Cambridge Marketing review - Issue 2 by Cambridge Marketing College

CAMBRIDGE MARKETING

FEATURES

The (New) Future of Marketing PROFILE

Omobono, the B2B Agency REPORTS

Building Support for the RSPB BONUS

The Little Book of Genius

‘ we started in bacon slicers’ Kevin Bishop, VP Brand System and Workforce Enablement, reflects on how far IBM has come in a century

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ISSUE II AUTUMN 2011

CMR ONLINE

Classics of Advertising

©The McGraw-Hill Companies, Inc. Reproduced with permission of The McGraw-Hill Companies, Inc.

The Man in the Chair

The McGraw-Hill Companies’ ‘Man in the Chair’ print advert is a classic example of the importance of bringing brand awareness to customers. This original version of the ad first appeared in 1958. It was recently updated for the era of social media in a video by the Business Marketing Association. Watch it online: youtu.be/nXG7zYWKHGU

CONTENTS

CONTENTS 5 Editorial FEATURES

6 The (new) Future of MArketing An edited extract from the 14th annual Cambridge Marketing Lecture, presented by Kevin Bishop, Vice President of IBM’s Brand System and Workforce Enablement 15 The Little Book Included with your copy of Cambridge Marketing Review, a bonus item from CMR and Peter Fisk 16 Agency Profile: Omobono An interview with Fran Brosan, Chairman 20 Case Study: Omobono, Ocean Sky A successful website redesign 22 Global Social Networking Is Facebook the one-stop-shop for social network marketing? REPORTS

28 Improving the Supporter Experience at the RSPB A report on charity marketing

30 The FuTURE OF GAMBLING IS IN OUR HANDS As technical and legal barriers are removed, the mobile gambling sector is set to generate huge profits in the near future 34 Building The Value-Based Price In the second exclusive extract from Value-Based Pricing, Harry Macdivitt and Mike Wilkinson delve into the mechanics of price-building 42 A Silver BUllet VIEWS

44 IT’S ALL HYPE ISN’T IT? Ever noticed how suddenly everyone seems to be talking about the ‘latest thing’? 48 do we need a box out of which to think? The analytical tools of marketing 52 The Tablet: The future has arrived 54 Intellectually curious Fresh ideas to expand your knowledge

Publishing Editor: Chris Burgess Chairman: Charles W. Nixon Contributors: Kevin Bishop, Daniel Cremona, Peter Fisk, Harry MacDivitt, Don Moyer, Terry Nicklin, Charles Nixon, Omobono, Roger Palmer, Ruth Smyth, Neil Wilkins, Mike Wilkinson, and Paul Woodhouse. Contact: Cambridge Marketing Press 1 Cygnus Business Park Middle Watch Swavesey Cambs CB24 4AA Tel: +44(0) 1954 234944 Fax: +44(0) 1954 234950 Email: chrisb@marketingcollege.com Issue II Autumn 2011 ISSN 2047-962X

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Front cover illustration: Amanda Barrett Cambridge Marketing Review is published quarterly by Cambridge Marketing Press Printed by Kingfisher Press, Bury St. Edmunds, Suffolk: www.kingfisher-press.co.uk The views expressed in contributions to Cambridge Marketing Review are not necessarily those held by the publishers. ©2011 Cambridge Marketing College. All rights reserved. You may photocopy this magazine for collaborative study purposes. Individual images under the licenses listed below:

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(Page 45) A derivative of Gartner Hype Cycle by Wikimedia Commons: http://commons.wikimedia.org/wiki/File:Gartner_Hype_Cycle.svg Available under a Creative Commons Attibution-ShareAlike 3.0 License: http://creativecommons.org/licenses/by-sa/3.0/

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Most Cambridge Marketing Review articles are accompanied by a word cloud from wordle.net. You can use our clouds to assess swiftly the themes of the article: the larger the word, the more times it appears in the text. If you would like to comment, please contact the editor, Chris Burgess: Tel: +44(0) 1954 234944 Email: chrisb@marketingcollege.com

Cambridge MArketinG Review Online

(Page 31) Horse Racing by Paulo Camera, 2009: http://www.flickr.com/photos/vegaseddie/3309217425 Available under a Creative Commons Attribution 2.0 License: http://creativecommons.org/licenses/by/2.0/

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Please contact the editor, Chris Burgess, to subscribe to the printed editions: Tel:+44(0) 1954 234944 Email: chrisb@marketingcollege.com

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Find out more about the Review and other Cambridge Marketing Press publications at www.CambridgeMarketingPress.com To download the iPad edition of the Review, Search ‘Cambridge Marketing Review’ in the iTunes App Store or in the Newsstand. Join our Facebook group to comment and get access to the latest digital editions at www.facebook.com/CambridgeMarketingReview Follow us on Twitter to keep abreast of the latest marketing developments: @C_M_Review Join our LinkedIn discussion group to network with fellow readers. Search in groups for ‘Cambridge Marketing Review’

Conventions: • We are marketers not marketeers; we are not cavaliers. • We practice marketing not advertising or PR. • When we refer to products, we mean products and services. Otherwise we refer to offerings.

EDITORIAL

Editorial The view from the outside

ambridge Marketing Review is a magazine for practitioners who are alive to the ongoing developments in the discipline, but this in no way makes this an insular publication. As aspects of marketing permeate all areas of business, Chris Burgess we can’t afford to focus keenly on any one part of the larger picture at the expense of any other. Our writers are immersed in their sector, but they also mindful of the view from the outside. Though CMR is by marketers, for marketers, we are always concerned wth issues of wider perception. As it is our aim to assist in the raising of marketing standards and ensure that it is regarded as integral to business success as Finance and Law. A community cannot wilfully consider improving its processes or its standing without a consideration of how these factors currently appear to outsiders. To many people, marketing is the agency side: the big B2C advertising campaigns. Mad Men instilled the impression that this industry is all intuition, glamour and liquid breakfasts, and this view still holds vodka with the public. Whilst a certain amount of a marketer’s work is along these lines, clearly this area has significantly changed. CMR’s profile (on page 16) of Omobono, the Cambridgebased, global B2B Agency, is part of our continuing series which looks into the approaches modern agencies take to the work they do. Of course, your colleagues in other departments are also consumers, and are overwhelmingly aware that brands are in competition for their attention. The current economic climate is forcing people to reassess the merits of brands on price more than ever (which is not to say that luxury brands are in trouble, merely that they must work harder to convince the public of their status). This month we feature a second exclusive extract from Macdivitt and Wilkinson’s Value-Based Pricing (on page 34) which addresses the challenge of correctly valuing your offerings, a subject relevant now more than ever. A series of recent high profile scandals - be it BP’s Gulf of Mexico oil spill or Apple supplier Foxconn’s spate of worker suicides - can only serve to set the tone for the coming decade: that products are not isolated brands, they need to maintain their public image to compete. Our keynote speech this month, starting over the page, is from Kevin Bishop, Vice President of IBM’s Brand System and Workforce Enablement. As he dicusses, authenticity and advocacy need to be your watchwords to attract and maintain custom.

The progress of social media marketing is one of the fundamental building-blocks of this new movement. Our feature on page 22 deals with social networking around the world to illustrate that there is digital life beyond Facebook. By addressing global consumers on a digital level brands are now communicating in a self-consciously open way; they are treating their customers as equals. CMR’s own Facebook group (www.facebook.com/CambridgeMarketingReview) allows you to comment and discuss with other readers. This trend towards openness is something that is altering the landscape of the future of marketing. CMR will continue to bring you insight into these developments whilst considering and reassessing tried and tested marketing methods.

The Cambridge Marketing College Annual Dinner and Lecture series brings together marketers from a wide range of backgrounds through its choices of involving speakers. This year’s lecture is extracted over the next few pages.

Chris Burgess is the editor of Cambridge Marketing Review. Email your comments to chrisb@marketingcollege.com

The (new) Future of MArketing An edited extract from the 14th Annual Cambridge Marketing Lecture, presented by Kevin Bishop, Vice President of IBM’s Brand System and Workforce Enablement

t’s a real honour to be here this evening: not only is it your 14th year of these annual lectures, it’s also IBM’s centennial year. When we started we made bacon slicers, time recording machines and punch cards. Now we don’t make those things but we make - and do - a whole lot Kevin Bishop of other things that make a difference in today’s world. Whilst many other very successful companies that have been around for a long time thrive by perfecting the same whiskey or the same beer or the same chocolate, IBM changes what we do many times over. Tonight I’ll explain something of how we do that and why that’s been such a successful strategy for us. The lecture is called the “New Future of Marketing” for a reason, because we think the world has changed very significantly and this holds profound implications for our profession. I want to start with something from the past: Image: Kevin Bishop, IBM

This is what for many years we have called marketing: taking a market segment that we want to address, raising awareness that we have something to say to this segment, trying to attract interest in our product and a desire for it, and eventually prompting the action to take that product off the shelf and put it into your shopping basket - whether you’re buying from a consumer or business to business perspective. The AIDA model turns out to have been around since 1898 and, as I was preparing for this speech, I was surprised to learn that the marketing funnel, at the heart of so much of what we do, dates back quite so long. I think we’d all agree that the world has evolved quite substantially since 1898, so we believe that it is time to look at those changes and re-evaluate the assumptions behind this model.

FEATURE - IBM

Image: Kevin Bishop, IBM

IBM employs around 75,000 people in India, a number approaching the 105,000 they employ in the USA

If Facebook were a country, with some 750 million members it would be the third largest country in the world, behind only China and India

Image: Kevin Bishop, IBM

The phenomenal connection of people and devices to the Internet is one force shaping our world. Alongside that, the physical world is changing: people are moving to cities in unprecedented numbers, so what kind of work we do and where work gets done are radically different today to the way they were in 1898. • This Internet thing seems to have taken off a bit and is clearly having some influence in how we spend our time. • If Facebook were a country, with some 750 million members it would be the third largest country in the world, behind only China and India. • Smart devices are changing the way we live and work: we’ve all probably got mobile phones in our pocket and GPS in our car, whilst some of us may be starting to invest in programmable washing machines or fridges, or may even allow other people to turn on or access our devices in some way. There are already, according to Gartner, some 26 smart devices per human being on the planet. • Mobile Apps: we downloaded some 7 billion in 2009 and, according to the Wall Street Journal, some 50 billion apps per year will be downloaded by just 2012.

These global shifts are affecting the marketplace but also the companies that operate in it. In IBM all sorts of things are very different from what they were even a few decades ago: • Some 73% of our people work remotely from where their Manager is (where remotely is more than 100 miles away and frequently across a country border); that’s a big change when you used to be able to shout to your colleagues across the office floor. • Half of our people now work somewhere “other than a traditional office”. They work from home, they work in their client space, they’re mobile workers in some way, they hot desk through locations. • We are truly a globally integrated enterprise with staff in the 173 countries of the world that we operate in - but now with a similar scale of workforce in India as the US. All this means that the cultural norms by which we, and many companies, operate have changed beyond all recognition. At the same time, the voices and opinions of our global workforce have never been so clearly heard.

Half of IBM’s people do not work in the office they work from home, in their client space, they hot desk...

For the past few years, IBM has been working with our colleagues in the Arthur Page Society, a well-respected communications and marketing organisation in the US, to understand these shifts in the context of our profession. Together with our fellow Page Society members P&G, Apple, Johnson and Johnson, e-bay, PepsiCo, BMW and others, we have developed a thesis that the old marketing model is dead. That is a big claim but we believe it’s justified: something very significant is happening. The old model no longer holds, and most important - something new is emerging to take its place. That is what I would like to share with you this evening.

Image: Kevin Bishop, IBM

Authenticity When you leave here later tonight, it is going to come down to two things that I hope you will remember.The first of those is authenticity. On the slide [bottom right] are a whole series of different quotes reflecting the views and experiences of our colleagues in P&G, Johnson and Johnson and others. What these experiences add up to is that the consumer now owns your brand. It’s the consumer that is defining what your brand stands for as they comment in social media and other places about the way your brand operates, not simply the products or services they buy. The implication of this is profound - it means we need to extend our culture beyond the firewall. It is no good simply to project who we are as a company through our actions in marketing and communications - through the media we either own or pay for - because, if some aspect of your company is out of line with the expectation that you are setting, a member of your constituency base (employee, partner, supplier, client etc.) will blow the whistle on you. Now, there have always been people who make it their vocation to call out and comment on business decisions - whether it is sweatshops in China or Fair Trade products from Africa - but what the internet has brought is transparency on a huge scale. It has brought ease of access to every single individual that you interact with in your business to be able to share their experience or point of view with the network of people that they interact with on a daily basis - typically some two hundred people per member on Facebook (and for our children, often with over a thousand ‘friends’, we can see where the future is going). People will share things with their network, with no knowledge or thought about who makes up their friends network (colleagues, suppliers, partners etc.) If they make a comment about something they have observed that is not authentic about your company - and others see and care about it - within hours that gap between what you say and what you do will be found out, will be publicised, will be circulated sometimes with huge reach and scale. It may not be front page news, it may not be ‘the tweet that killed the company’ (though we have seen a whole series of examples recently of tweets that have certainly killed individual’s reputations), but it will certainly go to people that matter, people within the community that know and already care.

So, the first thing that we need to learn about in this new future of marketing is this notion of authenticity - and the first point that I want to make is that our role in marketing communications has to change: we have to move from setting the agenda externally to setting the agenda internally as well. We have to take the lead to make sure that we lead what we’re calling The Authentic Enterprise: one where what the enterprise is lined up to what is says it does. If we as marketers don’t take the lead in this, it will be us as well as other organisations that suffer - there is a reason the average half-life of the Chief Marketing Officer is something around two years. As we think about Authenticity, and what it takes to build an authentic enterprise, we need to understand that many things have changed but some things have not. One of the things that has not changed, is that it is still people that buy stuff and that buying is still about people making decisions (whether you are a consumer, whether you are business to business). This is important because the core psychological principles behind the way people make decisions remain the same. We need to build belief, we need confidence, we need to be prompted to take action. Where the change to how we market comes in is when you probe a little bit deeper to understand the dynamics of how these things happen in today’s world. Let us start with the notion of belief. To come to believe something, typically we need to hear it from somebody we trust, we need to see credible evidence or we need to have experienced it for ourselves. The problem is, people don’t trust the same people they used to. People no longer trust politicians, that is well documented, but increasingly they don’t even trust scientific data. There have been too many examples of things which have been proven to be wrong or at least questionable, big stories in the press that have caused the average man or woman in the street not to trust many individual sources. In government it’s called the ‘Death of Deference’. In other

The consumer now owns your brand

FEATURE - IBM

look to the Web: According to Interbrand, IBM is currently the second most valuable brand in the world http://bit.ly/o9SpJb

Image: Kevin Bishop, IBM

photography with fabulous photographers to take it and make a great piece. Marketing is now about the health of the tree. If the tree is healthy, it will cast a strong and powerful shadow; it will therefore be easy for anyone to take a wonderful photograph, because the tree itself is a beautiful thing. This is the essence of the shift in emphasis around marketing communication, citizenship, indeed all the things that we engage with from within our profession: from manipulating the shadow (the image, the reputation, the brand), to managing the substance of the thing itself. In the words of my boss, “When a corporation and a decision-maker come together on the basis of shared purpose and values, the effect is to make the corporation a more distinct and successful enterprise and the decision-maker a more successful person and a motivated advocate”. Marketing is no longer about manipulating the shadow, it is now about the health of the tree

areas we’ve shifted to this notion of the social conscience: we would much rather trust the many people who rated the seller on eBay as a trustworthy seller than we would any particular source… certainly much more than anything the sellers might say themselves. We would much rather read the many stories that we can read from citizen journalists, rather than trust one editor of Al Jazeera or the BBC. We would much rather trust an aggregate picture of all kinds of collective input than any particular, singular point of input. Therefore the notion of having to establish trust is still true: but the mechanisms by which we establish trust (and through that, belief), the mechanisms by which we provide evidence that can be shared (and therefore establish belief), and the mechanisms by which we engage people to experience first hand something for themselves, have all shifted. So the core human psychology remains the same whether it’s the individual, the group or the crowd, but the tools that cause people to believe, gain confidence and act have shifted. This is what we need to understand as we engage in building our businesses. Not building our brands - but building our businesses.

Advocacy This brings us to the second key point I want to make tonight: the notion of advocacy. The reason that the marketing funnel is no longer appropriate is because it is no longer sufficient for somebody to desire and take action by taking your product from the shelf and putting it in their basket. Why? Because the next consumer needs to hear from their peers about what is right, what is good, what is appropriate, what they should buy. So, if the first consumer does not go beyond purchase through to active advocacy of your product, you can no longer drive growth as effectively as you could when there were only three television channels to broadcast through, only one of which took advertising; when there were only three or four newspapers, with very clear and solid loyal readership; or when there were very clear consumer advocates through individual organisations, or even collective organisations like the Which? Group. So unless we can build advocacy beyond the individual’s personal decision to buy or otherwise engage with you, we cannot operate in this new market environment that the internet has created.

Image: Kevin Bishop, IBM

The DEath of deference Abraham Lincoln said “Character is like a tree, reputation is like its shadow. The shadow is what we think of it. The tree is the real thing.” In IBM, we still have our roots in the US and so we have a special regard for the man behind this quote. But when we are talking about the authentic enterprise, we find that this quotation also works extremely well across Asia and India because of the power of the notion behind it. The shadow is what we think of it but the tree is the real thing. And so our very simple argument is that marketing is no longer about manipulating the shadow, it is not about manipulating a brand image, it is not about getting great lighting or good scaffolding or some really good

Without achieving customer advocacy, you can no longer drive growth as effectively as when there were only 3 TV channels and 3-4 newspapers

So how on earth do you do that? It’s not enough to say there’s a problem. I think you recognise the problem, certainly our colleagues in P&G, Johnson and Johnson, Apple and so forth, they all recognise the same problem. The way it manifests itself is slightly different according to the brand or the business, but the same common problem is ‘what do you do about it?’ Our view is that weight has shifted away from notions about a mission, a charter, a credo and brand attributes, to the notion of character. Any enterprise needs to have a ‘corporate character’. What do I mean by that? We’re here in Cambridge, and Cambridge University is a good example of an organisation that has a very distinctive ‘corporate character’ that it has maintained for centuries, continues to nurture and sustain, but also reinvents what that means in ways that are relevant to each new era of researchers, teachers and students. Corporate character is not about a simple set of rules or brand guidance to follow, it’s about a set of ideas that are constantly brought to life and reinvented by the participants in that enterprise. This is a difficult concept to discuss in the abstract, so I’d like to explain it a bit further in the context of IBM and our own corporate character. It is our centennial this year. We’ve been in business 100 years. We started in bacon slicers, we started in tabulating machines, we started in weighing machines, we went through the era of building punch cards and working with people like the US government to build the social security system after the Great Depression. We went through some enormous technical innovations, coming up with the notion of the first mainframe, in itself a wonderful technical achievement but one that would be of no value if it wasn’t useful for doing something. So, therefore, we worked with all kinds of people in many types of organisations to make that mainframe useful: to get cash out of the automatic teller machine; to be able to book our tickets online through the reservation systems that started with American Airlines’ Sabre System and many other wonderful examples.

From bacon slicers to the first mainframe computer So what I’m going to share with you now is our corporate character. This is not a piece of creative writing, it’s not designed to be a communication piece, nor is it written for any particular audience. It is an historical summary of who we are, and it says that we do 5 things: 1. ‘We pioneer intellectual capital that creates new value’. Whether that’s intellectual capital in the form of Nobel Prize winning scientists, intellectual capital in the form of engineers who develop and build new manufacturing techniques, or intellectual capital in the work of the sales, marketing and consultant teams that work with the client on their problems and find new ways of solving a client’s problems using our technology. Whether it’s new ways of hiring, training, recruiting, or developing employees, or new ways of running a global integrated enterprise, it’s part of the character of who we are, and has been demonstrably applied throughout our history. 2. ‘We apply science to the challenges of business and society.’ We apply science, the notion of scientific rigour; whether that is hard science, engineering science, management science, social science, it’s the notion of taking facts and evidence and learning by doing, by experience, by taking empirical evidence from each action in order to make the next step a better next step. Again, you can take that same approach and apply that to HR, finance and so forth just as much as you can apply it to engineering and consulting. 3. ‘We are global in presence, viewpoint and lasting impact’. We called our company International Business Machines back in 1924 but we had already opened offices in Brazil in 1914, just 3 years after we opened. We have been selling products in the UK since before we were even incorporated as a company. We have always been international in our presence but the point is, presence is not everything, it is not that you sell in 173 countries, it’s that you draw upon the insights and the knowledge of those countries in order to make choices that are right for your company and for the clients of your company for the long term. You cannot survive for 100 years, in fact you cannot survive for 10 years, if you don’t meet the quarterly success of your shareholders, of your investors. But you also

Image: Kevin Bishop, IBM

This is not creative writing, this is the historical summary of who IBM are

Through all these eras of technology, it was the collaboration with our clients that really distinguished our company. We did that again through the era of PCs, we did that again through the era of software, we’ve done that again through the era of services. And as we look back at this history in our centennial year, we’ve been able to write down what has been distinctive about our company because it states who we actually are, not who we say we are.

FEATURE - IBM

look to the Web: Ibm’s online archives trace the company’s origins back to the 1880s

Image: Kevin Bishop, IBM

http://bit.ly/i6wqMk

‘I am IBM, I’m an IBMer’

We collaborate, we don’t co-operate; as experts, we see the expertise of others need to actively plan for the long-term, and we do that by constantly looking to where the future issues are. What are the issues in business and society that are occupying people’s time, presence and most importantly their money? How can we bring our intelligence, reason and technology to make those things work better? 4. ‘We collaborate as experts, dedicated to the success of others’. Every word in here has meaning, we collaborate we don’t co-operate: we actively collaborate, pool knowledge and expertise. We are experts ourselves and we see the expertise of others, whether they are our clients, our business partners, or our peers in places such as this university. We are not dedicated to client satisfaction but to the success of others, including our clients’ customers and the communities in which we live and work. We work with the hospital for the benefit of the patient. We work with the education institution for the benefit of the student. We work with the retailer for the benefit of the shopper. We work with our client for the benefit of their client. 5. And in doing all this, we make the world work better. We make a positive impact through everything we do.

This set of five sentences is how we have come to articulate the essence of what our company demonstrably has been through the last 100 years. If you’ve been looking at what we do on the web, you’ll see that we’ve released 100 curated icons of progress. 100 iconic moments in IBM’s history that demonstrate how we’ve done this across different aspects of the company’s business so that it’s about every role in the company. And now we translate that character into what that means for the IBMer. And perhaps the greatest invention of our company is this notion of the IBMe: “I am IBM, I’m an IBMer.” If we as a company pioneer intellectual capital that creates new value, then we look for every employee to drive innovation in how they think and how they work. If we as a company collaborate as experts dedicated to the success of others, we expect everyone in the company to work as a strong collaborator, not as somebody who simply loosely co-operates with others, and so on through each element of our character. So now you can start to understand the notion behind my role of being in charge of a brand system and workforce enablement. My role was created some 2 years ago to take these concepts and to build them into the management structure of our company so that when you look at the processes of our company, they follow the character of the company. If IBM is about where we can apply science to the challenges of business and society, do we know what those challenges are?Taking a global viewpoint and learning from what’s been achieved already in forward-thinking places, like Stockholm, and Singapore and learning from that for the benefit of other cities in the world.

Image: Kevin Bishop, IBM

So for each one of these ideas about what the company stands for, communications. But what “Thinks and Performs like IBM” what the company does, we have the same notion expressed in the are things that are new to our job. So how can we start this and context of the IBMer. And I say IBMer because this is now about integrate all elements of what it is to look like, sound like, think an HR notion of employee: whether you’re part-time or full-time; like and perform like our institutions as a system? I offer a very whether you’re a contractor or a long-term employee, it is about simple example - an event. Here in IBM we are really interested in cities. Something like everybody that works for IBM. It’s as true for the student intern as it is for the person on a fixed contract, tied to a particular piece 1.8 billion people lived in cities back in 1980 and something like of business that we’ve won in our services business, as it is for 6.7 billion people will live in cities by 2030. It’s a huge migration of somebody who signs up for 3 years in a particular profession, as it people into cities. The way the systems of cities (water, electricity, is for somebody like me, who’s been with the company for 25 years public safety and so forth) work is of great importance to the world. and may be one of the last to end up staying with the company for So of course, we have a point of view around cities: most of their working life. This notion of what it is to be an IBMer • This starts with some lovely iconography and expressions like the phrase ‘smarter cities’, with guidance round how to use is about what it is to have a working experience at IBM, something these in traditional marketing. of lifetime value. Just as coming to a university such as Cambridge • We then have a point of view, so is of lifetime value even though you that when we organise some kind of may come here for only 3 years, do event, we consider what it is to sound your undergraduate degree and then like IBM, to sound like a company that move on. It leaves something with you collaborates with experts. We have a that has meaning. point of view, we have experts in our So, this brand and the brand system company but we don’t expect them to and workforce enablement mission that take centre-stage, we expect them to join I lead is probably best summed up by in centre-stage together with practitioners those five points that summarise our in cities; people that run major hospitals, corporate character. people that run major transport systems, Our brand strategy is very simple, to share in a true understanding of it goes with the shadow and the tree what the issues are. notion, it’s to be a great company and • We then consider what it is to therefore, a great brand. So, it is all think like IBM and to think like IBM about actually being a great company, is to collaborate. So when we run a and to be a great company is not conference around cities, it’s more like about what it is to look and sound How to build advocates at scale an academic conference with active like a great company - to have clear debate about what’s the nature of the issues and how do we brand guidelines, a clear message, a great logo, or lovely fonts. collaborate together as the eco-system to do that. IBM is the The advertising and PR teams do not report to me, they report to a convener of this community. We don’t seek to take the lead on peer. My role is about how we think and how we perform. How we the community: if we’re asked to lead we will, but if others take build and run systems that inculcate this culture into the fabric of the the lead we’re equally delighted. organisation and into the essence of the people that chose to join, that are screened for joining, that are then engaged and brought into • We act as the convener within this community because we believe that, when it comes to implementing something the company on joining - no mean task when you think how many like this, people will come to the unique expertise that we companies IBM has acquired and how many pieces of outsourcing have within our company – we will perform like IBM – so it business we have. Indeed, something like 20-25% of our workforce doesn’t matter if we lead or don’t lead because by engaging never chose to join our company: they joined through acquisition the group of people that are actually going to make a or through outsourcing, and yet we still seem to inculcate them change happen and empowering them to make the change, into this notion about what it is to be an IBMer and make that a we believe we benefit downstream. conscious choice. As we seek to put this into practice we use a simpler frame This is the notion of engaging people in a brand system – and the – one that could be applied to all enterprises. What is it to look, implications of the brand system concept are again significant: what you do in marketing has to extend well beyond our profession into what sound, think and perform like IBM? What ‘Looks and Sounds like IBM’ are things we as marketers your colleagues do elsewhere in your enterprise. They too have to be know well and are used to owning from within marketing and engaged around a common idea and it will be your role to lead that.

FEATURE - IBM

look to the Web: Ibm’s commitment to smarter water management through technology http://ibm.co/v2N4bK

Image: Kevin Bishop, IBM

But getting people through the awareness, interest, desire and action stage to buy your goods or services is no longer enough because, as we all now understand, in today’s world we need to establish advocates in the buyer’s peer group and we need to build out the number of those advocates at scale. How do you get people to believe? How do you get them to take action? And once they are taking action, how do you build sufficient confidence that the action that is being taking is meaningful and worthwhile and delivering the return somebody wants - even if this is buying washing powder and washing all the kids’ clothes that you need in your family household? It’s still the same cycle you have to go round to the point where the individual is prepared to be and actually becomes an advocate for what you do. This is where this bridge between the basic human psychology that we know that hasn’t changed and the significant shift in the way society engages and communicates that has changed because of the openness and egalitarianism of the internet, becomes important. I’m going to tell this story through an example around water and it begins with belief…

Tap water in many countries is not fit for drinking

…belief around water. Here in this hall, we’re drinking tap water and it may be that in most of our country, we believe that tap water is healthier than bottled water. There have been a number of incidents where bottled water has had problems and, since the Victorians laid the basis of our water supply and sewerage systems, we’ve been long staunch advocates for our water system being great here in the UK. But there are many countries in the world where it is very clear that people believe bottled water is healthier than tap water and - often because it actually is - their belief is true. The problem with tap water in many countries in the world is that it is not fit for use as drinking water. But the use of bottled water to combat that goes on, in turn, to create the middle problem. The experience and subsequent belief that bottled water may be bad for

we need to build the number of advocates in the buyer’s peer group the environment. It may be healthy for me but it’s creating significant environmental challenges through transport of the water, the glass, the plastic coming in and out of cities in many countries of the world. All in all, burning carbon, creating pollution, and depleting the fossil fuels are not good. But what could you do about this? Could we possibly shift to a belief that says, actually, bottled water can be good for the environment? You believe something: when you trust the person you hear it from; when you see evidence; when you experience it for yourself. So a number of water charities (and the particular example within here is an organisation called Water Equality) are building systems based on the following cycle: Every time you buy bottled water, some of the money from that goes back in to the production of clean water in other cities nearby, and, actually, it can generate funds to be good for the environment. Based on the evidence of money raised this way being spent on actual projects, they use the web and the social networks of a small group of active consumers to explain to other people what they need to do to act the same way. But action is not enough because we want people to go further and advocate, so they: reassure participants that what they are doing is right and makes a difference (through more web based examples of great projects and through face-to-face events that draw people together); take the people that are most active and put them on a pedestal; celebrate their contribution; and invite them to further events, in this case with the CEO of the organisation, congratulating people on their work ito increase their confidence. The purpose of all of this is to drive this notion of advocacy – to the point where this thing I believe in has become part of me. It’s become a part of me to the point where I wish to champion it, where I wish to share it with my friends and colleagues and I actually do. And by using digital platforms such as those shown here I make it easy for others to share. I leverage my personal network and I start to bridge between what I do in my work, what I do in my persona, my being, my beliefs. I share this with the people that I know because I care about it. By engaging with all of your stakeholders, all of your constituencies - employees, clients, partners, suppliers – you too can engage people in a system of belief, action and confidence. You can reach the point where the people in your network start to feel that what they do in your organisation is a part of their identity and they are willing to engage with their personal networks. That way

your employees (for example) do not become brand advocates: they actually become the brand - because it’s what they are, not what you have asked them to say. They’re proud of what they do, they talk about what they do because they benefit. Using IBM’s collaboration with clients as an example, our employees benefit from what we do because, as with their fellow citizens, we have better transport and less pollution in London through the congestion charging scheme because the integrated system of Transport for London is improving the situation, just as city authorities are doing in Stockholm and in Singapore and in the many different cities that we’re now engaging with to replicate the smarter cities’ experiences throughout the world. To draw my talk to a close, the point that I’ve been seeking to address is that all of our jobs need to change. That is to change in two ways: Firstly, we as marketers have to consider our role inside our company. We have always been experts in communicating what it is that we are, what we stand for, what our brand promise is, but now we have to be experts in truly collaborating with our colleagues so that all aspects of that brand promise are true, are authentic. And that isn’t just about the goods we sell. It’s about the supply chain we deliver them through, the sourcing policies we follow, the labour practices in the countries we work in and source from, i.e. all the diverse issues that our citizens and consumers care about. This notion of authenticity is key to organisational success and as marketing leaders we have to be the champions in building authenticity throughout our network. This requires intense collaboration with our peers in the boardroom and without that, our companies will not be successful. Not our brands but our company, organisation, or institution. This is what has to really change around our jobs, our role leading a collaboration of the willing across our respective enterprises. Secondly we need to look outside and work to create advocacy. Getting through the awareness, interest, desire and action phase of a buying cycle is no longer sufficient. It is no longer sufficient

Image: Kevin Bishop, IBM

Advocates bridge between their work, their personas, their beings, and their beliefs. They share something with the people they know because they care about it.

because of the way that people engage socially and are no longer deferential towards single sources of trust. It is critical that we take people beyond action and establish confidence that their actions were good, to the point where we build active advocacy amongst the many people that experience our products and the way we work. And whilst terms like the net-recommender score have been around for a long time as a better measure than client satisfaction, the notion is that advocacy extends beyond your client because it is equally about your supplier and your partner and your employee. This role I have to take the IBM brand system and engaging that through all of our workforce is a new and very different role, and very intentionally named to make us think. Many of you may know that IBM’s motto for a long time has been ‘Think’ and I hope that in my talk this evening that I’ve provoked a few thoughts with you… • Do you know who you are as an organisation? • If you do know who you are, are you ready to act like it as a whole, as a coherent unit of leaders willing to work together for the long term? • And, if you are ready to do that, are you mobilising all of the stakeholders that you need to be successful, not only for the short-term, but also for the long-term, so you have the chance to succeed, as we’ve succeeded in doing, constantly to reinvent what you deliver, your business model, your products, whilst staying true to your values, your beliefs, the meaning behind what you do and your own corporate character? After graduating from Cambridge in 1985, Kevin Bishop joined IBM as a systems engineer. Building a career in sales and marketing, he has risen to become head of the IBM brand worldwide. Kevin is also Chairman of the IBM United Kingdom Trust and Partnership Executive for all of IBM’s activities with the University of Cambridge. Outside of IBM, Kevin is a Liveryman of the Worshipful Company of Marketors, and is a regular contributor to the work of the Chartered Institute of Marketing and the Multi-Channel Marketing research group at Cranfield University. From 2004-2009 Kevin was Visiting Professor of Marketing at the University of Bedfordshire.

BONUS

The Little Book Included with your copy of Cambridge Marketing Review this month, your bonus item from CMR and Peter Fisk

Peter Fisk

enius is about thinking differently. Or as Einstein said, “Seeing what everyone can see, thinking what nobody has thought.” As marketers we recognise that we are not simply communicators of the present, but navigators to the future. Through insight, ideas and inspiration we have become the driving force of business. “Genius” marketers help their organisations look beyond today, to see the emerging opportunities, to rethink strategy and business models, to build new brands that shape markets and change rules, and engage consumers in deeper and different ways. Together, I hope that my four “Genius” books help you focus and energise your ideas, actions and impact as a marketer. Each book brings together around 50 concepts, 50 case studies and 50 practical tools to help you: • Think bigger ... having a bigger vision, looking beyond the boundaries of your current world, to understand issues better, learn from other places, explore new opportunities. We do this by thinking outside in, and future back. • Connect ideas ... creativity is about connecting the unconnected, resolving what we currently see as a paradox, using our logic (left brain) to focus, and intuition (right brain) to develop more insightful, innovative, inspired solutions. • Be bold, brave and brilliant ... nobody changed the world incrementally, by just doing safe things which have been done before. Innovation requires confidence and passion to make your bigger vision, and bigger ideas, happen with more impact. The need to think differently is driven by a changing world economic shake-up and shifting power, new technology and relentless innovation, new attitudes and priorities, new expectations and behaviors.

We now live in a VUCA world - volatile, uncertain, complex and ambiguous, but also vibrant, unreal, creative and astounding. As Picasso said “times of turbulence are the most exciting, because everything changes, and so everything is an opportunity.” So: • The shift from west to east (and north to south) is not just about finance and politics, but about ideas and talent, culture and attitudes too. Shenzen is the new Wall Street, Hyderabad the new Silicon Valley, Buenos Aires the new Milan • The shift from business to consumer (organisation to crowd), enabled by the social media means that people know more than companies can ever know, the best ideas are developed collaboratively, advocacy beats advertising, people trust people not brands. • The shift from big to small, scale to relevance, global to local, mainstream to niche, mass awareness to deeper engagement. Coke and Levis are dying brands. People are more different and discerning, they don’t want average solutions for average people. But all of that starts with you. You cannot wait for those who wrote the rules, or profit most from them, to change. You have to be the one who challenges, and helps others see the possibilities ... as Ghandi said, “Be the change.” My latest book is just out: “Creative Genius - the essential innovation guide for visionaries, border crossers and game changers.” (Wiley Capstone 2011) Find out more at Peter’s website: www.thegeniusworks.com or from peterfisk@peterfisk.com

Agency Profile: Omobono An interview with Fran Brosan, Chairman

Some of Omobono’s clients’ logos:

Relationships “Relationships drive business. We drive your relationships.” Omobono’s strapline is a point of differentiation, used to help clients understand communications from a strategic point of view. Whilst many clients have a great understanding of the relationship they want to drive, they turn to Omobono because it is not just about acquisition. For Fran, many other agencies, and perhaps the marketing industry as a whole, are obsessed with acquisition: “You shove people down the funnel, that’s your only job as a marketer. But in fact that’s only the beginning…” “It’s what happens from first contact through to purchase, repeat purchase, loyalty and advocacy. That is where the money is made and where you can make a difference between success and failure.” In Fran’s opinion, “Mostly agencies just think about building relationships to get people into the top of the funnel. But that’s just the tip of the iceberg... There are some fantastic statistics from organisations like the Harvard Business Review and Accenture that say retaining customers is much more profitable. It builds the bottom line, it builds your profit, it builds shareholder value.” Back to the lift. The name of the new agency was taken from Homobonus, the patron saint of business: Sant’Omobono in his native Italian (to this day, the staff celebrate the feast of Omobono on the 13th of November, with their recent 10th anniversary taking them to worship at the shrine of the saint in Rome). Rather than waiting on their divine benefactor to deliver them clients however, the first task was to gain work of their own. The first new business was from Liverpool Victoria. This project, to reposition With Profits policies in a more intelligible way, tested Omobono’s resolve to get to the heart of business communication. Beginning as a desire from Liverpool Victoria to tackle financial services from a language point of view – “They liked our tone of

Images: Omobono

n a lift on the way to a client meeting in 2001, a small group of agency employees made the decision to start their own company. “There comes a point when you’ve been working in another company where you start to think: what am I going to do next?” says Fran Brosan, Chairman Chris Burgess of Omobono, the Cambridge-based B2B agency. “We knew that when we worked together we came up with good solutions to client problems, so that was our basis.” Over the last 10 years this has been a core focus for the Omobono team: offering full solutions to complex client problems. This process has led the company to the top of the B2B marketing sector, where it now works with the likes of BP, Coca-Cola Enterprises, and Legal & General – a long way from the lift where it all began.

PROFILE - OMOBONO

Omobono’s current clients include, among others, bp, Business Link, Coca-cola Enterprises, Durham University, Legal & General and OCEAN SKy

It’s what happens from first contact through to purchase, repeat purchase, loyalty and advocacy. That is where you can make a difference between success and failure voice, they liked the writing” – the project developed from simply writing into creating direct marketing and other communications pieces for the company. This set Omobono into motion in the Financial Services sector, where they continue to work to this day for the likes of Axa, Legal & General and Standard Life. Omobono found itself at the heart of the Financial Services sector later in 2001, building up a rapport with the major players and establishing its reputation. A year later, the work they were doing contributed to the Sandler Review, a report to government aimed at making financial services more open and communicative. Omobono found its values at the forefront of this new movement. “At that stage,” says Fran, “there was a sort of upward wave of positivity, but of course the climate in financial services has dived in the last couple of years.” To Fran’s mind, you just need to look at the current television commercials for the major banks to see the difference: “The recent Halifax advert is about how they are open on a Saturday, and you think: what, you mean they weren’t? NatWest’s customer charter: 14 different things, about 11 of them are things where you think: I would expect that from a bank anyway.” Marketing the sector is heavily regulated, and adverts must comply with guidelines which stress the variable nature of investments, but financial services ads are no longer empowering in the “live your life to the full” way they once were, argues Fran: “These are not visions of opportunity, the communication is about ‘we’re behaving properly’ – it feels like they’re a bit embattled.”

Despite talk of TV adverts, this is not something that Omobono gets involved in, as you would expect from a B2B agency. “Maybe this is the difference between B2B and B2C (people often want to know what the difference is); I think partly it’s because a lot of B2B activity isn’t seen by the public. In fact, some of our activity is only seen by very small groups of people… sometimes we build websites that are aimed at 10 people within a big company. It’s about forging that relationship; it’s specifically developed to strengthen that relationship.” B2B is also marked by commercial confidentiality. Even very successful campaigns have to be kept secret. Digital: a means to an end 85% of the work that Omobono does is in digital. A team flexible enough to scale to most jobs, they have worked for, amongst others: Coca-Cola Enterprises, on their Europe-wide Corporate Responsibility and Sustainibility site; and Ocean Sky, the private aviation service, on their customer-facing website. Looking at Omobono’s own website you could be forgiven for thinking that web design is all they do. This is certainly not the case. As Fran admits, this digital face to the company is a conscious one: “I think agencies are always a bit schizophrenic because we know that the more focus you put in terms of how you describe yourself, the stronger the message. But we’re also always thinking ‘But if we focus on a really tight area, what happens if somebody wants us to do something else, which we can also do?’ - we might miss out on that opportunity. Agencies sometimes do not apply their

Digital has a powerful role to play in engagement

Image and Photo: Omobono

From

Omobono is seeking to use digital to change the marketing of business offerings. In the age of social media, customers can experience the brand and understand its values much more easily

Communication = subsidiary activity mainly focused on lead generation

Communication = experience of the brand

Office plants and a light and airy atmosphere bode well for creativity at Omobono’s Cambridge office

medicine to themselves.” However, the choice to focus on the digital aspect was not an arbitrary one. “Digital is a means to an end. Yes, we have pursued digital, but that’s partly because we deal with business audiences… Business audiences use computers and mobile phones, primarily, to consume information.” The digital focus was driven by a need to get the message out to audiences in the most effective way: “Given the audience that we’re targeting, the ability to deliver digitally is absolutely paramount.” As we are beginning to see, digital marketing can be seen to be helping to quantify the worth of the marketing department. Omobono does a lot of work for their clients by putting together web analytics so that they can measure the effectiveness and reach of their web advertising. “Most clients recognise that digital gives you a clarity that isn’t there with offline communications…” Fran continues, “Either sending people from a TV commercial online, or from a press ad online, or starting online, you can see what people are looking at, you can see where people are going, you can see what information they are requesting.” This is not something that agencies like Omobono have forced upon their clients however: “Clients like that visibility.” There is still a way to go with analytics, Fran believes. “It’s clear that people are still struggling to measure ROI in terms of sales or profit… It’s a constant battle for agencies because we don’t see the whole picture.” Omobono admits that working on one small part of a long customer journey can make it difficult to effectively measure the ROI of the campaign, as “there is a huge amount that can happen before you know whether they bought anything or were profitable. “People think of ROI… in a financial sense of what money did we get out of it?” continues Fran. “One of the interesting things that is happening at the moment is that people are thinking about ROI in different ways: what was the return in the sense of how did people respond/react to this? What did people do as a result of the money spent?”

The other side to financial services Having built up such a knowledge of web design and analytics, Omobono has taken these digital skills into some unexpected areas. A particularly challenging digital project was the Divorce Calculator. Fran is quick to thank the technical skills of her colleagues that allowed them to build this website, an online tool for the Money Advice Service designed to separate one set of household finances into two. “It looks simple because it’s been brilliantly designed, but technically it was quite complex… Everything that you see depends on what [figures] you’ve put in previously. Adam Hartwig, who’s our head of new media, led that project, and he’s a really clever guy who’s extremely good at what he does.” As for the limitations of what can be done online, Fran says it often comes down to the timeframe and technological situation: the state of the intranet, for example, of the client. “There’s always a way to do most things, but it’s just a question of finding a way… You can do anything if you’ve got enough money, but how do you do it to a budget?” This technical innovation is matched by a drive to win business in creative ways. There were three reasons that Omobono won the contract for the Divorce and Separation website from the Financial Services Authority. Both the first, their experience in making financial services information simple and accessible, and the second, their skill in website construction, should be apparent from their background experience. The third, however, was their partnership with the leading family law practitioners, Mills and Reeve. “We went to them and said ‘This project will need a law firm,

Omobono’s office walls reaffirm its high ambitions in marketing and design

Photos: Omobono

Omobono works under the certainty that they need to contact people and engage with them to offer them value at every stage of an often lengthy customer journey (“Business to business purchases: 18 months, easily”). This means that “each stage can be measured individually in terms of whether or not you have got people to respond in a way that will allow you to continue the conversation.” Fran believes that this is important for all projects, big or small, and perhaps more important the larger they get: “The end product might be a multi-million pound deal, but that’s going to be a very long way from the first time that they went onto a website to have a look at a particular thing because you sent them an email.”

PROFILE - OMOBONO

look to the WEB What works where in b2b? An interactive Digital Benchmarking Tool and the accompanying research

Image: Omobono

http://benchmark.omobonomarketing.com and http://omob.co/r3drlH

how to brief an agency

Omobono uses this chart to assess its clients’ stakeholder relations

why don’t we pitch collectively?’ So they went in as a joint supplier for the tender, and we won. It was just the right combination.” Fran’s ability to build a unique strategy to win business has paid off. Omobono did not pretend to know anything about the law, so they brought in an expert. This understanding of the business world is a core competency at Omobono. “At the heart of everything we do is an understanding of business and how businesses work,” Fran says. These kinds of business skills are hard earned though: “Over the last few years, we have researched the way that businesses are structured, the way their relationships are built, the way that they buy, the differences between a public sector business or a manufacturing business or a service business, the ways that you reach senior management… So we’re expert at business people and how to reach them, and what types of thing they are interested in being reached with.” By having this depth of knowledge on clients in a range of industries (not just financial services), Omobono is able to bring different things with them to each new client: “a sort of cross fertilisation of ideas.” The ebb and flow of deadlines with multiple clients bring in work at different times. “Flexibility is just how we all work,” Fran reminds me. “Something that agencies are very good at, and sometimes clients don’t quite understand, is that we all scale up or down all the time depending on the volume of work. And that’s just a way of life for an agency; you are constantly managing your resources.” Fran is similarly grounded on the position of Omobono in relation to their clients. “Agencies are a resource, and if you’re a good partner to your client you have to know the right time to just get on and deliver it well, on time, and on budget. Because that’s the most important thing that you can do for the client, rather than have big ideas that never materialise.” Chris Burgess is the editor of Cambridge Marketing Review. Email your comments to chrisb@marketingcollege.com

Our profile gives you an idea of the kind of approach that an agency like Omobono takes to the work it does for its clients. But how should you go about preparing a brief of your own for an agency? We asked Fran Brosan what she is looking for in the ideal brief: »» The ideal brief gives us a business problem, and asks us how we might use communications to solve that business problem. It’s that simple. »» The less ideal brief is when the client comes in and says, ‘I want a brochure.’ That might be the right solution, but what are you trying to achieve? »» What do you want that brochure to do for you? How will you measure whether or not it does that? Will your target audience feel that having a brochure is a worthwhile exercise, or is this just a waste of money? »» The next most helpful thing to get from the client is as many facts about the product, the proposition and the target audience as possible. »» Then our job is to try to provide some insight that says, given what you think the target audience believes about you, or your product, what can we do that is going to make them think: ‘Actually, that’s quite interesting, I want to look at that in more detail.’ »» Ultimately, a lot of what we do is making sure that potential customers of our clients spend more time considering our clients offering than that of the competition. »» That’s right from the beginning: • Do I know this brand? • Do I feel comfortable with it? • If I check them out online, what’s that web experience like? • Do I like the way that works? • Is it giving me the information I need? • If I dig deeper, are there some really solid, robust experiences and examples I can then pull out? »» All of that is a journey that the customer goes on, and our job is to make sure that every element of that journey is giving them a positive experience.

Case Study: Omobono, Ocean Sky A successful website redesign

or a business to grow, especially in the recent economic climate, it needs something to differentiate it, something which provides customers with a reason to choose it ahead of the competition. Ocean Sky has that distinguishing factor, offering a full service approach Omobono to private aviation that includes flights, brokerage, acquisitions and maintenance. The problem they had was that their services were not standing out in a competitive marketplace; their website was failing them. While Ocean Sky had already established an offline reputation as a quality private aviation provider, they needed to create an online presence reflective of the quality and breadth of their offering. Ocean Sky worked with digital communications specialists Omobono to restructure and rebuild their website in pursuit of this objective. About the client company Ocean Sky is one of the leading and fastest growing verticallyintegrated private jet companies in Europe, with headquarters in London and offices in Luton, Manchester, Prestwick, Zurich and Moscow. They offer a highly individual service covering: • Private jet charter • Maintenance and aircraft interiors • Management, sales and acquisitions • Fixed base operators With their own fleet of luxury medium, heavy and ultra-long-range private jets, they offer access to over 7,000 destinations worldwide – domestic, European and international. Strategy Based on industry and competitive research, Omobono developed a digital strategy to establish the Ocean Sky brand as a valuable business partner for customers and intermediaries. The key campaign insight was to ensure the site added value for the users rather than simply being about the brand. Given the nature of the industry, there has always been a propensity to build a collection of glossy imagery and very little substance. The website was restructured to present Ocean Sky’s services in two customer focused paths - ‘In The Air’ and ‘On The Ground’ – making it easy for customers to understand the Ocean Sky’s unique customer offering and help them find the services they need with ease. ‘In The Air’ covers all relevant aspects of planning and booking a charter flight. Designed to enhance customer experience, ‘In The Air’ includes a breakdown of fleet specifications, a flight planning tool and a dedicated area for brokers.

CASE STUDY

look to the Web: omobono’s redesign of the Ocean Sky website www.oceansky.com

The broker section features a real-time flight availability tool, which integrates Google Maps data with flight location information to improve brokering efficiency with precise, live feedback in a userfriendly application. ‘On the Ground’ covers Ocean Sky’s Aircraft Operations business including: Aircraft Handling, giving a breakdown of Ocean Sky’s Fixed Base Operations and their services, Aircraft Engineering and Interiors, and Aircraft Sales and Acquisitions. Across the site, a distinct set of creative imagery maintains the quality reputation of the brand. Copy has also been refitted, replacing jargon-heavy, industry-specific language with more concise and user-appropriate phrasing across all areas. Objectives of the campaign The objective of the project was to create a website that not only looked great and promoted the quality of Ocean Sky’s business, but also worked harder for the company and provided a range of users with the tools to better interact with the organization. Lastly the site ultimately needed to drive more business through digital channels. The target audience A wide variety of people book private air travel, so the site consequently had to accommodate a wide range of potential customers. These include people across the spectrum from personal assistants, high net worth individuals, C-Suite executives and groups looking for both value and increased flexibility by booking private air travel. Additionally brokers, a key part of the private aviation business, would need to access the site. The website therefore had to cater to an audience right across the board, providing clean and clear information that everyone could understand as well as detailed, upto-date information for appropriate users.

Photos: Ocean Sky

Media, channels and techniques One key element of the campaign was to increase traffic and, most importantly, business, meaning a focus on natural search engine optimisation was essential to increase hits. WordPress was chosen as the platform as it is naturally very powerful from an SEO standpoint; this was coupled with an innovative, engaging design and carefully written copy optimised for maximum natural search potential. The combined elements made for a highly engaging site that not only looked great, but performed excellently too, as our results show. Multiple language functionality Working in partnership with the client and translation agencies, the site content was translated into Italian, German and Russian to support the company’s international customer base. Translated content was then incorporated back into the site via a simple language management system, built by Omobono.

Results The new site has performed brilliantly from a business standpoint, when compared with the old site’s average performance: • Ocean Sky have received a 300% uplift in leads • The site’s bounce rate has dropped hugely from 55% to 30% • Average time spent on the site has doubled from 90 seconds to around three minutes • The average number of pages viewed per visitor has increased from around 2.5 to 4 • The site’s search rankings have improved dramatically, advancing to at least first page results in numerous highly competitive search terms, such as ‘Private Jet Company’ Most importantly, the site showed a dramatic increase in sales. The number of good leads received per month increased over 300% and this continues to this day. Their website is now an essential and integral part of their business strategy compared with the old site, which was seen only as an online brochure. Client testimonial Client feedback illustrates that the website has received much praise as being both visually and functionally distinguished from the rest of the industry: • “Feedback so far has been wonderful…” • “All the brokers think it is much easier to navigate, which was a primary objective.”

Ocean Sky: in the air and on the ground

This edited Case Study has been taken from Omobono’s submission to the Best Website category of the 2011 B2B Marketing Awards.

Global Social Networking Is Facebook the one-stop-shop for social network marketing?

ike it or loathe it, people globally have taken to social networking by storm. It is fast becoming an everyday mode of communication between friends, family and colleagues. Social networking has become such a phenomenon that Ben Elton wrote a novel called Blind Faith based on its Paul Woodhouse social impact, and there is even a film on the subject - The Social Network - which has won Golden Globes and Academy Awards. Social network marketing has not yet been completely embraced by marketers, especially those in small-to-medium sized businesses. Time and resource constraints have made people cautious about jumping into the complete unknown. However, as will be demonstrated, when implemented as part of an integrated marketing campaign, social network marketing has proven to be very successful. There is a plethora of social media and social networking sites and, while their key technological features are fairly consistent, the cultures that emerge around them are varied. From geographical segmentation to social interest groups, there is a site for every taste. Some sites cater to diverse audiences, while others attract people based on common language or shared racial, sexual, religious, or nationality-based identities. With so much to choose from how can we as marketers know how, and where, to start our social networking activity. Is there one site that can cater for all, one place where we can have a social networking presence that can tick all the boxes?

social network marketing must be Implemented as part of an integrated campaign What is Social Networking? Social networking websites have been defined as â&#x20AC;&#x153;web-based services that allow individuals to construct a public or semi-public profile within a bounded system, articulate a list of other users with whom they share a connection, and view and traverse their list of connections and those made by others within the system. The nature and nomenclature of these connections may vary from site to site.â&#x20AC;? (Boyd and Ellison, 2007) What makes social networking unique to marketers is that they allow individuals, and now organisations, to meet strangers and to visibly represent their own networks. The end-user is an engaged

FEATURE - SOCIAL

look to the blog: Annual Cambridge Digital Marketing COnference (2010) http://bit.ly/u3CZJ8

Word Map of Social Networks

Image: Vincenzo Cosenza (www.vincos.it)

December 2010

Facebook

VKontakte

Odnoklassniki

Draugiem

Orkut

QZone

Maktoob

Cloob

Hyves

Zing

Mixi

The most popular social networks by country according to Alexa and Google Trends for Websites traffic data as of December 2010.

participant; however, brand engagement is not often an end-user’s goal. On most of the larger social networking sites, participants are not necessarily looking to meet organisations, or even new people, but actually communicate with people they already know. Social networking is becoming a communication tool rather than a way of extending social networks. Sites like LinkedIn encourage the extension of a social network in the true sense of ‘networking’. In our own profession, we register on these sites to interact with other marketers for knowledge, ideas and even career progression. Most social networks consist of linked profiles of visible contacts, or ‘friends’, who must also be users of the same system. The visibility of a profile varies by site and according to user security settings and preferences. By default, profiles on sites such as Friendster and Tribe.net are crawled by search engines, making them visible to anyone regardless of whether or not the viewer has an account. Alternatively, LinkedIn controls what a viewer may see based on whether the user has a paid for account. Sites like MySpace allow users to choose whether they want their profile to be public or private. Facebook takes a different approach. By default, users who

are part of the same ‘network’ can view each other’s profiles, unless a user has decided to deny permission to those in their network. As mobile usage and marketing tools develop there are mobile-specific networks (for example, Dodgeball), but now most networks also support mobile interactions. Facebook, in particularly, advertises mobile usage on all smart phones and, more recently, tablets. The use of this type of website to share information, photos, videos, games, etc. is a wonderful opportunity for organisations to raise awareness of an issue, belief, product, service or event and spread it across a hugely wide network of people from different socio, economic, ethnic and geographical backgrounds. Rather than feeling dictated to, the consumer is putting more pressure on us to listen. Through social media tools we are learning how to. The Global Social Networking Landscape Many social networking websites target people from specific geographical regions or linguistic groups, although this does not always determine the site’s constituency. Social networking sites are designed to bring people together and try to offer widely accessible

FACEBOOK CURRENTLY DOMINATES THE GLOBAL MAP OF SOCIAL NETWORKING websites. Ironically, many unintentionally attract homogeneous populations, and it is not uncommon to find groups using sites to segregate themselves. This can be by nationality, age, educational level, or other factors that typically segment society. Finding a niche is an opportunity to enter the market. There are sites that have been designed with specific ethnic, religious, sexual orientation, political or other identity-driven segmentation, for example, Mumsnet. In the most extreme cases there are even sites for dogs (Dogster) and cats (Catster), although their owners must manage their profiles! The map on the previous page shows the most popular social networks by country, according to Alexa and Google Trends for Websites traffic data as of December 2010. Alexa’s traffic rankings are based on the usage patterns of Alexa Toolbar users and data collected from other, diverse sources over a rolling three month period. A site’s ranking is based on a combined measure of reach, unique to Alexa users who visit a site on any given day, page views and the total number of Alexa user URL requests for a site. Google Trends for Websites shows a graph reflecting the number of daily unique visitors. First and foremost, let us make this very clear, Facebook dominates the global map of social networking. Over 2010, Facebook continued to grow and take market share across the globe. According to Vincenzo Cosenza (vincos.it), “Zuckerberg’s creature continues to gain users around the world (almost 600 million). Since June 2010, Facebook has stolen new important nations from local, previously strong, competitors (in 115 out of 132 countries analysed it is market leader) especially in Europe, in particularly, from Iwiw in Hungary, Nasza-Klasa in Poland, Hi5 in Mongolia and from Orkut (Google) in Paraguay and India.” Facebook were reported to have prepared to enter the Korean market in the summer of 2010 with a Korean language mobile application, as smartphone technology was growing in popularity. Not just facebook Despite Facebook’s dominance, there are geographical markets that have not been infiltrated. Russia is still dominated by VKontakte. VKontakte is remarkably similar to Facebook in looks and functionality but Facebook has approximately five times as many users as its Russian rival. Despite almost colonising Europe and global dominance, Facebook just does not seem to be able to come up with a strategy that has convinced Russians

to cross over. The other site that has a presence in the lower regions of Russia is Odnoklassnikki. Translated, Odnoklassnikki means ‘classmate’ and is also popular in quite a few former Soviet Union republics, especially Azerbaijan. QQ, an instant messenger provider owned by Tencent with a social networking product known as QZone, is the leader in the highly populated nation of China. This is a terrific example of how, despite its global domination, Facebook is not necessarily going to help organisations reach every global market, or even the most registered users. Tencent reported figures of 200 million registered users of QQ in January 2009. The report stated that 150 million of these users regularly contribute to QZone. If that report was true then these numbers are highly comparable to Facebook, which had 175 million at the same point in time. If QQ or QZone decided to compete globally with an English language tool, then with its Chinese figures behind it, it could perhaps take over from Facebook in terms of registered users quite quickly, although it would have far more global markets to diversify into. December 2010 was the first time that the Vincos map did not feature Friendster since the map has been produced. This just goes to compound the failure of a site that could well have been sitting on Facebook’s throne. As an early social network, it was the one most young Americans first interacted with; now it is only really popular in the Philippines. Google’s Orkut, which failed to find significant traction in the English-speaking world, has three markets that it performs well in: Brazil with 50.60% share, followed by India (20.44%) and US (17.78%). In Arabic speaking nations, Maktoob is very popular; it is the predominant social network in Libya, Oman, Saudi Arabia and Yemen. There are several other examples of certain social networks colonising specific areas, and it is usually always down to a language barrier. It is not necessarily just a case of Facebook providing sites with differing languages that will help it compete. Locally produced social networking sites are successful in their native-language speaking countries because of the sense of local and national pride. Having said that, Twitter may have an advantage over Facebook in global appeal. The benefit of this instant-messaging, microblogging system founded in 2006 is its simplicity and the ability to communicate in your native tongue.

Google+ is not the search engine giant’s only social network: orkut is popular in INdia and Brazil

FEATURE - SOCIAL

The film The Social NeTwork (2010) details the history of Facebook, focusing on the series of court actions that have dogged its founder, Mark Zuckerberg

Second place What the Vincos map tells us is that Facebook is the strongest social networking site globally and most user’s number one choice. However, Facebook is not the only choice and is not everybody’s only network. What the map does not show us is their second or third choices. The table below is slightly more encouraging for aspiring networks and shows us as marketers that Facebook is not necessarily the only place to engage with the consumer. This table shows the rising trend in alternatives, mainly Twitter and LinkedIn. It is too early to tell if this means that Facebook will start to lose market share or not, but to assume that Facebook’s unarguable global dominance should stop us from looking at the alternatives is a mistake. Twitter and LinkedIn are showing genuine growth in high value markets such as Australia, Canada and Western Europe.

Table: Vincenzo Cosenza (www.vincos.it)

Usage Statistics According to Digital Life, the global digital consumer insights company, 46% of those surveyed use social networking daily, with 86% having used it at some point in their lives. The highest usage is in China, with 97% of people surveyed using social networking at some point and 54% every single day. This is supported by Chinese social networking site, QQ.com, being the twelfth most visited website in the world (Alexa). Globally, social media is the most popular online category when ranked by average time spent in December 2010, followed by online games and instant messaging. According to Nielsen statistics, consumers spent more than five and half hours on social networking sites in the month of December 2009, which saw an increase of 82% from December 2008 when users were spending just over three hours on social networking sites. In that same time period, global web traffic to social networking sites increased from 3 hrs 3 mins to 5 hrs 35 mins. The unique audience increased from 242,039,000 to 307,428,000 - an increase of 27%. The Digital Life survey also shows some interesting statistics regarding why users ‘befriend’ a brand. Forty per cent of respondents do so to ‘get more information about a brand’.

Top 3 Social Networking Sites by country as of December 2010 (vincos.it)

46% of people surveyed around the world by digital life use social networking every day. Social media is the most popular online activity Social Network Marketing But what can we do with this information? There are five distinct advantages to social marketing that make it a vital tool to any marketing campaign: 1. Better Targeting - Social marketing can draw a highly targeted segment of internet users to visit a business or website, increasing visibility of content on both a local and global level. Organisations benefit from being able to segment a large global audience. 2. High Return on Investment - Social marketing is one of the cheapest ways of marketing currently available, providing a high return on investment. Low investment means low risk to even the smallest business. 3. Does not require specialisation or vast technical skills - Most social networking sites are visually oriented and pretty straightforward, which means that practically anyone who understands how to use the internet can use social networking tools. 4. Works better than other online adverts campaigns - Because most internet users are bombarded with adverts every day, as a whole society has become so used to them that people are starting to become less receptive to them. Social marketing provides a personalised view point to attract potential customers to the things that interest them. 5. Increased visibility - Social marketing can help to spread information across a huge sphere of people across the globe.

Country

Social Network #1

Social Network #2

Social Network #3

Australia

Facebook

Twitter

Canada

Facebook

Twitter

France

Facebook

Skyrock

Twitter

Germany

Facebook

Xing

Twitter

Italy

Facebook

Badoo

Twitter

Russia

VKontakte

Odnoklassnikki

LiveJournal

Spain

Facebook

Tuenti

Badoo

United Kingdom

Facebook

Twitter

United States

Facebook

Myspace

Twitter

Facebook Facebook started as a juvenile prank and is now officially the most visited social networking site in the world. In January 2011 Facebook boasted the following numbers: • More than 500 million active users • 50% of active users log on to the site in any given day • The average user has 130 friends • People spend over 700 billion minutes per month on Facebook • There are over 900 million objects that people interact with (pages, groups, events and community pages) • The average user is connected to 80 community pages, groups and events • The average user creates 90 pieces of content each month • More than 30 billion pieces of content (web links, news stories, blog posts, notes, photo albums, etc.) are shared each month. • More than 70 translations are available on the site • About 70% of Facebook users are based outside of the United States • Over 300,000 users helped translate the site through the translations application • More than 2.5 million developers and partners from more than 190 countries build with Facebook Platform • People on Facebook install 20 million applications every day • Every month, more than 250 million people engage with Facebook on external websites • Since social plugins launched in April 2010, an average of 10,000 new websites integrate with Facebook every day • More than two million websites have integrated with Facebook, including over 80 of comScore’s U.S. Top 100 websites and over half of comScore’s Global Top 100 websites • There are more than 200 million active users currently accessing Facebook through their mobile devices • People that use Facebook on their mobile devices are twice as active on Facebook than non-mobile users • There are more than 200 mobile operators in 60 countries working to deploy and promote Facebook mobile products

Social Networking Communications should bring regular brand exposure to build credibility and develop long term relationships Advertising For the long term, the value for marketing on social networking sites may be simply the ability to reach niche groups via targeted advertising. Social networking sites, including Facebook, have targeted text advertising with fees in reach of small businesses. LinkedIn’s fees can be as low as a few pounds for 1,000 impressions and allow users to set a daily budget. Advertisers can choose two of seven criteria to target, including geography, industry, seniority and company size. However, though social network marketing is not a financial burden, it is resource heavy, with time being a crucial aspect to a successful campaign. Online social networks present an efficient platform for a business to use in the spread of its marketing message. In addition, it is also a great tool for getting visitors and page views to a website in vast amounts. The art of good digital marketing has always been based on a deep understanding of target customers and their behaviours. Facebook profiling within B2B or B2C campaigns allows a highly specific and targeted range of data to be integrated into advertising for maximum value from pay per click and pay per impression. An important part of any campaign is measurability, and this is no different with social networking activity. Different methods of reaching consumers can be measured in different ways: • Paid Media - these are adverts that contain creative as well as an option for users to engage with the brand by, for example, becoming a fan. • Earned media – is the term being used to describe brand mentions on Facebook that are broadcasted, or shared, by a consumer. This includes organic impressions: social stories that appear on the homepage of friends of users who have engaged with a brand or become a fan of that brand. • Social impressions – homepage adverts that include social context, like the names of users’ friends who are already fans of the brand, encouraging a user to follow. This is an example of a hybrid of both paid and earned media. From a brand perspective, a social media strategy will depend largely on the sectors that it works in. For example, brands in technology sectors will be more active in social media because they have to remain at the technological forefront in order to compete.

FEATURE - SOCIAL

look to the Web: Cambridge MArketing Review on Facebook http://www.facebook.com/CambridgeMarketingReview

Return on investment A McKinsey report into the social media and Web 2.0 activity of organisations over the past four years has provided some useful insight into the return on investment this brings. The report stated that: “Our data show that fully networked enterprises are not only more likely to be market leaders or to be gaining market share but also use management practices that lead to margins higher than those of companies using the Web in more limited ways.” “The share of companies where respondents report using Web 2.0 technologies continues to grow. Our research, for instance, shows significant increases in the percentage of companies using social networking (40 percent) and blogs (38 percent).” “And in 2010, nearly two-thirds of respondents at companies using Web 2.0 say they will increase future investments in these technologies, compared with just over half in 2009. “Market share gains reported by respondents were significantly correlated with fully networked and externally networked organisations. This, we believe, is statistically significant evidence that technology-enabled collaboration with external stakeholders helps organisations gain market share from the competition.” The report goes on to say that this success is based on the ability of organisations using Web 2.0 technologies to forge closer relationships with customers and involve them in customer support and product-development activity. It has to be emphasised, especially when organisations are using social media on a global scale, that communications to target customers through, for example Facebook, are about the development of longer term relationships and credibility. This comes from continued and regular exposure to a brand, product or service and not just the ‘click-through rate’ to a corporate website.

2010 was the turning point for social mediA Is it worth it? The exposure of advertising on Facebook is clear, but does it actually work? An online survey of Facebook and MySpace conducted for a publication titled Social Network Marketing, Engagement Marketing and Brands in 2008 suggests that it does, if not yet at a very high rate. Only 12% of Facebook respondents have added a brand as a friend to their profile; 64% of these were females. All respondents were aged between 18 and 30. The most popular industries followed are in FMCG, recruitment, media and entertainment, charities and travel. Forty-nine percent of Facebook respondents were either quite likely or very likely to promote or encourage their friends to follow a brand that they have added to their own profile. Similarly, 23% of Facebook respondents would be quite likely or very likely to become a fan of a brand if one of their friends had done so.

The future of social network marketing There is no doubt that 2010 was the year of social media. Facebook overtook Google as the website that people spend most time on, although Google still sits at number one on the Alexa Traffic Rankings, with Facebook in second place. Twitter gained immense power in circulating news and gossip. With more and more smart phones and mobile-enabled video content available, the demand for shareable content will increase. Is it a trend that will continue to flourish? Christopher Nickson of DigitalTrends.com is sitting on the fence. He states: “The economic downturn certainly won’t help any new sites get off the ground, and eventually some of us may get a bit jaded about the whole thing. Are we really networking in a social sense, or are we just hiding behind our keyboards and building lists of virtual friends rather than getting out there in the real world?” His feeling is that people will eventually get fed up with sites like Twitter detailing the excruciating minute details of everyday life, rendering it dull and boring. Google has already cut support and budget for Jaiku, a clone of Twitter purchased in 2007. However, Google has changed tack with the recent launch of Google+ which is in direct competition with Facebook. And if we take the global economic state as the only factor affecting the continued growth of social networking sites, then Twitter is in no way guaranteed to fail. In fact if some sites close and the market place become less fluctuated, this will only strengthen the position of giants, like Facebook, even further. Time will tell if the underdogs are able to compete. Paul Woodhouse is a Marketing Executive for Vetspeed Ltd. With a career spanning many sectors on both agency and client side, Paul has a passion for writing, and freelances for Cambridge Marketing College and other organisations.

REFERENCES: Alexa Traffic Rankings: Top 500 websites. http://www.alexa.com/ Bughin, J. & Chui, M. (2010) The rise of the networked enterprise: Web 2.0 finds its payday. Available from http://www. mckinseyquarterly.com/The_rise_ of_the_networked_enterprise_ Web_20_finds_its_payday_2716 Boyd, D & Ellison, N. (2007) ‘Social Network Sites: Definition, History and Scholarship’. Journal of computer mediated Communication, 13(1), article 11. Available from http://jcmc.indiana.edu/vol13/ issue1/boyd.ellison.html Chapman, T. (2008) Social Network Marketing, Engagement Marketing and Brands. Available from www.

socialnetworkmarketinguk.com/ SNMreport2008.pdf Cosenza, Vincenzo. World Map of Social Networks. Available from http://www.vincos.it/world-mapof-social-networks/ Digital Life Survey: Activating Social Media. Available from http:// discoverdigitallife.com/downloads/ pdf/ Activating_social_media.pdf Nickson, C. (2009) The History of Social Networking. Available from http://www.digitaltrends. com/features/thehistory-of-socialnetworking/ Nielsen Wire. Available from http://blog.nielsen.com/nielsenwire/ global/led-by-facebooktwitterglobal-time-spent-on-social-mediasites-up-82-year-over-year/

Improving the Supporter Experience at the RSPB A report on charity marketing

upport for charities is often very personal and emotionally driven. The ongoing relationship between the supporter and the charity is very important. This makes the consequences of getting communications wrong more severe and the potential rewards of doing it well much greater. The RSPB has Ruth Smyth existed for just over a hundred years and like many long-standing and large organisations we have grown organically over a long period and as a result, in a world of changing technology and communications, some of our processes restrict how we communicate rather than enhance it. As a large conservation charity, working on landscapescale conservation from policy development through to practical implementation, the RSPB faces two big challenges: the need to do more for nature and the environment and the challenge of increasing income to fund that. Over two-thirds of our income comes from private individuals donating regularly towards our work. Valuing these supporters and letting them know what their money goes towards is critical to retaining their support. Just over two years ago we asked ourselves how we could grow our support to help solve the problems facing nature. This question led to a project which explored classic marketing territory: how could we improve the experience of supporting the RSPB? The ultimate objective of the project was to gain more support from more people by improving the experience of interacting, donating, volunteering or campaigning with us. To meet that objective we knew we needed to improve not only our tools but also our internal processes. Untangling how we could get from our current position to our vision of being more locally and personally relevant to supporters formed the basis of the first stage of the project: a feasibility study. The Study The feasibility study ran for twelve months and was completed in spring 2011. It involved a team of five people: a mix of current RSPB staff and new employees. Achieving investment in this phase took strong leadership. Richard Spencer, who initiated the project and remains its main sponsor, describes it as â&#x20AC;&#x153;an unswerving conviction about the vision and objectivesâ&#x20AC;?. Making the feasibility study a success involved gathering information from across a large and geographically dispersed organisation, with the team talking to over 100 staff working in many locations around the UK. One area where we needed to improve was in how personal our communications were. An example of this is illustrated well by a letter from an unhappy supporter. They had written to complain

REPORT - RSPB

More than just working to protect Birds, The rspb aims to support nature and the environment in 5 main areas: Conservation, Farming, Policy Making, Reserves and Science

Our supporters rightfully expect us to get it right every time THE Results The team completed the feasibility study in April 2011 and reported their findings to the RSPB’s board. Their report outlined what we need to do to achieve our vision by making changes to our underlying technology, systems and processes. This will include investing in new tools, such as multi-channel campaign management software, but more importantly changing the underlying processes, and that will mean some big changes to how we work.

our customers, the end beneficiaries, don’t pay for the product - our supporters do It could also be argued that charities only exist because people care about the cause and so we are serving our supporters needs by delivering conservation. However, we still need to make our work tangible for supporters and build their trust in our ability to deliver: all of which require marketing techniques. Overcoming concerns about the importance of the project to the RSPB required excellent communication from the project team and engagement with staff throughout the organisation to demonstrate that the project would contribute towards the core aims of the charity. This was helped by having a cross-functional project board and a commitment to the project from the RSPB’s board of directors.

Photo: David Levenson (rspb-images.com)

Photo: Andy Hay (rspb-images.com)

about an email asking them to support an appeal they had already donated a significant sum towards. This letter pointed to one of the problems we needed to fix: the way we communicated with supporters was not joined up enough. The reason for this was that our tools and processes were inadequate in the world of multi-channel, personalised marketing communications and our supporters expected us to get it right every time. One of the principle challenges for a project like this is that, as in many commercial organisations, marketing is seen by some in a negative way: that it is used to sell people things they don’t need. This can be even more pronounced in a charity because the core aim of a charity is to further a cause, which makes securing income from supporters a means rather than an end in itself. This shifts the typical marketing model: our customers, the end beneficiaries, don’t pay for the product - our supporters do.

RSPB supporters on the 2009 Climate Change March in London, campaigning as part of the Stop Climate Chaos Coalition

Loch Garten in Speyside, Scotland, is one of 200 RSPB Reserves in the UK

The first phase of delivery has now begun and we have embarked on what is likely to be a challenging but vitally important programme of work for the charity. Richard Spencer sees the most important aspects to success as effectively managing the change within the organisation and celebrating successes as we achieve the steps along the way. This should enable the project to engage the whole organisation and maintain sufficient momentum to reach its ultimate aim: more support and money for conservation. The whole project has highlighted the strategic importance of joined-up communications and senior management commitment. One of the most important indicators that we are achieving this will be more letters from supporters: those telling us that we are doing a better job and they enjoy supporting us. As a charity marketer, receiving a letter like that is about the best feeling you can get. Ruth Smyth is Supporter Insight Manager at the RSPB. She manages a team of analysts and market researchers who try to understand the RSPB’s different audiences and share this insight to aid decision-making. Outside work Ruth is a trustee for Relate Bedfordshire & Luton and is part way through studying a Psychology degree with the Open University. She completed the CIM Diploma in 2007.

The FuTURE OF GAMBLING IS IN OUR HANDS As technical and legal barriers are removed, the mobile gambling sector is set to generate huge profits in the near future

istory has shown that gambling, in one form or another, whether sports, dice or chariot races, has been a part of nearly every culture. The iGambling sector has grown steadily and rapidly over recent years, with hundreds of betting companies being established offering different forms Daniel Cremona of online gambling. Mobile gambling has come a long way since the first mobile bet was placed way back in 2001. The mobile gambling market has grown rapidly with the huge success of technology: the iPhone, BlackBerry and other smart phones. There is a growing realisation in many governments that they can benefit more from a well-managed and regulated interactive gambling industry than from prohibition. Major countries like Spain and the UK have already regulated their online gambling industry. Italy and Germany are set to follow this trend. America will be legalizing the online industry in the very near future. With over 3 billion connected mobile phones in the world and widespread internet access, the mobile market will increase in liquidity in the coming years.

Gambling has been a part of every culture, and technology is making it increasingly visible in ours Technological Change The mobile gambling industry has considerable opportunity for growth as a result of the new technology development in the mobile device sector. With the rise of 2.5G and 3G services, and beyond, the mobile data market is rapidly overcoming the former technology constraints of low-bit data transfer. From Nielsen statistics, it can be noted that for 2009 Italy led worldwide as regards to smart phone adoption. Italy had a staggering level of 28% smartphone penetration, while Spain was not far behind with 23%. The USA was only ranked 3rd worldwide, with 17% smart phone penetration. France had the most chance for growth with a penetration level of 11%, just behind the UK, Canada and Germanyâ&#x20AC;&#x2122;s 12%, and Swedenâ&#x20AC;&#x2122;s 13%.

EMERGING THEME

AS There is no unified European law on mobile gambling, each country has different regulations; online gambling in finland is run by a Government monopoly, for example

Photo: Paulo Camera (Flickr.com)

On-the-spot gambling is now readily available when attending a Football match or the races Traditional Bookmakers like Betfred and William Hill are focusing on traditional sports but moving into the mobile gambling arena

Following the developments of these 2.5G and 3G platforms, a high level of awareness has been created amongst consumers that there are more services available on their mobile handsets, and in particular their smart phones, than just calling and texting. The latest smart phones have enhanced the mobile phone user experience by offering Java enabled graphics, high definition colour screens, touch screen interfaces, user friendly software, and 3G network connectivity that provides a great high tech feel to the consumer. 2005 saw the launch by At The Races and William Hill of the UK’s first live, daily, interactive 3G sports service on 3, the UK’s leading video mobile network. Since then, advances in 3G connectivity by mobile network operators have allowed iGambling providers to increase the level of betting, allowing a bet to be placed in real-time. Consumers, on the other hand, can experience both the betting and the live sports action on their handheld. The bookmaker Ladbrokes has been quick to seize these advances, as their 2010 press release reveals: “Ladbrokes launched the first fully functional iPhone betting application (registration and deposit included) in the app store during the World Cup and usage is soaring. The app is tailored to appeal to novice and casual betters and uses graphics and gestures that make full use of iPhone functionality.”

The proliferation of High Definition, TOuch screen, 3g devices has allowed the iGambling sector to flourish around the world

“This rapid growth has been driven by the increase in smart phone ownership enabling swift access to betting opportunities from any location. The upsurge has seen Ladbrokes break the 100,000 barrier for bets taken over mobile internet services on a single event for the first time.” Factors impacting growth Consumer behaviour • As consumers are now more aware of technology and more motivated to be the first to adopt the latest gadgets, many base their spending decisions on how their peer groups perceive their purchases. Another very important aspect is that mobile gambling opens the market for a large number of ‘amateur’ gamblers who are willing to try, but require privacy. They do not want to expose themselves by visiting the local bookie or a casino due to social pressure, but they are now free to gamble from anywhere. • There is also the Cultural Factor of how gambling is perceived, and its level of acceptance within societies in different countries. • Social Pressure - Mobile betting creates convenience: this is one of the most important advantages of technology since it allows access anywhere, anytime. This helps to enhance the social experience of gambling as it can be done whilst socialising with friends. Users can not only place bets prior to the sports event, but they may also do so throughout the race. This so called ‘on-the-spot gambling’ is much more convenient, as gamblers can remain engaged rather than having to divert their attention away from the match or event, as happened in the past. Technology • The integration of mobile billing technology has increased the options facilitating the placing of bets by end users. Consumers can use credit cards in order to retrieve money from their accounts as well as to place their bets accordingly. Such facilities are now commonplace throughout Western European countries.

•

Technology has helped towards protecting consumers and their bets through the development of antivirus software, in order to prevent hacking and fraudulent activity which can have an adverse effect on the mobile betting sector. This safety factor helps towards changing consumer behaviour, as the level of acceptance increases and users are willing to try mobile betting.

3. Psychographic segmentation - In Europe, and especially in the UK and the Scandinavian countries, betting is accepted within society. Here iGambling operators pose their offerings as something fun rather than needing to struggle to promote betting against opinion which considers it a social taboo, as is apparent elsewhere.

iGamblers’ Marketing Strategy The mobile gambling sector involves thousands of bets and transactions being placed regularly over hundreds of hours on the various betting websites. Juniper predicts that mobile traffic will double each year over the next five years. Betting operators therefore have to develop targeting plans in order to respond effectively to these changes in consumer buying behaviour, as well as to the changes caused by the increasing adoption of mobile betting in the coming years. 1. Demographic segmentation - With the largest number of mobile handsets in many markets owned by 20-35 year old males, this is the prime demographic for gambling. This group usually tends to be unmarried or marred without children, allowing for more time and disposable income with which to gamble. 2. Geographic segmentation - Betting companies need to focus on customers in particular regions. UK based betting companies like Ladbrokes and William Hill tend to focus primarily on the local market since it offers a higher degree of acceptance while keeping an eye on the global market. Betting companies coming from other parts of Northern Europe tend to give priority to attracting customers from the Scandinavian region primarily, rather than having a global approach, though this may soon change.

Future strategic options In order to improve operational activity and stay ahead of competition, many iGambling companies will need to enter into alliances. There are various reasons for strategic alliances to be formed: these include access to new markets and technologies as well as capital increase. • iGambling companies can join forces with software development companies in order to be able to develop applications which can be used by further smartphone users to grow the mobile betting sector. • Strategic alliances help towards the development of new distribution mechanisms for mobile betting operators. • The integration of lottery systems on mobile phones opens up new opportunities for gambling operators to push their products through new distribution channels. • Consolidation, on the other hand, is an option, with iGaming operators merging in order to access new markets which they did not target before, as well as to gain a dominant position in the marketplace to increase market share or liquidity.

20-35 year old males tend to have more time, and more disposable income to gamble with

Photo:Christos Georghiou/Shutterstock.com

Of course, despite the advances in smartphone technology, only electronic payment is possible

Adapting Skills for Marketing professionals In order for iGambling companies to be successful, their marketing staff will need to adapt and be educated in line with the goals for the future. The iGambling industry is very dynamic, and legislation and regulations are key factors marketers need to be familiar with in order to be effective. Companies need to have well-trained staff that are knowledgeable about all the legal issues affecting the iGambling sphere. The technical education of their staff needs to be improved so as to make sure they are well versed with the technology. Training programmes have to be developed in order to educate the staff within the organisation effectively about the process customers go through when placing a bet, in order to have a better understanding of the dynamics involved in mobile betting.

EMERGING THEME

One challenger to the established app stores is Amazon, which sells Android apps for its kindle fire tablet

Gambling operators will be moving their existing product into a new market iGaming companies have to focus their employees’ skills to a better use of web analytics. This will help them understand current and possible future trends and estimate the traffic on the website. Finally, today marketing and social media go hand in hand. Facebook, Twitter and YouTube are amongst the best known and most popular services. Marketing skills on the best use of these media have to be adopted in order to plan effectively for the future. Marketing promotions can be moved onto Facebook or Twitter; creating marketing campaigns on social media can be very effective since they have millions of users on daily basis. With the ever increasing adoption of smartphones, users can socialise on these social media platforms from wherever they are, thus increasing the exposure of the iGambling company by creating more awareness about its activities and bet offers. As users already play a number of games on social media sites, there could even be opportunities in the future for gambling from your Facebook profile.

Daniel Cremona is an experienced Account Management Executive at a leading Telecoms company in Malta. Daniel specializes in offering the optimal telecommunication solutions to the various clients he handles. He is also responsible for retaining the SME sector within the local market. Daniel completed the CIM Postgraduate Diploma in Marketing this year and will be furthering his studies by pursuing a Masters Degree in Digital Media.

iDEAS

Space for your thoughts

How is gambling perceived in the circles you move in? Have advances in technology had an impact?

Is a strategic alliance with a software development company an advantage in any other industry?

In what ways are iGambling companies utilising social media to drive increased interest in their services?

REFERENCES: BPP Professional Education, 2005. Strategic Marketing Decisions, BPP Professional Education 3rd edition N. Elkin, 2011. Smart and Getting Smarter: Key Mobile Device Trends for Marketers. Online available at: http:// www.emarketer.com/Reports/ All/Emarketer_2000763.aspx [Accessed 19 April 2011]. Dr. W. Holden. 2008. Betting on the Future. Mobile Gambling, Casino’s, Lotteries & betting 20082013 – Fifth Edition. Available at: http://www.juniperresearch. com/shop/products/whitepaper/ pdf/MGC08_Whitepaper.pdf [Accessed 20 April 2011].

C. Quick, 2009. With Smartphone Adoption on the Rise, Opportunity for Marketers is Calling. www.nielsen.com Online Mobile Blog, Available at: http://blog.nielsen.com/ nielsenwire/online_mobile/withsmartphone-adoption-on-theriseopportunity-for-marketers-iscalling/ [Accessed 17 April 2011]. C. O’Brien, 2010. World Cup 2010 sees mobile betting increase by 400% at Ladbrokes. http://www. igamingbusiness.com/content/ world-cup-2010-sees-mobilebetting-increase400-ladbrokes [Accessed 21 April 2011].

Building The Value-Based Price In the second exclusive extract from Value-Based Pricing, Harry Macdivitt and Mike Wilkinson delve into the mechanics of price-building

n the last issue of CMR, we saw that conventional pricing methods fail to take account of the value delivered by well-conceived and carefully differentiated products and services. As a result, pricing discussions between buyers and sellers tend to become adversarial. The customer Harry macdivitt perceives that the vendor expects too much payment for a product that can at best only partially address his needs. The vendor, for her part, becomes frustrated and, in order to win a deal, compromises her position by discounting. The result is a win-lose situation, the winner being the one who exercises the greatest power in Mike wilkinson the exchange. Future discussions become increasingly contentious as the previous loser tries to redress the situation. Value-based pricing (VBP), in contrast, seeks to identify and reach agreement on the benefits created by the product or service—economic and emotional. Once agreement is reached, both parties then share in the gains created by the transaction. Handled correctly, VBP leads to win-win situations and to long-term sustainable relationships based on trust. Defining VBP We suggest the following definition: A value-based price is designed and communicated such that all parties understand, recognise, and accept the distinctive worth of products and services purchased in the transaction and participate optimally in the gains created by their use. The first thing to note about this definition is that the price is specifically designed for each individual transaction based on our assessment of the critical mix of values to the customer. This mix consists of the net revenue gain to be achieved by the customer and the overall net cost reduction that he experiences as a direct result of adopting our proposed solution. This is not pricing on perceived value. We measure value as objectively as we can using, wherever possible, the customer’s own metrics. Therefore, it is pricing on objectively measurable value so far as is possible in a given situation. In constructing the value-based price, we make the fullest possible use of Value Triad thinking. Second, we should note the existence of multiple participants to the VBP transaction. The first two participants are obvious— the seller and the customer—and we shall examine these in a moment. Often there is also a third party involved, and if he is genuinely contributing to the value adding process, he is also entitled to benefit from the transaction.

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If you ask me how much something costs, I need to ask you, ‘Why do you want to know?’ Professor Emeritus Gordon Shillinglaw, Columbia Business School

The whole transaction is motivated by a desire to deliver a superior solution to a customer’s problem (or enable customers to exploit a business opportunity). This solution must be unique if the supplier is to claim and benefit from the measurable differential value. The buyer must be a winner, and her choice of solution must deliver to her real value in line with her own definition of value. Ideally, the buyer should be engaged in the co-creation of a solution that generates mutual value. VBP is not merely about delivering superior value to the customer. It is also about capturing a fair proportion of this value for ourselves. If all the value flows to the customer, there is no real point in our adopting VBP other than perhaps making the customer aware of the value that she has been enjoying and has come to expect. But then this is something our salespeople and our marketing collateral should be communicating anyway.

We need to have some skin in the game The third element of the definition relates to the customer’s understanding of the real worth of the value offered. Not every customer will acknowledge this worth. Some will seek to “rubbish” the assertions of the supplier or seek to denigrate the offer by challenging its uniqueness, performance, and so on. In such circumstances, the vendor needs to decide whether such a sale is worth the effort. He always should be prepared to walk away rather than compromise on price or yield to bullying behavior. There are, after all, other customers who will understand, acknowledge, and buy into a proposition. These value buyers are our target. For VBP to have any prospect of success, we need to deal with individuals who are willing to listen intelligently to our offer and have the vision to recognise the potential impact of this offer on their own value-adding processes. This will mean being willing on occasion to bypass procurement and go direct to the owners of the problem. The use of the word optimally is important. VBP is not just about charging higher prices, nor is it only about better profit—it is about better business. It is about being rewarded for creative thinking and innovation and delivering propositions to the right customers that generate sustainable win-win relationships. VBP is not about profit maximization at the expense of relationships, and it is certainly not about “ripping off” our customers. These attitudes merely lead to adversarial relationships in the future. As one of our clients put it, “We need to have some skin in the game.” The final part of the definition relates to products and services. In VBP, we are trying to provide customers with the best solution that we can offer them that will meet or exceed their criteria. This might, for instance, result in the creation of a bundle consisting of products, services, or both. The emphasis is on delivery of real value

that truly meets the customer’s needs and wants efficiently and costeffectively and doing so better than any other supplier to which the customer has access. Implicit within the definition is that our product or service must be clearly differentiated from those of the competition. This demands a much deeper discovery process and the collection and assessment of a lot of customer and competitor data. Since each customer is different, our products and services will offer different advantages to each depending on context. As a result, we will charge a uniquely constructed price for each deal. Even if the sum charged ends up being the same, the underlying transaction will differ from situation to situation. Comparing VBP with Conventional Methods In Chapters 3 and 4 of Value-Based Pricing we review the advantages and disadvantages of cost-based and competition-based approaches to pricing. While there are some favorable aspects to those approaches, they all suffer from serious systemic flaws. Table 1 on the next page compares conventional approaches to VBP across a number of dimensions. While VBP potentially can offer greater advantages to the user than conventional approaches, we need to use VBP carefully. It is not a panacea, and it should not be used in every situation. We certainly do not encourage rebuilding of price lists using VBP exclusively or indiscriminately. When should VBP be used? • New or enhanced products and services where these offer significant improvements in two or more areas of the Value Triad (e.g. Alathon, introduced by DuPont as an alternative to polytetrafluoroethylene) • Products incorporating novel technology that offer dramatically improved performance or significantly reduced costs in use (e.g., Dyson’s vacuum cleaner) • Products completely new to the world with no viable technology alternatives (e.g. flexible fibreoptic endoscopes) • Existing products and services being introduced into a new geography, where they represent a major improvement in performance compared with incumbent methods in that geography (e.g. mobile phones in remote areas of India or Africa) • Where other companies in an industry are already using VBP to price their products and services (e.g. accident and injury lawyers, logistics companies, and specialised consultancy services) • More complex transactions requiring a customised approach based on clear understanding of the customer’s situation and context (e.g. speciality chemicals suppliers and specialized management training) • Where we are able to meet a customer’s needs through our ability to construct a unique package of products and services, even within a highly competitive market (e.g. Virgin Mobile)

Table 1

Competition-based

Cost-based

Value-based

Focus

Competitors’ prices and specifications

Internal costs and their reduction

Delivery of measurable benefits to all parties to the relationship

Encourages

Pursuit of market share rather than profit

Formula-based approach that is applied by rote and without specific consideration

Co-operation, partnership, and deep customer knowledge

Customer Relationships

Not well developed

Central to all transactions

Reward for Innovation

Minimal or none

High and sustainable returns if innovation leads to meaningful product or service differentiation

Selling Methods

Transactional with emphasis on features and specifications

Consultative/solution-based demanding a detailed understanding of a buyer’s business context and value-adding processes

Inducement to Buy

Discounting and deals

Demonstrable economic advantages at different places in the value chain

Organisational Junior/middle management Approach with significant discretion for the salesperson

Junior/middle management with significant discretion for the salesperson

Needs to be part of a company-wide initiative to build value into all parts of the business

Ease of Calculation

Relatively quick and easy, but sometimes competitive prices are difficult to unearth, and judging the correct position may be unreliable

Quick and easy with most data More complex because it requires detailed available in house information about how the product or service affects the buyer’s value chain economically and how it affects decision-makers and users emotionally

Selling Skills

Transactional but requires reasonable knowledge of competitors’ prices and relative performance

Basic order taking and some transactional

Value Capture

Limited or none for the vendor, with the customer enjoying excessive consumer surplus

Limited or none for the vendor, Complete, or as well as our salespeople can with the customer enjoying negotiate based on an analysis of the clients valueexcessive consumer surplus adding processes and how we can enhance them

Demands the highest level of development of selling skills, and negotiation skills of a very high order, possibly leveraged by a team approach

Table 1: Comparison of Conventional and VBP Methods

Where the customer is conditioned through custom or usage to expect high performance at unrealistically low prices, re-education will be necessary. In some cases, this will be impossible, especially if the buyer is a price buyer and rejects or ignores all our efforts to demonstrate value. This is a very difficult challenge. It requires the buyer to acknowledge the value we bring, perhaps for the first time, within a context in which the buyer has previously possessed and has been willing to wield significant buying power. If the buyer seeks to dominate the relationship and is willing to apply raw buying power, there is virtually no scope for a VBP deal unless the problem owners can be engaged instead. Where the buyer is intransigent, the best approach is either to walk away or to recognise that VBP is not an option. In this case, the final price should be as close as possible to the highest price the customer is prepared to pay, and the product or service should be configured in such a way that the buyer receives only what she pays for.

Curiously, exactly the opposite seems to be happening in one industry. For as long as the profession has been in existence, it seems, lawyers have been charging by the hour for their services. Dissatisfaction with this approach to billing has been growing for many years because corporate clients find it difficult to correlate huge fees with measurable value. Recession has brought this to a head. Clients are now demanding clear demonstration of value and are requesting alternative billing arrangements. According to an executive from Crowell and Moring, a well-known international law firm: We align incentives with clients, a clear-cut shift from pricing hourly billing inputs. We no longer consider these arrangements as alternatives but as our primary fee arrangements. It gives us an advantage in the credit crunch and has led to a substantial increase in work.

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look to the web: Download the EPA’s Profile of the Plastic Resins and Man-Made fibres industry http://1.usa.gov/tvZTw4

Building a Value-Based Price The Value Triad© is used to analyse the real value that we offer to our clients. This may be related to reducing customers’ costs, to increasing a customer’s productivity, to reducing her “hassle,” or to improving her peace of mind. The first two elements of the Triad - revenue gains (RGs) and cost reductions (CRs) -generally are relatively easy to quantify. It is somewhat more difficult to put a rigorous economic value on emotional contribution (EC) - and even more difficult to defend it on objective evidence. Typical Business-to-Business (B2B) Example A company manufactures specialised adhesives (resins) for use in the automobile industry. Resins are used in gluing bodywork components during assembly. This adhesive is more durable than and more than twice as strong as competitive materials, which make it a very attractive alternative to competitors’ materials. The adhesive itself can be used effectively at a wider range of temperatures than competitive products. The resin is free of formaldehyde, which is toxic and unpleasant to work with, and has a much lower content of organic solvents, which are common resin components. These properties give rise to advantages both to the company incorporating these adhesives in its products and to its customers. Table 2 provides a Value Triad analysis of this situation. From the point of view of the end user, the properties of the new adhesive enable him to use the vehicle in more extreme environmental conditions, but most important, “things don’t fall off,” necessitating an inconvenient and time-consuming visit to the workshop. Better adhesive properties may even eliminate catastrophic failures at speed.

Table 2

RGs

CRs

Longer lasting, more durable joints

Fewer injuries, better productivity

Reduced warranty claims

Reduced hassle

Low volatile organic compound (VOC)/ toxic emissions

Lower absenteeism through workplace allergyrelated sickness

Fewer claims, avoidance of HSE investigation

Wider range of operating temperatures

More choice of geographical markets with extremes of temperature

Greater flexibility in mananufacturing process design

Peace of mind for managers

Table 2: Value Triad Analysis (from Vehicle Builder’s Perspective)

The Role of Pricing within the Marketing Mix Most managers are familiar with the concept of the marketing mix. This is a set of tools marketers use to generate customer demand at the time of the transaction (e.g. the “four Ps”—product, place, promotion, and price) or to build a strong customer relationship (e.g. the “seven Ps”—i.e. the four P’s plus people, process, and physical evidence). The mistake that is often made is to decide on the price upfront and then shoehorn the other mix elements to fit.

Price is the last part of the mix to consider This thinking is completely the wrong way around. We cannot possibly start to think about price until we are clear in our minds about the proposition we are offering to the customer; and we cannot be clear on that if we have not properly thought through our solution, the logistics of delivery, and how we will communicate the whole package. Price is the last part of the mix that we should consider. To do so, we need to know: • The nature of the product or service required to resolve the customer’s problem • What it costs us to deliver it • The economic, strategic, or emotional benefits satisfactory delivery of a product or service creates for the customer Until we know these things, we are not in any position to calculate the customer’s total cost of ownership or assess the benefits she gains and how price fits into this. Price is often the first element of the mix to be considered, and this then dictates everything else. The thinking is generally much less than rigorous. When the mix is assembled in this way, selection of the product or service element is based on cost rather than on delivery of real value. The Building Blocks of VBP In building up a value-based price, we focus entirely on the value our products and services offer to customers compared with some reference (usually a product or service that they are currently using or would choose if our solution were not available). The building blocks of a value-based price (Figure1) include: • The price of a reference product or service (RP) • The quantified net gains in revenue relative to the reference (net revenue gains, or NRG) • The quantified net reductions in cost relative to the reference (net cost reduction, or NCR) • Emotional contribution (EC), for example, greater peace of mind, risk reduction, reduced “hassle” and inconvenience, and so on Although difficult to quantify objectively, these factors can be immensely influential in the buying decision.

The formula for calculating a value-based price is: RP + NRG + NCR + EC = Maximum value-based price. Net Revenue Gain

Net Cost Reduction

Emotional Contribution

Maximum Value-Based Price

We need to know a lot about our customers’ businesses to be able to assess how our product or service enhances revenue streams or helps to eliminate costs. Once we have captured this information and we are able to justify our calculations, it becomes easier to construct a target value-based price. Unless the customer fully accepts and buys into our estimates, we are certain to be challenged on our calculations. In making this kind of calculation, we need to use the customer’s own data as far as we possibly can. If such data are unavailable, perhaps because the client declines to provide them, we should use authoritative third-party sources. We use our own estimates only if there are no viable alternatives. If the customer then challenges our figures, we can at least ask him what figures he considers to be appropriate. Let us now examine these building blocks a little more closely. Reference Price The price of the reference product is an essential component of the calculation. This is the price that the customer would pay for a product or service which he perceives to be similar to the one that we are offering—his reference product. If our product offers no added value compared with the reference product, then there is Figure 1: Building blocks of VBP.

Cost Reduction

Reference Price

Revenue Gain

Value Based Price

Emotional Contribution Added Value

Reference Price

neither revenue gain nor cost reduction, and VBP is not a realistic pricing option. Figure 1 shows how a value-based price is built up from these building blocks. The reference price is the price that the customer expects to pay (and is conditioned to pay) based on the price he paid on the last occasion he was in the market for a purchase of this nature. Industry practice may vary. For instance, the total price to the customer may include a bundled price consisting of the capital cost of the asset and the costs a variety of accessories and components. Alternatively, the price may be broken down to show itemised price elements. In calculating our offer, and when we are attempting to estimate NCR and NRG, we need to know and understand, as clearly as possible, the details of any competing offer so that we are genuinely comparing our offer with the customer’s real alternative. This means collecting sound factual information about the probable invoice price that the customer is likely to pay. In some cases, this information is readily available—the customer even may volunteer it, or it may be available with a little digging in public-domain sources, through competitive intelligence, from other customers, and from the competitor’s own marketing communications. Customers may not be willing to share this information with us and may expect us instead to make an offer based on our understanding of their situation. This is perfectly reasonable. However, it places us under greater pressure to think through our proposition fully and to identify where we think our proposition differs (positively or negatively) from other offers the customer may be considering. In many cases, it will be quite straightforward to identify a realistic reference price. In two particular scenarios, however, establishing a reference price is rather more difficult—the completely new product and the very large, very infrequent purchase.

CUSTOMER VALUE

completely novel, The first fibre optic endoscope was developed in the early 1950s by the renowned british physicist, Harold Hopkins.

If our product is new to the market - perhaps even new to the world - there will be no real reference for us to use. In this case, the reference price will be based on an analysis of how the customer is currently solving the problem or dealing with the situation. This makes matters very difficult for the buyer because he does not have a realistic benchmark against which to compare our offer. Such measures may be manual in nature, and the customer does not in fact perceive any problem. There are many examples of products or services that offer step changes in performance or are even completely new to the world. Typical examples of such innovations include the flexible fiber optic endoscope (for medical and industrial inspection or diagnosis), the smart phone, and the fax machine. Customers who more readily recognise the benefits of an innovative solution are those for whom existing approaches are inadequate or unsatisfactory. These customers have the greatest compelling need. They seek new approaches to solving problems that demand performance levels as yet unachievable by conventional methods.

Very large-scale valuepricing projects pose different problems Customers with highest-priority needs consist of those charged personally with solving some challenging business problem. These individuals have a compelling need and potentially will pay a price that is much greater than that other individuals elsewhere in the market would contemplate for an effective solution. The initial value proposition for these users recognises this need, and prices are set in a manner that might seem high to the early majority and perhaps even insane to laggards and late majority customers. If we can demonstrate that our offer can solve an otherwise intractable problem, we have a bridgehead into the market, and a new market may emerge as new users appear and new applications are developed. Very large-scale value-pricing projects pose different problems. In such cases, the reference price is considerably more difficult to assess accurately. Some of the complicating factors we have encountered in consulting practice include the following. Scale of the Project Very large-scale capital projects are almost impossible to compare item by item, and any attempt to equate two even contemporary projects is fraught with difficulty. Therefore, reaching agreement on an appropriate reference price is a negotiation process in its own right. Historical Prices Purchases made many years ago will be based on different costs and quite different commercial contexts than today’s purchases. It may be possible to apply some scaling factor such as the producer price index in an attempt to create comparable figures.

Current-Market-Context Factors These also have a bearing, for example, the degree to which competitors’ resources are committed and, as a result, whether there is a temporary surplus of demand over supply. In this case, the reference price will need to be updated to reflect the price that a competitor would quote today in order to make this new business attractive. Fairness Technology almost certainly will have moved on in all but the most conservative of industries. This means that today’s costs are likely to be very different (lower) in the event of technology change. Allocating a very high reference price based on elderly and outdated technology practices will be unfair and invalid. Such prices also may be anti-competitive. Net Revenue Gain (NRG) The NRG is the aggregate of all incremental revenues that result from use of our product or service compared with the reference product. We should note here that we need to calculate net revenue gain. It is conceivable that in order to access greater revenue, we may need to change processes, procedures, or approaches. These actions may create a temporary reduction in revenue. If the change is truly beneficial to our customer’s business, this reduction will be minimal and transitory. For instance, introducing highly automated machines to replace manually operated equipment will involve closing down current operations, preparing the site for new equipment, staff training, and potentially writing off old plant with temporary loss of production and revenue. Such costs may be very substantial, and we look at these under net cost reduction. Revenues are also reduced as a result of the changes, but we are betting that the new machines will pay for all of this in due course through higher output and more predictable quality. Net Cost Reduction (NCR) NCR is the aggregate of all avoided fund outflows from the customer as a result of employing a product or service in her business. We need to measure net cost reduction. Not every element of a product or service will lead directly to a cost reduction. In order to access the overall cost reduction, the user may need to make additional investments to enable the full cost reductions to be realised, for example, when introducing new equipment (as in the preceding example) or when investing in new accounting software. This requires customers to move from an Excel-based approach, which their business may have been implementing successfully for many years, to a more sophisticated system. To access the full benefits of the new package, they need to change accounting procedures, train staff, procure consultancy to implement the system, accept an initially higher level of errors, and troubleshoot until the system is fully operational. There are significant upfront costs that, one hopes, the downstream cost reductions achieved will more than pay for. In understanding the economic impact of our products and services, we need to think through these issues fully.

In building a value-based price for the customer, we need to pinpoint the key costs and pain factors that exist, demonstrate how these can be managed, and quantify the savings. Emotional Contribution (EC) EC is inherently difficult to quantify objectively. While it may be possible to assert a particular economic worth to a given EC element, this must be a reasonable and believable figure. EC elements are particularly useful when used in face-to-face selling and the negotiation stages of a transaction. The Negotiation Corridor In VBP, there is often an element of negotiation (Figure 2). This comes about because the reference price, in the customer’s mind, is much lower than the value-based price the seller offers her. This gap must be bridged, and it is bridged by the ability of the seller to convince the buyer of the economic attractiveness of the value-based offer. Unless there are compelling overriding reasons (e.g. urgency, managerial stress levels, political expediency, etc.), it is unlikely that the seller will achieve the maximum value-based price. In fact, the rational buyer would never accept this price, barring overarching EC elements, because the maximum valuebased price is an indifference price—that is, there is no economic advantage to the buyer in making this choice. In fact, when we factor in the time value of money, the maximum value-based price is in fact less attractive than the reference price. The final negotiated price will lie somewhere in the corridor between the reference price and maximum value-based price. How high will depend on the strength of the arguments and the seller’s advocacy skills, on the one hand, and the buyer’s budget,

MAXIMUM VBP

Negotiation Corridor

REFERENCE PRICE Figure 2: The Negotiation Corridor

Pricing is an emotive topic: we should expect some push back her determination to achieve the best deal she can for her company, and her ability to use her sources of information as a counter to the seller’s arguments, on the other. If the seller consistently fails to achieve a price higher than the reference price, then something has gone seriously wrong. Either the seller does not have the skills, or the relevant facts (and this is his employer’s failing) or the product genuinely does not offer any advantage. Price negotiations have a tendency to polarise positions and points of view and to become contentious. Pricing is an emotive topic, and we should perhaps expect some push back. If we could avoid or reduce the need for negotiation, this would pay benefits in terms of reduced hassle and conflict between the parties and help us to achieve the win-win outcome everyone hopes for. This can be accomplished at least in a few cases where there is complete openness and cooperation between buyer and seller in reaching agreement on the work to be done and how the downstream benefits will be shared. The VBP Worksheet The VBP worksheet enables us to capture all the relevant data to calculate a value-based price. It is the basis for a checklist to be used in client discussions (Table 3). There are a number of important points to highlight. Scenario This is the basis on which we estimate the total value delivered to the customer. It might be the total life of the product in normal use or a year of experience in delivering a service. We select the scenario that enables us to calculate our value-based price objectively and believably, remembering that we need to be able to use it to persuade our customer of the validity of our case. The scenario must be one with which she can identify. Quantified Value Triad Elements We must try to capture these elements as comprehensively as we can because we shall be building up our price using these ideas. It is possible that our solution will have some disadvantages over that of the competition. We need to identify these and make a realistic calculation of their impact on the overall argument. If our solution has too many disadvantages compared with the reference product, VBP may not be the best option, and we should use an alternative pricing method— there is no differential advantage. Comments Use this section to record how we reached the numbers in the worksheet— it is easy to forget—and to make necessary reference to original third-party sources of information. Also, we should

CUSTOMER VALUE

look to the blog: The difference between an ipad and a tin of tomatoes http://bit.ly/rHcgTe

Product/service

Comments

Scenario

Select this carefully— could be useful life, a year, or some other unit that makes sense in the context

Customer/client

Name of client and of contact person

Date

Date on which calculations were made

Value Triad elements

Comments

Emotional contribution

Add up cash value of all intangibles if calculable. In practice, quantifying these is difficult or impossible, but we should capture them on this worksheet because they can be powerful persuaders in face-to-face negotiations.

Total emotional contribution (EC)

Comments

Add: Revenue gains

Readily measured gains such as increased revenue, improved yield, etc.

Less: Revenue losses

Productivity losses from implementing our solution (e.g., cannibalisation, scrapping of stock).

Net revenue gains (NRG)

Net cash value of all benefits in the scenario

Add: Cost reductions

Ways in which our solution increases our customers’ costs. These need to be quantified objectively and ideally independently.

Less: Cost increases

Ways in which our solution reduces our customers’ costs. These need to be quantified objectively and ideally independently.

Net cost reductions (NCR)

Net cash value of all cost savings

Total added value

EC + NRG + NCR

Unit reference price

Price of reference product, which could be a competitive item or a previous version of our product.

Maximum economic price

RP + EC + NRG + NCR

Minimum economic price

RP or cost based or competition-based price

Target price

Negotiable Table 3:Generic VBP Worksheet

not forget to make a note of the various EC items. These can be overlooked easily or even forgotten in the course of negotiation, and we would lose a potential advantage. Maximum Economic Price The maximum economic price is the maximum price we can justify on objective data. In reality, the customer may well be prepared to pay more because of the EC elements, but we cannot justify this on numbers alone. In a B2B situation, the decision maker may have to answer to others inside his organisation for his selection - so we need to give him some powerful arguments. Minimum Economic Price The minimum economic price may be one of several things - the current (or time-adjusted) reference price of a competitor (which may be zero if the method is manual or very basic), our price to the customer for a previous product, or even the full-cost recovery price for our product. It does not need to be any of these. We can simply say that “x is what we want to achieve as a minimum for this sale.” Whatever we choose, it must be a realistic reference price to the customer and an absolute negotiation backstop.

Our Solutions For each row of the table, identify our solutions, along with the economic advantages and disadvantages associated with it. We must categorise these comprehensively. If we miss something significant, especially if doing so works to our advantage, this certainly will be picked up and challenged by the customer and may erode the credibility not only of our argument but also of our whole solution.

Harry Macdivitt is a specialist in Value-Based Pricing. Initially trained as a chemist, Harry spent a number of years in research before embarking on a career in business, and now delivers consultancy events for global companies. Mike Wilkinson works with organisations to maximise the effectiveness of their sales efforts. He has developed Play2Win© to aid the management of major sales opportunities, and Home Run!© to structure the approach to the consultative sale. Harry and Mike are co-directors of Axia Value Solutions, and co-authors of The Challenge of Value. Value-Based Pricing will be available from Amazon in November 2011.

BY Don Moyer

echnology has helped to solve countless business problems, so it’s tempting to view it as a cure-all. But that kind of thinking can lead to trouble. As H. L. Mencken wrote, “There is always an easy solution to every human problem - neat, plausible, and wrong.” Businesses often pursue technology solutions for the wrong reasons. As Andrew McAfee points out in “Mastering the Three Worlds of Information Technology” (HBR November 2006), companies even “invest in a technology because everyone else in the industry has purchased it or because it comes with glowing recommendations from consultants, analysts, and journalists.” He casts this practice as an outside-in approach to problem solving: “Executives describe a technology that’s available in the outside

world and propose that it should be brought into the company. No one stops to think about whether the organisation actually needs the capabilities that the technology offers.” McAfee calls instead for an inside-out approach whereby leaders first scrutinise the needs and capabilities of the business in order to clarify a vision for it. The specific technologies required, if any, will then come into focus.

Don Moyer has collected his series of cartoons as a book, entitled 64 Drawings. It is available from Blurb at www.blurb.com/bookstore/detail/949041

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IT’S ALL HYPE ISN’T IT? Ever noticed how suddenly everyone seems to be talking about the ‘latest thing’?

hether it be Twitter, cloud computing or the tablet PC, we’re led to believe that the world has fundamentally changed and we’d better get in on the act or be labeled a neoTerry Nicklin Luddite. Office chatter and social small talk revolve around the latest news of yet more impressive claims for some piece of technology. Then, some time later, we find perhaps from personal experience, that much of the breathless enthusiasm was mis-placed; the claims made for the new technology were somewhat overblown or ‘hyped’ (from hyperbole).

Remember sony and digital Audio tape? It may not matter much in the big scheme of things if we find we’ve wasted a few hours on a now defunct social media platform, or a few pounds on a consumer gadget now made useless as standards move on. (I’m still smarting from forking out for an ‘HD-ready’ TV set which turned out not to be ready at all for the new standard which promptly emerged.) But how do corporations - considering major investments in new systems, and looking five or ten years out for their expected returns – distinguish between the many pretenders, and reduce the odds when they place their bets hoping to identify the eventual winners? Careers and even companies frequently hit trouble when attempting to guess the direction technology will take. Remember Sony and digital audio tape (DAT)? In 1995, an analyst at Gartner, the global technology consulting group, attempted to provide a tool to help when she drew the first ‘hype cycle’. Jackie Fenn created a diagram, much like the one shown here, to map out various technologies and to characterize them according to how visible they were based on media interest, how ready they were for commercial adoption and how long this process would take. At this point, students of marketing will declare that we already have such a tool: the product life cycle (plc). Of course this conceptual device has its uses, but attempt to draw the plc for life assurance or the Rubik’s Cube and you’ll soon see that the idealized introduction / growth / maturity / decline curve simply doesn’t fit with reality in many cases. By sticking with technologies and applications, and in a 21st century context, the hype cycle might have more of a fit with what we actually observe. So what is the hype cycle?

HYPE CYCLE

look to the blog: Hype revealed (2010) - did it match reality? http://bit.ly/vVWqGP

As the diagram shows, there are five stages to the classic hype cycle. 1. The “Technology Trigger” occurs when the breakthrough first becomes known through a scientific discovery or other event that generates significant media interest. ‘Proof of concept’ demonstrators may be shown and speculation is rife over how consumers and society is poised to benefit. Companies are formed to exploit the innovation and vie for venture funding with promises of potential disruptive impact. 2. The “Peak of Inflated Expectations” comes next as publicity feeds on itself and the claims made for the technology get ever more expansive, resulting in unrealistic expectations. Development is expected to take place almost immediately and consumer expectations on pricing may be unrealistic. 3. Many technologies then fall into the “Trough of Disillusionment”

as the early promise is evidently unfulfilled. This may be due to early commercial products failing to live up to the promises, or suffering some other unacceptable characteristics. The media loses interest and so does the majority of the public. 4. Eventually, a “Slope of Enlightenment” is seen, where realistic applications of the technology are found, and the more visionary companies who have continued to experiment begin to benefit. Methodologies are developed to utilize the new system and the supply chain infrastructure begins to emerge. 5. Ultimately, a “Plateau of Productivity” is reached, where the benefits become more widely known and accepted. The next generations of the technology appear and the extent of the true market potential (perhaps in unforeseen applications) becomes apparent.

The Gartner hype cycle

Image: Wikimedia Commons

2. peak of inflated expectations Others take an interest

visibility

First media attention

Negative media attention Most refined versions of the product available

5. Plateau of productivity

20-30% of potential audience is a user

Early adopters take an interest

4. Slope of enlightenment

<5% of potential audience is a user Early versions of the product available

More refined versions of the product available

3. trough of disillusionment

1. Technology trigger

Time 45

OLED had passed the peak of inflated expectations So the Hype Cycle actually fitted our experience very well, and I suspect you’ll readily be able to map out the state of the market in your chosen sector to illustrate those technologies and applications which are regarded as upcoming, which have peaked and which are awaiting their renaissance as realistic, productivity-enhancing tools delivering real benefits. In 2010 for example, it seemed that Twitter was the social and business tool we had needed all along without realizing it. At last we could keep in touch with each other all the time on all matters - no matter how small (read trivial). “Do you tweet?” had become the dinner party ice-breaker of choice, and Twitter must have been near the Peak. In 2011, where would you put Twitter? Maybe on the slippery down slope since it seems that three-quarters of those currently trying it don’t go back. At some stage when the hype has died down, perhaps microblogging will see mainstream adoption,

OLED technology is used to make the displays for smartphones and some flatscreen tvs

Scientists developing lasers in the ‘60s could not have dreamed of their use in checkout scanners or dvd players and perhaps for an as yet unknown purpose. Those scientists developing lasers in the 1960s could not have dreamed that the most successful uses of their brainchild forty years later would be the supermarket checkout scanner and the DVD player! The Hype Cycle is not without its critics. Some say it’s not a cycle (but then neither is the product life cycle). More seriously, the axes have no formal scales, so the positioning of any points is ultimately subjective. Although the curve suggests that all technologies eventually reach the plateau of productivity this is clearly not the case, and a comparison of say the 2006 and 2010 charts would show that many technologies disappear altogether (at least from Gartner’s perspective) and are replaced by new ones. Despite these concerns, sixteen years after its creation, the Gartner Hype Cycle is still going strong, with the annual updates keenly anticipated. The classic hype cycle chart covers general emerging technologies, but now many versions of the hype cycle exist, covering more specialised aspects of technology such as: supply chain, mobile telephony, power and cooling and so on. Try typing ‘hype cycle’ into Google Images to see more examples than you could possibly need. Want to know more? You could do no better than to pick up a copy of “Mastering the Hype Cycle: How to Adopt the Right Innovation at the Right Time” written in 2008 by Jackie Fenn and colleague Mark Raskino (pub. Harvard Business Press). Before you buy that new TV, or tell your boss that you’ve discovered the key to increased future profits, you might just want to check out the latest hype cycle. Terry has over twenty-five years’ experience in marketing and sales, having worked at Marketing Director and Head of Marketing level in engineering, technology and professional services companies. Terry now runs Keynote PR, specialising in PR and communications for a variety of clients. He is Chairman of the CIM Cambridge Branch and Course Director for the CAM Programmes at CMC.

Further reading: http://www.gartner.com/ technology/home.jsp http://blogs.gartner.com/ hypecyclebook/

Jackie Fenn, Senior Analyst at Gartner explaining the technology hype cycle to the FT: http://video. ft.com/v/671553200001/HypeCycle-for-emerging-technologies

Photo: LGEPR (Flickr.com)

Several years ago, as Marketing Director for Cambridge Display Technology (CDT), I found myself in an uncomfortable position as the OLED technology that CDT was developing had undoubtedly gone past the Peak of Inflated Expectations. From the Technology Trigger ten years earlier, CDT had won all the awards, hit the front covers, and the general perception of the layman (if they had heard of OLEDs) was that roll-up, disposable display screens were just around the corner. A week did not pass without an ‘inventor’ somewhere asking us to fund their great new idea for incorporating full colour displays into everything from cereal packets to beds. One less well informed American journalist, on learning that the ‘O’ stood for ‘organic’ excitedly asked if we would soon be seeing TV screens made from vegetables! As it turned out, it would take a decade or so longer before OLED technology was mature enough to match the incumbent (and improving) LCD alternative and reach the Plateau of Productivity in the form of startlingly clear displays for smart phones and the latest ultra-slim televisions.

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do we need a box out of which to think? The analytical tools of marketing

ne of my favourite books is a rather dog-eared hardback published in the 1960s called Marketing Models (Day, 1964). It is in fact a collection of academic journal articles that I picked up in a secondhand bookshop for a pound or two. What fascinates me about this book is the relentless ROger Palmer efforts that academics at that time made in order to demonstrate a causal link between marketing actions and consumer responses: for example, the expenditure on advertising and response in terms of sales, or preferences for various brands of toothpaste moderated by shelf position. In the age of consumerism, this is reminiscent of a simpler time when the purpose of industry was to produce goods, and the role of consumers was to buy them. Demand at that time was unscathed by oil price shocks, oversupply, choice of products, consumerism, or ethical concerns for food quality, animal welfare and environmental impact. Of course, the Internet with its almost instant and cost-free access to information was then nothing more than a discussion document in the US Department of Defense. This article discusses marketing decisions and, more particularly, the tools by which information is organised and analysed in order to arrive at better decisions. In fact, information can be thought of as the raw material for marketing. The better the quality of the information that inputs to the decision, the higher the likelihood of making better decisions. Information as the raw material for marketing It was around this time that Professor Philip Kotler first published his book Marketing Management (1967), which has subsequently run to many additions. The Economist says of this book: “It applied rigorous analysis and mathematical methodology to the practice of marketing, something that had never been done before” (after Hindle, 2008). So here we see the genesis of the idea that information and analysis is the input to marketing decisions. This post-war period was a fascinating time in the development of not just marketing but wider management thinking, with numerous ideas and concepts contributing to the tools for organising information that we still continue to use today. The early work of the Chicago school of economists was based around developing a perspective on business strategy that linked to the work of Michael Porter (1980) in terms of the “structure-conductperformance paradigm” (SCPP). In other words, the structure of an industry is driven by the decisions that are made about strategy (conduct) which in turn drives performance. The more successful companies acquiring their weaker brethren, in turn changing the structure of the industry as it drives toward maturity. The SCPP showed how the life cycle analogy can be usefully applied to help us understand the emergence, development and ultimate decline of industries, as seen in the work of Katherine Harrigan (1980).

VIEWS - ANALYTICS

The Chicago school of economics advocates neoclassical price theory, economic liberalism and free markets

Figure 1: Analytical tools of marketing (Palmer, Cockton & Cooper, 2007:41)

Diffusion of Innovation 3% Innovators

13%

34%

Early Adopters

Early MAJORITY

LATE MAJORITY

16% LAGGARDS

Experience Curve

Product Life Cycle Introduction

Growth

Maturity

COst per unit

Decline

Time

HIGH

Boston Consulting Market Group Matrix Growth Rate

Low

Mooo

Woof

cash cow

dog

HIGH

Relative Market Share

Market Attractiveness (McKinsey) Matrix Existing Markets

Segment 4 Segment 3

Segment 5

New

Market Attractivness

Segment 2 Segment 1

Segment 6

Low

ansoff Matrix Existing

100%

Diagram: Roger Palmer

question mark or problem child

Star

PRoducts

Market Penetration Strategy

Product Development Strategy

Market Development Strategy

Diversification Strategy

New

0% 100%

Competitive Strength

0% Figure 1 illustrates diagrammatically the relationship between various of the well-known marketing analysis and strategy formulation tools. Here we can see that over time the varying different attitudes of market entrants determines the rate at which innovation is diffused into the marketplace; cumulatively these aggregate to form the product life cycle.

The life cycle itself has of course become ubiquitous as a tool for marketing. Typically this is referred to as the ‘product’ life cycle, but of course the concept is originally a biological one which can be applied in many different contexts – not least to ourselves. This is usually used by marketers with respect to products, but also, as discussed, in the context of an industry. This illustrates an important point, we should be clear about precisely what it is we are analysing. This is often referred to as the unit of analysis. One well-known marketing academic, whose blushes will be spared in this article, demonstrated in a book he published that he had confused the unit of analysis between the product and a brand. To explain: though Apple is a remarkably successful brand in the consumer electronics market, even they have had the occasional disappointing product. Simple errors like this can lead to inappropriate decision-making.

In 1962, a little earlier than Kotler’s milestone text, Everett Rogers published Diffusion of Innovations. The book starts with a tale about a remote Peruvian village suffering a series of health problems due to the consumption of contaminated water. To our eyes the obvious solution is to boil water to make it safe to drink. Yet in this village despite a sustained education programme the idea had still not caught on. The diffusion of innovation concept identifies that there are a number of different attitudes to innovation that significantly affect the rate of adoption of new ideas. One of the great contributions that this book lead to, and one that is clearly stated by Rogers, is that marketing takes place within a social system and over time. The mechanistic approach of my Marketing Models text looks only at the hard data and attempts to draw statistical relationships, ignoring the complexity of attitudes, opinions and emotions that drive insight into individual behaviour and create so much opportunity for marketers.

Essentially this suggests that costs can reduce as output increases due to learning effects: increases in efficiency and other economies of scale. He combined this idea with the product life cycle to produce the ‘Boston box,’ otherwise known as the growth-share matrix. Harking back to the SCPP mentioned earlier, underpinning this is the idea that market share is a key tool for competition. Our ability to drive our market share means that we have both lower costs and higher revenues from the market. Difficult to construct in practice (see for example McDonald, 2002), I have rarely seen either managers or students present a data driven model, yet the catchily named problem children, stars, cash cows, and dogs, and their associated strategy prescriptions, had immense appeal. In fact, this led to what has been referred to as the ‘matrix wars’ of the 1970s, as management consulting firms rushed to develop their own versions of matrix tools. Pre-eminent amongst these is the McKinsey matrix, developed in conjunction with GE in the US and Shell in Europe. It has a different twist on the original Boston box, comprising a 3x3 matrix with multifactorial scales representing market attractiveness and competitive strength. Typically, in compiling such a matrix a series of factors are selected and then weighted and ranked to give an overall score. The unit of analysis can vary but would typically be with respect to our product versus that of a competitor, or as in the diagram the attraction of various segments with each pie and slice representing the size and our share of that segment. Finally the analysis of information made possible by these various management tools leads to strategy formulation. The Ansoff matrix was developed by Igor Ansoff whose early insights were coloured by the complexities of managing within the Lockheed Corporation, before he moved into the academic world and gained renown as one of the founders of modern strategic thinking (Ansoff, 1965). The tool that bears his name assists in developing strategic options and considering the risks and return associated with them.

Analytical tools for marketing strategy and implementation Figure 1 illustrates diagrammatically the relationship between various of the well-known marketing analysis and strategy formulation tools. Here we can see that over time the varying different attitudes of market entrants determines the rate at which innovation is diffused into the marketplace; cumulatively these aggregate to form the product life cycle. Numerous and indeed exhaustive studies have been conducted in order to determine if it is possible to use the life cycle as a predictive tool (Rink & Swan, 1979), but unfortunately the golden egg of predictability is not laid by this PLC goose. The value of a theory is the degree to which it can be used to predict future actions, and the PLC concept does not fulfil this requirement. During the late 60s and early 70s Bruce Henderson, the founder of the Boston Consulting Group, developed the idea of the experience effect and applied it in the context of business strategy.

Information and decisions These tools are widely represented in textbooks and taught on qualification programmes; they are accepted as part of the way that we understand marketing. But we should question whether these things are quite so straightforward. Can the complexities of products, markets and customers be reduced to such simplicity and expressed in one of four or more boxes with a label attached and presumption of the ensuing strategy (invest in stars, shoot dogs etc)? It is even suggested that these tools are taught so widely in universities and colleges because they are simple and easy to teach! Perhaps they constrain our thinking and prevent us from seeing what is really happening in markets? There is also an implicit assumption that better analysis leads to better decisions and that this rational/logical process is appropriate. Some leading management thinkers strongly argue against this perspective (see http://www.mintzberg.org/ for example), with analysis paralysis being the result of this approach, and suggest that strategy just happens,

Marketing Alchemy!

VIEWS - ANALYTICS

look to the blog: Michael Porter Rear-View vision? http://bit.ly/s9yl0d

or rather is ‘emergent’. Indeed there is some evidence that suggests that following the prescriptive and simplistic strategies suggested by matrix tools can lead to inappropriate decisions (Armstrong & Brodie, 1994). There is also an implicit assumption of objectivity with such tools which is perhaps why they appeal to managers seeking simplicity and objectivity in a complex and ambiguous world. When calculating the scores for the McKinsey matrix these can result in figures to several decimal places. Such precision can imply accuracy and satisfy the need many managers have for the spurious objectivity of numbers rather than apparently less trustworthy opinions. When considering the McKinsey matrix who is it that decides what factors constitute ‘business strengths’? Who then decides the ratings and rankings that apply to the various scores? If we leave such decisions to managers responsible for protecting their department and their jobs we should perhaps not be surprised at the outcomes. Their ratings may mean that their products appear in the top left hand corner whilst competitors appear in the bottom right hand corner, thereby justifying the commitment or investment that they are requesting. A cynical perspective? I remember a consulting assignment with a major company I was working with. Sitting at the boardroom table, the person next to me (who was shortly to present) was busily amending their Powerpoint presentation and Boston matrix in order that the horizontal line representing market growth rate was adjusted. This meant that their product range appeared in the ‘star’ box rather than the ‘cash cow’ box. A simple adjustment to the vertical scale produced the required change – marketing alchemy! Perhaps the most dramatic change that we have seen from the 60s/70s to today is the very marked difference in the business environment. Economies of scale are much more relevant in a manufacturing context, yet in developed economies manufacturing may be no more than 15% of gross domestic product. So in a service driven economy, gaining market share is not necessarily the predictor of profitability that it once was - or may indeed be irrelevant. In addition, many businesses and industries are now approaching or are in the mature stage, with ever more aggressive customers and prices driven relentlessly lower. In these circumstances it is perhaps more appropriate to think of share of customer spend and the capabilities of individual businesses rather than the nature of forces driving industries. The competencies and capabilities argument suggests that the ability to compete is driven not so much by ‘know what’ as ‘know how’. We need to focus on the increasingly powerful tools that are the intangibles of an organisation: its understanding of processes, and its ability to build relationships, partnerships and networks. This will gain us a unique insight and understanding of current and future customer needs, and of the organisation’s reputation and brands. The focus of attention has moved from products and markets to value and customers. Products are simply the means whereby we

convey value to customers; if we can understand how our products and services are used to create value then that is the key that enables us to capture more of that value. When visiting companies, I often ask them how much detail they have about product profitability and costs. The answer can be summed up in one word: lots. I then ask a further question predicated with a statement: It is not products that produce profits, but rather it is customers, so what can you tell me about customer profitability and costs? This question is usually followed by a painful silence. The insight here is that our original toolbox of ideas and concepts are still relevant. We still need to be able to analyse products and markets and to express these in meaningful ways that convey insight and understanding. However this needs to be supplemented with a clear strategic view of our business model and how this can be managed and resourced with appropriate information. Kaplan and Norton, who developed the concept of the balanced scorecard, argue that metrics are simply the output of the strategy of the firm, and that the measures captured in the balanced scorecard are dependent upon the strategy. Similarly it can be argued that strategy is informed by our understanding of the complexities of the business environment and market places in which we work. Are we boxed in? Thinking outside the box? Or perhaps we are questioning the value of the box altogether as we seek greater insight and intuitive understanding. We should relate our information needs to our strategy options and business model, and avoid making strategic decisions based on limited or narrow understanding. Professor Roger Palmer is Dean of the Business School at Bournemouth University. Following extensive industrial experience he joined Cranfield School of Management, and was Head of the School of Management and Professor of Marketing & Management at Henley Business School. His research is in the area of strategy and value management

References Ansoff, H.I. (1965). Corporate Strategy. Harmondsworth:Penguin Armstrong, J. S., Brodie, R. J. (1994). Effects of portfolio planning methods on decision-making: experimental results. International Journal of Research in Marketing, 11, 1, 73-84 Day, R. (1964). Marketing models – quantitative and behavioural. Scranton PA: International Textbook Company Harrigan, K.R. (1980). Strategies For Declining Businesses. Lexington:Lexington Books Hindle, T. (2008). Guide to management ideas and gurus. London: Economist Books Kaplan, R., Norton, D. (2008).

Mastering the management system. Harvard Business Review, January, 78 – 93. McDonald, M. (2002) Marketing plans – how to prepare them how to use them. Oxford: ButterworthHeinemann Palmer, R, Cockton, J. and Cooper, G. (2007) Managing marketing – marketing success through good management practice. Oxford: Butterworth-Heinemann Porter, M.E. (1980). Competitive Strategy. New York:The Free Press Rink, D.R., Swan J.E. (1979). Product Life Cycle Research: A Literature Review, Journal of Business Research, 78 (September), 219-242. Rogers, E.M. (1982). Diffusion of Innovation. New York:The Free Press

The Tablet: The future has arrived

he world is changing again. Most major recessions involve a paradigm shift, a fundamental change in the way industry or society operates. In the last edition of CMR Paul Fifield highlighted the idea of Long Wave theory as proposed by Kondratieff and, whilst for most commentators the Charles Nixon world is going through a major recessionary period, no thought seems to be being given to whether there is an underlying fundamental change taking place. The last great recession, often referred to in the light of the current one, is that of the 1930s. The Great Depression saw a period of global turbulence and financial crisis but many commentators also noted the impact of electrification on mass production: a change that impacted in mass unemployment. Well, I would like to hypothesise that today we are at the start of a major change in the way we operate, and that is the Dawn of the Tablet Age. Whilst there is a lot of talk about cloud computing it is actually the rise of Smart Mobile Devices that will change the way we operate. And I say operate, rather than work, because the tablet will also blur the distinction between office and home. The phenomenon has only really been felt since the launch of the iPad in 2010, though the term Tablet PC was first coined in 2001 by Microsoft. There are now over 100 models on the market. Some of the most influential releases include: • iPad - April 2010 • Android (various) - Mid 2010 • BlackBerry Playbook - April 2011 • Kindle Fire - October 2011 • Aakash Tablet - October 2011

The Dawn of the Tablet Age Background Firstly and briefly, how did we get here and why is it so powerful a trend? The origins can be found in two routes - Computing and Telephony. As computers evolved from Mainframes and Bureau systems, through Minis to PCs, the impact was profound. Yet not as much as the impact of telephony. There are around 6.9 billion people on the planet, and since the advent of the PC in 1981 there have been over 1 billion PCs in use. On the other hand, the telephone evolved from the fixed line, to analogue mobile, to the digital handset of today and in the 20 years since the first digital mobiles arrived we have reached a point where there are now 4.5 billion in place. In the 1990s most people were introduced to computing via the desktop PC; in the 2010s most will be introduced via the mobile device.

VIEWS - THE TABLET

look to the blog: Try MArketing Apps (2009) http://bit.ly/sePeak

Why are they so encompassing? Because they are powerful in processing terms, mobile, always on, quicker and easier to operate, and reach to the heart of what users want. Indeed, a recent report (Kids Industries 2011, quoted Financial Times 15/10/11) suggested that whilst only 9% of pre-school children could tie a shoelace, 20% could operate an app on a smart phone.

creative wave of destruction There are currently around 0.5 billion smartphones in the world and by end of 2012 most new sales of phones will be smartphones. In addition to this there is the noticeable trend of households abandoning their landline telephone and using the mobile for all main communications. By 2015 it is likely that most mobile phones in use will be smart. As Smart phone usage increases, so does the use of the parallel device: the tablet. In 2011 tablets took only 5% of PC unit sales (IC Insights 2011); by 2014 this is estimated to rise to 24%. Gartner say that media tablet sales will continue to experience strong growth through 2015 when sales are forecast to reach 326.3 million units. (PC Report July 2011) But how are tablets used? A general analysis suggests that 45% of users use them for work,94% for email and 69% for reading newspapers. In addition 33% have paid for 20-50 Apps. This brings us to apps Launched in 2008 with 500 apps, there are now more than 350,000 free and paid for apps for the iPad alone. In the first nine months 1 billion were downloaded, rising to 5 billion by June 2010 and 10 billion by January 2011. On top of this are the Android App Market and Blackberry Apps World.

• 50,000 NFC readers in the uk (as of 2011) • 1 million E-transactions made in the UK in 2010 • 50m Android Phones in 2011 with ‘E-wallet’ technology • Mobile Transaction will Equal $245bn in 2014 • 42% of Smart phone users want to pay via their phone NFC Contactless payment statistics (Intelligent Environment)

So what is the Impact on the Marketing Mix? The interesting aspect of this technological “creative wave of destruction” (J. Schumpeter) is that it affects every aspect of the marketing mix. As such the constant use of the term ‘Mobile Marketing’ gives scant coverage to the full impact of the change. Leaving aside Promotion via the tablet the impact on the rest of the mix is profound. Product - on the Tablet Can you digitise your product? This has had a profound effect on the music and film industries, is effecting a dramatic change on the publishing arena and is not just confined to services and knowledge industries (the advent of 3D printing allows local manufacture on demand). It is also beginning to impact on the education and travel sectors. Distribution - via the Tablet The App Store allows ubiquitous delivery of every app to every user. (The only restriction is bandwidth). A truly envious position for a supplier in any other sector. Price - purchase via the tablet The Smart Device, through its connectivity, allows for instant payment and consumption of the services/app. In addition, it is possible that the device may replace the standard debit card in the near future in the physical payment scenario with ‘E-Wallet’ technology. Finally the Tablet/Smart Device links consumption with comment via connection to the world of Social Media. From a speech originally given in July 2011 to the International Marketing Management Conference in Tehran.

45% use tablets for work; business apps are plentiful in the iTunes App Store

Charles has many years of marketing experience, from government relations, through market research to marketing communications and strategy. He gained this experience working for Arthur Andersen, Mercury Communications, Extel Financial and Touche Remnant. Charles is Chairman and a founding director of Cambridge Marketing Colleges. He is President of the CIM Cambridgeshire Branch.

Most popular Marketing eBooks ON Amazon. co.uk Last issue, we listed the top 5 marketing books sold by Amazon. This issue, to support the dawn of the tablet age (p52), here are the 5 most popular sales and marketing eBooks for Kindle on Amazon UK: 1. The New Relationship Marketing By Mari Smith 2. Persuasion Skills Blackbook: Practical NLP Language patterns for Getting the Response You Want. By Rintu Basu 3. Nudge: Improving Decisions About Health, Wealth, and Happiness By Cass R. Sunstein and Richard H. Thaler 4. Write to Sell: The Ultimate Guide to Great Copywriting By Andy Maslen 5. Pitch Anything: An innovative method for Presenting, Persuading and Winning the Deal By Oren Klaff • Correct as of October 2011

This year’s Thinkers 50 Since 2001 the Thinkers50 has been a biannual ranking of the brightest business minds of our times; it is the definitive list of world’s top 50 business thinkers. At the time of writing the shortlist has been drawn up, but as you are reading this, the results will have been unveiled at the Thinkers50 London Summit taking place on the 14th November.

Intellectually Curious Fresh ideas to expand your knowledge

Get the Scoop Avoiding writer’s block is vital to retain momentum when blogging, tweeting and publishing relevant and informed content online. Writing for your followers and customers is straightforward in the early months after you first commit to doing it regularly but then the challenges begin as you feel you have said it all before, run out of new ideas or simply experience a lack of time. The ability to ‘curate’ new content from others as well as your own words is key to a new online publishing and sharing service called Scoop.it that seeks to address these challenges. Whilst still in beta testing Scoop.it provides the opportunity to own and curate a topic of interest using articles published by others as well as linking in with what you post to your own blog, Twitter and Facebook. In a Twitter-style feed of new content and articles you can keep track of what others The awards celebrate ideas, and look for people who challenge and increase the understanding of all areas of business, or have the potential to change the world. The list itself is announced at the summit, alongside the winners of the various awards. These include the awards for the Breakthough Idea, Leadership, Strategy and Innovation. The 50 thinkers are evaluated against 10 criteria:

are writing and when you see an article that’s relevant and interesting for your topic you simply Scoop.it and it appears in your online publication. Remembering to add your own blogs and postings is key to optimising the value you’ll see from the service as you position yourself or your organisation as current, relevant and informed in your chosen topic.

www.scoop.it/t/digitalmarketing-social-networking is a great example of Scoop.it in action focusing on the topic of digital marketing and social networking. As Scoop.it moves beyond its current beta testing to a full launch the rush for claiming of new topics will increase and so early adoption is advisable. Visit www.scoop.it for more details. - Neil Wilkins

Write and collect content to curate your Scoop.it page

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Originality of ideas Practicality of ideas Presentation style Written communication Loyalty of followers Business sense International outlook Rigour of research Impact of ideas The ‘elusive guru factor’ Some of the big names shortlisted this year include: Vijay Govindarajan for his $300 House design concept, Michael Porter of five forces

fame, and 2007 & 2009 winner C. K. Prahalad. The Thinkers50 is owned and developed by Des Dearlove and Stuart Crainer, adjunct professors at IE Business School. Previous top thinkers include Michael Porter in 2005 and Peter Drucker in 2001 and 2003. Find out more at www.thinkers50.com and read the full shortlists at www.thinkers50.com/ downloads/T50_Shortlists.pdf

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