Tuesday, August 26, 2008

Olympic Games - the value of a viewer

This week we have seen a lot of articles about NBC’s huge success with the Olympic Games. It’s a bit difficult to get all the final and consistent numbers but it seems that NBC have had close to 300 million TV viewers and almost 100 Million Online viewers for their Olympic coverage. In total NBC got $1 Billion TV Advertising revenue but only a bit over $10million Online Revenue. So, what does this mean in terms of monetized viewers in the TV versus Online world? NBC got $3 for a TV viewer while it received only $0.1 for an Online viewer, that is a 30:1 value ratio.

Why? Is the TV viewer 30 times more profitable for the advertiser? Is advertising to the TV viewer so much more impactful? No, the economic value difference can’t be explained by the different potential impact for advertisers but by the simple economic balance between demand and supply. There is a much tighter relationship between demand for TV spots and supply than with the demand and supply for Online advertising. Why? Because marketers still haven’t figured out the true value of viewers in both these channels, so the majority sticks with what they are used to. And this is TV. And it might get them some tickets from NBC or the media companies to some of the more interesting Olympic events. But to be fair we can't forget that there is objectively a much higher supply for Online space than for TV spots. Both these factors drive the tremendous value difference, not any ROI driven intelligence.

Monday, August 25, 2008

Traffic explained

There have been lately quite a few books that try to explain human behavior not as an expression of rational decisions but as a reflection of irrational but explainable patterns and decisions (e.g. “Nudge”, “Predictably Irrational”).

The book “Traffic” by Tom Vanderbilt falls into a similar category, he tries to explain human behavior around the phenomena of traffic. One of my favorite examples is the empirically derived observation that vehicles that see a cyclists wearing a helmet tend to pass closer than we they see a cyclist without a helmet. There are a few potential explanations:
  • Passing drivers may have read the helmet as a sign that there as less risk for the cyclist if they hit him
  • The helmet might have dehumanized the rider
  • Drivers read the helmet as a symbol of a more capable and predictable cyclist

Key Insight is that the helmet changed the behavior of passing drivers. What I love about this is that the scientist and psychologist Ian Walker set up this research project by mounting his Trek bicycle with an ultrasonic distance sensor and drove the same streets with different distances from the edge of the road, sometimes even dressed as a woman. He pursued all this effort to find out how his behavior and “personality” changed the behavior of passing drivers.

This example just shows again that we marketers are still not innovative enough in setting up consumer studies to truly understand consumer behavior. Innovative scientists seem to be much more creative than most researchers in the marketing discipline. Vanderbilt’s book includes many more such fascinating research projects. It's worthwhile to read and it might motivate some of us to develop more interesting marketing research projects.

Tuesday, August 19, 2008

Austria without Mozart or Sacher

The first stop of a brief trip through Europe in Vienna showed me once more that marketing wisdoms, challenges, and relevant strategies continue to differ strongly from country to country. It seems that smaller countries like Austria with approximately 8 million inhabitants remain in a different stage of our marketing disciplines:

  • The media fragmentation is still not as wide spread as in larger countries like UK or the US. It is still possible to reach 50% of the national consumer audience with one newspaper or one TV channel
  • Austrian Marketers have not yet shifted as many marketing dollars to Online Marketing as countries like UK where brands spend more money on interactive solutions than on television. Currently only 3% of Austrian marketing spend is being invested Online.
  • Geographic marketing intelligence and clustering is not as relevant as in larger countries due to a much more homogenous and less diverse geographic composition.

Some of the Austrian marketers that I met mentioned that their country continues to lag by 3-5 years in comparison to the more marketing pioneers countries like the US or UK (excluding mobile marketing). But smaller countries like Austria remain hotbeds for very creative solutions that deserve strongly our attention.

US headquartered marketing services firms and US centric brands can’t forget that any marketing solution needs to incorporate country specifics, especially in a more diverse and difficult to assess global landscape where countries can be on different marketing maturity cycles. India might lag in a lot of areas but its consumers are more centered and dependent on mobile than the US consumer, Austria might be slow on the Media Fragmentation curve but it has some very innovative retail solutions and customer relationship programs that are world class.

The world might be flat but there are still a lot of different colors and shapes of flatness.

Thursday, August 14, 2008

Liberal arts and Marketing in China

This week Saul Gitlin, an intimate expert of the Chinese marketing world, made a very interesting observation when we talked about the state of the marketing discipline in China. He outlined how the low value and poor perception of studying liberal arts in China might contribute to the slower growth of marketing in this large country. This lack of excitement for liberal arts amongst young people could significantly decrease the pool of talented and well trained creative thinkers that the marketing discipline needs so desperate.

Saul and I discussed a few strong similarities between liberal arts and marketing:
  • Absorbing written words (Books or Consumer research) to build a meaningful interpretation
  • The interlude between intense research and free flowing brainstorming to come up either with an interesting academic hypothesis or with a compelling strategic idea
  • Quick understanding of different universes, either the worlds of literary figures or of real consumers
  • Importance of intellectual curiosity to be successful in either disciplines

I will try to find some more concrete number over the next weeks to find a number correlation (percentage of beginning liberal arts student in China versus other countries as part of all beginning students) that might help us to validate Saul’s and my thinking.

Tuesday, August 12, 2008

Marketing Industry Score

Over the last week I have probably watched too much Olympics but I got fascinated by a New York Times Analysis of how much the swimming world records have improved over the last decade, in absolute reductions of seconds as well as percentage wise. It shows a dramatic improvement in speed cause by various factors, including improved pool design and faster swimsuits.

It occurred to me that we have nothing similar in our industry, nothing to truly understand if our marketing work has become better, more efficient, or more effective, just anything that could compare work over time. Is it only because the results of our work are tough to quantify? Or is it because our industry has such a strong aversion against measuring itself? Maybe it’s time to put the top 10 marketing indices and scores together and see how we have performed over the last 20 years. And at least we don’t have to wear swim suits that take almost 30 minutes to get into…

Saturday, August 09, 2008

Marketing and applied statistics

Today’s New York Times front page article about the attempt of various economists to predict the level of over or undervaluation of homes in different markets brings up a good questions: Is the marketing discipline just behind and resistant in accepting and using statistical methodologies to understand the inner-workings of its discipline or is the impact of marketing just more complex and difficult than understanding the value of real estate properties?

Over the last years I have seen more senior marketing executives acknowledge the importance of statistics and data modeling work but for a majority of them it’s still very difficult to grasp the application of analytics to their daily work with brands, clients, and marketing challenges.

It’s a long road to travel for our marketing discipline while Google and others are already building much faster roads. And they will charge us for traveling on it…

Wednesday, August 06, 2008

Airline Marketing as true Service?

There have been written enough pieces about the dismal state of the North American Airline industry, from unacceptable service to never ending delays or just pure chaos at check in, boarding, or luggage claim. I don’t want to tell my own personal story of distress or disappointment but rather raise the question, how should anyone market an US airline in today’s world (let’s exclude Southwest and JetBlue who are the outliers in this industry). An industry with extremely low expectations by its consumers and an ever increasing and ongoing passenger frustration?

There seem to be three conceptual options that airlines could follow in their communication approach:
  • Ignore the reality of today’s travelers and just continue to communicate the traditional messages of travel excitement, supposedly great service, and some either non-existing or irrelevant service upgrades
  • Get straight to the point, be honest about all current shortcomings (the average age of a US airline plane is more than 17 years old and will have more technical problems than a new airplane), admit mistakes and be totally transparent and clear about what the airline is planning to do to address at least some of the problems
  • Don’t market anymore at all in any mass media and reinvest all marketing communication dollars into service improvements either pre-flight or during the flight.

Interestingly enough all airlines are following option 1, no one has the courage to either pursue the full honest approach of option 2 or the marketing budget reallocation strategy of option 3. I think it’s very worthwhile to consider a combination of option 2 and 3. Then an airline would be brutally honest about the current state and the planned improvements and use cost efficient online communication (emails and corporate blogs) to spread the word to its core audience. I think airline marketers forget too often that the most valuable and profitable travelers are reading the business sections of newspapers and portals and are well aware of the real problems. They don’t want to be communicated to but they want to be informed. With this strategy marketing would become a much more efficient and honest information application without spin and would be transformed into a true service function for travelers. What a change.

It always amazes me how little courage we witness in our marketing industry, even in categories that are under tremendous pressure and fight for survival.

Monday, August 04, 2008

Sales signs everywhere

Over the week-end I went leisurely strolling around in a few of Chicago’s main shopping areas, from downtown to Lincoln Park to Lake View. I haven’t done this in quite a while, but I was able to make one interesting observation:

Every store has a sales sign at the front of its store, either in the window display ore on standing poles in front of the door or just anywhere where walking traffic could see it. The interesting fact is that there is no correlation between these sales signs and actual sales occurring in the stores. There is not even a meaningful connection between the size or the power of the traffic enticing message with the actual size of the sales (measured either in percentages of items on sale or the size of price reductions on a few items). In some of the store there we not even one single item on sale. After further reviewing the sales signs in front of the store I was able to decipher that the sales sign referred to an upcoming sales sign in a few weeks (e.g. Northface).

It shouldn’t surprise us that store managers are putting up sales signs to entice walking traffic to enter the store, especially in today’s times of a recession. I would love to see a research project that measures the impact of these sales signs on increased traffic (versus stores without a sales sign) and its impact on changed basket mix of consumers who enter a store with a sales sign (versus stores without a sales sign). I believe that for some stores the increased traffic due to sales sign is balanced out due to the negative impact of shopping basket value and margin. Consumers who enter a store with a sales sign expect to primarily buy items on sales and not regular priced items.

I think this could be a fascinating data capture and analytical project with clear implications of how to best use sales signs in trade areas with heavy walking traffic. Now I just have to find a retailer who would give green light to such a project…

Saturday, August 02, 2008

Insight about Insights

In last week’s “The New Yorker” Jonah Lehrer has a fascinating article about “Why good ideas come us when they do?”. His key finding is that one needs to alternate between very strong concentration of solving a particular problem and forgetting about the problem. Most good ideas and insights are occurring when one least expect it, it’s happening when you distract yourself away from the problem after spending sufficient time on trying to solve it. It’s the right balance between conscious hard work and giving freedom and space to the unconscious to come up with ideas that are beyond the conscious limits of one’s mind.

I am curious how many marketing organizations and marketer try to create a work environment that actually leverages this insight of how create insights. I am sure that many.