Saturday, 26 June 2010

What is iPad?

Creating a new category can be hard. People know what a phone is so the fact that actually making calls from a smart phone is now a secondary function for many people doesn't stop it being marketed as a phone.

The iPad is different though.

It's not a phone, but is has 3G.
It's not a laptop, but it has a web browser.
It's not a TV but it plays and streams videos.
It's not a games machine, but it has thousands of games.

It's something new.

People will buy it because it looks beautiful, is intriguing and has an Apple badge. People will use it because it fills a need.

So as the owner of a new shiny iPad I was intrigued as to how I would use it.

What I've noticed is I use it differently to a laptop. Sure I web browse on it, check my email on it, access Facebook on it - even read my work email on it and review attached documents on it.

But I don't use it in the same way.

Whereas previously I'd have spent longer in my social networks on a laptop, I find the apps get a greater share of use on the iPad.

On the laptop, the browser was the centre of the entertainment, on the iPad though the machine itself is the entertainment. If my usage is in any way indicative of how others use it then I think this is important for brands and how information and access is provided for customers.

Brands are used to providing websites and micro sites for consumers and increasingly have been integrating into social networks like Facebook because, frankly, this is where consumers actually spend their time. However with the iPad, I think consumers will expect more interaction through the applications - providing quick, easy access to information.

When they want to track the status of an order, the number of points they've accumulated or even browse a product or reward catalogue, increasingly I think consumers will want these as applications. It's likely that as with all things, consumers will have limited space for individual brands in a given category, so those providing a great application experience will probably get increased loyalty and that front of page position.

One great example of this is Pizza Hut. They saw online orders increase exponentially when they introduced an iPhone app for ordering pizza. As with all pizza brands, they already had an online website, but the introduction of a specific application increased engagement within their key 18-34 demographic. Its popularity was confirmed with over 1m downloads and a number-two free app position.

Like the Pizza hut app though, applications available today tend to have been designed for the iPhone. It's about information on the move or in the moment. Accessing my loyalty card, reviewing my friends statuses, ordering pizza or searching for a new contact in LinkedIn.

The iPad though is different. It's a more sit back and browse experience - time is available and users will want experiences. They will want entertaining. Brands providing a compelling innovative experience will be rewarded with increased dwell time leading to greater engagement. The Financial Times application for example is a much more engaging experience on the iPad than the website version - it's tactile and draws you in.

In the end though what the iPad "is" may take a little more time to define and Apple is certainly hedging its bets with it's latest advert saying :-

What is iPad?
iPad is thin,
iPad is beautiful,
iPad goes anywhere,
and lasts all day,
there’s no right way,
or wrong way,
it’s crazy powerful,
it’s magical,
you already know how to use it,
it’s 200,000 apps and counting,
all the world’s websites in your hands,
it’s video, photos,
more books than you could read in a lifetime,
it’s already a revolution,
and it’s only just begun.

I think the last two lines sum it up perfectly - the iPad is a revolution that has only just begun and ultimately, what brands choose to do with it will be as interesting as the consumers.

Sunday, 20 June 2010

Aligning shareholders and customers - is it possible?


With the recent BP Gulf of Mexico oil leak there has been a lot of focus on the interests of shareholders over other stakeholders - with the US successfully putting pressure on the company to forgo paying dividends to shareholders until the current situation is resolved.

Whilst this was probably a wise decision, it does demonstrate how removed shareholders can be from the day to day running of a business and it's main stakeholder - the customer - creating potential issues from a misalignment with these two groups.

Typically a customer is looking for good customer service, competitive pricing and a great range of products. (plus wild life not covered in oil)

The shareholder is looking for a return on their investment - increasingly short-term - creating pressure to lower wages, increase margins and reduce product production costs.

However not all companies have this misalignment issue.

John Lewis for example is a very successful brand with a unique way of working.  It has brought the interests of the shareholders closer to those of the customers by making it's employees partners in the business.  Each employee has a share and a say in its success (with bonuses this year equivalent to almost 2 months salary).

Started by John Stedan Lewis, he believed:-

That it is "all wrong to have millionaires before you have ceased to have slums"; that "the dividends paid to some shareholders" for doing essentially nothing were obscene when "workers earn hardly more than a bare living"

I think John Lewis was inspired in this respect.  He wasn't saying equality for all - you could be a millionaire - but you don't do it at the expense of others, in this case the employees.

This alignment of stakeholders seems to work as well.

Not only is John Lewis able to boast double the average industry rate of employee retention, but in an article in the Guardian it discusses research by the Cass Business School showing that employee-owned businesses create jobs faster; are significantly more resilient in an economic downturn; deliver far better customer satisfaction; boast substantially higher value added per employee; and, depending on the sector and size of the business, can deliver markedly higher profits.

Not all companies can follow the John Lewis model however and so for more traditional companies there is still a misalignment issue whereby the focus on the needs of shareholders - often short-term - causes a company to make decisions which affect the product and service delivered to customers.

Wouldn't it be great though if these two groups could see eye to eye more.

Where for example the desire of a customer for good service is matched by a companies desire to deliver it by investing in their staff - providing great benefits which retain them (and their knowledge).

Where the customer is prepared to pay a fair price for a fair product - even if this means paying a little more.

Where the products sold are in the long term interests of the customer not the short term interest of a quick sale.

Achieving this though can be hard if dividends paid to some shareholders for doing essentially nothing are more important than the needs of customers who are the lifeblood of the company.  As Don Peppers and Martha Rogers said in an open letter to Wall Street.

The only thing in short supply these days? Customers. Customers are difficult to find and hard to keep. Without customers, you don't have a business. You have a hobby.

So here's a radical thought - why not combine these potentially opposing groups by making customers shareholders - rewarding them for their loyalty with an increased stake in the company.  Not only would this give customers more of a voice but is also more likely to make them loyal.

Okay, so in reality this is not such a radical thought - co-opertatives have been doing this since 1844 when the Rochdale Partners first started paying a patronage dividend to customers.  This has continued into the modern day with the Co-operative Group paying its members a share of profits worth £50.4m this year - up from £38.8m in 2009 and £19.6m in 2008 - and in the middle of one of the worst recession in decades.

As Patrick Allen, Director of Marketing at The Co-operative Group says:-

It is only right that our members, who ultimately own and control the business, share in our success

It's interesting though that it's not just these long established companies like John Lewis or the Co-Op that are thinking in this way - looking to engage their stakeholders directly within the business.

Recently there have been other examples.

Hotel Chocolat is reported to be seeking to raise £5m to fund capital projects by issuing "chocolate" bonds.  Investors will be able to purchase either £2,000 or £4,000 bonds with the investment returned after 3 years.  However instead of interest payments, the investors will receive value in kind in the form of chocolate boxes - the value of which is reckoned to provide a net dividend return of 5.38%.  This will obviously create a closer engagement between the investor and the product and in all likelihood will recruit investment and hence shareholders from an existing loyal customer base.

Internet food delivery retail Ocado announced recently that it was looking to float the company next month and was offering existing customers the chance to purchase share in the company at the same rate as institutional investors.  Aiming it at existing, loyal customers, to be eligible you must have spent over £300 since 1st January.

Has the public mood changed since the collapse in the financial markets?  Do they want greater control and a closer relationship to the organisations they are loyal to?

It will be interesting to see if the public embrace these offerings - reversing what has been previously a decline in customer owned organisations such as building societies.

I do however think these are really innovative ways of engaging customers directly in the business and I also think there is a lot of scope for creating a long term loyalty programme along these lines which truly rewards customers for their patronage, by giving them an increasing share of the business and with it an increasing share of the profits they generate.

Not by doing essentially nothing - but by doing what every business needs - just being a good, loyal customer.


Photo credit kayak.wa

Saturday, 5 June 2010

Is Google about to pull a Kansas City Shuffle on Murdoch?


Do we purchase from a brand because they have the products we want or do we buy the products because we frequent the brand?

When surveyed, the number one reason for using many brands centres around rational reasons such as convenience - typically location in the case of a retailer and price.  However, if all brands are in the same location and stock the same kinds of product at the same prices, then what drives loyalty between one brand or another?

Well this is probably a question many TV broadcasters have asked themselves.

With television, the viewer essentially has one location in which to consume many different brands - whether thats ITV, BBC, E4, etc.  Each brand fighting for consumer loyalty by providing relevant content for their target audience.

There is really no reason to be loyal to a given TV channel when you can simply change over at the click of a button - but with an increasing number of channels, many viewers will have a small number that they "scan" when looking for content, knowing that these channels typically have something of interest to offer.

Writing in American Demographics back in 1998, Catherine McGrath pointed out that:-

Fifty years ago, households devoted nearly 12 hours a week to each channel viewed. Today, households spend a mere 4 hours a week per channel.

Time has moved on however and now it's not just more TV channels competing for attention, but also other media via the internet.  Recent Nielsen research showed that an increasing number of people are using the internet at the same time as watching TV, reporting:-

Simultaneous use of the Internet while watching TV reached three and a half hours a month, up 35% from the previous year. Nearly 60% of TV viewers now use the Internet once a month while also watching TV

But ultimately, what is the purpose of a modern TV channel?

Outside of any regulatory requirements in terms of programming, is it simply a way of aggregating content that has some link - whether this is specific like Travel, Shopping or Comedy channels or a wider lifestyle segment like Entertainment or Family channels?

If in essence a TV channel is simply a way to monetise content and you provide the right content that attracts viewers then this will be more likely to attract advertisers and with it revenue.

So the better you can make that content fit a target audience, the more likely you are to get long term loyalty or brand preference and more stable viewing figures.  This rationale results in more channels catering to an increasingly targeted and niche audience - all chasing after a share of that ad revenue.

At an estimated $70bn dollars of advertising revenue within the US alone and over 4bn TV viewers worldwide, that's a number worth chasing.

However, if this is the case and a channel is more focused on content aggregation than content creation, then their days may be numbered - there could be a new sheriff in town who's looking to re-write the rules.

With Google's recent announcement of Google TV, the need for a channel to aggregate content, to sign-post it for viewers may disappear.  Google aims to make it as easy to find a programme to watch on TV as it is to find something on the web - using search.

In fact, it will be as easy to find and consume the TV show you want as it currently is to find and consume the news content you want - something which has already been making the headlines, with Rupert Murdoch being very vocal about what he sees as the damage that Google is doing to the printed media industry, saying:-

We are going to stop people like Google from taking stories for nothing.  They take [news content] for nothing. They have got this very clever business model.

That however may be the least of his worries if Google pulls this off - while he's focusing on saving the printed media - and looking left - Google is about to move right and launch an attack on that best loved media channel - and Murdoch stronghold - the TV.

This isn't just a technical innovation like streaming content or the BBC iPlayer - it  could also fundamentally change the relationship between content creators, broadcaster and the viewers.

As Murdoch says, Google has a very clever business model and you can imagine they also have a very clever one behind this innovation.  Famous for being free at the point of consumption, whether its search, mapping or email, they make their money on personalised, targeted advertising - and they'll have their eye on a large slice of that $70bn in ad revenue.

For TV broadcasters to survive they are going to have to do more than just aggregate and sign-post content.  They'll need to start building relationships with consumers.

There are great examples of this already - whether its Film4 who have a strong brand spanning from film production to distribution or Hallmark who have a "loyalty lounge" which provides viewers with access to content, forums and competitions - creating a social channel around a TV channel.

The printed media have only just realised that they need to build stronger relationships with their consumers and brands such as the Telegraph are already experimenting with programmes to do this.  The jury is still out on whether these will work and whether this style of programme is ultimately the right approach.

However, if TV broadcasters don't build relationships now you can bet Google will and while broadcasters are still looking left (or worse simply navel gazing), Google will pull a Kansas City Shuffle and swoop in from the right - swiping a large share of the loot at the same time.