Archive for the ‘competitive advantage’ Category

The Tesla Model S… Marketing and Innovation Together Means Stunning Success.

April 9, 2012

Even though the tepid response to current all-electric vehicles like the Chevy Volt and Nissan Leaf indicate otherwise.

Here is quick review of the state of electric vehicles, as of Spring 2012…

“General Motors has temporarily suspended production of the plug-in electric Chevy Volt because of low sales. Nissan’s all-electric Leaf is struggling in the market. A number of start-up electric vehicle and battery companies have folded. And the federal government has slowed its multibillion-dollar program of support for advanced technology vehicles in the face of market setbacks and heavy political criticism.” – NY Times, The Electric Car Unplugged, March 24, 2012

A number of years ago, a friend turned me on to a quote by Peter Drucker that goes something like this… “The two drivers of business growth are Innovation and… Marketing.” This got to me and is a big reason I chose to get in the game of marketing way back when.

At our core, we are a big fan of “new stuff.” We love the challenge of taking new ideas to market, of creating or exploiting demand for products people don’t even know they want, need or love yet.

You Say You Got a Revolution!

In this regard, today is a feast for marketers with a taste for taking innovation on. That’s because we are living in a period of radical change powered by exponential growth of a variety of enabling capabilities. The most notable example perhaps is Moore’s Law and how the number of transistors on a chip have been doubling every 18-months since 1965. Starting gradually, almost flat, after enough doubling, the curve starts to climb and then goes like an elevator straight up if this compounding effect can be maintained.

There are a number of other enabling technologies entering this supercharged phase simultaneously including Bandwidth, Storage and Information creation itself as indicated by the Digital Universe Study conducted by IDC in association with storage leader EMC will attest.

The Potential of Innovation: A Vacuum Effect That Pulls Innovation Forward

Add it all up and we are living in a revolutionary period that is driving the Potential of Innovation, on the grandest scale.

What do we mean here by Potential of Innovation? Simply put, it’s when a Capability has entered the latter or steepest phase of the exponential growth, and the deployment or Utilization of this potential is lagging well behind, as the chart above indicates.

Over the years I have heard technologists describe this gap as a vacuum, a vacuum that by its very nature must be filled… and from what I can tell, the best of what fills this empty space can be boiled down to vision, creativity and innovation.

One company that to us most exemplifies these characteristics is Tesla Motors and most especially the Model S, their new vehicle that is now gearing up for production. With over 7,000 advance orders already on the books for this gorgeous pure electric vehicle, we believe the Tesla S will be a game changer and the first vehicle to truly fulfill the promise of widespread adoption of a car that is not powered in any way by the internal combustion engine, New York Times notwithstanding.

Here’s why?

Again and again we hear about energy efficiency and “green values” relative to the environment and planet we all live in. There is no doubt there is a much higher level of consciousness than ever before. The only problem is, although we may expect or want companies to be good environmental citizens and follow best practices, we as consumers don’t necessarily want to pay extra for it. And for all the talk about energy-efficient cars, the reason we don’t have them now is that customers traditionally follow the money… lower gas prices means we accept the status quo, high prices mean that we cut back. In other words we cut down consumption when fuel cost is high, but invariably resort to our old gas guzzling ways when prices go down with no real alterations made to efficiency standards.

Electric Vehicles: Niche Category…

What this means is that true electric cars appeal by definition to the niche we call Early Adopters, who are into energy efficiency and green tech because they believe in it and are quite willing to pay extra and buy before anyone else to support this belief. And Hybrids? These vehicles aren’t disruptive in any way except that they get good and often great gas mileage. They do prove however there is an audience for energy-efficient products.

This is what makes what Tesla is doing very interesting.

Tesla’s first car the Roadster has been on the market for a couple of years and has sold, if the public account is accurate, around 10,000 vehicles at $100,000 each. These cars are not only pure electric, they are also a very fast, super premium product. In other words, the Roadster is a high performance (0 to 60 miles per hour in 3.6 seconds) sports car that can perform in a league with a Ferrari or a Porsche, that just happens to be electric.

As far as markets go, this is an extremely limited audience by any measure. However, the Roadster is a clever first step from a strategic marketing perspective, as it begins to alter the accepted perception that electric cars by definition don’t measure up to those powered by internal combustion engines.

One of the other objections to electric vehicles overall is that they necessitate new driving habits and expectations that American car buyers have been slow to accept, if at all. The perception is that electric cars are slow, don’t drive as well, cost more than they are worth, and what’s worse, make driving a structured activity posing the risk that the batteries may run out of juice mid trip. This is not a recipe for wide-spread adoption in the US market, certainly.

You can see this reality playing out right now with the Chevy Volt:

“Volt offers the fuel efficiency and forward-thinking you’d expect from Chevrolet.”

The Volt has a range of approximately 35 miles, when the gasoline powered generation system kicks in, so drivers don’t have to worry about getting stuck. It doesn’t look bad, but politics notwithstanding, with a pure electric range of 35 miles a charge, it is compromised and production has stopped, at least for now.

“the new car. 100% electric. zero gas. zero tailpipe.”

And then there is the Nissan Leaf.

The Leaf looks funny, and with a range of 65 miles seems too complex and different for the mainstream car buyer. Again, this is a compromised driving experience, something only an early adopter electric car buyer could and would love.

… Or Mainstream?

The Tesla S is clearly different.

Tesla Model S: Another Vehicle Entirely…

As you can see it’s beautiful. I’d put it next to a Lexus, Mercedes or Infiniti anytime. It also boasts great performance for a luxury sedan (0 to 60 in 5.6 seconds), can go up to 300 miles on one charge, and because the drive train is all-electric, it opens up cabin space and also lowers the center of gravity for a great driving experience. In other words Tesla S is great luxury sedan designed from the ground up that is electric and not the other way around.

In fact, most drivers can get back and forth to work for a week on one charge.

Marketing is a Key Enabler

The question now is, how can we position this vehicle so that the mainstream car buyer get’s it?  As it turns out Marketing has a set of tools that can help us figure it out.

Here is the current positioning from an outside looking in point of view:

Tesla is beautiful luxury car that performs better than any other sedan on the market, including Mercedes, Lexus or Infiniti. It (base model) costs $50,000 gets up to 300 miles a charge, costs a few hundred dollars a year to run and is all-electric.

This can be reflected in Tesla’s own taglines:

  • Performance for the 21st Century
  • Electric from the Ground Up
  • Zero Emissions. Zero Compromises.

Not bad…

The issue here is these core positioning tag lines are not connected directly, and the umbrella line of “Performance for the 21st Century” forces us to define what that means to us. And since there is no “Mainstreet” context for reference,  the “Electric from the Ground Up” with “Zero Emissions and Zero Compromises” then is clearly focused to Early Adopters, which is fine except that it misdirects the overall value proposition away from the mainstream audience and dilutes the position that is inherent to the product to engage the larger “Majority” audience and therefore fulfill its true sales potential.

Positioning for Success

Let’s use our double vector model to break this apart and see what we can do re-position the Tesla Model S for even greater success.

Vector #1: Luxury Sedans

In this case, the Market Alternative is Luxury Cars.

The singular “value vector” in red comes down to best luxury performance in a world dominated by leading brands such as Lexus, Mercedes and Infiniti among others.

With a gorgeous bottom to top design with acceleration from 0-60 in 5.3 seconds and amazing handling, the Tesla S can clearly outperform its gas-powered luxury sedan counterparts.

Vector #2: Electric Cars.

As we can see, there are some stunning differences especially related to design, but here we are looking for a more logical or mental key difference, and what really sticks out is the range. Model S gets up to 300 miles a charge, the others not even close. The Volt goes so far as to integrate a gasoline powered generator that kicks in after 30 miles, but that is an obvious compromise. Tesla does not compromise here. This is where Tesla’s no compromise position noted above obviously comes from.

“X” Marks THE Position… Where Differentiation Matters

Add the two up and Tesla can now make a statement like this:

Add it all up: The Tesla S is designed from the ground up to be a beautiful luxury sedan that just happens to be all-electric. And because we make no compromises, Tesla S not only outperforms any gas-powered sedan in terms of pick up and handling, it also gets up to 300 miles a charge so you drive everyday and never fill up at the pumps again.

Now let’s revisit our tag lines:

Nissan Leaf boils it down this way – “the new car. 100% electric. zero gas. zero tailpipe.”

Chevy Volt – “Volt offers the fuel efficiency and forward-thinking you’d expect from Chevrolet.”

Tesla Model S – THE Luxury driving experience with no compromises, no emissions and up to 300 miles per charge.

Bottom Line: Now, what car do you want to buy? And I am not just directing this question to Early Adopters, who will validate the product, but mainstream car buyers who will elevate this 21st Century Silicon Valley startup into a real player on the auto manufacturing stage with a product category that for the moment at least, is given up as lost.

Marketing and Innovation: Where Everything IS Possible

On one level this is monumental achievement, but for someone like Tesla’s Elon Musk, whose other company SpaceX actually launches stuff into orbit around the earth, this is a manageable task. Tesla clearly demonstrates that when marketing and innovation come together, everything is possible.

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This is FIOS… This is BIG!???

June 2, 2010

Summary:

1. The Situation
• The Curse of the Anti-Brand Continued
• Field of Dreams Marketing: Build It and They Will Come?
• Oh Really!

2. Positioning 101
• The Ultimate Choice in Marketing: Make It Easier to Sell… or to Buy
• Customers Know “This is Big,” is Bad and Act Accordingly

3. Recommendations/How to Fix It
• The Power of One Word
• See The Difference

4. Conclusion

• Getting the Positioning Right Means Success. Getting it wrong…

This is Bad!
We have explored anti-brand/worst practice marketing before, notably in the airline industry. We explored the disintegration of the legacy carrier brands (United, Delta, American and the like), and how this has created openings for the quote unquote discount carriers such as Southwest, Jet Blue and Virgin to add value to in a variety of ways and in doing so develop true and sustainable brand connections with customers.

Another industry that traditionally seems to take this anti-brand/anti-customer approach is the telecom sector – phone, cell phone, cable and broadband providers again and again seem to go out of their way to make it as complex as possible to purchase and service these vital products that are so much a part of our daily lives today…. plans, contracts, service agreement periods, rebates, data services, VoIP, bundles and variable pricing, locked phones, unlocked phones, smart phones, dumb phones… figuring this all out is a daunting task!

And it is not to say these anti-brands don’t spend money on marketing. They do. And lots! It’s just that from a marketing and positioning perspective, many of these companies have attempted to make their product easier to sell, not easier to buy. This is a subtle yet often profound distinction which has often led customers to such a confusing array of product and bundled offerings and “deals” that get in the way of achieving the desired outcome, ironically of maximizing sales.

The result…

A Better Product Alone Does Not Mean Success
Last week, after a 2-year wait, we finally had Verizon’s FIOS installed in our home, and the promise of fiber optic digital broadband bundled with HD and voice over internet IP phone service was a reality for me and my family. We are all delighted to be freed from the shackles of our former broadband, cable TV provider for reasons noted above. We met our contract obligations years ago and costs continued to rise to unacceptable levels for what amounted to basic TV and Internet service without recourse.

When at last the day arrived, we were lucky enough to have a savvy, seasoned installer handle the actual installation process. It was in talking with him, that the results of anti-brand thinking, relative to positioning became very clear to both of us.

Just like the Nexus One discussion in an earlier posting, FIOS to me is a clearly superior product. Fiber optics is a much more efficient networking technology over say, cable and copper wire. Plus fiber is 21st century technology, copper wire represents the past.

On one level what this means is that FIOS’ speeds are faster, and do not slow down if say others on the same line are also connected at the same time as they do with cable or DSL. All things being equal, we found that FIOS is cheaper than the cable offering available to us with many more TV channels, and unlimited long distance to boot.

Sounds like a recipe for competitive advantage and market share domination, right!

This is where the conversation with installer got interesting.

Misplaced Positioning Can Doom Even the Best Products
Superior product and a massive TV buy not withstanding, he told me that FIOS apparently only wins only a small portion of the business where it competes against cable, and has not meet expectations for quite some time. It does apparently carve into the cable business some, but it does not dominate, not even close, at least in the markets covered buy our installer.

That was a surprise, especially since FIOS can make the case of being superior and cheaper! And then there have been news reports lately that FIOS’ planned expansion program in other markets has been postponed, affirming lackluster results so far.

What could be the problem? Could it be loyalty? Is there a deep brand connection to cable providers?

Nothing in any research I have seen over the years indicates consumer love for cable companies. Many are anti-brands with a clear take it or leave it attitude. Customer-centric service? Forget it.

In fact from what I see, on the TV side in particular, customers really resent cable providers. Many dislike bundled programming offerings in particular, and often feel gouged with ever higher prices and the inability to pay a la carte for just the channels they want.

And then without prompting, the installer and I both blurted out at the same time, obviously in harmony with an “aha” moment… “This is FIOS, This is Big!”

Verizon has spent untold $ millions to embed this unforgettable slogan in our minds. But what does it say from a positioning point of view?

Slogans are often what we remember, what we pass along, what we act on… or don’t.

Slogans that get the positioning down and answer questions, connect dots, and give us that “compelling reason to buy” message right on the spot are the ones that deliver results. Slogans that don’t, memorable though they may be, can’t do the job, no matter how much cash is thrown at it.

Unfortunately this is where Verizon missed the boat.

It Comes Down to One Word…
Let’s take this slogan apart for a minute. We know from an overarching perspective this is a Verizon product, and Verizon is the network, isn’t it? But what is FIOS anyway?

I will guess it has to do with FIber Optic System or something like that. It could be called ACME or ALPO for that matter. The name can be important, but all of us have seen meaningless names such as Accenture, Altria, and Exxon that have been created for very successful companies.

No, the problem word here is not FIOS, it is the word BIG. This is the key word and it does not tell us as customers what’s in it for us. To be effective, this word has to be clear, direct and mean something. It has to answer questions, not beg them.

In this case, BIG addresses the latter. I am sure Verizon loves the technology… they invested $ billions to bring it to us. But BIG. What does BIG do for you and I? We don’t know. We… have to think about it.

This is a problem because actually, in today’s busy world, we tend not to think about things like this. When left to our own devices and unintended questions arise in our minds, usually these questions support inertia and inaction.

For example, isn’t changing providers is a hassle?, and why change now?, immediately come to my mind. Customers, typical mainstream customers facing such a rhetorical quandary without a clear reason to switch, will typically say to themselves “I will happily stay where I am” and act accordingly.

This puts the “connecting of the dots” in the hands of market forces outside of Verizon’s control, which in terms of grabbing market share, is deadly! And Needless!

All of this is wrapped up in one, in this case, one misplaced 3-letter word.

BIG or BETTER Internet Service. What Do You Prefer?
As a marketer I have learned over the years that if you are going to critique someone else’s work, you should also offer up an alternative. This is only fair after all. So in this spirit, I offer up the word… BETTER.

The altered slogan would then read:

This is FIOS, This is Better!

I am not saying it is perfect or pretty or elegant, but now we as readers of the message have something to grab on to, that we can understand. Leadership is reflected in qualitative advantage… something that differentiates FIOS from the cable product and says there may be something in it for me as well.

Imagine now the conversation I might have had with the installer if the take away message we all remember is… This is FIOS, This is Better.

In the one instant a series of questions posed by the word BIG are replaced by a declaration of superiority over the competition… the Better that is Fiber Optical TV/Phone/Internet connections over copper wire/cable. Customers would almost feel like they are acting foolishly not to get a better product and better deal, no matter what.

Our minds would be embedded with Better than… cable positioning, so taking the buy action is natural and something already clearly mapped out. This is what effective positioning is all about and one example of creating a compelling reason to buy with a positioning core.

Marketing Misfire. Nexus One… Looks Like a Great Phone to Me! The Real Battle Was Positioning and Google Missed It.

May 13, 2010

Summary:

1. The Situation

  • What’s at Stake
  • Product Features
  • Current Positioning

2. Analysis

  • What’s Right?
  • What’s Wrong

3. Recommendations

  • Connecting the Marketing Dots
  • A 5-Step Plan: What can Google do about it.

Introduction

Recently, before the (in)famous lost iPhone debacle, Apple indirectly made another announcement of perhaps greater import relative to this already proven game changing device, the iPhone. It appears that at long last, Apple is making the big move to create a version capable of running on other carriers, in this case industry-leading Verizon.

As earlier postings on marketing to win attest, Apple needed to make this move or else risk having the product marginalized to niche status if they stayed on ATT exclusively. The risk is magnified especially since Google’s robust mobile, open source  operating system Android in tandem with other devices, notably manufactured by NHT, opens up the market above and beyond any one carrier.

And to make matters worse, it appeared that Google along with manufacturer NHT would be the tools of this destruction with the much heralded launch of it’s Google-branded Nexus One smartphone. Nexus One was designed to be platform-agnostic and besides featuring Android, it exploded the existing sales channel model traditionally controlled by the carriers, and sold direct to customers online through Google itself.

And if that wasn’t enough, customers were also offered both locked and unlocked versions of the device. If you wanted to purchase a subsidized version with a two-year contract, there was a T-Mobile version ready to rock for under $200, and a Verizon-ready model was going to roll this spring as well. Radical indeed.

Before we dive into what was wrong marketing-wise, remember there is much at stake for Google and perhaps NHT as well.

The smartphone is in fact a mobile computing platform and apps that run on these devices are, if I read the tea leaves correctly, potentially disruptive to Google’s online search-based ad model, especially as these platforms take off. I mean who needs search if in fact the app chosen already defines a clear area of interest as defined by the user?

This means that it is well worth Google’s time, talent, management attention and dollars to get in the game and win a real piece of the action, no matter what it takes. Otherwise others (re: Apple) will be in the driver’s seat. Android is one piece. An “iPhone killer” device, a Nexus One… another.

The Good: Feature by Feature… Nexus One Looked Like a Winner!

And what Google/NHT have done on the product level looks real good to me. The more you look at the features of Nexus One next to an iPhone, the better it looks.

It boasts a variety of powerful features including:

  • megapixel camera with a flash, versus the megapixel without flash on the iPhone 3GS,
  • the battery is removable and replaceable, iPhone’s is not,
  • there is a micro SD slot to add up to 32-gigabytes of memory, where with the iPhone, what you buy is what you get
  • apps run simultaneously on Nexus One which the iPhone is famously unable to do at this time
  • and we all know about iPhone’s inability to run applications developed on Adobe’s ubiquitous Flash platform, Nexus One of course runs Flash apps.

Plus Nexus One is the only smartphone to boast the Google nameplate, which is one of the world’s most recognized brands known for leadership in innovation. Add it all up on the product front, this is the good stuff!

The Bad: Positioning Is Where Google Falls Down

Alas, where this all is falling short is in the marketing and positioning arena, which is so essential for success in products of this class.

If there is one lesson we all need to remember and it seems we always forget, it is that product features do not a mainstream marketing strategy make!!!! We were taught this by Geoffrey Moore in his landmark book Crossing the Chasm.

Product features are great for early adopters but are not and don’t work as selling points to mainstream audiences who buy based on herd-like behavior criteria of peer adoption and market leadership.

When going mainstream, it is essential that customers get to feel that others just like them have and love the product, and then that they get to see and feel it for themselves, in order to win them over.

As far as I can tell, this is the whole deal right here on the Nexus One e-commerce and info page, the one that comes up when doing a Google or other search. Based on comments above, the positioning is off base, way off base.

From an e-commerce perspective alone, the presentation itself is simple and clean, just what we’d expect from Google.

From a positioning point of view however, what we see is a product message that by definition is focused on early adopters, not mainstream buyers. OOPS.

You can see it right away by Google tagging the device Web Meets Phone. Product features anyone? This tells us what it is, and if there was no iPhone, this may be necessary… but in an already established, hot product category, no way! Our response is so what?, isn’t that what a smartphone does? Nothing compelling there.

When we look at the rest of the Nexus One page we see the following sections, which also supports the product-focused positioning:

  • Demo
  • News
  • Already a Customer (Customer Service?)
  • Closer Look (including You Tube Channel)
  • And of course, a Buy Now button.

The question is why put the impediment of a Chasm crossing, first winning over early adopters and then mainstream buyers, in front of you when you don’t have to?

Getting the Right Message to the Right Audience

Google is a household name making a play to exploit Apple’s weaknesses and grab a piece of the mobile market. Since this is a competitive land grab type, early adopters are irrelevant here. This is a mainstream marketing move.

The criteria these consumers really care about here are leadership and referenceability. It has always been so. In other words, is the product a leader?, and do my peers have it, and love it?

Google as a brand is a leader, so customers can make the leap of faith to leadership on this level. The question is then, what do our peers think about it? Does it deliver? Is it (the product) “baked”?

Here is where the marketing for this product breaks down.

It is most likely that many potential customers don’t know anyone who has one, and what’s more, if they are interested, they can’t see it for themselves, let alone play with it and internalize the benefits of its many features. This appears to be a result of the Google-facing distribution channel. Because of this radical departure away from carriers, T-Mobile stores, the current existing carrier, don’t have them.

Re-Positioning: Connect the Dots and Take it to the Streets!

Assuming that this won’t or can’t be changed, what then? How can we get this product to the people?

How about testing then deploying some temporary pop-up stores and displays in key markets, key malls, key events, even key warehouse stores like Costco? Consumers can drop by and see, and ask the questions as well as buy… Plus such a temporary approach creates time sensitivity and urgency and also lends itself to deadline driven promotions to induce immediate buy decisions.

Segmentation

Also, so many students today use G-Mail and Google docs. What about more targeted programs, in this case engaging campus reps and offering sales incentives and scholarship-based promotions for sales results? Here is where you could play early adopter card… the rebel, be different card to build traction and gain market share.

Testimonials

One other avenue is to retool the YouTube Channel. Currently the Nexus One channel is all about product info and demos. Keep this content if you must, but also focus on customer testimonials instead. And this can be done strategically, and by that I mean seed it with some key persona or consumer types. Create some promotional incentives to drive submissions, then let it go.

There are plenty of consumer videos out there on the phone, but they are all over the place and you have to dive in to find them. They need to be connected back to the Nexus One page. And content kept on point as much as possible. This is where the incentives and promotions come in. These are necessary to create that peer support that is so essential.

Service?

Lastly, part of the fear factor that holds mainstream buyers back is service. They want and expect a tested service function. They don’t want or accept beta testing done on them. They want a fully baked whole product in place, operational and working. If not, they hold back and do what comes naturally.

They wait.

On the product/marketing side one big issue that can’t be , what happens if I am having issues? Who do I call? Where do I go? Since what is radical here is the “untethered” sales model, we have to know there is a clearly marked place we can go if we need help. Right now I have to figure it out and I don’t have a person to talk to or place to go.

Positioning is all about connecting ALL the dots and at no time is this more important than when mounting an incursion into mainstream markets with an entrenched and powerful leader.

Summary: A 5-Step Plan

To boil things down then, here is a 5-step plan to reposition the Nexus One into a viable competitor to the iPhone (note: there is still time!!!):

1. Re-position the product: Web Meets Phone positioning tag has to go. How about something like Nexus One by Google: The Smarter Phone or something like that.

  • Google. We need Google mentioned for leadership, making the phone not THE but A leading product,
  • “Smarter.” This way you create a qualitative showcase for the features to shine, but talk in the leader/market talk needed in mainstream communications

2. Narrow down to some tighter target segments,
3. Create incentives to drive and organize testimonials,
4. Take the product to the streets so customers can see, touch and buy the product from a person,
5. Re-communicate that Google is there for you relative service

Add it all up, now you have the marketing foundation to communicate a very competitive offering that can grab some market share. Now Google can add a link on the main search page for starters and they can realistically capture a portion of a % of that number to take Nexus One from failed iPhone Killer to a monster hit, with all the benefits of same!

Apple is safe. Or is it? NHT had fantastic earnings for its smartphone offerings through carriers on a global scale. NHT also has the ability to draw upon Google’s Android mobile operating system and Windows too, which will be releasing its new OS momentarily. So as Sherlock Holmes said, “Watson the game’s still afoot” but the battle for mobile superiority may be played out on another field.

Note: As I post this (May 13, 2010) Google/Android/Verizon announced sales in excess of iPhone for the first time. Stay tuned!

3-D Movies: How to Kill the Golden Goose Before It’s Time… Coming Soon to a Theater Near You!

April 2, 2010

I want to preface this posting to say I don’t like to look at movies as a horse race or the “who wins the weekend box office $’s derby.” I realize this is one way to measure popularity and success… and if movies are a popularity contest, don’t we like to invest, ooops, I mean spend our hard earned cash on the winners, the ones we know we will enjoy? But is volume the real measurement of goodness? In the herd mentality, of the if everyone else likes it, it must be good, kind of thinking, yes. But of actual goodness, perhaps not.

Earlier in the week, I was reading Lauren Shuker’s article in the Wall Street Journal entitled ‘Dragon’ Movie Fails to Tip Scales as Price Increases go Into Effect (March 29, 2010), which has gotten some great reviews, and am once again struck by the apparent marketing incompetence that seems all too inherent in the entertainment industry.

Here’s why.

It appears that there is no doubt that audiences very much enjoy today’s 3-D film experience. Huge 3-D successes such as Avatar and Alice in Wonderland, and the IMAX sales of each testify to this.

Now of course, in the sequel style, copy-cat mania that seems to be Hollywood these days, everyone and his brother wants in the bonanza. I gather that How to Train Your Dragon was filmed in 3-D, but for example, but Clash of the Titans, which will be released next week, was enhanced after filming was concluded and is not a native 3-D film, as Avatar and Alice were.

I have no problem with the studios tripping over themselves to milk the 3-D train for all its worth. But the operative word here is CARE. In the drive for revenue (greed?), it is becoming clear that if studios and exhibitors over reach, sales will be diminished and the technology reduced once again to fad status.

When looked at through our marketing lens, there are a couple of things to remember to prevent the latter while maximizing the revenue generating opportunity 3-D presents:

1. It is and I think always will be the story. James Cameron and Tim Burton are at their core master story-tellers which, love them or not, informs all of their work. 3-D is an enabler to the story, not the driver of it.  In other words, if you are going to charge a premium, it probably won’t work for lesser fare, at least until the film has built a core audience.

2. The last few years haven’t been all that kind to the movie industry. And we are still living through a recession. The market is price sensitive. The new price for 3-D movies under the new structure is approaching $20 a ticket! This can easily add up to  $100 per outing for a family of four, which makes a night at the movies a very pricey, special purchase, not a casual and affordable date night type of event.

3. Seeing a movie in a theater has some communal benefits and people love to go out.  However, part of the audience dip these last few years has been a convergence of sorts… where home movie systems with surround sound offer a near multiplex movie experience at a lower cost. And if that isn’t enough, 3-D capabilities are coming to a flat screen TV in your home, very soon!

So considering these elements, what should the exhibitors do to maximize this technology in a manner that makes marketing sense?

Make Sure That 3-D Adds Value to the Communal Theater Experience!

Central to the exhibitor point of view has to be exploiting the positive elements of the communal viewing experience and doing everything possible to add value to it.

I live in the Boston area, and one of the pioneers of the multiplex phenomenon is a locally based company called National Amusements.

Multiplexes were great for revenue generation, but with ever smaller screens and smaller auditoriums that result, the exhibitors themselves over time have diluted the big screen viewing experience thus opening the door for home theater to be a competitive threat today.

So much so, perhaps, that National Amusements itself is now leading the charge of such innovations as stadium style seating to enhance the comfort and viewing pleasure of their guests in such a way that is very hared to duplicate at home. They also created Cinema De-Lux, a first-class section in selected theaters offering food & beverage service and plush seating that audiences happily pay a handsome premium for.

The dilemma for 3-D is to add value without adding price resistance. The way to do that is to understand and then compress the product adoption lifecycle.

How can we do this successfully — Grow the audience for films and exploit the revenue generation potential?

There are a couple of ways this can happen.

The Simple Method

  • Keep prices low and raise them gradually for general screens.
  • Raise prices and focus marketing activities on IMAX and De-Lux venues, where movie goers expect to pay more.

The trick to remember is that 3-D is a positioning “ace up the sleeve”, something that can be compelling and different that makes the communal movie-going experience special versus the home theater and other options available today.

This in essence creates a tiered pricing structure. And of course prices can also be adjusted should say another Avatar-style blockbuster come along. The key then is not raise prices prematurely until the audience demand is established.

The Complex Method
Don’t raise prices for 3-D films shown on “standard” screens for an initial period, say the first week or so.

This offers a couple of extra powerful benefits:

  • The Power of Choice & A Sense of Urgency
    By setting up “Popular Pricing” now with a higher price later, an incentive, is applied to drive business for that first critical weekend that offers the audience a choice—go now pay less, or wait and pay more.
  • Audience Empowerment
    In this way the public can literally join the critics and other influencers to help decide the fate of the film, especially by getting the word out through social networks to their “friends” and support films they love.

Option #1 focusing price increases on the self-selecting premium segment piece is easier to adjust with the already high priced options such as IMAX and De-Lux in place. In other words raise the first class price and gradually raise coach fares over time.

Option #2, however, offers a variety of counter-intuitive tools that can help launch new films, stimulate choice and create a great reason for the public to join with others to get the word out that can also serve as the basis for a whole variety of promotional activities.

In either case, once the public is used to a staggered pricing schedule it will be easier for prices across the board to rise over time.

Care however, must be taken to matter what directions are taken (or not) to exploit 3-D as a value added tool to support the movie theater experience first. This is the golden goose that must be nurtured and protected at all cost.

Otherwise audiences will turn in other directions, which will negatively impact each new film’s success as we have just seen with Dragon, a worthy effort where it seems great notices are not enough to overcome resistance to new, steep and sudden price increases.

Clash of the New Titans… Is Google’s new Nexus One an iPhone Killer?

January 7, 2010

Yesterday (January 5, 2010) was a day I had been waiting for… the launch by Google of its own quote unquote game changing Nexus One smartphone. Already the pundits are proclaiming that Google will depose Apple as the smartphone leader… Long Live Google!

And we all know what Apple’s buzz machine has been up to. It seems that there will be big announcement at the end of this month where it is likely, quite likely that Steve Jobs himself will launch another game changing device, an iTablet kind of thing.

So how do these products intersect?

A couple of things are clear. In the portable music player space, Apple, the undisputed leader, has reached a turning point. Sales of iPods, the most popular music player on the planet are declining, perhaps for good reason. Using my students as a non-scientific focus group, I have seen again and again that not only do 99+% have an iPod, many have two and some even have three or even more! Could the market be saturated?

The iPhone which as we all know is only available on the ATT network, has proven to be a game changer and massive success, not only surpassing sales goals and a critical element to shareholder value, with Apple shares now pegged at $200+, but also the catalyst to the current generation of wi-fi enabled, touch screen iPods, the disruptive app store with over 100,000 applications available, and yes Mac sales, especially the latest Mac books with the 1-piece “aluminium” chassis/case.

I don’t know about you, but I also hear about more and more “windows” folks making the switch to Mac these days.

I bring this up because right now Apple’s marketing is working at virtuoso/best practice levels. Assuming this is the case, and knowing full well Apple’s penchant for keeping it’s cards close to the chest, I see a strategy here where there is more that meets the eye.

The iPhone is too important to simply let slide. And Apple has shown time and time again it has learned from its past and will not go down without a fight.

So here is an outsider’s perspective of what I expect.

1. Yes, there will be a tablet announcement. And if lead designer Johnny Ive still has his “touch” to create usable, game changing devices, this will be a hit, and will function on a number of levels, including as a book reader. Assuming color and the ability to highlight and add notes and such, let alone offer interactive and collaboration capabilities, the textbook market is ripe for the picking, today.

2. There will also be an iPhone announcement. If I read the tea leaves right, Apple will announce that the iPhone will be available on Verizon and perhaps other carriers too. This is essential and will allow the iPhone to maintain its first mover advantage and current leadership position. Apple has been here before. Remember that iPod was one of many until it became Windows-compatible. And yes, we have a number of articles that the ATT network is overloaded with data usage generated by the iPhone. This is signal for this change if ever there was one.

And to go a bit further out on a limb…

There will also be a next generation iPhone announced with longer battery life, perhaps expandable memory and a better camera, plus the ability to run multiple apps at once. And yes, there will be a software update for those using older versions.

Those are the big ones. And there is more…

3. There has been a lot of noise about an iTunes upgrade. Subscription, Movies on Demand, etc. This may impact all of the above.

4. Lastly, my guess also is that Mac books in particular will also get something new to add more premium value to the product line. Perhaps the addition of the new low voltage chips we have been hearing about that will extend battery life to up to 8 hours, and dreamer that I am, how about quad core chips on these machines?

Add it all up. Apple has been on the “to kill” list for quite some time, and has always stayed at least one step ahead, to ensure leadership in segments it created. I have no reason to expect anything less this time.

That said, Google’s entry is a welcome addition and great for consumers, but an iPhone killer… probably not, if the Apple marketing machine is half what I believe it is. The only wrinkle is that sustaining type of improvements won’t do it. The good news for Apple is that disruptive game changers are what they are all about.

Don’t know about you, but I am looking forward to the next announcement at the end of the month.