Strategic Efficiency

Over the last years accountability has been a dominant topic in most marketing discussions. But over the last 12 months of ever deteriorating economical situation the discussion around “Efficiency” has gotten more attention. The pressure to cut costs is as strong as rarely before. Therefore more and more marketing organizations, on the client as well as on the agency side, are discussing of how to reconfigure their marketing processes with one goal in mind: reducing costs. 

Most of these cost cutting activities are hastily designed and miss the bigger picture of redefining the business. In today’s NY Times Steve Lohr writes about the changes in management thinking and strategies in the lens of today’s crises:

“The sharp downturn will force companies to go beyond simple cost-cutting to take a hard look at the economics of their business. Most companies are actually bundles of three different businesses: Infrastructure management, product and service development and commercialization, and customer relations.” 

Translating these three areas of activities into the marketing field, we could conclude that we have the following three core domains of value generation in most communications centric marketing organizations:

• Production: Creating of all executional elements of marketing programs
  
• Idea and Strategy: Generating the right data driven and consumer-centric ideas
  
• Client Management: Managing all the relationships with clients and 3^rd parties.
  

It would be a good exercise for any marketer to dissect their organizations, processes, and value generation into these three components. It would enable them to find out how they can truly redefine of where they generate the real value of their organizations and where they are wasting time, money, and resources. It is not all about non-strategic cost cutting but about reconfiguring the business model of marketing around production, ideas and strategies, and client management. It is amazing of how many old bad behaviors und unnecessary tasks have survived over the last 20 good years within marketing. And most marketing organizations, both on the client and on the agency side, react by just reducing headcount without analyzing deeply of how they work. It’s time to redefine where and how a marketing organization can truly generate value.

Our business will continue to focus on accountability and how to build the most impactful marketing programs. But the need for efficient marketing will rather increase over the next years. And the so called good old times will not come back. This recession will continue to change dramatically our field. It’s a time of opportunity for marketers who are willing to be brutally honest with how and what they do.

Empirical emotions

Jonah Lehrer’s second book “How we decide” got rightfully a very good review in today’s New York Times. Lehrer is bringing a different perspective into the discussion of behavioral economists who have been successful in showing that the previous axiom of most economists “The human being makes rational decisions in any kind of economical context (e.g. buying, investing)” is wrong. He focuses on the driving forces of how we make decisions. 

His strongest points in the book are when he explains through a detailed description of the brain and dopamine neurons that “the activity of our dopamine neurons demonstrates that feelings aren’t simply reflections of hard-wired animal instincts…Instead, human emotions are rooted in the predictions of highly flexible brain cells, which are constantly adjusting their connections to reflect reality…Our emotions are deeply empirical.” 

Lehrer brings a fresh and interesting dimension of the old discussion between emotional and rational motivators in human beings. This has high relevance for designing and understanding any kind of marketing. Both, the behavioral economists and Lehrer’s school of thoughts demonstrate that there is no such clean distinction between the rational and the emotional. Both are much more interdependent and relying on each other than most of us had assumed. 

Lehrer’s insights deepen our knowledge of how great marketing could work in the intersection and tension between rational and emotional. Marketers will have a tougher time to say that a program should be just more rational or emotional. Most decisions of human beings are occurring in the grey area between both.

Raw data now

Last month Tim Berners-Lee, one of the leading pioneers in everything Internet, gave a great talk about the next stages of the Web, all centered on data. Now it’s available at Ted.com. 

His main points were:

• The first phase of the Web was publishing and sharing information and content, now we will start publishing and sharing data.
  
•  Transparency is just the first step of unlocking data and reframing its usage. But transparency by itself is not enough to change the dynamics of how we use data in a meaningful way.
  
• Putting linked data on the web is a critical aspect of the next stage of the web. Data becomes meaningful through its relationships to other data, by itself in isolation it is close to meaningless.
  
• Sharing raw data is more important than waiting to finalize a beautiful presentation layer for data. Too many companies and government institutions wait too long to publish their data because they have not yet finalized the last stages of visualizing and interpreting the raw data. Berners-Lee told the crowd to repeat the slogan: “Raw data now!”
  

 Once again Ted.com has shown to be a place for finding great presentations.

A billion people

In last week’s Fortune magazine Muhtar Kent from Coco-Cola made a very interesting observation, trying to explain his optimism despite all the brutally negative comments about our global economy. He says that one billion people will enter the middle class between now and 2020 and an additional one billion people will get urbanized. He quotes this fact as a tremendous positive impact that will accelerate our economy and global well being despite all the negative signs about today’s trouble. 

I haven’t been able to verify the fact but it sounds pretty reasonable. We tend to forget that over the last 20 years we were able to lower the percentage of extremely poor people on this planet (income of $1 per day) from over 30% to around 20%. 

Warren Buffet sounds similar optimistic. Over the last days he has said that 2009 and potentially 2010 will be difficult years but that his overall feeling is still optimistic about the economic future of the United States. He continues to believe that the US has the most enterprising and innovative culture in the world. The worst in our recession is definitely not yet over but it’s healthy to get for once in a while a broader perspective with a larger timeframe as Kent is trying to do.

The Private and the public

Lately the topic of “Privacy” has gotten again more attention. Facebook’s recently announced and then reversed change of its privacy policy has generated a lot of chatter in the blogosphere. It seems that there are two different points of views that prevail in this discussion. One is that personal information should be protected as much as possible since personal information belong to a private space of a person and should be protected by all means (dominant thought in most European countries). The other point of view is that industries should self regulate themselves to a large degree, since every other attempt of protecting privacy will hinder innovation and increase the level of unnecessary bureaucracy (dominant thought in the US). 

Some of the smarter discussions around this topic notice that there seems to be a significant difference between the attitude of younger and older people. Younger people seem to be much more comfortable in sharing personal information (think Facebook), whereas older people are much more reluctant to share this kind of information. The heated discussion seem to follow pretty strictly these different age groups. 

One of the smartest contribution to this topic is Kevin Kelly’stalk from 2007 where he outlines the argument that the core of the issue is not the questions of private versus public space. He observes/predicts a fundamental shift of the meaning and purpose of private and public space. Private becomes public when the benefit of transparency (transformation of the private into the public) outweighs the downside of entering the public. He argues that the ultimate development of one Internet machine in the cloud, containing all relevant public and personal information, will be an uniquely public space without the traditional borders between private and public. This virtual space will have conquered previously private defined areas, but with such tremendous benefits that there is no reason to complain. Transparency and its benefits will outweigh privacy concerns. 

One might disagree with Kevin Kelly but his reasoning demonstrates that the discussion of privacy is not as simple as it seems. It entails a more in-depth dialogue about the kind of technology based and enabled society we will be (or want to have) in ten or twenty years

What is the story with Microtransactions?

During the initial boom years of the Internet at the end of the last and beginning of this century Micro-Transactions were a big topic. Then this concept went asleep for a few years, now the iPhone, Kindle, and the discussion of how to save newspapers brought it back into the center of interesting business models. Maybe it’s just a coincidence that Amazon announced today its new Kindle application for the iPhone and iTouch? Or this announcement might even further heat up this discussion. 

There are a few reasons why microtransactions are getting more attention than a few years ago:

• The concept of “free economy” has taken strong place in today’s world in which huge players like Google establish themselves as major forces. Microtransactions are closer to a free economy than most other business models. Consumers got used to receive a lot of things for free which limited their willingness to buy larger items. But it will not hinder them to buy items for a small amount of money. The huge iTunes success with a $0.99 price tag per song versus widely available free music downloads proves the collaboration between business models centered around “free” and microtransactions.
  
• Today’s world of recession and consumer hesitation of buying large ticket items might further accelerate the acceptance of microtransactions. I know that a $13 price tag for a monthly Kindle subscription for a New York Times is not a true microtransaction but it is definitely a significant cost savings versus a $40 fee for a monthly paper-based home delivery. The borders between a traditional microtransaction and a just cost efficient monthly subscription fee might get more and more blurry.
  
• Even industries like computer games might move closer to a smaller transaction model instead of a sticker price of $40-$60 per game. Microtransactions will enable brands to move from a infrequent large transaction relationship to a more ongoing subscription like relationship. This could significantly enlarge a loyal and stable customer base for a lot brands. 

I don’t think that the verdict, success or failure, of business models around microtransactions is settled yet. It’s more likely that this concept will just enrich the current business universe with one more particular flavor. And this is an enjoyable one