Atomic Direct, LTD

For some time, marketing has been dominated by the theory that the way to success is getting your most loyal consumers to buy more. As a result, it’s become popular for marketing “guru”s to declare the end of mass marketing.

There’s just one problem: it’s not true. The best discussion of this reality that I’ve seen recently is found in Byron Sharp’s book “How Brands Grow” (2010, Oxford). Let me share a few of the realities I found in this excellent, and challenging, read.

Remember the “80/20″ Rule? It’s Wrong. In the 1930′s an Italian economist named Pareto suggested that 80% of a country’s wealth come from 20% of its citizens. Since then, this suggestion has been applied where it shouldn’t and been turned into a “rule”. (One such rule might be that “80% of manufacturing errors come from 20% of the process” – something that is sometimes true.)

In marketing, the 80/20 rule has come to claim that 80% of a company’s sales come from 20% of its consumers. Marketers use this to claim that the fastest way to increase profit is to convince the 20% to buy more – an idea that glorifies niche marketing and loyalty programs.

There Are Fundamental Problems With the 80/20 Rule.

Sharp analyzed this rule with hard marketing numbers from a large number of client campaigns. Let me note three findings:

The most loyal 20% of consumers drive only 50% of purchases – not 80.

The top 20% are the most expensive (in marketing dollars) way to increase sales. I’ve found they are often fully satisfied and don’t want/need more from your brand.

Today’s loyal are tomorrow’s disloyal. Sharp documents the human animal’s polygamous brand tendencies – making purchases from a wide range of brands. One result of brand polygamy is that a very large number of today’s loyal customers will be less loyal in the future.

Net out: Loyalists may just be the worst place to invest a large portion of your communication dollars.

So How Do Big Brands Succeed? Sharp suggests part of the answer is in the Double Jeopardy Law:

“Small brands have far fewer customers and those customers buy slightly less often.”

So brands that grow big do so by reaching out and expanding their base of consumers. For a taste of what Sharp has to say, see his presentation in this Ted video.

Sharp points to Apple as an example. Tech competitors blame Apple success on fanboys. But Apple has become big because my neighbors have iPods, iPhones and now iMacs. (Just look at the vast amount of Apple hardware on airplanes owned by people you’d never expect to buy Apple.)

This is true of brands like Nike and even, I suspect a brand who makes loyalty the centerpiece of their marketing like Nordstrom. In a category close to my heart, it’s true for DeWalt drills. Yes, a lot of contractors buy them. But contractor sales don’t make DeWalt huge. DeWalt is huge because suburban garages are filled with DeWalt drills.

Doesn’t Social Media Show Niche Marketing is More Powerful? Not when you analyze the total communication picture around social media.

“New media success stories” are mostly mass media success stories given additional legs in social media. How so? In most cases, new media’s role is to create enough awareness to get mass media outlets to deliver coverage in TV, print, newspaper, radio, etc… Then, and only then, does the big impact start.

For two examples look at Susan Boyle’s record sales or Lady Gaga’s massive YouTube numbers – both are the result of traditional media exposure. (Just notice how much print space Gaga gets.)

And the recent Old Spice campaign generated untold millions of social media interactions – but only after a massive TV campaign that probably spent over $10m..

It’s time for agencies to return mass marketing to it’s appropriate place. Byron Sharp’s analysis makes it clear that the one thing your brand cannot thrive without is Mass Marketing. And mass marketing is the one thing you can never do with the web or other new media.

So where does that lead us? Back to marketing mixes where mass media build the foundation and where niche media (like new media) just sweeten the deal in a smaller role.

Copyright 2011 – Doug Garnett – All Rights Reserved

My family upgraded to a beautiful new 55″ flatscreen, moved over our Comcast and TiVO, then added an AppleTV and upgraded our sound system. And, so, in one grand swoop, we became a modern TV family.

How is this new world? No longer needing to go to the video store for old movies is quite nice. But prepare yourself for four types of chaos.

Content Chaos

You’d think that a monthly Netflix subscription would deliver everything we need. But Netflix streaming has massive content holes. Even worse, there’s no way to predict whether the content you want will be available or not. Besides, Netflix only has old stuff. Old movies. Old reruns. And Disney isn’t on Netflix – at all.

So how about Hulu? The Blazer’s playoff game bumped 30 Rock. Of course, this season isn’t on Netflix. I find it on Hulu – the paid version (cha ching). We have a monthly now, but we really don’t need Hulu. Our cable/DVR combo is much better except for those few times there’s a problem with the cable feed.

Ah, but what about new movies? They are not available on Netflix. That means we have to either seek them at Redbox, TiVO them from the HBO feed, or pay through Comcast OnDemand or AppleTV. Hmmm, $4 a pop.

So we thought we’d figured a lot out. But then the Bin Laden raid pre-empted The Amazing Race. But who wants to miss that episode. So, we dashed off into Digital TV. Where to look? Netflix? Nope. AppleTV? Nope. Hulu? Nope. CBS’ website? Not on my iPad. Ah, its on the website if we choose to access it with my wife’s laptop. And as long as we wait some period of time after it was supposed to have aired.

Format Chaos

Before content chaos we confronted format chaos. These devices bombarded us with format options. HDMi or RGB? Svideo or RCA? 720p or 1070p? HD or SD? And each device (except AppleTV) has a huge range of input or output settings. Which one’s work well together? My former network manager wife shook her head as we tried to sort out the alphabet soup.

Remote Chaos

After basic setup, we entered “The Remote Zone”. Our TV is surrounded by 5 devices – each with it’s own unique remote. Then, I remembered a programmable universal remote I’d been given. About 3 days of tinkering later and one remote carried the whole system. Whew.

Reliability Chaos

So we get this all cobbled together… And then there’s an unreliable signal. With Netflix at least once or twice per movie or rerun we lose lip synch and have to restart. At other times Netflix stops in its tracks and pops us out. This didn’t happen wtih – what’s do you call that not so old way – cable?

Not Ready For Consumers

This world is far, far from a consumer quality world. Why?

Too complicated. You REALLY have to want to watch something to figure it out. (And, no, this won’t be fixed by making it 100′s of times more complicated with Google searching on the web.)

It is waaay too expensive. 10 monthly bucks here and there. Then little bits of $4 to get one movie at a time. So right now we are probably paying $30 to $40 per month over our cable bill. But Cable offers more and is easier to use.

With all this in place, we still mostly watch Cable using our DVR – a simple system that is cheaper and delivers the vast majority of what we want.

My kids watch the most on these digital gizmos. It seems to fit their developmental stage interest in watching the same basic program over and over.

And yet, have the digerati claimed about all this digital so-called freedom? That it’s simple and less expensive. NOT IN MY EXPERIENCE!!!

A Call To Action: Fix It

It’s true – none of this was possible 6 years ago. But that’s not the point.

Right now Netflix is real, but Hulu and most of the other options are toys. For them to move beyond this stage, they must rise to mass consumer quality. Consumers won’t pay extra monthly fees without getting far more in a far easier format.

The way things are going I expect we are entering a period with 5 years of bankruptcies, sales, mergers, and acquisitions. Then, maybe someone will bring it together under one roof.

Who might that be? Love ‘em or hate ‘em, my guess is that it’s the cable providers (e.g. Comcast) who are going to create a unified system. And given their track record for making easy-to-use technology, that should probably concern us all.

Copyright 2011 – Doug Garnett – All Rights Reserved

The advertising and marketing industry has let the term “Brand Advertising” come to mean “the only advertising that builds brand”.

This is VERY wrong. All advertising will build brand just as all marketing efforts need to build brand. Even worse, depending on your business needs, the emotional advertising specifically called “brand advertising” may be exactly the worst type of advertising to use.

So how do you determine if its right for you? One good starting point is the way brand advertising works financially.

Key Truth About Brand Advertising. The profit from today’s investment in brand advertising returns to you over a 5 to 10 year period. For massive multi-nationals, this may be just fine and brand advertising is often a smart choice. But most advertising clients can’t afford to spend millions today then wait for the profit years later.

Advertising Clients Should Be Classified According To Their ROI Horizon. Tonight in my Advertising Campaigns class I suggested we look at companies according to the point in time when they need profit from their advertising. Here are the three categories I gave them:

Short-term: Those companies who need advertising to pay for itself the first year. (These are often companies with less than $200M in annual revenue.)

Mid-Term: Those companies who need advertising to pay for itself within two to four years.

Long-Term: Those who can invest today without breaking even for 5 to 10 years.

Each Classification of Client Needs a Different Type of Advertising. I suppose there are some who would claim that if the client can’t wait 5 years, they shouldn’t be advertising. But that isn’t true and my agency has a bevy of case studies to prove it.

What was exciting tonight was that after laying out these categories, my undergraduate students had very clear ideas about how they would change advertising content if they were working for a short-term ROI client. Four stood out:

They needed the strategic goals to change to reflect this ROI horizon. (Strategic thinking that made this part-time professor happy.)

They suggested that the advertising required a stronger call-to-action – reflecting the truth that when you ask consumers to take action, they will.

They would create more product-oriented advertising – because product drives immediate action better than broad brand promises.

And they suggested that shorter term ROI clients would benefit from choosing media that is more promotional in nature.

And all this came up in a 15 minute discussion. Imagine the insights we’d get if the advertising business turned its full brilliance to this challenge.

ROI Horizon Should Start All Advertising Discussions. I’m sure I’ll get a few comments saying “it’s always in the brief”. But I don’t agree. Briefs often describe goals with words that, when you drill down, say little more than “do good things”.

Every advertising campaign should start with serious discussion of client needs, how they will measure ROI, and how much risk they can take before learning that the ROI will materialize. Unfortunately, it’s an exceptionally rare agency that knows how analyze a client situation this way then execute an advertising campaign that returns the right business result.

Education is a big part of the problem. Our Portland State advertising program is, fortunately, part of the Business School. But in today’s agency world, too many people (whether AE’s from J-school or creative’s from portfolio school) have essentially art or social science educations and are intimidated by business analysis. (In fact, some agencies reject applicants just because they have business training.)

Regardless, let me suggest that the next time your agency defaults to “brand advertising”, it should be your job to ask if that’s a good idea. And then open that discussion to all ranges of advertising and the business results each delivers.

All advertising builds brand. The key is to create advertising that delivers the business results you need while building brand.

Copyright 2011 – Doug Garnett – All Rights Reserved

Here’s a surprise. Facebook hired a PR agency, Burson-Marsteller, to smear Google… Oh wait. Facebook says they were just placing unflattering articles about Google privacy concerns. And there’s a tiny bit of outrage.

Why is it only a tiny bit given the depth of the scandal? Perhaps because deception is fundamental to the new media business. Oops. Did I say “deception”. That word is a bit loaded because deception is in the eye of the beholder.

And, that’s why it’s so effective. There are always excuses where a company can claim a deception is purely accidental or simply the result of good marketing (unless you have the Facebook emails).

Mark Twain knew deception’s power: “A lie can travel halfway around the world while the truth is putting on its shoes.” Today, new media propels the lies through 10 to 20 full earth orbits before the truth touches its laces.

And it’s exactly the new media investment ecosystem that knows best how to leverage the ability to deceive with…new media. Although told in highly creative forms, there’s really only one lie that new media teams use: new media will kill old media.

They suggest it everywhere and have caused it to become so prevalent in the Bay Area that even Farhad Manjoo couldn’t avoid passing along this lie in his book “True Enough” – after he had spent 200 perceptive pages looking at how we mislead ourselves.

I’m going to continue looking at this in a post that’s a bit long for my taste. But this is a critically important issue.

The most concerning new media lies are told with research. Using research in PR takes advantage of a blind spot in media.

Most journalists have at best a cursory familiarity with research. As a result, they don’t feel qualified to evaluate whether research is valid. So when a company makes a research based claim journalists feel obligated to cover it and will always state the theory that “it’s backed up with research” – especially if there are statistical error limits reported. (Those +/-3% numbers make anything believable.)

Fortunately, in politics Nate Silver at fivethirtyeight.com does excellent work commenting on misleading, skewing, and other deceptions with research. There is no equivalent in media and advertising. But Byron Sharp’s blog is beginning to challenge flakey advertising research.

This is a good development because research manipulation preys on the market at a vulnerable point – while they are attempting to rely on data to accurately understand rapidly evolving market forces.

Unfortunately there is a disaffected group who want nothing more than to throw out the “old way” and replace it with something new. Groups like this drink deeply from deceptive research because they aren’t really interested in truth – just finding ways to justify their ideas.

Create the Research Answer You Want. There are a wide range of options that create mis-leading research. One particularly insidious ploy works like this:

- Articles are placed that claim something (e.g. “TV is dying”).

- Research is done among the people who have read those articles and, quite surprisingly, this research finds those people “believe” TV is dying.

- The research is put out and it will show things like 90% of marketers “believe they should shift” their money out of TV.

Notice what is missing: reality. In fact, the key to brilliant use of this research is to ask marketer’s opinions and avoid tracking facts media facts (ad spending, ad effectiveness, reader engagement, etc…).

Those of us in the TV business know this work well because this type of research deception has been used against TV regularly. And, here, opinion doesn’t reflect reality. TV has been attacked since the 1980s when VCRs were going to kill it — but didn’t. And in this decade with the theory that DVRs would kill TV ads — but solid, trustworthy research shows that DVRs not only haven’t hurt advertising, DVR’s seem to have made it more effective.

Yet despite these truths, research lies support ad agencies who quite often claim TV is a dying medium. Fortunately for our economy, it’s not.

Twitter was a particular beneficiary of this type of work. It wasn’t until earlier this year we found out that Twitter reaches an exceptionally tiny portion of the US population. But the press hype created a marketing opinion shift that implied Twitter was much more significant than it really was.

Bandwagon Research. Another deception through research leverages the human urge to become one of the popular crowd and may have played an important part in Republican party actions that led to the election of Scott Brown to the Senate from Massachusetts.

I don’t know what actually happened in Massachusetts. But let’s take the hypothetical case and assume a candidate is behind, but not too far. A survey is crafted which is designed to show that the candidate is leading even though they aren’t (it’s easy to create this type of research).

Carefully timing the release of this survey will get independents and moderates to switch their votes and jump on the bandwagon. This can cause the election to swing and eliminate any opportunity for an opponent to respond.

This research is always “statistically” valid – but statistical validity doesn’t equal truth. Statistics in research never look at the validity of the questions being asked and can’t detect manipulation through cleverly wording the questions.

As one example of misleading with research, consider this study: http://www.strongmail.com/pdf/SM_Trends2011.pdf

Note that this study compares “advertising” with email. Wow. That’s like comparing answers between “will your company increase R&D spending?” and “will your company buy more binder clips?”

Then it reports headlines showing exceptional email strength. Except the fundamental comparison is flawed. And even if it weren’t flawed, the headline is meaningless when you really think about it. The 25% who will increase advertising will mean hundreds of times more money than the 65% who will increase email spending. The business opportunity is with advertising and not email.

But media won’t walk away from a study like this – or the headlines it generates. Instead they’ll use it to imply new media success and old media failure.

Study by study, the deception is nothing to worry about. But multiply this one study by the thousands more just like it and you have an entire industry jumping into wasting client money. And all the while, this research use is embraced by a group of people hungry to build agency bookings, make billions on IPO’s, drive their careers to new heights or become pundits.

As long as I’m on a roll,another deceptive practice in new media is the “look how big” comparison. Here’s one I heard at a Google presentation:

“Lady Gaga posted a music video and got 95 million views in a year. Just think about it, only 500,000 people are watching MTV.”

Let’s look at this. Lady Gaga is 1 in a million. And, her numbers ARE big – but they’re driven to those heights because of nearly non-stop coverage in the…wait for it…traditional media.

Still, let’s consider the MTV comparison. The Google presenter implied the internet is more powerful than TV. Bull.

In terms of viewer minutes, Lady Gaga’s videos got about 385 million viewer minutes in a year. In only a single day, MTV accumulates nearly twice as many viewer minutes. And in a year, they accumulate 700 times more. Note also that Gaga is the extreme example driven by excessive traditional media.

Consider also that MTV’s viewer minutes include advertising which means the ability to charge hundreds of millions of dollars each year for those viewings. Lady Gaga’s economic power? Hard to calculate. But, nowhere near the economic power of MTV.

And that means that we learn absolutely nothing about the value of online video from this example. But that’s not what our Googler said.

A Rampant Problem. I cannot comment fully on the intent of the people behind all this mis-leading research. A portion of the research error comes because many new media advocates lack the training to think clearly about research.

Regardless of intent, it is sad that the majority of media surveys mis-lead in ways like these. Certainly the media world is changing and that means we desperately need good research that shows the truth about this change. Too bad that the rarest of rarities is quality research about new media.

Copyright 2011 – Doug Garnett – All Rights Reserved

A recent report looks at all Internet bandwidth (upstream and downstream) and concludes that Netflix is now the single biggest consumer of bandwidth. (Report here.)

And so it begins.

What begins? That’s the big question. Fundamentally, the Internet universe we have come to know and love is threatened by the onslaught of movies online.

For example, in my neighborhood we can tell when our neighbors start watching movies – because our bandwidth slows down dramatically. And, talking with folks, it’s a pretty universal experience to lose Internet speed on Friday afternoon/evenings as well as weekend evenings.

Does this mean an apocalyptic Internet disaster? Probably not. But it looks like Netflix has stolen the internet eggs that we’d like to use for other things. And, from what I can see, the consumer, the movie business and the Internet business are all unprepared for the havoc Netflix is wreaking.

Netflix’s Loophole. I’m told that Netflix dominance is made possible in large part by a short term loophole. Right now, high speed Internet relies heavily on past investment in infrastructure that contributed to the dot com crash, then was bought for a song and expanded in the past decade. My guess is that this means that the current equation (you get all the movies you want to watch for under $10) isn’t likely to last.

So Netflix is using a type of bait and switch tactic: hook us with low prices and it sure looks like they’ll have to switch to high fees later. All this made possible because they don’t have to pay for the bandwidth they’re using today. The result will be that we end up paying more for Internet delivered entertainment than we ever have for cable.

There is an alternative outcome. Comcast (and other cable operators) seem to be the Timex watches of the entertainment business. Nothing exciting. Nothing particularly motivating. But they take a licking and keep on ticking. So in truth, Comcast may dominate and Netflix could be forced out of the picture.

I never believe companies who claim they have suspended fundamental economic truths. And Netflix’s statements about bandwidth lack economic truth. Fortunately we were reminded recently that economic laws can’t be broken when Blippy had to return to a sane business model.

So let’s hope that sanity comes back to the discussion of TV over Internet. Because right now it’s stuck in an imaginary economic universe where bandwidth performance is free.

And lets hope some of those angry birds get their eggs back so we don’t move back in time and end up with the neighborhood equivalent of dial-up because the Hawg stole the bandwidth.

Copyright 2011 – Doug Garnett – All Rights Reserved