Category Archives: The New Marketplace

Marketing Physics 101

First published February 9, 2012 in Mediapost’s Search Insider

Physics has never been my strong suit, but I think I have a good basic grasp of the concepts of velocity and direction. In my experience, the two concepts have special significance in the world of direct marketing. All too often I see marketers that are too focused on one or the other. These imbalances lead to the following scenarios:

All Direction, No Velocity

As a Canadian, I am painfully familiar with this particular tendency. Up here, we call it a Royal Commission. For those of you unfamiliar with the vagaries of the Canadian political landscape, here’s how a Royal Commission works. It doesn’t. That’s the whole point. Royal Commissions are formed when you have an issue that you wished would simply go away, but the public won’t let it. So a Royal Commission deliberates over it for several months, issues a zillion-page report that nobody ever reads, and by the time the report comes out, everybody has forgotten why they were so riled up in the first place.

This is similar to a company’s strategists noodling for months, or even years, about their digital strategy without really doing anything about it. They have brainstorming sessions, run models, define objectives and finally, decide on a direction. Wonderful! But in the process, they’ve lost any velocity they may have had in the first place. Everyone has become so exhausted talking about digital marketing that they have no energy left to actually do anything about it. Worse, they think that because it lives on a shelf somewhere, the digital strategy actually exists.

All Velocity, No Direction

With some companies, the opposite is true. They try going in a hundred directions at once, constantly chasing the latest bright shiny object. Execution isn’t the problem. Stuff gets done. It’s just that no one seems to know which direction the ship is heading. Another problem is that even though velocity exists, progress is impossible to measure because no one has thought to decide what the right yardstick is. You can only measure how close you are to “there” when you know where “there” is.

Failing any unifying metrics grounded in the real world, people tend to make up their own metrics to justify the furious pace of execution. Some of my favorites: Twitter Retweets, Number One SEO rankings and Facebook Likes.  As in “our latest campaign generated 70,000 Facebook likes” — a metric heard in more and more boardrooms across America. Huh? So? How does this relate in any way to the real world where people dig out their wallets and actually buy stuff? Exactly what dollar value do you put on a Like? Believe me, people are trying to answer that question, but I’ve yet to see an answer that doesn’t contain the faint whiff of smoke being blown up my butt. I suspect those pondering the question are themselves victims of the “all velocity, no direction” syndrome.

Balanced Physics

The goal is to fall somewhere in between the two extremes. You need to know the general direction you’re heading and what the destination may look like. You will almost certainly have to make course adjustments on the way, but you should always know which way North is.

And if you have velocity, it’s much easier to make those course adjustments. Try turning a ship that’s standing still.

What is an Agency’s Role?

First published January 26, 2012 in Mediapost’s Search Insider

Last week, I was talking to someone about what  role a digital agency would play in the future. We went down all the usual paths and came up with the usual answers, but afterward the question still lingered. What is our role in the future? I’m reasonably certain it won’t be the same as our role in the past.

In cases like this, I sometimes find it helpful to do a little linguistic excavation. I’m constantly surprised by how concise and accurate the labels we choose are, if we spend the time to explore their roots and unearth their true meaning.

What then is an “agency”? Well, agency is simply the capacity of an agent to act. It’s the sphere of “action” that surrounds an agent. So, we have to dig a little deeper. What is an “agent”? An agent is one who acts for another, by authority from them.  It seems simple, but is there a fundamental concept here that has gotten fuzzy with time?

In the early history of advertising, agencies were very much aligned with this definition, I think. They carried out the acts of advertising — including creation of the messages, production and placement — at their clients’ behest. The best agencies also contributed by helping clients uncover and communicate core brand values that resonated with an audience.

It was here that the role of the agency started to shift. It had to do with the concept of brand ownership. Somewhere along the line, agents began to believe they owned the brand. And clients seemed willing to abdicate this power to their agents. One agency talks about “360 degree brand stewardship.” It sounds nice, warm and fuzzy, but let’s cut the fat away and get to the bone of this phrase. What does that mean, really?

To “steward” a brand means to care for it and improve it over time. Again, that sounds like a good thing. But I fear that it shifts a fundamental duty into the wrong hands. I believe that “caring” implies ownership, and it can leave a brand in a precarious purgatory, caught between the company itself and its agency. In the days when brands were built largely around media exposure, perhaps it made sense for the fate of that brand to live with the agency. But that’s no longer the case. As Jakob Nielsen has said on at least one occasion, now “brands are built by experience, not exposure.” And the brand experience has to live with the company whose DNA defines the brand. By necessity, they have to be the stewards of their own brand, because so much of what makes that brand lives beyond the reach of an agency.

So if the original definition of an agency is passé, and the role of stewardship has to live with the company, what then do we become? I can hear echoes of “strategic partners” out there as I write. But to me that term has had its essential meaning squeezed out by overuse. I don’t think it captures the essence of what a digital agency should be. “Strategic partners” as a label is like a blanket, covering everything but defining nothing.

When I look at our best relationships with clients, there are three other terms I would use: “catalyst,”  “accelerator” and “guide.”

As a catalyst, we’re there to trigger change, to set off a chain reaction that has the potential to transform an organization.  We can do this by giving clients a vision of what’s possible. As an accelerator, we’re there to remove the roadblocks preventing the transformation. Finally, as a guide, we’re there to provide direction, helping clients a navigate the troubled waters of digital transformation and giving them some idea of what to expect.

Walmart vs. Amazon: A Regime Shift in Motion

First published November 17, 2011 in Mediapost’s Search Insider

Financial analysts are not predicting a rosy short-term future for Amazon’s stock price.  Recent blunders with the rollout of new Kindle devices and earnings under increasing pressure have these analysts predicting a shorting of Amazon stock. In all likelihood, Amazon’s share price will tumble.

So why is Walmart so worried about Amazon?

A recent article indicates that Walmart is preparing for what could be the “retail battle of the decade.” When you match the two up on numbers alone, it seems like the “mismatch of the decade.”  Walmart is 10 times the size of Amazon in overall sales. It’s the largest retailer on the planet, by a huge margin. Amazon doesn’t even crack the top 10. In fact, Amazon sits at #44 on the list of global retailers.

But let’s flip the numbers. When it comes to online sales, Amazon outsells Walmart 10 to 1, and its topline growth is 44% while Walmart’s per location sales growth is trapped in the low single digits (if there is growth at all). So, if online retail is a game changer, and if this signals a “regime shift” in the retail landscape, then Walmart is right to worry. In fact, they should be petrified.

The article steps through Walmart’s strategy for ramping up e-commerce, but one line in particular raises a huge red flag: “Walmart would love Amazon’s top-line growth, but isn’t about to settle for its profits.”

Walmart has built its empire on incredibly precise supply chain management, obsessing over the details of physical fulfillment. Company strategists hope to use this to their advantage in their war on Amazon. Fair enough. But when it comes to the tough calls required to fully embrace digital (and they will come), Walmart will be hampered by the need to protect an existing model that relies on bricks and mortar. This mixed set of priorities will virtually ensure Walmart will move slower than Amazon, who has no option but to excel when it comes to e-com. This is a classic “regime shift” scenario, and history is not on Walmart’s side. The fact that its e-com head office is pretty far removed, philosophically and physically, from the head office in Bentonville, Ark. speaks to the challenges that Walmart has ahead of it.

It’s Amazon’s move into CPG that has raised the ire of the giant from Bentonville. Soap, diapers and other consumer staples are the essentials that drive Walmart’s revenues, and these are areas that Amazon is aggressively expanding into. But it’s not just consumer packaged goods that Amazon has set its sights on; it’s also going after the industrial and B2B market. In fact, Amazon is attacking the established marketplace on all fronts, with the full intention of smashing the current model and replacing it with one that takes full advantage of online efficiencies. In short, if we remember the stages of a Kondratieff wave, Amazon is building the foundations of the reconstruction phase.

Amazon’s plans go far beyond the Kindle sales and struggles with profit margins currently beleaguering its stock price. This is a massive long-term play, and one that I would be hesitant to bet against. The act of shopping is about to change forever. In my previous column on this topic, many commented that for some things, the ability to touch and feel a product is essential. That may be true, but there are many, many more things where we could care less about the need for physical evaluation. Also, this divide between online and physical shopping tends to be a shifting one. Things we couldn’t imagine buying sight unseen just a few years ago are now purchased online without a second thought.

I’m not sure what lies ahead for retail in general, or the battle between Walmart and Amazon specifically. But I do know the retail landscape of the future will bear little resemblance to the one we know today. And I also know that the battlefield will be littered with causalities. It’s not beyond reason (or historical evidence) to suspect that the world’s biggest retailer may well be one of them.

The View Above the “Weeds”

First published November 10, 2011 in Mediapost’s Search Insider

Yesterday was not a good day.

It was a day that made me wish I had never gone into this business — a day that made me long for a warm beach and a mai tai. I don’t have these days very often, but yesterday, oh boy, I had it in spades!

I’ve been doing search (yesterday, I used a different, less polite noun) for a long time.  And I have to be honest, some days it feels like a thousand leeches are sucking the blood out of me. Given that, it was impossible to muster up much enthusiasm for the roll out of Google+ Business Pages or the raging controversy of Facebook’s “LikeGate.” Really? Are those the most important things to litter our inboxes with?

On days like yesterday, when I get caught in the weeds of digital marketing (where the blood-sucking leeches tend to hang out) I sometimes lose sight of why I got into this in the first place. This is a revolution. What’s more, it’s a revolution of epic, perhaps unprecedented, proportions. In macro-economic terms, this is what they call a long-wave transition or a Kondratieff wave (named after the Russian economist who first identified it). These cycles, which typically last more than 50 years, see the deconstruction of the current market infrastructure and the reconstruction of a market built on entirely new foundations. They are caused by change factors so massively disruptive, often in the form of technological innovations or global social events (for example, a World War), that it takes decades for their impact to be absorbed and responded to.

The digital revolution is perhaps the biggest Kondratieff wave in history. One could tentatively peg the start of the transition in the early to mid ‘90s with the introduction of the Internet. If this is the case, we’re less than 20 years into the wave, still in the deconstruction phase. To me, that feels about right. If history repeats itself, which it has a tendency of doing; we have yet to get to the messiest part of the transition.

These waves tend to precipitate what’s called a “regime shift.” Here is how the regime shift works. Companies started in the old market paradigm eventually reach a stagnation point. In our particular case, think of the multinational conglomerates built around market necessities such as mass distribution, physical locations, supply-chain logistics, large-scale manufacturing, top-down management and centralized R&D. In this market, bigger was not only better, it was essential to truly succeed. Our Fortune 500 reads like a who’s who of this type of company.  But eventually, the market becomes fully serviced, or even saturated, with the established market contenders, and growth is restricted.

Then, a disruptive change happens and a new opportunity for growth is identified. At first, the full import of the disruption is not fully realized. Speculation and a flood of investment capital can create a market frenzy early in the wave, looking for quick wins from the new opportunities. Think dot-com boom

The issue here is that the full impact of the disruptive change has to be absorbed by society — and that doesn’t happen in a year, or even 10 years. It takes decades for us to integrate it into our lives and social fabric. And so, the early wave market boom inevitably gives way to a collapse. Think dot-com bust.

As the wave progresses, the “regime shift” starts to play out. Established players are still heavily invested in the existing market structure, and although they may realize the potential of the new market, they simply can’t move fast enough to capitalize on it. Case in point, when industrial America became electrified in the late 1800s and early 1900s, the existing regime had factories built around steam power.  Steam-powered factories had a central steam engine that drove all the equipment in the factory through a complex maze of drive shafts and belts. The factories were dirty, dangerous and inefficient. New factories powered by electricity were cleaner, brighter, safer and much more efficient. But even with the obvious benefits of electricity, established manufacturers tried to retrofit their existing factories by jury-rigging electrical motors onto equipment designed to run by steam. They simply had too much invested in the current market infrastructure to shut the doors and walk away. New companies weren’t burdened by this baggage and built factories from scratch to take advantage of electricity. The result? Within a few decades, the old manufacturers had to close their doors, outmaneuvered by newer, more nimble and more efficient competitors.

When I plot our current situation against the timelines of past waves, I believe that given how massive this wave is, it could take longer than 50 years to play out. And, if that’s the case, there is still a lot of deconstruction of the previous marketplace to happen. The good news is, the building of the new market is a period of huge growth and opportunity. There is still a ton of life left in this wave, and we haven’t even realized its full benefits yet.

On days like yesterday, when my to-do list and inbox conspire to burn out what little sanity I have left, I have to step back and realize why I did this. Somehow, way back then, I knew this was going to be important. And yesterday, I had to remind myself just how massively important it is.

Bye Bye Big Box, Hello Digital

First published November 3, 2011 in Mediapost’s Search Insider

My friend Mikey (whom you may remember from the “Mikey Mobile Adoption Test”) and I were recently driving through our hometown, past a long row of new big-box retail locations that have recently sprung up.

I, somewhat exasperatedly, said, “Who the hell is going to buy all this stuff?”

Our town’s population is only 120,000 but we seem to have a huge overcapacity of retail space, with more going up all the time, thanks in part to a development-hungry First Nations band with plenty of available real estate.

Mikey replied, “Well, the town isn’t getting any smaller and people need to shop somewhere.”

That, and a recent article by MediaPost reporter Laurie Sullivan, got me thinking. Do we? I mean, do we need to shop “somewhere,” as in a physical store location?

I paused, and then replied, “I’m not so sure. I buy a lot more things online.”

“Really?”

“Really.”

A few days later, I was in a presentation where someone showed digital marketing growth projections for local advertisers on a slide. The growth over the next few years was relatively moderate: about 5% to 6% year over year. This despite the fact that the current penetration rates were well short of 50%.

Put it all together and I can’t help wondering whether we, collectively, are “sandbagging” our local digital growth potential. Modest growth projections assume fairly linear trends in the future. We use past adoption and extrapolate these into the future. Statistically, it’s probably the rational thing to do, but it doesn’t take into account the possibility of a dramatic shift in behavior. For example, what if we’ve reaching a tipping point where, as Sullivan notes, it’s just a lot easier to shop online than to actually hop in your car, drive across town and then try to navigate through a 25,000-square-foot massive retail location?

That’s the way things tend to go in real life. We don’t incrementally change behaviors, we change en masse. And when we do, we trigger massive waves of change that deconstruct and reconstruct the marketplace. I suspect we’re getting close to that tipping point.

Personally I, like Sullivan, find the physical act of shopping a royal pain in the tuchus.  Recently, my wife and I decided to go buy some coasters, those little squares that go under cups on your coffee table. Indiana Jones has embarked on less daunting quests. When we finally found them I reckon that, accounting for my wife’s and my time at fair market value, those coasters cost somewhere around a thousand dollars. All this for a six-dollar set of coasters that I don’t even particularly like (don’t tell my wife)!

We’re to the point now where shopping should be painless — a search, click and buy, then relax and wait for FedEx to deliver. Even local shopping can become massively more efficient through mobile technology. At some point, we have to realize that going to huge retail stores that are built to maximize per visit sales rather than enable you to find what you’re looking for is a horribly inefficient use of our time. And when we do, the current retail paradigm is flipped on its pointy little head. The net impact? Those modest growth curves suddenly shoot for the sky!

And all those big-box stores that Mikey and I drove by?

Perhaps bowling will make a sudden comeback. I know several great locations for an alley.

What’s So Interesting about Google, Anyway

First published July 7, 2011 in Mediapost’s Search Insider

I just received my review copy of “I’m Feeling Lucky, The Confessions of Google Employee # 59” by Douglas Edwards. That brings to six the number of Google themed books that are sitting on my bookshelf (including one by fellow Insider Aaron Goldman).

That got me to thinking. Are six books a lot to be written about one company?

Well, it turns out that there are more than six. A quick check on Amazon turned up no less than 11 books on Google, the company. That doesn’t include the gazillions of Google-inspired how-to books. So, to return to my original question, are 11 a lot? And if they are, why do authors write about Google? What does Google have that other companies don’t? And how does the Google story stack up against other corporate sagas?

It seems Google actually heads the high-tech pack when it comes to attracting ink. Again checking Amazon, I only found one book on Yahoo and two on Facebook. There were four on Microsoft and seven books on Apple. Of all the tech companies I checked, only IBM equaled Google’s tally, at 11. Of course, IBM has been around for over 100 years, compared to less than two decades for Google.

Google even beats corporate stalwarts like GE (seven), Proctor & Gamble (three) and HP (seven).

In looking at the list, a few things immediately came to mind. First of all, many of the books written about a company are actually written about a founder or chef executive of the company. Half the books written about Microsoft are actually biographies of Bill Gates. The same is true for Apple (Steve Jobs), GE (Jack Welch) and IBM (Lou Gerstner). But none of the Google books I’ve ready are about Larry Page and Sergey Brin. They’re about the company. Certainly, Larry and Sergey have starring roles, but they don’t overshadow the company itself. Google is always front and center.

Secondly, many of the other companies that are the subject of books have gone through massive restructurings or turnarounds, which formed the central theme of the respective books. Google hasn’t hit a slump yet. There isn’t even a lot of conflict in Google’s history to chronicle. Unlike Facebook, Aaron Sorkin (who adapted Ben Mezrich’s book “The Accidental Billionaires” for the movie “The Social Network”) would have a difficult time creating a juicy script out of the Google story.  It’s not nearly as “Hollywood” as Facebook’s rise to glory. And Google doesn’t generate near the animosity of a Wal-Mart (20-plus books, most of them about how the retail giant is destroying America) or Enron (the grand Champion of corporate story telling, with over 30 books, all about its ignoble collapse). So, what is it about Google that fascinates us, if it isn’t a rags to riches to rags to riches saga, an inside glimpse at an evil empire, or a superstar CEO?

All the books written about Google are generally complimentary, respectful and, in some cases, even a touch obsequious and over-enthralled. Those who choose to write about Google generally fawn all over the company, the brilliance of the co-founders, the velocity of its growth and the vibrancy of its culture. If there is muck to rake here, potential authors have yet to uncover it. The only other company I’ve found that even comes close to inspiring the sycophantic awe of Google is Disney, with over 20 titles, the majority of them complimentary.

I think the Google story has appeal because Google is something we all use. In many ways, the story of Google is the story of Web search (John Battelle’s approach) — and that has changed our lives in some pretty fundamental ways. It’s Google’s role as a catalyst of change — in how we think about information, in marketing, in how companies conduct themselves, and in a number of yet-to-be determined ways — that compel us to keep turning the pages. This isn’t a story about a company, or a brilliant founder. It’s a story about a society balanced on the cusp of dramatic and massive change.  Google is just the narrative framework many have chosen as the vehicle for their social parable.

Really, if you were going to write a book about search and how it’s changing our world, whom else would you write about?

Google’s Mission and the Economic Colonization of the Web

First published January 27, 2011 in Mediapost’s Search Insider

Aaron Goldman and I agree — it’s time for Google to rethink its mission statement. But we disagree on the reason. Goldman thinks it’s time “to call a spade a spade” and for Google to come clean on their intention to grab as many ad dollars as possible. From this perspective, the change in the mission statement is really just to better align it with Google’s business.

I think “organizing the world’s information” needs to be changed for a different reason. I think there are inherent limitations in it that may seriously impact Google’s revenue stream in the future.

A Quick Update

But first, some background. Eric Schmidt has moved into that corporate limbo called “executive chairman”-ship. I don’t really know what an executive chairman does. I asked Google and it’s also pretty fuzzy on the concept. According to Schmidt, it’s to focus on external partnerships and to “advise” Larry and Sergey. To me, it sounds like a long and polite good-bye. Whatever we know about the shift, I guarantee there’s more to the story.

Also, Google rocked expectations on Q4 earnings, so all appears to be rosy in Google-world. But quarterly earnings calls are a notoriously poor indicator of the strategic health of an organization. They reflect the success of strategic decisions made a year or two ago and the ability of the organization to execute against them. They tell you nothing about the strategy today, or how the company may do in the future. Which brings us back to the mission statement.

Missionary Work

Organizing the world’s information sounds like a lofty goal, and it is. It was entirely appropriate given the “wild-west” nature of the Web when Google first appeared in 1997. But on the Web, information equals data, and data comes in two forms: structured and unstructured. Google’s mission was defined at a time when almost everything online was unstructured. It was a mess. It needed to be organized. And Google’s revenue model sprung from its ability to match consumer intent with all this unstructured content. It was a broad-based attempt to tame the Web, and it was tremendously successful.

But the success came with limitations. If you’re going to try to organize unstructured information, you have to rely on some method to interpret the meaning of the information. You need some framework to organize information into. Google, like every other engine, relied on language as a measure of relevance — specifically matching content to a query made up of keywords. But language is notoriously difficult for machines to get right, because it’s ambiguous. Consider that words like “set,” “cut” and “break” can be defined in close to 100 different ways. Google’s struggle for the past decade and a half has been dealing with the difficulties of organizing unstructured data.

Another challenge is trying to deal with all unstructured data in the same interface. Google has tried to meet the challenge by incorporating more and more content categories into the main results page. There are currently more than a dozen categories you could conduct your search in. The elegance of the one-size-fits-all engine is rapidly becoming clunky and awkward.

The Colonization of the Web

Over the same time that Google has been pursuing its mission, the Web has become economically colonized. Where there’s an opportunity to make a buck, there is motivation to move data into a more structured format. Pockets of economically viable data have become increasing structured in the past 10 years, including all travel categories, books, movies, music and many commonly purchased products. Increasingly, we’re going to see this colonization, which will organize information in a way that Google could never do “on-the-fly.” And as this data becomes more structured, it allows for a different interaction with it. Data becomes more functional and more useful. It moves from conducting a search to using an application. Think of the difference between trying to plan a trip using nothing but Google — and planning the same trip using Kayak. That’s the difference between dealing with unstructured and structured data.

This colonization will hit Google where it hurts most — the highest volume, most commercially relevant searches. At this point, Google still acts as a navigational path to these structured destinations, but this is a transitional band-aid at best. The Web is growing up and it’s being tamed in bits and pieces; not by Google’s algorithmic wizardry but by commercial opportunities.

Google is right to focus on the possibilities of mobile. More and more of our online activity will happen there. But mobile is not a new frontier, it’s simply a new view into the same landscape. It will leverage the same colonies of structured data. In fact, the mobile use-case is perfectly suited to dealing with structured data. It will accelerate the colonization.

Google’s concept of “organizing” falls short of our end goal, which is using information to do things with. If I were Google, I’d be doing some wordsmithing using words like “useful” and “functional.”

High Risk & High Reward: Fully Engaged Buying

First published January 13, 2011 in Mediapost’s Search Insider

Last week I talked about High Risk/Low Reward purchases and said that when you’re in this quadrant, your “buying brain is driving the brake pedal through the floorboards.” True, but at least there is some consistency in the behaviors: risk trumps all.

When you’re navigating through a High Risk/High Reward purchase, you can be forgiven for appearing schizophrenic in your decision-making process. We swing back and forth from logic to what can only be described as love, with the volatility of a pendulum. If ever we were fully engaged in a buying process, this is the time. It’s all hands on deck for this purchase.

High Risk/High Reward purchases include new homes, vehicles, expensive toys and extravagant vacations. We spend a lot — but we also expect a lot. Game theorists and economists use a term called expected utility to describe our envisioned probable outcome from a decision.  It’s a pretty colorless term, and in theoretical terms, the lack of color in the label reflects the lack of emotion in the decision. Here, we weigh risk against logical outcomes — for example, the expected payoff from a wager.

Expected utility plays a major role in high reward purchases, but here, utility is dramatically colored with emotion. A car is not just about solving your transportation challenges (the expected utility). It’s about mid-life crises, keeping ahead of your brother-in-law, and the image of airing out your thinning hair on a cruise down the California coast. This, in many cases, is high-octane fantasizing, and there’s little logic to it.

Anywhere you find emotional rewards, you’ll find brands. And in these types of purchases of manufactured goods, you’ll inevitably find a brand turf war. Our complex relationships with the brands that define us are born in high-emotional-reward purchase scenarios. And in these types of purchases, the increased role of risk creates a delicious ambiguity in our rationalization of brand love.  We buy brands because of an emotional connection that comes straight from our limbic core (really, in this world of “pretty good” products, there is little to differentiate one brand from another), but our thinking brain kicks into overdrive to explain the logic behind our choice. We can’t seem to grasp the reality that logic had little to do with it.

These highly engaged purchases leave a vast and deep online footprint. We spend hours online, theoretically researching a purchase, but in many cases, we’re pre-rewarding ourselves through envisioning the acquisition of the reward. We use vehicle configurators and agonize over option packages and interior color schemes. We do endless virtual walk-throughs of homes. And we plan our dream vacation in minute detail, balancing recommendations from TripAdvisor and other sites against the limits of our budget and itinerary. Fantasizing begins online, and we have to allow for this in our marketing strategy.

When your product falls into this category, you want to support the fantasy as much as possible, utilizing digital media that encourages an emotional connection. Video and interactivity are a key part of the mix. We reach out on social media sites not just to manage risk by getting the opinions of others, but also to live vicariously through capturing the experiences of those who have bought before us.

As one would imagine, giving the depth and complexity of this online engagement, the search paths taken are equally convoluted. Search will be used repeatedly through the purchase process and for differing intents. There is no “one size fits all” approach here. In these purchase scenarios, a deep qualitative understanding of prospect behaviors will separate the great marketers from the herd.

High Risk & Low Reward: Buying with the Brakes On

First published January 6, 2011 in Mediapost’s Search Insider

After a brief detour last week (thanks for the many heartfelt messages for my Uncle Jim) I want to return to my exploration of the role of risk and reward in our online consumer behaviors.  We looked at the low risk/low reward and low risk/high reward quadrants. Today, we’ll continue by exploring the High Risk/Low Reward quadrant.

As a brief recap, our brains tend to apply brakes or step on the gas when steering through a buying decision based on the degree of risk and the promise of reward inherent in the decision. This dictates the nature of the consumer journey we take – both in terms of paths chosen and duration. I’ve talked before about the concept of bounded rationality, or the threshold of logical consideration we give to any decision. As behavioral economists have found, in almost every human decision, ration is modified by gut instinct. We call this “satisficing.” The only question, it seems, is the balance between the two. Risk and reward are hugely influential in determining our “satisficing” threshold for any purchase decision.

High Risk/Low Reward

In the last column, I described Low Risk/High Reward indulgences as “all gas and little brake.” The chocolate bar temptingly placed at the grocery store checkout aisle is just one example. High Risk/Low Reward purchases live at the opposite end of buyer behavior spectrum. Here your buying brain is driving the brake pedal through the floorboards. Consider this the consumer equivalent of teaching your teenager to drive.

In our personal lives, it includes such joyless purchases as insurance (all kinds, and the higher the premiums, the greater the perceived risk), financial planning, big-ticket home maintenance (not fun stuff like renovations, but replacing a roof, fixing a sagging foundation or getting a new furnace), car repairs and professional services such as lawyers or accountants.

Ironically, each of these types of purchases is usually triggered by either legislation  (car insurance), a non-negotiable need (a leaking roof) or the greater perceived risk of doing nothing (not having a lawyer in a divorce). If there wasn’t some impending reason to buy, we never would. There are no positive emotions at play here, only negative ones.

There is another type of purchase that falls into this quadrant that impacts many of our clients – bigger ticket B2B purchases. Indeed, I wrote an entire book on the subject : “The BuyerSphere Project.”

The lack of positive reward means our consumer research is all aimed at one thing and one thing only: the elimination of risk. In this scenario, risk has several dimensions: price, reliability and, because many of these purchases are predicated on avoiding future risk, balancing current risk against future risk. There is another aspect of risk, which is not commonly identified in these types of purchases: the risk of change. Often, big-ticket purchases require you to make changes in your routine, which involves change management.

When we look at what online behaviors might be for a High Risk/Low Reward purchase, we see risk mitigation as the key factor. Sites that allow buyers to compare several alternatives tend to be very popular, especially if they offer some type of rating. Online aggregators and directories tend to thrive in this quadrant, as they focus on quantifying pricing-based risk.

Because there is little or no emotional reward in these purchases, there is little in the way of positive emotional engagement.  As somebody once told me, nobody ever threw a party to buy car insurance.  Social media engagement is restricted to verifying you don’t get burned in the purchase. Rich-media demonstrations will be passed over in favor of quick comparison charts. And if you are engaging the senses, you’ll be capitalizing on fear of risk rather than a promise of reward.

Next week, we’ll make our way to the last quadrant of the matrix: High Risk/High Reward.

Baring Your Corporate Soul Online

First published December 2, 2010 in Mediapost’s Search Insider

Web presence is taking on a whole new meaning. I’m having more and more conversations with companies that are in the middle of redefining who they are online. In that process, they’re just not sure what they expose and what they keep hidden behind the kimono. Their website started as a marketing channel, but the explosion of potential customer touch points online makes the whole idea of a website seem hopelessly antiquated. Yet, there’s a limit in scope and complexity that makes websites an easily grasped online concept.

Here are some selected snippets from those conversations:

1.  “Is blogging really worthwhile? It’s a pretty high investment for the low traffic that blogs get.”

2.  “Yeah, we don’t really talk about that on our website. Would anyone be interested in that?”

3.  We launched our Facebook page and we have 170,000 fans already. Other than a potential audience to advertise too, we’re just not sure what that means.”

Here, then, is the business reality that lives on the other side of all these comments:

1.  The company in question is literally creating a paradigm shift by introducing new workflow management platforms in a very traditional industry. They succeed by convincing companies that technology can dramatically improve performance and profitability. Yet, despite the urging of their digital marketing department, they’re reluctant to embrace digital content generation channels (such as blogs) to spread this message.

2.  This company is a North American toy manufacturer that is evangelical in their mission to empower creative development in children. They employ one of the largest internal design teams in the industry outside of electronic gaming. And, the design team sits directly above the manufacturing floor (they’ve resisted the industry tide to move all their manufacturing offshore by dramatically improving efficiencies through technology) so they can follow their designs from inception right through to realization.

3.  A clothing retailer based in Montreal is going head-to-head with much larger American competitors and stealing significant market share in key entry markets because of the coolness of being “French.”The strength of the Quebecois culture shines through in the retailer’s promotional materials despite the fact that there has been no overt intent on the part of the retailer to capitalize on it.

Three different stories, but they all have one thing in common. As they consider their next steps in creating an online presence, they’ll all drawing closer and closer to the very essence of their companies. In the past decade and a half, we all rushed to create a website because it seemed to be the price of entry to play in the online marketplace. But since then, that online ecosystem has exploded along multiple dimensions. It’s much richer than it used to be.

At one time, a website was the only conceivable way to play, and those websites were all considered sales or marketing channels. But today, our customers expect to engage with us in an authentic and compelling way online. There is a reason why they’re intrigued by our products or services. And often, the answer to why that is can be found in the core of who we are. It lives in our mission, our core values and our people. Yet we almost never expose that online. What makes us different is infused into our corporate culture and may be taken from granted by those of us who live and work on the inside. We never think about exposing that side of us online. Yet it’s exactly those inside stories that set us apart. And yes, people are interested in that stuff. People care about how fanatical Zappos is about customer service. People respond to the obsessive worship of design that typifies Apple. And not all the drinkers of the Google Kool-Aid live and work within the Google Empire.

A while ago in my company we made a decision. We are a service company —  our product is our people. So we pushed them front and center on our website. We wanted prospects to learn a little bit about the team they’d be working with. Also, within our company, music was a big part of our culture. We had a number of employees who were also musicians. As almost an afterthought, we asked all our employees to submit their top-10 music lists and published them on our site. I can’t tell you the number of times I’ve met someone for the first time and they’ve told me that they also love the Eagle’s “Hotel California,” or that “Bohemian Rhapsody” still sets their head bobbing a la Wayne’s World. Our top-10 lists are consistently one of the most popular sections of our site.

It may not be part of the marketing plan, but don’t be afraid to bare a bit of your soul through online channels. It makes us human, and being human is a great foundation on which to build a relationship!