Archive for the 'Consumer Behavior' Category

The Death of Commoditization. The Birth of the Small Business

October 20, 2009

by joseph.young.2009

Image Source: Wired.com

Image Source: Wired.com

In today’s society, there is the belief that “free is good.” I have this belief as well, but I do think there are times when the saying isn’t always true. A situation that stands out for me is new products in the marketplace. When you see or hear about a product from a friend, in the news, or by any other means, what you’re hearing a someone’s invention. It is something they (the company) created by trying to understand their customer (often themselves) and making a product that serves their customer. That is the essence of new product development. You find a need in the market, and then you try to fill it with a product that you think the consumer would enjoy and purchase. And you, as the creator would be rewarded. In today’s society, that reward is financial, social, or some other high value asset.

Source: stock.xchang

Source: stock.xchng

So back to the inventor. This inventor has created something that they think you will like. And by buying their product, you say, “I like your product and I will support you.” What makes you decide to buy it? Maybe you tried it. Maybe a trusted friend recommended it to you. By some marketing initiative, you became aware of the product and decided that you wanted it enough to be willing to pay for it.

Source: Stock.xchng

Source: Stock.xchng

The problem with commoditization is that it drives down the quality of the product as the price drives towards zero. One example of this direct relationship between quality and price can be seen in toilet paper. Toilet paper is, in essence, free. If you wanted to, you could get toilet paper free for the rest of your life and never have to pay for it. Now I don’t know where to get reliably source of free toilet paper from, but a quick search would answer that question. The bigger point is that even in a market with free products, people pay. And people will pay a fair amount for high quality toilet paper. The point is that a commoditized product is often of poor quality, so the majority of consumers will pay for a higher quality product. You can pay with money, as in toilet paper, or with information, as in Google.

Source: stock.xchng

Source: stock.xchng

My proposal to you, the consumer, is to consider, “Why would somebody create something in a commoditized market?” Are they trying to make a quick buck? Or are they making something they believe in and think will improve your life. If you believe the reason they made the product is to make your life better, then I ask you to buy it. By buying that product, you are supporting the inventor’s dream. You are an early adopter. You buy into their dream product. The current iteration of the product may not be your dream product, but by supporting them, you give them another chance to make something better. You keep their company in the race. By selecting a commoditized version of the product, you don’t give them the chance to even try again. Aren’t we supposed to support smart risk taking? Without such, society wouldn’t grown and flourish.

The Back Up Phone

June 22, 2009

by joseph.young.2009

virginmobilephones

Unsubsidized prices of Virgin Mobile phones

I recently went to Cincinnati to visit my family for vacation. While I was out there, I drove over to Paramount’s Kings Island to enjoy the roller coasters. What I didn’t expect at the park was to loose my phone on the very first ride. My iPhone. My personal assistant, phone book, calendar, and primary channel for communication.

Let’s face it, we don’t use the home phone anymore. We consider it a back-up, and only use it when we’re low on batteries, or have bad reception. The cellphone is a personal communication device that has changed society forever. And to be without yours, is a strange feeling.

But I digress. I returned from my vacation without a phone and needed a solution quickly. I had been trying to decide between the new iPhone 3GS and the Palm Pre. Both phones look interesting, and could be a worthy replacement for my iPhone. But my phone would not be defeated. In checking my voicemail tonight, I received a message that my iPhone was still alive and most likely, working. They gave me a phone number to call, and I realized that I didn’t have a phone to call with.

At the end of my second quarter as a Teaching Assistant for our core marketing course, I came across a very interesting case. Virgin Mobile‘s pricing strategy was the students’ final case. Reading through the situation and the decision facing the management, it was interesting to see how carriers and customers have a combative relationship. Consumers want to leave carriers for bad service. Carriers lure consumers in with phones and hidden fees. We’ve spent so long in these contracts, that we don’t blink an eye at 2-year contracts. And here was a new player that identified the pain points for the consumer and created a plan that reduced customer acquisition costs, and protected themselves from high customer churn. This strategy ultimately proved successful for them.

Faced with a need to buy a “loner” phone tonight, I went to Target to go shopping. I was surprised to see so many players in the pay-as-you-go section of the mobile phone aisle. But I can understand why. I see this phone as a one time purchase that provides me with freedom to make calls and text messages. I’m paying $45 for a disposable phone booth that I can carry around with me. The funny part of this situation is that my 200 minutes doesn’t even exceed the 210 minute talk time of a full charge. As the price of products is driven down with innovation (technical, operational, etc.), products become commodotized and I now see this mobile phone as a thow-away product; something I would have ever considered 10 years ago.

Extending the h-index to Twitter

May 28, 2009

by startupmarketingdiva

Recently, I became a Tweeter.   Cool stuff.  And being the quintessential scientist that I am – a practitioner of the scientific method and strong inference, I like to collect and analyze data.  So, I began thinking about Twitter metrics and analytics.

Here are the basic key Twitter metrics to consider:  Number of followers, number following, number of updates, number of @replies, and number of @RT (i.e. “ReTweets”).  I found this last one to be the most intriguing especially after reading The Genius Index: One Scientist’s Crusade to Rewrite Reputation Rules in this month’s issue of Wired Magazine.  In a nutshell, this article is about Jorge Hirsch, a physicist who lives in a world defined by the “publish or perish” mantra, who decides to re-write the algorithm that defines a scientist’s reputation.  It’s not just about the journal impact factor (i.e. the caliber of journal that a scientist’s research is published in), but rather how many times a scientist’s work is cited by other researchers.  This is referred to the h-index (aka “the hirsch index” of course).

Similarly, it’s almost meaningless to note how many followers you have on Twitter.  Because, sooner or later, you’re going to get bots and spammers following you as well.  Plus, some Tweeters follow simply so that you can turn around and follow them – a kind of a diplomatic gesture, I suppose, in the Twitter world.  But, when a Tweet is ReTweeted, that’s when the signal to noise ratio increases for that particular Tweet and Tweeter.

There are groups working on a number of other metrics for Twitter – check out TwInfluence, which is a site where you can measure your influence as a Twitterer.  I don’t know the actual algorithm, but it calculates your degree of influence based on the velocity at which you acquire followers, taking into account their degree of influence, and the number of followers you accumulate over time, among many other metrics.  And, just today, I came across a search engine built especially for the social web called TOPSY (in the interest of full disclosure, one of the founders is my cousin).  It seems that TOPSY’s value is that it returns information in real time and more importantly, it filters the signal from the noise by using  reputation as a key metric.  So, for example, on Twitter, it filters the Tweets (and the links in the Tweets) that are most valuable based on the reputation of the author.  So your search returns information in the context of what people are actually talking about.

There’s a lot going on.  The dust storm is just starting and it’ll be a while before it settles.  But, like the early days of the internet, when the ‘hit counter’ ruled, similarly, in these early days of Twitter, ReTweets are a key metric to consider, or so it seems.

I’d like to hear your comments.  Yours truly – startupmarketingdiva.  Follow me on Twitter @startupmktgdiva.

Use of new media in regulated industries

May 28, 2009

by startupmarketingdiva

Since my last post on “the future of Social Media Marketing in Pharma,” I’ve seen quite a few conversations pop up around this topic and started ‘listening’ to them.  Here’s the scoop:

There’s a great blog on pharma and healthcare at Dose of Digital.  Check out some of the archived posts on the sidebar of this blog.  It’s evident that the FDA has not clearly defined the rules of engagement in the social media space for pharma and for that matter medical devices and diagnostics companies.  The same blog discusses ways to go around current FDA regulations using mobile marketing (But, I don’t think the point is to deceive customers or patients, or maybe it is? But that’s not my focus!)

Recently, Johnson & Johnson was slapped on the wrist by the FDA’s DDMAC (Division of Drug Marketing, Advertising, and Communications) for overstating the efficacy of Ultram ER, a drug for chronic pain, and understating its risks in this Ultram warning letter.  In another similar situation, Shire Development Inc was reprimanded for inaccurately featuring Adderall XR Capsules on YouTube.  Essentially, the Adderall warning letter claims that the video overstated efficacy and understated the risks, thereby “misbranding” the drug.  So were both of these cases deserving of the reprimand?

Before answering that, consider the blog eye on fda and a related podcast that very succinctly discusses the need for pharma’s participation in Web 2.o, pharma’s reservation to do so, and the FDA’s point of view.  In brief,  Mark Senak of Fleishman-Hillard spoke with Dr. Jean-Ah Kang, who is the Special Assistant to DDMAC Director Tom Abrams.  Although I recommend that you listen to the podcast, the script is nicely transcribed at MM&M.  Basically, right now the FDA has no formal policy on the use of Web 2.0 social media.  The key message from Dr. Kang was:  “it’s not the medium, it’s the message.”  As long as the message is fair and balanced, it doesn’t matter what medium it is conveyed in, whether it be Twitter, YouTube, website, or other traditional medium such as print.  But even so, as a company with a drug or other product in a regulated industry, you still need to cover your a%#.  How?  Dr. Kang says:  “follow the law” by submitting two copies of the final promotional materials using the FDA form 2253 under the guidance of 21 CFR 314.81(b)(3)(i) to DDMAC.  If you think your marketing materials require advisory comments on the draft proposal, you can certainly solicit the DDMAC for assistance in advance via their CDER page.   What this does is covers you from a third party wrongly reprocessing and misrepresenting your product and brand.

Is it better to have loose guidelines than to have an exhaustive list of rules and regulations spelled out by the DDMAC?  Apparently not.  The brouhaha continues.  Just a few days ago, DDMAC issued draft guidance for industry presenting risk information in prescription drug and medical device promotion.  The guidance hardly touches on the use of social media and the Web 2.0 environment.  There seems to be an even stronger response to the lack of guidance provided in this document, especially since DDMAC reprimanded 14 companies via “Warning Letters and Untitled Letters” for using sponsored links on Google in March of this year.  The letters basically claim:  The sponsored links are misleading because they make representations and/or suggestions about the efficacy of _fill in the blank drug_, but fail to communicate any risk information associated with the use of this product. In addition, the sponsored links inadequately communicate _fill in the blank drug _indication and fail to use the required established name. So, if you want to provide input to the draft guidance document, you have 90 days to do so, or you can join the bandwagon with others already planning to!

The landscape is much more complicated than what meets the eye.  How do you formulate policy around promotional materials in a regulated industry in a medium that can be altered, such as a wiki, or that must be communicated in 140 characters or less, i.e. Twitter?  For example, is it okay to Tweet:  “Joe used Viagra and he’s never looked better.  Ask your doctor how you can too!”  And, even if you can, I wonder what the effectiveness of such new media tools will be for the companies looking to promote their regulated products?  And, even more interestingly, how will and should the combination of various marketing channels change to optimize delivery of the promotional message?

I would love to hear your thoughts.  Yours truly – startupmarketingdiva.
P.S. follow me on Twitter @startupmktgdiva

Don’t touch that Dial!

February 25, 2009

by forrestsloan

Why recap what’s perfectly stated?

“LiveScience.com reports that a new study shows that people who touch an item at a store are more likely to not only buy an item, but pay more for it.”

For more details, check out this article.

On Target

February 25, 2009

by forrestsloan

The Target commercials “Brand New Day” are spot-on when it comes to understanding the new houshold economics.

They get that every purchase is now a serious economic decision so the benefits have to be front and center.  This goes for everything, no matter how basic.  Nowadays, a $9.99 DVD purchase and a $2.99 box of microwave popcorn are a much easier sell when framed as a “night at the movies” because you’re providing consumers with a lower-cost alternative to something they already are doing or might want to do.

Ad Age ran a nice piece today titled “Can Moms Save Us from the Recession?.”  It details some of the psychology behind household purchase decisions as made by today’s Mom.  Link to it here.   The parallels between these findings and the new Target ads are pretty obvious.  Nice work, Target.

Social Media Marketing (SMM) Done Right: Jack in the Box

February 5, 2009

by joseph.young.2009

Watching the Jack in the Box Superbowl ad seemed regular enough. A cliffhanger ad with a website URL as the call to action. Nothing special.

But going to the website, you recognize that they’ve done something great with it. They’ve taken advantage of social media tools to make the site feel more authentic and create an experience for users. The SMM tools used on the site: Blog, Flickr, Facebook, Twitter, YouTube, comment boxes, video comment submissions. Quite an impressive array of SMM tools. But more interesting than the number of SMM tools used, is the fact that they’re used properly. The YouTube videos shot with a handcam effect. The tweets are timed before and after the accident to show a change in character and and explanation as to what’s happening. This campaign keeps the Jack in the Box users engaged. It also keeps Jack in the Box at the top of their minds when they’re thinking of a fast food restaurant to eat at. That’s how it really succeeds.

The goal of SMM is the same as any other marketing: get the customer to buy. It’s just a new tool in your toolbox. Only use it in certain situations.

Motion Pictures Copying Video Games

October 26, 2008

Those of us hitting our thirties and forties (men mostly) have grown up with two things: video games and motion pictures. By motion pictures I mean television and movies. And by video games, I mean the stuff on the NES (Nintendo Entertainment System) and SNES (Super NES). Back in the SNES days, I was introduced to franchises. One that always rings fondly is the Final Fantasy Series. The great thing about a franchise is that you can do any number of storyline and characters without people ever becoming disinterested. Think of any great sports franchises. The Lakers, the Raiders, the Yankees. Any of these franchises are so powerful that they attract an increasing number of viewers (families and generations) every season (year). Video games publishers look for the same thing. Read the rest of this entry »

The Smear Campaign… Between Apple and Microsoft

October 20, 2008

by joecool79

If you haven’t seen the newest Apple commercials, you should take a look. The tired method of comparing a Mac to a PC is getting a bit dirty. Apple’s recent campaigns have been a direct attack on Microsoft. In response, Microsoft created a campaign to illustrate that PC users are not just old, stoggie ment in tan coats. And I think they did a good job of it. They such a good job, that Steve had to come back and swing low.

I’m not siding with either camp, mind you. But the fact that Apple’s taking a direct jab at Microsoft for spending money on advertising is a bit hypocritical. Apple has been using TV commercials to promote their products and services for years, and spending tons of money doing so. Watching game 7 of the ALCS, I was bombarded with commercials for the MLB app for the iPhone/iPod touch. I doubt that ad time is cheap, and with all the problems with MobileMe, maybe the company that should be spending less money on advertising and more money on bug fixing is Apple. I only say this because recent reports of Windows Vista indicate that it’s closer to what Microsoft original promised, rather than the half-baked OS that came out initially.

Android = Windows 3.1; Apple Inc. = Apple Computer Inc.

September 16, 2008

For those who haven’t already realized it yet, Android will be the next Windows 3.1. Aka, the dominant operating system on a platform (mobile). People are claiming that the OS X iPhone will be the next major OS for mobile because the iPhone/iPod touch have such great user experiences now. The only problem is that Steve will have the same problem now that he had back in 1991, Mac OS 7 was build for a closed system where Apple controlled both the hardware and software. This created a great user experience, but your audience was reduced because of the system was cost prohibitive for many customers, and because they were forced to live in the Apple ecosystem. Sounds pretty familiar to today eh? (iPod/iTunes/MobileMe/etc). It’s a great strategy if you can control the market. In the iPod case, it’ll be very difficult to dethrown the MP3 player.

But in the mobile space, Google’s Android will take the crown of leading mobile OS. Read the rest of this entry »

Content is King Regardless of Medium

September 16, 2008

If you ever follow the video game industry, there’s a saying going around these days, “Content is King.” For the past 10 years, technology has been what drives the games industry. The reach to get the most realistic environment for your story became what drove the industry. Nowadays we’re close enough. There are still those going for the last 10%. But on has given up goals oon graphics in one iteration to focus more on content. That company is Nintendo. They reduced their R&D on technology and cranked it way up on interactivity. The result is the Wii. And by the way they’re printing money these days, I think they made the right choice.

So going back to the original topic where “Content is King.” The realization is that games need great design and gameplay over great graphics. Read the rest of this entry »

Is our brain like a muscle?

July 22, 2008

Check out this recent post by Prof. Amir on Scientific American Mind:

The human mind is a remarkable device. Nevertheless, it is not without limits. Recently, a growing body of research has focused on a particular mental limitation, which has to do with our ability to use a mental trait known as executive function. When you focus on a specific task for an extended period of time or choose to eat a salad instead of a piece of cake, you are flexing your executive function muscles. Both thought processes require conscious effort-you have to resist the temptation to let your mind wander or to indulge in the sweet dessert. It turns out, however, that use of executive function—a talent we all rely on throughout the day—draws upon a single resource of limited capacity in the brain….

Here is a link to the rest:http://www.sciam.com/article.cfm?id=tough-choices-how-making

Research Corner – The Power of an Apology

June 5, 2008

We’ve all been there. That frustrating moment in which we find out that the contract for our cellular phone is not as straightforward as we believed it to be, or that the warranty for our laptop covers everything, except for the one single problem we are having with it. These kinds of frustrations and disappointments have become an integral part of consumers’ lives, and may take the form ineffective customer support, long lines, mouse print in contracts, etc. Bottom line is that such ‘treatment’ on the part of marketers is likely to affect the way consumers behave.

Read the rest of this entry »