Marketing Decisions

The blog of LHL Partners, LLC. The blogger is (often) Rick Lightburn, Chief Knowledge Officer of LHL Partners, with his observations about marketing. Our main page is at http://www.lhlpartners.com

Saturday, December 29, 2007

Belgian Monks

An amusing, but misleading, story about beer made by Trappist monks in Belgium is making the rounds: I even heard it about it at a recent cocktail party. Here's a blog that attempts to draw some marketing lessons from it:What Belgian Monks Can Teach You About Marketing.
That blog item concludes that "Depending on the scope of your product or service, restricted availability might actually improve your image and your bottom line."

It's misleading because while Belgian Monks might not be trying to maximize their profits, your boss almost certainly is and your task as a marketer is to help make that happen. If there's a shortage of product, then it's basic Econ 101 to show that either production is too small, or the price is too low, for profits to be maximized.

If you take your lessons in marketing from Belgian monks, then your boss has every reason to make your career as short as possible.

Wednesday, November 28, 2007

Communications and Product Development

An interesting item was published in the Small Agency Diary on AdAge.com that argues that "creative development" (i.e., communications development) isn't the same as "product development."
Why Your Agency Shouldn't Do Product Development - Advertising Age - Small Agency Diary
The author (Marc Brownstein) argues quite sensibly that advertising agencies are in a very different business than new product development. Ad agencies should focus on what their core competency is, and that is working with the intangible. Yes, product development shouldn't be left to the engineers, and should have a customer focus, and should have full participation from the marketing discipline. So there's a temptation for ad agencies, who like to be partners to their marketing clients, to get into that business.
But there's a further reason for agencies not getting into the product development business. Advertising agencies are unreceptive, if not downright hostile, to the idea of process. Many agencies approach creative development as a series of "one-offs," and don't try to improve, much less regularize, the way that they develop creative. Accordingly, they just don't process, and they can't get process and just don't do process.
While this hostility may be justifiable with regard to creative development (and I don't think it is,) it almost certainly is NOT justifiable with regard to new product development: the importance of having a new product process has been shown time and again (although no one process has emerged as dominant.)
So it would be an exceptional advertising agency that had any competence at new product development.

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Monday, November 12, 2007

The Product Space

There's a very interesting research article in the July 27 issue of Science (Vol. 317. no. 5837, pp. 482 - 487; fulltext not available online, abtract here) written by one professor from the physics department at Notre Dame University and three International Development professors from the Kennedy School of Government called The Product Space Conditions the Development of Nations, which caught my eye because of this graphic. (It's a very large PDF file, but it's very cool.)

It's unusual that physics or international economics professors would write something of interest to marketing analysts and the biweekly publication from the American Association for the Advancement of Science is not something that you keep up with (and may not even be aware of). But innovative ideas for a field usually come from outside, so I usually look afield. The article's abstract was enough to catch my eye:
Economies grow by upgrading the products they produce and export. The technology, capital, institutions and skills needed to make newer products are more easily adapted from some products than from others. Here, we study this network of related products, or "product space," finding that more-sophisticated products are located in a densely connected core whereas less-sophisticated producted occupy a less-connected periphery. Empirically, countries move through the product space by developing goods close to those they currently produce. Most countries can reach the core only by traversing empirically infrequent distances, which may help explain why poor countries have trouble developing more competitive exports and fail to converge to the income levels of rich countries.
In my mind, I read this as:
Businesses grow by upgrading the products they produce and sell. The technology, capital, and skills needed to make new products are more easily adapted from some products than from others. This leads us to the study of "product space"which is a conceptualization of the similarity of product categories as distances: the closer two products are to each other, the more easily the necessary skills are transferred from one to the other. Countries with an expertise in a centrally located category in this product space can move to another more easily than those who are not.

What this could mean for firms is that firms whose expertise is in a centrally located area are more likely to grow than others, or at least able to grow at lower cost than others. It would be interesting to see if the "Product Space" for firms within a national economy is anything like the "Product Space" for different national economies.

(Some of the ideas in this paper seem to be presaged by, if not more simply explained, by the work of urban theorist Jane Jacobs and import replacement, as discussed in her The Economy of Cities and her Cities and the Wealth of Nations.

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Monday, October 22, 2007

AT&T Rebranding Effort

In today's (October 22) Ad Age, there's a front-page story with the headline AT&T Rebranding Effort 'a Failure of Epic Proportions'? It features a lot of typical advertising agency myopia about branding, and is therefore rather silly.

The history is that AT&T, by acquiring Bell South, owned all of Cingular, which previously had been a joint venture. Faced with the prospect of either supporting the Cingular brand name along side of the AT&T brand name (and introducing that brand name into international markets) or converting the Cingular brand into the AT&T brand.

Since the Cingular brand had been well supported and well recognized, this conversion was decried by some. The Ad Age story cited above is one instance: one research vendor, who tracks consumers' awareness and attitude towards the brands of "12,000 companies," described the conversion as a "failure of epic proportions."

Most brands exist to generate awareness and liking for the products and companies that bear those brands. Most brand gurus seem to think that because brands can create value (in some categories), the creation of brands with high awareness and likability is the objective of all marketing. It isn't: the objective of marketing is sales. In many instances--but not all--the challenge of generating sales requires a brand with high awareness and likability. When sales challenges are not addressed by increased awareness and likability, then branding isn't important.

This is AT&T's situation right now. For AT&T to increase sales, it needs to focus on other things, such as reliability, coverage, and technical capabilities. Branding isn't going to help here.

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Monday, October 08, 2007

CRM Growth

An interesting article in destinationCRM of September 26 that while the survey firm AMR Research forecasts a substantial 16% growth in spending on CRM systems in 2008, 29%0 of companies surveyed report at least a glitch in CRM implementation, and fully 25% of all the licenses for CRM software go unused.
So there's a lot of wasted effort in CRM, even if there's growth in spending. (Smells like an opportunity to me!)

How come there's such waste?

The article only hints at that. Apparently that wasn't in the objectives of the study. But the director of the study at AMR Research make a few observations. The Information Technology departments of many organizations are primarily developing CRM deployments, but the priorities for CRM adoption are unlike many previous successful projects. The priorities in CRM successes are usability, easy reporting, analytics, and integration with desktop productivity tools. Sales and marketing departments will go off and use something else if it's easier. So while CRM deployments might develop CRM programs, they don't really control CRM programs.

This is aggravated by the availability of "software-as-a-service" among CRM programs. Some CRM systems can be completely 'housed' outside the organization, and developed and controlled outside of the organization's IT department.

Perhaps some sales and marketing departments can only poorly articulate what they need out a CRM system, leaving IT departments holding the bag with licenses for software that once seemed might work, but didn't in the longer term. Sales and marketing departments might have evolving, different or even conflicting requirements, which a fixed CRM deployment might not meet.

There remains big challenges in CRM adoption.

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Monday, October 01, 2007

Exit Engagement

An item in today's Advertising Age tells of Joe Plummer's exit as the Advertising Research Foundation's Chief Research Officer. Plummer was a big (if not the biggest) advocate of the concept of "engagement" and had led a long and large effort to find some universal metric for it.

"Engagement" was a big buzzword, as the article notes, back in 2006, and it was only a buzzword in my opinion, empty of any meaning, which is why the definition of any advertising industry-wide metric eluded Plummer and the ARF.

To find any metric one must consider the process one want to measure. Are there any universal cross-advertising processes? Well, there's exposure to the ad, and there's attending to the ad. Exposure is pretty easy to measure, and in addition doesn't depend on the advertisement's content. Attention is rather harder to measure, and certainly seems to be dependent on the content of the ad. But what process was supposed to be captured by the concept of engagement? Something like the response of the customer exposed to the ad. Was this response just clicking on a web ad, or going to the store and putting down money? And engagement was supposed to be independent of content, and specific only to the medium.

Beyond exposure, different ads work (when they work) in different ways, with different processes. The metric that works for one process may not work for another. The search for a universal "engagement" metric is futile. I hope it's over.

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Brand Building on the Web

A recent Forrester Research report on Brand Building on the Web gets the key point of branding right.
To convince consumers that their offerings are worth the prices they command, sellers of high-consideration products and services need Web sites that do two things: 1) communicate value in an emotionally engaging way, and 2) deliver value by offering useful, usable content and function.

The point of building a brand (or even having a brand) is to increase sales through increased sales effectiveness.

For high end products (like luxury automobiles), this turns into the two objectives listed in Forrester's summary: communicate value and deliver added value. These objectives aren't right because they somehow feel right, they're right because the obstacle to increased sales for nearly all products is customer trust, and the customer's trust can be created by branding.

There's value in Forrester's report for Brand Building off the web, too. The role of branding is the same on and off the web. After all, brands exist in the customer's mind.

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Wednesday, July 12, 2006

Brand Building

I received an invitation to a course led by a big-name marketing professor on "Building a Brand," with topics to include, according to the invitation,
- How important is branding?
- How do you develop a brand concept?
- How do you promote a brand?
- What makes a strong brand?
- When do you stretch a brand?
- How do you revitalize a brand?
- How do you rationalize your product line?
- How do you assess brand performance?
- What are the most frequent causes of brand failure?

It's missing the most important question: Why build a brand? I don't mean this question as rhetorical. It's an important question.
A brand is only a tool. The purpose of an organization isn't to build a brand; a brand is only a tool for achieving some other ends--a brand may be a really good way of reaching those other ends, or even the only way of achieving those ends, but it shouldn't be confused with those ends.
While "building a brand" may provide a common point of reference for the organization, it can't substitute for articulating a common sense of purpose.

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