Marketing 101: Selecting An Overall Positioning Strategy - Value Proposition

There are buzz words and phrases in marketing & branding that seem to have an "aura" or "mystery" revolving around them.  There are also phrases and words that people who have careers in marketing don't understand at all.  One of the most used terms in existence is the Value Proposition.  Yet, so many of my colleagues don't really know what one is, or how to use it.  So let's spend some time defining it and exploring what it is and how you use it.

What Is A Value Proposition?
Simple question, right? Yet...it's a bit of a complicated answer. So if I'm going to define this as simply as possible, I'm going to say it like this: A Value Proposition is the full positioning of a brand, product or service.  If I were to expand on the definition, then I would say that a Value Proposition is the full mix of benefits that the brand, product, or service is differentiated and positioned upon.  A Value Proposition answers the question: "Why should I buy this?"

Above is a fairly standard illustration of the matrix of Value Propositions.  On the top, we have three Price categories: More, The Same, and Less.  On the side, we have three Benefits categories: More, The Same, and Less.  So when we assemble a Value Proposition, we are pairing a level of Benefit, with a level of Price.  For example, I may choose to take a More for the Same approach, meaning I'm going to offer more features and benefits than my competitors, for the same price.

The combinations in the matrix that are green represent the most favorable approaches to take with your Value Proposition.  Those in red are rarely profitable, and tend to lead to problems or a loss of focus down the road.

Let's begin exploring some of these categories of Value Proposition.

More For More
When we tout a "More For More" value proposition, we are telling the consumer that we are providing them the best possible product or service, and we are charging a higher (some would say "premium") price to cover the costs of giving you the "best".

In the real world, it is easy to see who the "More For More" players are.  One of my favorites is Apple.  They are not shy about "More For More". Apple gives you the best design, the best quality, the best experience, at a price that meets their corporate goals for gross margins and profits.  When a company truly stands behind this value proposition, giving the consumer a premium product, with premium service and an experience that is consistent over time (the Macintosh has been around for 30 years), then it can be very successful.

In order to compete in a "More For More" market segment, you are going to have to find a product or service category that is under-serviced.  If there is a void in the market segment for a premium product, and if the market segment has consumers that can afford a premium product, then you can consider moving in to that area.  However, there are cons to following a "More For More" value proposition.  When you have a premium product, there will always be imitators that will produce a similar product or service, and claim that it has the same quality for a lower price.  Amazon has been marketing it's Kindle Fire HD as a higher quality, lower priced alternative to Apple's iPad Air tablet.  "More For More" brands, products and services will always be under fire by those who use a "More For The Same" or "The Same For Less" value proposition.

More For The Same
How do you counter a "More For More" competitor?  You present a "More For The Same" value proposition.  A "More For The Same" value proposition entales offering a product, service or brand with comparable quality, at a lower price.  Depending on the costs associated with producing your product or service, you may have the same margins as a "More For More" competitor, or you have have smaller margins, which you are hoping to make up for with a higher volume of sales.

What does "More For The Same" look like in the marketplace?  The auto industry is a great example. Lexus, Infinity, Kia and Hyundai are perfect examples.  Lexus and Infinity were the first to attempt to uproot major luxury "More For More" brands such as Mercedes, BMW and Cadillac.  Offering more car, for the same (and usually lower price), these brands were able to take away more and more market share. As a result, Mercedes and BMW realized that there were more customers available at lower price points.  More recently, Hyundai and Kia have followed the same approach, introducing their Genesis and Cadenza models to the marketplace.  However, "More For The Same" can fail, if you are not backing up your value proposition with the quality and features that you claim you are providing the consumer.

The Same For Less
Probably the most powerful Value Proposition is "The Same For Less". Why?  Because we all love getting a great deal.  Great product?  Lower price?  Yes please!  Need a high quality PC for less?  Get a Dell.  Need great quality food, clothes, and electronics?  Go to Costco.  Want door busting deals on name brand electronics?  Go to Best Buy or Fry's Electronics.  Need name brand groceries for much less?  Go to Winco.  You get the idea.

Less For Much Less
If you remember my discussion of social and economic groups, then you know the reality of the consumer: few people want, need, or can even afford the very best products and services.  As a result, there will always be a market for value products.  "Less For Much Less" is summed up with a definition of "offering a brand, product, or service of less quality, for a lower price".   In most cases, the reality of a consumer's monthly budget forces a consumer to stick with "needs" over "wants" during the buyer decision process.

This means you are going to provide a lower "performing" product (less quality and features), at a much lower price.  This also means that you are usually relying on a higher volume of sales to make up for much lower margins.

More For Less
I'm going to briefly touch on one Value Propositional tactic that we see fairly often in the marketplace.  "More For Less".  That's what we all want, right?  More features, more product, more value, for a really low price.  We typically see "More For Less" when a new brand is entering a target market with established players.  Many claim to offer "More For Less" today.

At first it's easy to do.  You are ripe with new investment capital, or you are a large company that has just budgeted a large amount of money towards a new product segment. So you market your product, and sometimes sell it at a loss, offering more features, for a better price.  However, over time, it becomes very hard to maintain a "More For Less" value proposition.  Companies will typically fall into this trap: losing focus.  With each new generation of your product, you will add more features.  All of this product development, all of this marketing, costs money.  Lots of it.  And unless you have other products in your stable that are selling well and creating profits, you will have to raise the price of your product in order to cover the costs associated with bring it to market.  If you don't, you lose money.  Not only are you losing money, but your product and your brand become so "busy" and "cluttered", you begin to lose out to your competitors, who are more focused, and have a more focused product and message.  In essence, you eventually confuse your consumers, and once your prices go up, they look elsewhere during the buying decision process.  Stay away from "More For Less", unless you can keep your focus, and you can manage your bottom line.

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Marketing 101: Market Targeting

Recall that a customer driven marketing strategy consists of four distinct "steps".  Previously I focused on the first step: Segmentation.  I defined Market Segmentation as dividing a market into smaller groups that contain distinct needs, characteristics, or behaviors that may require distinct products, services and marketing mixes.  Because buyers have different wants, desires, needs, geographic locations, economic resources, buying attitudes, and buying practices, we use segmentation to divide markets into "pieces" that can be reached more effectively.  Market segmentation reveals our potential opportunities.  Once we have segmented the market, we must decide what parts of it to target.

Targeting the Market
We can define a Target Market as a set of buyers that share a set of common needs or characteristics that we can decide to serve.  When targeting a market segment we must look at three factors: a segment's size and growth trends, a segment's structural attractiveness, and our own company's long term objectives and available resources. The first factor consists of the type of research we have explored in the past when discussing Primary Data.  It is vitally important that we collect and analyze data on current segment sales, it's growth rates and potential profitability.  Once we have that data, we must compare it to the size and growth characteristics that our own company is seeking.

Next, we must investigate the segment's major structural factors that will determine how attractive our participation will be.  There are many reasons a segment may appear unattractive.  First, a segment is generally less attractive if it contains numerous strong and potentially aggressive competitors.  More competition usually results in many alternative products that create price competition and limit available profits.  Second, a segment is less attractive if buyers have more power, forcing participants to keep prices lower in order to increase market share, which also reduces  profits.  Third, a segment is less attractive if there are suppliers with strong influence in the micro-environments that actively try to hold material costs at a certain level, with increases our cost of goods, which also reduces potential profits.

Once we have produced a detailed evaluation of the target's structural factors, we must consider our own long term objectives and available resources.  Quite frankly, your company may not have the skills, knowledge, intellectual property and resources to succeed in a particular market segment.  A company should enter a segment only if they can offer outstanding value and can gain and retain competitive advantages over other companies in a given segment.

Choosing a Marketing Method
Once you have selected an attractive market segment, it's time to determine the marketing mix through a targeted marketing method.  Targeted Marketing is generally conducted at four distinct levels.  These levels are based on the relative size of the targeted segment.  In order of large to small, these levels are: Undifferentiated Mass Marketing > Differentiated Segmented Marketing > Concentrated Niche Marketing > Micro-marketing at a local or individual level.

Undifferentiated Mass Marketing
Undifferentiated Mass Marketing is a marketing strategy where a company chooses to ignore market segment differences (presented by their Primary and Secondary Data) and go after the whole market with one distinct product offering.  This type of strategy focuses on the most common needs of consumers, rather than on what is distinctly different between them.  This is a classic strategy from the early to mid-1900's, with the goal of appealing to the largest group of buyers possible in order to create as many sales as possible.  This is the classic volume-based tactic.  Product margins are low, and the value given to the customer is marginal as well.  Most modern marketers do not believe this strategy is very effective.  Today it is very difficult to make a product that appeals to mass-markets due to extreme competition from more focused niche products.

Differentiated Targeted Marketing
Differentiated Targeted Marketing is a strategy where we select several market segments, and design focused products and marketing mixes for each one, with the goal of higher sales and a relatively stronger position within each segment.  The advantage of Differentiated Targeted Marketing is that it typically gives a company higher gross sales across segments.  However increased sales also bring increased costs, because it can be more expensive to develop and produce 10 units of 10 different products (versions that are focused towards specific types of buyers) than 100 units of one product (for mass appeal or niche segments).  It also costs more to market for multiple segments, because each segment requires separate marketing research, analysis, planning, and channel management.  Due to these disadvantages, a marketer must weigh the prospects of increased sales versus the potential increased cost of business when choosing a differentiated marketing strategy.

Concentrated Marketing
Concentrated Marketing is a marketing strategy where a firm chooses to pursue a large share of one distinct segment or a few segments or niches.  Concentrated Marketing allows a company to achieve a stronger market position within a segment due to their greater knowledge of consumer needs and desires within that segment, fine tuning product features and prices over time in responsive to changing trends.  Concentrated Marketing is very appealing for companies that have relatively limited resources for product development and marketing.   Concentrated Marketing is also attractive, because segments are generally smaller and usually attract very few competitors, allowing for higher margins.  However Concentrated Marketing comes with higher than normal risks.  Because most of your business is focused within one or few segments, you may suffer large financial losses a segment turns sour at any time. 

Micro-Marketing
Micro-Marketing is a strategy where companies tailor products and marketing mixes to the needs and wants of specific individuals or local consumer groups.  Micro-Marketing generally involves consumers in all phases of product development, giving consumers opportunities to practice self-marketing during the buying decision process.  Micro-Marketing can give consumers extraordinary value, and can give the companies extraordinary value and consumer equity in return.  However Micro-Marketing tends to increase product development and marketing costs by reducing natural economies of scale inherent in manufacturing.  Micro-Marketing is also logistically complicated due to the numerous requirements of executing different regional and local marketing mixes.

Once you have evaluated and chosen a segment to target, we must work on Differentiation: differentiating the market offering (ie: the product) and thereby creating superior customer value.  I will explore this topic in my next post.

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Marketing 101: Overview of Customer Driven Marketing Strategies

One thing is for sure, no human being is like another. Two people may be very similar, but they will always be different consumers, influenced by different attitudes and beliefs. As marketers we have to accept the fact that we can't appeal to all types of buyers in the marketplace, and there is just no way to appeal to any two buyers in the exact same way.

In order to achieve maximum value from consumers according to our working definition of marketing, we need to focus on the right target customers that will give us the right relationships that achieve maximum customer value and equity. Stop for a moment and notice that I wrote the word "target". This was not a coincidence.

Decades ago, most marketing money was allocated towards mass marketing efforts. Products and services were created to attract and serve as many customers as possible. It was thought that the best way to make as much money as a possible was to sell as many products as possible to as many people as possible. The concept of customer equity wasn't even a part of the mindset of the marketer.

Mass Marketing (also known as undifferentiated marketing) is a marketing strategy that originated in the 1920's as a way of appealing to as many potential buyers in the marketplace as possible. Mass Marketers choose to ignore market segment differences and try to appeal to as large of a customer base as possible with a single product offering. The marketer is assuming that their product meets the needs of an entire population of consumers, and that they can appeal to those consumers in the same way. Mass Marketers aim to broadcast their messaging to as many people as possible, as often as possible. Traditionally mass marketing has focused on the mediums of radio, television and print due to their reach. The marketer assumes that by reaching the largest audience possible, exposure to the product is maximized and sales will be at their maximum.

However there are clear disadvantages to mass marketing practices.  First, we know now that consumers don’t all think alike; so what works well for one group of consumers does not always translate well for another. Second, consumers are becoming less and less interested in "standardized" products (think canned soup), and are very willing to pay higher prices for products that cater to their needs and desires.  Third, mass marketing usually involves much higher costs, especially for the corresponding media buys.  For smaller companies with smaller marketing budgets, mass marketing just isn't possible.  A more focused, budget-effective method of marketing is required: Customer Driven Targeted Marketing.

Customer Driven Targeted Marketing
Because of its advantages and the reality that all companies differ in their abilities to serve different market segments, most marketers have shifted over to customer driven targeted marketing.  In the process of creating a targeted marketing plan we identify one or more marketing segments, and then develop products and marketing programs that are "targeted" to each type of consumer we are pursuing.  A customer driven marketing strategy consists of four distinct "steps", typically grouped into two groups:

1) Selecting The Right Customers To Serve:
-Via segmentation: by dividing the total mass market into smaller segments
-Via targeting: by selecting the right segment or segments of the marketplace to enter

2) Deciding On a Unique Value Proposition:
- Via differentiation: differentiating the market offering (ie: the product) and thereby creating superior customer value
- Via positioning: placing the product offering in the minds of the target consumer with the right messaging

These four steps create value for the target consumer, and allow us to receive value from them.  Over the next few posts I will be diving in further to the Customer Drive Targeted Marketing process.

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Marketing 101: Primary Data Collection - Research

In this edition of the Marketing 101 series we will take a quick look at Primary Data collection.  So far we have been discussing data that is considered secondary.  Secondary data was collected by someone else.  Whether it was your sales department, or a comScore research report that you purchased, it was created by someone else other than your department.  It did not involve any of your department interacting with existing and potential customers to collect data.  It was not collected with your marketing objectives in mind.

There is nothing wrong with secondary data.  You cannot perform any Market Intelligence without secondary data.  It is a great and necessary starting point for any of your research.  Secondary data is critical when you are defining the problems and objectives that are the focus of your Marketing Intelligence initiatives.  However in most cases, you will need to collect primary data of some kind in order to have the information you need to make real decisions.

What is Primary Data?
Primary Data is research that has been conducted by your organization, first hand. It is also known as Field Research.  It is usually more reliable than secondary data, because it is usually more accurate since you collected it yourself.  Primary data is specific and relevant to your products and services. However, Primary Data is often very time consuming to collect, and usually costs more to create than purchasing secondary data reports. You must take special care when collecting primary data.  It needs to be relevant, current, and as unbiased as possible.

Primary Data is relevant when it directly applies to your company's products and services.  It is relevant when it relates to the problems you are trying to solve, and the marketing goals of your organization.  Primary Data is current when it is recent, and directly corresponds to the profile of your customers TODAY.  Primary Data is unbiased when your subjects have been honest and open during data collection.  When constructing your Primary Data collection plan, you must consider research methods, contact methods, the sampling plan, and your research instruments.

Research Methods consist of observation, surveys, and experimentation.  Contact Methods typically consist of mail, phone, personal interaction, and various online methods.  Sampling Plans take into account units, size, and procedures.  Research Instruments typically consist of questionnaires and other mechanical instruments.  Let's start with a quick discussion of Research Methods.  There are three typical ways that Primary Data is collected in marketing: observation, surveys, and experiments.

Observation
Observation is the collection of Primary Data through observing people, their actions and the situations they are in.  Observation may be the easiest research to do.  Typically, observation is also the most cost effective method.  Observation can also give you data that people aren't usually willing to tell you themselves, such as their feelings, emotions, attitudes or the motives behind their buying decisions.

How does observation work?  It's extremely simple.  Take a restaurant franchise owner.  He may be planning on opening another location.  He may also have little or no money to pay for marketing research.  However a lot of the data he needs he can collect himself.  He can get into his car and drive around town, observing the traffic patterns.  He can see where his clientele goes to shop.  He can see what time the traffic appears.  He can call real estate agents and ask them for lease prices for different properties.  He can drive around and look for areas that don't have his type of restaurant, looking for areas of little competition.  He can do all of this for just the cost of the gas in his car.  You can do this yourself.

Surveys
Surveys are the most common method of collecting Primary Data.  Surveys are the best way to get the descriptive information that you need for your marketing intelligence.  Simply put, surveys collect data by asking other people a series of questions about their personal knowledge, emotions, attitudes, preferences, and buying behaviors.  Surveys can provide you a wealth of data.  There is always a golden nugget, a piece of data that can give you the insight you need to figure out the direction of your next campaign.

However, there are drawbacks to the data you collect via surveys.  Often people just don't recall some of the information that you are asking for, and as a result, they are unable to answer the questions.  Therefore the response that they give will not be the complete truth, it may be something that they feel you want to hear.  Sometimes people are unwilling to provide information that they might deem "private".  This prevents completely truthful responses, and it skews the data that you are analyzing.  If the responses seem too good to be true...they just may be.  

Experimentation
Primary Data can also be collected via experimentation.  Experimentation is the practice of gathering data by selecting matched groups of people, giving them different treatments or scenarios, controlling related factors in their environments, and checking for differences in their responses.  Experimentation gives us what we call "causal" data.  Causal data helps us explain cause and effect relationships.  Experimenting helps us try to answer "why" someone is doing something, and what influences their buying behavior.

A common example of experimentation is price testing.  To the buyer, price will be the final emotional factor that determines whether or not they will give us their hard earned money.  Depending on the product and market segment, price may be the most important factor.  How do you know what price is the right price?  You have to test it.  Many companies will test certain prices when collecting primary data on a new menu item that is being developed.  How do you think McDonalds knows how much to charge for a Big Mac?  They tested how much they can charge for that Big Mac, looking for that magic number that will provide the most sales and the most profit.

In my next post we will continue this exploration of Primary Data by examining different contact methods.



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Marketing 101: The Microenvironment - Competitors

I want to start this week's post with a bit of caution: even though there may not be a lot to write, this part of the Micro-environment is by no means small or light.  In fact, it is complex, requires a lot of thought and study, and must be properly evaluated.  It's your Competitors.

The marketing concept states that in order for your marketing to be successful, your business must provide greater customer value and satisfaction that your competitors.  In other words, you must do more than simply adapt to the needs of your target customers.  Let me state this again:  You must do more than just give your customers what you think they need, or they say they need.  You must gain a strategic advantage by positioning your products and services against your competitors in the minds of your customers.

This is all about positioning.  You have to differentiate yourself from your competitors.

You can't do this unless you study your competition.  You have to study them, their products, their marketing messages, and figure out how to stand out above them.

This takes time and a lot of studying.

Remember, no single competitive marketing strategy is best for all companies and situations.  You need to take into account your size and position compared to your competitors.  Large firms with dominant positions in an industry can use certain strategies that smaller firms don't have the ability to from a resource standpoint (money and manpower).  But being large is not enough.  There are winning and losing strategies for all sized businesses.  Small businesses must find the strategies that give them larger rates of return. 

When is the last time you took a hard look at your competition?

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Strategic Marketing 101: The SWOT Analysis

My next post discussing the basics of marketing is the SWOT analysis.  A SWOT analysis is an essential part of any Marketing Plan.  It's best to include it early on in your situational analysis.  It may seem like a simple summation, but it's a great 30,000 foot view of the state of your business and the outside environment.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

Strengths
Strengths are any characteristic of the business that may give it an advantage over it's competition.  Strengths can include internal capabilities, resources, and other positive factors that can help the business serve its customers and achieve it's goals.

Weaknesses
Weaknesses are characteristics that may place the team at a disadvantage relative to it's competition.  Weaknesses include internal limitations and negative factors that may interfere with the performance of the business.

Opportunities
Opportunities are external chances to improve profits in the environment.  They can be favorable factors or trends that the business may be able to exploit.

Threats
Threats are external elements in the environment that might cause problems for the business or project.  They are unfavorable factors that can challenge the performance and profitability of the business.

The goal of a SWOT analysis is to match a company's strengths to attractive profitable opportunities in the market, while eliminating or overcoming any weaknesses and minimizing any threats.  The identification of SWOT's is extremely important, because subsequent steps in the process of the trategic marketing of a selected objective may be derived from the SWOT.  Users of a SWOT analysis need to ask and answer objective questions that will manufacture data for each category (strengths, opportunities, weaknesses, and threats) and maximize the benefits to find a competitive advantage.

If you are a smaller business, and you have never done a SWOT analysis, I would really suggest that you go through this exercise.  Have multiple members of your team contribute to the lists in each part of the table.  Then example the list with your core management team or executive team and talk about each item as objectively as possible.

A SWOT analysis is an essential exercise when constructing a marketing plan for your business.  Doing it will probably open your eyes to factors internal and external that are influencing the long-term performance of your business.

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Artists.MTV: Smart or Just More Confusion?

It feels a little bit like deja vu.

This month Viacom's MTV announced a "MySpace"-like initiative called Artists.MTV.  The basic idea is to provide music artists a centralized place to access MTV's 60 million+ monthly visitors.  Aritsts.MTV will allow musicians to "claim" their sites and upload music, videos, photos, and link their "pages" with social-media accounts and other online shopping carts. "Pages" will go public at MTV's Video Music Awards this fall.

We've seen this before.  MySpace's music initiative was a mildly successful attempt at the same "thing."  Digital downloads have driven the price of music down to very affordable levels for consumers.   Once there were only a few places for consumers to get their media.  Now the problem is that there are almost too many places to get your music, music videos, and self-promote.  Add the juggernaut of iTunes into the picture, which is estimated to have up to 70% of digital music sales market share, and one has to wonder if anyone can change consumer's buying and mind-share habits.  At first glance, Artist.MTV could just be adding to the current marketplace confusion outside of the iTunes ecosystem.  But if you take another look at it, it very well could be extremely smart.

One of the biggest pet peeves of many artists is that they don't get a large enough cut of music sales revenue.  Over the last decade, declining CD sales revenue, piracy and a paradigm shift to digital music sales have steadily lowered the revenue artists receive from their music. Lower concert-ticket sales have also lowered the income artists receive each year.  According to Shannon Connolly, VP of digital-music strategy at MTV Music Group, "We felt like the world needed a place that's comprehensive and thorough, and that allows artists to connect with fans at scale...The goal is to help artists get paid." Summarizing their efforts, Ms. Connolly commented that ..."the goal here is to give artists the opportunity to monetize what they do...artists can get heard, get promoted and get paid."

What?  They want the artists to get paid?

It may be a basic play off of greed, but quite frankly, it may be enough to make a difference.  The Artists.MTV initiative (which includes the  VH1 and CMT brands) will share sales revenue with artists and ANY ad revenue generated on the pages through an agreement with Topspin Media.  This also gives artists the ability to receive the majority of revenue from sales of music, tickets and merchandise.  An increased share of sales may be the "ticket" to show iTunes, and other record companies, some real competition.

Digital sales, the digital marketplace, self-selling and self distribution are all meant to increase the income of the actual creators and producers.  Artist.MTV may actually be more than lip-service.  It may actually be the real deal.  Only time, and MTV's 60 million monthly visitors, and a significant marketing campaign, will be what tells us if anything can crack the thick shell of the iTunes ecosystem and the traditional record companies distribution network.

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Reality Check: Marketing Defined

Every so often you have to evaluate how you are doing.  If you are a marketing professional, it's your responsibility.  So when is the last time you stepped back, and took a look at what you were doing?  Sometimes the best way to do that is to start with the basic definition of marketing.

The simplest definition of marketing I can think of is: Managing profitable customer relationships.  The goals are to attract new customers through superior value, and to keep growing customers by delivering customer satisfaction.  If you are doing these things, then you will be able to capture value from customers to create profits and customer equity.

So if we break this down, then we get some basic questions that are extremely useful for evaluating your current strategic marketing plans:

1) Are your customer relationships profitable?
If you're not making money, then it's time to start figuring out why.  Start collecting data and begin looking for trends.  It's going to take time to get things back to profitability, so it's best to get started now.

2) Are you attracting new customers?
As much as we hate to admit it, we're always going to lose a customer.  Even the most loyal customers may eventually buy another brand.  If you're not attracting new customers, eventually your sales will fall flat, and you will not be profitable.  So what are you doing to attract new customers?  What value proposition are you presenting to them?  Are you properly differentiated from your competition in your target market?  If your value proposition isn't clear, if you're not clearly different from your competitors, then confusion may be keeping customers from being convinced you are the solution to their want or need.

3) Are you creating satisfied customers?
Are product's perceived performance exceeding expectations?  Meeting expectations? Are customers buying your goods and services again?  Are you gaining new customers?  Or are you dealing with dissatisfied customers and poor sales?  Remember that customer value and satisfaction are the building blocks for developing and managing your customer relationships.

4) Do you have key measurements of your customer equity?  
Customer equity measurements can be better indicators of your performance than sales and market share numbers.  If sales are high, and market share is high, but your customer equity is low, you're going to be losing sales and profits will be tanking soon.  Get some data so you can make some real decisions.

Sit down by yourself, and with your team, and take a day to honestly answer the above questions.  You may be surprised at some of the responses.  Now may be a great time to make adjustments to your strategic marketing plans.

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Media Consumption In A Digital Age: It's One Big Experiment

In the past, there was a silver screen, a few broadcasters, and a lot of paper.  If you wanted to watch something, you sat in front of someone's television or a theater screen.  If you wanted to listen to music, it was on a stereo - home or portable.  If you wanted to read something, or take something with you, it was most likely printed on paper.  You were in your home, in a movie theater, picked up the mail, or you went to a store to purchase your entertainment.

A few large companies controlled the publishing and availability of the media you chose to consume.  Prices were pretty much the same everywhere you went.  Competition was non-existent.  That's the way it was.  Then this "thing" called the personal computer appeared.  Then the internet appeared.  Everything changed, and it still is.

Last year Time, Inc. hoped to take advantage of it's multiple consumption and distribution publishing model. Time Inc. was attempting to bundle "digital" media with a traditional print subscription under an "All Access" strategy - which would have eliminated print-only subscriptions in the process - and would have allowed Sports Illustrated to raise its price to $48 from $39. Sports Illustrated reversed course in January.  Said Steve Sachs, Executive VP of Consumer Marketing and Sales, "That price, we found, was higher than the market commanded.  Monica Ray, the Executive Vice President of Conde Nast, commented, "The whole industry has the opportunity to redefine what a subscription is."

What kind of subscriptions do consumers want?  Is a "subscription" model appropriate anymore?  How do I find out?  The only way you can find out is by collecting data.  Without data, you're making decisions in the dark, you are walking around blind.  Since the way consumers consume media is changing, we need to be collecting data and study how our customers are using our media products.  If we don't adapt, if we aren't willing to constantly evolve our model of media delivery, we will forever be stuck in our traditions, and more media institutions will perish.

There are no longer a few ways to consume media.  Now there are many publishers, many screens, and the vast majority of them are portable.  Oh ... there still is some paper too.  Because traditional publishing methods have changed drastically from decades of old, traditional media publishers are walking around blindfolded, feeling their way around a media consumption environment that they no longer control.  Today publishing in a digitally dominated ecosystem has become one big experiment, and understanding what will work for you is all about knowing your customer ... and that requires data.

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The Department Store Finally Evolves

Well maybe it already did, through Kohls.  But I digress...back on topic.

Yesterday JC Penney CEO Ron Johnson announced sweeping changes in an effort to refresh the brand, and the department store "way" of selling product. 

It's about time. 

During Mr. Johnson's tenure at Apple, his team, "always parked at the department stores...because there 'weren't any cars.'.  You know you have a problem when people are using your parking lots to visit other retail locations other than your own.  Mr. Johnson, while noting that JC Penney was in it's 110th year, said, "I believe the department store is the No. 1 opportunity in American retail. And this isn't something I decided last June when I took the job. This is something I decided 10, 15 years ago."

So what does this new opportunity look like? 

First, it starts with a dramatically more realistic product pricing structure.  Consumers rarely purchase products at full price.  In any economy, up or down, consumers are more willing to part with their dollars when products cost less, ie: when they are on sale.  Mr. Johnson, acknowledging this, is leading JC Penney to adopt a "fair and square" pricing model.  It's this simple: If a T-shirt that usually is priced at $14 but typically sold for closer to $6, will be priced at $7. This puts it right in line with what a consumer was actually paying for that shirt.  If it's a featured product, it will be priced at $6. Clearance time: $4. This change alone should help to drive sales.  Why?  It allows JC Penney to sell product at prices consumers are willing to pay, instead of constantly holding onto inventory, and hoping to clear it out every quarter. 

The second thing Mr. Johnson is doing is completely revamping JC Penney's promotional calendar and spending.  Currently, JC Penney's sales year has 590 promotional events.  Mr. Johnson wants to reduce that to 12.  The reason: noise.  When you are constantly promoting promotion after promotion, it creates "noise" for the consumer, and eventually it all blends together and the consumer doesn't know what to focus on.  As a retailer, you become less relevant and harder to keep track of. 

To illustrate his point, Mr. Johnson had presentation attendees walk down a hall covered with old ads and circulars, calling it the "Hall of Hell." Promotional spending will also change; instead of $2 million per promotion, JC Penney will now devote $80 million a month towards entire product line promotion.

This is so refreshing.  To finally see a department store (or any big-box retailer other than Walmart) understand that their pricing structure and promotional model is so out of touch with consumer buying habits is amazing.  For that brand to make realistic ... frankly common sense changes ... is fantastic.  I sincerely believe that, if successful, JC Penney will force their competitors to re-brand and re-price.

Consumers will be the beneficiaries of these changes.  Products will sell for lower, more realistic prices.  Sales will increase, and retailers may begin to see the growth that they have been hoping for. 

I hope JC Penney succeeds.

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Be Purposeful Or Else You Will Be Ignored

On Tuesday, Facebook announced that it would begin adding "Sponsored Story" ads to users' news feeds in January.  This will not happen in mobile apps yet.  This announcement is another step in Facebook's plan to monetize it's business and make it a viable advertising platform. 

If you're an advertiser, this gives you an easier way to get in front of the eyeballs of millions of Facebook users.  If you're Facebook, you just earned yourself some more ad dollars and paid a few more bills.  If you're a Facebook user, you may have another reason to ignore Facebook today.  And that's the caution to throw into the wind:  "Sponsored Stories", if overused, will quickly be ignored, and will have little to no value for any advertiser.  In fact, if Facebook isn't careful, and if you aren't as a media buyer, "Sponsored Stories" could be a huge flop.

Remember that "reach" basically is the number of individuals you want to expose your message to through any type of media scheduled over a given period of time.  For focused groups of audiences, Social Media and other online advertising provide great reach.  However, frequency is where things can go wrong.  When you're visiting a website, such as a news outlet, you expect to see ads.  You're voluntarily allowing yourself to be exposed to them.  Even if advertisements appear, we tolerate them, because we're simply using the website to consume information in an impersonal matter.

Social Media isn't impersonal, it's personal.  Frequency can quickly die off with Social Media, because when ads invade our personal "space" online, we change our usage patterns; quickly visiting a services like Facebook less, or even stopping altogether.  Once that happens, you've lost that consumer, potentially alienating them from your brand (as an advertiser), and possibly losing another revenue generating user. 

That's the slippery slope.  As an advertiser, you need to make sure not to abuse Social Media advertising.  It's users may be more receptive to your messages, but if you over "communicate" to them, too frequently, and without specific value or purpose in your message, they will quickly ignore you.  Once they ignore you, your Brand Awareness measures and credibility may start to decline as well.

Facebook needs to quickly decide how much advertising they really want to force their users to view.  If they continue to add more "ads" to people's feeds, Facebook may quickly lose users, and one of the "pot of golds" of internet advertising may cease to be.

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It's about the content, not the algorithm

SEO. Search Engine Optimization.  For the past few years, no other term (other than Social Media) has owned the mindshare of marketers and business owners when it comes to the web.  It's almost a foregone assumption: if I build a website, I must perform SEO.  If I own a website, I must perform SEO.

The next big assumption is that performing SEO means either hiring an expensive "SEO Company", or getting a "SEO For Dummies" book and doing it yourself.  What exactly are you doing when you are "SEO'ing"?  Altering "alt" tags, meta data, headers, tagging images, keyword selection, link-backs...it's almost as mind-boggling as trying to guess how many letters there are in a can of alphabet soup.  Why are we putting ourselves through this insanity?  It's because we desparately want to be at the top of Google's listings.  We want to meet, beat, and even fool Google's algorithm at it's own game. 

It's time to stop the insanity.  Sure, having as much of your content indexable as possible is worthwhile.  Sure, you want to have good keyword selection and contextual page titles.  But lets get one thing clear.  No matter the algorithm, if you don't have relevant content, and others don't think you're content is relevant, Google isn't going to care either.

Google cares the most about relevant content.  If your content is actually about what you claim your website or webpage is addressing, then your content is relevant, or contextual.  If you title your page "Dogs", but you present information about cats, then it is not relevant.  Google and it's genius engineers have figured out how to "crawl" your website, examine your content, and rate it's relevancy.  It grades everything on your page that it can search, or "index.

Not only must your content be relevant, but it must be updated frequently.  Google will index your site on a set schedule once it "finds" you for the first time.  How often you update your content, or create new content, will determine how often Google "decides" to visit your site.  If you create a site, and never update it, then Google will eventually "decide" to visit your site more infrequently, and as a result, it will lower you in relevant search results.  But if you continually update your site, and continue to create relevant content, Google will raise you in it's search results.  Old and stale = forgotten and unimportant.  Fresh and exciting = relevant and important.

Even if you write relevant content, and keep it fresh, unless others also think it is relevant, then Google will not raise you up the search ranking results.  How do others make you relevant?  Link backs.  The more people, in contextual situations, link back to you, then your content is relevant.  What is a contextual situation?  Link farms are NOT contextual situations.  In fact, Google has clamped down on this practice; recently altering its algorithms to remove link farms from the equation.  So many people were "playing" the system with link farms and dummy websites that Google re-worked it's code to severely discount the influence of link farms and dummy websites.

What Google did was increase the relevancy of a website, with content relevant to yours, linking back to you.  For example, a blog post talking about dog sweaters, mentioning your comments about them, and linking back to your site, is relevant.  A series of forum posts on a public community forum site about dog sweaters, with links back to you in those posts, are relevant.  A series of social media posts on Facebook or Twitter, mentioning content about dog sweaters and linking back to your site, are relevant.

Google cares about content that others care about, and if they care about you, then Google cares about you.  So go ahead and optimize those page headers.  Make your site's content match your keywords.  Make as much of your website able to be indexed as possible.  But if your content isn't relevant, and if others don't care about your content, then Google won't either.

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Another Ad Network = More Fragmentation

On Wednesday Yahoo released it's "Living Ad", interactive video ad format for advertisers.  This new ad format works within an ad network, that is centered around Yahoo's Livestand publication app.  Livestand, along with it's ad network, enters an already saturated ad "market" occupied by the likes of Flipboard, Zite, AOL's Editions, and Pulse.  Yahoo is pushing advertisting packages to buyers, some of which are said to run upwards of $500,000.

According to Yahoo, Livestand features a magazine-style layout.  It will launch with some content from third-party publications.  Those publishers will share their ad revenue with Yahoo.  The details of these revenue sharing arrangements are not yet known. These publishers can also re-sell ad packages on the plarform.  I can only deduce that Yahoo get's a cut of that revenue as well. Diane McGarvey at Scientific American, which is offering some content on the Livestand, states Yahoo will keep about 70 percent of revenue on ads sold to appear inline with Scientific American content.
Living Ad, along with Livestand, is one of many initiatives to attempting to make Yahoo a relevant player in mobile advertising.  Mobile advertising is projected to net around $1 billion this year in the U.S. and up to $1.2 billion in 2012, according to eMarketer. Yahoo is positioning itself to receive as large a portion of this pie of revenue as possible.

The mobile ad space is already over-saturated.  Frankly, none of the ad formats and networks bring anything new to the table.  Nothing currently compells a consumer to do anything after viewing these ads compared with any other form of advertising medium.  We don't need another ad network.  We don't need another "method" to get an ad to a consumer.  What we need is a new type of ad, a new way to interact with a product, that might actually compel a consumer to buy.

Advertisers, and content networks, need to bring new ideas to the table.  The internet and mobile phone networks bring whole new possibilities to advertising via interactive ads.  An interactive ad would allow a consumer to configure products, explore them, walk around them, try a focused "demo" of it.  After they have played with it, or configured it to their hearts content, they could be connected with a vendor to purchase that product within a few clicks.  This gives the consumer a quick way to satisfy their emotional desire to buy the product.

However, most online ads don't do anything other than present a picture, an animation, a call to action phrase, and link to a normal website.  There's no point to showing a traditional ad online or on a smart phone if there's nothing new about it's experience.  None.

Yahoo's Living Ad is trying to do this.  However, most advertisers don't seem to know how to create an ad "experience" that really compels consumer interest.  We need to stop telling

If advertisting is going to survive, and make money, the "ad" as we know it needs to evolve along with the technology available to deliver it.  With the growing popularity of mobile devices that are connected to mobile data networks, there is a new opportunity to truly try something new.  Who is going to lead the way?

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Is the 30 second spot relevant?

No one watches commercials anymore, right?  In the age of the DVR, we zip right past them.  Commercials are old school, they are relics of ages past.  It's all about the web, social media and gorilla marketing via YouTube, right?

Is there any point to a 30 second commercial on broadcast television?  Absolutely!  Not only are they relevant, but they are the best way to build brand equity through brand awareness.

In order to build Brand Awareness, you need to get the attention of your audience.  No other human sense gets our attention better than visual stimuli.  The phrase "a picture is worth a thousand words" is still very true.  Commercial advertising used to be all about the "sell".  Get a spokesperson, list off your product's features, and tell everyone to buy it.  There was no better way to sell a car or a frozen dinner in the 1960's and 70's than to list off your features and tell a viewer to go and buy it.  It doesn't work the same today.

Today you have to get someone's attention.  You have to pique their interest.  You have to create buzz.  You have to make the emotional sell.  Saying your car is "Imported from Detroit", or "You're In Good Hands With Allstate" speaks louder than telling everyone your insurance has lower monthly premiums.  Connecting with an older audience, while featuring someone from a new generation in a simple t-shirt does wonders when you want to get everyone to ask, "Where's the Beef?".  One commercial, one visual, can spark a flood of conversation that spreads from the office water cooler to the status updates of Facebook. 

Today television presents a great ROI, not just because you can reach millions of eyes at one time, but also because you can use it to drive people to more direct brand interaction and messaging.  The venerable commercial used to be a one-way experience.  The viewer watched it, and you hoped that the message would soak in.  You hoped they would go to a store and interact with your product.  Today a viewer can have instant interaction with your brand via the internet and mobile devices.

Today a commercial that doesn't just create interest, but moves someone to interact with you is essential to a successful campaign.  Want to find out more?  Go to our website.  Want to get great deals?  Visit Facebook or GROUPON to get 20% off your first purchase.  Visit YouTube for more clues and win your very own car.  You couldn't do this 20 or even 10 years ago.  Now you can.

No other medium allows you to reach as large an audience at once as television.  However, Jerry Shereshewsky, a New York City ad agency veteran and CEO of Grandparents.com, asserts that if you want to get narrower than a general demographic, you're out of luck.  With today's audience diversification and deep pool of niche channels, this isn't the case. TV is now a target rich environment, and it allows you the opportunity to tailor your message for any specific demographic.  Even better, that demographic is a willing listener.  You don't want to watch Food Network or G4 because you have to, you watch it because you want to, because you're interested in that hobby or vocation.  Viewers of these niche channels are already willing to buy items to suit their interests, and if your product fits these interests, they are willing to listen to you.

Getting attention, creating interest, and encouraging brand interaction are all possible today through the focused use of the 30 second spot. What used to be a multi-million dollar shot in the dark is now a viable, successful option for building brand equity through brand awareness and brand engagement.  Consumers are willing to watch commercials...are you giving them a reason to watch yours?

Wendy's Brings Back "Where's the Beef" - Chicago Tribune
Which Ad Strategy Works For You? - Entrepreneur Online

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Facebook helps advertisers engage their customers

I'm taking a break from my review of basic marketing fundamentals to discuss something key from the recent Facebook F8 event.

On September 23rd, Michael Lazerow published an article on Adage commenting on Facebook's Ad product evolution.  In his post, Michael comments on three key items:

• Facebook now helps you build better connections
• Facebook can be used to let your customers tell your product's story
• Facebook can help you unlock the value of people

I want to comment more on these ideas.

First, the whole "point" for a business using Facebook is to connect with their customer.  Seems like a no-brainer, right?  Maybe ... but what many businesses assume is that once someone "Likes" their business, they are instantly connected, and their "Likes" will pay attention to whatever they post, even if they post nothing.  "Like" DOES NOT equate to "connecting".  Mr. Lazerow is correct when he says, "It's about what you offer them and it's clear that the company's (Facebook) focus has shifted from growth to engagement" (reference to Facebook added).

Facebook isn't about announcing another product.  It isn't about beating your chest.  It's about posting CONTENT that is relevant to your customer.  It's about GIVING them something that matters. If you sell cameras, post tutorials about photography techniques.  Give them tutorials focused on teaching them to use your product.  Post a 50% off coupon for Facebook members for camera accessories.  GIVE them something that is VALUABLE to them.  Remember when we were talking about Brand Equity in my last post?  Facebook is a great place to build brand awareness and brand equity.

Use your customers to build your brand equity.  Have them tell your product's story.  Have them show and tell others about how they have used your product.  Their voice (positive and negative) carries more clout and emotional credibility than yours ever will.  Continuing on the camera example, inviting users to post their photos from vacations with your camera allows them to share their emotional connection with your product.  Awarding prizes for the best photo taken with your camera helps to strengthen the customer's "bond" with your product and brand.  The "community" built, and the quality of photos submitted (hopefully) will build better brand equity than you could do yourself through traditional advertising via any medium.

Advertising doesn't always "reveal" the fact that your customers have value.  They don't just give you money.  They are a very real voice in the marketplace.  Make them a voice for you.  Facebook (and potentially Google+ in the future) allows you to connect and unlock their value in a way that we never had before social networking existed.  It's time for you to take advantage of it and truly engage with your customer to build your brand equity.

Credit: Adage

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Brand Assessment

Last week I discussed the details of Brand Architecture.  Before I talk about further evaluating a Brand Architecture, I wanted to explore the Brand Assessment.  The data gained from researching and evaluating your brand in an assessment is a key requirement before considering any future change in your Brand Architecture.  If you don't know anything about your brand in the marketplace, you cannot make any intelligent decisions about it's direction in the future.

There are two key parts to a Brand Assessment: the Brand Essence and the Brand Communication.  

When reviewing your Brand Essence it is important to determine:

• Awareness: Are you known in the marketplace?
• Favorability: How do people feel about you?
• Function: What benefits do you provide your customers?
• Key Driver: What prompts consumers to engage with you?
• Support: What "backs up" your key function in the marketplace?
• Differentiation: What distinguishes you in the marketplace from everyone else?
• Personality: What compelling attributes define you?
• Quality: What is the quality of your brand in the marketplace?

When reviewing your Brand Communication, you should review:

• Messaging: What messages are the most compelling to your current and potential customers?
• Name: How effective is your current name in the marketplace?
• Logo: How effective is your current logo in the marketplace?

The amount of detailed, reliable data you can collect on each of these areas will help you determine the direction your brand should go in the future.

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