Archive for March, 2008

Run-time marketing

Although mobile communications (mocoms) began primarily as a service for business users and rich individuals, for over a decade mocoms have attracted a mass consumer audience.   Perhaps for this reason, it is often the case that mocoms marketing folk have cut their baby teeth in the fmcg sector — those consumer goods that move off the shelves so fast that only a short, unpronounceable acronym with all the vowels deleted to save time would keep up with them.    But there are many differences between telecommunications and other consumer products and services, and, despite having pre-cut teeth, these imports don’t always cut the mustard.

We have long tried to identify these differences, and the key difference seems to be the time at which the product is created.     If you sell chocolate bars, you make them in a factory, deliver them to a store, and sell them to consumer.  The product is created before it leaves the factory door.   If you sell draught beer, the product is partly created before it leaves the factory (that would be the “beer” part of “draught beer”), but also partly created at the time the service is purchased (the “draught” part).   So a publican who waters down the beer he or she sells will alter the quality experienced by the end-user.

But telecoms services are not created beforehand, and they are not even created at the time of purchase; instead, they are created at the time of use.  Provision of a network and its level of quality are created and re-created each and every customer call, and not even just once per call, but repeatedly throughout a call.  As a cellular phone user moves around during a call, for instance, his or her call will be routed through different cells, and these may vary widely in quality of service — for example, due to the presence or absence of other, simultaneous users in each cell.   This is quality of service generated on-the-fly, at runtime, to use some computer-speak.  And, as with all marketing, perceptions matter far more than reality:   if customers expect a network to be congested they may be more accepting of quality of service problems than if they’ve been led to think they will be the only users of it.

Lots of fmcg folks don’t see the difference with their prior world.  Marketing can’t simply order the folks in the factory to ensure good quality product, and then sit back, gin and tonics in hand, to commission a few TV spots.  Instead, Marketing has to ensure that customer expectations are set and re-set realistically to match the quality of service being generated by Engineering as the network operates.  For new networks, add, “and as the network rolls out”.    Marketing have to monitor customer expectations and perception of network quality and compare with actual network quality in real-time, and adjust campaign tactics as they do so.  Marketing, too, has to be generated, on-the-fly.  It’s a lot harder than selling candy.




The network is the consumer

Different Network Topologies Economists use the term network good to refer to a product or service where one user’s utility depends, at least partly, on the utility received by other users. A fax machine is an example, since being the sole owner of fax is of little value to anyone; only when others in your business network also own fax machines does owning one provide value to you. Thus, a rational consumer would determine his or her preferences for such a good only AFTER learning the preferences of others.   This runs counter to the standard model of decisions in economic decision theory, where consumers come to a purchase decision with their preferences pre-installed; for network goods, the preferences of rational consumers are formed instead in the course of the decision process itself, not determined beforehand.   Preferences are emergent phenomena, in the jargon of complex systems.

What I find interesting as a marketer is that ALL products and services have a network-good component. Even so-called commodities, such as natural resources or telecommunications bandwidth, can be subject to fashion and peer-group pressure in their demand.  You can’t get fired for buying IBM, was the old saying.   Sellers of so-called commodities such as coal or bauxite know that the buyers make their decisions, at least in part, on the basis of what other large buyers are deciding.  Lest any mainstream economist reading this disparage such consumer behaviour, note that in an environment of great uncertainty or instability, it can be perfectly rational to follow the crowd when making purchase decisions, since a group may have access to information that any one buyer does not know.  If you are buying coal from Australia for your steel plant in Japan, and you learn that your competitors are switching to buying coal from Brazil, then there could be good reasons for this; as they are your competitors, it may be difficult for you to discover what these good reasons are, and so imitation may be your most rational strategic response.

For any product and service with a network component, even the humblest, there are deep implications for marketing strategies and tactics.  For example, advertising may not merely provide information to potential consumers about the product and its features.  It can also assist potential consumers to infer the likely preferences of other consumers, and so to determine their own preferences. If an advertisement appeals to people like me, or people to whom I aspire to be like, then I can infer from this that those other people are likely to prefer the product being advertized, and thus I can determine my own preferences for it. Similarly, if the advertisement appeals to people I don’t aspire to be like, then I can infer from this that I won’t be subject to peer pressure or fashion trends, and can determine my preferences accordingly.

For several decades, the prevailing social paradigm to describe modern, western society has been that of The Information Society, and so, for example, advertising has been seen by many people primarily as a form of information transmission.  But, in my opinion, we in the west are entering an era where a different prevailing paradigm is appropriate, perhaps best called The Joint-Action Society;  advertising then is also assisting consumers to co-ordinate their preferences and their decisions.    I’ll talk more about the Joint-Action Society in a future post.




Method marketing

Montgomery Clift in the film “I Confess” Method acting (aka “The Method”) is an approach to acting in which the actor tries to recreate and inhabit the emotional and psychological world of the person he or she is portraying.   The approach was originally created by the Russian theatre director Constantin Stanislavksi,  and is premised on the actor not merely “acting”, but “being” the character.   If done successfully, the method can lead to great authenticity in performance.  But not everyone accepts this approach.  There is a wonderful story of method actor Montgomery Clift, pictured here, on the set of Alfred Hitchcock’s 1953 film, I Confess, being asked by the director to stand by a window so that the cameraman could take a quick external shot of him looking through the window.  Clift asked what his character would be thinking as he looked out the window.  Hitchcock replied, Who the hell cares!, or words to that effect.  The two argued, with Clift thinking that motivation and character was all, while Hitchcock just wanted his picture finished. (Hitchcock also preferred actors who left all the thinking to him, and so it is not surprising that he and Clift never worked together again.)

I believe the same authentic empathy is required for good marketing, and marketers have to fully inhabit the world of their target customers.   If the target customers are the same social class or ethnic group as the marketers themselves, then such Method Marketing probably comes without awareness — marketers are selling to people like themselves.  But often marketers are not themselves part of the target audience, and have to struggle to understand their customers and their environments profoundly.     Global companies that do this well, such as Unilever, are often thought by others to have “gone native”, allowing local managers great autonomy.    Local autonomy, of course, does not guarantee empathy with local customers, but it certainly is necessary.

A situation I have experienced several times is a company from a developed country launching a subsidiary in a developing market.   The latest marketing technology is deployed, including customer database systems and marketing data warehouses, to support customer profiling, friends and family programs, affinity marketing, the whole shebang.  All this advanced technology requires air-conditioned offices and needs people with advanced skills to deploy and operate.   Even if these people are local (and many are), they too sit in the air-con offices in the downtown skyscrapers in the capital city.     An environment less like that of the target customers is hard to imagine.   Although local marketers, usually with relatives in the villages, the kampongs and the favelas, will quickly realize the authenticity challenges here, they often have a hard time persuading their western-world masters that a problem exists.

The strangest example I ever witnessed was a long-winded discussion in a start-up mobile phone company in a developing country in Asia about whether to bill calls by the second or by the minute.   The intended target market were people living in rural towns and villages. No one in the room seemed to appreciate that most of the target customers did not wear watches.




Speak now!

Senator Barack Obama   Following the US presidential election primary campaigns from afar, I have been struck, as have many people, by the great oratory of Senator Barack Obama.   For those of us with experience in non-governmental sectors or in foreign-aid circles, his style of speaking is very familiar — it is the voice of a community organizer, creating self-awareness and encouraging group action, and doing so superbly!     (As an aside, since the nuclear briefcase and the bully pulpit are pretty much the only real powers of a US President, character, judgment and oratory would seem to me far more important as criteria for assessment of presidential candidates than the details of their proposed legislative programs.)

In reading some of the commentary on Senator Obama’s important speech this week in Philadelphia on race, I came across this post by psychologist Drew Westen.  In speaking about race relations and a US national conversation on race, Westen says:

“We can’t solve problems we can’t talk about . . .”

It is hard to emphasize just how deeply and profoundly American this view is.   There are many cultures in which the majority of the population would take the precisely-opposite view — that we cannot solve problems we DO talk about, that solutions to difficult social or even personal problems can only be found by working in the background, behind the scenes, in the corridors of power rather than in public forums, where it is possible for solutions to be found and agreements reached without any loss of face.   England, despite sharing a common language and a common political history with the USA, is one such culture, as are those of North and East Asia.  Even when people suspect that open discussion may be needed to solve a difficult problem, they may still prefer to keep shtum, since the pain of enduring the problem may be far less than the pain of admitting its existence or of discussing it openly.

What is the relevance of this to business, I hear you cry out (or not, depending on your culture)?    I have worked on multi-national business ventures where this particular cultural difference threatened to overwhelm any other profession-disciplinary, corporate or personal differences.  In one case, a consortium of companies from the USA, Britain and Korea worked together on a joint venture where the Americans always tried to surface any problem and discuss it openly in the weekly project meetings.  Both the Brits and the Koreans recoiled from this approach, and the two would often caucus together before project meetings to try to pre-empt any difficult discussions.   I don’t know if the Americans on the project ever knew of the corridor-caucusing of their two partners, or why so many difficult matters were sent for “off-line” resolution, only to disappear or else be magically resolved, apparently without any discussion.  

There are many wonderful qualities of American culture, and, in my opinion, openness and transparency are among these.  But not everyone thinks so, and it would behoove us all in an age of global interactions and inter-dependence to recognize this.

POSTSCRIPT (Added 2008-03-21):  It is also worth noting that some cultures may discuss problems publicly but only in elliptical or indirect terms.   Shona culture (found in Zimbabwe and Mozambique), for example, has a highly-sophisticated use of metaphors, parables, multiple-meaning-layers, and even songs, as a means of somewhat open discussion of sensitive topics.   The use of such sophisticated linguistic devices means that a speaker can intend that an utterance be understood differently by different audiences.  Not an insignificant reason for his political success is that Robert Mugabe is a grand master of these multiple simultaneous registers, of being heard to say different things to different audiences at the very same time, and of clearly being heard to say without actually having said.




Porous boundaries

Over at This Blog Sits At, Grant McCracken has an interesting discussion about the new corporation.    One of the features he identified is porousness, the idea that boundaries between an organization and its environment are fuzzy and in flux.  This has long been the case in telecommunications services, whose very business is connecting people.  So it is perhaps not surprising that telcos have been porous places for some time.

For British Telecom (BT), Britain’s largest fixed network operator, Vodafone, Britain’s largest mobile operator, was both a major competitor (when BT owned mobile network Cellnet/ O2) and a major customer (because calls from Vodafone’s customers connected across BT’s network, for which access Vodafone paid BT).  At the same time, BT’s customers, both fixed and mobile, called Vodafone’s mobile customers, so BT was also a major customer of Vodafone.  At one time, each company was the largest customer of the other.  This makes something of a mockery of traditional linear supply-chain analysis.  How do you manage a relationship with a company that is simultaneously a major competitor, a major supplier and a major customer?  With kid gloves and internal Chinese Walls, presumably.    You may even decide to leave one market, as BT did by demerging O2, in order to simplify the relationship.

Because most telecommunications markets were once regulated monopolies, most still have a major incumbent (as BT is in Britain).   This fact often makes governments and telecoms regulators tip the scales in favour of new entrants, in order to redress the inherited monopoly.   A common procedure is to allow new entrants to co-locate their switching equipment right alongside that of the incumbent — even, in some cases, inside the same buildings.   How many companies, other than telcos, could tolerate competitors having dedicated space and equipment inside their own buildings?

And it gets even more complex.  As I commented on Grant’s post,  major users of telecoms services, such as American Express, often want direct access to the switches of their telecommunications services supplier so as to facilitate rapid reconfiguration of their service profiles.  Large telcos, such as Verizon, will often allow such access to their major customers.  But then companies such as AmEx, not being phone companies, often do not have the skilled staff to execute such reconfigs. So, Verizon lends AmEx some personnel, and a Verizon employee is sent on longterm secondment to work for AmEx; he or she may be paid by AmEx and report to a boss at AmEx, while retaining a career and benefits at Verizon, and physically sitting still in a Verizon building. Where do his or her loyalties lie?

Porousness indeed.




Globalization lives!

Annette Funicello I was witness to a conversation this week between Japanese and Mexican colleagues who reminisced about their common experiences as teenagers in the 1990s, on opposite sides of the world, playing the same Nintendo games.   I was reminded of a conversation I had once in a shebeen (a bar) in rural Zimbabwe in about 1985 with a black Zimbabwean mathematician about the many American TV series we had both seen growing up in the 1960s and 1970s, again in different hemispheres and neither of us in North America  – Superman, Batman, Bonanza, The Mickey Mouse Club, etc.  But it was not only American culture on our TV screens across the former British empire – we had both also seen the Japanese historical action series, The Samurai, a hit phenom in both countries.




Nominal imperialism at IKEA

Apparently, Swedish furniture retailer IKEA has systematically applied Danish names to doormats and carpets, while keeping Swedish names for more expensive items of furniture.   If this pattern of naming is systematic as claimed, then it is hard to see how it could be accidental or inadvertant.  If the pattern was accidental, we should expect IKEA to issue a hasty apology for any unintended offence caused, to Danes or to others.  Instead, IKEA went on the offensive, with a spokesperson allegedly saying:

“these critics appear to greatly underestimate the importance of floor coverings. They are fundamental elements of furnishing. We draw worldwide attention to Danish place names with our products.”

Whatever the perceived justification, insulting your customers can never be great marketing.  One of the features of colonialism is a lack of appreciation for the feelings of the colonized.  Hundreds of years of condescension are manifest in those three sentences.  Danes have every right to be offended.

UPDATE (2008-03-17):  Spiegel Online have now retracted their original news story (the retraction is at the same address as was the article), although it is not clear from this retraction that either the original allegation against IKEA or the quoted response from an IKEA spokesperson are inaccurate.  Here is the text of the retraction of the news story by Spiegel Online:

03/06/2008

Retraction

‘Is IKEA Giving Danes the Doormat Treatment?’

Last week, SPIEGEL ONLINE published an article about IKEA products named after Danish cities. We regret that we must retract the article because of inaccurate reporting. We apologize for the error.

 In the article originally published at this address, SPIEGEL falsely reported that Danish researchers Klaus Kjøller and Trøls Mylenberg had conducted a “thorough analysis” of the naming conventions at Swedish furniture maker IKEA. In fact, Kjøller was approached by a journalist from the free daily Nyhedsavisen who had inquired about why apparently inferior IKEA products had been given the names of Danish towns.

Kjøller answered the question, but says he was very surprised by the “extremely exaggerated” article that appeared on the cover of Nyhedsavisen the following day, which would later get picked up by other media in Denmark and abroad, including SPIEGEL ONLINE.

“The story sounds good, but it unfortunately isn’t true,” Kjøller told SPIEGEL ONLINE on Monday. The author of the article and the editorial staff failed to contact Kjøller prior to the publication of the article.

SPIEGEL ONLINE strives to adhere to the highest standards of reporting and apologizes to its readers for the error, which we deeply regret.

— The Editors

UPDATE 2 (2012-09-14):  Yet, it seems, IKEA does indeed have a naming policy in which different categories of products are given names from a particular category of real-world places and objects.  Finnish place names are used for dining furniture, for instance.   In this schematic, it seems that carpets are assigned Danish place names.    This is certainly not inadvertent, but deliberate.   Why were these products assigned those particular names?




The post-modern corporation

red-arrows.jpg Anyone who has done any strategic planning or written a business case knows that planning requires one to forecast the future.  If you want to assess the financial viability of some new product or company, you need to make an estimate of the likely revenues of the company, and this requires making a prognosis of the level and nature of demand for whatever it is the company plans to provide.   “Taking a view on the future” is what the M&A people call this.

The problem is that the future is uncertain and different people may have different views of it.   There are usually many possible views one could take, and stakeholders are not always able to agree on which is the most likely.  Financial planners typically deal with this uncertainty by developing a small number of scenarios: often called a best case,  an average case, and a worst case.    These scenarios are very rarely ever the actual “best” or the actual “worst” that the planners could conceive.  More typically, they are the best or worst “plausible” cases.  Similarly, the middle case may not be average in any sense of the word, but simply a case the planners happen to favour that is somewhere between the best and worst.   Often the average case is the best the planners think they can get away with, and they contrast this with an outlandish upside and a still-profitable downside.   As with other human utterances (eg, speeches and published papers), effective business planners take into account the views of their likely audience(s) when preparing a business plan.   

For telecommunications companies operating in a regulated environment, there is a further wrinkle:  the fifth “P” of telecoms marketing, Permission.  To gain regulatory approval or an operating licence for a new service, telcos in many countries need to make a business case to the regulatory agency.  Here, the regulators may have their own  views of the future.  Quite often, governments and regulators, especially those in less developed countries, feel they are behind in technology and believe that their country has a vast, untapped market ready for the taking.   Sometimes, governments have public policy or even party-political reasons for promoting a certain technology, and they want the benefits to be realized as quickly as possible.   For these and other reasons, governments and regulators often have much more optimistic views of likely demand than do the companies on the ground.

Thus, we have the situation where a company may prepare different business plans for different stakeholders, each plan encoding a different view of the future:  an optimistic plan for the regulator, a parsimonious plan for a distribution partner and yet another for internal use.   Indeed, there may be different views of the future and thus different plans for different internal audiences also, for reasons I will explain in my next post.   Living with uncertainty, the post-modern corporation treats its view of the future as completely malleable — something which can be constructed and re-constructed as often as occasion or audience demands.

In my next post, I’ll talk about the challenges of planning with multiple views of the future, and give some examples.

Reference:  This post was inspired by Grant McCracken’s recent post on Assumption-Hunting.  




We apologize for this delay in transmission . . .

. . .  ladies and gentlemen.  Our guest speaker has been unavoidably delayed.  While we await his arrival, please watch this short video.   It’s a re-creation of the titles to the movie “Star Wars”, as if done by legendary 60s designer Saul Bass:

http://www.youtube.com/watch?v=z25t-PQDn5A