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The Measurement of Whispers

August 26, 2009

The Measurement of Whispers

Prologue*: It has been written that Sir Walter Raleigh wagered Queen Elizabeth I he could determine the weight of smoke issuing from his pipe. A daunting challenge at the time, the wager was settled by noting the weight of the tobacco he placed into his pipe and the remaining ash…

“Your Majesty” said Raleigh, “cannot deny that the difference hath evaporated in smoke.”

”Truly I cannot,” was her reply.

(story concludes at end)

*****

In the time before, business was simple. Most things tended to follow the prescribed path defined by the immutable law of Efficiency and Economies of Scale. It guided our actions everything from sourcing through to consumption. It was how we as business and consumers thought of the world around us – if it wasn’t mass …well it couldn’t be good,  now could it?

But then we started to talk to one another. Islands of solitude became linked, businesses and customers began to evolve, buyers became consumers who became customers who turned out to be partners. Efficiency of scale started to give way to scale of intimacy and scale of innovation. Companies that tired of competing in a flat world came to recognize that customer experience and customer communication could form a critical competitive strategic platform. We came to realize that customer value in fact defines corporate value, an insight which brings about the most powerful change of all – the shift from push to pull.

whisper_150x200Our tools for defining and measuring things in a pull world suddenly seem inadequate. What do we measure, how do we know it is working, what’s the ROI, what’s the risk. These are just some of the questions echoing in the minds of those contemplating the journey as waves of change roll through the marketplace with increasing force and pace.

We are left trying to reconcile what we knew with what we see, the reality we can measure with the reality we cannot, between that which is said and heard and that which is whispered, understood and believed.

The understanding of it is simple in theory but elusive in practice. Simple because with only four ‘moving parts” (the sender, the receiver, the message and the system the message propagates through) the far corners of the globe can be brought closer (be more relevant) to us than our next door neighbor.

Blame it all on Milgram’s Small World experiment which ushered in the globe shrinking concept of Degrees of Separation forever changing our perceptions of relationships. In fact in the grand scheme of human endeavors – one’s connectivity index may one day rank alongside the mapping of the human genome, the periodic table and the (eventual) discovery of a grand unifying theory of physics in our fundamental appreciation of the connectivity of things.

The foundation of all models is built on biological (agent contagion) models where the mathematical relationships between: Susceptibility, Exposure, Infectiousness, Recovery have been outlined. Marketers need only to substitute: Target market, Response rate, Propagation and Relevance to simulate wondrous scenarios.

But understanding how we might get there requires us to first consider the sudden popular rise of Hush Puppies. It was the single question which set off Gladwell’s populist book (The Tipping Point) where he re-introduced some of the basic rules for the propagation of epidemics.

  1. The law of the few: where Connectors (nodes is network terminology), Mavens (credible experts that keep us informed) and Salesmen who convince us to buy into something are the key actors
  2. The Stickiness Factor (Chip and Dan Heath’s subsequent book Made to Stick- why some ideas survive and others die outlined their assessment of the key SUCCES factors: Simple, Unexpected, Concrete, Credibility, Emotion, Stories)
  3. The Power of Context

 

According to Gladwell, Hush Puppies became popular because they were being worn by a select few ‘influential’ people that ‘infected’ others they came into contact with – making them want to buy a pair as well and so on… Marketers soon scoured the countryside in search of the Influentials. The self proclaimed variety seemed to spring up like weeds almost overnight.

Nonsense thought Duncan J Watts, if these people were so influential why didn’t the other things they were wearing, doing, eating or drinking also gain popularity? Tough question that.

Watts brings forth a different model incorporating the principles of percolation (which considers the problem from the system’s ability to facilitate/hinder/contain the spread*, see here) and infection by basically wondering how forest fires got started.

* In other words, if we connected the dots between everyone, how much of the total would we be able to cover? Where is it vulnerable to collapse and where is is vulnerable to spread?

Sure an arsonist would be more efficient at the task, but surely ANYONE with a match can do the job, or enough people with matches – especially if the forest is dry enough or the winds are blowing just right. That is the essence of his Big Seed model:

Seed: How many people initially exposed to the message
Propagation (Z): How many people this message has been forwarded to
Responsiveness (B): The % of those propagated that will ultimately act on the message when received

which recognizes the need/place for both mass and targeted attempts at ‘infectious persuasion’. You don’t have to be special in any way, just a man with a match.

The success of any viral program rests on its ability to propagate. Sufficiently high and it can reach a point of critical mass that can precipitate a cascade. One definition of a cascade (see: A Theory of Fads, Fashion, Custom and Cultural change as Informational Cascades, Bikhchandani et al) is characterized by the point at which individuals “go with the flow” forgoing their private knowledge in favor of public knowledge. Many liken cascades to an unstoppable avalanche but in fact some cascades are exceptionally fragile and can easily revert to a random state bouncing back and forth between the possible outcomes.

What fascinates us all is why the system that is able to withstand a multitude of simultaneous and /or sequential shocks without any effect can undergo a massive transition triggered by an innocuous signal.

Within society, we tend to cast these events as some form of crowd wisdom** (or folly), but as marketers trying to convince the population they have the better mousetrap, the greater truth can turn out to be more serendipitous. Because if your brand happens to experience enough of these aborted propagations at the wrong place or time ….the secret to life, happiness and the pursuit of infinite wealth grinds to a screeching halt or at best plods along at some lower general equilibrium level… at least until the next wave rolls through.

**That we ascribe higher value to those events that survive the cull was the foundation of several books (Fooled by Randomness by N. Taleb, The Drunkard’s Walk by L Mlodinow) which reviewed the psychology of survivor biases.

Just how wide a ripple our individual actions (can) have on those around us is difficult to measure but one recent Harvard study (The Dynamics of Personal Influence and SEE HERE, Nicholas A. Christakis) suggests that behavioral influences might be cast as far as 3 degrees of separation! (if we use the average of 42 people per degree of separation (42x42x42) that’s a sphere of influence as much as 74,000 people – although the study itself only had 12,000 people mapped out)

Influence across

Degrees of Separation

1 degree 2 degrees 3 degrees
Smoking 61% 29% 11%
Happiness 15% 10% 6%
Obesity# 45% 20% 10%

#“If an ego stated that an alter was his or her friend, the ego’s chances of becoming obese appeared to increase by 57% … if the alter became obese. However, the type of friendship appeared to be important. Between mutual friends, the ego’s risk of obesity increased by 171% …if an alter became obese. In contrast, there was no statistically meaningful relationship when the friendship was perceived by the alter but not the ego. Thus, influence in friendship ties appeared to be directional.”

This is just one of the findings emerging from a data treasure-trove spanning 32 years (Framingham Heart Study) examining the social network ties of 12,000 people. (see NEJM The Spread of Obesity in a Large Social Network over 32 Years and here)

However, one of the inherent criticisms of the use of contagion theories in marketing is that consumers are not like vampyres. One exposure does not automatically create the desired follow-on impact, but in fact once exposed to the message – may sometimes cause them to become immune to its effect, killing off any future chance of propagation. So if one exposure isn’t enough, how many does it take?

In a model created by DJWatts (Source: A simple model of global cascades on random networks and later elaborated upon in his book  “Six degrees, the science of a connected age”) a number of the key pieces have started to come together.

The center point of the mathematics was being able to map out the boundaries for cascade potentials within a range of connectivity and propagation thresholds that if mimicked in real world human systems would conceivably yield the calculated results.

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To assist in your interpretation of the graphs, areas to the right of the line indicate there wasn’t a mathematical potential for a global cascade to develop.

Potential is a key word, there are no implicit guarantees that if the conditions are met, a cascade will develop.

As the chart illustrates, someone with 10 friends (see Z labeled axis) having a threshold level of 10% (horizontal axis) meets the mathematical requirement for a cascade – which is not met by a person having a 30% threshold level.

The study revealed:

1. Connectivity: His simulations looked at a range of contacts (see Z axis in above figure) to understand at what point is a more connected node/person more or less important to a cascade. The important distinction to note here is that connectivity would refer only to those for whom the message has potential relevancy – hence it is a subset, not the total size of one’s contact list. To put the Z axis in context, keep in mind that six degrees of separation with 6 billion global population computes to an average connection size of 42.6, the 6th root of 6 Billion.

A)    When the landscape has few/sparse connections cascades are less likely to occur. And those that do start are likely to  be contained because of the frailty of the daisy chain. Within that frailty, anyone who happens to be relatively more connected – becomes critical to a cascade potential (the hip Hush Puppy innovators in the Tipping Point thesis).

B)    When the landscape has many/dense connections one would expect cascades to be a more common occurrence, right? Wrong, what happens is that cascades become limited by their ability to overcome the local (ie; individual’s) stability threshold.  In other words a crowd of skeptics is still a crowds of skeptics…but any cascades that do develop will be LARGE.

Logically, those conditions would hold true unless a wave forms. The difference between a wave and a cascade is the amount of organization around it. Most of these simulations are based on random hops through a (connected) network…enough hops and enough conversions and a cascade develops. But if an organized assault manages to take shape and propagate, a cascade is more likely to result since the probability of overpowering the threshold is greatly enhanced. As you can imagine, this distinction is most important in human systems.

In other words in a traditional cascade (viral event) not all ‘friends’ are created equal consequently there is a degree of randomness surrounding a conversion. And whether one accounts for that as a more powerful friend or a lower level threshold – the net effect is the same – we are more likely to give greater credence to what closer friends have to say/share than more distant acquaintance. Now imagine sitting at your desk Monday when all of a sudden a wave hits you – everywhere you turn your friends confront you with the same wave – do you really think you will be able to withstand that kind of social pressure? Asch studied something much more innocuous – the length of lines and ….well read for yourself.

Achieving that level of organized dispersion however would require access to everyone’s social graph which only exists inside the walled gardens of social media. The pending launch of Google Wave might result in some ‘interesting’ examples of coordinated propagation.

2. Threshold for change: The model suggests the fewer the connections the higher the minimum threshold for a cascade potential. Having only a few friends it would appear, means one needs more persuasion to change. (follow the graph from left to right along the horizontal axis as you shift from less to more stringent thresholds for change)

But that is somewhat misleading  because at the operational level (one can’t have a fractional friend) a person with four friends and a 25% threshold is operationally equivalent to 30% with three friends or 30% with four friends – one would need but a nudge from a single friend to convert. The difference is that with a larger pool of friends, there is increased probability of meeting that threshold requirement.

Or is it?

Wouldn’t that mean that we would be changing our minds constantly, choosing brand A one minute then brand B the next because of the flux of messages  bouncing between friends. Consider this real world experiment involving 14,000 people randomly assigned to one of four parallel ‘worlds’. They found that winners in one scenario were losers in the next and vice verso – all determined by the presence or absence of information regarding the (popularity of) choices of others. (see  DJWatts, Experimental Study of Inequality and Unpredictability in an Artificial Cultural Market)

It might be helpful to consider the dynamics from the perspective of an innovation diffusion process. While many consider innovators to be of equally high value (an innovator is an innovator is an innovator), the work of DJWatts suggests the existence of a value  differentiation that lies further downstream;

“the success or failure of an innovation may depend less on the number and characteristics of the innovators themselves than on the structure of the community of early adopters. Clearly, the more early adopters exist in the network, the more likely it is that an innovation will spread. But the extent of its growth—and hence the susceptibility of the network as a whole—depends not only on the number of early adopters, but on how connected they are to one another, and also to the much larger community consisting of the early and late majority, who do not tend to respond to the innovators directly, but who can be influenced indirectly if exposed to multiple early adopters.”

 

Of note, this finding adds clarity to the simpler mechanism described in the Bass diffusion model which concerns itself with only the rate of innovation and imitation – in other words the size and speed of the wave of change.

Before we go running off trying to find those Innovators again, we mustn’t forget that innovation is ultimately relativistic. Each one is defined by the task at hand at that point in time. I might be considered an innovator today for something and not for something else or at even at another point in time. Chasing after innovators is like herding cats, a point echoed by Taylor;

“The results of all this research can be summarized in the same way Kassajrian summarized the relationship between personality and consumer behavior’…the great majority indicate that if correlations do exist they are so weak as to be questionable or perhaps meaningless. ‘Thus psychological, sociological and demographic characteristics do not seem likely to identify early triers of new products”  James W. Taylor, A striking characteristic of Innovators JMR vol XIV Feb1977, pg 104

 

But as we will come to see, once we allow for variability in the system, the more we get change. But how much variability does it take to tip the scales?

3. Homogeneous/heterogeneous: Watts induced variability in the system by allowing threshold levels to fluctuate by 5% and 10%. The result (fig. a above) shows how the increased variability enhances the (larger) range for which cascade potentials are likely to develop. In other words it doesn’t take much to change POTENTIAL outcomes.

So if variability facilitates cascades and homogeneity suppresses it, might marketers pause to reconsider if their efforts to focus on specific (homogeneous) targets may in fact be hindering their ability to trigger a cascade? The simple truth is that we may never know what aspects of a group’s characteristics or the message are the critical differential elements for ‘success’, or even if we do know, we might be powerless to do anything about it.

4. Scale Free vs Uniform: “Unlike the Poisson distribution of a uniform random graph, which is sharply peaked around a well defined mean, power law distributions are highly skewed with long tails, corresponding to increased network heterogeneity. Fig. b (above) implies that random graphs with power law degree distributions tend to be much less vulnerable to random shocks than uniform random graphs with the same z…”

Here Watts describes and tries to mimic a traditional online/internet environment where the variability in the population tends to follow a long-tail distribution. Consider Facebook for example – where a few people will have an inordinate amount of connections which then drops off dramatically to the vast majority who have relatively far fewer connections.

It would seem contradictory that in a system having increased variability would result in a lowered cascade potential since we just finished saying the opposite. The answer I believe (since I’m not a mathematician) lies in considering what happens at each individual point of change. Here we would find that local variability has decreased since the surrounding neighbours are more alike. Just imagine taking a slice out of a long tail and an equal sized slice out of a bell curve and contrast the variability in those slices.

Back in the real world, we mustn’t forget the important consideration isn’t the total number of contacts (and how it’s distributed) as it is the number of relevant contacts, in that difference lives Spam and context.

 

It’s a Flat World after all (apologies to Walt Disney)

Knowing the drivers of cascades and some of their boundaries, we should be mindful that in many cases we act inside a flat world where

a)       the cost/benefit of decisions are relatively inconsequential, or

b)       the norm itself is ill/broadly defined and so easily ‘accommodated’

and so the context defined by external cues can have dramatic over-riding impact. Indeed, it’s the very fact of ambiguity that gives rise to our interest in cascades since there is no mystery around the cascade that develops for example, when cars approach a red light.

One of the most dramatic examples of the power of context can be found in this social experiment (See Pearls before breakfast) involving Joshua Bell – an internationally renowned violinist, who performing on a concert stage commands worldwide respect, attention and wealth …but as a street musician performing as a on a subway platform  manages to stop but a handful of people who collectively place his value at $32.17.

One can’t help but wonder what outcome might have befallen Mr. Bell had he faced this jury of peers earlier in his career, who recognized the talent but not necessarily enough to put him at the top of the list. An average review here, a bad break there … in much the same way that our brand initiatives rarely lack technical competency but achieve success or failure based on a turn of events.

This has led some to conclude that our cascading behavior results because we simply find it more efficient (less risky) to follow than to innovate. (John Conlisk (2002) in Costly optimizers versus cheap imitators & Schipper (2004) in Imitators and Optimizers in Cournot Oligopoly)

Clearly, watching the environment around us is a key dynamic of reasoned cascades. The notion of signal-to-noise clarity captures some of its most critical characteristics. But….

 

ARE ALL CASCADES CREATED EQUAL?

So why exactly did the T-Mobile dance get more viewers

than this one?

Are the messages any more or less compelling? They both scored well 4.5-5.0 stars. Did one get better seeding? Too serious perhaps, maybe its just the wrong thing to ask people to take in without preparing the groundwork first.

Maybe the first question we need to ask is how do we define success. How many click generating eyeballs do we need to qualify for this thing we call a cascade. AdAge.com  consider anything less than 4 million views in a week to be a sub-world class event -who says, does that matter?

What are we trying to achieve, a large footprint or a deep one? For that matter how fast should a cascade propagate. Is a tsunami better than a tide? Once the cascade passes what business benefit do we derive from it or is the event itself the success? How long does the cascade halo last?

Within the current mathematics of cascades, we only measure its effects on a 2 dimensional plane. Imagine what awaits when we add the additional dimensions? Till then, the truth of the matter is we will never know WHY one thing succeeds and not the other. We just don’t have the data so we can only describe in terms of what we measure. The mathematics of sociology gives us a sense of HOW the bigger wheels are connected. But it is here, in the mind of the beholder, that the effort lives or dies and whose individual decisions create the widely divergent outcomes.

We can be reminded of that fact if we can remember this well worn riddle…

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How many psychologists does it take to change a light bulb?

Just one….

BUT it has to want to change.

My consideration of cascades lies in its value as a propulsive force of change which among other things allows us to achieve greater levels of scale in our social communication – capturing the intimacy of 1:1 and amplifying it to a 1:many scale.

But before we get there I think these additional cascade characteristics will aid in furthering our practical understanding of the HOW. To get there I find it usually better to begin at the end first

 

 

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4. Benefit of Change. Why should people change/take action? Is the benefit of the cascade limited to the exposure or does it grow linearly or better still, exponentially in some power law or Metcalfe’s law trajectory.

It’s surprising how few consider this question. They seem to be content with the value they derive from the exposure without considering the value to their audience. Imagine if the benefit of the basic viral event grew in value for everyone involved as more and more people adopted it in much the same way as the value surrounding the introduction of fax machines or social networks?

Pundits say the more successful virals give people something to talk about which spreads the BUZZ. That’s a start, but consider thinking further outside the box to incorporate some sense of mass benefit. (everyone who registers gets a benefit, the more registering the greater the benefit to all – as this attempt by Sears Canada which is seeking to garner a larger base of twitter followers ) As we evolve our use of cascades for different purposes, addressing this question will be critical. It’s greatest application is likely to lie in social based initiatives (like Social Vibe) where the reality of a win-win-win outcome exists.

3. Cascade evaluation process. At the moment of truth when the consumer is exposed to the cascade, how are we asking them to make their decision, does it call for a reasoned or emotional process?

The more intense the involvement, the deeper the evangelism … which in turn has greater impact on the attitudinal and/or behavioral engagement outcome and propagation propensity. But should we have a separate effort to address those motivated to change by reason rather than emotion? If we presume “birds of a feather”, then the different  types of call-to-action appeals will find their relevant audiences and some might even be exposed to both.

This leverages one of the most important element of cascades – in that the message tends to find its likely recipients rather than the 1.0 methods which relied on mass communication or targeted lists to push out. The smarter will recognize this and use it to their advantage.

2. What is the Signal/Noise value of the message

  • identical signals will have higher or lower value depending on the influence/authority of the sender relative to the recipient
  • the clarity and value of the signal over the background noise is determined by the signal’s relevance and stickiness factor
  • the effort of response (awareness, interest/desire, action, purchase), risk of delaying a response and cost of making a wrong selection will all contribute to a quicker propagation of the desired cascade.

1. Cascade objective. There are three fundamental tasks we can set for a cascade be it to simply co-exist, augment an existing entity or to supplant something. Each increasingly difficult task requires a different configuration of target market selection, adoption and propagation thresholds, different core messaging and supplementary communication channels to facilitate message awareness and conversion. A misalignment here can doom the effort.

These dimensions will have a dramatic impact and propel the wiser to success.

Are we engaged yet?  Is that relevant?

As marketers many of us are tasked with the pursuit of two key yet seemingly contradictory challenges, the need to achieve scaled results and customer intimacy.

Any tool that promises to help improve customer intimacy is latched on quickly. So the level of debate in the marketing community surrounding social media; defining its role for some, justifying its resource expenditure for others comes as no real surprise.

Adding to the cacophony is a poorly defined notion of the worthwhile goal of ‘strengthening customer engagement’ and the equally vague, marketer proclaimed ‘events’ during which we ‘communicate’ with our customers who get to ‘experience the brand’. All the more ironic given these achievements are held to be the pinnacle of (social) marketing success.

To move forward we must first agree that engagements and events are not for us to proclaim, rather it is for our customers. This is a critical distinction which ensures we do not lay claim to a level of attachment/involvement that does not exist.

Secondly we need to define what we mean to achieve when invoking the term “Customer ENGAGEMENT”, the nature of that engagement (Wallet, Mind, Heart, Life) and OUTCOME (Behavior versus Attitude)

Customer Engagement

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These dimensions spanning as they do the thinking, acting, feeling and buying dynamics capture the essence of the commercial relationship brands strive to have with customers.

Some may come to consider that by this definition many in one’s consumer franchise might be hard pressed to meet even the minimum requirement of engagement. That indeed may be the case, I suppose it’s a consequence of the quickening pace of life and the power of technology – a condition we have labeled as RELEVANCE.

The silence of NOISE

The achievement of relevance and engagement is daunting. A Google search into the number of ads an average consumer is exposed to daily brings up citations ranging from 400 on up to a staggering 13,000 messages a day! Whatever the truth, it’s not likely the problem is going to get better. With the emergence of new channels or new mediums (mobile), the inherent  ratcheting effect results in net increases  in advertising volume despite the partial offsets brought on by the closing of some media channels (daily newspapers) or the redistribution of advertising monies from analog to digital and street. The effects are already being felt as email response rates and internet banner ads have reported declining response rates.

Still, others opine that these concerns over relevance can/will be diffused by our increasing ability to achieve scalable, automated offer specificity. That at long last we are on the cusp of realizing the dream of having the right offer at the right place and time (firmly planting a smile on the faces of both Lord Leverhulme and John Wannamaker) ushering in a bold new marketing renaissance.

But as we gain more precise alignment capability, we must also gain more precise understanding of timing and respect for how much we expect someone to be open to buying. Notwithstanding the universal law of target marketing (response rate increases with target and offer relevance) the pragmatic reality is those gains will be short lived unless there is some restraint on the volume of offers, a migration to search-based business models and/or an uptick in consumer disposable income. Otherwise our technological gains will be silenced by the noise or silenced by other technology. (See here)

The Measurement of Whispers

(Defining Context)

It has been said that to be heard over the noise of a crowd, one can try to scream louder or speak softly.

Context gives us the ability to whisper. It defines whether the message will be heard, how the message is interpreted, how and with whom it might be shared. It will determine whether we see/hear a concert pianist or ‘just’ a street performer.

The earlier overview of cascades helps us better understand how we can use those insights to create brand differentiating community based cascades whose messages branch out to find their most appropriate targets.

To get there we must first prove the value. Hence the question of socmed’s ROI justification is fundamentally a debate about the merits and subsequent proportions of “above the line” (ATL) versus “below the line” (BTL) spending. The tragedy is that while socmed seeks to have a type of intimacy/specificity that (albeit on different levels) is shared with other below the line marketing tools (email, direct mail) it lacks the ability to create a link through the purchase funnel and is judged/funded as an ATL channel. For many the debate has become stuck  on philosophical merits which rarely assuages. Perhaps we need to approach this from another direction and view socmed as a “between the line” expenditure because properly configured it can bridge ATL and BTL marketing impact.

Within the practicing socmed community, there is any number of best practice sources that speak to the importance of tracking all manner of things like; reputation, those expressing agreement, criticism, or support, for trending and stratifying the importance of those voices in order to monitor and respond when necessary to key conversations surrounding the brand. But without knowing what aspect of brand is important, we end up with a diluted effort in messaging and conversation – generating and reporting on chatter instead.

Others put forward a broader scope suggesting a correlational if not an integrated marketing impact assessment spanning sales, SEO/PPC/Organic, third-party endorsements and the spread of user-generated content, but the challenge lies in linking data streams.

Some suggest the opportunity to simplify by using a Net Promoter Score measure within social media given that those consumers who have more conversations with the brand tend to have higher NPS scores which tend to have stronger brand results which tend to have stronger profit which tend to have….

Not being able to provide an irrefutable causal link between effort and profitable results, others still approach the ROI substantiation problem on the premise of “the-comparable-expenditure-that-would-have-been-otherwise-required” argument. The work itself is sound (follow this link  to a social media ROI calculator) even if one doesn’t fully embrace its ‘look-at-the-money-you-saved’ premise.

None of these are wrong things to do but they largely lack the ensuing actions that is needed to garner support from both the CEO and CFO. That support can be found by focusing socmed activity in furtherance of the brand vision/mission for the simple reason that the memes found here are by definition key value differentiators for the brand.

By way of example consider this, the Mission/Vision statement for Coke*** and the paths it blazes for its brands, the type of consumer conversations that are likely to exist there and the sales value the brand will gain as a result.

The Coca-Cola Company – Our Mission

Our Roadmap starts with our mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions.

  1. To refresh the world…
  2. To inspire moments of optimism and happiness…
  3. To create value and make a difference.

Our Vision
Our vision serves as the framework for our Roadmap and guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable, quality growth.

  • People: Be a great place to work where people are inspired to be the best they can be.
  • Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy people’s desires and needs.
  • Partners: Nurture a winning network of customers and suppliers, together we create mutual, enduring value.
  • Planet: Be a responsible citizen that makes a difference by helping build and support sustainable communities.

With this type of roadmap (see the rest of the mission/vision statement below***) we can leverage current efforts/tools in social marketing intelligence (for example see Social Web Analytics eBook 2008) refining the dimensions under a few key memes that tie back DIRECTLY to the brand’s vision/mission.

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So if the brand speaks to being a good corporate citizen, define that and activate the brand community to influence, participate, judge and acknowledge the efforts you and they are taking on everyone’s behalf.

If your brand is supposed to be seen as fun, environmentally sensitive, hip, a thought leader, an innovator, a champion of the down trodden … how do you go about fulfilling that mandate? When your brand speaks about customer centricity or providing value, define what that means and then consistently “walk the talk” throughout the organization not just in social media channels.

It stands to reason that if the constituency is kept abreast and discussing these brand value memes, they will come to have an elevated appreciation of the brand which ultimately drives higher sales/profit. Those who do not believe in that link are left with only one option and that is managing the business for short-term transactional efficiency.  And if people aren’t responding to the conversation, you have just learned an important albeit painful truth about the disconnect between what your brand considers to be important and what your paying customers do.

That elevation is the context we seek in order to help our customers appreciate the fuller value of the purchase offers we extend elsewhere. When we show that those (individuals, segments) with higher opinions/engagement are ‘better’ customers in total – be it in terms of share of wallet, or some efficiency of purchase  or profitability metric then a large piece of the ROI substantiation puzzle falls into place.

But notice the sequence…its talk first, then listen, then converse. Exciting stuff, to be leading a conversation and establishing the context under which the brand’s value is better understood and appreciated. The simpler truth is that if we can keep a focused conversation around those things the brand is supportive of, then we have gone a long way to re-balancing the scales between push vs pull. The path of these conversations might even lead to informal or formal crowd sourcing initiatives that facilitate even deeper involvement with the constituency. This will not eliminate the debate on the optimal resource allocation mix, but at least there is some foundation to build upon.

There are some who may take exception to an active dialogue with consumers, arguing that consumers don’t wish having brands/sales people interjecting into their “private’ conversations. That is true, but I am proposing this course of action for NEW conversations and inviting consumers to join in the discussion and help it develop into a force of positive change. A much different and complementary proposition  to current practices. Be certain, there is a need to ‘be there for the customer’ when they reach out for help, the difference is proactivity and focus, return on investment versus cost of goods sold.

CONCLUSION: The GREAT Challenge

The great challenge facing brands is compression. There are fewer resources available (time, money, people) and more expected/required…Moore’s Law on steroids. In that compression, the flow of the immediate seems like an eternity and both marketers and consumers are challenged to fathom anything outside of the flow. As a consequence we cycle through the same problems (how do we get them to buy, how do we stay relevant) hopping from tactical to tactical. Consumers being offered tactical, respond in kind reinforcing the feedback loop.

Whispers happen in that flow. Having discovered that being social is more difficult and time consuming (because its benefits are earned and not simply bought), some are looking to tap into the whispers to try to gain a real time tactical advantage over their competitors.

Others, having overcome their initial fascination and desire to achieve global/viral cascades are seeking the more pragmatic and higher strategic value of the medium by co-influencing  conversations based on share of life. These efforts lead to cascades of a different sort and scale where the deeper impact stems from the power of context and trust rather than managing another part of the spectrum to display ads or deriving intelligence for more ‘relevant’ offers.

It begins by establishing a (digital) outpost for the brand community and expands from there to a participative dialog with consumers around the key differentiating elements of the brand’s platform as identified in the brand’s mission/vision of establishing a relationship.

Done successfully it will placate the ROI demands of business which otherwise has little patience for anything but the most active of scalable engagements. Providing indefatigable proof of an ROI is achieved once we know the WHO, at which point much of the pressure for justifying the WHEN, WHERE and WHY tends to blend into the background. Knowing WHO allows brands to backtrack into their CRM platforms and pull out most of the rest.

Be certain that ‘cascades’ happen all the time …only more slowly and on different scales with the forceof whispers.

*****

…“Then turning to those around her, who were eyeing with amusement the curious play on the pipe, she continued, “many laborers in the fire have I heard of (alluding to alchemists)who turned their gold into smoke, but Sir Walter is the first who has turned smoke into gold.”

Source: NYTimes May 3, 1896

*my thanks to Rick Ferguson at Colloquy for bringing a rendition of this tale to light.


 

***Coke: Mission, Vision & Values

The world is changing all around us. To continue to thrive as a business over the next ten years and beyond, we must look ahead, understand the trends and forces that will shape our business in the future and move swiftly to prepare for what’s to come. We must get ready for tomorrow today. That’s what our 2020 Vision is all about. It creates a long-term destination for our business and provides us with a “Roadmap” for winning together with our bottler partners.

Our MissionOur Roadmap starts with our mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions.

  • To refresh the world…
  • To inspire moments of optimism and happiness…
  • To create value and make a difference.
Our Vision
Our vision serves as the framework for our Roadmap and guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable, quality growth.

  • People: Be a great place to work where people are inspired to be the best they can be.
  • Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy people’s desires and needs.
  • Partners: Nurture a winning network of customers and suppliers, together we create mutual, enduring value.
  • Planet: Be a responsible citizen that makes a difference by helping build and support sustainable communities.
  • Profit: Maximize long-term return to shareowners while being mindful of our overall responsibilities.
  • Productivity: Be a highly effective, lean and fast-moving organization.
Our Winning Culture
Our Winning Culture defines the attitudes and behaviors that will be required of us to make our 2020 Vision a reality.
Live Our Values
Our values serve as a compass for our actions and describe how we behave in the world.

  • Leadership: The courage to shape a better future
  • Collaboration: Leverage collective genius
  • Integrity: Be real
  • Accountability: If it is to be, it’s up to me
  • Passion: Committed in heart and mind
  • Diversity: As inclusive as our brands
  • Quality: What we do, we do well
Focus on the Market

  • Focus on needs of our consumers, customers and franchise partners
  • Get out into the market and listen, observe and learn
  • Possess a world view
  • Focus on execution in the marketplace every day
  • Be insatiably curious
Work Smart

  • Act with urgency
  • Remain responsive to change
  • Have the courage to change course when needed
  • Remain constructively discontent
  • Work efficiently
Act Like Owners

  • Be accountable for our actions and inactions
  • Steward system assets and focus on building value
  • Reward our people for taking risks and finding better ways to solve problems
  • Learn from our outcomes — what worked and what didn’t
Be the Brand

  • Inspire creativity, passion, optimism and fun

2010 in review

January 2, 2011

The stats helper monkeys at WordPress.com mulled over how this blog did in 2010, and here’s a high level summary of its overall blog health:

Healthy blog!

The Blog-Health-o-Meter™ reads This blog is doing awesome!.

Crunchy numbers

Featured image

A Boeing 747-400 passenger jet can hold 416 passengers. This blog was viewed about 12,000 times in 2010. That’s about 29 full 747s.

 

In 2010, there was 1 new post, growing the total archive of this blog to 38 posts. There were 5 pictures uploaded, taking up a total of 336kb.

The busiest day of the year was April 22nd with 91 views. The most popular post that day was The Measurement of Whispers.

Where did they come from?

The top referring sites in 2010 were gilkalai.wordpress.com, twitter.com, en.forums.wordpress.com, linkedin.com, and shots.snap.com.

Some visitors came searching, mostly for steps, chess, leonardo da vinci anatomy, brand essence, and momentum.

Attractions in 2010

These are the posts and pages that got the most views in 2010.

1

The Measurement of Whispers August 2009
8 comments

2

The Big Shift – Managing resources in an uncertain world March 2009

3

The Anatomy of a Brand Purchase – Part 1 January 2008
6 comments

4

Toward a better brand (12 thoughts) April 2009

5

Brand Affinity Dynamics June 2007
1 comment

The face cloth

March 25, 2010
tags:

This is a parable (perhaps true) told to me by Stephen Baker (The Num3rati) when I interviewed him for a feature article with Direct Marketing a few years ago. It captures the essence of our modern digital lives. Lives we were once able to keep separate from the ‘real world’, the digital world that in many respects has become more pervasive and ‘relevant’.  As mobile computing expands with geographic location tracking (Foursquare etc…) and with facial recognition ( Recognizr) set for introduction, as ever expanding data farms are crunched by increasingly powerful heuristics there are benefits and conveniences to be had … just as there are costs for those conveniences.

However the question we will need to come to terms with in the not to distant present, is what is the fair market value for the loss of anonymity?

The face cloth

Birth of Venus by Sandro Botticelli 1486Turns out a female acquaintance was attending a co-ed college.

She, we’ll call her Venus, happened to be showering in her dorm when a fraternity launched a blitz

…nothing sinister just the typical college pranks.

Venus, hearing the ruckus thought little of it at first. She reckoned by the time she was finished her shower, the boys would have vacated the dorm and she’ld be able to return to her room with her modesty intact. But in their hi-jinx, the boys had absconded with her robe and towel!  And when they failed to leave the dorm after an hour, Venus realized she would need to make a critical choice, protect her modesty and stay in the shower till they eventually left or risk exposing herself.

She chose to make a run for her dorm room since she had an imminent  term paper deadline to meet. But with only a face cloth to afford her some modesty there was a problem…

In the end, Venus covered her face and made the bolt to her dorm room deciding that having the boys catch a glimpse of a fully naked woman’s body streaking past them was less of an exposure than having her identity revealed.

….and that is the choice we all need to make.

Retention is the New Aquisition

July 23, 2009

This article with a few select gentle edits was co-written with Phil Olivieri as part of the July’09 issue of Direct Market see here for a PDF of the entire issue.

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Retention is the New Acquisition

by Miro Slodki & Phil Olivieri

Ask any business today and it will profess to be both customer-centric AND long-term focused. Whereas the past practice of customer acquisition at any cost has become too costly, it has given rise to the  pursuit  of new forward-thinking customer retention initiatives that in effect create value.  Some even say that this is the underlying principle of Alfred Rappaport’s famous dictum that

Without customer value there can be no shareholder value.

As any marketer will attest, the calculus of the Life Time Value (LTV) metric encapsulates many of marketing’s most important customer behavioral outcomes – the value stream (revenue/margin/profit) and the costs associated with the acquisition of new customers, the retention growth of next best customers (as a function of response rates to up-sell and cross-sell offers), the reactivation of lapsed customers, the loss of customers, the impact of word of mouth referrals and finally the discount rate to reflect the inherent risk/volatility premium of the financial value stream all of which provide  an ongoing tally of that customer/segment anticipated retained present value.

Still, there are some things LTV doesn’t accommodate very well, beginning with the basic formula where the use of a single average discount rate runs the risk of leading to under spending on existing customers and overspending on new customer acquisition efforts. Others have also noted shortfalls accommodating the social multiplier-network effect reflecting a brand’s incremental advantages as it crosses threshold levels of scale/community (see Gupta, “Value of a Free Customer). Hogan et al (2002) also speaks to underlying drivers of purchase continuity like quality and service satisfaction as well as competitive effects.

So how do we define retention? It’s actually a trickier question that it seems. At the most basic level, everyone will agree that retention can be validated at the last instance of purchase. What about the time in between, especially for those who buy infrequently or irregularly? Consider as well that many view retention to be both a state of mind AND a state of being.

Not surprisingly then, our definition of retention will form the cornerstone not only of one’s brand strategy (catering to buyers at one end or partners at the other) but of the company itself. How the company/brand chooses to interact with customers (and visa versa) along the Push Vs Pull continuum in an increasingly interconnected world through experience, word of mouth and reputation can literally transform retention into a powerful acquisition channel.

In fact Gupta, Lehman & Stuart showed that improved customer retention had the largest impact on customer value, followed by improved margins with reduced acquisition cost having the smallest impact. The results show that a 1% improvement in customer retention enhances customer value (and, in turn, firm value) by approximately 2.45% to 6.75%, whereas a similar decrease in the discount rate increases customer value and thus firm value by only .5% to 1.2%. In other words, the retention elasticity is almost five times the discount rate elasticity. (see “Valuing Customers”).

If keeping customers creates superior value, then it follows that greater success will come to those better able to establish not only a value-differentiated brand, but also actively engaged partnerships. Support for this comes via McKinsey which noted that consumers tended to have  one of three types of relationship orientation;

1) emotive (strong brand attachment),

2) inertial (habitual brand buyers either uninvolved or don’t feel need to change) or

3) deliberative (frequently reassess and recommit to the brand)

(See McKinsey, “Customer retention is not enough”).

Moreover, McKinsey suggest the greater opportunity lies not in trying to mitigate against outright customer defection, but in seeking to influence expenditure shifts between competing offerings. In their calculations, managing the upward migration of a brand’s share of requirements (with engaged customers) could have as much as ten times more value than concentrating on defections alone. The quality of active engagements is further corroborated by an IBM retail sector study which reports that at (any) given level of spend, a greater proportion will come from brand advocates than non-advocates. (see “Why advocacy matters to apparel retailers”)

We are all familiar with the fabric of social connectivity first studied in Milgram’s Small World experiments. Since then we have seen many popularized models (Gladwell’s Tipping Point, Duncan J Watt’s Big Seed – one can even include the field of Behavioral Finance) recognize the influence of those around us in our decision making. Add to this the evolution from linear to scale power laws made possible by our new found global social network connectivity and one quickly realizes that the pendulum  of marketing is swinging bringing us full circle to the realization that retention is both behavioural and attitudinal.

Armed with that knowledge some marketers eagerly embrace the chance to engage one’s customers in co-creational activities across all elements of the brand while others pursue a traditional behavioral relationship orientation. In either event, from a CRM practitioner’s perspective, there are several best practices companies can adopt and implement to realize retention as the new acquisition.

First, it is important to identify best, next best and the worst customers.  A mutually beneficial business relationship requires that we identify best and next best customers and collaborate with them through a dialogue to create new value that will benefit both parties over the long term.  Deciding which customers to focus on and invest in for growth and which to simply maintain, and in some cases neglect, is the first and most important strategic decision toward intelligent customer retention.  It is important to recognize that value creation is a joint experience between the brand and the customer and consequently, value will vary with each.  Basic CRM analytics and simple business rules allows companies to indentify and flag these customers in their data warehouse.

Curiously, many companies often overlook the fact that managing customer retention is both proactive and reactive and both need a plan to succeed. Proactive management requires businesses to be able to anticipate customers’ needs based on past and current behaviour, i.e., lifecycle (products or services that customers need throughout their lives), life stage (student, younger independents, older independents, families, retirees) and attrition propensity.  One might also consider some form of customer appreciation retention bonus to customers for having graciously supported the brand in the last year. In fact those proactive measures may play a significant role in any reactive retention management plans the business puts into action since it has some foundational goodwill investment to draw against its account with the customer.

Straddling the proactive/reactive management of customer retention are event detection triggers which can be set up in the customer data warehouse using business rules and operational processes to trigger a heads up notice to customers that some aspect of the brand promise has been below expectation, but that the brand is aware of the situation. That ‘simple’ notice not only avoids unnecessary customer enquiries, but also signals the sanctity to which the brand upholds in terms of consistent service delivery.

A best practice is to develop a master contact management plan and strategy (CMP) that will serve as a communications roadmap and optimize interactions, both proactive and reactive, through appropriate channels.  The CMP is a multi-dimensional matrix that assigns appropriate messages and treatments by customer across their life stage and life cycle also taking in to account, propensities for cross-sell, up-sell and attrition.  Within the CMP, companies can assign relationship investment thresholds based on the value of the customer, which translates into richness of offer, optimal channel selection, etc.  The CMP can be operationalized using campaign management technologies for both outbound and inbound channel interactions.

Campaign management applications (CMA) help companies to evolve by shifting to a more customer-centric strategy that delivers consistent and superior experiences to more savvy and demanding customers; it leverages the increasing proliferation of addressable attention channels – including inbound (call centre, retail locations, branches with treatment prompts) and outbound (direct mail, statement/invoice with personalized messages); and strives for responsiveness to individual customer behaviors leveraging real event detection in near real time.

CMA functionality also helps companies achieve the transition to customer-centricity by:

  • being customer-aware: the ability to capture what a buyer is saying both explicitly, i.e., leveraging existing warehouse investments) and implicitly (to process that information to determine what to say next);
  • providing centralized decision making with optional decentralized execution and co ordination : to determine the best marketing message to extend in outbound and inbound marketing channels, online and offline;
  • enabling cross-channel execution: to help drive message and treatment consistency as well as a synchronized seamless experience as customers interact with the enterprise;
  • integrating marketing operations: to help marketers improve collaboration and facilitate cross-channel planning, design, execution, and measurement;
  • anticipating new customer insight and channel capabilities: attitudinal fusion, mobile channels, social networking relationship channels.

In addition, what’s managed also needs to be measured to ensure the success of all customer retention efforts.  Performance measurement is a business imperative and key performance indicators (KPIs) must be created to depict the current state of the customer and generally include such metrics as retention rate, incremental value (revenue/margin/profit), engagement index, etc. And while there is much excitement about the promise of social media channels, there is also uncertainty about the measurement of conversations and the application of any learning to everyday customer management practices. To do nothing is the worst decision, to test and learn the wisest.

So then, perhaps the most important learning of all is that, as marketers and CRM practitioners, we need to challenge the comfort of our data warehouse defined universe to include additional ‘truths’, acceptance of which, will bring one back to the beginning and excel in a connected social world where increasingly, retention is the new acquisition.


TV Commercials 2.0 – revisited

May 29, 2009

This post was first published on the Canadian Marketing Association blog on January 29,2009 and recently revisited (Let’s Vote) by Hollie Shaw at the National Post.

In between there have been several venerable print/newspaper properties succumb to declining ad revenues as business models adjust themselves to changing competitive and economic conditions.

Over at Millward Brown – Nigel Hollis has also been asking questions (see here, here and here) regarding TV commercials making the point that despite media fragmentation it remains a leading, powerful and current weapon in the marketer’s arsenal.

But I ask that as you read through the rest, to wonder aloud…. if advertisers had to compete for audiences (and not simply buy access to them), whether the competition wouldn’t  unshackle the advertiser’s craftsmanship – to make one stop and engage with the communication instead of reaching for the fast forward button.

One might argue marketers best interest is to create sales generating ads from the outset…perhaps … but that doesn’t explain why so many commercials are being zapped. The only answer is to have marketers, advertisers, broadcasters and consumers working together  learning  how to create better value for each other. No doubt these ideas need further refinement – but the point remains the status quo is quickly becoming an ineffective option.

Here’s the original post:

old_tv_set_rc

For some time now parts of the marketing world have been wondering if the growing problem advertisers are having getting their commercials seen by their intended targets is not a problem of their own making.

One only needs to look at the Clio awards to see some great commercials being produced that stop traffic (and drive sales?), but these are the showcase creative executions that do not reflect the main stream advertising that is broadcast day in and day out. And that’s part of the problem, its push based advertising and some of it is not as good as it could/should be. This started me to wonder if we might see greater success (on many levels) if we adopted a google customer voting approach to TV commercials.

So here’s the idea:
What if we allowed consumers to come to the program/station website to preview and select which commercials they would like to see? They’ld have an opportunity to pick from a pool of let’s say 10 commercials from which they select their final 5. The “Top 5” commercials with the most votes get aired, the rest…

Now the financial model for the networks would be based on 3 streams.
1. A fee from advertisers who wish to be submitted into the pool, plus a second fee for each commercial viewed and voted on.
2. A subsequent fee for the airing of the winning commercials.
3. Free analytics for the winners while losers would have to pay.

The station/program have an opportunity to wrap a contest around the voting event, spike program interest with teasers and get important viewer data in advance of the airing. Those ads that don’t make the cut, can try again – but if it fails to solicit a customer following then the advertiser has learned something about their commercial execution. Consumers could be encouraged to watch the aired commercials by participating in some on-screen promo/QR code event.

If you think this is a little far fetched – have a read of a similar approach being taken by Pepsi for the Super Bowl as they seek to get consumer input on which spots consumers will get to see. Pepsi Tries Super Bowl Spot Selection 2.0

So what do you think?
If consumers could pick which commercial they would see, would that:
1) Raise the level of commercial entertainment/communication value of the ads
2) Provide additional value to advertisers and revenue for broadcasters
3) Increase the % of viewers that watch and retain the messages being broadcast to them
4) Give consumers a sense of ‘programming control’ that would help broadcasters ‘engage’ their audience

Or do you feel it’s too little, too late.

In case you haven’t had your fill of TV commercial, this links to my collection of favorite commercials like Apple 1984 and others…

Is it time we fired our Shareholders? revisited

May 25, 2009
This article was orignally posted on the Canadian Marketing Association blog on June 25,2008 to speak to the financial crisis besetting the economy. Since then, we have had various parties pointing the fingers of blame on all of us, the media,  business, government.

CNN’s Anderson Cooper ranked the consumer as  first on the top 10 list of culprits for the collapse. Michael Useem writing in the Washington Post (The Officer Should Eat Last) places the blame on an absence of (corporate) leadership. Others point to the media as this watershed  exchange between Jim Cramer (MadMoney) and Jon Stewart on The Daily Show – Thursday March 12,2009 (official clip, unedited clip)

In truth, the ultimate culprit IS us and our tendency to pursue short term solution paths because of our constrained ability to measure/predict beyond the near-term and perhaps impatience brought upon by the accelerating pace of change around us as illustrated by Ray Kurzweil.

Until we become better forecasters, the only ‘answer’ is a set of higher guiding principles as the logical pursuit of short-term can result in unintended consequences as illustrated in this seminal article (The Tragedy of the Commons) by Garrett Hardin.

Which ultimately raises the question of cause and effect – if we acted with one set of beliefs – then our assumptions for the future would be made easier because of our appreciation/understanding of those  implicit underlying assumptions…believing in long-term allows us to better at long-term.

umpireout3

The Problem:
Peppers & Rogers call it Short-termism. (Rules to Break and Laws to Follow)
A condition so dire they rank it as their #1 rule to break for a company to succeed. It speaks to the pressure the stock market places on meeting short-term profits and expectations – sometimes culminating in truly tragic consequences as evidenced by; Enron and Arthur Anderson, the $300+Billion US sub-prime mortgage crisis and even reaching into allegations of fraud:

SEC Commission charges that Adelphia, at the direction of the individual defendants: (1) fraudulently excluded billions of dollars in liabilities from its consolidated financial statements by hiding them in off-balance sheet affiliates; (2) falsified operations statistics and inflated Adelphia’s earnings to meet Wall Street’s expectations”

Ironically, the quest for trying to meet the short-term profit goals of the stock market (perhaps also spurred on by a desire to merit contracted bonus targets) actually wiped out more shareholder ‘value’ than ever would have happened otherwise had but a modicum of fiduciary responsibility prevailed.

“…But along with the goal of accountability, there’s an unintended consequence since it effectively tells CEOs that their continued employment depends on meeting short-term goals. That’s because Sarbanes-Oxley has made boards less hesitant to dismiss CEOs, and the boards themselves serve at the pleasure of shareholders and their institutional fund managers, who are increasingly looking at short-term results.” according to Jagdish Seth, Professor of Marketing at Emory University: Are U.S. Companies Doomed to Keep Planning for the Short Term?

While dramatic and extreme, these aren’t isolated cases. Consider Southwest Airlines, often sited as a leading customer-centric organization (Ranked #2 on Fortune’s 2003 Top 10 Most Admired Companies in America) and their fall from grace in 2007 as reported by CNN:

“Discount air carrier Southwest Airlines flew thousands of passengers on aircraft that federal inspectors said were “unsafe” as recently as last March, according to detailed congressional documents obtained by CNN.”

While the airline claimed flight safety was never an issue that message was not heard judging by responses to the story from readers.

“…..Once trust is broken, it is hard to hand over the lives of my family to a company that does not have our best interest and safety at heart.” Phil – March 10, 2008

“I’m a retired airplane mechanic.…Thank de-regulation for your cheap tickets, but the excessive competition in the industry means cost controls eventually get a stranglehold on every part of an airline, except executive compensation…The next time you buckle in, remember that you are only getting as much airline safety as you were willing to pay for, and have a nice flight.” JC March 7, 2008

There’s a sizable concern that things just aren’t right. When Bain completed their 2007 global survey they found a ratio approaching 2:1 of managers (43 percent agreed while 25 percent disagreed) who felt their companies would have better long-term results if privately owned.

Some companies have intentionally avoided a stock exchange listing for that very reason.

“Certainly one of the advantages is being able to manage for the long term without having to become obsessed with quarterly results. When a company like ours (Bechtel) is taking on major projects with long-term risks, it is certainly advantageous to have that longer-term perspective.” Jonathan Marshall – Bechtel Source

Others purposely engineer their ownership structures to protect their ability to thrive in the long term. Google’s IPO submission read in part:

“The standard structure of public ownership may jeopardize the independence and focused objectivity that have been most important in Google’s past success and that we consider most fundamental for its future. Therefore, we have designed a corporate structure that will protect Google’s ability to innovate and retain its most distinctive characteristics.” Source:

Some point out the short-termism problem is “contained” to certain stock markets.

“…Other than London, the European stock exchanges and especially their Asian counterparts tend to have limited liquidity because of family ownership and bank holdings. … So the biggest stock owners don’t see their shares as commodity items. Instead they’re something to be developed and passed on to the next generation.”
Source: Professor J. Seth, Are U.S. Companies Doomed to Keep Planning for the Short Term?

Others still, may feel the current situation simply requires better risk management practices, management oversight and/or a realignment of compensation practices (see Rotman’s “The Risk Issue” Spring 2007 for an excellent overview). Perhaps they’re right, but I think we need to consider that these are all symptoms of the same underlying short-termism problem. For those who agree the short-term focus is “wrong” – shouldn’t we do something about it?

matrix_pill

An alternate view of the purpose of an enterprise:
The prevailing view (for many) that customers exist to create profit for the enterprise’s shareholders is in contrast to an emerging alternate vision which notes that the purpose, indeed the very existence of the enterprise is to profitably serve its customers. Without them, there is no enterprise….there are no shareholders. In this new paradigm we come to see that the ultimate stakeholders that define the success of the enterprise and to whom the enterprise is ultimately “accountable” to are its customers… not the shareholders.

So if we come to recognize that:

1. having a short-term focus does not have a privileged profit generating status
2. the enterprise’s profits are created by the will of customers, and
3. profit streams typically require some investment to ensure their continuation,

then we need to ask ourselves the final question…

IF we have shareholders demanding short term profits that will come at the expense of the long-term value of its customers, shouldn’t the enterprise seek to “fire” those shareholders? …Just as surely as it would fire an employee or supplier that was working at cross purposes . Just as surely as it ‘fires’ customers that aren’t profitable by minimizing interaction expenses and/or realigning fees.

If the pressure for delivering near-term profits puts the brand on a path that exposes the enterprise to greater risk, then surely the C-suite and the Board of Directors must take a stand and uphold their fiduciary responsibility. As noted earlier Boards may be afraid of being exposed to lawsuits from shareholders for not maximizing profits – but with this emerging viewpoint, they may face a similar legal threat from the other side (although I am not a lawyer). Shareholders after all, are free to select other enterprises or financial instruments benefiting as they do from their capital liquidity if they wish to maximize their short-term profitability objectives. Shareholders with a short-term investment horizon ……are not stakeholders.

This doesn’t mean the enterprise isn’t held accountable for meeting profit and other objectives. Quite the contrary, it places an even greater premium on identifying, developing and implementing sustainable value. Short term profits and time to market pressures don’t have to win out over the long term investment decisions since it is not any less profitable if it is done right (if over the slightly longer term).

Collins & Porras (See: Built to Last) spoke of the need to have a BHAG (Big Hairy Audacious Goal), a long-term vision that is supposed to be so daring in scope that is seems almost out of reach. What is needed is a willingness to pursue this path led by the CEO adopting the mantle of responsibility of the Chief Brand Officer. (see Ted Matthews) The resulting realignment of systems, people, skills, program implementations and performance compensation will provide a stronger balance of what is good/better/best for the maximum accumulation and retention of profitable customers and the realization that retention is in fact the new acquisition.

For those interested in more, this clip starts off Niall Ferguson’s The Ascent of Money series

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The great media debate – evolution or revolution

May 15, 2009

Nigel

re your post: The great media debate – evolution or revolution you said:

“I believe that we are watching evolution at work. By and large, technology is changing far faster than humans can adapt to it. But when a new technology satisfies a basic human need better than an old one does, that technology takes off. Social media satisfy the basic human need to connect with others….

…But if your business model requires economies of scale to produce a product at an attractive price, then you need a mass market. And to communicate with the mass market and create mass demand, you need good old-fashioned reach….”

As you mentioned and noted by others (Kurzweil (see here)  and Hagel, Seely Brown & Lang at HBR (see here) technology induced change has  shortened the life span of many things. By virtue of the flow of information we are exposed to our attention span has (sadly) become shorter.

But the real game changer in this new dynamic are the power laws of network connectivity – our ability to form, be influenced and influence groups is no longer linear in scale. While individual attention spans are shortened in aggregate they become more powerful – the pass along buzz becoming a currency of perceived worthiness elevating its value above traditional communication.

While any transition is by definition fragmentory, the critical question rightly noted about this transition is whether will we be able to manage and convert PULL activities into demand generation on the scale and timeline demanded of us by (PUSH) shareholders.

“We’re moving from a world of push to a world of pull. Push programs operate on one key assumption – that it is possible to forecast future demand. When demand can be forecast, we can efficiently push resources to where they will be needed when they will be needed.” Hagel et al

“But unfortunately what makes Facebook a great venue for connecting with others does not make it a good medium for marketing. Social media can’t replace traditional media for marketers….There is a fundamental problem facing marketers today. Fragmentation is rampant, online and off. So the cost of reaching a mass audience continues to climb…”

The answer to that question rests on our ability to create and communicate differentiated value. More than ever, undifferentiated ‘value’ will be lost in the noise. Setting aside for the moment the more critical question about the scale of value intimacy we can achieve, Duncan J Watt’s Big Seed Marketing model recognizes the confluence of the two worlds, of using  “mass” media to seed messages which are hopefully embraced and propagated by the social component. Either can be sufficient, but both working together elevate synergies by providing co-creational “value with”  to reinforce the  “value at” customer communication allowing mass scale businesses to accomplish a critical ‘slight of hand’.

The soul searching debate about the ROI of “social media” rages without appreciation of the larger dynamic shifts. One must learn to accommodate both since both messages add value and increasingly both will be needed to stay in the game.

Which of the old and new channel frequencies survive is open for speculation as both will be reconfigured or perish. It is important to remember that the ability of a channel to facilitate ‘social’ requires more than a label, it inherently needs to support some form of co-creation, interaction or dialogue – let’s call that interactive. That we think 140 characters is enough to constitute a dialogue is an indication of the compression we are undergoing.

The only certainty I can point to is that media fragmentation can be better managed with pull based brands.  The process of communication is a multi-frequency endeavor, each having its role to play at different times for different reasons. Yet somehow we have forgotten that communication can/should be measured as everything that happens between purchases and attributed back to that ROI.

Still there are many unknowns, at the top is the opacity of the individual tipping points between the new polarities (scale Vs intimacy, Push Vs Pull, “value at” Vs “value with”)  and how the herding instinct emerges from intimacy – which will provide scale advantages of a different sort. The is a key point that many marketers fail to recognize, within a networked community, the greater our effort  to communicate and relate to individual customers the greater its impact on all customers – just look at Zappo’s, apple or any customer intimate brand.

For some, these are scary times. They feel paralyzed without the safety of an ROI to support their initiatives. The only thing I can offer is to heed the ancient warning of mariners  “here be monsters”  as today that applies more to the status quo than to the uncharted waters we have entered – because once the shift happens…

cheers

Miro

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