Archive for the ‘Disruption’ Category
To my regular readers, I’m sorry that the blog has gone a little stale over the past week, but I’ve been a bit preoccupied trying to find a new job. Nevertheless, traffic is way, way up on the Sprint post and I have been having lots of great conversations with people who have commented on it. In lieu of a new topic, which I promise to get to this week, I’ll pass on some of those additional thoughts from my conversations. Perhaps if Sprint were a Sense & Respond organization, they would be joining in the conversation or at least be actively listening. My guess is they’re not.
Of all the comments on the post, no one defended Sprint. To the contrary, all but one had negative things to say about them. The other guy just had negative things to say about female cellphone users. Thought certainly not a statistically valid sample, I would wager that few people really love their wireless provider. It’s the nature of the industry in the US. With limited competition due to the high cost of entry, the wireless providers aren’t compelled to differentiate on customer service and in my experience, Sprint is the poor service leader.
You may have noticed that this story has gone mainstream with coverage by the Associated Press, ABC News and Brandweek . The details, if you haven’t seen them are mind-boggling. David Reich wrote a great summary today on his blog, “my 2 cents”, but here’s the big thing to consider:
Out of Sprint’s 52 Million customers, only 1000 received the letter saying they were calling customer support too much. Do the math. That’s less than .002% of their customers.
There is no way that that small percentage was adding any material cost to their operation. (update: As a friend pointed out, the actual cost of these calls could have been material; however, the methodology for counting is unclear. For example, the ABC story indicates that a single call with 5 internal transfers might have been counted as 5 calls). Sprint says that, on average, these customers were calling in 40-50 times per month. Perhaps that’s true and given my personal experience with trying to get my own Sprint bill fixed, I can appreciate that.
Nevertheless, Sprint made the decision to go after them in a way that became very controversial, very public, very fast. The cost of this action in terms of bad PR is on par with Circuit City’s recent bungle. where they fired 3400 of their most experienced store employees to cut costs. Several months later they are still trying to explain that one, but it’s too late. In both cases, the damage to public perception has been done, although in Sprint’s case, it was pretty low to begin with and their defensive spin machine is just getting fired up. In my opinion, it was a failure of leadership in both of these companies to make such shortsighted decisions without considering how their customers would view them.
One of my conversations this week was with the Conversation Agent herself, Valeria Maltoni. She pointed me to a post she wrote about the wireless business in the US and speculates that Apple may be just the disrupter needed to shake up the industry. It’s a great post and has some David Letterman Top 10 humor to boot.
An article published today in Advertising Age really resonated with me. It makes the case that the maturing marketplace, combined with the hyper-connected, in-control consumer “has created a seismic shift from one-size-fits-all mass markets to millions of markets of self interest.” That assessment carries huge implications for retailers who are trying to move product that was once a specialty, but is now a commodity. Strategy consultants Booz Allen Hamilton explain it this way:
As every market matures, choice increases. Then competition drives up quality and convenience to the point at which offerings become commoditized. The only businesses that then thrive are those that move beyond “me-too” or incremental offerings to marketing more-relevant and more-differentiated products and services. The only way to accomplish this is to focus on a narrower target.
Technology & The Long Tail
Technology has played a major role in facilitating this shift. Marketers are now able to micro-target specific groups, engage customers with more frequency and intimacy, and customize to consumer specs. Moreover, technology has enabled consumers with the tools to seek out suppliers that offer just the thing they want.
Think about it. If you are a retailer focused on selling lots of stuff to lots of very different people, you are probably fighting a loosing war of diminishing margins, market share and profitability. On the other hand, brands that have figured out how to excel at attracting and keeping loyal a narrowly focused niche will probably continue to do well. And why is that? Once you, the customer, has experienced having your ever-increasing levels of self-interests met by a niche provider, you have a hard time going back. For example, why would I continue to go back to a retailer for accessories that I know from previous experience, they probably will not have (not even on their website).
As even a senior Wal-Mart official recently said, “no customer today will stand to be treated as part of a mass market anymore.”
This is a major disruption and marketers who fail to respond to it quickly will suffer. According to Advertising Age, the value propositions of those who ignore niche marketing…
“…will be less relevant than those of competitors. For those slow to adopt niche marketing, the future also is bleak. Attempts to recoup share will be difficult because competitors will have preemptively established closer customer relationships.’
A number of brands and marketers have embraced niche marketing. Names like Target, Crocs, Red Bull and American Girl. The all have the same objectives as any other marketer, but they have sensed the disruption and have responded by finding a new way of going to market.
Narrow, not Small
The other thing that has changed is what niche marketing really means in today’s environment. It’s still “the targeting of a more narrowly defined customer group seeking a distinctive mix of benefits”, but niche markets are not the “marginal opportunity” that they were once viewed to be. Today, niches are viewed much more positively.
In today’s marketplace, niches are flourishing. Some niche brands are generating hundreds of millions in sales. Sometimes, narrow niches, fueled by mavens and connectors, become the next big, disruptive thing. The big point of the article is that niches should not be equated with small. Instead, think of narrow. Then target very specific groups who will relate to and find differentiation in your offering. At this point, you are no longer a commodity and you can increase your margins by charging a premium. Do this over and over with different products and services, and you can generate volume and growth that makes up for your narrow targets.
Smaller targets, larger focus
Ten years ago, the medium was still the message. Eight years ago, we could still think of the 4P’s — product, pricing, place, promotion — as essentially independent strategies. Five years ago, everyone started to buzz about customer-relationship marketing. About two years ago, we got really excited about digital-marketing tactics and started to apply them without any real strategic purpose. All this has changed.
So what’s really new about the new niche marketing? It’s realizing that while our targets have to narrow, our definition of marketing communications has to broaden. Today, everything communicates what a brand stands for, all the time.
It’s like the old saying: If you are on the wrong train to begin with, every stop along the way is the wrong stop.
The article closes with 10 principle to harness the power of niche marketing:
- Position your brand as narrowly as is economically possible.
- Become the specialist that anticipates the needs of your target.
- Rapidly work with the target niche to co-innovate.
- Set as your goal such consumer centricity that the target niche will want to co-brand their identity with yours.
- Live by a higher standard of ethics.
- Embrace a business model and metrics that grow the most valuable assets of the new niched economy.
- Reap first-mover advantage by learning how to identify a niche of opportunity.
- Re-imagine your role as that of entrepreneurial founder of a special interest group.
- Forget push marketing; excel at pull marketing.
- Realize your brand is now “media” competing against all other media
What do you think? Does this make sense to you ? Can you think of companies that could immediately benefit from leveraging niche marketing?
(Source: Advertising Age)
Just when Twittering seems to be all the rage, a new player hits the stage. It’s called Jott.com and its one of the coolest innovations I’ve seen in a while. Here is the basic idea:
You call Jott on your mobile phone. You speak the name of the person or group you want to send a message to. You speak for 30 seconds. Those sentences get transcribed and e-mailed. It could be a “note to self”, or a client, or an employee, or your team, or your spouse who never seems to have either of their two cell phones turned on (that’s another story).
Instant speech to text conversion with messaging. Kinda like a 30 second Twitter version of a podcast.
I often judge the coolness of something by using my 13-year old daughter as a barometer. She thinks Twitter is “totally geeky”, but when I showed Jott to her, she was instantly hooked. She immediately started playing with it; not for anything productive mind you, just wanted to see how much abuse it could take (singing, laughing, nonsensical jibberish). She also told her friends about it and they started Jotting each other. The hyper-connected youth have yet another way to communicate.
I have to agree with Drew McLellan who predicts that Jott “is going to be the breakout of 2007”. Drew suggests several ways he is going to use it:
- Dictate notes from meetings and send them to myself for a record. Jott it.
- I’m pulling out of a client’s parking lot and send a note to our Project Manager about opening a new job. Jott him.
- Forget milk? Never again. Jott me.
- Have a breakthrough idea while waiting to board a plane — jott my entire staff before I forget said idea. Jott the team.
- Want to remind my daughter to do XYZ but she’s going to get home before I do. Jott her.
- See someone across the way at Panera and want to remember to call them in a week or so. Jott me.
- Have forgotten to grab a book from the office 3 times. Jott me.
- All the stuff that I try to write down before I forget it. Jott me. Jott me. Jott me.
The other reason this may be big is that it is potentially disruptive to the wireless carriers. Think about it. Text Messaging is hot. Over 80 Million US subscribers sent over 100 Billion text messages last year (Pew Research). Teenagers have made it a routine way to communicate. Most individual subscriber plans charge $.02 per message sent and received. With Jott, you never have to pay to send a message, so you can send more messages under you current plan, or reduce your monthly costs by switching to a plan that allows fewer messages.
Now if someone will just build a simple interface to allow me to Jott to my Twitter account, I’ll be in lifelogging heaven.
Olga Kharif at Business Week believes the Apple iPhone will disrupt the cellphone upgrade model. That model says that users generally replace their phones every 18 months. They do this for a number of reasons: Phone is broken or has battle scars, new features, new styling. The biggest reason, of course, is that the industry enables it by giving free or cheap phones when you agree to a new contract.
In a recent article, Olga’s makes this argument:
“The new iPhone from Apple….brag[s] touch screens instead of buttons. That means that if cell phone makers or carriers decide to add new functionalities to these phone when they are already in use, they could, potentially, do that over the air. Want to enable consumers to shoot, edit and post videos to a mobile site in a new way? Just send them an application with virtual buttons that will appear on their touch screens and allow for this application’s use.
If consumers are able to get new applications this way, I think some of them will stick with their phones longer. After all, today’s phones all feature cameras and Web access. Unless handset makers come out with additional hardware making replacing handsets every 18 months a must, I don’t see why consumers will keep on changing their phones as often, especially since the phones’ prices seem to be on the rise. After all, with a simple software upgrade, users will be able to drastically change their phones’ looks and functionalities anyway. So, why splurge on a new phone?”
She goes on to ask her readers if they agree. The article is short, but the list of comments is long and each side makes good points.
Here’s my take. The upgrade cycle today is controlled by the carriers. Apple wants to change that. The iPhone may be the hottest CE product of 2007 and millions of people will pay the premium to get it. Once that happens, and assuming that the experience lives up to the Apple brand (and the hype), people will not be so eager to upgrade just because their contract is up. Assuming that the 5 year exclusive deal with Cingular doesn’t change, they won’t really be able to switch anyway. Being touchscreen based does not make the iPhone an infinitely extendable platform (sorry Olga). There will be ongoing evolution of the technology, just as there has been a steady stream of product improvements to the iPod. This is what will drive the upgrade cycle for iPhone users. The cycle may remain at around 18 months, but it will be the product itself that shifts the control of the cycle to Apple.
What do you think????
I just bought a Wii. They are still hard to find, but I happened upon a pallet of them in my local Costco last week (right place, right time). Although I have been blogging about the Wii Experience for months, I had never experienced it personally. After the first swing of the virtual tennis racquet, I felt it. I was really “playing” tennis. I was not “pressing A to swing”. With just that brief experience, I completely understand why the Wii has taken off like it has. ‘It’s the experience, stupid!’, and it’s quite a success story.
Nintendo has long been the underdog in the video game market. Sony and Microsoft flew past them in terms of titles and realistic graphics during the last cycle. Nintendo titles have historically been more “family oriented” (no cop killing or hidden sex scenes), and their stock performance has historically been lackluster. When the third generation (3G) console war started heating up last year, the PS3 was supposed to be the big cheese (with the big price tag). XBox 360 had gotten a head start on the 3G market a year ago and had over 150 titles so they were expected to hold on to the number 2 position.
Retailers, while covering all the bases, believed that PS3 would be the big winner. As a result, they all fought for the same scarce pre-christmas inventory. Fast forward three months and we are now seeing headlines like: “Nintendo’s Wii Leaves Sony’s PS3 In the Dust and Nintendo Wii Sales Quadruple PlayStation 3 and Analyst: PS3 Readily Available, Wii Still Sold Out?
I visited no less than 6 stores on Monday night – EB Games, GameStop (NYSE: GME – News), Best Buy (NYSE: BBY – News) and Target (NYSE: TGT – News). None of them had the Wii in stock. I spoke to one of the employees at GameStop and he told me that they get Wii shipments from time to time, but the units sell within minutes. Talk about demand. He did volunteer that they had plenty of PS3’s stacked up in the back.
Were there early indicators that the PS3 would fail so miserably against the Wii? If you recognized those indicators, could you have profited by changing your retail strategy and focusing more on the Wii? Did any retailer see opportunity? Perhaps Gamestop did as they secured an exclusive agreement to have Wii demonstration kiosks in their stores. Did they “Sense & Respond” or was it accidental? Here are some early indicators that could have pointed the way:
1. PS3 is too expensive for the average household
Lots of discussion about this from analysts following the E3 debut. An analyst with ABI Research was quoted as saying “Asking consumers to pay $500 to $600 for a game console, when most have yet to purchase an HDTV, will give many current PlayStation 2 owners reason to consider the competition.”
2. E3 Performance: Poor PS3 showing; Big Nintendo buzz
“We went into E3 2006 unconvinced of the Wii name or the machine’s potential and walked away from the Convention Center knowing for certain that Nintendo has another hit on its hands…. The Big N’s new platform may lack the graphic horsepower of competitor PlayStation 3, but its innovative controller stole the show right out from underneath Sony’s collective feet.”
3. Continuous stream of bad news and missed expectations from Sony
Originally slated to debut in May, 2006; pushed to August, and then to November, Sony just could not deliver. Industry observers were warning as early as February, 2006 that the PS3 could be a flop due to the high cost of the technology-bloated console. Sony’s strategy was to use the PS3 as a Trojan horse to get Blu-Ray into your family room, but limited availability of key components which were reported as far back as July ’06 caused Sony to scale back the number of units available in North America delayed European availability until 2007.
4. Nintendo’s disruptive shift that focuses on the experience of the gamer
I think this was the biggest indicator that Nintendo would be the clear winner. Nintendo’s decision to approach the business from the players perspective and make a product that truly engages the player (at half the cost of a PS3) was disruptive.
It’s been a while since I last discussed the recent videogame console war. It was long my belief that Nintendo’s Wii, with its focus on the player’s experience, would be the real winner. Although there is plenty of time for these two to battle it out, the early results are a clear indication that Nintendo’s approach has disrupted Sony. Michael Urlocker’s OnDisruption blog has a great post that lays out the case and offers six concepts about Disruption that are applicable to any business:
- Nintendo’s market disruption is not about better technology;
- Disruption is not about incremental improvements;
- Disruption is about understanding where the customer experience is not good enough;
- Disruption is about making a product more accessible;
- Disruption is about changing the basis of competition;
- Disruption is about a new business model.
Pulling off quite a coup, Wal-Mart has entered the movie download business with a bang. In the announcement today, the company announced agreements with all six major movie studios — Walt Disney, Warner Brothers, Paramount, Sony, 20th Century Fox and Universal — to sell digital movies and television shows on its Web site (www.walmart.com/videodownloads), becoming the first traditional retailer to do so. Wal-Mart, who lost the battle against Netflix on DVD rentals two years ago, sees that the bigger opportunity is in downloads.
The move plunges Wal-Mart into direct competition with established players like Amazon.com, CinemaNow and the 800-pound gorilla, Apple’s iTunes. Wal-Mart will face a number of challenges. Apple dominates the digital download space, leaving only a very small share of the market for others to scrap over. And where Wal-Mart is the king of retailers, they have no real competence in digital distribution.
What they do have is clout and they have leveraged that clout to do what Apple has been unable (or unwilling) to do: to pull together all the right Hollywood players. Wal-Mart has also partnered with Hewlett-Packard to create an easy-to-use Web site and develop a broad library of videos.
Movies will run from $12.88 to $19.88 on the day the DVD drops, while older flicks start at $7.50. All movies will have roughly the same price as the actual DVD at Wal-Mart stores, though. Not sure why download customers would want to fork over almost what you’d pay for the actual DVD, but then again, I’ll do just about anything to avoid going to a Wal-Mart. The pricing is designed to protect the DVD business which will keep the studios (who have considerable clout themselves) happy.
The service will have TV shows from Comedy Central, CW, FX, Logo, MTV and Nickelodeon. Major networks are not in the mix as of now. TV shows run a bit cheaper than iTunes, at $1.96 a pop. Altogether, it will offer “access to 3,000 productions,” with the mix split roughly 50/50 between movies and TV shows.
Just as MP3 downloads have disrupted the CD business (just ask Tower records), digital movie downloads will be disruptive to the DVD business and possibly other CE products such as DVRs. You can already watch recent episodes of ABC shows for free. If, in the near future, I can get high-def downloads of shows that I missed, why pay for a hi-def Tivo and the monthly subscription that goes with it? This disruption could also impact CE retailers who do not move into the digital distribution space. The war is just starting, but it will be interesting to see how it develops.
<via NY Times>
A new Video on Demand deal between Comcast and Disney gives Comcast the ability to use some ABC shows for its massive VOD effort as well as broadband. But more importantly, the far-reaching agreement may become the model on which the new media world soon operates.
According to BusinessWeek, Comcast is expected to announce a new TV portal, code-named C-TV, that Disney will help promote through the use of film and TV clips that Comcast would use online. Down the road, the two companies may work more closely together to provide ABC, Disney Channel, and other kinds of programs for the portal as well, according to sources at both companies. But that’s just the start of the relationship…
Disney is expected to help Comcast test the notion of showing movies on demand at the same time the movies are available in DVD stores—effectively shortening the lag time before cable gets access to those films. It’s a development certain to drive major DVD retailers like Wal-Mart (WMT) nuts. “The deal is all about Comcast wedging itself into an online content company and using Disney as a partner to get there,” says UBS analyst Aryeh Bourkoff, who follows both companies.
Both companies have been aggressively trying to improve their image. Disney wants to be seen as more agile and an adopter of new technologies. Comcast needs to update its offerings to remain competitive with Telcos and new media outlets like MySpace. This deal accomplishes both objectives by giving Comcast access to Disney programming for its On Demand service. Disney gets access to more than 24 million Comcast TV subscribers and another 11 million high-speed Internet customers. Disney intends to sell ads for most of its shows. Where will the partnership go from here? The BusinesWeek article says:
Disney has told Comcast it is willing to participate in a test in two markets, in which it would offer movies on demand three or four months after the movies show up in movie theaters—the same time DVDs are shipped to retailers such as Wal-Mart. Disney has already ruffled feathers among retailers like Wal-Mart and Target (TGT) by offering its movies on Apple’s iTunes site at prices that the large retailers believe are below their wholesale price (see BusinessWeek, 9/11/06, “The Empire Strikes Back”). But this could send folks to Comcast instead of Wal-Mart to buy the DVDs. For Iger, who has said he wants to experiment with narrowing the “windows,” it is a toe in the water.
For Comcast, Disney presents a formidable ally in taking on telcos and others in the battle to deliver movies and TV shows over the Internet. C-TV, the new TV portal due in the coming weeks, is expected to help consumers organize their videos—be they consumer-generated or shows that they have streamed or downloaded from other sites. But down the road, Comcast wants to make episodes of TV shows available online, giving it the ability to offer custom-made channels for shows like Lost or Desperate Housewives. ABC hasn’t agreed to that, but the lines of communication are open since both companies are eager to experiment in the broadband world, according to sources with knowledge of the deal.
Given the extremely tense relationship these two have had in recent years, the new spirit of cooperation is remarkable but also very good for both companies. In the end it may mean profound changes in how media is bought and consumed and that will be disruptive to retailers who rely on DVD content as a traffic driver.
Is the traditional camcorder going the way of the VCR. Recent trends indicate that the answer is “yes” and its a big problem for camcorder makers and CE retailers.
Sales of camcorders have fallen 6.7% to $785 million so far this year, according to researcher NPD. In a recent article entitled The Coming Camcorder Conundrum, BusinessWeek points out that the traditional camcorder is being replaced by……. wait for it……. the Cellphone. Consumers are also opting for low-cost, flash-based, disposable recorders.
“Many consumers are looking for less expensive, less complicated machines, and in growing numbers they’re adopting devices on the low end. Pure Digital Technologies specializes in disposable, point-and-shoot, flash-memory-based camcorders. Its latest point-and-shoot model, released in October, holds up to 60 minutes of video and sells for about $129.”
Pure Digital understands what most people are doing with video these days. They are creating content for distribution on the web and Pure Digital is building disposable camcorders that interface to Google Video and Sony’s Grouper. A YouTube interface is in the works. Pure Digital believes that the traditional camcorder market, reaching fewer than 3 million units a year, will expand to more than 20 million devices sold as disposable and point-and-shoot camcorders proliferate.
The phone manufacturers are on the same track. The quality available on phones and other low cost devices doesn’t compare to today’s high-end camcorders, but they make up for it in ease of use and price, and over time, the quality will get better.