Archive for the ‘marketing news’ Category

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.

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Starbucks… Back to the same old Grind???

December 17, 2009

Recently Starbucks launched its VIA Instant Coffee product, for $1 a packet or cup. When I first heard about it, I thought they were crazy! Here you have a true category creator, in this case premium coffee, coming up with what to many is a downscale, basically commodity type of product. Look at it this way, currently you can get a 20 ounce cup (“venti”) for over $2 today in the Boston area where I live, or you can get a cup of instant (Nescafe and even Tasters’ Choice) for pennies.

Is there a difference in taste? You bet. Then does this mean that Starbucks is lowering its standards?, in essence looking to capture that “cup of joe” on the run crowd?, probably not, at least directly for a $1 a packet.

To most of us Starbucks means affordable luxury, infinite choices, the third-place on top of home and office, “Venti” and “Grande” instead of large and jumbo, rich flavored beverages, etc. How does this square with a product category that we associate as bland, chemically adulterated, “instant” coffee…

The danger here is if we associate VIA as an instant coffee product. If it comes down to price, it is very expensive. And if it is not positioned strategically, then the “instant” product can take the Starbucks brand down a notch or two. Talk about a potentially very dangerous brand conflict in the works!

If customers begin to associate a premium brand with a commodity product, the risks are:

  1. elevating the commodity product while at the same time lowering your brand value, and/or
  2. trying to swim upstream and justify an off the charts price against other much cheaper products in the, in this case, instant coffee category.

A mis-fire and at best the product will fail with worse consequences possible if people sense that brand is deteriorating and losing value.  Talk about high risk and high stakes.

And Starbucks has muffed it before.

Remember how in their zeal to speed up service they mechanized the bar drink process in order to serve more customers more efficiently? They reduced the hand crafted nature of the beverage and role of the barrista. This opened the door for potent “new” competitors such as Dunkin Donuts and even McDonald’s to leverage mechanical processes and also offer such beverages, enter the premium category and take market share.

Add to this that the company has taken what appears from the outside to be a passive marketing posture these past few years with flattening sales to boot, and I wondered how they could pull this off.

Glad to say, Starbucks did it… and did it with superb marketing intelligence!

You could see this high level of marketing thinking in the launch itself.

If you are a Starbucks fan you may remember that this past fall they had VIA tastings in each store as part of the rollout. The interesting thing was what they tasted VIA against. My initial thought was that they would taste against Instant Coffee to show how much better (hopefully!) it was.

But instead they did something completely different… they tasted and literally positioned VIA against Starbucks brewed coffee itself and used Instant to define convenience, not the category.

I will argue that this was a stroke of marketing genius. Here’s why.

  1. They redefined the instant coffee category into Blue Ocean, uncontested territory, from a low price/commodity play to convenience… take it anywhere.
  2. Instead of trying to push up market in the instant coffee category ($1/cup price for a product costing in the pennies), they pushed down in the brewed category (Starbucks flavor for $1/cup).

Roll it all up and with VIA now you can now have a cup of Starbucks you can take or have almost anywhere for a buck! Sounds good to me, and tastes good too! Apply marketing at this level to the company overall, well Happy Days may indeed be back at Starbucks again.

HULU Contemplates a Lulu

December 6, 2009

OK. This harkens back to those internet “go-go” days of the late 90s – get first-mover advantage and scale and the money will follow. Sounds like the script for the movie Field of Dreams… “build a better product and the customers will come,” which as a marketer often working in the tech sector, is a line I hear all too often.

If what I just read in Business Week (“HULU’s Tough Choices”, Dec. 7, 2009) is any indication, HULU, the very popular free video streaming site with 40 million downloads per month (second only to You Tube) has run up a $35 million annual loss and is suffering just such a fate as the web bubble did.

HULU is not just an ordinary site. Funded in part by NBC, Fox and ABC, HULU was the film/video industry’s response to the technological disruption of FREE that had obliterated the music industry and with the prevalence of cheap bandwidth and storage, was heading it’s way. They saw how the music industry not only lost control of the new now dominant digital distribution channels but also found itself rendered obsolete, and did not wish to suffer the same fate.

One of the experiments put forward was HULU and lo and behold, I can get yesterday’s episode of 30 Rock and all sorts of video and film content on demand (1,700 titles) playable on my computer any time I want. And with WiFi-enabled LCD flat screens upon us, let alone the ever easier ability to integrate TVs into our home networks, this free content on your HiDef TV is nearly a reality. Or is it?

If the Business Week article is to be believed, the era of premium content at HULU is upon us. In other words, content we will have to pay for. And what is to be the price for this content? Your premium cable service!

Wow! Let me see if I have this right. Here comes this disruptive force of free streaming video content sponsored by the broadcast and film industry. It’s ad supported model is not really sustainable, at least right now. So yes, those happy days of free content appear to be coming to an end. And now the industry in its wisdom is telling us we may have to pay, and the way we will pay is in support of the what were soon to be disintermediated cable TV interests!

I mean after all, do we need cable anymore if a thriving online channel is delivering this content through our medium of choice through our server, versus the cable box? I guess the cable industry saw the handwriting on the wall too and isn’t about to go quietly into the night.

We could spend all day trying to figure this out. Is the Comcast acquisition of Universal (and NBC) from GE a factor in this equation? I will leave this to others to decipher.

My beat is marketing, and the question on the marketing side is, is this the best you can do, HULU? You have built a brand, you have scale, you have content and now you want to punt, snatching defeat from the jaws of victory while the experiment is in process? What a waste for you and the viewers who love you, and if my students are any indication, many do.

We all know that it is one thing to point out problems, another to pose solutions. Marketing is all about solutions, so let’s see what we can come up to get HULU out of this mess, knowing their ad model as currently in play isn’t sustainable.

Recommendation #1.
Up the value of the advertising.

How so?

As I see it from the outside, HULU has been a pioneer of offering choice to visitors? Watch the long ad and see the show uninterrupted… or choose the shorter ads sprinkled throughout. This is a great start.

How about going further and offer viewers even more choice? Offer a menu of ads by type and even product. Let the viewer self-select their ads of interest.

You can be high or low tech about it too. Low tech… base the ad offerings by the show, or if you want to be more slick, apply behavioral information to narrow down the choices based on each visitor’s clicking habits.

How does this improve value?

  1. You are empowering your viewers with more, not less control
  2. Ads are more relevant as a result
  3. And in doing so, viewers actually act and “raise their hands,” which direct marketers know is the most costly and difficult part of the customer acquisition process

What this means is that response and conversion rates should be higher and I will argue in the absence of evidence either way, at least worthy of testing. And should indeed response/conversion rates improve, the value of the advertising will go up and command a higher premium.

And one other point. Advertisers could be charged based on actual visitor selection and or performance. If viewers don’t click, they don’t pay. And when visitors do engage, they pay more. Integrate some interactive promotions and calls to action for those that do select and powerful interactions can take place.

Recommendation #2:
HULU Ju Jitsu

I see HULU as more than a platform for streaming video… free streaming video on demand. I call it a Network of One. It is our own personal Video network, programmed by us just the way we want it, with the content we love, when we want it and hopefully soon, where we want it too.

The motor that has driven it’s success to date as the second most visited source of streaming video content is the fact that it is free. Don’t kill it! Use it! Since Fox, NBC and ABC are principals, create premium content that bring fans closer to the shows, films and actors they love with interviews, webcasts, blogs, tweets, contests, and even closer interactions and behind the scenes access. Create opportunities and other reasons to join fan clubs and other communities and pay for the privilege based on the degree of proximity and interaction.

Peel off some percentage of 40 million for tiered service and subscription packages that supplement the free streaming content, and some interesting numbers come into play. 1% of 40 million is 400,000 prospective customers. Find reasons to get them to pay up to say $100 per year for something special above the free content… well you get the idea.

For one thing, HULU is no longer operating at a deficit. Up the percentages… every .1% is 40,000 customers afterall, and the return can be even more radical. Personally, I would love the opportunity to win a lunch with Tina Fey, a comedic genius if there ever was one.

The “Bucks” Ends Here…

June 10, 2008

One of the core principles of our 5 Laws at Marketing 2.0 Win is the Law of Process = Chaos. What this principle says is in simple terms is that process in the service of strategy is a good thing, however if it is the driver or central organizing principle of a company’s marketing or in this case public face, take care, take very good care.

We can see this playing out on a grande scale right in front of our eyes with coffee giant Starbucks. After an incredible run of phenomenal growth on a global scale, we see the symptoms… declining stock price and unhappy investors clamoring for relief, bringing visionary Howard Schultz back into the CEO role at the company. His self proclaimed goal… to help the company get back to its core… the coffee/community experience that in today’s Starbucks’ corporatized environment seems lost.

How? Howard himself gave us a couple of examples… of this disconnection: fresh-locked packaging, where you can’t smell the product anymore. And “goof proof” espresso machines. Machines that make it simple and fast to “build” a specialty drink, while put a wall between the customer and barrista and taking the artistry out of the drink making process.

I agree with that these are customer disconnects. But do they disconnect with the brand that Starbucks is?, enough so, so as to flatten sales in existing stores, like we have seen with Wal Mart, Dell and others?

In this case I am going to argue the answer is NO. The issue is not a brand conflict here.

Yes, these changes matter to some degree… but they are fixable and incremental issues, touch points that need to be aligned, indeed, but not a commodity-busting strategy that they really need to fix the problem.

You can see this in action in the Got a Great Idea/Tell Us, community function that now is front and center on their web site. I love the concept. Surrender control and open up the floor for your customers to offer their insights and then respond back, with action.

Some popular customer generated ideas… Free WiFi, a Loyalty card (buy 10/get one free) and others are incremental ideas… and sound hardly new or radical. My advice… implement them. However, don’t expect they will turn the tide.

The real issue is that the Starbucks concept is now approaching the mature phase of the product lifecycle, as these ideas so clearly demonstrate. The reality is that the Starbuck’s concept is now a commodity, which in fact the company with its “goof proof” drink making process helped bring about. This means that price, lower price and greater non-differentiated competition are the business drivers.

Look at it this way. MacDonald’s is now rolling out espresso/specialty drinks. Dunkin Donuts, one of the big winners in the Starbuck’s phenomenon, has been offering these lower cost specialty drinks for the past couple of years. Soon enough it seems every fast food chain will offer them. So now what?

Let’s take a closer look at Dunkin Donuts, because here is where the solution lay. At the outset, I admit it, I am a Starbuck’s regular. It is not my favorite, but with locations it seems at every corner nationwide, Starbucks delivers a consistent and premium product that meets my expectations almost every time.

Last week I offered to make the office coffee run, and one of my colleagues ordered not a Starbuck’s but a Dunkin Donuts coffee, medium vanilla. It was then that my mind was blown.

We know that Dunkin is not a premium coffee but a more everyday product, a blend I am told of Arabica and other less expensive coffees. It is a lower wholesale cost, more generic product. But when I saw the price for the cup at Dunkin which was $1.79 or in essence $.10 less that a similar size Starbuck’s, I was floored… generic product at a premium price! The folks at Dunkin must be smiling all the way to the bank! Thank you Starbuck’s!!!

So Starbuck’s is in an interesting position… its premium product is being attacked by generic products and commoditized… forced to concede on price or lose customers, because as we know, you can get a specialty drink anywhere… for less!

What is Starbucks to do?

Howard Schultz, if you read this… incremental, process-oriented activities focused on your existing customers are good but in fact cannibalizing, because these kinds of activities are pulling revenues from your existing audience. I will argue that the way forward in this case is to reposition Starbucks and counterattack to build market share.

In other words, Loyalty is important, but it comes at a cost and won’t drive growth. Look at it this way, “free WiFi” and “buy 10 get one free” are tactics and I will argue not nearly enough. Nor is “watch the barrista” or “smell the coffee.” Although appropriate, these tactics do not a growth strategy make.

Just as Dunkin and others offer what we can argue is an inferior product at a better price thanks to you, Starbucks now needs to execute a jujitsu strategy and show consumers in simple and clear terms the added value of their premium product over the competition. This is a classic re-positioning strategy.

So… ladies and gentlemen, the drum roll please… time for the Pepsi… ooops, the Starbuck’s challenge. Put your product up against the competition in “blind” tastings and build a campaign around it… Wow! This really is better!

As it stands, an espresso is an espresso is an espresso, and it will stay that way until Starbucks does something about it. That time, I will argue, especially if I was an investor and I am not, is NOW. And by doing so, the company can carve out MacD’s and Dunkin customers who in fact are ready to appreciate the difference premium makes. The key is to connect the dots positioning wise and make it clear to them what this difference is where the rubber meets the road, and for Starbucks that is in what is a better tasting cup of coffee every time.

The Case for the Negative Brand?

April 11, 2008

What a week in the airline industry! We all know the airlines are suffering. High fuel costs have decimated profits and now it appears many carriers as well. Just today Frontier went into bankruptcy in attempt to reorganize, and Aloha and a number of others out of business entirely.

Now add to it the FAA and the “inspection crisis” plaguing American Airlines in particular and their MD80 airplane which makes up more than half of their fleet. For the last couple of days, this fleet has been grounded for apparently long overdue wiring inspections in the wheel wells of each plan, causing thousands of flights to be cancelled and over a quarter million customers inconvenienced at best, often stranded in locations they didn’t intend for hours and even days.

Passengers by law can be compensated for hotels should they be stranded overnight, and of course American will rebook passengers on any carrier and will even issue vouchers for cancelled flights as long as you initiate your next flight by April 17.

And if you go to their web site at http://www.aa.com/index_us.jhtml, you can see crisis control marketing in action… notably an “ADVISORY: AIRCRAFT INSPECTIONS AFFECT SOME AA TRAVELon the home page and special jump page at dedicated just for this at http://www.aa.com/aa/pubcontent/en_US/urls/md80.jsp.

If you look carefully you will see that American is terribly sorry, its not our fault, safety is concern #1 and please e-mail us if you are stranded overnight. It appears to be written by a team of lawyers to mitigate liability, nothing else.

Are you kidding!!!

E-Mail us with your travel info and we will get back to you… it doesn’t appear that effected passengers are buying it either. Phone lines are jammed, and customers have been know to try to get through for hours on end with no luck. And ticket lines at airports are no better. Passengers are waiting for 4 and even more hours just to talk to an agent!

What a mess! I will argue, especially in light of the inspections, our trust is shaken, passengers are having vacations ruined, businesses are being disrupted, and all American can do is offer an apology and tell us to e-mail them. The only thing that’s even more surprising to me is the apparent lack of outrage by the public and government officials.

Now let’s go back to Valentine’s Day 2006. A snow storm hits the east coast of the US, shutting down JFK in NY, hub to another airline, in this case a brand that is beloved by its customers. This disrupts Jet Blue to its core. Thousands of passengers are stranded again, some for days. In other cases, they are actually stranded on planes on the tarmac, without electricity, running water and other amenities for hours, in one case up to 14 hours. Not good.

On top of that, their phone systems went down, planes and crews that could have been mobilized to take up some slack, were not utilized and sat idle. There was no apparent recourse and outraged customers went ballistic.

The media also took up the charge. Business Week, which was getting ready to announce their Top 25 Customer Service Champs, had just enough time to publically eliminate Jet Blue, who was ranked #4 overall, from their list entirely. And the talk shows went crazy, with Leno and Letterman all over it.

In this particular case, here was a darling brand in trouble, and Jet Blue rose to the challenge. CEO David Neeleman responded authentically and quickly to the challenge as you can see in this You Tube video produced in response that you can see at http://www.youtube.com/watch?v=-r_PIg7EAUw.

First you can see Mr. Neeleman is tieless and clearly upset. He is not rehearsed or smooth at all. It looks and feels authentic. He apologized, of course, immediately, and then takes responsibility… and potential liability as well. Then he announced 3 steps they were taking to attack the problem immediately and to top it all off, announced their new, groundbreaking Customer Bill of Rights to ensure better performance in the future.

Talk about getting ahead of a crisis!

Contrast that with American. JetBlue messes up and creates outrage, the far bigger American messes up on an even grander scale, they blame the government, seek to minimize liability and we just yawn and thank the powers above that it wasn’t us on one of those flights.

The difference from our Marketing 2.0 perspective… is brand. American’s brand along with the other once platinum carrier brands is tarnished, almost an anti-brand. When we think of major carriers today, we think delays, inconvenience, lousy service, and with all this FAA stuff going on, minimal trust at BEST.

So a problem like this comes up for American, and from a brand point of view, its business as usual. We expect it. Yikes! No brand conflict here, clearly.

Jet Blue on the other hand was another story. People love flying on it for a number of reasons and have a strong brand connection. That was why when they stumbled back in 2006, the brand was in conflict and we were outraged.

I will argue that in the long term, JetBlue understood that they had to act, and that action, pro-active action would have a cost and a short term negative financial impact on the business. I will argue that these kind of issues can be considered a marketing issue and fixing it marketing spend, which as we now see has strengthened customer loyalty and is likely keeping the business healthier in these times.

American has no brand, nothing to protect. Their quote unquote marketing is all about damage control at best and placing the blame on others. This is not a good indicator of American’s marketing prowess, and long term health of that and other similar airlines.

 

Are Ad Words Dead?

April 8, 2008

We have seen the headlines over the past few months… “signs of click recession!” or “decelerating clicks!” Obviously these are referencing Google and are referring to ComScore’s recent monthly data reports showing decline in the number of times consumers clicked pay per click ads that accompany Google search results.

We can infer from the headlines that journalists and the powers that be may attribute this to environmental factors as a result of a slowing economy. Others say this is the result of a conscious effort by the company to trim clicks so that they can limit the supply and charge more.

We can go back and forth about the cause, but it clearly appears that advertisers, after years of consistent and meteoric growth, may be getting fewer sales per click, which is bad news indeed for all concerned.

Marketing 2.0 Win has its own theory, borne out of let me say up front non-scientific research in my work as an adjunct professor of marketing at Emerson College in Boston. I see it in the classroom all the time, the search-based PPC ad platform is becoming mature and students (vis a vis consumers) aren’t noticing or responding to them as they have before.

Remember Banner Ads? Or Flash-based web site intro’s? How cool they seemed… then, and how they don’t now?

Thus is it may be with search-based adwords. When we first encountered them, they raised the bar for relevant ads, based on what we were searching for at the current moment. Google not only delivered us better search results than the others, the search based ads as often as naught mirrored our interest at that instant and offered us the potential to find best price for products we may be seeking. We were interested, we noticed, we clicked through and we bought, finally making the long sought after promise of the web to deliver relevance to individuals a reality.

No, don’t me wrong, Google is not resting on any laurels. They are a great innovating company and their acquisitions of YouTube and DoubleClick prove this. However, YouTube even with huge numbers of visitors is still hard to monetize, and the DoubleClick approach to knowing where you have been, as well as where you are in order to make better inferences leading to more relevant ads, well this opens up a whole Pandora’s Box of issues from privacy to trust that will only get more intense and slow things down.

In our world view, if relevance is king then as the Law of Surrender = Victory dictates, control is key… customer control. To make it simple, ask the customer what they want. Offer them a way to choose from a menu of ads or create a profile that can be changed at any time, which can then help serve up ads on search, on You tube, Hulu or wherever, that will be more relevant. For example, when is a car ad most relevant? Probably when you are in the market. Give customers the ability to declare their interest.

By doing this two things happen. 1. With the customers help and control, ads will be more relevant and targeted, and 2. The more opportunities the customer has to raise their hands, the more likely a prospect they will be, which will translate into higher conversions and sales.

So, has search-based advertising had its day? You be the judge. However from where we sit there is no doubt that the novelty may be wearing off and that the quest for relevance is ongoing. In Marketing 2.0 Win, it is certain that if companies do more to bring customers into the mix, relevance will follow, which in the end creates even more opportunities for growth.

Radiohead Surrenders Control and Makes a Bold Move

October 3, 2007

The big news on the music marketing front this week has to be the upcoming release of Radiohead’s 7th album “In Rainbows.” The reason is simple… the extremely popular band is no longer affiliated with a major label and releasing the music direct to the public themselves… no label, no itunes. This alone is fairly radical. Some great artists have been unaffiliated with a label and releasing product for years quite successfully.

 

One example that comes to mind is one of the most successful jazz artists today, composer Maria Schneider and her constantly touring “big band”. She is a part of a cooperative record label called Artists Share and is able to offer her fans a variety of levels of participation with her recording projects… from simple album purchase to tiered access to the project’s creative process all the way to Executive Producer level for higher financial contributions… audience choice. She has been so successful with this that not only has she been able to take on and fund ever more ambitious projects, she even received the first ever Grammy for a pure digital album.

 

And others such as Prince who take the long view of their business have distributed their latest recordings for free, in his case as in insert in a newspaper or at concert events.

 

Radiohead is taking this thing to new level because customers are invited to pay what they wish for a download version of upcoming album…directly from them!

 

If you follow Marketing 2.0 Win you know that one of our 5 laws of marketing for the 21st century is “Surrender = Victory.” In essence what this law indicates is that in our topsy turvey world, like it or not customers have control and the more we as marketers are willing to surrender control to them, the more successful we will be.

 

Radiohead is doing just this…surrendering maximum control. We can argue that they can afford to, especially when you consider that they are one of the world’s most popular bands with a huge fan base and they have in effect disintermediated most of the middle men in the process. But the inverse is also true, one could also argue they have the most to lose.

 

One outstanding question what will fans do?

  • My sense is that some will choose to pay nothing… which is totally acceptable.
  • Many will base their choice based on the digital retail price which, depending on how you look at it is 9.99 on iTunes and 8.99 on the new Amazon MP3 service.
  • And assuming people like the new album, many will probably pay more based on its emotional value.

This “feeling” will also be driven by the fact that fans will be dealing with the band directly and my guess is this will be perceived as a righteous act, worthy of support.

 

This is all good, but there is one more factor in the mix of this bold act that excites me the most. We know that iTunes has been the most successful legal distribution channel with 3+ billion tunes downloaded. This represents a tiny fraction of music that is downloaded… for free every day however.

 

This what some would call “underground audience” is in the hundreds of millions of individuals worldwide. They have contempt for licensed content and labels and believe it is their right to get the music they want for free. Like it or not, they feel entitled to it.

 

By surrendering control, I figure Radiohead is making the first real and legitimate move to capture some of this audience. If they can pay whatever price they wish, I will guess many will. The only question then is how much? No matter what, Radiohead wins… consumers win… and a whole new way to engage the largest possible audience may emerge… an audience that is empowered to dictate their own terms in the transaction. Welcome 2.0 a new day!

Sour Notes in Music Industry: Change the Beat!

August 15, 2007

One of the industries we have and continue to track in my Principles of Marketing class at Emerson College is the music industry. Watching the business implode upon itself in attempting to deal or not deal with the internet disruption over these past 6 years has been nothing short of amazing to watch. We saw Napster, which solved the problem of getting the music people wanted, when, where and how they wanted it… and for FREE completely paralyzed the industry as a whole. We also watched with horror the industry’s response… raise prices and sue the barbarians.

 

We also saw with great interest Apple do the unthinkable. First they came up a music player in what was a crowded field. What made it stand out at the time was coupling iPod with iTunes, so that for the first time anyone (with a Mac) could organize their libraries and EASILY download their music into the thing. That got the ball rolling. And then they jumped across an internal chasm, making a Windows version of iTunes to open up the market at large and get beyond a simple niche play. We all know how this transformed the industry in the process while selling hundred + million iPods, and the company which went from Apple Computer to Apple Inc.

 

I remember very well the press at the time saying the iTunes would be the proof of concept that customers would indeed pay what they perceived was a fair price for digital music… and that then the labels would finally act themselves.

 

Six years later, I am still waiting. iTunes is the undisputed leader in legal music downloads.

 

And labels continue to complain that the iTunes Store is charging too little for their content. This summer it was news that Universal Music refused to sign a long term agreement with iTunes, preferring short term agreement instead. Leverage anyone?

 

Recently Warner Music, the most digital label of them all declared a net loss of $14 million for Q3 2007, even with revenue from digital music up 27%. Perhaps after they get beyond plunging CD sales and cost associated with realigning operations and other charges, things will be better.

 

Plus the DRM (Digital Rights Management) issue. The labels still don’t get it… and Apple does. As our Law of Surrender = Victory attests, the game is over anyway… customers have control, like or not… now exploit it. 

 

However, what if once and for all labels learn what they need to learn from Apple?

 

Why not leverage their assets to which includes basically music of all genres going right back to the beginning of recorded music, and sell directly to the public themselves? They have the assets, they have brand power (although long dormant at this time) and they have retail merchandising prowess that can be extended to the web, plus there are these low cost vehicles to build audiences like never before. Labels also know how to add value, so that once they lift the constraint of DRM, they can still add value to drive revenue, beyond simply extended CD’s or other Bonus content.

 

Sure it’s risky. It probably makes no sense to anger Apple… but if you are Universal Music or Sony or other music giant, you are already probably have.  iTunes needs you too, remember. 

 

The trick then becomes, old rules don’t apply. If the first thing you do, once iTunes is removed, is jack up prices, it won’t work. Remember you are still competing against FREE after all. And there are audiences you have ignored for decades like me (25+) that offer untold opportunities… its just we go way beyond “Classic Rock” and other such genre-specific limitations. You have the content…. You have the need… you have the means.

 

I hope you stop making noise and market to win. Please don’t make us wait another 6 years!

 

Today is THE Day! What does the iPhone Launch Really Mean?

June 29, 2007

Tonight June 28, 2007 is a special night. I guess we can call it iPhone minus one, because tomorrow after months of hype and often brilliant word of mouth buzz marketing, tomorrow IT is here. No, you don’t need to listen to me talk about that… this product is one of the most highly anticipated product releases since… since Playstation 3 maybe???, or how about VISTA? OK, I know what you might be thinking, is different, this is IT!

I probably agree, but the big ? is why? After all the iPhone is just a, phone isn’t it? If you read all the pundits from Gartner to the Wall Street Journal, proclaiming this is great or this is just another what I would call “thing du jour” it is easy to get confused, so let’s see if I can help clarify for you with a marketing 2.0 win perspective.

First off, I have to tell you, I ain’t buying one myself although I am tempted There are two reasons for this. 1. I am not on ATT and I have no stomach to switch, or have another phone. I need one phone, but two? and I don’t feel like paying a $200 penalty to Sprint to cancel and switch. And since I can’t just get it as an iPod or web device without the phone service?,  I am not interested at this time. So yes, I guess these silly penalties are a barrier to most of us, aren’t they? And 2. since the phone on the 2G Edge network, which is, for web purposes, slow as molasses, maybe I will just wait.

Do I sound like a guy looking for excuses not to be an early adopter? I guess you are right.

So, saying all this, I will go out on a limb and tell you I think from a 2.0 perspective, this thing is going to big, really big. They are coming at this from marketing strength that can’t and I believe won’t be denied.

Apple has gone on the record to state that their goal is to sell 10 million units by the end of 2008. Some pundits say this is impossible, others say no problem. I am with the no problem camp. In fact, if they follow the iPod playback and offer over time a variety of configurations, 10 million or 1% out the total phone market of 1 billion + is modest.

Here is our rationale. This device is more than a phone.

First, it is an iPod, a new iPod with a touch pad… “the best iPod we’eve ever made” said Steve Jobs when he launched it this in, can you believe this past January? And if you have heard the iPod Time and Space podcast here at Marketing 2.0 Win.com, you know what that means. Even though we can’t buy the iPhone as an iPod yet (might the next generation iPod with a touch screen version be coming out soon?), one pillar of iPhone is the iPod, which with over 100 million sold, is the undisputed leading portable music player in the world. Think about it, wouldn’t it be nice to launch something new, something perhaps disruptive and facing the infamous Chasm as made famous by Geoffrey Moore, while one big piece of it is still at the top of its game, as the iPod is? Not bad.

You can see this play out every day in the phone business. Ever since Job’s announcement, we have seen every other phone maker weigh in with their new “smart” phone or music phone, all to lackluster response. Is it because Apple sucked up all the buzz? Perhaps? To me, its not they sucked up all the buzz, it is because no other phone will have an iPod.

On the phone front, which is the second pillar of this device. It has some cool features. The ability to sort through voice mail messages, I love it. But these are only features. What is underneath the features that is worth note, is what Apple is all about. The thing is gorgeous, it is cool and unless there is a huge mess up, it is simple, relatively speaking, easy to use, something which even my simple straight ahead Katana is not.  In other words for the first time, there will be a phone that we can figure out how to use.

Lastly, I was concerned about the web browser, something I am personally interested in. The iPhone is supposed to offer us a fully functional Safari browser, but really, on such a small screen? And once again, here we go, on 2G, how good is that? Well at least if the Mossberg’s of the world have it right, yes on 2G it is dreadfully slow, but on WiFi, it rocks! And the browser is the real thing.

Now I will add in a couple of more things, they may not be here now, but since once again as Job’s said, “we are really a software company!”, what happens if they can spruce up text messaging? Add in GPS, and voila, localized, rich messages served via phone. Oh la la. And what happens when WiMax really hits…VoIP cell service? ATT may be a different beast then. And the glue that puts it all together, the iPhone, which is designed, as far as I can see, not as a super “smart” phone really. This is a people’s phone, a phone for anyone to use and enjoy.

So what does this mean, at least as far as Apple’s story goes. In 1984 Apple created the Mac, but the real show for computers was in business, where IBM and WinTel put it all together to rule the roost. Apple in that world was in the end marginal at best. I just read yesterday that Gartner reported that the iPhone would be rejected by business… it doesn’t fit in, and it hasn’t offered the security and other assurances business needs to adopt.

I will argue, in this one, so what? The smart phone is marginal, the iPhone is another market, hitting the sweetspot of the mass market and I will assume finally makes the cell phone usable and fun, and yes… beautiful, simple and cool. At that point the iPod may be ready to make it into business, and give a run to Blackberry’s, but it’s success at that point will be undeniable.

The iPod is the anchor, and its success has been phenomenal. The iPhone goes to the next level and if I read the tea leaves correctly, will not only open the door to conquest on the mass market scale, I will argue on a larger scale than even that of the iPod. Plus the new functionality will add new life to the next generation of iPods, which I will bet can’t be that far away… at least I hope not!

Bravo!!!