Interview with Joe Bush from The Chat Shop

Having already interviewed Denys Zhadanov from Readdle, I (Josh) am lucky enough to ‘chat’ (sorry for the terrible, terrible pun) with another young entrepreneur and marketer.  Joe Bush is a founder of The Chat Shop, an agency working to optimize online behavior, offering consulting, implementation and managed services, with a focus on the live chat space. Clients include Mercedes-Benz, Wasteland-Ski and The British Film Institute. If you ever browse a website and have an opportunity to chat with an online assistant, this is what The Chat Shop facilitates.   Here is what we talked about:

Josh:  What are the key benefits to your clients of using The Chat Shop’s services?

Joe:  The first step when we work with a new client is to get to understand their current business and their future plans from both an internal perspective and a customer viewpoint. We utilize a range of tools and methodologies (many of which are proprietary to The Chat Shop) to do this, with the findings being fed into our strategy. As a result of this, each client is different but the benefits they receive tend to fit into one or more of the following categories:

1.      Conversion Optimization
2.      Customer Service
3.      Basket Abandonment
4.      Average Order Value
5.      Lead Generation / Lead Qualification
6.      Customer Experience
7.      Insight

Across our clients, the average increase in conversion/lead generation through chat is 20% – delivering a favorable return on investment. Interestingly, when we first started the business we underestimated the level of insight and understanding generated through chat – this is actively fed back to clients. Analytics and data can tell you what is happening but chat allows you to understand why.

Figure 1 An example of our live chat on a mobile device

Josh: Business-to-business marketing often involves quite traditional, non-digital marketing tactics, while tech start-ups are almost exclusively using internet marketing to promote their businesses.  As The Chat Shop is both offering a business service and is a tech start-up, what do your promotional activities currently look like?

Joe: We’ve used in the past, a wide range of channels to market the business: content marketing, whitepapers, infographics, social media, email, search engine optimization, partnerships, networking events, exhibitions… etc. Gaining a client is a long process, and is often about being there at the right time. I am very keen on meeting prospects face to face, and so exhibitions and events are perfect. This will always be backed up by a strong digital presence.

Josh: Wow!  That’s a huge amount of different promotions you are doing.  There is an old adage in marketing that goes ‘Half of my marketing budget is wasted, but I don’t know which’.  Do you agree with this?

Joe: Definitely!  It is very difficult to identify touch points when you are doing multi-channel marketing.  You can identify the last touch point that sends a client towards us – such as a blog post for example – but never the whole path of touch points.  Sometimes we gain new clients from just good search engine optimization, other times it is a much longer process for them to move from awareness to action.

Chat Shop

Josh: There are some people that believe monitoring consumer activity on websites is violation of privacy and is unethical, what are your views on this?

Joe: We would never ever want to be intrusive.  This is why the structure of our chat software has been designed from the ground-up to fit seamlessly with our client’s websites: it is easily minimized and our chat agents are trained to only initiate conversations at just the right moments.  We are also fully compliant with all the necessary regulations, including the Data Protection Act and ISO 9001.

Josh: Lastly, is there anything else you would like to add?

Joe: Don’t forget to consider what happens to your visitors when they arrive on your site. A huge amount of resource goes into driving traffic to your site, with on-site behavior almost left to chance. As frustrating as it may sound… a website is rarely performing it’s 100% best. Preferences and customer behavior changes over time and will also differ from person to person. Never underestimate the value in knowing the “why” behind the “what”.

If you have any questions, don’t hesitate to get in touch either through the comments or:

@chatshopjoe

uk.linkedin.com/in/joebush/

© Josh Blatchford, author of Manifested Marketing 06/11/2013

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5 Reasons why Apple Rocks at Marketing

Steve Wozniak recently spoke at the AppsWorld 2013 conference.  What was of particular interest to marketers was Wozniak’s claim that “marketing is the most important thing” when launching a new product.  Furthermore, he believes that a major reason for Apple’s success was becoming market-led.  These are important concepts for business leaders to understand: developing a market-led culture is very often cited as being linked to financial success.  However, having a market orientation – or culture – is a very vague concept.  Let’s take a look at what the 5 key requirements of developing a market orientation – or in other words: five reasons why Apple is great at marketing.


1)  Customer orientation –
Steve Jobs and Wozniak had an incredible knack in understanding consumers better than they understood themselves.  This meant that Apple was able to revolutionize the technology industry with new products, such as the personal computer: the idea that a computer would be for the home and not work was absurd at the time Apple was founded…  Jobs famously said “customers don’t know what they want until we’ve shown them”.

2)  Competitor orientation – Apple has always stayed on-the ball in terms of keeping ahead of its competitors.  A huge benefit of this has been the ability for Apple to position itself as the only luxury brand in the technology industry.  It goes without saying that the ability to charge a premium price is key to driving sales revenues.

3)  Interfunctional Coordination – although Jobs was partly-infamous for having an autocratic leadership style, he was equally famous for his abilities as a visionary.  This meant that Jobs was able to both inspire project teams to work towards the same goal – and force them to if necessary!  But regardless of the how, this approach lead to high levels of coordination.

4)  Long-Term Focus – it took decades before Apple products became successful beyond the world of geek niches and into mainstream consumer markets.  Despite this, the brand was never re-positioned or never targeted a different market.  Instead, Apple kept true to its strategy of targeting early adopters and consequently the brand grew massively through word of mouth recommendations.  This enabled Apple to cross ‘The Chasm’ from niche to mass market.

5)  Organizational Culture – combine all of these facets together and instill a belief that marketing is every employees’ responsibility, then you foster a marketing culture.  I think that this is the most important reason for Apple’s long-term success.  While Apple may have had some criticism from Wozniak at the conference, the firm is still delivering strong shareholder value.  The death of Jobs doesn’t not appear to have damaged the culture he created, rather his legendary status could well have enforced it.

Let me know in the comments if you think the death of Jobs has had any negative impact on Apple.

© Josh Blatchford, author of Manifested Marketing, 28/10/2013

Disclaimer: to avoid sounding like an Apple fan-boy, I’d like to point out I don’t use any Apple products.  Although, I do have an iPod in a cupboard somewhere at home 🙂

Microsoft’s Bing – Marketing Communications

Microsoft is a U.S. computer software firm, founded in 1975 by the legendary Bill Gates.  One of Microsoft’s products is Bing, an internet search engine that was launched back in 2009. Initialy, the vast majority of consumers – particularly the less tech-savvy – felt no need to switch from Google.  However, Bing’s market share has now grown to a respectable 17.9%, while Google has remained at a dominant 67%.  Microsoft’s next marketing strategy is to steal disloyal Google users in an attempt to gain further ground on Google’s share.  Part of this strategy is a campaign called ‘Bing It On’.

As part of Microsoft’s market challenger strategy, the aim of the campaign is to convert Google (the market leader) users to Bing users.  Google consumers are encouraged – through social media marketing and online public relations – to visit http://www.bingiton.com.  On the website visitors are asked to make five searches and vote each time for which results they prefer.  Importantly, these results are unbranded, which should mean that visitors are unbiased in their voting.  At the end of the experiment, their results are shown, identifying the users favorite search engine.

There are, unfortunately, a number of flaws with this test: previously visited links are purple, slight forms of branding are visible – such as Bing maps – and lastly users are likely to search for their interests and therefore roughly know how Google displays those results.  As a result of this, the implementation of this communications tactic is less than ideal.

Having said that, in terms of marketing strategy this is a very clever idea.  Just to reiterate: it is the implementation that has reduced the likely effectiveness of this tactic in changing consumer behavior.  In true, Manifested Marketing style, lets take a look at a strategic model that shows why this is a good communications campaign in theory.

 

There are four types of buying behavior:

Complex Buying Behavior this occurs when the consumer perceives there to be lots of differences between brands along with a highly involved information search.  Hence, the buyer searches extensively for information on the available brands before making a purchase.  An example of this would be shopping for a car.

Dissonance Reducing Buying Behavior in this case there is not perceived to be any meaningful difference in brands by the consumer, yet still undergo a high involvement information search.  This is because the consumer fears making a purchase they will later regret and similarity between brands makes it hard to find a suitable product.  An example of this would be purchasing a carpet.

Variety-Seeking Behavior – this behavior is present when there are differences between brands, yet the purchase is not risky enough to warrant an extensive information search.  Consumers are likely to demonstrate this when buying confectionery.

Habitual Buying Behaviorlastly, when consumers see very little difference in available brands, there is minimal risk and no information search, they are likely to buy the product out of habit.  This is the type of Google user Microsoft’s Chief Envisioning Officer, Dave Coplin, is aiming to ‘steal’ from Google.

By engaging consumers, and making them think about the search engine they are using, Microsoft intends for consumers to realize that there are differences between Bing and Google.  Consequently, anyone with little brand loyalty to Google is likely to switch from habitual buying behavior to variety-seeking buying behavior.  This would result in Bing gaining a larger market share from ex-habitual buyers now using Bing on some occasions.

I believe this is a much more realistic prediction of consumer behavior than hoping Google users will ‘kick the habit’ and jump straight to using Bing exclusively.  As search engine choice is a low involvement decision, social judgement theory states consumers should have a wider latitude of acceptance – this means they will believe a greater variety of opinions.  Despite this, media attention of the campaign – particularly from the Freakonomics Blog – have harmed its reputation.  Thus consumers are now skeptical about believing Bing’s claims on user preference, which damages the credibility of the Bing It On website. The overall effectiveness of the campaign is thus undermined.

Despite the shoddy implementation, I think that this campaign is a step in the right direction for what Microsoft’s marketing strategy needs to be in order to grow Bing’s user base.  Specifically, I think they should use their second user advantage to watch Google closely and then introduce futher  Bing features over time to differentiate themselves.  I believe this is far more likely to be successful than Microsoft’s past strategy of duplicating Google’s services.

If you have taken the Bing It On challenge, let me know your results and search engine preference in the comments below!

© Josh Blatchford, author of Manifested Marketing, 12/10/2013

Amazon – Should Amazon Open Retail Stores?

Please forgive me on being late on this subject, but I would like to return to some of the rumours that were floating around previously in February (2012).  Namely, Amazon reportedly has plans to open a retail store in Seattle before the end of 2012.  The said store would stock high-margin items such as Kindle e-Readers, Kindle Fire and a plethora of accessories – from cases to lights to screen protectors.  Moreover, as Amazon’s own publishing division grows further and multiple stores are opened, the stores could also stock books.

So is this a good marketing strategy for Amazon?

Before debating if they should open a retail store – with the intention of eventually having national changes across the US – I believe that if they do open a store the firm definitely needs to only stock Kindles and related high-margin products.  Stocking physical books, would incur far too many overheads to be worthwhile and confuse the overall theme of the stores.

There are definitely compelling reasons for Amazon to open stores.  One only has to look towards Apple’s success and their retail store design to see lots of lessons that Amazon can learn from the Apple stores.  Ultimately, I think that there are three marketing benefits that Amazon will gain from having its own stores:

1)  Product  Engagement

Firstly, by having a boutique-styled store Amazon can show case its Kindle products – and potentially a smartphone later this year.  Given one of the challenges for online services is reducing the tangibility of their product offering, if consumers could try-out products in store they would be much more willing to make large purchases.

Further to this,  it would help to speed up the adoption rate of Kindles.  Currently, the firm relies on early adopters spreading word of mouth.  However, by having Kindles on show for prospective customers to try, qualms and worries about reading on a screen that customers may have can be quickly over-come; also, having a physical store would help target older customers.

2) Improve Customer Service

There are a number of benefits that customers would gain from having the store: order products online and collect in-store, customer returns service and even a Genius Bar-inspired customer support desk.  Not only would these facilities allow Amazon to compete in the physical world against Best-Buy, Target and Wal-Mart, these are services that help augment their products with added-value.

This is in-line with CEO Jeff Bezos’ vision of ‘Building premium products at non-premium pricing’.  So in order to compete against Apple – which it is competing more and more directly as it launches its own technology products (See  Cloud below) – they need to offer the same level of service, without the huge price-tag.  Moreover, as Amazon’s own range of electronic devices gains popularity, there will be a greater need for after-sales service.

 

3) Brand Engagement and Publicity

As I mentioned in a previous post about Apple, a lot of their new product success comes down to lavish product launch events that generate lots of free press coverage.  It also lets customers show their devotion towards the Apple brand.  Amazon could potentially use the same strategy, which would work well for future tablet computer – and even smart phone – launches.

But, I can see two potential drawbacks of opening the stores.

Firstly, is copying Apple a good idea?

Of course, Amazon does not have to mimic Apple stores – albeit they probably will – but ever since the rumours emerged the two firms have been up for direct comparison.  Microsoft has launched stores and have been criticised – somewhat fairly – for copying Apple.  Also, Amazon do not have sufficient own-brand hardware to truly fill out a retail outlet.  This could be overcome by stocking other electrical goods – such as laptops, TVs and digital cameras, but it would weaken the differentiation between Amazon stores and general electrical retailers.  This is what Microsoft stores currently suffer from (see video below) by stocking diverse hardware brands.

 

Secondly, will a retail presence damage Amazon’s brand identity?

Amazon currently has the second highest retailer brand value of $28,665m (the firm is behind Wal-Mart who has the highest retailer brand value).  Accordingly, to the world Amazon is known as the world’s largest online retailer.  But what will the company be known as afterwards?  To many outside the US, this brand identity will remain the same; however, opening retail outlets does confuse its brand identity.  By having an online and offline presence, it just becomes more and more similar to its competitors and loses differentiation.  Moreover, as the firm will be in closer competition to other electrical retailers (Bestbuy, Target, Wal-Mart) and any short-comings in its offline service will be scrutinised against them.

What is the overall verdict?

Despite the issues I have just highlighted, I think that, on the whole, it is a good strategy.  Primarily because it supports Amazon’s related diversification strategy and potentially will allow it to offer greater customer service, which will make future technological product’s more likely to be adopted by consumers.

But there is a slight catch-22 dilemma: Amazon does not yet have sufficient own-brand products to open a viable store based on their high-margin and tech products.  But in order to successfully launch such products, such a smartphones later in 2012, they would probably need a physical retail presence.

I will be monitoring Amazon’s diversification plans over the year and another Amazon post will be coming on why cannibalising your own sales might be a good strategy – keep informed by subscribing!

© Josh Blatchford, author of Manifested Marketing, 12/04/2012

Research in Motion – How Branding Can Save BlackBerry

As you may have heard Research in Motion (RIM) is not having the best of times, to say the least.  The firm made a loss of $125m for the first 3 months of 2012 and had a decline in net profit for the full financial year of $2.2bn.  Moreover, this comes amongst major organisational change, with co-chief executives Mike Lazaridis and Jim Balsille only having resigned in January of this year.  Clearly,the new CEO, Thorsten Heins, has to make some serious strategic and marketing decisions.

The first of these decisions has been to focus less on the consumer market and focus more on their core – or orignal customers – of business executives.  It is important to note that RIM is not abandoning consumers, as many report, and there is plenty of opportunity to turn the business around.  The firm simply hopes this business-orientation will mean it will compete less directly with the likes of Apple, HTC and Samsung – to name a few.

Other business writers have already discussed whether or not this is a viable strategy.  Many have criticised it:

‘RIM chose a strategy based on how easy it would be to execute rather than how successful it would be’ – Macworld.

Others have said that the firm should focus on consumers, as that is where the revenue growth is.

But marketers have come out in favour of targeting business users.  According to the Elaboration Liklihood Model, for a high-involvement product like a mobile phone, it is the ‘Steak’ or the ‘Sausage’ (the core product) that persuades people – or businesses – to purchase a BlackBerry.  Whereas, the ‘Sizzle’ (branding and advertising), is less persuasive.  David Taylor, argues that BlackBerry phones have become all Sizzle and no Sausage.

The general consensus that BlackBerry phones, the core of the product,  are the problem has led to many business writers primarily focusing on the features and innovations that future phones need (see Sydney Morning Herald and Mobile Opportunity). But I think the critical issue is branding.

So to clarify there are the following combination (depending on market and whether to focus on the Sausage or Sizzle) of strategic options:

Blackberry’s current position is strategy 3 (see below), and has announced a return to strategy 2.  Which will hopefully allow it to use a combination of 2 and 4 in the future: keep its products up-to-date and add profitable value through marketing.

However, I think the strategy Blackberry needs is initially strategy 1, and then move to have a combination of strategy 1 and 4 once it has revitalised its product range.

Hence their strategy should be in three stages:

1) Look to consumers’ needs to develop new product features = improving the Sausage;

2) Use branding to target business users with these new product features = improving the Sizzle.

3) Ultimately, these two improvements will allow RIM to use Laswell’s (1948) triple appeal to encourage business customer’s egos to choose BlackBerry (this will be returned to later).

(There should be no debate about targeting consumers vs business users or having Sausage vs Sizzle – they need to be good at all four to compete in a saturated market.)

1) Improving the Sausage:
Now, this might seem contradictory to target business users by focusing on the needs of consumers.  But an underlying assumption that others seem to have made is the belief that consumers and businesses have different needs.  I strongly believe in order to be able to appeal to business users, the firm must firstly target consumers.

Part of BlackBerry’s problems is that they have attracted lots of teenage consumers (see graph, from Ofcom, below) who use the phone’s keyboard to send text messages – or use BlackBerry messenger – easily and quickly.  But this was once a feature that appealed to business users for sending emails.

At the same time the iPhone has become more popular among business users than BlackBerries:


So it would seem that BlackBerry have become popular among teenagers by making a phone designed for business use; and that Apple have become popular among business users by making a phone designed for consumers.  Therefore, both market segments must have converging needs.

Hence – and please hear me out – the features that BlackBerry needs to implement  are consumer-orientated even if it means loosing short-term brand identity with business customers.

This, like I said, is because consumers and business users actually have similar needs (after all, executives are only human!)

I would suggest the following changes to be made:

1) Introduce touchscreens for all phones – better for users playing games and watching videos;

2) Move to Android or Windows Mobile operating systems – allows more apps to be downloaded;

3) Ditch the keyboard – makes the device more portable/allows larger screen depending on the phone design.

Obviously, these would only allow BlackBerry to maintain market share in the consumer market, as these features are nothing new/innovative, but that would still be sufficient to improve their products for business customers.

The next part of my proposed strategy is taking the new Sausage and giving it a business-orientated Sizzle.

2) Improving the Sizzle:

Unfortunately for BlackBerry, as mobile phones are public necessities, the choice of brand is highly influenced by reference groups.

Therefore the trend of teenagers adopting the phone looks set to continue:  as teenagers seek self-verification goals within social groups, if they own a BlackBerry they believe they will popular;  as business users seek self-enhancement goals, they can improve their esteem if they own an iPhone.

According to Heider’s (1958) balance theory, teenage users of BlackBerry phones has changed  consumers attitudes towards BlackBerry

Original attitudes towards BlackBerry:

There used to be a strong positive connection between business users and BlackBerry and, as a public necessity, this was highly evident to potential consumers who could associate business men with the BlackBerry brand.

Thus anyone who believes that their actual sense of self is a business person, or their ideal self-concept is to be a business person, they would purchase a BlackBerry as it would be seen as appropriate group behaviour to be a business person, whom they have favourable attitudes towards.

Current attitudes towards BlackBerry:

Now, however, there is a strong positive connection between teenagers and BlackBerry.  Consequently, those who like BlackBerry for business reasons must also view teenagers positively or in the same light as BlackBerry.  Thus, if they saw teenagers unfavourably there is a good chance they now also see BlackBerry negatively.

So, in order to improve the brand or the Sizzle, BlackBerry need to get business users to start using their revitalised phones again and also act as opinion leaders.  They can replace teenagers with business people, as personifiers of the brand, by using any or all of these strategies:

1)  Use opinion leaders as the target market segment – approach select businesses directly and offer to supply their firm with company phones for free.  Using high-profile firms with a corporate reputation, such as IBM, would help re-condition consumers to associate BlackBerry and business people.  Ideally, BlackBerry needs to pair being a successful business person/company with using their phones.

2) Create opinion leaders – offer a referral scheme for work colleagues in professional jobs.  For instance, a BlackBerry customer, who uses the phone for personal use and work, can ‘introduce’ a colleague and they are both rewarded with BlackBerry Playbook tablets.

3) Use opinion leaders in marketing communications – RIM need to use advertisements that feature opinion leaders, whether or not it is clearly scripted.  This has recently been used by rivals HTC to target a youthful segment:

In addition to using word-of-mouth communications, I recommend RIM taking an upward brand stretch to make the product more exclusive:

1) Bring out a new brand name – this new brand name should be used to categorise RIM’s phones that are designed for business users; the existing BlackBerry name/devices should be left to target emerging markets as low-tech and cheap smartphones.

2) Premium price – to reflect the overall positioning of the new line of RIM phones for business people, they need to become a status symbol and, in our Western society, this can be easily done with a premium price.

Thus, by now RIM should have improved their Sausage with features consumers want, and, dressed it up with Sizzle to give it a business brand image.  The third and final step is to combine these seemingly polar strategies into a triple appeal.

3) Creating a triple appeal

According to Freud our personality consists of an Id, which seeks immediate pleasure (naughty side), a Superego that seeks to conform to societal expectations (nice side) and an Ego that balances the two.

In order to create a triple appeal RIM must appeal to the Id, Superego and Ego; this will have been done by giving their phones consumer features with a business brand image.

The appeals to the Id include: ability to download apps, play games, watch videos on a larger screen.  But conversely these can be viewed to also satisfy the Superego: download productivity apps to use on commutes and business trips, ability to play games is an indicator of hardware quality, larger screens makes emails easier to read.

Ultimately, these are easy to balance by the Ego through positioning the new phones as ‘naughty but nice’.  This is very important because there are two situations that RIM should sell their new range of business smartphones

1) Allow them to go on sale through consumer retail outlets to target business customers who want to use the phone at work and for personal uses.

2) Selling directly to firms.  Here the triple appeal is still important even in B2B markets.  Namely, although the deciders and purchasers within the firm will want the order for the Superego benefits, they will be heavily influence by others in the firm who subconsciously want the phone for its more fun/consumer benefits.

Further to this, the triple appeal strategy needs to be communicated explicitly to consumers, as well as being ‘baked-in’ to the product.  This means featuring the triple appeal in advertising, as successfully done by Aero chocolate and Maltesers (it is chocolate, but a ‘lighter’ option).

Thanks for reading a second in-depth post in a row!  To summarise: I think RIM need to make the phones better consumer experiences, use reference groups to target business users and combine everything to create a triple appeal.

What do you think they should do?  Leave your comments below.

© Josh Blatchford, author Manifested Marketing, 06/04/2012

P.S Happy Easter 🙂

Apple – An introduction to Marketing Strategy

This company almost needs no introduction.  Although I am not really a fan of their products, there is no denying the huge success of Apple: the technology company now has the highest market capitalization in the world at $573 billion, which is more than Microsoft and Google’s valuation combined; the firm is the most admired company in the world; and the Apple brand value is worth $153.3 billion alone.  The list is simple endless…

Having only briefly spoken about Apple before, this post will show how the firm’s success is based on simple marketing concepts.

The Product Life Cycle (PLC)

Apple’s iPod is a textbook example of how to manage the PLC from introduction through to decline.

The PLC consists of 4 stages: New Product Development, Introduction, Growth, Maturity, Decline.  But it is the introduction and maturity stages where Apple’s marketing ability really shows.

What sets Apple apart from every other technology company is how it utilises its Apple stores to create over-the-top product launch events and generate free publicity.  Every time Apple launches a product (not just iPods), all employees make an effort to ensure each customer is congratulate the new owners.  It is simple but effective:  thousands queue outside – even camping out for several days – just to experience a product launch by Apple.  This is entirely unique to Apple – one cannot even imagine consumers showing the same amount of passion for a Microsoft product.  The stores are simply great for free PR.

As the maturity stage is the most profitable time of PLC, it is crucial to extend this period to be as long as possible and delay a decline in sales.  This is very much true with the iPod.  The iPod has already experienced massive growth; now sales are stagnant and predicted to decline.  Hence, Apple continuously roll-out extension strategies, updating the iPod with more features, more colours, larger memory, faster processors, a smaller size – anything to keep on getting a short-term sales boost.  The cumulative effect of these short-term updates is that, combined, they actually increase long-term sales – see this great infographic on how the evolution of the iPod has grown sales.

Apple also recognise that decline is inevitable – one day they will have to stop selling the iPod.  But they are more than prepared for this – the iPhone is almost a direct substitute for the iPod, while the Apple Store is becoming more and more orientated to iPad and iPhone users.

Product Development

Product development is just one of the growth options in Ansoff’s Matrix, but perhaps the most effective for global brands.

As you can see (above), product development involves launching a new product to the firm’s existing customers.  If you, like Apple, already have a global presence, in major markets, and understand your customer inside-out, it arguably offers the best trade-off between risk and reward.  By launching the iPad, iPhone and operating systems to the same audience Apple builds up integrated customer relationships across multiple platforms and therefore creates brand loyalty.  This increases the likelihood of new products being a success.  Conversely, Google’s innovations have high failure rates.

The effect on sales of this product range filling strategy has had a cumulative effect on Apple’s sales growth:

The Boston Consulting Group Matrix/ Product Portfolio Management

The famous BCG matrix classifies a firm’s product portfolio into four strategic business units (SBU): Stars, Question Marks, Cash Cows and Dogs.  Within each SBU, there are again four potential strategies to take: build market share, hold market share, harvest (reduce investment) and divest (phase-out).

Star:  This would be the iPad because it has a high share of the rapidly growing tablet market.  As the iPad is in its growth phase of the product life-cycle, the product is beginning to lose its first-mover advantage as other manufacturers begin to launch their own tablet devices.  Hence, Apple should invest heavily into marketing the iPad in order to grow sales to maintain their share (sales need to grow at the same rate as overall market sales to maintain market share within a growing market).  But in the future, when market sales become stable, Apple should harvest the product to turn it into a Cash Cow to fund other SBUs.
Question mark: Despite Apple’s best attempts, PCs with Microsoft operating systems still continue to dominate the PC market.  Much of this is down to strong business-to-business marketing and high switching costs for businesses and consumers, alike.  Apple could potentially used three strategies for their Mac software:

1) Divest – this could allow Apple to devote more time on their most profitable products, but it is highly unlikely as the Mac is part of the firm’s brand identity.

2) Build – Apple could potentially invest lots and lots of resources to try to turn Macs into a star, however even with Apple’s huge cash pile, it is questionable if it is even possible to beat Microsoft-powered PCs.

3) Hold – this is the most likely strategy.  Apple will probably continue to develop new Macs and support existing customers, however investments will be kept at a minimum and be target towards the iPad.

Cash Cow: Apple’s source of steady flows of income are clearly the iPhone and the iPod; both the MP3 and mobile phone market have reached saturation and Apple has a high share of both these markets.

As the iPod is reaching the decline stage of the PLC, Apple is beginning to harvest the product.  That is, slowly reducing investment in marketing iPods to increase their profitability; by generating more cash, further investments can be made into question marks or stars.

In the future, Apple will probably only maintain their market share of the iPhone. It is a highly profitable to generate sales from existing customers from upgrades, which can be almost guaranteed after a consumer invests heavily in downloads from the app store.

Dog: Lastly, Apple TV – a device that allows media files in iTunes to be played on a TV – has never really caught-on.  By launching a second and third generation, Apple have shown they are committed to building sales.  However, unless the overall market for digital media receiver grows, it could be more profitable to divest the product.

Competitive Positioning

Apple have a clearly defined premium strategy: they offer more benefits for a higher price.  According the Value Proposition Matrix (above), any of the white squares are competitive strategies.  But, I personally believe a ‘more for more’ position is perhaps one of the more effective.  This is because it is highly profitable and hard for competitors to copy a premium identity.

Developing a premium, or luxury image, is incredibly hard for both new and existing brands.  Hence, it is highly unlikely any of Apple’s competitors will risk undertaking an upward brand stretch and gain a premium status.  Moreover, this type of branding allows a premium price tag to be attached to any product – regardless of the quality – with an Apple logo, allowing the firm to make huge gross margins.

This heavily links into Micheal Porter’s famous generic strategies:

A firm’s scope can be either to target a niche market (narrow scope) or a mass market (broad scope); and their strategy can be based on low-cost, or differentiating themselves, with additional benefits, from their competitors.

Apple has been very clever with their choice of strategy, depending on the product.  Initially – and for a long time – the firm used a Differentiation Focus strategy while Apple only sold Mac computers.  The firm was very niche and was targeting Innovators and Early Adopters:

According Everett Roger’s Diffusion of Innovations theory and Kotler, those who adopt new technological products act as opinion leaders and brand evangelists who spread word-of-mouth promotion about your product.  This then attracts the Early Majority, where the bulk of sales comes from.

After Apple used a Differentiation Focus strategy and masses of consumers where becoming more aware of the Apple brand, the firm has moved towards a pure Differentiation strategy.   This is seen by the iPod and iPhone that are used by wide range of consumers.

Many firms make a mistake these days of not targeting the Innovators and Early Adopters – they try to immediately win huge sales.  Seth Godin (and I) believe this is a poor strategy:

Branding – Corporate Branding / Family Branding

If you have read my previous post on Proctor & Gamble, I am a very strong believer in the power of corporate branding.  This is where a single brand image of the firm is used to promote their range of products, rather than developing a brand for each product category.  Apple is a great example of this.

Apple’s own brand values – innovation, simplicity, style – have been consistently emphasised across all of their products.  These have even been personified by former CEO Steve Jobs’ personality.

This is highly beneficial to the firm because it makes new product launches much more likely to be successful; it seems that Apple could launch an iWhatever and consumers would buy it.  Moreover, Apple customers have been so conditioned to Apple brand values that it is naturally assumed a new Apple product will be any of the above brand values.

Further to this, Apple also benefits from something called the ‘Halo Effect’.  This is where a customer purchases/likes one product from a firm and is then interested to try out other products the same company has to sell.

As the graph shows, after a big rise in iPod sales in 2003/4, Mac sales also started to pick up more significantly.  Many think this is down to the Halo Effect – consumers enjoy their experience so much with their iPods they decided to fully ‘make the switch’ to Mac computers.  It has been found by Apple Insider that almost 20% of Mac sales have come from once PC owners who first purchased an iPod.  More recently, the same Halo Effect is occurring because of the iPad

To reiterate: it is because Apple has such a good corporate brand that consumers believe if they like one product by the company, they will like all of their products.

Services Marketing

Although I have already blogged about the Genius Bar, it is worth mentioning it again here as it provides a good lesson in services marketing.

Ever since the end of WW2 services marketing has been given growing attention by businessmen and academics.  Now, in the 21st Century, offering additional services to a product has become a major source of competitive advantage and brand differentiation.  Apple, for example, achieves differentiation from other technology firms through having retail outlets that allow them to provide superior customer service.

The Genius Bar, offers Apple customers face-to-face technical support; a very welcome change to poor after-sales service provided by their competitors.  This helps augment their products and support their ‘More for More’ competitive positioning, hence it is an important way to add value to Apple products.

In addition to enhancing their value proposition, it gives Apple an unrivaled chance to practice interactive marketing – engagement between employees and customers.  Where as other technology firms often only practice external marketing, Apple can use interactive marketing to enable customers bond with the firm.  This is helped by the fact that employees are – or at least perceived to be – brand ambassadors that truly believe in what they are selling.

Marketing Communications

Lastly, there is no point in doing any of the above unless consumers know about it.  However, it is hard to say what makes great campaigns.  But one thing is sure: they have to be original.  There is no real strategy or science behind it, but Apple have managed to get it right on so many occasions:

I hope I have managed to cover the main theories, and used Apple to help explain these, but if I have missed anything out please let me know in the comments below.  I also hope I have highlighted how important the Apple stores are to the firm’s success as I feel this is something that is often overlooked by other business writers.

And thank you for reading the whole post!

© Josh Blatchford, author of Manifested Marketing, 29/03/2012

Nissan Motors GB – Tangibility-Intangibility continuum

I finally have had success in finding a marketing placement – I will be working as an After-sales marketing co-ordinator for Nissan Motors GB.  I am thrilled to be able to work for such a great company and within the motor industry, which I have always had some sort of interest in from an early age; I am now a keen Formula One fan.  From what I understand of the role so far – I have not yet received the contract yet – I will be mainly focusing on warranties, road-side assistance and Nissan’s own insurance scheme.

This relates to a very important marketing theory of services: the tangibility-intangibility continuum.

On the far left on the scale we have ‘pure tangible goods’ that have no service element – these are, in fact, very rare to find.  Although salt itself is a pure physical good, it has to be at least delivered.  Moving towards the right, we have ‘products accompanied by one or more services’, such as perfume purchased from a retailer.  Next, in the middle, there are ‘hybrid offers’ – these have as much ‘product’ inputs as ‘service’ inputs, from which a consumer receives value.  A typical hybrid offer is fast food, which is served to the customer in a short duration at the expense of quality.  To the right of this offerings, such as a travel, are ‘services accompanied by minor goods’. Lastly, on the far right of the scale, ‘pure services’ can be distinguished.  These, like baby-sitting, do not result in the physical ownership of anything.

In terms of a car’s position on the continuum, it is most likely to lie in-between ‘a product accompanied by one or more services’ and a ‘hybrid offer’.  For Nissan, in particular as an innovative car manufacturer, their cars are more likely to be classified as hybrid offers.  This can be best explained by using the Nissan Leaf – their 100% electric car.

In the selling the Leaf, Nissan have gone above and beyond the usual mix of services offered with a car.  As the Leaf is the first of its kind in the UK, Nissan have to use a market leader strategy.  This involves expanding the total market size for electric vehicles; as Nissan have such a huge share of this niche market, the best way to win sales is to increase the benefits of owning an electric car, knowing that newly generated prospective customers are most likely to choose them (the only other electric car producer in the UK is Tesla)

Hence, Nissan have gone to great lengths to introduce new services that make owning an electric car more enjoyable and practical.  In particular, Nissan have collaborated with British Gas to consult customers on running an electric car and even install charging stations at customer’s homes.  Moreover as the location of services is so very important, the company has integrated an application that allows the nearest charging station to be located on-the-go.  Ease-of-access is crucial for charging stations, which is why, not only are they being installed at service stations, supermarkets and city centre parking spaces, there is – simply – lots of them!  This map visualizes just how many, and how accessible, these charging stations are.

Simply, as Nissan are leading the way in the electric car market, it is in their best benefit to offer additional services that make owning an electric car more feasible and enjoyable.  This is – in general – a crucial way to gain a competitive advantage through marketing: offer services with products and offer products with services.  Hence, working within after-sales marketing would be such a great opportunity as the line between a product and service is becoming more and more blurred.  There is even a marketing theory called ‘Service Dominant Logic’, which states that all products and their benefits are in fact a service – for instance, a car’s service would be to get to one place to another.

If any readers are searching for a placement I would love to hear from you!

© Joshua Blatchford, author of Manifested Marketing, 15/01/2012

Microsoft’s Kinect – Market Development

I would like to reflect upon my first ever blog post.  If you have the memory of an elephant – or have revisited the original post – you may recall that I predicted that the Microsoft’s Kinect would be a success and the Sony Playstation’s Move would be a failure.  Well, a year and a half later, the Kinect now holds the world record for the fastest ever selling consumer electronics device, having sold well over 10 million units early this year.  The Playstation Move has done relatively well, considering a higher proportion of PS3 owners have the Move device; but the Kinect is a clear winner.

So why has the Kinect performed better than the Move?  They provide the same benefit: game interaction.  Thus, I belive there are 3 key reasons that made Microsoft’s  marketing strategy for the Kinect highly competitive and created huge sales.

1) Simplicity.  Traditional marketing theory states that a technological product must first be targeted at the early adopters, who then create word-of-mouth promotion, which in-turn attracts the early majority.  However, the Kinect is an extension strategy for the original Xbox 360, but is targeting a new consumer.  In other words, despite the original target market being familiar with technology, Microsoft intended to prolong the life of the Xbox 360 by opening it up to ‘casual gamers’.

This goes against marketing convention; hence, Kinect needed to be easy to understand and use.  Moreover, the simpler the product is to use, the easier it is for retailers to sell to customers.  This is where Microsoft really got an advantage over Sony.  Microsoft used a ‘push’ marketing strategy, whereby they made it as easy as possible for retail staff to promote the Kinect, at the expense of the Move.  In particular, Microsoft gave retailers free Kinects and TVs to allow consumers to try the product in-store.

Although the video above was taken in Microsoft’s own official store, it is not uncommon to see Kinect being played in PC world, GAME or Blacks electronics.  This, obviously, would not be possible without some form of business-to-business marketing strategy – even for consumer products, companies must collaborate with marketing channels.  How does this relate back to simplicity?  As the Kinect requires no peripherals or controllers – or even knowledge of how to play video games – it encourages staff and consumers to try-out the product.  The Move, on the other hand, requires so many peripherals that it is far less welcoming.

2) Social appeal.  This builds upon the simplicity of the product – it is easy to pick-up and play that anyone can join in.  I have personally experienced how fun it is to play the Kinect with friends; the boxing game is particularly a great laugh!  A lot of Microsoft’s marketing emphasises the social appeal of gaming.

This something that is truly baked-into Microsoft’s gaming business unit, which is evident in their huge dedication to Xbox Live, the online gaming platform for the Xbox 360.   Sometimes companies add in features as an afterthought, however social gaming is at the heart of Kinect as it truly enhance’s the consumer’s experience.  In comparison to the Move, expensive peripherals make social gaming much more difficult and, thus, detract from the overall experience (multiplayer gaming for the Move, could be seen as an afterthought).

3) Multiple uses.  Any great product or brand can be expanded for new markets or new uses.  This can be seen with Lucozade.  The same holds true with the Kinect and extends for several levels of alternative uses.  On one side of the scale (related diversification), the Kinect’s motion sensor can track hand movements to allow Xbox 360 menu navigation – ‘Minority Report Style’.  On the other end of the scale (unrelated diversification), Microsoft has allowed third-party developers to utilise the Kinect device for completely different uses.  If any one of their inventions becomes a commercial success, Microsoft will be able to claim royalties for doing no further product development!

To conclude, I belive there is an important lesson to be learnt from Microsoft.  That is, be simple and social.  This means that more consumers understand your product, and then a higher proportion of these consumers will talk about the product.

Before I end, some of you may be thinking I am ignoring an important factor in the Kinect’s success, which is almost like an ‘elephant in the room’.  I am of course talking about ‘Dance Central’, the best-selling game for Kinect.  This shows that another important sales-driver is novelty.   However, the danger of relying on a game to drive console sales is that this is not a sustainable competitive advantage.  To ensure the long-term success of Kinect, I suggest that Microsoft needs to continue to expand the ways in which the device can be used for their own products.  I believe there is a huge potential to introduce it to PC gaming and to the Microsoft Surface.

Please let me know what you think the other applications for the Kinect device could be in the comments section below.

© Joshua Blatchford, author of Manifested Marketing.  25/12/2011

Nintendo – New Product Development

Nintendo has recently announced the ‘Wii U’, which is scheduled to launch sometime during 2012, at this year’s E3 press conference.  This is a great example of a product development strategy.  This is where a company itends to market a new product to their existing customers; the ‘new and improved’ version of the best-selling Wii games console, features a new touch-screen controller, HD gaming and a revamped look.  These are all features that aim to enhance the core benefit offered to customers – thus, boosting sales.  However, can Nintendo reproduce the success of the original Wii?

There are three reasons why generating market-leading levels of sales may be harder than expected to replicate:

Mature Market – the original Wii used what is known as a ‘blue ocean strategy’, which involves creating a new market as a result of the product launch.  Namely, the Wii introduced families to video gaming.  In contrast, the Wii U’s product development strategy will now be targeted at this existing market.  It is debatable that these ‘casual gamers’ are enthusiastic enough to purchase another console, particularly during our economic climate.

Increased Competition – the maturity stage of a product’s life cycle always involves competitors becoming more established and thus pose a greater threat.  There are several ways to define who your competitors are. If you take an industry view, Nintendo are obviously competiting against Sony’s PS3 and Microsoft’s Xbox 360; however, considering a market perspective the real threat comes from Apple’s iPad.  Arguably, an iPad may be more appealing to casual gamers: the device is not just deicated to gaming, the games are cheaper and the device is even easier to use.

Increased Cost – this is a key consideration for Nintendo’s chosen market segment.  All these extra features, obviously, mean a higher price will be charged; price skimming will be required to recoup high research and development costs.  More significantly, the core benefit of the Wii was gaming with the whole family; the new touch screen controller is also likely to cost a lot more.  This means that the true price of the the product – when all the accessories are purchased for the whole family – is going to be substantially high.

Having said that, prior to the original Wii’s launch many people were sceptical whether or not Nintendo had got their positioning strategy right – even mocking the  homophone name ‘Wii’.  Perhaps Nintendo is set to prove the market wrong again?  Please let me know what you think – leave a comment below saying if you think the Wii U will be a success or flop.

I think, despite the odds, Nintendo have lots of experience and are set to deliver another record-breaking product.

 

UPDATE 17/06/2011

Nintendo Global President Satoru Iwata has told IGN, due to the cost of the controller, Nintendo will be focusing on games that require only one controller.  Does this mean that multi-player gaming will be less fun or even non-existent?  This was a major selling point of the original Wii and could spell disaster for the Wii U.  Check out IGN for more info.

© Joshua Blatchford, author of Manifested Marketing, 13/06/2011

The Times – Pricing and Distribution

According to The Guardian –  information I read for free online, funnily enough – The Times has lost around 90% of its online readership since making registration compulsory, and therefore effectively charging for online news. This bold move, when there are plenty of other alternatives, ultimately means revenues may fall if the fewer amount of customers registrations does not exceed the commission from a large amount of customers viewing advertisements. Hence, charging more for a price elastic product is almost never a good tactic. Despite this, it may be viewed as a  necessary strategic change to keep up with the external environment, which will be evaluated through a combination of a PEST and a SWOT analysis.

The downsides to this decision are obvious: lower readership means lower revenue, a sudden price increase means poor PR and the former and later ultimately mean less competitiveness; the main threat to The Times’ website is their competition, in a well-defined, monopolistic market. Unlike traditional publishing and paper distribution, online media is a much more competitive market – according to Micheal Porter’s Five Forces. As online businesses famously have lower barriers to entry in the online market – where as traditional newspaper printing needs expensive capital investment – there will inevitably be a fight to be a cost-leader, as revenue is likewise lower. Also, readers have greater purchasing power online: they do not need to purchase the product! This means that there is minimal customer loyalty in the online market – a stark contrast to traditional newspaper distribution – which would explain the huge decline in The Times’ online readership as substitutes are quickly found.

But it would be naive to completely dismiss the move; given the market-wide decline of newspaper readership, and a rise of internet usage, it seems a good strategy to ‘join ’em if you can not beat ’em’. Despite paper readers being worth twice as much as online readers, The Times newspaper makes a daily loss of £240,000, which is not entirely accountable to the normal decline in advertising during a recession. The way to turn the business model around, therefore, may be to tap into a new market to boost sales revenue – a form of market development from Ansoff’s Matrix. In addition to the ever-growing usage of the internet, online news, in particular, may become a particularly lucrative market thanks to technological innovations, like the iPad, that increase accessibility to and boost readability of websites . Which in turn, may mean the older reader – a core customer of traditional newspapers – will eventually turn to online media; if The Times does not meet the needs of customers, the instinct of good marketing, their demise may be faster than their competitors.

So will the strategy work? This depends entirely on an external influence: rival newspapers. Hitherto, it has not been unusual to see trade-specific or specialist sources of news to charge online readers, for instance the Financial Times; but now The Times may have created a turning point whereby general online news slowly follows suit. If rival newspapers start to charge for online content too, which decreases the purchasing power of customers and availability of substitutes, then customers may see paying for online news as inevitable and justified, despite lower added value compared to print versions. Having said that, I believe the strategy will fail because other newspapers’ reactions will be determined by the readership of The Times, which does not look convincing, and there will always be a free substitute available: the BBC.

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