Author Archives: ghotchkiss

Why Agencies and Clients are Calling It Quits

“Love on the Rocks – ain’t no surprise.”

Neil Diamond

In yesterday’s Online Spin, Maarten Albarda signaled the imminent break up of agencies and clients. Communication is close to zero. Fingers are being pointed. The whisper campaign has turned into outright hostility.

When relationships end, it can be because one of the parties is just not trying. But that isn’t the case here. I believe agencies are truly trying to patch things up. They are trying to understand their one-time life partner. They are desperately gobbling up niche shops and investing in technology in order to respark the flame. And the same is true, I believe, on the client side. They want to feel loved again by their agency of record.

I think what’s happening here is more akin to a break up that happens because circumstances have changed and the respective parties haven’t been able to keep up. This is more like high school sweethearts looking at each other 20 years hence and realizing that what once bonded them is long gone. And, if that’s true, it might be helpful to look back and see what happened.

The problem here is that the agency is a child of a marketplace that is rapidly disappearing. It is the result of the creation of the “Visible Hand” market. In his book of the same name, Alfred Chandler went to great lengths (over 600 pages) to chronicle the rise of the modern organization. The modern concept of an advertising agency was a by-product of that. Vertically integrated organizations came about to overcome some inherent inefficiencies in the market – notably the problem of geography and the lack of a functional marketplace network that came with rapid expansions in production and transportation capabilities. Essentially, markets grew too rapidly for Adam Smith’s “Invisible Hand” to be able to effectively balance through market dynamics. Organizations grew to mammoth size in order to provide internal efficiencies that allowed for greater profitability. You had to be big to be competitive. Agents of all types filled the gaps that were inevitable in a rapidly expanding market place. Essentially an agent bridged the gap between two or more separate nodes in a market network. They were the business equivalent of Mark Granovetter’s “weak tie.”

Through the 20th century advertising agents evolved into creative houses – which is where they hit their golden period. But why was this creativity needed? Essentially, agencies evolved when advances in production and distribution technologies weren’t enough to expand markets anymore. Suddenly, companies needed agencies to create demand in existing and identified markets through the sparking desire. This was the final hurray of the “visible hand” marketplace.

But the explosion of networking technologies and the reduction of transactional friction is turning the “visible hand” market back into the “invisible hand” market of Adam Smith – driven by the natural laws of marketplaces. The networks of the marketplace are becoming more connected than ever.

This is a highly dynamic, cyclical market. Straight line strategic planning doesn’t work here. And straight line strategic planning is a fundamental requirement of an agency relationship. That level of stasis is needed to overcome the inherent gaps in a third party relationship. Even under the best of circumstances, an arm’s length relationship can’t effectively “make sense” of the market environment and react quickly enough to maneuver in this marketplace. And, as Albarda points out, the client-agency relationship is far from healthy.

The ironic part is all of this is that what was once an agency’s strength – its position as a bridge between existing networks, has turned into its greatest vulnerability. Technology has essential removed the gaps in the market itself, allowing clients to become more effectively linked to natural networks of customers through emerging channels that are also increasingly mediated by technology. Middlemen are no longer needed. Those gaps have disappeared. But the gap that has always been there, between the agent and the client, not only still exists, but is widening with the breakdown of the relationship. Agencies are like bridges without a river to span.

If you read the common complaints from both sides in the presentations Albarda references , they all come from the ever-widening schism that has come from a drastic change in the market itself. Simply put, the market has evolved to the point where agency relationships are no longer tenable. We on the agency side keep saying we need to reinvent ourselves, but that’s like saying that a dog has to reinvent itself to become a fish – it’s just not in our DNA.

The Rhythm of Strategy

I confess – I poked the bear a little last week. Not too much. Just a little. I purposely oversimplified one side of an argument to set up a debate. I knew there would be those that would swing to the other side in defense of strategy. I initiated an action, for which I knew there would be an equal and opposite reaction. I sometimes do that, because I believe in waves, or oscillations, or rhythms. Call it what you want – I believe in them because they always beat stasis or straight lines. Nature doesn’t move in straight lines.

You didn’t disappoint. You very ably defended strategy. And you did it in an intelligent and nuanced manner – unlike, say – Donald Trump. From a post in response by Rick Liebling: “I would … argue that the “seizing of opportunities” is not the antithesis of strategic thinking, but rather the result of it.  A strong brand strategy helps a company understand what it should, and just as importantly, shouldn’t do. This type of discipline is what allows a company to seize those very opportunities.”

And from Nick Schiavone: “I believe that Principles, Vision and Execution are more critical to “success & satisfaction” than strategies, ideations and systems when it comes to launching, building and sustaining brands.  The end result is really an ongoing, experiential relationship between a special “customer” (i.e., a person of need or desire) and the product or service provided under the auspices of a special “preparer.”(i.e.,  a person of art & science). “

Here’s the thing. When I said much of a businesses performance comes down to luck, that sounded disparaging. But it’s far from it. Luck could also be defined as the circumstances of our environment. They are the factors that lie beyond our control. And they tend to be rhythmic in nature. Sometimes they’re good, sometimes they’re bad. Sometimes they’re huge swings in either direction – what Nassam Nicholas Taleb calls “Black Swans.” And if you look as strategy as Rick Liebling does, then strategy is simply being very good at detecting these rhythms and responding to them.

But that’s not how we typically look at strategy. In fact, our entire mythology and methodology around strategy tends to run in decidedly straight lines. Strategy should be decided on high and be disseminated down to the front line masses. In the case of brand strategy, it may be determined by an agent working on your behalf and delivered in the guise of branding guidelines and polished ads. It should be decisive and unerring. It should plough forward, despite circumstance. Phil Rosenweig’s point in The Halo Effect was not that we should just surrender to the whims of fate, but that we shouldn’t kid ourselves about the importance of fate and our ability to control it. There is no single, “straight line,” universally applicable recipe for dealing with fate.

The problem with strategy, as it is practiced in most organizations, is that it blinds us to fate. We tend to execute in spite of circumstance, rather than in response to it. Rather, strategy in the new marketplace should perhaps be renamed “sense-making.” It should embrace the rhythms and oscillations of fate rather than dampen them in the name of strategic thinking. Organizations should become one massive sensory and experimental organ, constantly monitoring the environment and responding in a rational and opportunistic way.

Finally, let’s not discount the impact of effective leadership and management practices. I said last week that leadership, when isolated from other variables, only accounted for 4% of an organization’s performance. Management practices accounted for another 10%. That sounds ridiculously low, but only because we tend to excessively canonize those things in our business mythologies. Let’s approach it in a more rational way. Let’s imagine that two companies, A & B, both launched this year with $10 million in sales. Over the next 20 years, both companies were subject to the same rhythms – positive and negative – of the marketplace. But, because of superior leadership and management, Company A was able to more effectively capitalize on opportunity, giving it a 14% advantage over Company B. In 2035, what would be the impact of that 14% edge? It’s not insignificant. Company B would have grown in sales to $21 million, growth of just over 100%. But Company A would have sales of almost $290 million. It would be almost 14 times the size of Company B!

It’s not that I don’t believe in strategy. It’s just that it’s time to rethink what we do in the name of strategy.

Is Brand Strategy a Myth?

BrandStrategyThemeOn one side of the bookshelf, you have an ever growing pile of historic business best sellers, with promising titles like In Search of Excellence, 4 +2: What Really Works, Good to Great and Built to Last. Essentially, they’re all recipes for building a highly effective company. They are strategic blueprints for success.

On the other side of the bookshelf, you have books like Phil Rosenweig’s “The Halo Effect.” He trots out a couple of sobering facts: In a rigorous study conducted by Marianne Bertrand at the University of Chicago and Antoinette Schoar at MIT, they isolated and quantified the impact of a leader on the performance of a company. The answer, as it turned out, was 4%. That’s right, on the average, even if you have a Jack Welch at the helm, it will only make about 4% difference to the performance of your company. Four percent is not insignificant, but it’s hardly the earth shaking importance we tend to credit to leadership.

The other fact? What if you followed the instructions of a Jim Collins or Tom Peters? What if you transformed your company’s management practices to emulate those of the winning case studies in these books? Surely, that would make a difference? Well, yes – kind of. Here, the number is 10. In a study done by Nick Bloom of the London School of Economics and Stephen Dorgan at McKinsey, the goal was the test the association between specific management practices and company performance. There was an association. In fact, it explained about 10% of the total variation in company performance.

These are hard numbers for me to swallow. I’ve always been a huge believer in strategy. But I’m also a big believer in good research. Rosenweig’s entire book is dedicated to poking holes in much of the “exhaustive” research we’ve come to rely on as the canonical collection of sound business practices. He doesn’t disagree with many of the resulting findings. He goes as far as saying they “seem to make sense.” But he stops short of given them a scientific stamp of endorsement. The reality is, much of what we endorse as sound strategic thinking comes down to luck and the seizing of opportunities. Business is not conducted in a vacuum. It’s conducted in a highly dynamic, competitive environment. In such an environments, there are few absolutes. Everything is relative. And it’s these relative advantages that dictate success or failure.

Rosenweig’s other point is this: Saying that we just got lucky doesn’t make a very good corporate success story. Humans hate unknowns. We crave identifiable agents for outcomes. We like to assign credit or blame to something we understand. So, we make up stories. We create heroes. We identify villains. We rewrite history to fit into narrative arcs we can identify with. It doesn’t seem right to say that 90% of company performance is due to factors we have no control over. It’s much better to say it came from a well-executed strategy. This is the story that is told by business best sellers.

So, it caught my eye the other day when I saw that ad agencies might not be very good at creating and executing on brand strategies.

First of all, I’ve never believed that branding should be handled by an agency. Brands are the embodiment of the business. They have to live and breathe at the core of that business.

Secondly, brands are not “created” unilaterally – they emerge from that intersection point where the company and the market meet. We as marketers may go in with a predetermined idea of that brand, but ultimately the brand will become whatever the market interprets it to be. Like business in general, this is a highly dynamic and unpredictable environment.

I suspect that if we ever found a way to quantify the impact of brand strategy on the ultimate performance of the brand, we’d find that the number would be a lot lower than we thought it would be. Most of brand success, I suspect, will come down to luck and the seizing of opportunities when they arise.

I know. That’s probably not the story you wanted to hear.

25 Years of Photoshop

Jennifer in Paradise.tif – the first photoshopped pictureBrothers Knoll sent over their original Je

Jennifer in Paradise. It’s a picture that’s become iconic in the history of digital imagery. It shows a topless woman with her back to us, sitting in the blue waters of Bora Bora and gazing towards the island of To’opua. But it’s not what the picture shows that makes it iconic. It’s what happened to the picture after it was taken. Jennifer just happened to be the girlfriend of Photoshop co-creator John Knoll. So, when he was demonstrating what Photoshop could do while pitching it to Adobe in 1988, this was the picture he had handy. As such, Jennifer in Paradise became the first picture in history to be Photoshopped. Adobe bought in. Two years later, in February, 1990, version 1.0 hit the shelves.

I was introduced to Photoshop a few years after this. I believe it was version 2.something. Up until that point, I, and the rest of the world, believed that the camera doesn’t lie. You could believe your eyes. But Photoshop would change all that. It would push us over the brink from an analog to a digital world. It would take reality and break into a million pixels, each of which could be manipulated into something that looked real, but wasn’t.

Of course, technology had got there before Photoshop. John worked at George Lucas’s Industrial Light and Magic. So did Jennifer. The vacation in Bora Bora came after the couple had just finished a marathon run to finish up Who Framed Roger Rabbit. But digital manipulation of images was the sole domain of highly trained technicians working on equipment worth hundreds of thousands of dollars, using industrial strength software that was specifically written for the purpose. Before Photoshop, only a handful of people in the world could digitally alter an image.

That all changed when Version 1.0 of Photoshop was released. Digital manipulation became democratized. It, along with Aldus Pagemaker, Aldus Freehand and the Mac gave us all the power to publish. But for me, the power of Photoshop was always in a different league. To be able to manipulate photos, which up to that point were the hallmark of veracity, now that was a brand of sorcery that went far beyond the pedestrian shuttling of words back and forth on a screen. It was intoxicating and a little sacrilegious. Nobody cheered when you turned out an adequately typeset newsletter, but when you showed them a well-photoshopped image that magically messed around with reality, that got passed around. Pagemaker was a tool, but Photoshop made you an artist.

For me, Photoshop was the first program that made me aware of the power of digital media. I, like millions of other desktop publishers, had assembled a ragtag collection of tools that consisted mainly of pirated programs. But I actually paid for Photoshop. Why? Because each edition added features that opened a new Pandora’s box of possibility. When you cracked the cellophane, you were guaranteed at least of couple weeks of OMGs as you put the program through it’s paces. Photoshop made me fall in love with digital.

Today, it seems like digital has always been with us. Our world is a better-designed place than it was 25 years ago. And a quarter century may seem like forever in today’s terms, but that makes Photoshop just a few years older than my oldest daughter and it seems like she was just born yesterday.

The 90’s were a heady decade for me. I turned digital, never to turn back. I bought my first Mac, a little Mac SE 30 about the size of a home espresso machine. Soon, I would catch my first glimpse of the Internet. I created my first website. I tried Google for the first time. And by the end of the decade, I decided my fledgling agency would focus exclusively on the digital side of the industry. Jennifer in Paradise was a big part of that.

Later in the same day that John Knoll snapped that fateful picture, he proposed to Jennifer. It was the start of something magical, both for the Knolls and for the rest of the world. Thank you.

Ode to a Grecian Eurozone

comm-crisis I’d like to comment on the Greek debt crisis. But I don’t know anything about it. Zip..or, as they say in Athens – μηδέν. I do, however, know how to say zero in Greek, thanks to Google Translate. At least for the next few minutes. I also happen to know rather a lot right now about the Tour de France, how to wire RV batteries, how to balance pool chemicals, how to write obituaries and most of the plotlines for the Showtime series Homeland. I certainly know more about all those things than the average person. Tomorrow, I’ll probably know different stuff. And I will retain almost nothing. But if you ask me what in the world is happening right now, I’ll likely draw a blank. I’d say it’s all Greek to me, but a certain Mediapost columnist already stole that line. Damn you Bob Garfield!

I’m not really sure if I’m concerned about this. After all, I’m the one who has chosen not to watch the news for a long time. My various information sources feed me a steady diet of information, but it’s all been predetermined based on my interests. I’m in what they call a “filter bubble.” I’ve become my own news curator and somewhere along the line, I’ve completely filtered out anything to do with the Greek economy. It’s because I’m not really interested in the Greek economy, but I’m thinking maybe I should be.

(Incidentally, am I the only one who finds it a bit ironic that the word “economy” comes from – you guessed it – the Greek words for “house” and “management”)

The problem is that I have a limited attention span. My memory capacity is a little more voluminous, but there are definite limits to that, as well. To make matters worse, Google is making me intellectually lethargic. I don’t try as hard to remember stuff because I don’t have to. Why learn how to count to 10 in Greek when I can just look it up when I need to. I’m not alone in this. We’re all going down the same blind cornered path together. Sooner or later, we’ll all run into a major crisis we never saw coming. And it’s because we’ve all been looking in different places.

40 years ago, to be well informed, you had to pay attention to mainstream news sources. It was the only option we had. We all got feed the same diet of information. Some of us retained more than others, but we all dined at the same table. Our knowledge capacity was first filled from these common news sources. Then, after that, we’d fill whatever nooks and crannies were left with whatever our unique interests might be. But we all, to some extent, shared a common context. Knowledge may not have been deep, but it was definitely broad.

Now, if I choose to learn more about the Greek economy, I certainly have plenty of opportunities to do so. But I’d be starting with a blank slate. It would take some work to get up to speed. So I have to decide whether it’s worth the effort for me to inform myself. Is the return worth the investment? Something has to tip the balance to make it important enough to learn more about whatever it is the Greeks are referendumming (referendering?) about. And in the meantime, there will be a lot of other things competing for that same limited supply of information gathering attention. Tomorrow, for instance, it might become really important for me to find out how close BC is to legalizing pot, or what the wild fire hazard is in Northern Saskatchewan, or what July’s weather is like in Chiang Mai. All of these things are relatively easy to find, but I have to reserve enough retention capacity to use the information once I find it. Information may want to be free, but the resources required to utilize it depletes our limited stores of cognitive ability.

Perhaps we’re saving more of our attention for on demand information requirements. Or maybe we’re just filtering out more of what we used to call news. Whatever the cause, I think we’re loosing our common cultural context, bit by byte. A community is defined by what it has in common, and the more technology allows us to pursue our individual interests, the more we surrender the common narratives that used to bind us.

A Few Words on Memories

It’s been a highly emotional weekend for me. After a long battle, my Mom slipped quietly away in the middle of the night last Thursday. My Dad, my sisters Laurel and Heather and I held her hand and stroked her forehead for most of the night as we watched her increasingly shallow breaths. We spent a lot of time reminiscing. It was all horribly beautiful. It was life – and death.

When a parent passes away, you feel like a large chunk of your life has been suddenly ripped away. In my almost 54 years on the planet, my Mom has been one of the constants that has connected the ever changing dots from my birth to today. As I started for the door of the hospital room for the last time and looked back at the tiny still figure on the bed – also for the last time – I realized that constant is gone. I’m adrift. I’m an orphan (my Dad is actually my stepdad). I’m at a loss for words.

Maybe that accounts for the huge wave of nostalgia that hit my sisters and myself this weekend. We realized that a significant piece of our lives was teetering on the edge of a precipice – slipping away from our grasp. We were desperate to freeze it in our memories, securing it for the future. When so much was slipping away, we needed to hang on to what we could. So, we wandered the streets of the small Alberta town we all grew up in. We snuck into our old high school, looking for the locker we had in grade 8 and sitting in the desks in the classroom. We tried to find our grad photos. We were even going to knock on the door of the house we all grew up in, 30 some years ago, and see if the new owners would let us take a quick look inside. But then we decided that was just a little too creepy.

The more past you accumulate, the more important it becomes. This is especially true for your childhood. We all need to know where we came from. One of the most touching discussions I’ve had with my Mom I had a month and a half ago. I was asking her about her childhood. As she remembered, her face transformed. A small smile fixed to her lips, she sunk into a warm remembrance of a post war childhood in Southern Ontario, safe in the embrace of an idyllic home town (that has since become a sprawling suburb of Toronto), family card games with the laughter of the grown-ups fueled by gin and tonics and summers spent “up north” in cottage country.

“It sounds like a good childhood,” I remarked.

“It was a good childhood. A really good childhood.”

She then closed her eyes and napped for a bit. I watched her sleep. Life is short. Life is sad. Life is good.

My Mom, as a little girl in Ontario

My Mom, as a little girl in Ontario

So, I have some fundamental questions. For those of us of my generation or older, childhoods are reconstructed from mostly bad photographs, old letters and our memories. None of these are terribly high fidelity representations of reality. But this can be a good thing. It allows us to fill in the blanks, emphasizing the highs and forgetting the lows. For most of us, it gives us the childhood we wished we had, which can be very comforting 78 years hence as we lie in a bed, slipping towards the end of our journey. But what will the essence of childhood remembrance be for the person who was born today? They will leave a huge digital dust trail. How much of it will be available in 8 decades? As they try to construct a refuge in their memories, will there be digital evidence to call bullshit on them? Will indelible fidelity be a good thing or bad?

Daniel Kahneman has discovered that our remembered lives usually bear little resemblance to our actual experiences. Was my Mom’s childhood really as good as she remembered? I know there was pain. I know there was heartache. I suspect life was much harder than she recalled. But that’s not the point. At that moment, when she needed it most, her past was what she wanted it to be. And that’s exactly what my sisters and I found this past weekend, when we needed it. It was a very human thing we did – highly inaccurate, totally implausible and completely indispensable. I wonder how technology might screw that up for my kids and grand kids.

Goodbye Mom. Dream beautifully.

Feed Up with Feedback Requests

Sorry Google. I realize this is my last chance to tell you about my experience. But you see, you’re in a long line of companies that are also desperate for the juicy details of my various consumer escapades. Best Western, Ford, Kia, Home Depot, Apple, Samsung – my in box is completely clogged with pleas for the “dets” of my transactional interactions with them. I’ve never been more popular – or frustrated.

I appreciate the idea of customer follow up. I really do. But as company after company jumps on the customer feedback bandwagon, poor ordinary mortals like myself don’t have a hope in hell of keeping up. It could be a full time job just filling out surveys and rating every aspect of my life on a scale that runs from “abysmal” to “awesome” The irony is, these customer feedback requests are actually having the opposite effect. Even if my interactions with the brand are satisfactory, the incessant nagging to find out if I “like them, I really like them” are beginning to piss me off. In the quest to quantify brand affinity, these companies are actually eroding it. Ooops! Talk about unintended consequences.

So, if we accept the fact that knowing what our customers think about us is a good thing, and we also accept the fact that our customers have better things to do with their lives than fill out post-purchase surveys, we have to find a more elegant way to get the job done.

First of all, customer feedback should be part of a full customer relationship continuum. It should be just one customer touch point, not the customer touch point. You have to earn the credibility that gives you the right to ask for my feedback. Too many companies don’t worry about gauging satisfaction “in the moment.” If you don’t care enough to ask if I’m happy when I’m right in front of you, why should I believe that you’ll pay any attention to my survey. But too many companies jam this request for feedback on their customers without doing the spadework required to build a relationship first.

Worse, because compensation is increasingly being tied to feedback results, you get the “please say you’ll love me” pleading on the sales floor. See if this sounds familiar: “You’ll be receiving a survey from head office asking me how I’ve done. I don’t get a bonus unless you give me top marks in each category. So if there’s anything I can do better, please tell me now.” There are so many things that are just plain wrong with this that I don’t know where to start. It’s smarmy and disingenuous. It also puts the customer in a very awkward position. When it’s happened to me, I just murmur something like, “No, you’ve been great,” and run with all speed to the nearest exit.

The next thing we have to realize is that not all purchases are created equal. Remember the Risk/Reward matrix I talked about in last week’s column about how our brains process pricing information? While this applies to our motivational balance going into a purchase, it also provides some clues to the emotion landscape that exists post-purchase. If the purchase was in the low risk/low reward quadrant, like the home improvement supplies I picked up at Home Depot this weekend, it’s a task that has been crossed off my to-do list. It’s done. It’s over. The last thing I want to do is prolong that task by filling out a survey about said task. But, if it’s something that falls into the high risk/high reward quadrant, such as a major vacation, then I am probably more apt to invest some time to give you some feedback. The Rule of Thumb is: the higher the degree of risk or reward, the more likely I am to fill out a survey.

The final thing to remember about customer surveys is that you’re capturing extremes. The people who fill out surveys are usually the ones that either hate you or love you. So you get a very skewed perspective on how you’re doing. What you’re missing is the vast middle of your market that may not be sufficiently motivated to toss you either a brick or a bouquet.

I’m all for getting to know your customers better. But it has to be part of a total approach. It begins with simple things, like actually listening to them when you’re engaging with them.

How Our Brains Process Price Information

On-Off-Switch-For-Human-BrainWe have a complex psychological relationship with pricing. A new brain scanning study out of Harvard and Stanford starts to pick apart the dynamics of that relationship.

Uma R. Karmarkar, Baba Shiv, and Brian Knutson wanted to see how we evaluate a potential purchase when the price is the first piece of information we get as opposed to the last piece of information. They used both fMRI scanning and behavioral tracking to see how the study participants responded. Participants were given $40 dollars to spend and then were presented with a number of sample offers. In all cases, the price represented an attractive bargain on the product featured. But one group was given the price first, and the second group was given the price last.

There was another critical difference in the evaluation process as well. In the first phase of the study, participants were shown products that they would like to buy, and in the second phase, they were shown products that they would have to buy. The difference between the two was how they activated the reward center of our brain – the nucleus accumbens. I’ve been talking for years about the importance of understanding the balance of risk and reward in our purchase decisions. This study provides a little more understanding about how our brain processes those two factors.

In the first phase, participants were shown a variety of products that they would consider rewarding. These would fall into the first quadrant of the risk/reward matrix I introduced in my column from 5 years ago. The researchers were paying particular attention to two different parts of the brain – the nucleus accumbens and the medial prefrontal cortex. For a layman’s analogy, think of you and a five year old walking down the toy aisle in a department store. The nucleus accumbens is the five year old who starts chanting, “I want it. I want it. I want it.” The medial prefrontal cortex is the adult who decides if they’re actually going to buy it. In the study, the researchers found that the sequence in which these two parts of the brain “lit up” depended on whether or not you saw the price first. If you saw the product first, the nucleus accumbens started its chant – “I want it.” If you saw the price first, the prefrontal medial cortex kicked into action and started evaluating whether the offer represented a good bargain. In the case of the reward products, although the sequence varied, the actually purchase process didn’t. In most cases, participants still ended up making the purchase, whether price was presented first or last.

But things changed when the researchers tried a variety of products that fell into the second quadrant of the risk reward matrix – low risk and low reward. These are the everyday items we have to buy. In the study, they included things like a water filtration pitcher, a pack of AA batteries, a USB drive, and a flashlight. There was nothing here that was likely to get the nucleus accumbens starting to chant.

Now, it should be noted that this follow-up study did not include the fMRI scanning, but by tracking purchasing behaviors we can make some pretty educated guesses as to what’s happening in the respective brains of our participants. Here, presenting prices first resulted in a significant increase in actual purchases over instances when price was presented last. If price comes first, we can imagine that the prefrontal cortex is indicating that it’s a good bargain on a needed product. But if a relatively boring product is presented first for evaluation to the nucleus accumbens, there’s little to excite the reward center.

An important caveat to this part of the study comes with knowing that the prices presented represented significant savings on the products. After the simulated purchases, participants were asked to indicate a price they would be willing to pay for the product. When the price was the lead, the named prices tended to be a little lower, indicating that if you are going to lead with price, especially for quadrant two products, you’d better make sure you’re offering a true bargain.

If anything, this study provides further proof of the value of knowing a prospect’s mental landscape. What are the risk and reward factors that will be motivating them? Will the media prefrontal cortex or the nucleus accumbens be calling the shots? What priming effects might an early introduction of price introduce into the process?

When I wrote about the risk/reward matrix five years ago, one commenter said “a simple low-high risk/low-high reward graph is not very useful for driving just in time and location based offers, discounts, etc.” I respectfully disagree. While more sophisticated models are certainly possible, I think even a simple 2X2 matrix that helps map out the decision factors that are in play with purchases would be a significant step forward. And this isn’t about driving real time variations on offers. It’s about understanding the fundamentals of the buyer’s decision process. There’s nothing wrong with simplicity, especially if it drives greater usage.

The Coming Data Marketplace

The stakes are currently being placed in the ground. The next great commodity will be data and you can already sense the battle beginning the heat up.

Consumer data will be generated by connections. Those connections will fall into two categories: broad and deep. Both will generate data points that will become critical to businesses looking to augment their own internal data.

First, broad data is the domain of Google, Apple, Amazon, eBay and Facebook. Their play is it to stretch their online landscape as broadly as possible, generating thousands of new potential connections with the world at large. Google’s new “Buy” button is a perfect example of this. Adding to the reams of conversion data Google already collects, the “Buy” button means that Google will control even more transactional landscape. They’re packaging it with the promise of an improved mobile buying experience, but the truth is that purchases will be consummated on Google controlled territory, allowing them to harvest the rich data that will be generated from millions of individual transactions across every conceivable industry category. If Google can control a critical mass of connected touch points across the online landscape, they can get an end-to-end view of purchase behavior. The potential of that data is staggering.

In this market, data will be stripped of identity and aggregated to provide a macro but anonymous view of market behaviors. As the market evolves, we’ll be able to subscribe to data services that will provide real time views of emerging trends and broad market intelligence that can be sliced and diced in thousands of ways. Of course, Google (and their competitors) will have a free hand to use all this data to offer advertisers new ways to target ever more precisely.

This particular market is an online territory grab. It relies on a broad set of touch points with as many people across as many devices as possible. The more territory that is covered, the more comprehensive the data set.

The other data market will run deep. Consider the new health tracking devices like Fitbit, Garmin’s VivoActive and Apple’s iWatch. Focused purpose hardware and apps will rely on deep relationships with users. The more reliant you become on these devices, the more valuable the data collected will become. But this data comes with a caveat – unlike the broad data market, this data should not be striped of its identity. The value of the data comes from its connection with an individual. Therefore, that individual has to be an active participant in any potential data marketplaces. The data collector will act more as a data middleman – brokering matches between potential customers and vendors. If the customer agrees, they can choose to release the data to the vendor (or at least, a relevant subset of the data) in order to individualize the potential transaction.

As the data marketplace evolves, expect an extensive commercial eco-system to emerge. Soon, there will be a host of services that will take raw data and add value through interpretation, aggregation and filtering. Right now, the onus for data refinement falls on the company who is attempting to embrace Big Data marketing. As we move forward, expect an entire Big Data value chain to emerge. But it will all rely on players like Google, Amazon and Apple who have the front line access to the data itself. Just as natural resources provided the grist that drove the last industrial revolution, expect data to be the resource that fuels the next one.

An Eulogy for “Kathy” – The First Persona

My column last week on the death of the persona seemed to find a generally agreeable audience. But prior to tossing our cardboard cutouts of “Sally the Soccer Mom” in the trash bin, let’s just take a few minutes to remind ourselves why personas were created in the first place.

Alan Cooper – the father of usability personas – had no particular methodology in mind when he created “Kathy,” his first persona. Kathy was based on a real person that Cooper had talked to during his research for a new project management program. Cooper found himself with a few hours on his hands every day when his early 80’s computer chugged away, compiling the latest version of his program. He would use the time to walk around a golf course close to his office and run through the design in his head. One day, he engaged himself in an imaginary dialogue with “Kathy,” a potential customer who was requesting features based on her needs. Soon, he was deep in his internal discussion with Kathy. His first persona was a way to get away from the computer and cubicle and get into the skin of a customer.

There are a few points here that important to note. “Kathy” was based on input from a real person. The creation of “Kathy” had no particular goal, other than to give Cooper a way to imagine how a customer might use his program. It was a way to make the abstract real, and to imagine that reality through the eyes of another person. At the end we realize that the biggest goal of a persona is just that – to imagine the world through someone else’s eyes.

As we transition from personas to data modeling, it’s essential to keep that aspect alive. We have to learn how to live in someone else’s skin. We have to somehow take on the context of their world and be aware of their beliefs, biases and emotions. Until we do this, the holy grail of the “Market of One” is just more marketing hyperbole.

I think the persona started its long decline towards death when it transitioned from a usability tool to a marketing one. Personas were never intended to be a slide deck or a segmentation tool. They were just supposed to be a little mental trick to allow designers to become more empathetic – to slip out of their own reality and into that of a customer. But when marketers got their hands on personas, they do what marketers tend to do. They added the gloss and gutted the authenticity. At that moment, personas started to die.

So, for all the reasons I stated last week, I think personas should be allowed to slip away into oblivion. But if we do so, we have to find a way to understand the reality of our customers on a one to one basis. We have to find a better way to accomplish what personas were originally intended to do. We have to be more empathetic.

Because humans are humans, and not spreadsheets, I’m not sure we can get all the way there with data alone. Data analysis forces us to put on another set of lenses – ones that analyze – not empathize. Those lenses help us to see the “what” but not the “why.” It’s the view of the world that Alan Cooper would have had if he never left his cubicle to walk around the Old Del Monte golf course, waving his arms and carrying on his internal dialogue with “Kathy.” The way to empathize is to make connections with our customers – in the real world – where they live and play.  It’s using qualitative methods like ethnographic research to gain insights that can then be verified with data. Personas may be dead, but qualitative research is more important than ever.