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According to marketing guru Seth Godin: There's "no such thing as price pressure...you (just) need to increase your value. "
It looks like Seth Godin's latest post is on the same lines as two of our earlier posts: Value vs Price and decomodifying a commodity from our blog (in its former home). We're in good company!
Stephen
I'm currently reading The Pirate's Dilemma by Matt Mason. It's early days yet and I'm getting a little dismayed by the high-tech utopianism. But I'll give you an update when I'm done. In the meantime, though, there's some great stories in there, from which we could learn alot.
The first I wanted to share is about Madonna. In the run up to the release of American Life in 2003, the music majors were getting tough on piracy. They'd seen off Napster (officially declared bankrupt in 2002), and were feeling pretty confident.
Now, we know from Kryptonite the dangers of ignoring what's going on online. After ignoring the online videos showing their very expensive bike locks being opened with a biro, they ended up looking pretty foolish (and pretty broke), when the mainstream media picked up on the story. 10 days later they'd promised a full product exchange. Estimated cost $10m. Estimated cost to their reputation? Who knows.
So, Madonna wasn't going to ignore these people. No, she was going to go one better. She was going to wind them up.
In what probably sounded like a great idea in a brainstorm, Madonna and Warners decided to post some of the tracks from the forthcoming album on KaZaA.com, a peer-to-peer network. But when all those Madonna fans downloaded these free files, instead of the songs they got something very different. They got Madonna screaming 'What the fuck do you think you're doing?' at them over and over again. Way to go, Madge. That'll tell them.
What do you think happened next?
Somewhat predictably, the message was sampled and remixed, becoming its own 'single' (called WTF). Some of these remixes can still be found here, along with the original source files.
Though slightly embrarassing for her, not the end of the world. But this was just the start. The coup de grace was delivered on 19th April, a couple of days before the album's official launch. Madonna's website (www.madonna.com) was hacked, and the entire album was placed free for download on her homepage, accompanied by this message:
Nice work.
So, stop and think. You might not like what your customers (or in this case, fans) are doing. But you certainly shouldn't ignore them. And you certainly, certainly shouldn't go out of your way to piss them off. Because now they can fight back. Be constructive, talk to them, find common ground.
-- Toby
I was in New York recently and what did I see? Wellies, that's what. Well to be clear, I noticed lots of incredibly stylish individuals in and around Soho, Greenwich and the Meat Packing District wearing them. At the time I chuckled to myself. The fools I thought. It was only later when I found myself holding a pair in my hands, that I realised I was actually jealous that in no way I could pull it off. Miserable about this, you'll be pleased to know that I balanced things up, by buying myself some bright blue sunglasses that made me look 12.
I thought I'd put this behind me, until it was bought back to my attention in a meeting I had the other day, when Michael Tulley, a trend guru at OMD UK, was talking about subculture making it's way in to the mainstream. Intrigued by this I went to the site of The Sartorialist himself, and he too has noticed the high Street Wellie.
Clearly they are a must for festivals, and it is no surprise that designers now produce them for those that want to stand out from the crowd. What is interesting is that it is now bridging over in to every day life. It reminds me of the Hush Puppies case Gladwell spoke about in the Tipping Point. People wearing wellies down the high street and in bars is a sign of what is to come. As Nassim Nichola Taleb would say, it is an example of a black swan.
I am heading to my mum's in the country this weekend. She will be delighted to hear that she is so cutting edge. Go Mum.
She'll be less delighted when she finds her Wellies have been stolen by her son.
Sam
Why are we so irrational when it comes to our love of Free?
I'm currently reading Predictably Irrational by Dan Ariely the behavioural economist. It's very good by the way. It's basically a summary of lots of social experiments that he and some of his colleagues have undertaken to demonstrate how expectations, emotions, social norms and other invisible, seemingly illogical forces skew our reasoning abilities and show how irrational rather than rational consumer behaviour can be. One chapter focuses on our love of Free. His view is that "free us gives us such an emotional charge that we perceive what is being offered as immensely more valuable than it really is". Here are two examples he gives.
The first was an experiment that was conducted in a large public building offering Lindt chocolate truffles for sale at 15 cents or Hershey's Kisses for sale at 1 cent (both being at a much lower price than their normal retail price, the Lindt truffle being a better quality than the more everyday Hersey's Kiss) - with a limit of one chocolate per person. The result: 73% chose the Lindt truffle and 27% chose the Kiss. Next they moved the experiment on by dropping the price of each by 1 cent, the Lindt becoming 14 cents and the Hershey's Kiss became free. What happened? 69% of customers chose the free Kiss, opting to pass on buying a Lindt truffle at a very good price. Basically when Free was on the agenda the customers behaved in a much more irrational way. To ensure that the results weren't influenced by not having to get out your wallet, the experiment was repeated next to a till where people were buying something in any case producing similar results.
The second example was analysing Amazon's free postage offer. Now I'm hooked on this to the extent that I nearly always buy extra books to make sure I qualify for their free postage and it seems like I'm far from the only one. It turns out that Amazon were running this offer in every country they operate in with the exception of France where they were running a similar incentive scheme but in this instance the shipping cost was the equivalent of about 10p rather than Free. Now 10p is a pretty good offer, but one that was virtually ignored by the French. However this all changed when the offer was aligned with the rest of the world and turned to Free - a drop in 10pence, but a significant uptake in the offer.
What does this mean for brands? Well the model works for mobile phone operators and retailers and appears to still work with laptops for The Carphone Warehouse. Some people may also have heard about this free gun offer when you buy a car which has gone down a storm for one car dealership in the US. More on it in the video below:
It looks like brands should at least consider reframing their retail offers to incorporate Free, could start to incorporate more imaginative Free incentives or at least could test where free fits in in their market. The alternative might be to be drawn into discounting mainly on price which of course could create an ugly race to the bottom which no one is likely to win in the long-term.
Stephen
PS: To get a feel for the rest of the book you can that this How irrational or rational are you? test.
According to new research, reported by Brand Republic, 83% of internet users have watched video online and 59% watch at least one clip a week. This, apparently, has got the TV companies worried.
It shouldn't. At least not yet. First, over a quarter of internet users who have watched video online are watching one 'clip' a week or less. That's not much.
Obviously we have to be careful of averages here. We've discussed before 'normal' vs. 'power-law distribution' (aka The Long Tail) - it's on the old blog, in the Clay Shirky post. There's clearly a group of people out there consuming this stuff in vast quantities. It's these people we need to think about harnessing. A blanket 'reach' number, though an interesting barometer of technological acceptance, is not that helpful for planning.
There's also evidence that consumption of online video is supplementing, not replacing it, traditional TV viewing. The New York Times recently highlighted this trend in this piece about the increasing numbers of lunchtime web broadcasts at lunchtime.
But this isn't the main issue. The main issue is that, though demand may be rising, supply has exploded exponentially. With 10 days worth of video uploaded onto every minute onto Youtube, it is estimated that Youtube now uses as much bandwidth as the entire web did in 2000. Bandwidth that costs Google $1m a day.
The problem for consumers is navigation. There's just too much crap out there to filter. And this is where TV comes in. As Mike Parker, Head of Strategic Sales at Channel 4, pointed out at Media 360, for all the digital boosterism around the Gorilla ad, more impacts were delivered in their first spot (Big Brother), than across the whole of Youtube last year. And I've talked about Ronaldinho before.
It was this TV exposure that lead people to look for the ad online. Similarly the fantastic Dorito's 'You Make It, We Play It' campaign, and the fantastic response it generated in terms of both quality and quantity of responses, was driven by the desire for the fame and exposure that getting your ad on TV will bring with it.
The point really is this.
First, don't build the best kept secret on the internet. There are very few people out there who will actively look for your stuff on the off chance. You've got to lead people to it.
Second, whilst it's fine to put your TV ad on Youtube, it's neither integrated or particularly sophisticated. In fact, it's the even less intergrated and sophisticated than those old TV supers that said 'See national press for details'.
At least they recognised that different channels were good at different things. If someone's actively searching your brand on youtube, don't they deserve a bit more than the TV ad that took them there in the first place?
This is a big opportunity. Use it right.
-- Toby
In the world of entertainment, price and availability have ceased being differentiators. Everything's available all the time.
Brands add value in this space through navigation. The implicit or explicit recommendation of something to an audience they already have a relationship with. For example, the fact that a TV show appears on a certain channel carries an implicit recommendation. The stronger the channel's brand, the stronger the endorsement.
Obvioulsy, it doesn't stop there. Brands like Amazon have built their business on recommendation, through software that analyses your purchases, and then compares them to the rest of their user base to find matches. They're usually pretty good. Though not all the time....
With this in mind, I was fascinated to read Kevin Kelly's analysis of the value of these 'recommendation engines'. His conclusion? Netflix's recommendations alone are worth $7billion to the film industry. That's alot of money (particularly set against US Box Office last year : $9.6 billion).
Exact figures aside, it's clear that online retail and distribution now seems to be if not replacing the Holy Grail of national 'theatre' distribution, at least running it a close second, as this article from Variety shows.
This would be, boringly, the 'Long Tail' again.
That Mr. Anderson was definitely onto something.
-- Toby
