“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

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

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Links – 13th June 2008

Due to the two ATP festivals last month, I made a conscious effort to take a short break from my link updates. Once the habit was broken, it inevitably became difficult to get back into the groove. Grand Theft Auto and Euro 2008 have not helped matters.

I did toy with the idea of dispensing with them altogether, but I like the idea of this blog as (partly) a repository of all the great thinking, reporting and happenings out in the wide world.

And so I present the highlights of my web reading from the last 6 weeks or so. I’ve included the news items as although they will have dated, they may have slipped through the net.

Rather than dump the hundred or so links into one unwieldy post, I’ve cut them up into manageable themes. I will split the themes up into one post a day over the coming 4 days. By which point I should be fully up to date and in a position to get back into the habit of weekly updates. Well, until I go on holiday in um… 3 weeks.

The first theme I present to you is…

Marketing links

Creating fast strategy (Adliterate) – excellent post on quick strategic planning/thinking

What every good marketer should know (Seth Godin) – originally written 3 years ago but recently updated

A day mapped out by brands (Jane Sample)

Ten ideas for conversation (Conversation Agent) – tips on how to create compelling content, with example links to some great blogs

Can there be too much of a good thing? – Academic study by Sheena S. Iyengar and Mark R. Lepper showing that people were more likely to purchase jam when there were 6 choices than when there were 24

Planners are adventurers (I’m Only Doing This Because I Have To)

Interesting look at the Net Promoter Score (CNN) – Personally, I like the NPS as it indexes a factor that can both be rationalised and be genuinely insightful. I’ve seen other indexes either based on emotional scales, and on self-evident truths that completely fail to convince

Billboards that look back (New York Times) – as mentioned, the lack of an opt-in may be an issue. See phorm.

Bookmarkable Advertising (Adverlab) – very thought-provoking

What makes an idea viral? (Seth Godin)

Is the Surface Unsigned new bands competition a scam? (Pete Ashton)

Very good review of the 4 hour work week (W+K London)

Why marketers shouldn’t create campaigns around fear or disgust (Fast Company) – I agree. No matter the product, the positives should always be highlighted. In my eyes, Obama did a better marketing job than Clinton (aside from the fact that he won)

Why Zappos pay new employees to quit (Harvard Business Leader) – a stroke of genius

Starbucks rolls out energy drinks (Seattle PI) – this seems like a rather ill-conceived brand extension to me

50 greatest commercial parodies (Nerve)

Portrayals of George Bush in international advertising (Creative Bits)

Email checklist (Seth Godin)

Expansion pack for an advertising spoof of World of Warcraft (Creative Beef) – very funny

Product placement rose 6% in Q1 in the US (Nielsen)

List of product placements in Sex & The City (Vanity Fair) – I assume this includes prop placement as well as paid product placements

Yet Andy Burnham indicates the government will block the loosening of product placement laws in the UK – while I am biased (working as I do as an advertising researcher for a commercial broadcaster), I think this is a terrible decision. It underestimates the intelligence of the general public, it ignores that we are generally exposed to it as it is (through US imports and the cinema), assumes that production teams aren’t capable of subtly integrating brands, and stifles a potentially new revenue stream that would provide funds for investment in quality programming

I feel quite strongly on this and may revisit it in a future post, though for the time being I am fully occupied with fleshing out a few different ideas in the limited “free” time I have

Of the above links I would particularly recommend Creating fast strategy, Interesting look at the Net Promoter Score, Why Zappos pay new employees to quit, What every good marketer should know and the comments on Product placement not coming to the UK though they are all worth reading, given that they represent the best of what I have read on the topic for the past 6 weeks

The remaining themes and the days I plan to publish them are (Hyperlinks will be included as they are published)

Saturday: Trivia, and Interesting/thoughtful articles

Sunday: Interesting websites, and useful tips

Monday: Technology and web2.0 links

Tuesday: Miscellaneous random links

I’m also planning to write another post during this time, but this will depend on how distracted I get by other events

sk

Links – 31st April 2008

Quite a lot of links this week (I had a quiet weekend) but the highest quality update so far. Some really excellent articles in here – well worth a bookmark!

Blog-related:

• Clay Shirkey’s widely blogged-about speech on social surplus NB: I have left comments on several blogs about this. I agree with his underlying point – there is a social surplus and creating great things like Wikipedia take up relatively small chunks. But social surplus is something that I think we are running short of already, and there does need to be a balance between active and passive entertainment. TV and gin are friends, not the enemy! A great, thought-provoking speech though – required reading for those yet to see it

• How Newton’s law works with brands (David E Bowman) NB: I love this theory encapsulating mass and proximity – simple and beautiful

• The full Heroes media experience (Fast Company) NB: When the makers of Heroes say there is a 360 experience, they aren’t kidding. Transmedia in all its glory

• How can we measure innovation? (Freakonomics)

• Pre-experience design (Russell Davies) NB: Extremely thoughtful post on the importance of the entire brand experience – the product as the service and so forth

• And Russell Davies again on the importance of design in advertising NB: I love the phrase Beating people over the head with crap is less and less viable. That will make for a smaller industry but hopefully a better one.

• Nigel Hollis and Hayes Roth answer questions on branding (Financial Times)

• Shops should pay more attention to the fitting rooms (New Statesman) NB: Another example of customer service being overlooked

• Thoughtful piece on Yahoo! becoming more open (Groundswell)

• Excellent, mind-bending essay on Schrodinger’s puzzle and the ever-changing digital sphere (Zero Influence)

• Record labels want a music tax – and it could work (Slate) NB: Though this would be the “thin end of the wedge”, to use a phrase I have heard a lot recently (after having never heard it before)

• Bertlesmann succeeding where others are failing (CNN)

• Wieden+Kennedy’s philosophy in illustrated format

• Does the new Cadbury advert show that creatives cannot direct? (Brand Republic)

• There are now more and more writers but less and less readers (New York Times) NB: This parallels (although direct causation may be tenuous) rising levels of content creation and interaction at the expense of passive consumption online

• White paper on content marketing strategies (Junta 42)

• On a similar theme, attention-deficit advertising (Business Week) NB: Linking on from the product as a service to the advertising as a service. If a company can provide something useful and brand it, it is win-win. Research shows people are willing to accept advertising if they are opting in to receive something useful

• A Miller sponsored blog is causing Budweiser’s ire (Wall Street Journal) NB: All is fair and love and business, but I personally find this a bit low and unnecessary

• Jeff Jarvis vs. Michael Tomasky on citizen journalism (Comment Is Free)

• Mechanisms for brand marketing integration (Branding Strategy Insider)

• Were Mesopotamians the first brand addicts? (New Scientist)

• Wiley have put a load of science books online for free perusal

• ebay fraud (The Register)

• 17 creativity-sparking websites (Lifedev)

• P&G are allowing their (potential) consumers a say in where they advertise NB: I don’t see the benefit of this – which niche but mobilised group can shout loudest?

• 10 worst job interview questions (Business Pundit)

• Starbucks coffee at home NB: Brilliant new website, again linking back to providing something useful for consumers. Apparently, the Africa Fatula is the coffee blend for me

Random

• World’s biggest useless things NB: This really struck a chord with me. One that I can’t really describe. Both melancholic and uplifting. How something essentially meaningless can reward people with pride and achievement. An analogy to blogging??

• How to touch up pictures (Wired)

• Fascinating blog of a person who is spending 12 months learning where all of his food came from, and how it is produced

• 7 sandwiches trying to make it in New York (New York Times)

• Free Tibet flags are being made in China (BBC)

• Did this man live to the age of 256? (Wikipedia)

• Extremely intricate Lego creations (otbeach)

• Many graphs showing the frequency in spam over time (xtdnet)

• Supermemo – the memory-improving tool recently featured in Wired

• Ways to trick out your desktop (Lifehacker)

• Guerrilla gardeners (Guardian)

• 15 great Kurt Vonnegut quotes (AV Club)

• Microsoft create an armband to control our fingers (New Scientist)

• Profile on Christopher Hitchens (Prospect)

• The “Amen break” drumbeat and the golden ratio (Constructing the Universe)

• Is anti-virus software overrated? (Lifehacker) NB: I had a tremendous amount of hassle trying (and failing) to change virus-scan software last year. Seems anti-virus companies are monotheistic

Among these excellent posts and articles, those I would recommend most highly are:

Blog-related: Clay Shirkey’s widely blogged-about speech on social surplus, How Newton’s law works with brands, Pre-experience design, White paper on content marketing strategies, Wieden+Kennedy’s philosophy in illustrated format and Starbucks coffee at home

Random: World’s biggest useless things, Guerrilla gardeners, 15 great Kurt Vonnegut quotes and The “Amen break” drumbeat and the golden ratio

Phew!

sk