Like I said in my last post, I am not a fan of Apple products. I have a Windows Phone, I love my Zune, and a month after I joined Rackspace I retuned my MacBook Pro to the IT department to get a Dell Windows 7 laptop. I have worked with Apple products for many years, I sold many Macs when I was in the digital imaging business in the early 90s and here are iPods, an iPhone and an iPad in our household.
Yet, as a marketer and a business man it would be foolish not to recognize the unique ability in Steve Jobs to transform industries: personal computers, music, cell phones, animated movies and publishing. Steve also had his share of failures : The Apple Lisa, hiring John Sculley, NeXT, Apple TV (so far), Ping FM, and others.
You have probable read a dozen ‘Leadership lessons from Steve Jobs’ articles, but I have a slightly different perspective that I want to share. These are the three reasons Steve had an incredible ability innovate, according to the Adaptive Marketer:
1. Steve clearly understood customer needs
Apple is famous for not doing traditional customer research . A few days ago Guy Kawasaki came to Rackspace and told a group of us at Rackspace “the day you see Apple doing a focus group is the day you must short your stock”. It is easy to come to the conclusion that Steve ignored customers creating customers on his own.
It is true Apple does not do customer focus groups, there is no feedback section on the website and after 5 years there is only one iPhone form factor despite customers who have asked for a physical keyboard, larger screens or a smaller, lower-cost version.
But there is a difference between not accepting direct customer feedback and not understanding customer needs. Steve was frustrated with the user experience in the first iTunes-enabled phone, the ROKR. Steve understood customer’s frustration with smart phones in general. He understood customer needs, and used his technology and user experience genius to create products that served those needs.
In fact, Steve Jobs’ first press quote, published in the July 1976 issue of Interface magazine read “If we can rap about their needs, feelings and motivations, we can respond appropriately by giving them what they want.” referring to his customers for the Apple I, hobbyists.
2. He understood it success is not a result of having the best technology, but in offering the best user experience.
This ability is especially important in the technology industry where most product managers, marketers and executives are fixated on the virtues of the latest technologies that we often miss or misunderstand customer needs. Steve was a geek at heart, but he also deeply understood the importance of customer experience.
Probably as important, he understood the power of simplicity. If you look at his product launch keynotes (and if you are a marketer you must), the message was concrete and simple to understand.
In 2005 when he launched the iPhone, he did not have slides with a hundred features, technologies and capabilities. Instead, the iPhone was presented as a phone, a music player and a browser: three concepts that everyone understood. He did not talk about how many megapixels in the camera, how many megahertz in the processor, or the details behind multi touch technology. It was simply a phone, a music player and a browser.
In terms of technology, there was nothing revolutionary in the iPhone. The Windows Mobile phones available in 2005 could do everything an iPhone could do. But Windows Mobile was not simple. The best technology does not always win. Otherwise we would all be using Amiga computers.
3. Steve was relentless in making his dreams a reality.
In a previous post, I summarized Marcus Buckingham’s perspective on leadership: Great leaders are restless for change, impatient for progress and deeply dissatisfied with the status quo. The possibility of a better future burns them and propels them. Great leaders see the future so vividly they have no choice but to do everything in their power to make this future real.
Steve really was an example of this. When the iPhone was announced, there was no market for $599 phones. There were only a handful of phones that were so expensive. If you worked at Motorola, for example, and proposed launching a $599 phone, the response would be that market research showed there were not enough buyers willing to pay so much for a phone, especially a phone that did nothing new.
“Apple iPhone will fail….The iPhone is nothing more than a luxury bauble that will appeal to a few gadget freaks. In terms of its impact on the industry, the iPhone is less relevant.” – said Mathew Lynn, from Blomberg in2007
Yet, Steve said Apple would sell 10 million phones in the first 18 months. And he did.
There was no market for iPads, either. Tablets had been available for years. Microsoft issued me a Toshiba tablet when I joined in 2004, which was interesting but I used mostly as a normal PC. When the iPad was launched people were confused about the use case. Why would anyone need one? Seemed like a cool toy for people with a couple hundred bucks laying around.
As my friend John Smolucha points out in a recent blog post: “Even more impressive, nearly 75% of Apple’s revenues come from just two products: the iPhone (53%) and the iPad (20%). The first iPhones began shipping in June 2007 and the iPad only became available a year ago, on April 3, 2010. I don’t know about you, but I’m not aware of any other company that generates nearly 75% of its revenue from products that didn’t exist five years ago, while doing it during a global economic downturn.”
Steve believed in his dreams beyond what rationality, beyond market research, beyond corporate practices and policies. He had a vision and worked tirelessly to make it a reality. Yes, he was a micromanager, but only because he was a perfectionist and did not accept any deviations from his dreams.
Today most people would regard Steve Jobs as the inventor of the iPhone. I want to share the story of the iPhone that I believe is true, even though I don’t have any proof. It is based on storied I heard and observations. None of this is confidential information I gained while I worked at Motorola in 2004.
How Motorola invented the iPhone
Back in 2004 the RAZR was the best selling phone in history. Apple was starting to dominate the music industry with the iPod and was getting ready to launch the iPod nano. Apple was happy, things were looking good.
Motorola had a team in Libertyville working on customer trends, lifestyle, and technology trends. At the time, a few Motorola phones had music capabilities, and the company saw an opportunity to converge the iPod and the RAZR.
The story is that Ed Zander, Motorola’s president at the time, had a meeting with Steve Jobs to share this idea. Apparently, Steve was not very interested in the idea. Then Ed said something that changed Steve’s point of view (and probably the world):
“When you leave the house, you always bring the three things: keys, wallet and your cell phone. That’s it. Your iPod is not in this list.”
At that point, Steve understood Motorola’s idea and agreed to build a product. The Motorola ROKR E1 was launched on September 7th, 2005. It was the first phone to work with Apple’s iTunes, a truly revolutionary concept. Yet it was fatally flawed.
There were a few key problems with the ROKR: it could only store 100 downloaded songs at any given time, probably a limitation imposed by Apple to avoid direct competition with the iPod. There was no USB interface, which made the process of getting music into the phone incredibly slow. Apple did not seem to be particularly excited about the ROKR, Ed Zander complained to Apple about lack of support and undercutting it with the Nano.
However, the biggest flaw was usability. Like most cell phones in 2005, the user interface was not intuitive. Here is where you can see the genius of Steve Jobs at work: Steve understood without great user experience the idea of a music phone was going to fail.
Most likely, Steve became frustrated about the lack of UX focus at Motorola, and thought he would execute on the same idea on how own. Development on the iPhone started that same year, in 2005. . It was a monumental task. Building a cell phone operating system from scratch is not an easy task, even for Apple. The iPhone shipped June 2007. The rest, is history.
The iPhone was not perfect when it launched. At the time, it was a closed system that did not allow any third party apps. Apple asked developers who wanted to innovate to basically create a browser app optimized for the Safari mobile browser. After a few months, Steve saw the opportunity in an ecosystem and opened the iPhone to 3rd party apps. Today, the breadth of iPhone apps is one of the strongest selling points, and the focus of the “There is an App for that” ads.
Before Apple fanatics show outside my home with pitch forks and torches, I am not trying to take credit away from Steve. People who know me know I am not a fan of Apple products (I love my Windows Phone and yes, I have a Zune and it is great), but it would be foolish not to recognize Steve as an incredible innovator.
Today (February 2012) I had the opportunity to present at the American Marketing Association Austin luncheon lunch on the topic of how to establish a premium position in the marketplace.
The key points form the presentation:
Building a premium product is about differentiating by focusing on a segment of customers who are willing to pay more for a product that serves them better. Premium products are created by value.
People buy emotionally – then justify their decisions rationally
What drives business success? What is the one thing any business can do to increase its chances of surviving, thriving and growing?
We are always looking for a single thing that can give us success, the ephemeral silver bullet. It’s called the delusion of the single explanation (read more about this one and 8 other delusions here). In business, like in most cases, it is always a combination of factors that results in success. Strategy is probably at the top of the list. Other factors include execution, passion, culture, and some may even say luck (timing is usually a better description).
While I believe Strategy is the #1 factor, I was looking for a formula to create a strategy that could be applied broadly, to almost every business, of any size and industry, to increase its chances of success. I think I found it.
The Formula for Business Success
Long time ago, probably in the early 90s I saw a magazine ad for Lotus (I believe) which had a central message designed to make small business owners feel empowered. The headline read:
Give Customers What they Want, Make Money, Repeat
Since, it stuck in my mind because of its simplicity and power. I am sure most people read it and thought “d’uh! – of course!’. Some of the most powerful concepts in business and in life are hidden behind simple phrases like this one. Often we fail at the basics. Often we get distracted by complex stuff and ignore the basics. My college professor used to say “Marketing is common sense, which is the least common of all senses. Never underestimate the Power of Simplicity.
Why is this simple customer so powerful? Let’s break it apart:
Give Customers what They want – offers four insights:
Giving customers what they want is very different than giving customers what you sell. This means you must change your marketing and your entire organization around customer needs, not around your products.
Third, it means you need to decide who is your customer. It is very hard for a business to try to satisfy every kind of imaginable customer. You need to understand market segment,s buying behaviors and the type of customer you are better suited to serve. You can start with simple terms – do you want to serve a quality oriented customer, a price conscious customer or one that values full service?
Fourth, the ‘Give’ talks about the delivery model. I think about it as understanding how your customer wants to consume your product. What format, what pricing model, what packaging, what place, etc.
Make Money – This is about having a fundamental understanding of your business metric. Understanding your cost to acquire a customer, your fixed and variable costs, cash flow, profitability, margin, cost of capital – start with the basics. If you talk to owners of small businesses, you may be surprised how many have no clue about many of these metrics. The same can be said of product managers, marketers, and even large companies. Remember the dot com bust? The focus on making money also means your business must be market driven, not technology or buzzword driven. Another no-brainer that is often the cause of business failure.
Repeat – This is a key part. It talks about building the culture, the processes and the company around these basic principles. Listening to customers once is not good. Looking at your balance sheet every now and then is not good management. These need to be habits. Even more than that, they need to be made core of the way you think about your business – as an entrepreneur, as a CEO or as a product marketer in a large company.
I hope this formula can help you and your business, or at least re-think your overall strategy.
Like most business people with global responsibility, I fly quite a bit. I have been a Platinum member for a couple of years and have flows withAmerican almost a million miles now. A few weeks ago I headed to the counter and asked to be added to the list to get upgraded. After all, I have 18 segment upgrades in my AA Account.
“No can’t do. You cannot use your segment upgrades anymore” said the AA Lady. Wait…what? Last year because I was transitioning to a new job, I did not fly much, and when I flew other airlines were more convenient. I did not get enough miles to qualify for Platinum – or Gold. I missed by just about 2,000 miles. I was demoted from Platinum elite member to member. And if you are not Gold, you cannot use your earned segment upgrades. American won’t allow me to use the upgrades I earned by being a loyal flier for years.
Then, I got an email yesterday where American is asking me to pay $559 to retain my elite status at Gold and enjoy benefits such as checking two bags at no extra cost, which I get at Southwest.
What American does not get is that I am the same guy they used to pamper with free upgrades to business class on an intercontinental trip, complementary access to lounges and other perks. Now that I am traveling again, I don’t feel compelled to use AA – for them I am just a guy. In reality, I am a business traveler, and I spend more than I would like on travel – and American knows it. American’s loyalty program failed to prove loyalty to me as a customer .
American has lost my loyalty and the loyalty of thousands of customers. Now American is in bankruptcy and at their current market ($218 million) Apple could buy the airline with the profits they make in a day and a half. But the goal is not to pick on American or rant about my experience, I am using it as an example of having the wrong idea about what a loyalty program should be.
“ Loyalty programs should be about demonstrating loyalty to your customers, not about bribing customers to do business with you”
Here is the problem: Most Loyalty programs are focused on rewards, which ends up being the same as bribing the customer to do business with you. Ironically, there is no loyalty in bribery: as soon as the bribe stops, customers will go elsewhere.
What if you thought about a loyalty program in a different way? What if the goal of your loyalty program is to demonstrate your loyalty to customers? Customers that feel appreciated, that feel they trust a company, that believe a company will stand by its principles, will become a loyal customer. Customers will be loyal because they will want to do business with you. Not because you bribed them. Seth says “Loyalty can be rewarded, but loyalty usually comes from within”
Maybe that’s why Forrester Research found no correlation to a small negative correlation between customer loyalty and having a loyalty program.
The key driver of loyalty is good, consistent, trust worthy service that meets the needs of your customers.
The old customer marketing funnel based on the AIDA model (attention, interest, desire and action) is obsolete. The new marketing funnel needs to be customer focused. The new customer model is CSLA (horrible, but hey, acronyms suck anyway): Costomer -> Satifaction -> Loyalty -> Advocacy
You create a Customer when they buy a product or service from you
Customer becomes Satisfied when you meet or exceed expectations
Satisfaction drives Loyalty, which is repeat purchases
Satisfaction and Loyalty make the customer an Advocate that promotes your product or service via word of mouth
The World is flat. If you have a website or run an online business, it is global by definition. As a business grows it starts thinking about how to optimize their online presence to better serve customers around the world.
The way it usually works is that a subsidiary uses part of its marketing budget to create a local site and local content. Over time this problem gets bigger and bigger, often ending up with multiple websites with no coherent strategy. The result is uncoordinated infrastructure investment efforts, inconsistent experience for customers, back-end integration challenges, privacy governance problems and continued investment in localization.
What is missing is a global online strategy. While building a global online strategy must be done in a way that is relevant to your own business, I want to offer a few ideas or best practices that could help:
1. A single online infrastructure and one global user experience.
In a world of global consumers, political boundaries and languages are becoming somewhat irrelevant (not totally, of course). Customers travel, migrate, commute and deliver services globally. B2B companies have subsidiaries and regional offices in multiple countries. Privacy, compliance and user experience governance is better done centrally. With all this under consideration, it makes more sense to have a single, adaptable, global site.
This means a single global infrastructure that allows you to have a single strategy, one investment and consistency across regions on aspects such as your content delivery network strategy, PCI/HIPAA compliance, video management platform, personalization, back-end/ERP integration, privacy compliance, CRM strategy, URL shortening, social strategy, etc..
It also means having a central point of view and strategy for user experience: registration, social integration, newsletter subscriptions, profile and personalization, order history, and other preferences.
Web infrastructure is not cheap: content management systems can be expensive, especially if you are buying one for every region. Implementation and maintenance (people) costs are usually about 10x the cost of the software, which means using Open Source instead of a commercial app can have marginal cost savings benefit, sometimes negative if open source requires more customization and maintenance. Maintaining multiple content management systems can get quite complex, especially when you consider content federation, syndication, localization and content lifecycle.
2. Define your language translation strategy and priorities
The two key pieces of information you need are country (for shipping as well as to present local stores, events, promotions, etc,) and language – these should be ideally two separate preferences.
Plan your user experience to allows international visitors to find their locale (country and language) quickly and can change their preferences easily. Their current IP address should be used for suggestions only – you don’t want all your sites to switch to Japanese if you travel to Tokyo for a week.
The first decision is to decide what languages require support and in wat priorities based on your business strategy. Start by understanding the revenue contribution from each country, primary languages – and most importantly, what countries and customer profiles require a localized online experience.
It could be that your target customer in a particular country actually prefers English content. This is common for technology buyers who perceive (correctly) that English content is more compete, more up to date and more accurate (free from translation mistakes). It could also be that your buyer is more comfortable in English but the actual end users require localized language. It could be that the culture in a particular culture requires localization as a business courtesy and a sign that you care for customers in that country and respect their nationality.
Once you understand priorities, a site map should be used to determine what content needs to be translated. Some companies translate only the top one or two levels on their website, others only pre-sales content, others a mix based on more complex decision-making. A best practice I have observed when one the top-level of content is translated is that at content that is not localized is still made available but there is a mark on the link (as simple as an asterisk) that indicates the content behind that link is in English. Once you have this, you should start forming an idea of the amount of content required to support each additional language.
The next step is to decide on your localization process. It can be as sophisticated as manual, outsourced translation by native speakers to using Google translate. A balanced approach could use assisted translation: machine translation that is reviewed by translators for accuracy. Using a standard dictionary for consistency of use of technical terms, informal language expressions and phrases is a best practice here.
A very important, and often overlooked, part of this process is to think about how will you update content. This means having a strategy not only to translate the initial set of content, but also considering ongoing process to update content based on what changes in the original site. It also means building the dependencies between localized and original content in case the original content is retired, updated or deleted (i.e. for legal reasons).
3. True internationalization requires taking into account Culture
Building a global online presence is tricky because of all the little things that change from culture to culture. Certain colors, terms or images may be offensive in a particular culture. Certain words change meaning from country to country. There are historic cultural sensitivities that impact, for example, using Spanish from Spain in Latin America. Religion, business practice, privacy and many other factors come into play.
For large organizations. it is useful to establish a central location (i.e. a Wiki) with guidelines and tips to make content more culturally sensitive. This means, what colors to avoid, what tone to use when addressing specific cultures, what type of advertising or messages could be considered inappropriate, etc.
4. Centralization with Local Empowerment
Centralizing your online presence after the local marketing team has built a country or regional site can present organizational challenges. The local team should welcome the fact they won’t have to invest time and resources maintaining online infrastructure, however there will be a concern over loss of control and a legitimate need to be able to have control over local promotions, local activities and local content.
The worst possible outcome is that the new global site becomes the excuse for poor regional financial performance. This can be avoided if you involve the regional teams from the beginning of the project, if they provide input in the requirement gatherings phase and if the site is built to enable some degree of local control.
Most modern content management systems enable delegation features that make it easy to determine what parts of the site can be changes by regional teams and which ones should not. It is important to define these rules from the beginnig. For example, for brand consistency and IP protection, the global/corporate team should be defining global logo usage, site images, colors and overall brand image.
Local teams might have the ability to create certain number of pages, control local offers, maintain the local event calendar, promote local case studies, feature local press activities and influence the SEO strategy to include keywords relevant in a particular region. In other words, they could enjoy the benefits of a global site while still maintaining some level of autonomy and power to influence their local business.
All the decisions and points above have budget and process implications. How will they affect corp/local budget distribution? Who will pay for localization? what to do with existing web-aligned people in the regions? etc. No one said this would be easy.
5. Global Site as a Service and Governance.
This brings an interesting concept: The global online team as a service. For a central/global web team to be effective there needs to be an agreed SLA with the regions/subsidiaries and a defined process for capturing feedback and allowing them to participate in the definition of future development of new features and enhancements
Reciprocally, the local team must agree to abide by a set of agreed rules, made very clear in a policy document with specific enforcement controls, for aspects such as buying and using domains, social media participation, launching and maintaining tactical regional microsites, and probably most importantly, a customer data strategy, which brings us to the last point.
6. Customer Data and Privacy Strategy
In some countries, violation of privacy laws is punished severely and could result in people going to jail. In many global companies, a violation of the policy (creating a microsite around corp guidelines that allows customers to register or sending an email with an excel file with names and email addresses) results in immediate termination of the employee.
You probably have heard of the Google execs that went to jail for allowing an end-user to upload illegal content to YouTube in Italy, even after the video was taken down quickly after it was flagged. This is an extreme case, of course, the intention is not to scare you but to make you aware of the importance of the legal aspects one must consider, starting with privacy laws.
A basic set of guidelines will define what information should be captured, what re the guidelines for allowing people under age to register and what is considered ‘under age’ in each country, clear policies for handling PII (personally identifiable information) including how it should be stored (a central repository with encryption) and deletion, credit card information handling and PCI compliance, opt-in/opt-out, global unsubscribe and customer preferences.
It is a lot of work, yes. Is it easy? absolutely not. But it is certainly worthwhile. The Web is quickly becoming the most important customer interaction channel for all types of organizations – it already is for many. The good news? once you build a global online presence based on a solid strategy your company (and hopefully you) will enjoy its benefits for many years to come. I hope this posts helps you get there.
Are you pricing your products right or are you leaving money on the table?
The Concorde was one of the most innovative machines ever built. The first and only supersonic commercial aircraft capable of flying at twice the speed of sound is also one of the most beautiful machines ever built. The Concorde story provides an interesting lesson on pricing.
During the first 6 years of operation, the fantastic Concorde lost money for British Airways. Losses were so bad, in 1982 BA’s boss Sir John King gave the responsibilities of the newly created Concorde division to Captain Brian Walpole and gave him two years to turn Concorde losses into profits. If he failed, BA would terminate operations, shutting down Concorde for good.
The COncorde team decided to do some market research. They asked businessmen how much they thought a Concorde ticket cost. The answer, “Most of them didn’t know. It was their secretaries or travel companies doing the bookings. When they were asked to guess, because they were senior, very important people, they all guessed that the fare was higher. ” – explained Captain Jock Lowe, Concorde resource & Planning Manager.
This insight led to a new pricing strategy. Captain Lowe described “So very simply, we said, we’ll charge them what they think they are paying. And so we put the fares up”. There was a discrepancy between what the company was charging and the value customers saw in the product. Have you asked your customers how valuable is your product or service to them?
Concorde ticket prices were doubled to over $7,000, one way, in today’s prices. As a result, Concorde was repositioned to provide a super-elite class for bankers, the rich, and the famous. Concorde became the place to be seen.
Despite the high price, sales were very strong. For one particular day, half the tickets for its first fare-paying London-New York flight were sold out in the first two hours of booking, (source).
Concorde started making money. Lots of it. “We made about $500 million pounds in net, clear profit.”. Estimates point to $50 million pounds in profit per year. That’s significant, even for a company the size of BA.
Many companies build their pricing strategies based on cost + margin. Often, there is a predetermined margin based on an overall pricing strategy or on a corporate profitability target. The story of Concorde sows us the power of market-based pricing and the importance of understanding the true value of the products and services your company offers. Do you know what is the price elasticity of your products?
I recently finished a great book by Marcus Buckingham: The One Thing you Need to Know. The author is better known for his work on Strengths-based success, but this is an excellent book that any manager or leader should read. One of the key concepts in the book are differences between managers and leaders.
Managers are all about PEOPLE. Their job is to align team strengths with the needs of the organization, to care for people, to show them he or she has their career in mind, to give them direction and resources and to cover their back. Managers are individualizers.
A Great Manager is a catalyst that turns people’s talent into performance that is aligned with company goals. A great manager demonstrates he or she sincerely cares about the team, making employees believe their success is the manager’s primary goal. Great managers get satisfaction from the small improvements in growth they see in the people they manage.
Leaders are all about VISION. They have an ability to visualize a better future so clearly and they are so passionate about it, they can’t help but do everything they can to make that future a reality. Their vision and passion make people follow them independently of their position in the org.
Great Leaders rally people to a better future. Great leaders are restless for change, impatient for progress and deeply dissatisfied with the status quo. The possibility of a better future burns them and propels them. Great leaders see the future so vividly they have no choice but to do everything in their power to make this future real. Great leaders are curious, bold and confident, and they have a great sense of optimism.
How to become a great Leader? Sorry but what makes a great leader cannot be learned. You either have it or you don’t. Leaders are born. Leaders need, however, a fully realistic assessment of the difficulty of the challenge ahead and they need to bring an unrealistically optimistic belief in the ability to overcome it.
How to become a great Manager? Marcus offers a very accurate set of recommendations. Interestingly, the discussion starts by defining the fundamental human needs: a modern version of Maslow’s pyramid, in a way. These fundamental needs stem from fundamental human fears. They are:
Fear of death – Need for security
Fear of strangers and outsiders– Need for community
Fear of the future and uncertainty – Need for clarity
Fear of chaos – Need for authority and classification, order
Fear of insignificance – Need for respect
What do these needs have to do with management? These fundamental human needs apply to humans at all times, including work. A manager that is aware and understands the fundamental human needs of his or her employees will find the following management guidelines as very useful:
Provide clear expectations and goals to your team
Show recognition and praise for the accomplishments of your team, big and small
Demonstrate to your team you sincerely care about them as individuals
A good team requires interdependency: it cannot be a group of individual players
Marcus defines three things every good manager needs to know about each team member:
1. Their strengths and weaknesses
2. Their triggers and hot buttons
3. Their individual style of learning: analyzer, watcher or doer.
You can be a great manager and a great leader. If you are interested, a good first step would be to read this book.
This week Sucharita Mulpuru wrote a blog post about Facebook commerce that turned out to be quite controversial. Sucharita’s previous post on the topic was aptly named 500MM users.. so why can’t they show you the $$. A bold quote from the post “No one’s revenue will come from Facebook”, along with a recommendation to stop wasting time chasing F-shiny objects, and focus on fixing the basics (like search and ratings & reviews) which have proven results.
My thoughts are pretty aligned with Sucharita, in the sense that no one seems to be making money from Facebook other than Facebook, Zynga and a few agencies – in the gold rush the money was made selling picks and other mining tools. I see brands confused about how to even think about Facebook and chasing meaningless metrics such as number of fan “likes”. When marketing leaders share their goal for social marketing this year is to get to 100K or 1 million likes, I ask them what they will do with the customers that have liked the brand, usually resulting in blank stares and confusion.
So I want to share my humble opinion on the role of Facebook for marketers.
One of the principles I feel strongly about is that social media is only a set of tools to help you achieve business objectives. Then, let’s start with the basics and think about how can interactive marketers leverage Facebook to achieve business and marketing goals. “Social media goals” don’t count, unless they are leading indicators in the context of a broader strategy. Think about it: the main reason marketers care about Facebook for one simple reason: there are over half a billion potential customers using it every day. As I wrote in a previous post, you have to fish where the fish are – but you have to bring them home (your site) to cook them (make money). It was the same with video and other new tools available to marketers.
Sounds logical, yet, brands continue spending millions of dollars in media sending customers to Facebook. The traffic should flow the other way around. Getting customers to respond to an ad is difficult enough to send them to a site where you have little control with the hopes they will “like” your brand and maybe someday somehow and up on your site or buying your product.
A couple weeks back I saw an online ad for Sierra Mist Natural, curious to learn more about the new drink I clicked on the ad, which took me to Sierra Mist’s Facebook page. Not only was this not the experience I was expecting, I was unable to learn more about the product, learn what makes it natural (is it using Stevia for sweetening, natural flavors or something else?) and landed on a Facebook page where a couple customers had quite negative comments on the product.
To sort through all the confusion it could be useful to think about Facebook as four discrete opportunities:
1. Encouraging fans to advocate your brand on Facebook
This is the most basic, but also the most powerful Facebook tactic so far and it’s free. I have blogged about this extensively. People trust recommendations from their friends. Chances are their friends are on Facebook too.
If your brand has 50,000 fans (Sorry Facebook, “likes” does not work as well), and if you can get one of every five to tell their friends how much they like your brand, you would have 10,000 people advocating personally to an about 1.3 million potential customers about your brand. 1.3 million customers you probably can’t reach through your traditional marketing efforts. Your customers can advocate on Facebook without even having to “like” your brand. You don’t even need a brand page on Facebook – customers can advocate directly from your website.
2. Your brand’s presence on Facebook (brand page) and “Likes” associated with it
Most brand pages on Facebook are quite boring and expose visitors to customer service issues or provide irrelevant information to customers. It’s time to get creative and map a proper brand experience on Facebook. The possibilities are endless, but don’t create siloed microsites or just copy your website in the Facebook iFrame. Do something useful like providing reviews, Q&A, links to your site and resources that will engage customers in a social context. There are so many things a brand can do here that it would be impossible for me to provide best practices, so I won’t try. This is an area where a good agency can help.
3. Facebook commerce
To clarify, with F-Commerce I mean not only adding your product catalog to your Facebook page but actually enabling transactions within it: you can complete an order without ever leaving Facebook. I think it makes sense for a few select use cases: buying tractors on Farmville, buying a song using iTunes credits, etc. However, I am really skeptical this will be mainstream – ever. For a couple of reasons:
Leaving Facebook to complete the transaction on the brand’s main site is easy. It takes seconds and can be completely transparent for the user.
The user experience will probably be better on the main site. Brands have invested millions on content management systems, search capabilities, interactive features, social capabilities and other elements that give customers a better on-site experience than what is possible on Facebook.
Many consumers probably consider most brand sites to be more secure and reliable than Facebook. With the news about Facebook security and privacy issues I guess people would rather share their credit card number with an established business than with a social network that has no good track of protecting personal information.
Alvendia (now 8thBridge) shared the total sales on Facebook across all the brands they serve peaked at $100K in December. That’s less than $3 million per month, a number that is largely insignificant for their client base. Brands should still make their product catalogs available on Facebook to encourage advocacy and sharing, with an easy link to the product page on the main site.
4. Advertising on Facebook
In the end, Facebook is not a social company – it’s a media company that makes money by selling advertising. Advertising on Facebook should be evaluated like you would consider advertising on any other media outlet: based on audience profiles, advertising formats, targetability and ultimately, click-through rate. I am not an expert, but it is common knowledge that CTRs for Facebook are pretty low compared to industry averages. Maybe because when customers are in “social mode” they are not so interested in ads. The risk is that customers start mentally ignoring the ad space on the right most like most of us ignore banner ads on most web sites.
Then again, for the right reasons, with the right strategy, advertising on Facebook may be the right thing to do. Back in 2004, I was one of the first to advertise on Facebook when we were promoting the Imagine Cup. That particular campaign yielded decent results.
Conclusion
In conclusion, if you start with your business goals in mind (and not with “let’s do something on Facebook”) then go on to evaluate the four ways you can leverage Facebook for your business in the context of a customer experience journey, Facebook can be a really powerful tool that produces top-notch results.
Bazaarvoice and the CMO club recently published a report about how CMOs think about social media and how they are finding ROI (or not). You will find a number of stats and details in the report itself. I want to share my own perspective on what I think are the implications made evident by the research.
Social is Important. Every marketer knows it. Customers have shifted the way they buy. Social is here to stay, there is no question about it. Every CMO knows they need to have a social marketing plan. This should not be a surprise to anyone, the report simply confirms it.
Measuring results is harder than expected. The report shows social media is harder to measure than what CMOs expected. By looking at last year’s report, it is clear most of them thought by now their social marketing efforts would have matured enough to have a good measurement framework. Today, most marketers are measuring engagement, not actual business impact. Many are still chasing shiny objects. Consider how many companies are trying to grow their Facebook fan pages without a clear reason why they are doing it or a strategy to convert fans into business value.
Social Marketing is too tactical. Without an indication of results, CMOs can’t make investment decisions on social media. As a result, most companies are still in experimentation mode. Only two years ago, social marketing meant blogs and wikis. Last year it has been about Facebook and Twitter. Now GroupOn (which is not even social, IMHO) and Foursquare join the category of shiny objects. Small and large businesses are jumping on the GroupOn mania, getting 25 cents on the dollar, often without thinking through a strategy.
Sadly, without a framework for results, CMOs have a hard time deciding how much to invest in social. According to research by Altimeter, the average large company is investing only $830K per year in social marketing. This budget can cover salaries for a team of three people, maybe a community platform to run support forums and a listening platform. The amount of resources, budget and results in social marketing is insignificant relative to overall marketing efforts. The danger is that a CMO hires a social strategist, two people to “man their Facebook and Twitter pages”, start a blog and ‘check’ – they have a social strategy, they can move on to more important stuff.
CMOs know they need to shift their investments from traditional advertising to social and digital efforts, but they can’t do it blindly. Even if a CMO wanted to shift $20 million dollars to social, they would have a very hard time finding where to spend it.
Reading the results from the research can be heartbreaking. The obvious question is: How to build an effective social strategy? There is no easy answer, however, I want to offer four ideas to help you build social into your marketing strategy:
Social is not a Strategy. Eventually, the word social will go away. Humans are inherently social, most human activity is social. We don’t talk about digital computers or electronic calculators, it is assumed. Companies are in business to make money. According to management guru Peter Drucker, the only valid business purpose is to create a customer. That is a paying customer. Social is not a goal, it is a means to an end. Should you experiment with social? Sure. What I am suggesting is to always think about how each social marketing activity will support your business goals.
Social as a marketing tool. Social tools can help marketing, innovation, customer support and other functions. But this is a blog for marketers. Yesterday I was having lunch with a friend who asked me if he should hire a social media strategist. To his surprise, I said ‘No’. I suggested he should hire a marketer that understands how social media can support the organization’s marketing goals. A marketer that understands how social marketing efforts can work together with ‘traditional’ marketing efforts to create more customers. To make money.
Smart social metrics. In any business functions leading indicators are important. For years, online marketers have measured page views as a leading indicator for customer engagement that then can be converted into paying customers. In the same way that email newsletter subscribers are an engagement metric that companies can leverage to do permission marketing to drive sales, the number of Facebook fans are also an interesting metric that enables permission marketing to drive sales. But you have to think through the experience: from leading indicator to business impact. Build a model that uses social media tools, to drive engagement and activity that then impacts business goals. Take a look at the model in this slideshare from two years ago, and at a more evolved model in Jeremiah Owyang’s Social Media ROI Pyramid
Social drives Advocacy. Social Marketing can be used by marketers in many ways: to build confidence in customers, to learn from customers and monitor your brand to make your organization more customer centric, etc. If you are looking for a quick win, I suggest consider using social media to drive advocacy: tap into Facebook , customer reviews and other forms of social media to empower your customers to sell for you. Word of Mouth is nothing new, it has been around forever. Social Media online makes it easy for happy to customers to drive advocacy and makes it scalable – and often measurable – for marketers.
Good luck with your social marketing efforts. Have fun. Be authentic. Experiment. And learn.
