues, or in-store marketing materials. Sephora, the cosmetics retailer, is testing in-store advertising that gives customers a code to access reviews on their mobile phones.

Just two years ago, Mr Decker says, opening up a site to potentially critical third-party reviews was a big decision for retailers, and usually had to be approved by the CEO. Now, some retailers actively solicit reviews: Sears Holdings recently offered customers the chance to participate in a sweepstake by submitting reviews to its new MySears and MyKmart community websites.

Argos, the UK catalogue retail­er, which started running customer reviews last year, found customers were 10 per cent more likely to buy products that had been reviewed on its site than those without them. When it e-mailed recent customers to ask them to submit reviews, the company received more than 200,000 in the first four months of 2009, with 70,000 in one day alone.

Copyright The Financial Times Limited 2009.

WSJ: Coconut Water Bubbles

ADVERTISING
AUGUST 27, 2009

Coconut Water Bubbles

Drink Makers Ramp Up Ad Campaigns for Niche Market

By SUZANNE VRANICA

As the once-hot bottled water business loses steam, drink makers are starting to pour money into marketing campaigns for what they hope will be the next sector to come to a boil: coconut water.

Beginning this week the Zico coconut water's name and logo will be pasted onto pedicabs in New York City while O.N.E. coconut water will make an appearance on the new season of ABC's "Extreme Home Makeover."

Zico in Hermosa Beach., Calif., and Los-Angeles-based O.N.E. World Enterprises are the early stage of what marketers say will be a major marketing push over the next year behind coconut water. Coconut water is the clear liquid inside young, green coconuts and is different from coconut milk, which is pressed from the coconut meat.

Zico is starting to market its coconut water on pedicabs in New York.

A popular drink in Brazil, the water is now catching on in the U.S., thanks to its healthy image and athletes and celebrities such as Madonna who drink the product.

The goal now is to broaden the reach of coconut water drinkers beyond the athletically inclined.

That is becoming increasingly important for beverage makers of all sizes that have watched sales of bottled water -- their cash-cow in recent years -- get hurt by budget-conscious consumers and environmentalists who oppose the use of plastic bottles. For the past 52-weeks ended July 12, sales of bottled water dropped 6% to $7.6 billion, according to Chicago-based market-research Information Resources Inc., whose figures don't include sales from Wal-Mart Stores.

Meanwhile, sales of coconut water doubled this year to roughly $20 million, estimates Beverage Marketing Corp, a New York-based research and consulting firm.

"Although it's a very tiny part of the beverage business, it's growing fast because it's seen as a natural product, it's relatively low in calories and it has a lot of potassium," says John Sicher, editor and publisher of Beverage Digest. "Coconut water is on the brink of becoming significant."

The category's potential is now attracting the biggest players in the beverage business. Earlier this month, PepsiCo agreed to buy Brazil's largest coconut water company, which makes coconut water brands Kero Coco and Trop Coco. Terms of the deal weren't disclosed.

A spokesman for PepsiCo says the company has "no immediate plans" to sell its coconut water brands in the U.S. "Our primary focus is the significant opportunity we see to grow this business in Brazil," he added.

Even so, it's just a matter of time before coconut water brands from giants like Pepsi and Coca-Cola -- and attendant ad campaigns -- are headed to the U.S., say beverage industry experts. Coke and Pepsi have in the past used their marketing weight to muscle into niche markets.

For example, Energy Brands in 2005 spent $3.3 million on U.S. ads for its Glacéau Vitaminwater, according to TNS Media Intelligence, an ad-tracking unit of WPP. Then Coca-Cola bought the brand in 2007 and pumped in marketing money, shelling out $68.4 million last year and enlisted expensive pitchmen such as Shaquille O'Neal to promote the product.

O.N.E. plans to spend $1.6 million on marketing this year and says it will double its marketing budget next year while Zico, which spends about $1 million annually on marketing, says it will increase marketing outlays by 50% next year. Until now both companies have relied largely on sponsorships of niche sports and public sampling events.

Rodrigo Veloso, , O.N.E.'s chief executive officer, says the company is "ramping up its marketing" and intends to use product placement in movies and popular TV programs such as TNT's "The Closer" to promote its brand. It is also dipping its toe into traditional advertising and is planning to launch a billboard campaign within six to eight months.

For the past few years, Zico has relied largely on striking marketing alliances with Bikram Yoga studios around the country. Developed by yoga guru Bikram Choudhury, exercises in Bikram Yoga are conducted in rooms heated to 100 to 110 degrees. Zico gives out free samples, hung signage and sponsored events at many of the Bikram studios.

"Zico sponsors everything, our shows, parties and competitions," says Jennifer Lobo, co-owner of Bikram NYC, which owns several studios in New York.

It still sponsors yoga, but recently Zico has started moving into endurance sports such as triathlons. In June it signed on to sponsor marathon runner Pam Reed, who recently ran in Badwater Ultramarathon, a 135-mile race from between Death Valley to and Mt. Mount Whitney, Calif.

Zico says it won't do traditional advertising such as TV commercials. "The best way to build a brand, particularly a beverage, is to build an intimate relationship with consumers using one-to-one marketing," says Mark Rampolla, Zico's founder and chief executive.

The two companies are likely to face major competition from the beverage titans. The smaller brands have two choices: "get acquired or face increased competition," says Mr. Sicher from Beverage Digest.

But Maile Buker, vice president of marketing at Zico, say Pepsi's entering the field brings "legitimacy to the category," and adds that "the rising tide will lift all boats."

Write to Suzanne Vranica at suzanne.vranica@wsj.com

Printed in The Wall Street Journal, page B10

Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved

FT: Shopping habits of China's 'suddenly wealthy'

Shopping habits of China’s ‘suddenly wealthy’

Published: August 21 2009 14:41 | Last updated: August 21 2009 14:41

In the past decade China has become the workshop for the world, its low-cost labour force toiling in factories to churn out cheap goods destined for western consumers. Many of the raw materials needed to feed this industrial juggernaut have to be imported from other countries and today China is the biggest driver of markets in commodities such as copper, oil and iron ore.

But as well as a multitude of low-paid factory workers, the country’s manufacturing boom has also ­created a large and growing number of baofahu – literally, the “suddenly wealthy”. Their shopping habits and changing tastes are reshaping global trade flows at the other end of the production chain.

The rise of the Chinese consumer has ­provided unprecedented opportunities for enterprising global corporations and many now look to the country as their biggest growth market for the indefinite future. And while China’s nouveaux riches share many of the tastes of their counterparts in any other part of the world, there are also a number of customs and cultural legacies that have ­created new markets for ­products that have little value elsewhere. This has encouraged global companies to invest an increasing amount of time and money in understanding what makes the Chinese customer special and how best to market or customise products.

In some cases, traditional Chinese tastes, combined with the explosion in wealth during the past decade, have created a rapacious and unsustainable call for the body parts of endangered species. The manufacture of ­traditional delicacies, ornaments and medicinal ingredients has helped to cut swathes through populations of sharks, elephants, seahorses and other species across the world – and that demand is only expected to increase.

Jamil Anderlini, FT deputy Beijing bureau chief

. . .

Big cars, flashy cars

In the US, cars need giant cup-holders, but in China, it’s chauffeurs that are de rigueur. So when Porsche recently decided to launch a four-door sedan in the midst of financial Armageddon, it chose to do so in China – perhaps the last place on earth where anyone still has RMB2.5m (£200,000) to spend on a chauffeur-driven sports car.

At the Shanghai auto show in April, the Porsche Panamera – which offers the ample legroom required by China’s back-seat-riding bosses – premiered alongside the Geely GE, otherwise known as the Baby Rolls-Royce (much to the displeasure of the real Rolls-Royce). Then came news that China plans to buy Hummer and make it greener. China’s love affair with big, flashy autos is clearly just beginning.

The newly wealthy everywhere love to flaunt their money, but China’s rich are even more shameless than most: cars are not a means of locomotion for the affluent Chinese, they are a symbol of success, status and the naked power of the internal combustion engine over the bicycle or pedestrian.

According to Friedhelm Engler, director of design for GM’s Shanghai-based Pan Asia Technical Automotive Center, cars in China are all about “face”. He says the bulky, “three-box” shape that is still overwhelmingly popular is deeply embedded culturally in a country where the rich traditionally rode in palanquins. To western eyes, that makes many Chinese cars look old-fashioned, especially on the futuristic streets of Shanghai, with its space-age skyscrapers. And parking such cars – not to mention parking a “Baby Rolls” – is a nightmare in the city’s congested, narrow streets.

China needs smaller cars, and some younger consumers are leaning toward hatchbacks; but in a country where grandpa or dad is often footing the bill, four doors still often win out over five (not least because grandpa or dad may not know how to drive, so they rely on the younger generation to squire them around at weekends in the three-box). This is a world where the young can start their motoring life with a Buick, not a 2CV or Beetle; Buicks are more popular in China than they have been in the US for decades.

But western car manufacturers are betting that things will change, as China’s budding love affair with the automobile matures. The country is on track to become the world’s largest auto market this year – several years ahead of expectation – and car styles could be transformed at the speed of light. “Chinese consumers are used to moving quickly, from no TV, to a flatscreen,” says Engler. Their auto style may be dowdy today – but in China, tomorrow is always just around the corner.

Patti Waldmeir, FT Shanghai correspondent

. . .

Gold

China loves gold in all its forms: as a reserve currency, jewellery, an investment – even gold that is not real at all, or “virtual gold”, the internet commodity used as currency in online games such as World of Warcraft. The Chinese government is trying to crack down on trade in virtual gold, which is “farmed” by online gamers in China and sold to online gamers in the first world.

But when it comes to the real stuff – gold jewellery and gold bullion, for either adornment or investment – trade in China has risen sharply. Beijing recently revealed that it had been secretly buying gold for years in order to diversify its foreign reserves, and had almost doubled its bullion holdings. But they are not the only ones: the rising tide of wealth among middle-class Chinese has made China the second-largest gold jewellery market in the world since 2007, behind only India. Sales of gold and silver jewellery in China rose by an astounding 28.7 per cent in May year on year – proof, if any more were needed, that Chinese consumers have certainly not stopped spending money during the financial crisis. Total gold demand in China last year was nearly 400 tonnes, up by 21 per cent from 2007.

But Chinese people like their gold purer than their western counterparts: 24 carat, rather than 18 carat. The reasons for that, says Shi Heqing, gold analyst at Beijing Antaike Information, are partly historical: “Chinese people have gone through several wars in the last century, and the memory of those is still fresh, so they like secure ways of keeping their money. In the west, people seem to use gold more for decoration or beautification.”

The recent rollercoaster ride in the mainland stock market – which at one point last year had fallen by 70 per cent from its 2007 height, but has since crawled back to half the peak level – has also prompted more investment interest in gold in bullion form, gold market analysts say.

Mr Yu, a 55-year-old antiques trader in Shanghai who declined to give his first name, says he bought 500g of gold in 2007 and increased his holding to 2,000g at the end of last year. “I know people who are still buying stocks at this moment … but gold may be better for people my age who are more risk-averse.”

Or as Shaun Rein, managing director of China Market Research in Shanghai, puts it: “In China, the banking system has only recently become stable. Chinese people like gold: you can always melt it down and it’s easy to carry.”

Patti Waldmeir, with additional reporting by Yan Jin, former FT Shanghai news assistant

. . .

Barbie

No one knows more about shopping than the women in the Shanghai typing pool: all those one-child babies have grown up into over-indulged 20-somethings with office jobs and 100 per cent disposable income. Their parents or grandparents pay for rent, food, healthcare and every other human need; all the rest goes on clothes, shoes, make-up and … Barbie?

Mattel is banking on Shanghai’s girlie-girls to revive its flagging fortunes. The biggest Barbie store in the world recently opened on the city’s Huai Hai Zhong Lu shopping street, where all six floors are infused with the spirit of that 1960s model of female perfection, the blonde and cinch-waisted doll whose brand must rank as one of the greatest successes in the history of world marketing.

But in China, Mattel is breaking that brand mould in a big way: Barbie is supposed to transform herself from a doll into a lifestyle. Nearly a whole floor of the store is devoted to Barbie clothing in grown-up sizes – exorbitantly priced sequined tops that my American eight- and nine-year-old girls would not be caught dead in because Barbie (to them) is a little kid thing. But Shaun Rein of China Market Research says “cute sexy” is what the typing pool wants, and judging from the huge popularity of the Hello Kitty character in that age group, it might just work.

Jinky Gu, spokeswoman for the Shanghai store, has another perspective altogether. “Chinese parents won’t stop investing in their children’s education even during the economic crisis.” The notion that Barbie is an educational toy might horrify the feminists among us, but it just might work among the stiletto-heeled Shanghainese. It would not be the first time that a jaded western brand got a new lease of life in China.

Patti Waldmeir, FT Shanghai correspondent

. . .

Spirits and fine wine

Shanghai White is the latest product offering from Diageo, the UK drinks business behind such brands as Johnnie Walker and Guinness, and its launch this summer gave the world a glimpse of how the tastes of China’s new rich are changing the liquor landscape.

Shanghai White is being marketed as premium vodka but it is produced in a venture with a Chinese baijiu distillery, combining the distilling process of both vodka and baijiu. The “but” in there is because baijiu is the national firewater in China, with a taste sometimes described as a mixture of tequila and dirt.

Of the roughly five billion litres of spirits consumed every year in China, the vast majority is baijiu; the combined consumption of all foreign spirits is estimated at less than 1 per cent of the total. The allure of such a large market has convinced Diageo that it needs to adjust its product line.

In the wine market, meanwhile, bottles of Château Lafite and Louis XIII are indispensable accoutrements for display in the gleaming new mansions of China’s super-rich, although such badges of wealth are more likely to be seen as investments. The cachet of ordering an expensive bottle also still far outweighs the pleasure derived from drinking it, and Chinese nightclubs are filled with wealthy people ordering top-shelf cognac then mixing it with gallons of sweet, green-tea-flavoured soft drinks.

Only around 5 per cent of grape wine consumed in China is currently imported but this is changing and at numerous recent European wine auctions the winning bidder has been Chinese. While European winemakers have not yet contemplated changing their products to suit Chinese tastes, the marketing strategies of wine dealers are already shifting eastward.

Jamil Anderlini, FT deputy Beijing bureau chief

. . .

Ivory

For more than 7,000 years, Chinese artisans have been crafting elephant ivory. Favoured by the Imperial household as far back as the Qing dynasty (1680), ivory has an illustrious reputation and an association with the wealthy and elite. But in 1989, the trading of ivory was banned worldwide through the Convention on International Trade in Endangered Species (Cites), after more than half of Africa’s 1.3 million elephants were poached in a single decade. And yet, with a carving trade established in antiquity and a burgeoning middle class who, for the first time, can afford to buy ivory, China remains its biggest importer.

As Asian elephant herds dwindle, African elephants have become the only source of ivory. In late 2008, Cites authorities allowed China to bid with Japan for tusks from official stockpiles – consisting of ivory collected from elephants that had died a natural death – in four southern African countries. In an open declaration of a continuing demand, 12 Chinese traders bought 62 tonnes at an average price of $144 per kilo. Since this legal purchase, more than 11 tonnes of illegal African ivory have been impounded en route to China.

Elephant poaching largely takes place in central Africa, where poverty and political instability are rife. Chronic unemployment, the availability of firearms and corruption all facilitate the illegal ivory trade. These regions are also home to unregulated domestic ivory markets, where carved items are bought and sold. According to ivory expert Esmond Martin, the majority of buyers are Chinese. In a scramble for Africa’s minerals and resources, the continent has seen a recent influx of Chinese workers – a presence that is visibly reflected in the illegal retailing of ivory. On a recent trip to Addis Ababa, Ethiopia, Martin recorded 1,433 items of ivory openly displayed in the city’s main streets and central market. Among these were 149 pairs of freshly carved ivory chopsticks, selling for $16 each – in sharp contrast to a Chinese retail price of $139 – and signature stamps and jewellery. All of these items were small enough to potentially smuggle through customs.

Martin had previously estimated that 4,900 to 12,000 elephants from central Africa were killed each year to supply tusks to the craftsmen of Africa, China and Thailand. Conservationists are deeply concerned. According to Barbara Maas, CEO of Care for the Wild International: “With the number of Chinese nationals resident in Africa rising, and poaching on the increase, the frontline between supply and demand for ivory is now perilously close, with a disastrous outcome for elephants.”

Rose Gamble, freelance journalist

. . .

Dairy

The Chinese have become the second-biggest consumers of milk globally, after Indians. Demand has been helped by Beijing bombarding the populace with health messages about the benefits of dairy, by urbanites adopting more western diets and by rising incomes. Dairy consumption in China has doubled since 2000, and reached some 30 million tonnes in 2007, according to Rabobank, the food- and agriculture-focused bank.

International dairy producers got a further boost last year in the form of China’s milk and infant formula contamination scare, which led to two death sentences for men involved in deliberately tainting the country’s milk supply with the chemical melamine. “China’s milk powder imports have more than doubled since the melamine crisis,” says Tim Hunt, senior dairy analyst for Rabobank. “It played a huge role in shoring up market prices for internationally traded products in the first half of 2009.”

Nevertheless, at just 22kg per head each year, China’s dairy consumption falls well short of wealthier Asian countries such as Japan (where people eat some 75kg of milk, cheese, ice cream and yoghurt each year) and is piddling next to European Union residents, who consume 223kg each year. Still, foreign dairy groups see potential in the Chinese market. Although consumption fell in the wake of the melamine scare, it is expected to return close to pre-crisis levels by the end of the year.

Meanwhile, MilkLink, the UK dairy co-operative, this year became the first British cheese maker to export Stilton to China, targeting urban Chinese as well as western expats. The company’s cheeses, which will soon include English cheddar, are being sold in supermarkets along the country’s east coast, including branches of Tesco and Wal-Mart. Simon Mercer, head of export at The Cheese Company, part of MilkLink, claims natural cheeses will be the next big growth story in China’s dairy sector, a forecast backed up by research group Zenith International. It says cheese consumption, currently less than 4 per cent of the country’s dairy market, will rise alongside the expansion of fast food chains such as Pizza Hut and McDonald’s.

As the dairy sector grows, Mercer forecasts China will “suck in” imports, but warns that the UK – where milk production is in decline – is not in a position to meet demand.

Jenny Wiggins, FT consumer industries correspondent

. . .

Dried seahorses

The aphrodisiac counter is always the most arresting section in the menageries that are Chinese medicine shops. Among the eyes of newts and toes of frogs are mounds of dried seahorses. In traditional Chinese medicine, consuming seahorses is thought to be beneficial for human kidneys, improving memory, reducing swelling, helping women give birth, treating arthritis and even curing breast cancer. But the most important function of the humble hippocampus is the treatment of impotence. Maybe it has something to do with the fact that seahorses are the only known vertebrate species for which males rather than females give birth. Or maybe it’s just because they are so exotic.

For most of the past 1,000 years, only the richest Chinese patients could afford to include seahorses in their love potions. But with industrialisation, rapacious modern fishing techniques and China’s economic renaissance, dried seahorses have become widely available and are even sold pre-packaged by the dozen in supermarkets across the country.

Chinese consumers demand up to 250 tonnes of dried seahorses annually, but populations in China’s own territorial waters have been so depleted that only 10-20 tonnes a year can be sourced domestically. The remainder is imported from places such as Vietnam, the Philippines, India and Africa. And because dried seahorses weigh so little, 250 tonnes is equivalent to tens of millions of seahorses killed every year for Chinese aphrodisiacs – figures so enormous that even some in the Chinese medicine industry have started to voice concern that this precious ingredient will soon be fished into extinction.

The obvious answer? Farming seahorses. But attempts to do so on a commercial scale have so far had little success.

Jamil Anderlini, FT deputy Beijing bureau chief

...............................................................................

“Penny pinching, ruthless, suspicious shoppers”

Hail the Chinese consumer, putative saviour of the global economy, writes Sameena Ahmad. China is still growing, at an enviable 8 per cent clip, and within that retail sales are rising by 15 per cent and more each year. The country now boasts more millionaires than the UK and glossy malls to serve them are springing up even in tawdry third- and fourth-tier cities. Parched of profits at home, a growing number of multinational corporations are betting on China’s billion-strong army of shoppers to bail them out and the rest of the world.

But in order to sell successfully to the Chinese, you have to understand them – and too many international companies (still) don’t. While the country is growing richer rapidly, the absolute numbers remain relatively small. Total consumer spending in China reached $1,700bn in 2007, according to the most recent figures available, compared with $12,000bn in the US. In new research on the Chinese consumer to be published next month, McKinsey, the management consultancy, classifies just two million households out of a population of 1.3 billion as “wealthy” and that is based on fairly modest annual earnings of more than $30,000. The mass middle class is certainly growing and numbers some 70 million urban households, but these still earn just $5,000-$10,000 a year. That buys western shampoo, Ikea furniture and a television, but not many cars or diamonds.

The current healthy growth in retail sales is also not as good as it looks. Government purchases at retail stores are included in the figures and in many cities, including Beijing, the government has also been helping indirectly by handing out vouchers to finance purchases of anything from computers to weddings. The big spender in China, in years past and even more so today, is the state: private consumption as a percentage of gross domestic product has fallen from 60 per cent in 1968 to 36 per cent last year and could be as low as one-fifth in 2009 as the government ramps up capital investment.

In fact, the Chinese, who already have a world-beating savings rate of nearly 40 per cent of their income, tend to become more frugal when times are tough. As bank deposit rates decline, most of us spend more. The Chinese tend to stash away even greater sums to make up for the lost interest. The reason for this conservatism is the lack of a social safety net in China – citizens have to provide for their own medical care, old age and possible unemployment.

This makes them “penny pinching, ruthless, suspicious shoppers”, says Tom Doctoroff, north Asia director of advertising agency JWT and a writer on Chinese consumer trends. In a recession this behaviour only grows worse. “The downturn has made people keener on finding the cheapest deal,” says Yuval Atsmon, an associate principal in McKinsey’s Shanghai office. Even when they can easily afford it, buying a PC typically involves six visits to a store, and more often than not, customers will wait six months before making their decision after consulting blogs, online comparison sites and – the most important source of information in China – friends and family. Sales of copycat mobile phones, with all the functions of top models but a lower price, have soared from 17 million units in 2006 to 62 million units last year.

Brand consciousness is high, at least in the big cities, but brand loyalty is much lower than in the west. A price cut or good in-store promotion can often sway shoppers. And for cultural reasons, appealing to an individual’s taste or personal comfort typically doesn’t work, Doctoroff points out. A purchase either has to publicly signal status or wealth, like a flashy car does. Or provide a practical benefit: the latest craze in China is chocolate with added calcium, eaten not for pleasure but for the health benefits. The growing appeal of diamonds to women is not based on romance, but as a financial signal of a man’s commitment. Trust is another key issue in a country where so many consumer products are faked. Chinese mothers, for example, will pay 30 per cent more for safe baby milk – and this should favour foreign brands.

But foreign retailers and manufacturers have to cope with vast regional differences in demographics, language and culture that make it hard to plan a single marketing strategy – indeed treating China like a single country is usually a mistake. Natives of Zhejiang on the east coast like “toilet roll as rough as sandpaper”, the former head of Wal-Mart China liked to observe, a penchant thankfully absent elsewhere. Atsmon points out that cities even an hour apart can be entirely different: in southern Shenzhen, more than four-fifths of the population consists of migrant workers, mostly under the age of 35, who speak Mandarin and drink in bars. In nearby Guangzhou, migrants number just over a quarter, more people are older, enjoy watching Cantonese TV and go out to restaurants to drink with family members. Adequately addressing such niches requires an army of local suppliers, costly infrastructure and several layers of wholesalers and intermediaries. Even then, success may remain as elusive as it always has been: “No matter what you may be selling, your business in China should be enormous, if the Chinese who should buy your goods would only do so,” lamented Carl Crow, an advertising executive in Shanghai and author of the original book on how to sell to the Chinese … more than 70 years ago.

Sameena Ahmad is a business writer for The Economist

Copyright The Financial Times Limited 2009

NY Times: Ads Follow Web Users, and Get More Personal

July 31, 2009

Ads Follow Web Users, and Get More Personal

By STEPHANIE CLIFFORD

For all the concern and uproar over online privacy, marketers and data companies have always known much more about consumers’ offline lives, like income, credit score, home ownership, even what car they drive and whether they have a hunting license. Recently, some of these companies have started connecting this mountain of information to consumers’ browsers.

The result is a sea change in the way consumers encounter the Web. Not only will people see customized advertising, they will see different versions of Web sites from other consumers and even receive different discount offers while shopping — all based on information from their offline history. Two women in adjoining offices could go to the same cosmetic site, but one might see a $300 Missoni perfume, the other the house-brand lipstick on sale for $2.

The technology that makes the connection is nothing new — it is a tiny piece of code called a cookie that is placed on a hard drive. But the information it holds is. And it is all done invisibly.

“Now, you’re traveling the Internet with a cookie that indicates you’re this type of consumer: age group X, income level, urban versus rural, presence of children in the household,” said Trey Barrett, a product leader at Acxiom, one of the companies offering this linking to marketers.

Advertisers and marketers say this specificity is useful, taking out the guesswork involved in online-only profiling, and showing products to the people most likely to be interested. Retailers including Gap and Victoria’s Secret are using this tactic.

But consumer advocates say such unseen tracking is troubling. On the old Internet, nobody knew you were a dog. On the new targeted Internet, they now know what kind of dog you are, your favorite leash color, the last time you had fleas and the date you were neutered.

“The industry’s love affair with persistent cookies has made it virtually impossible for users to go online without being tracked and profiled,” said Marc Rotenberg, executive director of the Electronic Privacy Information Center, in an e-mail message.

While Congress has been holding hearings on online privacy lately, the sessions have focused on online behavioral targeting. The industry has argued that no government intervention is needed, an argument that the Federal Trade Commission has so far accepted.

Consumers can avoid cookie-based tracking by deleting cookies from their computers or setting their browsers not to accept cookies. But few do, and privacy advocates say it is easy for companies to add cookies without users noticing.

For decades, data companies like Experian and Acxiom have compiled reams of information on every American: Acxiom estimates it has 1,500 pieces of data on every American, based on information from warranty cards, bridal and birth registries, magazine subscriptions, public records and even dog registrations with the American Kennel Club.

Patrick Williams, the publisher of the personal finance magazine Worth, recently asked Acxiom to find the names and addresses of 10,000 Americans from each of 11 cities who had houses worth more than $1 million, net worth of over $2 million, lived within a few miles of other rich people and subscribed to business publications.

“They are the scariest data research company around — they know far too much,” said Mr. Williams, who said he was very happy with the amount of information it gave him.

Companies like Acxiom and a competitor, Datran Media, make the connection between online and offline data when a person registers on a Web site or clicks through on an e-mail message from a marketer.

Datran’s cookies include 50 to 100 pieces of information. Both companies say cookie data is anonymous and generalized. Datran and Acxiom then sell advertising on Web sites like NBC.com, Facebook and Yahoo to companies that use their data.

For marketers, all this data is a boon. Beltone New England, a hearing-aid company, asked Datran to find people online who were 65 and over, owned a house, were head of a household, made more than $35,000 a year and lived in New England so it could show them ads. Datran also tested the same ads with a wider group of people.

“What was surprising was we found the majority of responders turned out to be women 35 to 40 who had elderly parents at home,” said Perry Ebel, Beltone’s director of marketing and business development. He said he was changing his offline marketing to include that group.

By using real-world data online, marketers can customize messages even further — showing different products to people with different shopping habits, whether it is in ads, an e-mail message or in semipersonalized Web pages.

Rodale, which publishes books along with magazines like Men’s Health and Prevention, uses Acxiom data to help determine which promotional e-mails to send to which customers. Offers aimed at women might be accompanied by an e-mail message offering a Father’s Day subscription to Men’s Health for him and a free book on losing belly fat for her. Young men might get another offer — a book on sex positions. Some marketers are using offline data more subtly — for example, showing a budget shopper a discount offer and a regular shopper a full-price section.

“The people who buy less frequently and are most price-conscious may get a better deal than someone who buys more frequently, who would buy anyway,” said Christopher S. Marriott, global managing director of Acxiom Digital, a division of Acxiom.

Of course, shoppers would have little reason to think their experience or their ads are being personalized based on their home value or Volvo ownership.

“It is a little Big Brother-ish,” said Betsy Coggswell, 49, a social worker in Fullerton, Calif., who shops online regularly. Still, she said, she wasn’t shocked. “Every time you put out information about yourself — people have got to understand — it’s going to be collected by somebody.”

Some online companies avoid matching online and offline profiles. In 2000, DoubleClick abandoned plans to connect online and offline data after a huge outcry. Google, which later acquired DoubleClick, has been conducting studies that connect the two areas, but it does not currently collect or serve ads based on such personal information without user permission, Sandra Heikkinen, a Google spokeswoman, said.

While Acxiom, Datran and some of their partners address their use of tracking in their privacy policies, such policies have become worthless, Mr. Rotenberg said. “Real transparency means that the user gets access to the information, not to a policy about the information,” he said.

Paul M. Schwartz, a law professor and privacy expert at the law school of the University of California, Berkeley, said the unwitting participation by consumers makes online marketing different from offline.

“Interactive media really gets into this creepy Orwellian thing, where it’s a record of our thoughts on the way to decision-making,” he said. “We’re like the data-input clerks now for the industry.”

Copyright 2009 The New York Times Company

NY Times: Mom-and-Pop Operators Turn to Social Media

July 23, 2009

Mom-and-Pop Operators Turn to Social Media

By CLAIRE CAIN MILLER

SAN FRANCISCO — Three weeks after Curtis Kimball opened his crème brûlée cart in San Francisco, he noticed a stranger among the friends in line for his desserts. How had the man discovered the cart? He had read about it on Twitter.

For Mr. Kimball, who conceded that he “hadn’t really understood the purpose of Twitter,” the beauty of digital word-of-mouth marketing was immediately clear. He signed up for an account and has more than 5,400 followers who wait for him to post the current location of his itinerant cart and list the flavors of the day, like lavender and orange creamsicle.

“I would love to say that I just had a really good idea and strategy, but Twitter has been pretty essential to my success,” he said. He has quit his day job as a carpenter to keep up with the demand.

Much has been made of how big companies like Dell, Starbucks and Comcast use Twitter to promote their products and answer customers’ questions. But today, small businesses outnumber the big ones on the free microblogging service, and in many ways, Twitter is an even more useful tool for them.

For many mom-and-pop shops with no ad budget, Twitter has become their sole means of marketing. It is far easier to set up and update a Twitter account than to maintain a Web page. And because small-business owners tend to work at the cash register, not in a cubicle in the marketing department, Twitter’s intimacy suits them well.

“We think of these social media tools as being in the realm of the sophisticated, multiplatform marketers like Coca-Cola and McDonald’s, but a lot of these supersmall businesses are gravitating toward them because they are accessible, free and very simple,” said Greg Sterling, an analyst who studies the Internet’s influence on shopping and local businesses.

Small businesses typically get more than half of their customers through word of mouth, he said, and Twitter is the digital manifestation of that. Twitter users broadcast messages of up to 140 characters in length, and the culture of the service encourages people to spread news to friends in their own network.

Umi, a sushi restaurant in San Francisco, sometimes gets five new customers a night who learned about it on Twitter, said Shamus Booth, a co-owner.

He twitters about the fresh fish of the night — “The O-Toro (bluefin tuna belly) tonight is some of the most rich and buttery tuna I’ve had,” he recently wrote — and offers free seaweed salads to people who mention Twitter.

Twitter is not just for businesses that want to lure customers with mouth-watering descriptions of food. For Cynthia Sutton-Stolle, the co-owner of Silver Barn Antiques in tiny Columbus, Tex., Twitter has been a way to find both suppliers and customers nationwide.

Since she joined Twitter in February, she has connected with people making lamps and candles that she subsequently ordered for her shop and has sold a few thousand dollars of merchandise to people outside Columbus, including to a woman in New Jersey shopping for graduation gifts.

“We don’t even have our Web site done, and we weren’t even trying to start an e-commerce business,” Ms. Sutton-Stolle said. “Twitter has been a real valuable tool because it’s made us national instead of a little-bitty store in a little-bitty town.”

Scott Seaman of Blowing Rock, N.C., also uses Twitter to expand his customer base beyond his town of about 1,500 residents. Mr. Seaman is a partner at Christopher’s Wine and Cheese shop and owns a bed and breakfast in town. He sets up searches on TweetDeck, a Web application that helps people manage their Twitter messages, to start conversations with people talking about his town or the mountain nearby. One person he met on Twitter booked a room at his inn, and a woman in Dallas ordered sake from his shop.

The extra traffic has come despite his rarely pitching his own businesses on Twitter. “To me, that’s a turn-off,” he said. Instead of marketing to customers, small-business owners should use the same persona they have offline, he advised. “Be the small shopkeeper down the street that everyone knows by name.”

Chris Mann, the owner of Woodhouse Day Spa in Cincinnati, twitters about discounts for massages and manicures every Tuesday. Twitter beats e-mail promotions because he can send tweets from his phone in a meeting and “every single business sends out an e-mail,” he said.

Even if a shop’s customers are not on Twitter, the service can be useful for entrepreneurs, said Becky McCray, who runs a liquor store and cattle ranch in Oklahoma and publishes a blog called Small Biz Survival.

In towns like hers, with only 5,000 people, small-business owners can feel isolated, she said. But on Twitter, she has learned business tax tips from an accountant, marketing tips from a consultant in Tennessee and start-up tips from the founder of several tech companies.

Anamitra Banerji, who manages commercial products at Twitter, said that when he joined the company from Yahoo in March, “I thought this was a place where large businesses were. What I’m finding more and more, to my surprise every single day, is business of all kinds.”

Twitter, which does not yet make money, is now concentrating on teaching businesses how they can join and use it, Mr. Banerji said, and the company plans to publish case studies. He is also developing products that Twitter can sell to businesses of all sizes this year, including features to verify businesses’ accounts and analyze traffic to their Twitter profiles.

According to 

NY Times: Site Wins Fashion Fans by Letting Them Design

July 27, 2009

Site Wins Fashion Fans by Letting Them Design

By CLAIRE CAIN MILLER

The fashion Web site Polyvore allows users to build collages with photos of clothing, accessories and models that they think go well together.

MOUNTAIN VIEW, Calif. — The fashion magazines Vogue, InStyle and Lucky may rule the newsstand racks. But online, they are also-rans, overlooked by the fashion-conscious in favor of Polyvore, an upstart Web site far from Fifth Avenue.

Polyvore is a user-generated fashion magazine filled with user-generated ads. The people who go to it play fashion editor and create collages featuring pictures of clothes, accessories and models from across the Web. Readers view the collages, which the site calls “sets,” and if they click on a dress or necklace, they are taken to the Web site that sells it.

Founded by three ex-Yahoo engineers, Polyvore has been focused on getting people to visit the site. It seems to be working. Polyvore had more than 835,000 unique visitors in June, almost 25 percent more than the traffic to Style.com, run by Vogue, and InStyle.com, according to Compete, a Web analytics firm. It is also far bigger than the Web sites of Lucky and Harper’s Bazaar. While other fashion magazine sites have been struggling to hold an online audience, Polyvore has tripled its traffic in the last year.

Now it is shifting its focus to making money. It runs ads, like the magazine sites do. But it also earns a commission when users click on or purchase clothes from certain e-commerce sites, though only about a quarter of outbound clicks make money for Polyvore. The company is now trying to forge relationships with clothing and accessories sites in return for uploading their product catalogues to the site.

“To compete with the Vogues and InStyles, it’s not just about transacting and maximizing the dollars per page view,” said Peter Fenton, a partner at Benchmark Capital, which invested $2.5 million in Polyvore. “There’s this aspirational side and entertainment side, which none of the sites up until now have done a good job at tapping into.”

At the same time, Polyvore is giving stale e-commerce sites a much-needed jolt of inspiration. “Online retail started around digital cameras. Now, sites are using the same engines to sell shirts, but that’s not the way they should be sold,” said Pasha Sadri, co-founder and chief executive of Polyvore. “Clothing is much more visual.” And unlike cameras or books, clothes and accessories are bought as part of a whole outfit, though many sites still show pieces of clothing individually.

Mr. Sadri, a corduroy-wearer who is not particularly fashion-forward himself, conceived the idea for Polyvore in 2007, while working at Yahoo. He was the software engineer behind Yahoo Pipes, a tool that allows people to pull together content from across the Web, similar to what Polyvore does.

When Polyvore users surf the Web, they use a tool called the Clipper, downloaded and saved on the toolbar, to select images and save them to Polyvore, where anyone can use them in a collage.

Brands and e-commerce sites can also upload their items to Polyvore, though today 95 percent of the images come from users. Polyvore attributes images with a hyperlink to the original site. (It gets about five requests a week, usually from photographers or painters, to remove images.)

To create a set, users drag and drop images and manipulate them. Polyvore also offers fonts for text, and audio clips from Amazon. Its 928,000 registered users create 28,000 new sets a day. A set inspired by Blake Lively, the “Gossip Girl” actress, includes a picture of her with a leather jacket similar to the one she is wearing, available on the Zadig & Voltaire Web site for $840. It also features accessories for the outfit, like Coach boots, Ray-Ban aviator sunglasses and a T-Mobile Sidekick.

On a blog called Boutonnieres & Bow Ties, brides-to-be submit photos of their wedding dresses. Samantha Shih, owner of a menswear company called 9Tailor, uses Polyvore to create the groom’s outfit, complete with tie and cuff links, and uploads it to her blog.

To increase revenue, Polyvore is engaging fashion companies to sponsor content on the site. Tory Burch promoted its summer collection, which was inspired by Venice, by running a contest on Polyvore that asked users to create Venetian-themed sets using the new Tory Burch pieces.

Lori’s Shoes, a boutique in Chicago and online, recently noticed a surge of traffic coming from Polyvore, which John Coyle Steinbrunner, the company’s creative director, had not heard of.

Now Lori’s Shoes wants to advertise on Polyvore. “It just gets us a better customer than banner ads or cost-per-click ads, they’re just instantly more loyal,” Mr. Steinbrunner said. “As opposed to just being a customer, they get to help determine what the look and aesthetic of the shoe is.”

Some online retailers, including Charlotte Russe and Torrid, license Polyvore’s technology to use on their own sites. Sucharita Mulpuru, an e-commerce analyst at Forrester Research, says she thinks licensing is the most promising use for Polyvore and competitors like Kaboodle.

“On the retail sites themselves, people are looking to be inspired and are down the funnel of the purchase process,” she said. But while using Polyvore’s site, “people are in a different mind-set, they’re looking to browse, they might not be looking to buy.”

Polyvore also plans to sell data on customer preferences it compiles on the site. It could potentially tell a retailer that a type of shoe is more popular in Manhattan than Los Angeles, so it would know where to stock the shoe. Or designers could upload images of new items before deciding to produce them to get input from fashion-savvy users.

It could also give buyers information about trends in real-time, faster than monthly magazines, said Jess Lee, Polyvore’s product manager. This fall, for example, watch for recent trends bubbling up on the site: exposed zippers, fingerless gloves and butterfly prints.

Copyright 2009 The New York Times Company

AdvertisingAge: Is Customer Service a Media Channel? Ask Zappos

 

Is Customer Service a Media Channel? Ask Zappos

Brand Turned Cost Center Into Unassailable Asset Even Amazon Looks Up to

By Pete Blackshaw

Published: July 23, 2009

Pete Blackshaw

Is customer service a media channel? It's a great time to ask that question, as it comes right smack in the wake of Amazon purchasing Zappos for nearly a billion dollars. That's a big number for an online shoe company.

We can certainly follow standard protocol and analyze this by looking at the fundamentals and "usual suspect" metrics, but I suggest we take a detour and ask a few less obvious -- yet infinitely revealing -- questions. For instance, why did Amazon CEO Jeff Bezos, more than a year and a half ago, attentively and noticeably take notes near the front row at South by Southwest while Zappos Tony Hsieh talked about Zappos' culture, values and service? What could the lanky shoe guy possibly know that the former Time magazine "Man of the Year" doesn't?

Here's another one: How on earth did the CEO of a shoe company enter the "million follower" club on Twitter? I mean, isn't that club reserved for the likes of Lance Armstrong, Ashton Kutcher, Shaquille O'Neill and other mega-celebrities? What on earth could a shoe company CEO say that would keep us so engaged, eager to tell others and at times feeling a bit "religious"?

And another: How on earth can a company drive serious revenue that lets its employees do all these weird, off-protocol things like occasionally delivering pizza, not shoes, when customers call the 800 number? I mean, where's the discipline and focus, folks? Sounds like touchy-feely dot-com hype revisited, no?

Yes, I'm sure there is a mountain of analytical bean counters behind the magic numbers in this deal, but we all know what's really going on. Heck, we've been talking about it incessantly for well over two years.

Zappos is a game changer, and it found value -- and ferocious word-of-mouth and brand advocacy -- in a place most of us leave for dead and certainly don't consider even close to being a media channel: customer service. They took this "cost center" input and turned it into an unassailable asset, fortified by the founder-CEO's sometimes "cult-like" (arguably irrational, by the typical marketing book) obsession with serving the consumer at all costs. It wasn't flaky. He approached this with focus, discipline, real incentives and an obsession over a "different" set of numbers.

Zappos did this at a critical juncture for all of us. We know word-of-mouth matters. We suspect "advocacy" might be the metric that truly moves the needle. Even separate from the Amazon deal, Zappos probably did more to shape our collective mind-set around the importance of "paid" vs. "earned" media, and it titled us much toward the later.

But lest anyone mistakenly conclude this is all about Twitter -- or the "mother of all social media case studies" -- let's not forget they first focused on the boring stuff. Whenever I consult brands' social media, or what I now prefer to refer to as CRM 2.0, I insist they do two things: Call their 800 number and then try to send e-mail feedback to themselves. Most fail -- miserably. Zappos takes precisely the opposite path. It plasters the 800 number all over, even in Spanish. It recklessly (I say brilliantly) throws so-called "operational costs" to the wind and writes it off as a marketing investment. It's not just that it is "powered by service," as the tagline suggests; service is its core DNA.

If you look hard enough, you can count more than 20 service offers or invitations for feedback on the Zappos home page. Just imagine, the world's largest online retailer -- also pretty good at service themselves -- just dropped nearly a billion bucks on a company that promotes the very things we religiously hide from the consumer.

Being a "Nielsen" guy, I love numbers, data charts and trends. But sometimes you can just "feel a movement." One of my aha moments with Zappos came the night before I moderated a panel for Ad Age's 2008 Digital Conference in which the Zappos CEO was participating. My wife and I were aggressively surfing the site, looking for soft spots or vulnerabilities I could translate into an uncomfortable question to destabilize my big-fish panelist. We decided to have an online "chat" with a Zappos service representative, and started throwing her every obnoxious question we could think of.

It was like we invited her to a party. She relished in the questions. Her enthusiasm was off the charts. When we asked her what she thought of the Zappos CEO, she gushed with authentic passion because he and the rest of the management team really made employees feel special working there.

Darn if I haven't told that story a thousand times, and even included it half the industry speeches I deliver. Zappos figured out early on that customer service and employee advocacy is way better and more efficient than paid media. But unlike the rest of us, it didn't just pontificate that philosophy. It put it to work.

I think we should all buy those shoes.

ABOUT THE AUTHOR

Pete Blackshaw is exec VP of Nielsen Online Digital Strategic Services and author of "Satisfied Customers Tell Three Friends, Angry Customers Tell 3,000" (DoubleDay). He is also chair of the National Council of Better Business Bureaus. His biweekly column looks at the relationship between marketing and customer service in the age of consumer control.

Fast Company: 6 Lessons From the Best Marketing Campaign Ever

July 12, 2009

6 Lessons From the Best Marketing Campaign Ever

By Rohit Bhargava

Last month an unlikely underdog stunned the marketing world at the International Cannes Advertising Festival [1]. At the show, a single marketing campaign took home a Grand Prix award in three categories simultaneously--direct, cyber and PR-- something that had never happened before in the 50+ year history of the show. Contrary to what you might expect, the unanimous winner of this unprecedented victory was not a Fortune50 brand with an advertising budget of millions, but a small Tourism board promoting a little known island off the Great Barrier Reef.

The winning campaign was called the "Best Job in the World [2]" and was essentially a big online job search conducted through social media for a new "caretaker" for Hamilton Island in Queensland, Australia. Done on a comparatively paltry marketing budget of just $1.7 million dollars and reliant on fortuitous PR and word of mouth, the campaign achieved stunning results, including over 34,000 video entries from applicants in 200 countries, and more than 7 million visitors to the site who generated nearly 500,000 votes.

Just two weeks ago on July 1, the winner of the competition [3]--a 34-year-old British man named Ben Southall [4] started blogging and touring around Queensland, finally bringing the competition to a close. For the next six months, he will be touring around Queensland, sharing his adventures through a video blog, writing, Twitter account [5] and Flickr photos [6]-- generating even more interest in Hamilton Island and all of Queensland in the process. The tangible results for the island are rolling in as well: Amway Australia chose it as the site of their upcoming annual conference, and domestic Aussie airline Virgin Blue just started flying a direct flight between Sydney and Hamilton Island [7], due to the rise in demand from travelers wanting to get to the island.

I realize that tourism and the travel industry may seem far removed from your business. Unfortunately, we don't all have the natural beauty of Hamilton Island to fall back on when starting our marketing campaigns. Still, a big part of the reason for the amazing success of this campaign was not what they were marketing, but how they used social media to do it. In that, there are some lessons anyone trying to promote a product or service could use:

1. Make it believable. Many marketing groups would never make a claim if they can't provide substantial evidence. How might Tourism Queensland prove that their job is the best in the world? They can't. But it is believable because it is a beautiful place and fits what many people's definition of a dream job might be.
2. It's not about how much you spend. One of the major benefits of smart public relations and social media is that it scales in a way that advertising typically doesn't. In other words, you don't have to pay more to get more. The real trick is to have something worthwhile to say that people can't help talking about. You need a good story.
3. Focus on content, not traffic. The typical marketing campaign focuses on traffic to some kind of site. For Tourism Queensland, the biggest payoff of this campaign was having over 34,000 videos on YouTube from people around the world talking about how much they love Queensland. Aggregate the views of all those videos, and multiply them over the long term and you'll start to understand the true impact of their campaign.
4. Create an inherent reason for people to share. Another element of this campaign that worked extremely well was the fact that there was voting enabled on the videos. What this meant was that after someone submitted their video, they had an incentive to share it with everyone in their social network online to try and get more votes.
5. Don't underestimate the power of content creators Most recent statistics point to some number between 1% and 10% of the user base of any social network are the active content creators. Though these percentages may seem small, the potential impact of some of these individuals are vast online. It could easily become the secret weapon for your next marketing campaign.
6. Give your promotion a shelf life. The best thing about this campaign may just be the content yet to come. Ben, the winner, just started blogging and sharing videos and photos, but the content is already engaging, high quality and inspires you to dream of making it to Queensland yourself. Over the next six months, his itinerary will take him across the state of Queensland and unlock many other unique opportunities. Best of all, this content will live on far beyond the time span of the campaign.

Read more of Rohit Bhargava's Influential Marketing blog [8] on Fast Company.

Rohit Bhargava [8] is SVP of Digital Strategy at Ogilvy PR [9] and author of the award-winning book Personality Not Included [10], a guide for brands to be more authentic. He writes the popular non-obvious marketing blog Influential Marketing [11] and speaks frequently around the world on social media, marketing and the power of personality. Follow him on Twitter at @rohitbhargava [12] or become a fan on Facebook [13] before July 31 to be among the first to get a free download of his new ebook on August 1.

---

Links:
[1] http://www.canneslions.com/about/
[2] http://www.islandreefjob.com/
[3] http://www.thisislondon.co.uk/standard/article-23714073-details/Briton+begins+%27best+job+in+the+world%27/article.do
[4] http://www.youtube.com/watch?v=jgPXkIDYr7M
[5] http://twitter.com/Bensouthall
[6] http://www.flickr.com/photos/tourismqueensland/
[7] http://www.travelagentcentral.com/air-travel/virgin-blue-offers-new-direct-flights-down-under-16084
[8] http://www.fastcompany.com/tag/influential-marketing
[9] http://blog.ogilvypr.com/
[10] http://www.personalitynotincluded.com/readpni/
[11] http://rohitbhargava.typepad.com/
[12] http://www.twitter.com/rohitbhargava
[13] http://www.facebook.com/rohitmarketingauthor

Article location:http://www.fastcompany.com/blog/rohit-bhargava/influential-marketing/7-lessons-best-marketing-campaign-ever

BusinessWeek: The Pros and Cons of Co-Branding

Sales & Marketing July 10, 2009, 11:19AM EST text size: TT

The Pros and Cons of Co-Branding

It can enhance both partners—or put a dent in one. Make sure you pick a partner that's a good fit with your company's products, values, and image

By Steve McKee

The moment Roger Penske announced his planned acquisition of the Saturn brand from GM, Saturn dealerships around the country initiated a spontaneous and organic co-branding campaign, erecting banners and billboards to celebrate the alliance.

Saturn of Wichita's advertising proudly proclaimed: "Finally, a car guy owns a car company." Scott Davies, owner of the dealership, explained the resulting traffic increase by saying: "People want to buy from someone they like. A lot of customers won't buy a car from GM, but they will buy a car from Roger Penske." That's why Davies—and many other dealers like him—were so eager to associate Saturn with Penske.

It was an odd and unintentional (at least from GM's perspective) co-branding effort, but it paid off. Saturn's marketing director, Kim McGill, said the Penske announcement led to a 35% sales jump in June over the prior year.

Co-branding is nothing new, and it's something that we as consumers take somewhat for granted. Visit a grocery store and you'll see dozens of examples, from the ice cream aisle (Breyer's (UL) and Hershey (HSY)) to the snack aisle (Lay's (PEP) and KC Masterpiece (CLX)) to the cereal aisle (Kellogg's (K) and Healthy Choice) to the dessert aisle (Cinnabon and Mrs. Smith's). You can also find co-branding examples in the automotive world (Coach (COH) and Lexus (TM)), the hospitality industry (Bulgari and Ritz-Carlton), the footwear business (Disney (DIS) and Crocs (CROX), the franchising world (Tim Hortons (THI) and Cold Stone, the airline industry (Southwest (LUV) and SeaWorld), and even in product catalogs stuffed into airplane seat pockets ("Order your Braun Oral-B Plaque Remover today").

Why Co-Brand?

There are a number of reasons companies embark on co-branding programs. To begin with, they're a powerful way of introducing one company's products and services to the loyalists of another. Perhaps the best example of this is the now-legendary "Intel Inside" campaign, which launched a brand that few consumers had ever heard of into the stratosphere by piggybacking on the equity of big computer makers such as IBM (IBM) and Compaq (HP). Within a year of the program's launch, Intel (INTC) was co-branding with some 300 computer manufacturers.

Co-branding also enables one brand to benefit from the "halo of affection" that belongs to another. That was the rationale behind Nike's (NKE) original 1984 alliance with Michael Jordan, and the effort has done wonders for both. Similar (if more mundane) is the co-branding EconoLodge has done in its housekeeper-certification program with Mr. Clean (PG) in an effort to leverage the importance hotel guests place on tidiness.

Another benefit of co-branding is cost savings, something that can't be overlooked during tough economic times. That's one reason you increasingly see fast-food restaurants like Pizza Hut (YUM) and Taco Bell (YUM) sharing the same building—and sometimes the same counter, menu boards, and staff. In some cases, companies co-brand in order to charge a premium, such as Ford's (F) two-decade partnership with Eddie Bauer and its more recent creation of the "450 horsepower supercharged Ford F-150 Harley-Davidson Super Crew" with an MSRP of more than $42,000.

It's Not Just for Big Companies

Co-branding is not just for giant national or international brands. While a small business may have difficulty linking up with Nike or Procter & Gamble, there are an increasing number of off the shelf co-branding opportunities of which many businesses can avail themselves. Programs have been developed by credit-card companies such as Visa (V) and MasterCard (MA), retailers including Starbucks (SBUX) and Barnes & Noble (BKS), and even shipping companies—the U.S. Postal Service offers a service by which you can add your company logo to its priority mail packaging.

Beyond these, there are bound to be dozens of custom co-branding partners for just about any type of small business, whether you serve a local geographical area or a national vertical market. The key is to think creatively about products or services that complement yours in some way and that will enhance the appeal or credibility of your offering.

For example, a restaurant could co-brand with a local packaged-foods maker to create a new menu item, an accounting firm could co-brand with an information-technology provider to create a new consulting offering, or a physician might co-brand with a hospital on a new service line. A good place to start generating ideas is by thinking about other types of companies that do a good job serving your target market. You might even ask your customers to identify other companies with which they do business and see if you come across any patterns.

Develop Your Own Guidelines

Be careful, however—co-branding is not without its risks. First, it tends to have a dilutive effect, since it spreads the credit for a positive experience across two brands where normally there's only one. And if the experience isn't positive—even if it's the other brand's fault—it may reflect negatively on you. (Not to pick on the Postal Service, but if your company's name is on the side of a Priority Mail package, how does it reflect on you if it arrives late or damaged?) Further, while in a well-conceived co-branding program the whole should be greater than the sum of the parts, you can't get away from the fact that you are to some extent relying on another brand's equity. That can, in some cases, make your brand look weak or secondary.

It's important, therefore, to carefully consider your own co-branding principles before you enter the fray. Develop guidelines that are right for your business that will enable you to objectively assess opportunities that arise. Many large corporations have set out formal guidelines for this purpose—AT&T (T) even put a Co-Branding Decision Tool on its intranet to help guide managers through a variety of decision factors related to co-branding opportunities.

One of our clients developed three criteria that have (by design) somewhat limited their co-branding options. First, they will co-brand only with companies that share complementary values. Second, they will co-brand only with products that (as they do) hold best-in-class status. Third, they will co-brand only in situations where they can retain full review and approval rights on all elements of communications. That narrows the company's co-branding possibilities, but it also reduces its risk.

Create a proposal and reach out

Your criteria may differ based on what's most appropriate for your situation, but "fit" should be a prime consideration. While many brands share similar characteristics, no two are exactly alike. Co-branding ice cream and root beer is a natural; co-branding sports cars and computers less so (though that didn't prevent Ferrari from linking up with Acer). Ecco Shoes co-branding with the World Wide Fund for Nature makes intuitive sense; Chanel and Hello Kitty is a bit more of a head-scratcher. Look for brand fit not only from the perspective of attributes and benefits but also with respect to core values and corporate philosophies.

As a starting point, examine existing co-branding examples and ask yourself how good of a fit they appear to be and why. Beyond that, seek out other companies and ask them to share their co-branding guidelines. Then divine the co-branding principles that are right for your company. Once they're in place, you can brainstorm potential partners who may be a good match and consider the benefits of linking up from their perspective as well as yours. Then put together a proposal and reach out to them.

Co-branding is an often-overlooked strategy by which the whole can truly be greater than the sum of the parts. While it should be used sparingly and judiciously, it could generate a new level of interest and excitement around your products and services.

For more on co-branding, flip through this slide show of 20 co-branding examples. Then read a Q&A with Tim Hortons' David Clanachan and Cold Stone Creamery's Dan Beem on their ongoing co-branding partnership.

Steve McKee is president of McKee Wallwork Cleveland Advertising, a firm that specializes in helping stalled companies rekindle growth. He is the author of the new book, When Growth Stalls. 

Copyright 2000-2009 by The McGraw-Hill Companies Inc. All rights reserved.

Online Metrics Insider: Analytics Isn't Just For Marketers

Analytics Isn't Just For Marketers...

Judah Phillips, Jul 07, 2009 03:30 PM

The practice of online analytics is most often discussed in the context of marketing. Analytics pinpoints the highest performing marketing and advertising campaigns. Analytics assists in identifying and helping to nurture leads. Analytics informs marketers of audience attributes and behavior, so that the best and most appropriate messages can be targeted to them. Analytics must be used to optimize search. While all of these statements are true, and I agree that analytics for marketing is among the highest and best use for the data, it is not the only use for data by far. Several other business functions can benefit from having access to data provided by online measurement systems, such as: Product development. Data is crucial to the successful development and ongoing extension of the feature set for online products. Data-driven decision-making helps inform product managers of how to enhance a product to meet core user needs. From tracking and testing elements of user experience for measuring and optimizing conversion, the data captured and reported by analytics can help product developers more quickly determine and extend what is working and eliminate what isn't. Sales. Arming the sales staff with data that identifies the attributes of an audience and their demographics, psychographics, and firmagraphics provides the underpinning for sales presentations, for informing potential customers about the reach and frequency of audiences, and for demonstrating success of a site compared to competitors. Finance. Specific actions taken by customers or users of a site generate value that can be quantified in hard currency -- from product purchases to advertising revenue to real or proxy values for certain actions, such as registrations or clickthroughs. The beancounters can analyze trends and deviations in this data to realize, estimate, and predict business cycles and their material effect on corporate finance. Customer Service. Data about trends and absolute numbers in customer attrition or account cancellations, surges in new registrations, increases in the purchases of certain products, and the volume of customer transactions, can help inform staffing levels in customer service and pinpoint areas of concerns for customer service specialists. Development. While marketers don't care much for the technical data available in analytics tools, such as JavaScript support, Flash, Flex, Silverlight, browser types, screen resolution, and more, these types of data are useful to technologists who are hard at work developing upcoming releases. User Experience. Designers should look at the (often maligned) browser overlay and heat mapping visualizations, click tracking reports, and form completion and abandonment reports to understand how their designs are (or are not) working to fulfill goals. Other business functions can benefit from Web data as well. Business planners may look at data representing seasonal traffic trends and purchasing cycles. Strategists may use the data to generate recommendations for extending the business at its edges. Business line managers can segment data related to the performance of certain products or customers. Data has value way beyond just the marketing discipline in which it is so often referenced. It can be the lifeblood of a business when made available in easy-to-use systems, with enough resources dedicated to capturing, analyzing, and communicating it across the business. How do you use data beyond the scope of marketing?  Source: http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=109334

FT: Brands show off niche side

Brands show off niche side

By Jenny Wiggins

Published: July 1 2009 22:35 | Last updated: July 1 2009 22:35

When Mars, the maker of M&Ms, Skittles and Twix, embarked this year on its first new confectionery brand launch in 20 years, it turned to women for inspiration.

Fling, a chocolate bar on sale in California and online at www.flingchocolate.com, is quite clear about who its target market is: the slim fingers of shimmering chocolate are packaged in a bright pink wrapper with the slogan “Naughty, but not that naughty” while claiming to contain less than “85 calories per finger”.

“We really went unapologetically feminine,” explains Thomas Pinnau, vice-president of indulgence for Mars’s snackfood division. “We had lengthy discussions about whether pink would be too feminine but we decided if it’s polarising, that’s good.”

Although other chocolate brands have often subtly pitched their products to one gender or the other – about 65 per cent of Dove chocolate bar buyers are female, while 70 per cent of Snickers bar buyers are male, and Nestlé prints the words “not for girls” on the Yorkie bars its sells in the UK – what is unusual about Fling is the overt nature of its gender bias.

“This brand is taking it a step further,” says Rita Clifton, chairman of Interbrand, the brand consultancy. “It feels overtly female.”

Some consultants are sceptical that Fling will work. “Consumers happily buy into brands that cleverly target them but if the brand image is too obviously transparently marketed, they can feel patronised,” says Don Williams, chief executive at Pi Global, a London-based brand consultancy .

But Ms Clifton says Mars can succeed by tapping into online social networking sites that allow companies to target specific groups of consumers. “You can get a critical mass of people around a particular [brand] at very low cost,” she argues. “Providing you can sell enough of your brand at the right price, you’ve got a business model.”

Mars is promoting Fling on websites, such as Facebook where the brand has more than 5,600 fans. Comments have included: “Had my first naughty fling in the office yesterday ... YUMMY!”

Other food companies also use the internet to approach women.

PepsiCo, the snackfoods and soft drinks group whose brands include Lay’s crisps and Sun Chips, is taking a similar approach via two websites: www.awomansworld.com and twitter.com/awomansworld, the Twitter site (which has nearly 3,000 followers). The sites are used to pitch snackfoods like popcorn and vegetable crisps at women. “Snacks made just for you,” the womansworld website says.

PepsiCo developed the online sites as part of a strategy to “better communicate” with women, says Becky Frankiewicz, vice-president of women’s portfolio marketing at Frito-Lay. “Consumer goods companies have long recognised the purchasing power of women in the household ... but less so her purchasing power for herself,” she explains.

Doug Anderson, senior vice-president of research and development at Nielsen, the US market research group, says these kind of gender-specific marketing strategies reflect the “overall decline” of the mass market, in part due to a drop in the number of households with children.

He argues that consumer products will increasingly need to be targeted at niche markets of all kinds, including those differentiated by gender, age and ethnicity. “The consumer marketplace is more fragmented than ever –  there’s clearly a risk in business – as usual,” he says.

Andy Fennell, chief marketing officer at Diageo, the UK distiller, agrees that consumer goods companies can no longer blithely mass market their products.

“Consumers have an expectation that you’ll get into some kind of dialogue,” he argues, adding that consumers now expect to be involved in the development of brands. He points out that while there are some 600 Face­book pages dedicated to Diageo’s Baileys liqueur brand, the company has initiated only one of them.

Diageo has taken advantage of this changing dynamic by employing the rapper Sean Combs, who goes by the name of P. Diddy, as a “marketing partner” for its Ciroc vodka brand. Mr Combs is paid to help develop the brand, and he tweets about it at twitter.com/iamdiddy“.

Thousands of people follow him,” says Mr Fennell. “Fundamentally, the way human beings interact with each other has shifted.”

Copyright The Financial Times Limited 2009

FT: Brands left to ponder price of loyalty

Brands left to ponder price of loyalty

By Andrew Edgecliffe-Johnson in New York

Published: June 21 2009 22:31 | Last updated: June 21 2009 22:31

Big brands’ best customers have been defecting in droves since the beginning of the US recession, according to a study. By this year, more than half of a typical US brand’s most loyal shoppers in 2007 had switched to rival products.

A two-year analysis of 685 grocery and pharmacy-stocked brands, using data from 32m consumers’ supermarket loyalty cards, found that in 2008 the average brand lost a third of its formerly highly loyal customers.

The study will alarm packaged goods groups, as the most loyal customers – those choosing one brand for more than 70 per cent of their purchases in a category – should also be their most lucrative.

“Defection is top of mind for brand managers now because they’re the most profitable customers,” said Eric Anderson, associate professor of marketing at Kellogg School of Management, Northwestern University.

“Price and promotion have become so salient at retail, that what we thought was the loyal customer can be moved with discounts,” he added.

EDITOR’S CHOICE

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Past recessions have seen similar defections from top-tier national brands to stores’ private-label goods, Mr Anderson said. Academic research showed that customers could be quickly persuaded to switch by a cheaper price but took far longer to switch back.

The study was conducted by the CMO Council, which represents chief marketing officers, and Catalina Marketing’s Pointer Media Network, which has equipment in 25,000 stores analysing buying behaviour. Catalina can provide a two-year anonymous purchasing history on individual customers. Brand managers and retailers who had seen the data had been startled by it, said Todd Morris, senior vice-president at Catalina.

“They’ve always known there was churn but could never put their finger on how big the issue is.”

The study comes as marketers are leaning more heavily on research and on targeted advertising, as they seek to improve on the “spray and pray” approach of mass media marketing formats, such as 30-second television advertisements.

Copyright The Financial Times Limited 2009

FT: Marketing's new vein

Marketing’s new vein

By Andrew Edgecliffe-Johnson

Published: June 10 2009 23:01 | Last updated: June 10 2009 23:01

An e-mailed invitation dropped into journalists’ inboxes last month, announcing a party on the rooftop of Gawker’s Manhattan office. The event was to celebrate the addition of Bloodcopy, a new blog, to its network that already includes technology, lifestyle and gossip sites such as Gizmodo, Lifehacker and Jezebel.

Bloodcopy offers a familiar mix of viral videos, online discoveries, celebrity sightings and opinionated riffs on stories in the news, all in the irreverent tone for which Gawker’s blogs are known. The only difference, as explained by “Andrew”, Bloodcopy’s “editor-in-chief”, is that the site is “a blog about vampires, by a vampire”.

Visitors might also have noticed unusual advertising from some familiar brands: a Gillette promotion of a “True Blood special edition” of its Fusion Power razor under the slogan “Dead Sexy”; a Geico ad asking how much you could save on insurance if you were immortal; or a picture of a convertible Mini Cooper inviting readers to “Feel the wind in your fangs”.

Clicking on the marketers’ messages would take you to a site for HBO, the Time Warner-owned subscription television channel, promoting the second season of True Blood, its series about vampires, starting on Sunday.

As consumers increasingly fast-forward through conventional 30-second spots and flick past advertisements in newspapers and magazines, marketers are becoming seduced by the promise of viral marketing.

The search for ideas that inspire potential customers to discuss them and pass them round their online networks of friends is turning advertisers into content creators, generating campaigns around campaigns, fictional online worlds and back stories to the narrative of their core marketing message.

The campaign for True Blood is a rare example of the elaborate lengths to which such thinking can be taken.

In its effort to develop the show’s conceit that vampires are now able to live among humans, HBO has gone far beyond traditional teasers that typically accompany a new season.

The Bloodcopy blog has attracted more than 11m page views – remarkable for a piece of advertising content – but behind it lie dozens of other online initiatives. They include websites such as AmericanVampireLeague.com and FellowshipoftheSun.org that purport to be for pro- and anti-vampire groups, a vampire soap opera, a fake weekly news show and viral videos peppered around YouTube.

The co-branded ads are appearing in newspapers and magazines and on billboards, which have also carried more traditional posters with details of the show’s launch date.

HBO’s offline promotional efforts extend to an “advertorial” created with Vanity Fair, mimicking the magazine’s celebrity party coverage in a photo shoot of “celebrity vampires” and their human friends.

The ‘blogvertorial’ that divided a company but pleased its client

“Vampires are not real,” began a post on Gawker’s io9 science-fiction blog last month. It wearily explained that items on the site appearing to be from a sister company called Bloodcopy were, in fact, promotions for HBO’s True Blood series and not an editorially driven Gawker blog.

In a split with his commercial colleagues, Gabriel Snyder, Gawker’s managing editor, was denouncing the campaign they had agreed.

Such tensions occasionally flare up over newspapers’ “advertorial” deals. Online, however, sensitivities are particularly high.

What Forrester Research calls “sponsored conversation”, or paying bloggers to write about a brand, has had a chequered past. The soft drinks group Dr Pepper/7Up ran into a boycott six years ago after using bloggers to promote its Raging Cow drink.

But the desire of advertisers to reach influential audiences means that “blogvertorials” are likely to become more common. Chris Batty, a Gawker marketing executive, told Harvard’s Nieman Journalism Lab that most of its advertising revenue could come from sponsored posts within four years.

Ironically, Gawker’s client appears delighted with all the fuss. For HBO, it all adds to the viral buzz, says Jeremiah Rosen of Campfire, which devised the Bloodcopy strategy.

AM New York, the commuter freesheet, will also feature an eight-page evening edition tomorrow, targeted at the undead reader, while evening wake-up calls will be aired for the nocturnal vampire audience on local radio stations across the US. 

“We started out conceptually trying to figure out ways to hack reality,” says Jeremiah Rosen, director of accounts at Campfire, the New York agency that created Bloodcopy for HBO. “In a world where vampires exist, they would act stupid as well. There would be celebrity sightings and launch parties.”

Campfire was founded by the team that teased cinema audiences with The Blair Witch Project, a fictional horror film presented as an amateur documentary, more than a decade ago, and has won plaudits for past campaigns such as The Art of the Heist for Audi, which staged the theft of a vehicle and involved consumers in trying to find it.

Its pitch is that audiences are no longer satisfied with old-style marketing messages. “They want experiences that will make them think and make them realise they’re part of a community,” Mr Rosen says.

The message resonated with Zach Enterlin, vice-president of advertising and promotions at HBO. “The days of a traditional print ad or 30-second spot really cutting it with the consumer, I think, are gone,” he says.

If so, what may replace them is a complex web of small initiatives requiring tight co-ordination, if HBO’s experience is any guide. The True Blood campaign involved no fewer than 12 different agencies, media buyers and in-house creative teams.

For Don McNeill, president of Digital Kitchen, which worked on the co-branded campaigns, viral videos and a fake cinema ad for vampire dental care, the biggest leap was the decision to mingle True Blood’s message with that of other brands.

“My pitch was ... let’s do something that would scare the hell out of NBC or CBS,” he says, “but even for HBO, this was pretty exotic, so I’m quite surprised they went for it.”

Mr McNeill was equally surprised to secure six willing brand partners, including Harley-Davidson motorcycles (“Outrun the Sun”), Ecko Unltd perfume (“Attract a Human”) and Monster, the jobs website (“When you sleep inside a coffin, it’s easy to think outside the box”).

“I think it’s pretty amazing these top-tier household brands would allow us to blur the line between fact and fiction,” he says.

Some partners had concerns about whether it might interfere with their core campaigns or confuse customers who might want vampire-targeted motorcycles that did not exist. What won them over, says Mr McNeill, is down to the continuing struggle for brands to find original ways of breaking through to consumers in a cluttered advertising market.

Steve Sylven, a Monster spokesman, says that “being singled out by HBO as the de facto brand for employment – even for vampires – solidifies our leadership position”.

According to Michael Norton, communications director for Gillette, a further attraction was the unique chance to be involved in an HBO series because the subscription-only channel does not normally carry advertising.

Mr McNeill predicts that such joint initiatives will become more common, saying: “Brands can piggyback off each other.”

Nobody involved in the True Blood campaign would discuss how the brands shared costs but Mr Sylven says “this is a cost-effective way to get our brand in front of people”.

Campfire’s Mr Rosen argues that the True Blood campaign will also encourage clients who are already asking why they should have to rely on traditional broadcasters to create content alongside which their brands can appear. “Why shouldn’t they have content they create themselves and have control over?” he asks.

It is a labour-intensive process, but according to Mr McNeill it serves three key purposes: generating buzz for HBO; rewarding its most ardent fans; and engaging those who have yet to tune into the show.

As HBO and its disruptive marketing partners plan a television-style “season finale” for Bloodcopy, the True Blood campaign is drawing to a close.

According to Mr McNeill, a campaign about the undead may offer ideas for an advertising revival: “Is advertising broken and do people have to do something different? I think so, absolutely.”

Copyright The Financial Times Limited 2009

FT: Out to launch in a downturn

Out to launch in a downturn

By Jonathan Birchall

Published: June 3 2009 20:42 | Last updated: June 3 2009 20:42

Brad Casper, the head of Henkel’s US consumer products business, says he can get core customers of his Purex detergent brand to spend more on their laundry – even in a deep recession.

The company has an idea it believes could shake up the market: a souped-up version of the anti-static fabric sheets used in American tumble dryers. Henkel’s version is put in at the start of the washing cycle and includes concentrated detergent and fabric softener.

Purex, a low-cost brand, has about 10 per cent of the US market. Its Complete 3-in-1 Laundry Sheets are about 20 per cent more expensive per wash than buying the Purex versions of the three ingredients separately.

Mr Casper says the recession could even help the launch of a product that has taken five years to develop. “It’s absolutely the right time because your share of voice is so much larger,” he says. The launch includes national television advertising and race-car sponsorship. In addition to lower media marketing costs, there are fewer new products to compete against as other companies cut back on spending.

Henkel is not alone: other big brands are bringing out products at an apparently unpromising time. Colgate-Palmolive has launched four-packs of disposable mini-toothbrushes and mouth freshener, called Wisp, which it says address the “currently unmet need of on-the-go tooth cleaning” – but which cost more than breath-freshening strips.

­Kimberly-Clark has launched a premium “pure and natural” version of its Huggies baby products. Procter & Gamble’s recent recession-era innovations include Olay Pro-X, a range of “clinical” anti-ageing products that sell for about twice the price of its regular Olay anti-ageing creams.

Pioneer that served up a treat in recession

Can a new product succeed in a recession? Lynn Dornblaser, who tracks new product trends at Mintel, the consumer market research company, likes to cite the launch by ConAgra foods of its Healthy Choice frozen dinners in 1989 – just as the US was entering a three-year slowdown.

The 14-item line set out to create low-fat, low-salt versions of foods that people habitually eat. It was a wild success, with the brand’s sales hitting $350m and taking 10 per cent of the market in two and a half years. “It is so obvious now that it was such a seminal product, because it changed the frozen-meal market in the US completely,” says Ms Dornblaser.

The Healthy Choice launch, she says, also showed the importance of having a senior executive behind a big innovative step in a tough market.

Charlie Harper, the chief executive who built ConAgra into a multibillion-dollar business, had suffered a heart attack in 1985. When a colleague praised his wife’s tasty chilli stew – made with low-fat turkey rather than beef – he realised there were hundreds of thousands of people in the same position, and championed tasty low-fat “lifestyle” food.

Tony Palmer, chief marketing officer of Kimberly-Clark, argues that economic conditions are less important to a product’s success than whether it is aimed at genuine customer needs. “If you do those things, chances are you’ll be successful whether you are in a recession or not, or whether you have a premium product or not,” he says.

The company’s Scott’s brand launched its first cardboard roll of paper towel in 1930, in the middle of the Great Depression.

But while the central principles of identifying and marketing an attractive innovation remain the same, Mr Palmer says, “the consumer is changing”. As a result, “maybe the decisions we make as a result of the work we are doing are varying” – such as the use of ­coupons and free samples to encourage customers to try new products, and changing the marketing mix.

Purex decided to retest consumer acceptance for the new product in January, after the collapse of the stock markets and the surge in economic anxiety, Mr Casper says. A positive response “led to the conclusion that there was no reason we shouldn’t do the launch”, the largest of its kind undertaken by the brand.

In spite of the consumer mood for saving money, Purex will not use free sam­ples to encourage people to try it. The company believes the product is attractive enough to allow Henkel to direct marketing funds to other advertising efforts to build consumer awareness.

Michael Kuremsky, general manager of the Olay brand at P&G, says the Pro-X product, which costs at least $42, is markedly more expensive than other Olay products. But it is aimed at a more prosperous customer, who would be used to spending $100 or more on similar products in department stores rather than in drug stores.

“The prices are, yes, high and up-price for the mass channel, but actually they are a value for this particular consumer,” he says, describing the product as one of the company’s “big ideas”.

Aware that the economic mood could deter some customers from trying the product, P&G offered a money-back guarantee and high-value rebates to drive sales while trying to maintain the product’s premium status. A customer who spent more than $50, for instance, would qualify for a $25 voucher to spend on future purchases.

“We had a lot of conversation about this ... We knew we had to take the economic crunch seriously,” says Mr Kuremsky. P&G decided it would have to focus on persuading consumers to try the product.

Some product launches, in contrast, have unexpectedly found they are aligned with the current recessionary consumer mood. Purex’s tests of its laundry sheets indicated that consumers, while cutting back in many areas, were receptive to something new that could introduce some excitement into their shopping, as a small domestic luxury.

Overall, however, product launches slow during a recession. In the US food industry, Mintel, the consumer research firm, has data showing that the number of food and drink products introduced in the first three months of 2009 was down 51 per cent on the previous year, and down 32 per cent on the previous month.

As for those that go ahead, Lynn Dornblaser, who tracks new products at Mintel, says for some companies it can be “very hard to turn the ship around” on a planned product launch, even if they want to. Some, she says, try to focus on their biggest ideas, particularly if a product is close to launch. “Instead of having 10 or 12 things going on at once, they focus on one or two really big ones,” she says.

But initial results from some of the larger product launches suggest that if you make the right product, consumers will come, even in a recession.

­Colgate-Palmolive has reported strong initial sales of its Wisp mini-toothbrushes – 7 per cent of the toothbrush market in the first week of April.

Olay’s Pro-X has taken about 5 per cent of the anti-ageing clinical market, says Mr Kuremsky at P&G, which is “right on track for what we were planning”.

As the Purex product hits the store shelves, Mr Casper is optimistic that the laundry sheets have the potential to become a $100m brand in their first year.

Copyright The Financial Times Limited 2009

Fast Company: Six Ways to Avoid Landing in the Product Failure Bin

May 29, 2009

Six Ways to Avoid Landing in the Product Failure Bin

By Mark Dziersk

A decade ago the ability to generate ideas for businesses was a terrific and unique offering, and often a good business. Many companies and consultants were conducting workshops aimed at coming up with ideas, hundreds of ideas, and getting paid handsomely to do it. Today, it seems most of the businesses I deal with have more than enough ideas, it's determining the right ones to invest time and energy into that is the trick.

In the hallways of Northwestern University, where I teach product design, a common and often-quoted statistic is that eight out of ten new product introductions fail. Of the two that make it through the first year, eight out of ten of those fail in year two. What a dismal success rate. In order to make sure your new product introduction is not one of the "never had a chance" crowd, try some of these strategies:

1. Don't have a casual relationship with the truth. Or, said another way, how a brand works and what is inside, had better line up with what the outside promises. Brands that over promise and oversell, be it through styling or labeling, will meet a certain, swift death in today's hypercompetitive market. They will be ratted out on the Internet by legions of anonymous, enabled, pitchfork-wielding consumers ready to unmask snake oil wherever it's detected. If you don't want to end up in the innovation death pile, make sure what you're selling lives up to the hype. If it doesn't, rather than pushing it at people, you'd be better off reconsidering whether you should do it at all.

2. Side effects can kill repurchase. An enchanting basil-scented cleaning product that smells as wonderful as the picture suggests, turns into a ultimately disappointing consumer experience when it leaves a streaky film in sunlight. Or how about this: Take a popular kids' drink, concentrate it, put it into a squeeze bottle, squeeze it into a glass of water and POW! Instant drink. Great idea, right? Until you realize that the package you've just created, in the hands of a middle schooler, is a squirt gun filled with permanent clothes staining ammunition that is stickier than flypaper. If the first moment of truth is purchase, and the second is use, it's really the third moment, when someone comes back to buy it again--or not--that makes or breaks the business.

3. If the emperor has no clothes, say so. "Right, JB!,we are on it, great idea!" Or, as Monty Python would say, "Splunge [1]." Have the courage to stand up to nutty ideas no matter where they originate. As long as the quality of the idea is your motivation, what formerly might have gotten you fired, could make you a new product hero today. Find ways to get around company politics, skewer sacred cows, and re-invent tired protocols, and your solutions will have a better chance of connecting. If consumer behavior and purchase habits have changed dramatically, then by logic, the same old, same old will not work to develop new, killer solutions to problems.

4. Knock yourself off before someone else does. When the program is near completion, and the rollout is planned, gather all the unused concepts off the floor, especially the ones that were too "far out," and start three new initiatives for trying to outdo your product before it even debuts. By knocking yourself off before others do, you may learn some important things about the product you are about to introduce. At a minimum, this strategy will allow you to develop a thicket of patents to interfere with future would- be lampreys. Then double down by staging these "knock yourself offs" as future pipeline ideas, or as I like to call them, "Vectored" solutions. You will eventually have created a continuous innovation stream.

5. Go fast even if you don't need to. It sounds counter-intuitive, but in the right situation it can be a wildly successful technique. I had a client who never did any insight work or research. Office products. We must have made ninety of them one summer alone. The company was very successful. The client would identify a need via observation and common sense deduction, and then work the answer until it was right at breathtaking speed. (It was Gladwell's "Blink" thesis in action.) We made many hundreds of product prototypes, and threw them out there until some connected. A handful of hits more than compensated for the more abundant misses. There was joy and uninhibited creativity in the process and the work felt fresh.

6. Facebook is the new focus group. If you are working on ideas, instead of keeping them secret, put them out there for response. At minimum, use the Internet and chat rooms and social networks--or even a forum like this--to test them. Sharing content is part of a new attitude around understanding user experience. If there is a "reveal" issue, you can cloak it. Use the flip of the Web anonymity issue highlighted in point one. Find out what the tribe or community of people who are invested and aligned around the issue honestly think and you will have an early understanding if your product is headed for success...or pointed toward the dreaded failure bin.

Read more of Mark Dziersk's Design Finds You blog [1]

Mark Dziersk [1] is the VP Design at Brandimage-Desgrippes & Laga [2], one of the world's largest design and branding firms. At brandimage, Dziersk has worked on projects for clients ranging from Dove to Banana Republic to a pop-up store for Henri Bendel. Dziersk joined brandimage in 2007, after 13 years at the Chicago product design firm Herbst Lazar Bell, where he and his teams won dozens of awards for products as diverse as the Motorola NFL Coaches' Headset, to the first-ever single use camera for Kodak. Dziersk, himself, holds over 100 patents.

Dziersk gives back to his larger professional community as well, having served on the board of the Industrial Designers Society of America and as president of the Society in 1998. He also acted as executive editor of IDSA's premier publication, Innovation, introducing new design elements and recruiting authors from outside the design field. Mark's course, "Essentials of Industrial Design," in Northwestern University's Master of Product Development program, helps left-brained types get comfy with their inner tattooed design side.

Article location:http://www.fastcompany.com/blog/mark-dziersk/design-finds-you/6-ways-avoid-landing-product-failure-bin

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Links:
[1] http://www.youtube.com/watch?v=3v0I4OQi7CQ
[2] http://www.brand-image.com

iMedia Connection: Twitter brand smackdown - The winners and losers

 

Published: June 01 2009

 

Twitter brand smackdown: The winners and losers

 

By Rodney Rumford

Twitter brand smackdown: The winners and losers 

Although Twitter has been all the rage for the last few months, there is still a huge gap in how well brands are executing on this opportunity. Many brands are doing a fairly good job, and others are clearly out of the loop and need a reality check with regard to how they are using Twitter -- if they're using it at all.

It is important to note that Twitter is not an island of communication. Rather, it is a communication channel that quickly jumps its own confines and lives in multiple places online (Facebook, blogs, widgets, etc.). However, a very small percentage of companies are fully integrating Twitter into their marketing and communication strategies. Just having an account on Twitter does not mean that you are leveraging its fullest potential. Significant additional effort is required for Twitter to become a top-performing part of your communications and branding strategies.

In this brand smackdown, I'll be highlighting several sets of competing brands across various vertical categories and comparing the effectiveness of their overall Twitter strategies. There may be instances where I have missed a particular brand's other presences on Twitter, in which case, it is merely symptomatic of the fact that the company has not integrated its Twitter presence into its main brand web presence and marketing and communications strategy. Such integration is essential to helping consumers easily find what they are looking for.

Ford vs. Nissan

Ford has a clearly defined Twitter presence that handles brand and reputation management for the company. In short, the company listens and responds quite well. It shares news, product information, and points to resources, news items, blog posts, etc. Ford has also segmented its presence into multiple accounts (seven, to be exact), including handles such as fordtrucks, fordmustang, and forddrivegreen. The company's social media manager has a Twitter account that is used for both listening and interacting. Ford has presented itself very transparently on Twitter for quite some time, and overall, the company has done a good job in its execution.

When it comes to Nissan, we could only locate one Nissan account -- NissanCube -- and its updates are nominal. The company is failing to interact at all with its audience. Rather, it uses Twitter as a broadcast channel. Notably, there is no way to find the company's Twitter presence from its website.

 

The automotive industry is hurting across the board. Interacting and extending their brands via Twitter is a fiscally smart move that all automotive players should be embracing.

The winner: Ford

Nike vs. Zappos

NikeStore is Nike's main presence on Twitter. It is used to promote store specials, discounts, and new product announcements. The company does not make any efforts to interact with consumers on Twitter. Rather, it uses the channel as a pure distribution model. The company has done 34 updates in seven months, it is followed by 3,400 people, and there is no way to find Nike's Twitter presence from its site. In short, the company's Twitter efforts represent poor execution that doesn't seem to be well thought out or integrated into any broader communications plan.

  

Zappos, on the other hand, is a brand that is regularly held up as a great Twitter use case -- and for good reason. The company uses Twitter as a support channel, it listens and engages, and its CEO actively tweets in a very transparent manner. Zappos is very real and provides a phenomenal level of support through Twitter as a communication channel. So if you want a good example to follow of a brand doing very interesting, compelling, and effective communications and engagement on Twitter, I suggest you watch Zappos closely.

 

Also of note: The company has a directory of every employee Twitter address on its website. This is a best practice that all companies should follow.

The winner: Zappos

Dell vs. Apple

Dell embraces Twitter and has integrated it into its broader communications strategy. The company has a cohesive and integrated Twitter strategy -- one that can be held up as a case study for how to leverage Twitter correctly for a large consumer brand. The company has more than 30 Twitter channels that it uses intelligently to communicate to very specific audiences. It exhibits a strong penchant for listening and responding, and the company does an amazing job on Twitter from an engagement and distribution perspective, as well as a great job segmenting content for the specific desired audience.

 

Apple, on the other hand, appears to be missing in action. As one of the world's premier brands -- a technology brand, nonetheless -- its absence on Twitter is puzzling to me and many others.

The winner: Dell

NFL vs. MLB

The NFL's presence on Twitter feels like a third-string effort. You can't even find a link to the Twitter presence from the main NFL web property. Its tweets are a bit sporadic and limited. The engagement factor is virtually nonexistent. The league did do a good job covering the drafts in real-time, with links to the picks. But beyond that, the NFL's use of the platform is very minimal. The league was virtually silent on Twitter on Super Bowl Sunday and blew a huge opportunity (the league had about 1,000 followers). It responded to no one and totally abandoned the Super Bowl account hours after the game. The league is using Twitter in a pure distribution model. It appears to not have a game plan on what it is doing across the league for each individual franchise team. And seriously... users can only take so much of NFLprguy's PR-slanted tweets. (The fact that I have three times the followers that he does might be indicative of his reach.)

  

MLB has two accounts on Twitter, MLBTV and MLBlogs. It primarily uses the MLBlogs Twitter account in a somewhat conversational mode and does respond to people. You cannot find a single reference to Twitter anywhere on the MLB website. While there are MLB baseball players that are using Twitter, finding them is like finding a needle in a haystack -- one that no one is even willing to look for. Why the league is not making players easily findable via a directory escapes logic. MLB certainly appears to be hanging in left field.

 

Rare is the brand that inspires passion like professional sports teams; thus, the opportunity to tap user sentiment and passion is high. Major pro sports leagues such as the NFL, MLB, and the NBA need to get their acts together and get granular and engaged on a team level. I challenge all sports franchises to reach out to their fan bases and designate several "official fan Twitterers" for each team. They are called fans for a reason -- they are fanatics. Leverage them. 

Sports leagues are also all missing a huge opportunity for photo sharing via Twitter from fans at ball games. Everyone has a phone at these events and frequently share their photos with friends. Give them a common channel for submission, sharing, recognition (i.e. a website and the Jumbotron), and online distribution, and you have a winning combination on your hands.
 
How these professional sports leagues don't have a unified and cohesive Twitter engagement strategy escapes me completely.

The losers: All pro sports franchises

Dunkin' Donuts vs. Starbucks

Let's end on a high note, shall we? Both companies in this section of the smackdown listen effectively to what people are saying about their brands. They respond accordingly, in a timely fashion, to both the positive and negative. They also both embrace a personal touch that is very authentic and seems to be serving their audience well. They use Twitter for sharing news, product launches, interesting stories, and they do it in a very authentic, non-self-serving way.

 

What is interesting to watch is how each brand has grown its following of Twitter evangelists who step up organically and respond to other people's mentions of the brand and help people out.

 

No matter what your brand size, these two companies are representative of how a retail brand can use Twitter to provide excellent customer service and fully engage with consumers by listening effectively -- while at the same time carefully managing their brands' reputations.

The winner: Starbucks, by a sip -- and only because it has substantially more followers

Conclusion
It is important to note that the world is quickly shifting to the real-time web. Consequently, consumer expectations have shifted upward. Online immediacy, engagement, and accessibility are becoming even more paramount in how your brand is being judged by your customers. You no longer have the luxury of responding in a matter of days. On Twitter, a firestorm can erupt and spread far and wide literally in minutes. That is the beauty, genius, and double-edged sword that is Twitter.

When major news outlets like CNN make Twitter part of their reporting experience, it is clear that this communication channel is here to stay. The recent Oprahfication of Twitter has moved the adoption rate into the stratosphere. As a point of reference: Since Oprah joined Twitter a little over a month ago, the service's North American monthly unique users have doubled to more than 19 million.

It is important for you to start thinking about how you should be fully integrating Twitter into your business. You might very well need several accounts that serve discreet and specific functions to specific audience segments. Take a lesson from the winners described in this article, and you'll be well on your way to reaching new levels of engagement among your target audience.

Rodney Rumford is the CEO of Gravitational Media and author of "Twitter as a Business Tool." You can follow him on Twitter at www.Twitter.com/rumford.

NY Times: Message in What We Buy, but Nobody's Listening

May 19, 2009

Findings

Message in What We Buy, but Nobody’s Listening

By JOHN TIERNEY

Why does a diploma from Harvard cost $100,000 more than a similar piece of paper from City College? Why might a BMW cost $25,000 more than a Subaru WRX with equally fast acceleration? Why do “sophisticated” consumers demand 16-gigabyte iPhones and “fair trade” coffee from Starbucks?

If you ask market researchers or advertising executives, you might hear about the difference between “rational” and “emotional” buying decisions, or about products falling into categories like “hedonic” or “utilitarian” or “positional.” But Geoffrey Miller, an evolutionary psychologist at the University of New Mexico, says that even the slickest minds on Madison Avenue are still in the prescientific dark ages.

Instead of running focus groups and spinning theories, he says, marketers could learn more by administering scientifically calibrated tests of intelligence and personality traits. If marketers (or their customers) understood biologists’ new calculations about animals’ “costly signaling,” Dr. Miller says, they’d see that Harvard diplomas and iPhones send the same kind of signal as the ornate tail of a peacock.

Sometimes the message is as simple as “I’ve got resources to burn,” the classic conspicuous waste demonstrated by the energy expended to lift a peacock’s tail or the fuel guzzled by a Hummer. But brand-name products aren’t just about flaunting transient wealth. The audience for our signals — prospective mates, friends, rivals — care more about the permanent traits measured in tests of intelligence and personality, as Dr. Miller explains in his new book, “Spent: Sex, Evolution and Consumer Behavior.”

Suppose, during a date, you casually say, “The sugar maples in Harvard Yard were so beautiful every fall term.” Here’s what you’re signaling, as translated by Dr. Miller:

“My S.A.T. scores were sufficiently high (roughly 720 out of 800) that I could get admitted, so my I.Q. is above 135, and I had sufficient conscientiousness, emotional stability and intellectual openness to pass my classes. Plus, I can recognize a tree.”

Or suppose a young man, after listening to the specifications of the newest iPhone or hearing about a BMW’s “Servotronic variable-ratio power steering,” says to himself, “Those features sound awesome.” Here’s Dr. Miller’s translation:

“Those features can be talked about in ways that will display my general intelligence to potential mates and friends, who will bow down before my godlike technopowers, which rival those of Iron Man himself.”

Most of us will insist there are other reasons for going to Harvard or buying a BMW or an iPhone — and there are, of course. The education and the products can yield many kinds of rewards. But Dr. Miller says that much of the pleasure we derive from products stems from the unconscious instinct that they will either enhance or signal our fitness by demonstrating intelligence or some of the Big Five personality traits: openness, conscientiousness, agreeableness, stability and extraversion.

In a series of experiments, Dr. Miller and other researchers found that people were more likely to expend money and effort on products and activities if they were first primed with photographs of the opposite sex or stories about dating.

After this priming, men were more willing to splurge on designer sunglasses, expensive watches and European vacations. Women became more willing to do volunteer work and perform other acts of conspicuous charity — a signal of high conscientiousness and agreeableness, like demonstrating your concern for third world farmers by spending extra for Starbucks’s “fair trade” coffee.

These signals can be finely nuanced, as Dr. Miller parses them in his book. The “conspicuous precision” of a BMW or a Lexus helps signal the intelligence of all the owners, but the BMW’s “conspicuous reputation” also marks its owner as more extraverted and less agreeable (i.e., more aggressive). Owners of Toyotas and Hondas are signaling high conscientiousness by driving reliable and economical cars.

But once you’ve spent the money, once you’ve got the personality-appropriate appliance or watch or handbag, how much good are these signals actually doing you? Not much, Dr. Miller says. The fundamental consumerist delusion, as he calls it, is that purchases affect the way we’re treated.

The grand edifice of brand-name consumerism rests on the narcissistic fantasy that everyone else cares about what we buy. (It’s no accident that narcissistic teenagers are the most brand-obsessed consumers.) But who else even notices? Can you remember what your partner or your best friend was wearing the day before yesterday? Or what kind of watch your boss has?

A Harvard diploma might help get you a date or a job interview, but what you say during the date or conversation will make the difference. An elegantly thin Skagen watch might send a signal to a stranger at a cocktail party or in an airport lounge, but even if it were noticed, anyone who talked to you for just a few minutes would get a much better gauge of your intelligence and personality.

To get over your consuming obsessions, Dr. Miller suggests exercises like comparing the relative costs and pleasures of the stuff you’ve bought. (You can try the exercise at nytimes.com/tierneylab.) It may seem odd that we need these exercises — why would natural selection leave us with such unproductive fetishes? — but Dr. Miller says it’s not surprising.

“Evolution is good at getting us to avoid death, desperation and celibacy, but it’s not that good at getting us to feel happy,” he says, calling our desire to impress strangers a quirky evolutionary byproduct of a smaller social world.

“We evolved as social primates who hardly ever encountered strangers in prehistory,” Dr. Miller says. “So we instinctively treat all strangers as if they’re potential mates or friends or enemies. But your happiness and survival today don’t depend on your relationships with strangers. It doesn’t matter whether you get a nanosecond of deference from a shopkeeper or a stranger in an airport.”

Copyright 2009 The New York Times Company