Monthly Archives: July 2006

Meeting a Marketing Finance Luminary

Writing can be one of the loneliest tasks imaginable. Even when you write publicly, you often sustain long stretches of silence when you wonder whether or not anyone even reads. Responses to writing, even blogging, are few and far between, and often the responses that do come are not of the encouraging variety. But every once in a long while, someone responds to something you say in a way that makes everything worthwhile.

As a dedicated academic poser, every few months I download a big batch of articles on business and marketing from various academic journals and go on a reading binge. It can be a huge slog to get through the often opaque writing, grand theories, and rigidly defined methodologies that in the end, produce little more than the slightest philosophical tweak on what 20 other scholars have been saying for 50 years. But in the middle of what seems a big pile of academic deadwood, there are some incredible diamonds–ideas that shed light on the kabbalistic structures of market strategy, and change the way you think about business.

Victor Cook, Jr., now Professor Emeritus of Marketing at Tulane, has produced a number of those diamonds over the past 35 years. His papers on marketing strategy for the Journal of Marketing (e.g.: Understanding Marketing Strategy and Differential Advantage, 1985, Vol. 47, Issue 2)  gave me my first clues to the financial underpinnings of marketing, and what financial equations can reveal about market strategy. 

So imagine my surprise at getting an email from Victor Cook. He was just dropping me a courtesy note to let me know he had published a new book, and he had used a quote from a BusinessWeek Column I wrote years ago about marketing’s ironic inability to package and position itself as a profession. I just about fell out of my chair. Okay, I know academic marketing is the ivoriest of towers. But this wasn’t some doctoral student whose only contribution to the literature was a rehashing of 40 years of competing theories; this was someone with a history of forging important ideas. He not only read something I wrote and quoted it, but he took the time to let me know and sent me copy of his book. Well, it made my day, and my week. 

So I got a chance to spend some time on the phone with Cook, discussing the future of marketing. His new book, Competing for Customers and Capital, lays out an explicit framework for tying marketing performance to shareholder value. This is the holy grail for the next generation of CMOs, who are sorely lacking a key to the corporate boardroom. I’ve just gotten the review copy, which I’ll be pouring over and discussing here over the next few weeks. But for all the heady discussion about theory and frameworks, one story Cook told me has been ringing in my head. He developed a course to teach these financial theories of marketing to actual marketing students, but the course was challenged on the grounds that it didn’t belong in marketing, but in finance. Who challenged it? Other marketing faculty.

This revolution may take longer than expected.

Go Floyd!

Quick diversion from marketing to shout with reckless enthusiasm that heroes still exist. Floyd Landis is my new hero, right up there with Fred Rogers. Some of you know I’m a fan of cycling, and every year I follow the Tour in truly geek fashion–by reading the live commentary from Cycling News–some of the most compelling writing you can find anywhere, especially if you follow it day-by-day in real time. What Floyd Landis accomplished today is nothing short of amazing, and genuinely inspiring.

"Floyd Landis turned himself around from a defeated, broken man to a probable Tour de France winner in the space of a six-hour stage," said Paul Sherwen, a former pro and play-by-play announcer for OLN’s live Tour coverage. "What he did today was ride himself back into contention. Theoretically, that was impossible."

If you want to read about it, you can find a good article here. I’m just excited to see a giant of an athlete appear out of nowhere after so many have fallen from grace. Go Floyd!

Brands with your Breakfast

In what may very well turn out to be the most brilliant idea in modern marketing, CBS will unveil a new advertising platform this year: your food. It seems the vast mix of conventional advertising mediums–like print, television, radio, Internet and outdoor–is just too shallow to effectively deliver everything the CBS brand has to offer. So starting this fall, CBS will be coming to you directly from your refrigerator, as a laser imprint on your eggs.

Responding to the overwhelming crowd of entertainment ads in newspapers, magazines and Web sites, George Schweitzer, president of the CBS marketing group, decided it was time to think out of the box and really get in your face. "You can’t avoid it,” Schweitzer chuckled.

The inspiration for the experiment apparently arose from the dismal lack of promising programs for the fall line-up. Without the quality programming to draw bigger audiences, CBS has shifted funding priorities to marketing in order to build positive brand associations through aggressively intrusive messaging.

The tactic has already given new life to CBS’s staff of writers, who are referring to the medium as egg-vertising. Newly inspired slogans are said to include: "CSI” (“Crack the Case on CBS”); “The Amazing Race” (“Scramble
to Win on CBS”); and “Shark” (“Hard-Boiled Drama.”), while ads for new comedy shows include “Shelling Out
Laughs,” “Funny Side Up” and “Leave the Yolks to Us.” Plans are said to be in the works for a new police drama with an ironic edge based entirely on breakfast puns.

The egg advertising follows months of research and development into food-born messaging, with CBS now positioned to corner the egg-messaging market, and staking initial claims in breakfast produce and meats.  While basking in the glow of this masterful stroke at CBS, Mr. Schweitzer remained modest. “I think, it’s like, you know good ideas when you see them.”

Why Businesses Really Fear Blogging

Have you
ever noticed how it sometimes takes an epiphany to reveal the reality of an
obvious truth? Like, I don’t know, sitting in traffic in a $60k SUV burning
$3.50 a gallon and, even though you’ve sat in the same gridlock every day for
years, on this day you happen to notice the endless lines of single-occupant
vehicles, the single half-empty carpool lane, and for the first time it dawns
on you with sparkling clarity the breathtaking stupidity of modern life? Yeah,
that feeling. I had a moment like that yesterday. Not during my commute, but during
a panel discussion about blogging and digital media technology.

I was part of a panel for the Backstage Pass series of industry discussions at Pillsbury Winthrop in Palo Alto, moderated by Tamara Ireland Stone of Rainmaker Communications. Though the discussion was highly practical, focusing on the challenges and pitfalls of new information channels like blogging, I fell into my usual routine of veering off into the social and philosophical context of the debate. While it’s important from a business perspective to understand the immediate impact of disruptive technologies, I’m always interested in seeing the flow of the bigger picture—in this case, how the control of information is becoming distributed, how consumers are learning new skills to filter and process data, how businesses are having to learn how to shift from polished monologue to broader dialog with their audience.

The old
paradigm of corporate communications that businesses understand—the one-way
broadcasting of a tightly designed and controlled message—is giving way at an accelerating
pace to a chaotic and uncontrolled market discussion. Bulletin boards, chat
rooms, blogs and list groups allow consumers to share information and influence
public perceptions about companies and products, and businesses are quickly
being relegated to just another participant in the conversation. Some companies
are actively engaged in the discussion, some are trying out various schemes for
influencing the dialog, but most are just standing on the sidelines scratching
their heads.

So while we
panel experts were doling out our sage advice about how businesses can better
understand and engage the blogosphere it suddenly occurred to me why this is
such an immense challenge for so many businesses. I always just assumed it was
about control. Businesses want to minimize risk; control is a powerful tool in
minimizing risk; and the new channels of communication take much of the control
away from business. Panic ensues. But my epiphany was about something much more
obvious and fundamental.  

The advice
that has become standard among blogging experts is that any business engaging
in a dialog with their market must be authentic, open and responsive. You can’t
just hire a PR agency or a freelancer to write your blog—you’ll be defrauded or
disregarded, or both, in an Internet minute. Companies must put executives on
the frontline who can engage intelligently, responsibly and passionately about
what the company does. This is an obvious challenge for companies that have a
contentious relationship with their market, a hyper-secretive culture, an
impatience for dealing with questions, or a style of business that might not
stand up well under public scrutiny. But it’s also a serious challenge for
companies beleaguered by a far more common vice: uncertainty.

And this,
finally, was my penetrating revelation into the obvious. Why do so many
businesses fear the give-and-take dialog that is the currency of our new
communications technology? Not primarily because of the lack of control—that only
scares those who were good at controlling their image in the first place, an
elite few who are now engaged in tactics to control their image in the new
paradigm. What far more businesses fear is the lack of a consistent, cohesive
and compelling story–much less business operation–they can be confident in sharing and defending clearly to
win the hearts and minds of their market. After all, it’s easy to package, polish
and publish a perfect message for mass consumption. But to embody that message as a business,
to understand its meaning and its implications throughout every commercial function, to champion that message and to believe it, that takes something that most businesses just
haven’t spent a whole lot of timing working out.

The Tyranny of Long Tail Minorities

This just mystifies
me. Marc Gunther, a senior writer at Fortune, has just posted a column claiming
that the Internet has left us all poorer from the overwhelming glut of information
choices. The column is sort of a tangential review of Chris Anderson’s finally
released book, The Long Tail, which describes how business is being reshaped by
the growing viability of micro-markets—which essentially means that consumers,
in part by virtue of the Internet, can develop and satisfy all kinds of niche
desires instead of conforming to a mainstream taste dictated by the economies
of mass production. Instead of a mass market, The Long Tail argues, we’re
evolving into a mass of niches.

Gunther
seems to think this is a sad kind of progress. After all, the fragmented
Internet, with its endless rat holes serving niche interests, is incapable of creating the kinds of mega-stars and ubiquitous ad
slogans that unify our culture into such a homogenous ideal.

“Think of
the feeling that comes a few times a year—the morning after the SuperBowl or
the Oscars—when tens of millions of Americans share a common experience."

I’m kind of lost about what the Internet has do with the common experience. I mean, did we all not share in Zinedine Zidane’s headbutt? It wasn’t only the talk of TV, newspapers and radio, but video clips and remixes have been plastered all over YouTube for days. But alas, according to Gunther, it is the Internet and its world of choices that is eroding the very fabric of our
national identity.

“I think
the explosion of choice has left us poorer in at least two arenas. The first is
journalism….Yes, there is more information available to us than ever, but I don’t
think we are better informed. Niche media will, inevitably, continue to weaken
mass media.

"The second
arena where we are worse off is politics. This is related to journalism, as the
moderate and responsible voices of the Mainstream Media get drowned out by
partisan, opinionated cableheads and bloggers. Politics in
America  has
become polarized for many reasons, but a big one is the fact that people can
now filter news and opinion they get to avoid exposure to ideas with which they
disagree.”

Hmmm.
Choice is bad, because we get more information
we can choose ourselves rather than being spoon-fed
whatever the Wise Editors decide, and that
keeps us from being
well-informed. Because apparently, we aren’t smart enough to
figure out what information is worth reading, and we need other, smarter people
to tell us what to read, and big spectacles with stars and flashy ads to help bind us
all into a nicely pasteurized culture.

I’m hearing
a lot of this kind of argument lately, from people terrified of the uncertainty
of how our world is actually shifting with all of these new channels of communication. They always seem to arrive at the
conclusion that choice is somehow corrosive, instead of seeing it as a symptom.
Why do we all migrate so rapidly to a world of choices? Because what we’ve been
fed for so long in the mainstream SUCKS.

Network
news pretty much stinks across the board. Where’s the reporting on Darfur? When’s the last time you heard about Afghanistan? Or a critical story about a major corporation that, ahem, owns a major network? Don’t even get me started on politics. Do you
have any desire to see who’s going to run for president in 2008? And that’s all
the fault of new choices available on the Internet? Give me a break. And here’s
a news bulletin: the Internet allows you to filter news and opinion to avoid exposure
to ideas with which they disagree. Interesting. I guess the masses of people who listen to talk radio, or watch Fox vs. CNN all day long are opening their minds to reasoned debate.

The
explosion in choices available via the Internet is a reflection and reversal of
the rise of mass markets during the 1950s. Some people are just tired of same
old mainstream crap, others don’t trust the sources of mainstream ideas and
information. The phenomenon of choice is not the problem, it’s a symptom of our
cultural and technological evolution. As time goes on, we’ll learn new
techniques for sourcing and sorting information, just as new powers will emerge
to bring certain channels and ideas into the foreground and galvanize larger audiences.

But hey, if
it doesn’t work itself out and we end up losing the kind of common cultural identity cemented by the
Oscars, the SuperBowl and catchy ad-slogans, I won’t be losing any sleep.

Rating Commercial Viewership

The advertising world is all atwitter over news today that Nielsen will
start offering viewership numbers for televised commercials beginning
with the new fall season. Using the same 10,000 set-top boxes they use today to measure the incredible consciousness-melting power of American Idol, Nielsen proposes to give the first accounting ever of just how many people tune out during the commercial break. Media executives everywhere anxiously await the dramatic fallout:

The Wall Street Journal reports that executives at both TV
networks and advertisers expect the new Nielsen ratings will show that
viewership declines noticeably when a program breaks for commercials.

Wait. You mean people actually change channels and go to the bathroom during commercials? You’re kidding. Advertising executives everywhere are shocked and amazed at this new development, not to mention outraged:

   

"Prices
should go down," media buyer Bruce Goerlich, executive vice
president at ZenithOptimedia told the paper. "If I was a
buyer, I would be taking the stance of, ‘Quite frankly, what you said
you were delivering, you weren’t.’"

It’s shocking I tell you. Just shocking. (I love the "if I was a buyer" routine. Uh, hello Bruce. You ARE a buyer…) The only thing worse than the paper-thin positioning from advertisers and network execs is the utter lack of insightful reporting from some leading ad industry analysts. Many are rushing so fast to be the first guru to unveil their vision of the future they fail to see through the smoke and mirrors. Here’s one typical remark:

Either way, as advertisers see hard numbers that show their television
investments are even less accountable than they suspected, they will
begin to seek new outlets at a faster pace than they have.

"Hard numbers"? Where did anyone get the idea that Nielsen delivers hard numbers? The recent problems Nielsen has had justifying its ratings adjustment for Tivo viewers demonstrated just how much secret sauce they’ve been adding the ratings mix. In this article from MediaPost, Lifetime’s EVP of Research explains how Nielsen cooks the numbers:

"If important demos are underrepresented in
its sample, Nielsen frequently uses mathematical factors, giving them
more "weight," and raising audience levels ascribed to those demos in
its final ratings… …
Nielsen’s calculation systems are so complex,
especially since they’ve weighted people in the database so that a
person is not a simple person. A person is 1.1 on one day and 1.5 on
another day."

It makes sense. I mean, why waste money on quality programming to raise audience levels when you  can just use a complex mathematical factor? I suspect the same concept will work quite nicely for commercials. 

The Future of Marketing

While I was away, I had an article out in Executive Decision and an interview with Investor’s Business Daily discussing various opinions on the road ahead for marketing. If I could always be this productive while on vacation, I’d never come home.

The Executive Decision article is probably the most succinct discussion I’ve written in the past few months about the challenges marketers face in today’s business environment. The crushing day-to-day requirements for most marketing departments puts the lie to all the best-selling pap about "customer-centricity". The ugly truth is that the average marketer today doesn’t have nearly enough resources to spend time worrying about the customer–there are far greater pressures to reshape the marketing function into an omniscient analytical machine. 

The interview with Investor’s Business Daily isn’t all that illuminating on the surface. Just a few quotes on background in an article about Dell’s recent misteps, with a focus on the impact of marketing. What’s interesting is that the discussion about marketing’s shift toward an analytical framework was so fascinating to IBD, and they saw it as a lens for understanding significant challenges facing companies like Dell. If marketing got that much respect in the boardroom… You can find the IBD article here.

What does all this have to do with the future of marketing? Marketing is at this very moment in the middle of a massive re-engineering. The focus on building an analytical foundation for marketing that utilizes technology to track customer lifetime value and weigh opportunity value is important, and will certainly shape marketing for decades to come. But it’s not an overnight transition. The shift has been underway already for at least five years, and will be another five years before the expectations business managers have today for useful dashboard measurements will be realized in any intelligible form. In the meantime, the incredible pressure to effect this transformation is taking marketers away from their primary task: knowing and serving the customer.

The immediate future of marketing will be marked by two basic types of marketing organizations: those that get so distracted by a focus on the promise of emerging analytics that they completely abstract the customer (Dell?), and those that manage to keep a firm grasp on knowing and serving customers first (Apple?). For now, it seems there are far more companies in the former camp than the latter.

Reentry

I’m officially back. I was unofficially back from Hungary two weeks ago, but it was so nice being gone, I decided to lay low for awhile and see if anyone noticed. I spent so much blissful time away from my computer, I’ve forgotten what a keyboard feels like.

Let me start by saying what a phenomenal, beautiful, exciting country Hungary is. It felt like stepping back into a Europe of the past, undiscovered by the hordes of tour-bus travelers. I have no doubt it will be "discovered" soon–it is a very modern and friendly country with great food, beautiful architecture, and a fascinating history, all at about half the price of the rest of Europe. The biggest drawback for Americans is that very few people speak English, and once you get out of Budapest, unless you know some German or Russian, you’re reduced to smiles and pantomime.

Budapest_1I won’t bore you with the whole travelogue of My Trip to Hungary, but just a few impressions related to what I usually muse about here, and I’ll bring it round to a relevant conclusion for marketers. 

As a westerner traveling in an unfamiliar Eastern European country, I often felt like I was traveling in a parallel universe. When you’re in the countryside, it’s a romantic idyll right out of a coffee-table book. There are medieval castles and cobblestone streets, old men driving horse-drawn carts, and babushkas carrying bundles of firewood on their backs. But when you come into a major town, it’s like you haven’t left home. The speed of economic progress and development in Hungary has deposited convenience-store gas stations, Big Box mega stores and major shopping malls in every city. When you walk into a mall, it’s a mirror image of any mall in America, except the brands are different, everyone is speaking a language you don’t understand, and all the signs are completely unintelligible. It’s a little disconcerting walking around in such a familiar setting of bright lights and buzz, but feeling everything just slightly off by half a degree of reality.

Clearly Hungary, now as a member of the EU, is moving rapidly toward a full-scale Western economy–notwithstanding their recent election of a socialist party to government, and it seems that a lot of investment is flowing. You can see evidence of the pace of investment the moment you leave the airport, particularly in the predominance of advertising on every surface available. It appears that T-Mobile owns Hungary–their pink ads are completely ubiquitous everywhere in the country. Billboards, buses and taxis, phone booths, building broadsides, subway cars–whoever has the outdoor advertising account for T-Mobile has a monster of a job–and commission.

One thing that I found surprising in Hungary, and thought-provoking, is the attitude towards communism. It’s natural for a Western tourist to notice some of the vestiges of Hungary’s history as a soviet satellite with a strange mix of nostalgia, dread and superiority. This attitude is catered to for a profit, with a popular terror museum in Budapest, and a fascinating park where many of the overbearing statues of Lenin and the idealized proletariat have been gathered for posterity. But when you talk to Hungarians, they aren’t nearly as thankful for the fall of communism as you might expect. Time after time, Hungarians young and old replied to the question "How are things different for you?", with a common refrain: "It was safer; there was less crime. Medical care was better. Schools were much better. Retirement was better." A common example given–probably because schools were just getting out for the summer–was that under the communists, all children had access to a range of activities during the summer, one of the most popular being sailing on Lake Balaton. Now, you have to pay for your children’s activities on your own, and the expense has put Hungary’s favorite pass time out of reach for all but the most wealthy.

The most succinct summation of the frustration Hungarians feel under the transition to a free-market economy was that in the past they had no opportunity, but the means to live day to day. Now they have plenty of opportunity, but no means. Surprisingly, I heard this perspective even from a cousin who appears to be quite wealthy. He works for a successful software company as an engineer, and lives with his wife and family in a beautiful new custom home in a wooded suburb of Budapest. But for all the trappings of a beautiful life, the stress of the economic lifestyle–working 12-hour days under a constant string of deadlines and deliverables–may not deliver the dream they’ve all been sold on.

Obviously, opinions and experiences vary widely–and I suspect they are very different from country-to-country depending on how communism was administered. But I relay these impressions only because of my surprise that the black-and-white version of history that we know and love as the Americans who defeated the Evil Empire isn’t as simple as it seemed. And here’s where I’ll bring it all around and tie it into the theme of this blog.

Emerging markets are one of the biggest new arenas for business investment and marketing. It’s easy to see on the surface the differences between emerging markets like Brazil, Russia, India and China. But it’s important to understand that economic outlook and opportunities are greatly influenced by the attitudes of the market, and even in neighboring countries in Europe, those attitudes not only vary widely, but can be significantly at odds with what we expect. Even as a relatively informed and open-minded person, I was significantly surprised at what I learned on the ground in an emerging market of great interest and value to Western investors. Our views of history are not shared, and our views of the future are not embraced enthusiastically by all. How does that impact the perception of how we do business, and especially how we address emerging markets?