Cluetrainplus10: Thesis no.2

This is my blog post on thesis 2 of the Cluetrain Manifesto, forming part of cluetrainplus10. This is a project set up by Keith McArthur to celebrate the ten year anniversary of the manifesto’s publishing. I am one of many bloggers who has picked a thesis to cover today.

I feel like a bit of a charlatan, as I haven’t read the full book. I feel like I have, since the book gets referenced and rehashed so often but I should really go to the source at some point the get the version without embellishments and misinterpretations. I have at least read the manifesto though, and there was a thesis available that I wanted to cover so…

2. Markets consist of human beings, not demographic sectors.

Without wishing to revert to school essay-writing style, it is important to deconstruct the parts of this thesis.

Firstly, markets. Straightforward enough – an exchange of a good or service between a giver and receiver. The economy is made up of a vast number of complex and interconnected markets.

Secondly, demographic sectors. Now the tighter definition of a demographic will look at the objective population characteristics of that segment. Age, gender, ethnicity and so on.

However, loosening this could incorporate location-based, attitudinal, behavioural or lifestyle factors. Segmentation is not a science, after all.

Prisoner Patrick McGoohanThirdly, and finally, there is human beings. We have consciousness, emotions, motivations and free thought. We are not numbers, we are free men.

So, on a tight reading, the thesis could be saying that we shouldn’t be grouped into segments or demographic sectors, but treated as individuals that can fluctuate in and out of pre-defined targets as and when we please.

Technically correct, but this works better for pull-markets than push. In a pull market, the seller has ceded a degree of control. I self-select myself to customise the experience within the constraints to give myself maximum utility. The web has been a great enabler of this.

But most markets are still push markets. Unless your population is a super-select group (e.g. multi-billionaires), it is technically infeasible to treat all potential traders as individuals. That is where demographic sectors come in useful. Population characteristics are pretty outdated and completely overlook the fantastic diversity of our society. Attitudinal or behavioural demographics are much more useful (and fluid).

This reading also overlooks an important element of the thesis. As human beings we are plural. We may be individuals, but we also act in groups. Some might say that we have an inherent herd mentality.

So it is feasible to target groups by attitude, but we should treat them with more grace and humility. With humanity. Not calling them targets, for one thing.

And this works both ways. We should be human ourselves. Organisations should display this emotion, free thought and consciousness that defines us as who we are.

This gets to the heart of the thesis, in my opinion. And it is ever more relevant as the economy gets destroyed by rampant, greedy capitalism. It may not bring the short-term efficiency of a quick trade on the stock exchange or a last second snipe on ebay, but it creates meaningful and long-lasting relationships. Which ultimately benefits both sides.

We are people. We may be grouped, but we are not homogeneous. We are not faceless, we have multiple faces. Our name is legion. And we should recognise this.

We have been slowly learning to treat the customer with respect by using various platitudes.

“The consumer isn’t a moron. She is your wife”David Ogilvy

Now it is time to respect ourselves.

sk

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Segmentation is not a science

An Advertising Age blog post inaccurately entitled “The Death of Customer Segmentation” (those pesky subs) argues that traditional market segmentations should be combined with “self-segmentation” techniques such as user recommendations, networking groups, opt-in alerts and consumer generated content/feedback.

The author, Michael Fassnacht, finds traditional segmentation problematic because:

  • It is too static in a fast-paced society
  • People can belong to different segments at different points
  • Consumers want more control over their marketing activity

He believes that incorporating these self-selection elements will empower the consumer to pick the most relevant messages for themselves.

I can’t quite articulate my problems with this article but they broadly fall into three areas

1. Segmentation is not a science

Segmentation is an art. It is about interpretation. It is about tendencies. It delivers a framework; not a silver bullet of success.

Segmentation analysis is created through factor and cluster analysis. . There is no correct answer – the final solution is decided by weighing up the coherence of each cluster against the ability to manage the result (ie a twenty cluster solution will produce more coherence than a four cluster solution, but twenty targets are harder to manage than four).

Clusters are only indicative; they aren’t precise or mutually exclusive. To illustrate this, I will use my favourite segmentation example: Phones 4u.

Take “Flashing Blades”:

All these descriptions will be tendencies. Flashing Blades are more likely to be these demographics, and more likely to follow this lifestyle. Otherwise, it would be a segment of about six people, not 1.68m. So within this group there will be some women, some pensioners, some teetotallers and some pacifists.

So, those identified as “Flashing Blades” aren’t pure “Flashing Blades”. They are just closer to this target than the others. Being part of different segments isn’t an issue.

However, a lack of dynamism could be a more valid criticism. In a few situations. Some behaviour patterns change, but it is unlikely that the core of a personality will. So while I have recently changed some of my leisure habits (one reason why my link updates are on temporary hiatus) I am still fundamentally the same person and will likely approach most markets in the same way.

And a segmentation is only likely to focus in one market, despite the complex interactions between them. In that respect, a successful segmentation may be self-defeating; I may be identified as a potential but through adept targeting I become a consumer/user/fan. Does that then invalidate the model or does it mean I can move into a new segment?

In theory I can, but a segmentation model is based on interplay of variables among one group of respondents at one point in time. A template of a few “golden questions” can approximate assigning people into segments, but over time segments are the same in name only – different biases and different tendencies will become primary determinants in cluster behaviour and so the segmentation becomes gradually less insightful and the golden questions less relevant.

While a segmentation is far from perfect, introducing consumer input isn’t the answer.

2. Self-segmentation will be ignored by the majority of consumers

Fundamentally, most people just aren’t that into picking out relevant messages, despite the author’s assertion. We are going back to perspective biases.

Of Facebook’s 200m members, how many fully customise their experience and give certain activities or adverts a thumbs up? Not many, I would guess.

I don’t think I would be incorrect to posit that most see advertising as a necessary evil – we put up with it in exchange for free content. If we had the option to turn off advertising, we would, even if we view some adverts as entertaining or informative.

If this were to happen, opt-in mechanisms would then become useful – people can’t only rely on word of mouth for product information. But I can’t see this happening very soon and more importantly, does the consumer even know what they want?

3. Self-selecting tools are only of limited value

Unless you are an Amazon-esque retailer with massive size and scope, opt-in elements are going to be fairly limited. I can’t see how any meaningful segmentations can occur outside of one person choosing to positively rate one item and another person not rating it.

Even in cases where it may be appropriate, there is still going to be a disconnect between what the consumer wants and what the advertiser wants. For instance, a low income urban male may choose to find out more information about Burberry products. But Burberry want to target Kate Moss, not the Blackout Crew.

Perspective biases can also become an issue – something may improve our lives, but we cannot conceive of it and so no activity around it is registered. The consumer doesn’t always know best.

This is why observation may be the missing element. If traditional segmentation does need to be enhanced, surely behaviouaral targeting tools (I’m thinking more Audience Science than phorm) would be better suited?

Rather than as a supplement to a traditional segmentation, they could be used as a sense-check. Does real-life behaviour match our abstract targets? Again, this is only going to be relevant for certain sectors, but I see it as being far more powerful than opt-in models.

Ultimately,  segmentation models are frameworks. They are not a science and they are far from perfect, but they can be useful in the short-term. In the longer term, they become more difficult to maintain (particularly in fast-evolving industries) but perhaps a degree of behavioural targeting can be used as an indicator for the continuing relevance of the segmentation. It certainly shouldn’t be reliant on consumer opinion.

This post has been incoherent even by my lofty standards, so any thoughts on segmentation would be most welcome…

sk

Image credit: http://www.flickr.com/photos/rogerss1/

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“All you can eat” offers

I’ve been thinking about subscription models recently – specifically unlimited usage models.

It isn’t right for all business or all sectors, but generally they seem a good thing. Service industries, for instance, would struggle to cope with an increased demand without a commensurate increase in revenue. And premium good sellers would be reticent to participate in a model where price is to an extent commoditised.

Subscription models can be effective where:

  • The product is disposable (in the sense that it is impermanent) yet potential customers are price sensitive. Each purchase is a transaction, and this transaction requires careful consideration. People will only buy when they can guarantee they will get their money’s worth – they will generally be unwilling to risk a substandard product
  • A product suffers from a great deal of indirect competition. The customer doesn’t face a zero-sum choice in product A or product B, but has a range of alternative sectors to choose from. Growing the market is arguably more important than growing share.
  • A new product category is introduced and people aren’t aware of or don’t understand the benefits that they can receive from changing their behaviour
  • Complementary products are able to benefit from an increase in use of a separate product

Subscription services can transform industries:

  • Film rentals: No longer do people have to decide whether each title will be value for money. With an unlimited subscription from the likes of Netflix or LoveFilm, they can afford to experiment. Not only does this benefit the company, but the industry as a whole grows
  • Mobile phone packages: The mobile internet only took off when unlimited data charges were introduced. This post from Vic Gundotra of Google has some nice stats showing growth resulting from these new packages
  • The food industry originated “all you can eat” offers, but this is too short-term to create real value. People still eat a meal; they are just encouraged to eat more food. Rather it is the more long-term offers that create more value e.g. free refills encouraging people to stay in a coffee shop longer, where they then buy more snacks. I wonder if there are any examples of monthly subscriptions for restaurants? This could work well e.g. pay a monthly fee and then eat there as often as you wish.
  • While not quite “subscription”, loyalty/reward cards can help retain long term business. Chris Stephenson has a great example from Starbucks.

I have actually been persuaded to participate in two subscription services recently:

  • At Cineworld I pay £12 a month for unlimited screenings. This has changed my behaviour for the benefit of both Cineworld and the film industry. Last year I went to the cinema twice. In the past month I have been 5 times. I have purchased overpriced snacks there, but most importantly I am not cannibalising revenue. I am a new customer and I haven’t yet been to a sold-out showing – so the marginal cost of me sitting in an empty seat to watch a screening is effectively zero. A win for cinema and a loss for the other entertainment industries where I am now spending less time
  • I have paid $80 for a season’s access to MLB.TV where I can watch live, archived and “condensed” versions of every baseball game (as the regular season before play-offs is 162 games per team, that is a lot of content). I like baseball but I am not a diehard fan. However, Sky Player’s sports package (£35 a month for non-subscribers) seems overpriced for the marginal cost of adding a newuser who unable to have a dish installed in his flat. It is their prerogative to keep premium pricing, but they risk losing out to specialised services such as MLB.TV and Footyonline.TV, (£23 for a season; HT Graeme Harrison). Infrastructure and rights issues notwithstanding, could Sky not offer single sport or genre packages online, and look to upsell with additional services? That would have persuaded me to buy.

Subscriptions make me question the long-term viability of some services. iTunes has been phenomenally successful in its transactional model, but if someone gets a subscription model correct (or if Spotify can make an ad-funded model work), will that spell the end? Purely transactional models seriously inhibit overall consumption – for instance this is the primary reason why the French VOD offering is so far behind that of comparable countries (they have little free catch-up; it is predominantly pay per view). Is iTunes capping legal consumption of digital music and video?

Finally, is there scope for unlimited subscription models in research? For the large part, no. Industry currencies and syndicated surveys cater to a niche, but research is rarely objective data and the greatest value is derived from the service i.e. interpretation of results, not the results themselves. Companies such as Mintel and Forrester may be able to build a small amount of face time in their fees, and then upsell further consultancy or ad-hoc research, but for the most part I view this as a potential limitation to the core offering.

However, where there is indirect competition, a struggle to communicate benefits or opportunities to upsell complementary products, subscriptions appear to be an enticing prospect.

sk

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Perspective bias and the anchoring effect

Anchoring is a cognitive trait that causes us to rely too heavily on certain pieces of information when making a decision, such as an up-until-then trusted brand name selling us a lemon.

Perspective bias is a form of subjectivity or self-selection where we are unable to divorce our own prejudices and experiences from a decision.

Both exist. Both are prevalent. And both cause problems.

When you are a researcher, you need to ensure all information is communicated clearly. This could be rewording technical jargon, removing colloquialisms or introducing cultural as well as literal translation for foreign language work. For instance, if you want to know about the video on demand market and the effects of Hulu among US residents then you shouldn’t use the phrase video on demand. That’s pay per view. Hulu is online video.

When you are a design engineer, you need to realise that someones opinion of your new product is going to be rooted in what they already know. While this new flat-screen TV may be twice the size of my old CRT, it takes a bit longer to start. This new laptop may have high-speed wi-fi and bluetooth, but the keys are a bit harder to type on. This car has great handling, but where is the cup holder?

When you are a metropolitan advertising buyer looking after a mass market brand, you need to consider that while you may hate that prime time “drama” on ITV1, it appears that 7m of your potential customers don’t.

When you are a social media expert/rockstar/heavyweight champion of the world (delete as appropriate), you may think that your actions cause ruptures into the fabric of society. But do they? Motrin don’t think so.

When you pontificate that a brand is dying, have you taken a health check out of your immediate eyeline?

Incidentally, I like that tech companies are based in a valley – it acts as a nice metaphor for the echo chamber and short-sightedness of so many of the “end is nigh” kool-aid drinkers that seem to have a voice disproportionately larger than the size of their other senses.

Anyway, I think that is enough snark for one post. The point I want to make is that we should do our best to identify a frame of reference – it could be a good thing in the case of designers trying to improve their product or a bad thing when a researcher is trying to design a survey for a country that they have never visited, but it should be sought.

Some in advertising may disagree as it promotes the rational over the emotional – it suggests we methodically compare products rather than be captured by a glass and a half full of joy. My subjective opinion is that emotional advertising works only when we are overfamiliar with a product. I know what a chocolate bar is, and I know what Dairy Milk tastes like and the ad does a good job at reminding me of these facts.

But when it is a new product, that emotion isn’t enough. The ad wouldn’t have had the same impact if it were advertising an everlasting gobstopper. I need to know the functional benefits – why should I change my behaviour? What do I get out of it? The reason is the key.

Of course, the best campaigns can combine both the functional and the emotional. “1,000 songs in your pocket” tells me why an iPod is an improvement on a walkman in a memorable soundbite.

To use an old cliche, we need to walk a mile in other people’s shoes. Look through someone else’s eyes. To take a recent example, a few of my colleagues recently held a session where they showed people who had never before used a computer how they worked. Can you conceive of that? I can’t. These people had never picked up a mouse. Seeing how they interacted with it, and how they overcame the initial trepidation to complete a few simple tasks would have been a fascinating reminder into how what we take for granted is completely alien to another group of people.

Ultimately, it is the little things that matter. Just because we think something is fine doesn’t make it fine. Second, third and fourth opinions should be canvassed. Different perspectives sought. New angles explored.

We shouldn’t be complacent.

sk

Image credit: http://www.flickr.com/photos/ranopamas/

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Carpe diem

An unwanted corollary of thinking time – the topic of my previous post – is the possibility of feeling unproductive or lazy. There is a distinction between the two – thinking is doing, after all.

And doing is important. We should do stuff. And we all have free time. So we should look to do stuff in our free time (whether it is at work or home). Not tomorrow. Not the next day. Today. Now.

(Incidentally, Clay Shirky’s post on how our social surplus has populated Wikipedia is well worth a (re)read. As fun as drinking gin is, I think crowdsourcing is more worthwhile).

I’m sadly a deadline worker. I get things completed on time, but it usually involves a late night on the eve of submission.

And of course not everything has a deadline. So things slip. And slip. And slip. So I’m instiling self-imposed deadlines on all of my activities. Starting with this blog.

I have several drafts in WordPress filled with a few rambling thoughts – my online  post-it notes, so to speak. Some get written, some don’t. The worst offender is a post on the relationship between music and marketing that has been in my drafts for the best part of a year, and it has been some time since I stopped collecting news stories from Music Ally or Songs for Soap.

So I’m deleting it. I still have the bookmarks if I want to revisit the topic from a different angle, but for all intents and purposes that blog will not see the light of day. The deadline has passed.

Why? Because the quality of an output (whether a blog or otherwise) is a function of its context – its place and time. All the links in that draft are now old. Madonna may still be with Live Nation, but Groove Armada may not be associated with Bacardi for much longer. The interest is drying up, and the trend has passed. So my blog post dies.

If we think we have a good idea, we should execute it while it is still fresh (albeit considered). We shouldn’t save our best ideas, or wait for the “right moment” to come along. We should act. We learn by doing and we become stronger and better for it. New ideas will come. In the same way that saving money is bad for the financial economy, saving ideas is bad for the creative economy. Because not only do we improve from acting, our peers and associates benefit from the (hopefully) positive externalities of our ideas.

Therefore, I am imposing a deadline of Sunday to respond to Charles’ excellent post on cultural bias related to warped percerptions of Microsoft. It’s a cracker and has rattled a few cogs in my brain.

sk

Image credit: http://www.flickr.com/photos/jaewalk/

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