Monthly Archives: June 2005

Apple’s Core Positioning

I went to a business rountable last week in San Francisco, and found myself sitting around a table with a group of senior marketing executives talking about various issues in pop marketing. The topic of Apple’s incredibly successful run over the past few years came up, and the popularity of the iPod. One anecdote in particular made me start thinking more critically about Apple’s current position, and how that might change as they take on more visibility and more market share.

One of the guys at the table was shopping for an MP3 player for his teenage daughter. When he mentioned the iPod, she screwed up her face just as you would imagine a girl would if her father offered advice on fashion accessories. "I don’t want an iPod. Everybody has those." Apparently, the cool brand among her friends was anything but an iPod. She ended up falling in love with a Zen from Creative Labs.

A little red light started glowing in the back of my head when I heard this story. There have been a number of interesting PR threads over the past few months involving various growing pains for Apple: their shift to Intel chips; an increasing virus threat as their OS gains market share; their lawsuit against three journalists for uncovering future product plans; closer scrutiny into Apple’s environmental record, and some complaints among music fans about iTunes’ business structure. None of this is too surprising: Apple is a large company on a tear–their stock has doubled in the course of a single year. Along with all the glowing coverage about how Apple is shaping popular culture, you expect a fair amount of critical coverage as well.

What interests me about this anecdote, though, is that it cuts to the heart of what has always been Apple’s brand–the cool factor. Apple has always put a lot of resources into design aesthetics, and with good results. They’ve been the creative light in the middle of a technology industry dominated by Bland. But the more technology becomes mainstream, and the more marketshare Apple gains of that mainstream, the more ordinary Apple’s image becomes.

I’m sure no one at Apple is losing any sleep over their image–they have a strong sense of identity, and good retail brands like Apple are very adept at reinventing themselves to stay fresh. But Apple’s rapid growth is going to change the dynamics of brand marketing significantly. I’m sure Design will remain at the core of Apple’s brand image, but it will be interesting to watch their positioning moves over the next year to see how they adjust to a growing presence in the mainstream. What does it mean to Think Different when every third person in your Subway car is wearing a set of white ear buds?

Thought: A propos of "Think Different", does anyone know if the genesis of that tagline was a response to IBM’s longtime motto "Think"? Apple was often going after IBM aggressively in their ads (remember the toasted bunnies?), and it’s typical of their strategy, but I’ve never seen anyone parse it specifically.

The “Run Screaming” Imperative

A good friend of mine runs IT for one of Berkshire Hathaway’s portfolio companies. He fits the IT profile pretty well: he grew up around computers (his dad was a 30+ year veteran of Big Blue), goofed around with programming and hacking (I remember spending 5th-grade sleepovers typing in lines of code to program "Battleship", not to mention hours of "Zork"), he’s into gadgets and motorcycles and servers. Now he is the primary gatekeeper for the technology infrastructure for his company.

If you’re not heavily into direct marketing, you might be surprised to know that this demographic is one of the most expensive to reach effectively. IT decision-makers are one of the most highly prized market segments because they command an enormous percentage of the aggregate business capital budget. Not only are they difficult to reach because the demand is so high and the channels saturated, but they’re typically distrustful of marketers and prickly about having their privacy breached in any way. It’s one of those cosmic allignments that make you wonder about the order of things: a group that hates more than anything to be bothered, smack in the bullseye for people that will stop at nothing to bother them.

So I called my friend yesterday to ask him for some insight about the IT purchasing process. IT purchasing is highly studied by marketers and analysts, and I’m working on a study for one of my company’s clients to look at one particular facet of the process. The study is being designed to better understand the role the Internet plays in actually influencing corporate IT purchases. Much of the structure of industry vertical sites on the Web is tailor-made to influence corporate buying–research, opinions, competitive comparisons, pricing and ROI data–and we want to understand more about the effectiveness of different Internet channels at different points in the buying process.

What’s interesting about the discussion we had is not the insight that will help shape the study–everything pretty much begins with a Google search to start exploring product options, usenet groups to hear war stories about particular products, calls to peers to compare notes, etc. etc. What was interesting was my friend’s characterization of marketing. For him, it’s basically been reduced to a big game: marketers come after him all day long, and he does absolutely everything he can to avoid them. If you call to sell him something, you’ll never reach him. The receptionist will put you into a mailbox that he monitors without ever revealing his name or title. If you send him email, it will be scanned and ignored. That’s par for the course, and typical for IT.

What’s interesting to me is his characterization of those stalwart IT influencing tools: the whitepapers, demos, benchmarking guides and analyst reports. These are touchpoints IT marketers rely on to get their message out, and if my friend is any kind of a canary-in-the-coal-mine, the outlook isn’t good. His characterization of "the game" is that he now assiduously avoids any content in which he can’t clearly discern the motivations of the messenger. Benchmarking study by a leading analyst: who’s funding them? Buyer’s guide in a magazine: who’s advertising? Discussion guides on a popular forum: who’s seeding the boards?

My take on these issues has always been: read them, and think critically about the source. My friend’s take: avoid them and look for more reliable information from peers. He summed up his attitude when he told me he treats it as a game: "any time I think anything has been influenced by marketing, I run screaming."

Instinct or environment?

The Invisibility Motive

There’s a new release of Tor out today, a piece of freeware that lets you connect to a virtual underground railroad for data, helping you surf and move data anonymously over the Internet. The software establishes a network path of servers between you and your destination, but each server only knows which server the data is coming from and which server it is going to, not the entire origination-destination path. As the site explains, it’s like taking a twisty path that is hard to follow and erasing your footsteps as you go.

Other than the obvious drivers and fears behind such technology (anonymous access to porn, hidden communications among terrorists, anonymous hacking and spying), there are some mainstream drivers that are of significant interest to marketers.

First of all, there is significant demand for anonomyzing internet activity. Marketers have come to rely more and more on the powerful demographic and behavioral data they can gather from Internet customers which helps them target their products and messaging more effectively. But a lot of users are uncomfortable with the notion of being tracked, and are willing to take steps to become invisible–even to hide such seemingly innocuous data as their browser type and version, through tools like Privoxy. There are many good arguments that collecting demographic and behavioral data is good for consumers, because it ensures better products and more effective (and thus cheaper) distribution. Unfortunately, business has cultivated an increasing antipathy among many consumers with invasive tactics that make consumers fearful of protecting their private information and behavior.

So what happens if this technology takes off? Companies will still have access to powerful behavioral data based on the traffic traversing their site, but some of the data they have today will either be lost, or become statistically suspect–such as geographic data, browser and platform data, and anything not derived directly from activity on their own site.

The second interesting use being explored among early corporate adopters is the use of anonymizing technology to conduct competitive intelligence. There are already ways for companies with good resources to anonymize their traffic, this just brings it down to the level where small companies can start trawling around their competitor’s sites without the fear they’ll be sniffed. But the obvious extension of such a democratic technology is its potential to undermine many of the tools used to prevent click fraud. If an entire network of anonymous tunnels is available for obscuring traffic, and proxy applications can strip computer identification data, then generating malicious traffic to trip up a competitor’s metrics or drive up their pay-for-performance budget can’t be far behind.

The interesting question to consider is how some of your customer’s behavior may start looking more and more like the behavior of malicious competitors–or, to be more precise, won’t look like anything at all–and what, as a marketer, you’ll need to do to make sense of such a data shadow. What if your most valuable prospects are inclined to become invisible? Would you notice the trend?

Killing Customers Softly

Everyone’s talking breathlessly about the apparently sudden realization that Amazon and other retailers may be "secretly" shifting prices around to give different deals to different buyers. The buzz is being driven by an article from AP reporter Ted Bridis spotlighting a new study by The Annenberg Public Policy Center titled Open To Exploitation, which highlights the ignorance of American shoppers.>

percent of American adults do not know that it is legal for online
stores to charge different people different prices at the same time of
day for the same product. This Groundbreaking new study explores this
and many other shopping facts that all Americans need to know in order
to protect themselves from online and offline exploitation.

It’s interesting that many people passing the story around are focusing on Amazon–probably because it’s the most recognizable brand in online shopping. The story originated from an incident in 2000, which you can read about here at The Register. In that instance, Amazon was giving a better promotional price to first time shoppers than it was to loyal shoppers. Apparantly, the practice has evolved as companies find ways to deal with "bottom feeders" who scour the Web for the cheapest prices. According to the Bridis article, one photography Web site is searching your cache to see if you visited a number of other sites to check prices, and then offering a higher price to bargain hunters to discourage price shopping, while offering better discounts to loyal customers to try to retain them.

Companies have long offered acquisition discounts to attract new customers, which existing customers don’t get. You see this most gallingly in cell phone ads which offer fantastic premiums and benefits to new customers, but existing customers need not apply. The question was always how to do this in such a way that you don’t anger loyal customers enough that they switch to a competitor. Cell companies have relied on long contract terms that lock you in tight, while Amazon has depended on building a customer experience that can’t be replicated elsewhere, and which will hopefully overcome any annoyance over some missed deals.

What’s intersting now is that the practice seems to be evolving as companies gain the ability to track more behavioral data, and target those kinds of customers that are most profitable for them. It’s price strategy beyond the price war. What intrigues me most about this whole story is the realization that Amazon probably has the most powerful price modelling system on the planet. A number of years ago I worked on the repositioning and rebranding of Talus Solutions in preparation for their acquistion by Manugistics. Talus provided a system of profoundly robust price modeling applications–the kind used by automobile companies and airlines to figure out the revenue impact of myriad pricing programs, including discounts, promotions, and all the competitive strategies that go along with pricing. We’re talking about the kind of programs PhD economists sit in front of all day to fine tune programs that can swing revenue millions of dollars in either direction.

When you consider the volume and variety of what Amazon is selling, and the data they have to populate their models, you know they have some pretty heavy iron on hand to calculate how they can squeeze an extra dollar or two out of every sale they can. Some people feel that’s exploitation, but is it? No. It’s good business in an age where competition is driving profits down to a razor’s edge, and it’s what allows Amazon to keep giving customers the convenience and variety they want.