It’s the Fall that’s Gonna Kill You

Butch: I’ll jump first.
Sundance: Nope.
Butch: Then you jump first.
Sundance: No, I said!
Butch: What’s the matter with you?!
Sundance: I can’t swim!
Butch:  Why, you crazy — the fall’ll probably kill ya!

                                     Butch Cassidy and the Sundance Kid – 1969

Last Monday, fellow Insider Steven Rosenbaum asked, “Is Advertising Obsolete?” The column and the post by law professor Ramsi Woodcock that prompted it were both interesting. So were the comments – which were by and large supportive of good advertising.

I won’t rehash Rosenbaum’s column, but it strikes me that we – being the collective we of the MediaPost universe – have been debating whether advertising is good or bad, relevant or obsolete, a trusted source of information or a con job for the ages and we don’t seem to be any closer to an answer.

The reason is that an advertisement is all of those things. But not at the same time.

I used to do behavioral research, specifically eye-tracking. And the end of an eye tracking study, you get what’s called an aggregate heat map. This is the summary of all the eyeball activity of all the participants over the entire duration of all interactions with whatever the image was. These were interesting, but personally I was fascinated with the time slices of the interactions. I found that often, you can learn more about behaviors by looking at who looked at what when. It was only when we looked at interactions on a second by second basis that we started to notice the really interesting patterns emerge. For example, when looking at a new website, men looked immediately at the navigation bar, whereas women were first drawn to the “hero” image. But if you looked at the aggregates – the sum of all scanning activities – the men and women’s images were almost identical.

I believe the same thing is happening when we try to pin down advertising. And it’s because advertising – and our attitudes towards it – change through the life cycle of a brand, or product, or company.

Our relationship with a product or brand can be represented by an inverted U chart, with the vertical axis being awareness/engagement and the horizontal axis being time. Like a zillion other things, our brain defines our relationship with a product or brand by a resource/reward algorithm. Much of human behavior can be attributed to a dynamic tension between opposing forces and this is no exception. Driving us to explore the new are cognitive forces like novelty seeking and changing expectations of utility while things like cognitive lock in and the endowment effect tend to keep us loyal. As we engage with a new product or brand, we climb up the first side of the inverted U. But nothing in nature continues on a straight line, much as every sales manager would love it to. At some point, our engagement will peak and we’ll get itchy feet to try something new. Then we start falling down the descent of the U. And it’s this fall that kills our acceptance of advertising.

2000px-HebbianYerkesDodson.svgThis inverted U shows up all the time in human behavior. We assume you can never have too much of a good thing, but this is almost never true. There’s even a law that defines this, known as the Yerkes-Dodson Law. Developed by psychologists Robert Yerkes and John Dodson in 1908, it plots performance against mental or physical arousal. Predictably, performance increases with how fully we’re engaged with whatever we’re doing – but only up to a point. Then, performance peaks and starts to decline into anxiety.

It’s also why TV show runners are getting smarter about ending a series just as they crest the top of the hump. Hard lessons about the dangers of the decline have been learned by the jumping of multiple sharks.

Our entire relationship with a brand or product is built on the foundation of this inverted U, so it should come as no surprise that our acceptance of advertising for said brand or product also has to be plotted on this same chart. Yet it seems to constantly comes as a surprise for the marketing teams. In the beginning, on the upslope of the upside-down U, we are seeking novelty, and an advertisement for something new fits the bill.

When the inevitable downward curve starts, the sales and marketing teams panic and respond by upping advertising. They do their best to maintain a straight up line, but it’s too late. The gap between their goals and audience acceptance continues to grow as one line is projected upwards and the other curves ever more steeply downwards. Eventually the message is received and the plug is pulled, but the damage has already been done.

When we look at advertising, we have to plot it against this ubiquitous U. And when we talk about advertising, we have to be more careful to define what we’re talking about. If we’re talking specifically, we will all be able to find examples of useful and even welcome ads. But when I talk about the broken contract of advertising, I speak in more general terms. In the digital compression of timelines, we are reaching the peak of advertising effectiveness faster than ever before. And when we hit the decline, we actively reject advertising because we can. We have other alternatives. This decline is dragging the industry down with it. Yes, we can all think of good ads, but the category is suffering from our evolving opinion which is increasingly being formed on the downside of the U.

 

 

Will We Ever Let Robots Shop for Us?

Several years ago, my family and I visited Astoria, Oregon. You’ll find it at the mouth of the Columbia River, where it empties into the Pacific. We happened to take a tour of Astoria and our guide pointed out a warehouse. He told us it was filled with canned salmon, waiting to be labeled and shipped. I asked what brand they were. His answer was “All of them. They all come from the same warehouse. The only thing different is the label.”

Ahh… the power of branding…

Labels can make a huge difference. If you need proof, look no further than the experimental introduction of generic brands in grocery stores. Well, they were generic to begin with, anyway. But over time, the generic “yellow label” was replaced with a plethora of store brands. The quality of what’s inside the box hasn’t changed much, but the packaging has. We do love our brands.

But there’s often no rational reason to do so. Take the aforementioned canned salmon for example. Same fish, no matter what label you may stick on it. Brands are a trick our brain plays on us. We may swear our favorite brand tastes better than it’s competitors, but it’s usually just our brain short circuiting our senses and our sensibility. Neuroscientist Read Montague found this out when he redid the classic Pepsi taste test using a fMRI scanner. The result? When Coke drinkers didn’t know what they were drinking, the majority preferred Pepsi. But the minute the brand was revealed, they again sweared allegiance to Coke. The taste hadn’t changed, but their brains had. As soon as the brain was aware of the brand, some parts of it suddenly started lighting up like a pinball machine.

In previous research we did, we found that the brain instantly responded to favored brains the same way it did to a picture of a friend or a smiling face. Our brains have an instantaneous and subconscious response to brands. And because of that, our brains shouldn’t be trusted with buying decisions. We’d be better off letting a robot do it for us.

And I’m not saying that facetiously.

A recent post on Bloomberg.com looked forward 20 years and predicted how automation would gradually take over ever step of the consumer product supply chain, from manufacturing to shipping to delivery to our door. The post predicts that the factory floor, the warehouse, ocean liners, trucks and delivery drones will all be powered by Artificial intelligence and robotic labor. The first set of human hands that might touch a product would be those of the buyer. But maybe we’re automating the wrong side of the consumer transaction. The thing human hands shouldn’t be touching is the buy button. We suck at it.

We have taken some steps in the right direction. Itamar Simonson and Emanuel Rosen predicted a death of branding in their book Absolute Value:

“In the past the marketing function “protected” the organization in some cases. When things like positioning, branding, or persuasion worked effectively, a mediocre company with a good marketing arm (and deep pockets for advertising) could get by. Now, as consumers are becoming less influenced by quality proxies, and as more consumers base their decisions on their likely experience with a product, this is changing.”

But our brand love dies hard. If our brain can literally rewire the evidence from our own senses – how can we possibly make rational buying decisions? True, as Simonson and Rosen point out, we do tend to favor objective information when it’s available, but at the end of the day, our buying decisions still rely on an instrument that has proven itself unreliable in making optimal decisions under the influence of brand messaging.

If we’re prepared to let robots steer ships, drive trucks and run factories, why won’t we let them shop for us? Existing shopping bots stop well short of actually making the purchase. We’ll put our lives in the hands of A.I. in a myriad of ways, but we won’t hand our credit card over. Why is that?

It seems ironic to me. If there were any area where machines can beat humans, it would be in making purchases. They’re much better at filtering based on objective criteria, they can stay on top of all prices everywhere and they can instantly aggregate data from all similar types of purchases. Most importantly, machines can’t be tricked by branding or marketing. They can complete the Absolute Value loop Simonson and Rosen talk about in their book.

Of course, there’s just one little problem with all that. It essentially ends the entire marketing and advertising industry.

Ooops.

Why Marketers Love Malcolm Gladwell … and Why They Shouldn’t

Marketers love Malcolm Gladwell. They love his pithy, reductionist approach to popular science – his tendency to sacrifice verity for the sake of a good “Just-so” story. And in doing this, what is Malcolm Gladwell but a marketer at heart? No wonder our industry is ga-ga over him. We love anyone who can oversimplify complexity down to the point where it can be appropriated as yet another marketing “angle”.

Take the entire influencer advertising business, for instance. Earlier this year, I saw an article saying more and more brands are expanding their influencer marketing programs. We are desperately searching for that holy nexus where social media and those super-connected “mavens” meet. While the idea of influencer marketing has been around for a while, it really gained steam with the release of Gladwell’s “The Tipping Point.” And that head of steam seems to have been building since the release of the book in 2000.

As others have pointed out, Gladwell has made a habit of taking one narrow perspective that promises to “play well” with the masses, supporting it with just enough science to make it seem plausible and then enshrining it as a “Law.”

Take “The Law of the Few”, for instance, from The Tipping Point: “The success of any kind of social epidemic is heavily dependent on the involvement of people with a particular and rare set of social gifts.” You could literally hear the millions of ears attached to marketing heads “perk up” when they heard this. “All we have to do,” the reasoning went, “is reach these people, plant a favorable opinion of our product and give them the tools to spread the word. Then we just sit back and wait for the inevitable epidemic to sweep us to new heights of profitability.”

Certainly commercial viral cascades do happen. They happen all the time. And, in hindsight, if you look long and hard enough, you’ll probably find what appears to be a “maven” near ground-zero. From this perspective, Gladwell’s “Law of the Few” seems to hold water. But that’s exactly the type of seductive reasoning that makes “Just So” stories so misleading. You mistakenly believe that because it happened once, you can predict when it’s going to happen again. Gladwell’s indiscriminate use of the term “Law” contributes to this common deceit. A law is something that is universally applicable and constant. When a law governs something, it plays out the same way, every time. And this is certainly not the case in social epidemics.

duncan-watts

Duncan Watts

If Malcolm Gladwell’s books have become marketing and pop-culture bibles, the same, sadly, cannot be said for Duncan Watts’ books. I’m guessing almost everyone reading this column has heard of Malcolm Gladwell. I further guess that almost none of you have heard of Duncan Watts. And that’s a shame. But it’s completely understandable.

Duncan Watts describes his work as determining the “role that network structure plays in determining or constraining system behavior, focusing on a few broad problem areas in social science such as information contagion, financial risk management, and organizational design.”

You started nodding off halfway through that sentence, didn’t you?

As Watts shows in his books, “Firms spent great effort trying to find “connectors” and “mavens” and to buy the influence of the biggest influencers, even though there was never causal evidence that this would work.” But the work required to get to this point is not trivial. While he certainly aims at a broad audience, Watts does not read like Gladwell. His answers are not self-evident. There is no pithy “bon mot” that causes our neural tumblers to satisfyingly click into place. Watts’ explanations are complex, counter-intuitive, occasionally ambiguous and often non-conclusive – just like the world around us. As he explains his book “Everything is Obvious: *Once You Know the Answer”, it’s easy to look backwards to find causality. But it’s not always right.

Marketers love simplicity. We love laws. We love predictability. That’s why we love Gladwell. But in following this path of least resistance, we’re straying further and further from the real world.

Google’s New Brand Launch – Function Driving Form

What would happen if you created an advertising agency run by engineers?

You’d have Google. That’s what.

Last week, I was on the road. I went to Google something on my smartphone, and noticed the logo had changed. I thought at first it was a Doodle commemorating some famous typeface designer, so I didn’t spend too much time digging into it. But on the next day, when the new Google word mark was still there, I decided to see if this was deliberate and permanent. Sure enough, Google had quietly swapped out their brand identity. And they did it in classic Google style.

I wasn’t a fan – at first. But I was looking at it from a purely aesthetic perspective. I prefer classic serif faces. I love the elegance of the curvatures and strokes. Sans serif faces always seem to me to be trying too hard to be accessible. They’re like the puppies of the design world, constantly licking your face. Serif faces are like cats – stretching luxuriously and challenging you to love them on their terms.

But the more I thought – and read – about the branding change, the more I realized that the move was driven by function over form. Google was creating a visual and iconic language with the change. It was driven by the realities of maintaining an identity across a fragmentation of platforms and contexts. One can almost imagine the requirements document that had been put forth to the design team by the various Google engineers that decide these things – a logo that minimizes visual friction and cognitive load – scales well on all screens from nano to peta configurations (and eventually yocto to yotta)– acts as a visual wayfinder no matter where you are in the Google universe – and looks just a little whimsical (the last of these being a concession to the fine arts intern that was getting lattes and Red Bull for the group).

In the last month, Google has announced a massive amount of corporate change. Any other company would have taken the opportunity to mount a publicity event roughly the size of the Summer Olympics. But Google just quietly slipped these things into their weekly to do list. The logo dropped on a Tuesday. A Tuesday! Who the hell rebrands themselves on a Tuesday? There was no corporate push from Google other than a fairly muted blog post, but in researching this column, I found commentary on the change on pretty much every major media. And they weren’t just reporting the change. They were debating it, commenting on it, engaging in it. People gave a damn, either for or against.

That’s when I realized the significance of Google’s move. Because function was driving form – because engineers were dictating to designers – the branding had to be closer to its market. The rebranding was being done to make our lives easier. It wasn’t there to launch some misguided agency driven interpretation of an envisioned future, or slide Google into some strategic position in the marketplace. It was done because if wasn’t done, Google couldn’t do all the rest of the stuff it had to do. Google didn’t tell us what we should think of the move. They just did it and let us decide.

If function determines branding, then it’s living in the right place – the intersection between the market and the marketer. I’ve previously chastised Google for their lack of design thinking, but in this case, maybe they got it right. And maybe there’s a lesson there we all need to learn about the new rules of branding.

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.

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.

Deconstructing the Market of One

“So, what are you doing now?” My old college friend asked, right after he finished swearing at me because of my early retirement. He assumed I’d be doing something related to marketing.

“I’m starting a cycling tourism business.”

“A what…?”

“Cycling tours.”

“Do you know anything about cycling tours?”

“Not really.”

“Hmmm. Okay. Well, that’s good. It is good, isn’t it?”

“I guess so. We’ll see.”

Truth be told, I’m probably getting too much pleasure from these little flashes of cognitive dissonance that happen when I tell people about my current project. I like watching as they struggle to connect the dots. Maybe it’s because it gives me some comic relief from my own struggles to connect the dots. But I’m beginning to suspect there may by a silver lining in my ignorance. Because I know so little about this business, I’m also taking a different approach to the one aspect I should know something about – the marketing of it.

Connected People in NetworkI could have jumped in and started lining up search campaigns, digging into social media targeting and setting up email campaigns. But instead, I took a step back and looked at the most successful cycling tourism operation I know – the Hotel Belvedere in Riccione, Italy. It’s become a mecca for road cyclists. This year, TripAdvisor rated it as one of the top 20 hotels in the world, based on the rave reviews of it’s cycling clientele. If you’re a road cyclist, chances are pretty good that you’ve heard of the Hotel Belvedere. And if you have heard of it, chances are extremely good that you heard about it from a friend who also cycles. The Belvedere has built its substantial business largely on word of mouth.

We all know word of mouth is the most effective form of advertising. But why is it so effective? We typically assume it’s because the message is coming from an objective source that we trust. But I suspect there’s more to it than that. I think it’s because word of mouth is almost always delivered from one person to another. Word of mouth is messaging to a market of one.

There are some fundamental aspects of this that bear closer examination. Word of mouth usually occurs between friends, or, at the least, acquaintances. That means both parties have at least a passing understanding of each other. They know of common interests and personal likes and dislikes. This allows the message to be tailored for optimal reception. The most effective points of persuasion can be embellished and the least effective ones can be skimmed over. Messages are pre-filtered based on an implicit understanding of the audience.

Secondly, word of mouth advertising is based on a two-way conversation. The message evolves according to that conversation. Questions can be asked. Areas of interest can be explored more deeply. Concerns can be addressed. And, all along the way, both parties learn more about what a future engagement between the prospect and the product in question would look like.

I suspect the power of Word of Mouth comes not just in the objectivity of the sender of the message, but also in the medium in which the message is delivered (thank you Mr. McLuhan). And, if this is the case, then we should see how the strengths of that medium could be extended to other marketing efforts. We should deconstruct the advantages of targeting a Market of One.

The biggest hurdle seems to be the lack of mass normally associated with marketing. In my case, I’m actually planning for a slower approach to marketing, building allowances into the business plan for a marketing plan based on building engagements one at a time. If you’ve ever read Eric Ries’s excellent book, The Lean Start Up, you already know such things are possible. The advantage of the Market of One approach is that each encounter also provides invaluable market feedback, allowing to you to continually evolve your offering. You focus on going deep, rather than going wide. Each encounter gives you the opportunity to create a friendship.

Wrenching Changes in Ad Revenue Models

This week, I’ve talked about the importance of information foraging in understanding online behaviors and our interactions with content, the fact that we don’t really think our way through online interactions, but rather navigate through instinct and habit, and yesterday, how different intents lead to different levels of engagement with ads. All of this has been to show how Rupert Murdoch and other publishers are seriously off base in trying to put walls around their content to protect their obsolete business models.

The Planting of Intent

But, as comScore Chair Gian Fulgoni commented on yesterday’s post, does all this mean that display ads have no value? Yes, we agree, ads aligned with intent, such as search and relevant text ads, are the ideal, but something needs to plant that intent in the first place. Something needs to create awareness, which sparks need and kicks the brain into gear to go seek information. In Gian’s words:

there’s another issue that needs to be addressed: not all consumers search for information via an online search query. They’re just not all that rational. As a result, using display ads can get an advertiser a far higher reach against the target audience. And that higher reach can cause the total sales lift from a display campaign to rival that from search – even if the sales lift among those exposed is higher in the case of search.

There’s also another even more important point that we need to consider: brand building. That needs to occur even when the consumer isn’t foraging for information in support of an impending buying decision. Otherwise the value of an individual brand name isn’t going to be as meaningful to the consumer when he / she is in the shopping / buying mode. CPG manufacturers know this well. Every week, their special prices (“temporary price reductions”) are shown in the local newspaper feature ads. Placed by the retailer but funded by the manufacturer. The consumer can pick and choose the products they intend to buy and where they will buy them (and, incidentally, store loyalty is not the norm). This information – delivered by old media still, but, I would argue, aligned with consumers intent to shop and buy – determines, to a great extent, the store at which a consumer shops and the brands they buy in a particular week. But the important point is that the CPG manufacturers don’t just leave it with running these types of feature ads. They understand that they need to be supplemented with “branding” advertising that they run themselves because they need to make sure that their brand value has been firmly established in the mind of consumers before they compare prices across brands at the shopping / buying stage. This type of branding advertising is delivered via TV, print and radio – and increasingly today, via the Internet. It’s a critical part of brand marketing, and I think it should remain that way even in today’s Internet world, because — as one of our clients recently said to me — “God forbid that price becomes the only determinant of consumers’ brand choice!”

I voiced similar opinions in a previous post, No Search is an Island. Search itself has a naturally limited inventory. If no one is searching for a term, there is no inventory to buy. This lack of scale and reach has been the single biggest limiting factor in search marketing. If you suddenly cut out all awareness advertising, you’ll eventually find your available search inventory dwindling in lock step. Gian’s points are well taken, and indeed, one of the biggest questions for me is how much residual branding value is derived from an ad that is noticed but not clicked. As I said yesterday, I think it depends on how pressing the user’s intent is. If they’re browsing content, my suspicion is that the residual value would be higher than if they’re on a focused information finding mission.

Differing Shades of Gray

As is most transitions, the truth is there there is no absolute answer here. One is neither right or wrong, black or white. What is happening is a shift from one type of behavior to another. The answer is gray, and each day, that shade of gray is gradually shifting more from black to white. Murdoch won’t suddenly find his revenue model shutting off one day. But what will happen (and there are dozens of newspaper bankruptcies to support my case) is that the revenue model will gradually erode. In fact, it has been happening for some time. As we switch our behaviors from a destination information economy to a just-in-time information economy we’ll spend less time casually browsing content and more time taking brief forays through search to find specific pieces of information. And when we do so, all the challenges in ad engagement I addressed yesterday will have to be dealt with. Murdoch’s revenue model won’t shut off tomorrow, but it will gradually melt away to the point where it’s unable to support the business. That is why there’s more than a hint of desperation in his rantings. He knows the ship is sinking and he’s lashing out at what he thinks the cause is: Google. Unfortunately, he’s lashing out at the wrong cause. The real cause is his reader’s changing behaviour.

Brand Building = Fence Painting?

The other point I would make about brand building is this: Gian is right, we need some way to build brands in public consciousness. But even the options for building brand are rapidly shifting. It used to be that mass media was the most efficient choice. It offered reach and frequency. It was scalable and could be measured in GRPs. The market was treated like a fence to be painted. What was the most efficient way to apply as much paint to as much area as possible? The answer, the biggest possible spray gun. It was a pretty simple equation: Area of fence X density of paint = complete saturation. The spray gun didn’t even need to be that efficient at painting, we just had to keep pouring in more paint. Which was fine, as long as the fence was all in one place. But now, the fence is scattered over an impossibly large area. There are fragments spread everywhere. Suddenly, the spray gun isn’t working so well anymore. We need a new approach to brand building, and we’re beginning to explore new techniques, such as tapping into social networks and word-of-mouth. It seems in today’s world, Tom Sawyer had it right..the best way to paint a fence is to enlist an army of recruits to do it for you.

You Can’t Put a Wall Around News

The challenge advertisers face now is trying to find a way to reach an increasingly fragmented market who is spending less time with traditional media and are increasingly seeking information in bite-sized pieces, rather than sitting down to a full meal. And that’s a challenge that traditional media, represented by Rupert Murdoch, seem unable and unwilling to face. Their answer seems to be to rant, rave and hope the whole mess will go away. If people are increasingly seeking information through Google and not looking at my ads, fine, I’ll just lock out Google and lock in my audience by forcing them to pay. Murdoch is skiing down the wrong side of the adoption curve. And, as Danny Sullivan pointed out in his Search Engine Land post, you can no longer put a fence around information and keep it proprietary, especially in the news industry. Breaking stories will break in hundreds of ways online – through Twitter, networks, blogs and news aggregators. Even if the Wall Street Journal breaks a new story, they can’t control it. People don’t care about the source anymore, all they care about is the information. Even if Google is locked out of Murdoch’s content, it will find it somewhere else and will index it. And people will go where ever Google lets them go. For this reason, I disagree with Danny about the viability of a mutually exclusive relationship. Google doesn’t need the Wall Street Journal, but I do believe that the Wall Street Journal needs Google.

So what about the deal with Bing? Is that the answer to Murdoch’s woes? After all, you still get search visitors and you control your content. Again, for all the reasons I’ve stated over the past week, I don’t think this is any answer at all. It may look good on paper to two companies that are entrenched in command and control thinking, but it doesn’t reflect the real world at all. And if Murdoch would take a few minutes to glance at the latest search market share numbers, even he might see why it doesn’t make sense to kick the elephant out of bed to make way for the mouse (okay..perhaps a small dog).

In the final analysis, we have people changing their information consumption habits, which is giving advertising a wrenching kick right in its revenue model. The dramatic success of search was indicative of the power and speed of this behavioral change. The successful model of the future will understand and embrace the reality of information foraging and will leverage the changing habits of people. The search part, aligning with consumers when intent is present, is the easy part to work out. The challenging bit will be to swim upstream and figure out the pieces that have to be in place to spark intent and put the mental train in motion. My suspicion is that mass solutions will no longer work. We’ll have to figure out how to brand build one prospect at a time, one relationship at a time. None of this is good news for traditional publishers, but hey, if everyone won in evolution, the world would be a much more crowded place.