George's New Media Review

Declining Ad Revenues at Regional Recreation Magazine

noreply@blogger.com (George) — Sun, 02 Aug 2009 14:25:00 +0000

Exploratory research
Our company in this case study is a regional print magazine that has suffered steadily declining revenues. McDaniel and Gates (2008, p 41) recommend that research analysts perform situation analysis and exploratory research to correctly define the problem. Such preliminary work yields the essential context to better understand the problem, including industry and market trends, economic influences, and competitors.

In my exploratory research, I found a sound model for declining magazine revenues provided by Evans and Wurster (2000, p 42). The Internet has “disintermediated” print newspapers and magazines. Online media are imposing a new, more severe revenue structure on the venerable world of print journalism. In the past, magazines acted as intermediaries between journalists and readers because of the economics of the printing press. That has changed with the electronic media on the Internet.

Advertisers have taken note, and increasingly their business is allocated to online media. The situation is so dire that Ives (2008, p 1) asks whether print magazines will survive another five years. Maddox (2008, p 1) reports that magazine ad revenue across the board declined 2% in 2007.

Duncan gives us some insight on the advantages enjoyed by Internet (2005, p. 443) and they include better target selectivity compared with local print magazines, better geographic reach and shorter lead-time. Fine (2008, p. 1) reports on the declining prospects of mid-sized magazines for several reasons including online competition, but also a defection of advertisers who question the mid-term viability of print media because of the shift online.

Implications of Exploratory Research

Based on this exploratory research, declining ad revenues seems to be a symptom of an even worse problem. McDaniel and Gates (p. 45) inform us that a symptom is a result that is caused by something else and they recommend to continue asking, “what caused this” until you can’t go any further. This also helps to narrow the focus from the broader management problem to a more specific marketing research problem (p. 46).

Wyner (2001, p 1) says that the extent of our marketing research, as well as the tradeoffs we make in that research, depend on the risk to the business. Our exploratory research revealed a paradigm shift happening in print media. The situation for our regional recreation magazine is potentially dire.

This is a risk that management cannot ignore. From the exploratory research, we have information that our symptom of declining ad revenue might be caused by online ad competition, and concerns over our mid-term viability. Our audience is advertising spenders. We need to research the implications that our print magazine is undermined by online competition.

Problem Statement
Our magazine is encountering competition from online alternatives so that our advertising revenues are declining. To handle this problem, we need to understand the share of ad spending our clients plan to allocate to online and to print over the next five years. Additionally, what ad pricing is available to our clients from online competition? And finally will an online version of our magazine cause our clients to think us more viable?

Objectives for Primary Research

Forecast the transfer of our current print revenue to online competition based on client spending plans
Understand the new revenue structure of an online magazine in our product mix based on online ad rates
Discover our readership attitude to an online version of our magazine
Know our advertiser attitudes and beliefs about us if we stay strictly in print versus introducing an online product.

Recommended research design
Descriptive design is appropriate because we understand the underlying relationship between declining revenue at print magazines and online advertising. As McDaniel and Gates note (p. 49) "implicit in descriptive research is the fact that management already knows or understands the underlying relationship among variables in the problem." From our exploratory research we do have that understanding. We do not seek to understand what causes a shift in advertising revenue from us to our online competition since our exploratory research provides strong argument for that. We want to estimate the magnitude based on our client advertising plans.

On the other hand, we will be testing a new service with respect to reader and advertiser attitudes and beliefs. This is a causal study: what effect will a Web version have on readership and advertiser attitudes. Deploying a Web version is our independent variable while the attitudes and beliefs are dependent variables.

Incorporating both descriptive study and causal study will result in a more expensive design but as noted above this particular management problem could be calamitous. It will impact the ongoing concern assumption of our firm so we need the answers from marketing research in crosscutting areas. This may then result in more than one research method as well – is this reasonable? Wyner (2001, p 2) assures us it is: “Increasingly, however, marketing applications have combined elements of all three methods to get the benefits of each.”

Recommended methods
We recommend a causal design for finding the impact of a Web version of the magazine on reader and advertiser attitudes and beliefs. The method for causal can be survey or experiment (see McDaniel and Gates, 2008, p. 50). Wyner (2001, p 1) observes that experiment enables us to test a service that does not currently exist while at the same time controlling “nuance variables to show the true effect of the product [for us, service] itself.” While we could survey for a causal relationship, according to McDaniel and Gates, experiment is the better choice in our case.

Descriptive study would be appropriate for client spending plans and online ad rates. A survey for client spending plans is an orderly and structured approach to discover facts and opinions such as those underlying spending budgets (see McDaniel and Gates, 2008, p 50). An observational field study does not seem necessary for discovery of online ad rates. Instead, a phone survey seems a sufficient method.

Conclusion
This regional print magazine faces a risk with catastrophic consequences. Following the research design and using the research methods in this report will provide the marketing research data to more completely understand the nature of the problem. It will also provide insight into client spending plans, and client and reader attitudes towards a brand extension, adding an online version of the magazine.

References
Duncan, Tom (2005). Principles of Advertising and IMC. New York: McGraw-Hill Irwin.

Evans, Phillip and Thomas Wurster (2000). Blown to Bits. The Boston Consulting Group. Harvard Business School Press.

Fine, Jon (2/18/2008). Sweating Bullets in Magazineland. BusinessWeek. Retrieved on May 31, 2009 from EBSCOHOST.

Ives, Nat (11/3/2008). Will print survive the next five years? (cover story)
Advertising Age. Retrieved on May 31, 2009 from EBSCOHOST.

Maddox, Kate (May 5, 2008). Q1 ad sales reflect the slow economy. BtoB Magazine. Retrieved on May 31, 2009 from http://www.btobonline.com/apps/pbcs.dll/article?AID=/20080505/FREE/733276802&SearchID=73317453989427%23seenit

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Wyner, Gordon (2001). Representation, Randomization, and Realism. Marketing Research. Retrieved on May 31, 2009 from http://www.imc.wvu.edu/

E-Tailing at a Children's Toy Company

noreply@blogger.com (George) — Sat, 25 Jul 2009 16:46:00 +0000

Search Strategy
A regional toy company is considering the Internet as a selling channel and commissioned a background research report to decide if this retailing channel warrants further investigation. I used the Internet to do background research on toy retailing on the Internet. McDaniel and Gates (2008, p 86) recommend listing the distinctive words that might identify articles as a first step for an Internet search. I chose the following words: buy educational toys online. For my first search I did not try to enclose phrases or clichés in quotes because I wanted to see a wider range of results to get other ideas for searching. This starting gambit hit a rich vein of useful material. In addition to educational toy company Web sites, I found this blog that reviews educational toy companies: Suite 101.

The companies reviewed in the blog such as The Discovery Channel provided useful information. Moreover, I followed the McDaniel and Gates guidance (p. 87) to “vary your approach with what you learn,” and picked up some words and other ideas in the review of these companies. E-tailing was a new word and eToys was a high profile failure that merited investigation. I decided to also improve the quality of my source material (see McDaniel and Gates, 2008, p. 87) and started searching with my new terms and information in EBSCOHOST. The following is my report to the toy retailer, call them KidzBiz.

The Market Reality for Online Educational Toy Sales
There is no mistake that revenue growth for online educational toy sales is front-running its brick and mortar relation by a significant margin. Online sales now form a significant share of sales for educational toy companies with the vision to participate in this channel. On example is Fat Brain (see Davis, 2008, p. 1), which has most of its sales online. It also takes advantage of the infrastructure services provided by Amazon to reduce the risk and cost of selling online by sharing Amazon server capacity, technical services and expertise.

Carson (2009, p 1) reports that Fat Brain is now on the Internet Retailer’s Hot 100 List. Furthermore, Inc. Magazine (2008, p 1) reports the astonishing growth in Fat Brain sales of 428% from 2002-2008. It also reports that the company is ranked number 40 in the Top 100 Consumer Product Companies. Not bad for a small family owned business that started in a garage selling educational toys through local stores.

What about established players? According to Internet Retailer (2006, p. 1), Toys-R-Us online sales jumped 20% with increasing strength in both number of orders and average order size. Although they do not specialize in only educational toys, they do sell them and experienced a 33% growth in sales of toys for toddlers. Hughes (p 32) reports that Disney has experienced phenomenal success in selling educational toys by “redefining babies solely as learners whose potential to learn can be released by consuming these products.” The combined message is a powerful indicator that online sales of educational toys for toddlers yield rich returns.

Are there other examples? Consider Leapfrog, an educational toy vendor who sells in brick and mortar retail stores, through its own online store and through online channels like Yahoo Shopping. In its quarterly filing with the SEC (see SEC, 2009, p. 15), Leapfrog reports that it plans to increase its online presence. This is in spite of, or perhaps because of the beating retailers are getting from the economic downturn (see SEC, 2009, p. 14).

The Discovery Channel (2008, p. 12) reported in its 10-Q news conference review that it closed all brick and mortar stores on May 17, 2007 and now will sell its educational products solely through catalog and their online store. They further inform us (p. 3) that they are aggressively investing in their online properties. Web traffic to their Web sites almost tripled from March 2007 to March 2008 from 13 million unique visitors per month to 33 million. Please note that the report does not break out visits to their online store from visits to their informational sites.

What about the high profile failures
The most high profile failure for an online toy company was eToys. Sliwa (2001, p 1) reports that eToys faced strong Internet competition from Amazon. As noted above, Amazon is now willing to partner with toy sellers. Moreover, Gomolski (2001, p. 72) goes into more depth about why eToys withered before Amazon. She reports that the eToys business model was based on competitive pricing but they had neglected to build awareness about their pricing. In addition, they failed to use the Internet to build customer relations of any kind. This resulted not only in inadequate brand awareness but also a failure to connect with children.

Moreover, eToys did not have the critical mass to reach profitability quickly and at the same time did not have cash flow from conventional business operations to sustain itself. The result is that eToys was not able to initially compete online with Amazon and could not sustain itself until it could.

How Can We Trust the Data
Can we trust the information used in this report? The sources are well respected. Inc. magazine, InternetRetailer, ComputerWorld, and InfoWorld are news magazines of note. They follow standard journalistic practice, which is designed to ensure reliable reporting. The Contemporary Issues in Early Childhood is a professional journal. Articles are peer reviewed to again ensure information reliability.

McDaniels and Gates is an academic textbook. It has been reviewed by the editorial board of John Wiley, one of the most trusted publishers. Finally, audited 10-Q statements are filed with the federal government. Heavy penalties under the administrative law are assessed for publishing false information on these statements.

Recommendation
KidzBiz has a lucrative opportunity to expand its sales and establish a presence in a new and growing sales and distribution system, the Internet. That system is placing relentless pressure on traditional brick and mortar operations. Today, KidzBiz is solely dependent on that old tired soldier. The next step should be to review Kidz Biz internal customer, product and sales data.

Johnson (2009, p. 3) says that, “secondary data can be greatly enhanced when merged with internally-generated data.” Kuchinskas (2003, p. 2) reports that in 2000 Dell experienced declining growth in the educational market because of tightening education budgets. They responded with a database-marketing program to the education sector. Database marketing on the Internet should enhance KidzBiz sales.

References
Carson, Mark (January 8, 2009). Fat Brain Toys Named To Internet Retailer’s 2009 Hot 100 List. Fat Brain Press Release. Retrieved on May 26, 2009 from http://www.fatbraintoys.com/about_us/press.cfm?pr_id=62

Davis, Don (September 2008). Advantage Amazon. Internet Retailer. Retrieved on May 26, 2009 from http://www.internetretailer.com/article.asp?id=27583

Discovery Holding (May 8, 2008). Discovery Holding Company First Quarter Earnings Release. Retrieved on May 27, 2009 from http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/05-08-2008/0004809260&EDATE

Gomolski, Barb (02/05/2001). Going global: Some lessons from eToys and Yahoo that might help you. InfoWorld. Retrieved on May 29, 2009 from EBSCOHOST.

Hughes, P (March 2005). Baby, It's You: international capital discovers the under threes. Comtemporary issues in early childhood. Contemporary Issues in Early Childhood. Retrieved on May 26, 2009 from
EBSCOHOST and http://www.wwwords.co.uk/pdf/viewpdf.asp?j=ciec&vol=6&issue=1&year=2005&article=4_Hughes_CIEC_6_1_web&id=74.6.25.186.

Inc. Magazine (2008). Company Profile: Fat Brain Toys. Retrieved on May 27, 2009 from http://www.inc.com/inc5000/2008/company-profile.html?id=200808330

Internet Retailer (June 21, 2006). Toysrus.com swings into the black in first quarter. Retrieved on May 26, 2009 from http://www.internetretailer.com/dailyNews.asp?id=18996

Johnson, E. (2009). Using Secondary Data & Databases. Retrieved on May 30, 2009 from WVU www.imc.wvu.edu.

Kuchinskas, Susan (Sep 2003). Data-based Dell. Adweek Magazines' Technology Marketing. Rertieved on June 5, 2009 from WVU IMC 611 week 3 readings.

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

SEC (March 31, 2009). Form 10-Q for Leapfrog Enterprises. Retrieved on May 27, 2009 from http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=6580220-812-158026&type=sect&TabIndex=2&companyid=108193&ppu=%252fdefault.aspx%253fcik%253d1138951

Sliwa, Carol (1/8/2001). Facing Tough Rivals, eToys Nears Oblivion. Computerworld. Retrieved on May 29, 2009 from EBSCOHOST.

Using ColdFusion to add XML data to a SQL database

noreply@blogger.com (George) — Wed, 22 Jul 2009 16:44:00 +0000

Using the ColdFusion XML document object can present some unexpected challenges when updating databases. Variable references to elements in this structure do not return values as one might expect but instead return new structures. Useful ColdFusion functions such as <cfoutput> resolve these new structures into values behind the scene, which can mislead you when trying to debug wrong values being placed into the database.

As an example, consider the following. An xml file has a field named ICN, among others. We will read the file and update a SQL database. First, we get a file handle.

< cffile variable="gmrXML" file=" “wits.xml" action="read">

Then a ColdFusion XML Document Object datatype, using our file handle and the ColdFusion xmlParse() function:

< cfset myxml=" xmlParse(gmrXML)">

When we use cfoutput to see what we have, all is well:

<cfoutput>
<cfloop to="#arrayLen(myXML.incidentList.Incident)#" from="1" index="i">

#myXml.incidentlist.incident[i].ICN#
…

The output on our Web page shows the ICN value we expect:

200458431

Good enough. We now add it to our database with the following code:

<cfquery datasource="SMC" name="loadSMC">
Insert into aIncident(ICN)
values(#myXml.incidentlist.incident[i].ICN#
< /cfquery>

and when we look, the value in the ICN column in the database is not 200458431 but instead is

<?xml version="1.0"?>

This disappointing result is because in the cfquery above, we were treating the ICN reference as a value. cfouput helped in this deception because we could treat it as a value with this sophisticated function. A look at cfdump shows what happened.

Here is a dump of the reference:

It is not a value but a structure. To get to the value we want, we need to add .xmlText to the end of the reference we used so that the query now looks like:

<cfquery datasource="SMC" name="loadSMC">
Insert into aIncident(ICN)
values(#myXml.incidentlist.incident[i].ICN.xmlText#
</cfquery>

This works as expected.

ColdFusion Program to Read XML File

noreply@blogger.com (George) — Mon, 20 Jul 2009 14:11:00 +0000

Markup encodes and transfers metadata about information such as its structure and format. XML is a markup language, derived from the much earlier SGML, which uses strings of short words to surround the data it is describing. These strings of short words are known as tags. An example would be <name>George</name> <phone>555-1212</phone>.

With XML, a structural model of the data in a file can be encoded along with the data. The structure can be as simple as name and phone or much more complex, with fields like name and phone embedded in other fields like employee. A style sheet, an XSL, can be used to transform the tagged data in an XML file into a Web page. Likewise, a schema file, an XSD, can communicate database information in database operations.

ColdFusion provides a subset of functions that enable a programmer to operate on XML files. A typical operation would be to read an XML file, work on it and write it, perhaps to a database. A datatype in ColdFusion has been created for XML and is known as the XML document object. By doing this, Adobe extends the reach of its already existing ColdFusion structure functions to encompass XML data as well.

Structures consist of objects, properties, and objects embedded in other objects. Name and phone embedded in employee is an example. The dot operator is used to delimit what object in a structure you want to access. The general syntax is <object>.<object>, <object>.<property>. These can be combined to get for instance <object>.<child object>.<property>, so to access my phone number, we would use the dot operator: <employee>.<phone>

The following ColdFusion code uses some of the XML functions to read an XML file. It starts by validating the XML data file to ensure that it is consistent with its schema.

<cfset myResults= XMLValidate ("wits.xml", "wits.xsd")>
<cfoutput> Is Valid? #myResults.status#!
</cfoutput>

Next, a file handle is obtained.

<cffile variable="gmrXML" file=" “wits.xml" action="read">

Then we get a ColdFusion XML Document Object datatype using our file handle and the xmlParse() function:

<cfset myxml=" xmlParse(gmrXML)">

Now we are ready to loop through the data, and display different field values. This test file consists of a series of incidents embedded in an incident list. In addition to its own properties, an incident will have an embedded list, or object, of one or more incident types. In addition to this, it will have, an embedded facilities list, of zero or more facilities involved in the incident. These embedded lists correspond to embedded objects or to child tables in a database.

<cfoutput>
<cfloop index="i" from="1" to="#arrayLen(myXML.incidentList.Incident)#">
Incident 
#myXml.incidentlist.incident[i].ICN# 
#myXml.incidentlist.incident[i].Subject# 
#myXml.incidentlist.incident[i].Summary# 
#myXml.incidentlist.incident[i].IncidentDate# 
Event Type 

<cfloop index="j" from="1" to=
"#arrayLen(myXML.incidentList.Incident[i]. EventTypeList.EventType)#">
#myXml.incidentlist.incident[i].EventTypeList.EventType[j]# 
</cfloop>
 Facilities 
<cfif StructKeyExists(myXml.incidentlist.incident[i].FacilityList,"Facility")>

<cfloop index="j" from="1" to
"#arrayLen(myXML.incidentList.Incident[i]. FacilityList.Facility)#">
#myXml.incidentlist.incident[i].FacilityList.Facility[j].FacilityType# 
#myXml.incidentlist.incident[i].FacilityList.Facility[j].Indicator# 
</cfloop>
<cfelse>
No facility for this one
</cfif>
</cfloop>
</cfoutput>

The ColdFusion arraylen is used in the “To” parameter of our loop to return the number of Incidents in this incidentlist. There is one incidentlist per file. Our dot operator starts with the file handle, then refers to the incidentlist we know to be in file (because we validated), and the particular incident is referenced with our index variable [i]:

myXml.incidentlist.incident[i].ICN

The incident number property, ICN, is accessed from the record just read from the file. For EventType, it is very similar. Since we know we will have at least one Event Type in every incident (one or more), the following code is sufficient:

myXml.incidentlist.incident[i].EventTypeList.EventType[j]

On the other hand, we may not have a facility (zero or more) and will get a null pointer exception if we try to dereference a facility in an empty facilitylist. We need to use the ColdFusion StructKeyExists function to test if a facility object is embedded in the facilitylist for the current record.

<cfif StructKeyExists(myXml.incidentlist.incident[i].FacilityList,"Facility")>

If so, then we loop through the facilities involved in the incident, else we indicate no facility.

The Marketing Research Report: Now and in 1964

noreply@blogger.com (George) — Sun, 19 Jul 2009 14:22:00 +0000

The information obtained from marketing research is useful for analysis and decision-making. McDaniel and Gates (2008, pp 5-7) state that research is a fundamental means of understanding the environment, and how organizations and individuals exist, work, compete and make decisions. They go on to say that research provides data on the effectiveness of organizational actions, and insights into organizational changes needed to change the outcomes in the environment.

Furthermore, research is the basis for exploring new opportunities in the environment. Research helps segment the environment, and match segments with the characteristics or the product or action. Reporting research findings is an essential part of making it actionable. Johnson (2009, p. 1) advises us “the research report, the final step in the research process, requires thoughtful preparation and presentation.”

What are the key components to a research report?
With one interesting exception, the key components of a research report have not changed much since Boyd and Westphal published their Marketing Research text in 1964. Some forty years on, McDaniel and Gates (2008, p. 468-9) still have the following elements:

Title Page: The name of project.

Table of contents: A list of major sections.

Executive summary: Key findings and recommendations.

Background: Strengths, weaknesses, opportunities and threats.

Methodology: although Boyd, et al organize this with three major subsections, the research design, collections methods, and sampling.

Findings: A summary of results for every question in the survey.

Appendices

Boyd and Westphal have these same sections but also include a major section on Limitations. They note (1964, p. 575) that “A good report sells the results of the study, but it should not oversell. Every project has limitations.”

McDaniel and Gates (p. 470) tell us that the report interprets findings to arrive at conclusions using induction and then deduces recommendations from the conclusions. Induction starts (pp 470-2) by examining one-dimensional tables and then it cross tabulates to see how characteristics both independently and in tandem affect the dependent variable. A recommendation explains how a differential advantage can be obtained (p. 472). Finally, contrary to popular belief, the report does use pictures and graphs.

How would you incorporate those components into an effective research presentation?
Rubin and Babbie (2005, p. 661) admonish us to know our audience. They emphasize that the report writer must distinguish between professional colleagues and business readers. It is critical to not make assumptions about the existing knowledge of business readers. They go on to say that with business readers it is best to keep terminology simple and clear.

Furthermore, summaries and visuals appeal to business readers as does expressing the implications for their area of operations. Neal (1998, p. 23) recommends that we take time to explain complex analysis and data to our business audience. Doing so will build confidence in the research.

Boyd and Westfall (1964, p. 570) say that to make the report effective, start at the beginning. The report writer must keep the study objectives in mind when writing the report. The writer should be selective of what is included in the report, making sure it is related to the objectives. McDaniel and Gates (2008, p. 468) likewise suggest keeping the report strictly oriented to the objectives. They say, “The genesis of the report and the researcher’s thinking are the objectives provided by the client….”

McDaniel and Gates further tell us to be storytellers (p. 468). With mountains of information, the challenge to the report writer is how to package it into a coherent message. Story telling helps. They finally inform us that Microsoft PowerPoint is not only used for the oral presentation but often for the written report (p. 470). This has been my experience at work. Vendors, including prestigious firms like Booz Allen, submit final reports as PowerPoints. It is fitting with our over burdening workloads.

How does the written report differ from the presentation in terms of its function and format?
Boyd and Westphal (1964, p. 579) say the oral presentation demands “greater use of dramatics”, in other words more use of visual aids. They also suggest that transparencies, what we now call PowerPoint slides, make greater use of “headline style” writing. McDaniel and Gates (2008, p. 473) note that the presentation is an assembly of stakeholders who need to get “reacquainted with the research objectives and methodology.” They say that a copy of the full report along with the visual presentation should be handed to the participants.

The presentation must succinctly express the following (p. 475) as part of the persuasion process. First, interpret what the data mean and the impact on the organization. Next, we have learned something and does this new knowledge reveal new opportunities? Finally, what could be done better? This last point goes to the Boyd and Westphal inclusion of a Limitations section in the report itself.

McDaniel and Gates (2008, p. 476) offer the possibility of using Web technology to publish the presentation. We have done that at work. It is easy to publish a PowerPoint as a self-contained Web page or as an attachment to a blog. The blog allows for community feedback and commentary. We deal with an organization of lawyers, so we still need the face-to-face and the cross-examination in person, even if we post on a Web page

References

Boyd, Harper and Ralph Westfall (1964). Marketing Research Text and Cases. Richard Irwin.

Johnson, E. (2009). Communicating Research Results & Managing Marketing Research. Retrieved on July 11, 2009 from www.imc.wvu.edu.

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Neal, William D (Spring 1998). The Marketing Research Methodologist. Marketing Research.

Rubin, Allen and Earl Babbie (2005). Research Methods for Social Work. Thompson/Brooks/Cole.

The HERI College Senior Survey

noreply@blogger.com (George) — Sat, 04 Jul 2009 13:13:00 +0000

The Higher Education Research Institute (HERI) at UCLA executes a national survey every year to better understand the college experience so that higher education can be improved. They use a meticulously laid out questionnaire and this year’s version is available at: GSEIS. Christian and Dillman (2004, p. 78) found that the amount of space and how it is apportioned can affect response. The HERI questionnaire has evenly apportioned and pleasing spaced formatting.
They exclusively use close-ended questions with a mix of dichotomous, multiple choice, and mostly scaled response. While their questionnaire is highly organized, it does not always reflect the principles of questionnaire design espoused by marketing research. Applying these principles would improve their instrument.

McDaniel and Gates (2008, p. 298) note that dichotomous questions are often subject to measurement error because they offer only black and white choices when many times shades of gray are needed. This is not the case with the HERI questionnaire. Question 6 is the only set of dichotomous choices and they are truly yes/no.

The first three pages of the HERI instrument are mostly scaled response questions. They not only allow seniors to express an opinion about a subject but also calibrate the intensity of that feeling (p. 299). A potential problem with scaled response, remembering category options, is avoided in this questionnaire by its careful design.

The fourth page introduces multiple choice questions. McDaniel and Gates (p. 299) warn that the choices may not cover all alternatives but this may be mitigated by offering an ‘other’ choice. HERI does not do this. They should to improve the questionnaire over time. In addition, Question 27 may have positioning bias. The two positive answers about colleges are positioned where they are most easily seen.

The next question reveals another common problem in the questionnaire. McDaniel and Gates (p. 301) say that words should have the same meaning to all respondents and that, additionally, words used in questions should have a precise meaning. In Question 28 both flaming liberals and draconian conservatives could indicate themselves as moderate. This same issue occurs in Question 13 about drinking frequently or occasionally. What I consider occasional, someone else may consider frequent. Finally, in Question 5, what does the word regularly mean in “regularly communicated with professors?” Specific guidance about how many for frequent, occasional and regular is needed.

Sensitive or embarrassing questions are handled by HERI in a robotic manner. In Question 13 students are directly asked about mental depression, the need for professional counseling, and alcoholic drinking habits.

Question 19 asks about marijuana, same sex marriage, denial of services to undocumented immigrants, and affirmative action. Many may be sensitive to these issues and McDaniel and Gates (p. 327) recommend using one of two techniques in such cases: 1.) Counterbiasing; or 2.) 3rd person voice. HERI does not. This is not an anonymous survey.

McDaniel and Gates (p. 301) also admonish us not to ask questions the respondents could not answer correctly. In Question 14, HERI asks students to guess what quintile they are in for various aptitudes or domain knowledges. Ambrose and Anstey (2007, p. 28) state that an important topic category in a survey is measuring the knowledge of the population. By this they mean discovering the levels of understanding. However, in the HERI survey, the students would have no frame of reference for knowing the answers to the various parts of Question 14 and so McDaniel and Gates apply with full force.

McDaniel and Gates (p. 302) also recommend that time periods be kept recent. They highlight a question as poorly worded because its time period is a year. In Question 9 of the HERI instrument, the time period of a year is used in twenty parts to that question. As McDaniel and Gates ask, unless the students kept an accurate diary of each of the twenty activities, how would they know? A better approach is to ask how much the respondent has done in the past two weeks and then if that is more or less than average (p. 302).

All in all, I found the HERI questionnaire to be well done but a few questions could be fine tuned to get more complete and more accurate results.

References
Ambrose, David and John Anstey (March 2007). Better Suvey Design is Stick for an Answer. ABA Bank Marketing. Retieved from http://www.imc.wvu.edu/ on July 4, 2009.

Christian, L and D DIllman (Spring 2004). THE INFLUENCE OF GRAPHICAL AND SYMBOLIC LANGUAGE MANIPULATIONS ON RESPONSES. Retieved from http://www.imc.wvu.edu/ on July 4, 2009.

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Assessing the Impact of a Sexual Harassment Lawsuit at a Metropolitan Restuarant

noreply@blogger.com (George) — Sat, 27 Jun 2009 23:38:00 +0000

A popular metropolitan restaurant recently suffered the negative publicity of a sexual harassment lawsuit. The courts settled the suit in favor of the restaurant, but an interesting question is how would we measure the damage to the restaurants brand equity. Since I had our mandatory Fair Employment Practices training this week, it's an apropos topic.

Exploratory Research

Harris and Smith (2002, p. C1) define a crisis as any newsworthy event that has happened or will happen in the near future that has the potential for adverse publicity. The sexual harassment event associated with the Restaurant X satisfies their definition of a crisis. In his section on public relations, Duncan (2005, p. 563) says that this type of incident should be treated as a crisis because of the extreme impact it poses to Restaurant X’s “reputation and brand relationships.”

Lichtenstein, et al (2004, p. 29) reinforce Duncan’s premise by noting that corporate social responsibility strengthens brand equity and say its impact goes beyond sales. This means that a consumer perception of Restaurant X as an environment that condones sexual harassment will have a negative effect not only on sales. A reduction of brand equity will also result and with it there will be a consequent loss of owner equity. It is vitally important for Restaurant X to verify through marketing research the attitudes its publics harbor about the incident.

What type of survey research should be initiated

Management should already understand that negative publicity in general affects customer retention. They will want to know if their specific sexual harassment publicity is reducing their customer retention and sales. The goal of this marketing research should be to “shed light on [this specific] association or relationship,” which is how McDaniel and Gates (2008, p. 49) characterize a descriptive research design.

The basic method of research should be survey. McDaniel and Gates (p. 50) inform us that experiments are typically used only for causal research designs. Observation would be an inefficient approach to determine opinions and attitudes on the restaurant’s sexual harassment case because there is no direct interaction with the customer. Surveys are “an orderly and structured approach” to understand “opinions and attitudes.”

This research should be quantitative. Qualitative research is “not necessarily representative of the population of interest,” (see McDaniel and Gates, 2008, p. 110). Surveys are a good tool to find out what factors influence consumers (p. 142); in this case, did the publicity influence customer retention and sales. Of the various types of surveys, I recommend Computer-Assisted Telephone Interviews (CATI).

Why CATI?

In this situation there is a tradeoff between turnaround speed, measurement error, and cost. CATI is the optimal strategy, with Internet Panels a close second. Johnson (2009, p. 2) notes that non-response bias is a significant source of measurement error. He also informs us that both telephone and mail surveys are subject to increasing non-response rates.

Thee (2007, p. 1) reports another problem with telephone surveys for the restaurant: because of the substantial use of cell phones, telephone sampling frames are no longer geographically based. On the other hand, the restaurant public is geographically bound. Thee goes on to say that households with only a cell phone numbered 16% in 2007 (p. 1) and this could grow to 25% by the end of 2008.

CATI can help here. McDaniel and Gates (p. 152) inform us that the computer can customize each questionnaire according to how the respondent answers previous questions. We could ask if they are currently in the metro area. If not and they have no intention of visiting the metro area, then we could close the interview.

McDaniel and Gates (p. 365) also report on a method for determining the extent of nonresponse bias. They cite two studies that suggest nonrespondents are not a clearly distinct subgroup from the general population. To find out for certain in this case, only a very small follow-up survey using nonrespondents as the sampling frame need be conducted.

Johnson (2009, p. 1) informs us that restaurants make frequent use of self-administered surveys. The reason they are not the best solution in this case, is that customers already lost to Restaurant X because of the lawsuit won’t be patronizing the restaurant anymore. In addition, a self-administered survey approach will not have the same quick turnaround as online techniques (see Johnson, 2009, p. 2).

Interviews such as door-to-door and executive would have little traction with the immediate needs of the restaurant. Mall intercept interviews would be too expensive, and in addition, McDaniel and Gates (2008, p. 172) say to avoid such an approach when the incidence rate is low because it will be too expensive. The number of patrons of Restaurant X is low compared to the total population in the metropolitan area.

Internet Panels have been used in other crisis management situations. Duncan (2005, p. 564) reports that McDonald’s setup a panel to protect its reputation from the fallout over a fraud perpetrated in its promotional games. McDaniel and Gates (p. 156) also discuss the advantages of panels. Johnson (p. 2) informs us that “companies like Survey Sampling” provide consulting expertise to “construct a sample to match the target population” and then rent a panel from their large database. Still, as Johnson (p. 2) observes “The internet population is not representative of the population as a whole,” and “Internet users are concerned with privacy and, thus, may refuse the survey.”

What topics should the survey cover?

First up is demographics such as gender, age, and race. The next topic would investigate level of awareness. It would be used to discover the news sources that informed the respondent about the lawsuit, as well as their knowledge about the particulars of the case, and knowledge about Restaurant X policies and training to prevent sexual harassment.

The third topic would be to determine their opinion about how Restaurant X handled the sexual harassment accusation. Duncan (2005, p. 563) says that for such a crisis it is a good idea to survey opinion about the company’s level of honesty, helpfulness, speed of response, clarity, and consistency of message.

The fourth topic would be to find out from patrons about their experience with the restaurant. Have they ever witnessed sexually harassing behavior at the restaurant? Has the staff been professional and courteous? The fifth topic would be to establish the factors that influence Restaurant X patron decisions to frequent a restaurant. An important aspect here is how did the sexual harassment lawsuit affect their opinion about Restaurant X and their willingness to be a customer? The sixth topic would be open-ended questions to find out their opinions about what further steps Restaurant X should take.

The survey population

The population is the existing, lost and potential customers of Restaurant X in the metropolitan area. With no further information from the restuarant advertising or news stories, I will assume that the entire metropolitan area should be viewed as potential customers. To focus only on existing customers would not discover the opinions of lost customers. Additionally it would exclude the only source of growth, new customers.

The sampling units and sampling frame

The sampling unit would be households because people tend to go to restaurants as a family or as a couple and not alone. The sampling frame should not be the telephone directory for the metropolitan area. McDaniel and Gates (pp 333-4) list the problems with the telephone directory including problems with unlisted numbers and their prevalence among non-whites and younger people. Instead random-digit dialing from phone exchanges in the metropolitan area will form our sampling frame.

Simple random sampling will be used to create our random-digit dialing frame. Johnson (2009, p. 3) notes that probability sampling, like simple random, gives the researcher a representative sample of the population. Specifically for simple random sampling, a computer can randomly select the sample and this is consistent with the CATI approach I recommend.

The sample size

The main difference between qualitative and quantitative research is sample size (see McDaniel and Gates, 2009, p.108). Managers are more “comfortable with marketing research based on large samples and high levels of statistical significance” (p. 109). Another factor that will affect our sample size is the required confidence level. Wilson and Ogden (2004, p. 56) say that

"Survey research requires at least a 95% confidence level and a margin of error of less than 5% to be actionable.”

Do we need to know the exact population size for the metropolitan area? Using a sample size calculator it quickly becomes apparent that after a certain point increasing population size by an order of magnitude does not increase sample size requirements by more than a single person or two. Creative Research Systems (2009, p. 1) provides a Sample Size Online Calculator that I used to calculate the following sample sizes:

(The calculator is at Creative Research Systems).

Given the gravity of sexual harassment allegations and the damage to brand equity, owner equity and ongoing sales, I recommend a sample size of 384.

References
Creative Research Systems (2009). Sample Size Calculator. Retrieved on June 17, 2009 from http://www.surveysystem.com/sscalc.htm

Duncan, Tom (2005). Principles of Advertising and IMC. New York: McGraw-Hill Irwin.

Harris and Smith Public Affairs (July 3, 2002). Public Relations Handbook. Retrieved on June 10, 2009 from http://www.awphd.org/PRhandbook/PRhandbook.pdf.

Johnson, E. (2009). Quantitative Research: Surveys & Sampling. Retrieved on June 11, 2009 from http://www.imc.wvu.edu/.

Lichtenstein, Donald R., Drumwright, Minette E. & Bridgette M. Braig (October 2004). The Effect of Corporate Social Responsibility on Customer Donations to Corporate-Supported Nonprofits. Retrieved on June 9, 2009 from http://www.imc.wvu.edu/.

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Thee, Megan (December 7, 2007). Cellphones Challenge Poll Sampling. NY Times. Retrieved on June 10, 2009 from www.imc.wvu.edu.

Wilson, Laurie and Ogden, Joseph (2004). Strategic Communications Planning, 4th Ed. Kendall/Hunt Publishing Company.

Measuring Attention and Packaging Design

noreply@blogger.com (George) — Sat, 20 Jun 2009 16:28:00 +0000

A national cereal company has developed a new, healthy cereal for teens. Currently, the company is considering two package designs and would like to assess the effectiveness of each package design in getting the attention of teenagers.

Independent and dependent variables, treatment groups, the design and control for extraneous factors.
Percy (2008, p. 256) notes that mothers are key decision makers for family health and eating habits. Teenager awareness and acceptance, and mother acceptance will jointly determine the purchase decision. Our task is to test the effectiveness of two alternative package designs in getting teenager attention. The dependent variable is teenager attention. The independent variable is package design.

Wilson and Ogden (2004, p. 36) define an influential as an opinion leader, and observe “that people follow the advice of someone they trust and has knowledge on the subject.” We want teenagers who eat cereal but who are also influentials. They will be our subjects. This is a new product and the most important group to reach in this introductory phase is the influentials.

McDaniel and Gates (p. 114) also recommend “Influentials.” They say these people are two to five years ahead of the curve and have significant influence among their peers. They say, “Recruiting influentials is particularly useful when a marketer is trying to determine to launch a new product….” Brooks (2006, pp 31-2) agrees and further says, “A growing body of consumer research suggests the 60-second conversation is dethroning the 30-second ad.”

We will have two experimental groups and one control group. Experimental group one will view package design one. Physiological Measurements will be made to monitor their response to the package design. These measurements can show interest and arousal levels (see McDaniel and Gates, 2008, p 192). The treatment is to show them the design. Likewise for experimental group two but for package design two instead. The control group won't be shown either proposed design.

There are problems with measuring attention because it may change during the testing process and also the subjects know they are being tested for it (see Boyd and Westfall, 1964, pp 105, 111). A control group can help compensate for this. The control group will share the exact same experience as the two treatment groups, except they will not be exposed to a package design.

They will, however, be read the same statement about the new product and package designs and that they will be measured. McDaniel and Gates (p. 219) note that the control group is not subject to treatment, in this case exposure to one of the package designs. Their participation can be used to dampen extraneous factors, like the anticipation of knowing they will be measured.

Experimental design and conduct of the experiment.
The steps are

Three groups of influentials will be randomly selected

Physiological Measurements will be made of each group

Each group will be read each the same statement about the new product

For the control group, the post measurement will be taken

For the two treatment groups, show each their respective packaging designs only and take measurements

The research design is a True Experiment Design (see McDaniel and Gates, 2008, p 219), the Before-and-After with control design (p. 219). The test subjects should be assigned to each group randomly to control extraneous effects. The experiment should be held in a lab for high internal validity (p. 211).

References
Boyd, Harper and Ralph Westfall (1964). Marketing Research Text and Cases. Richard Irwin.

Brooks, Steve (November 2006). How to Build Buzz. Restaurant Business. Retrieved on June 19, 2009 from EBSCOHOST.

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Percy, Larry (2008). Strategic Integrated Marketing Communications. Butterworth-Heinemann.

Wilson, Laurie and Ogden, Joseph (2004). Strategic Communications Planning, 4th Ed. Kendall/Hunt Publishing Company.

A New Logo for Wendy's?

noreply@blogger.com (George) — Sun, 14 Jun 2009 14:03:00 +0000

Background
Wendy’s is an international fast food chain that ranks third in hamburger joints behind McDonald’s and Burger King (Hoover’s, 2009, p 1). It has over 6,500 locations in the United States and more than 20 countries worldwide. Management is considering changing the Wendy logo and brand character to keep it current. There is a concern that changing the well-known logo could have adverse repercussions. To study consumer opinion a series of personal interviews will be conducted.

According to Keller (pp 156-159), logos and brand characters are an easily recognizable way to identify a company and product. They are central to advertising campaigns and packaging. He says they can “create perceptions of the brand as fund and interesting.” However, (p. 158) he also notes they must be changed from time to time. Betty Crocker spent over $1M to update its tired brand character (pp 164-5). This $1M price tag is also the case for updating a logo (p. 157).

Sampling Method
The background information shows the importance of correctly updating a brand character, and that an appropriate budget must be allocated to this important task. Having an accurate cross-section that is representative of Wendy’s customers outweighs cost. We do not want to draw incorrect conclusions by using a sampling method known to be inaccurate.

The life-cycle of a sampling plan is to define the population, choose a data-collection method, identify a sampling frame, select a sampling method, determine sample size, develop operational procedures, execute the plan (see McDaniel and Gates, 2008, p330). This specific assignment is to select and justify a sampling method. Our first decision is between probability samples and non-probability samples. McDaniel and Gates (p. 334) note that probability samples are better for obtaining a representative cross section of our population. Given the importance of the logo or brand character, we need to have the best representation we can get. The trade-off is cost but we should have a budget commensurate with the task.

Next, we must decide among the several probability sampling methods. I like the stratified sample because it has a smaller sampling error than the other methods (see McDaniel and Gates, 2008, p. 341). It is more efficient because it eliminates one of more sources of variation through the stratification process. The researcher is making the “sample be more representative by making sure that important dimensions of the population are represented in their true population proportion.”

Wendy's should stratify on country. According to Hawkins, et al (2007, p 40) cultural factors that like language, demographics, values and nonverbal communications can impact marketing communications. A cultural faux pas with a brand character or logo can make Wendy’s appear like confused Martians. Using country to stratify, I can also avoid the main drawback on stratified sampling – we usually don’t know in advance the proportions of the strata (see McDaniel and Gates, 2008, p. 342). However, Wendy's consolidated financial statements do have that information.

Finally, should the method be proportional allocation or disproportional allocation? In this case, the method should be proportional because it is easy to calculate the relative number of locations in each country to the total number of locations (p 342). Within each country (strata), do simple random sampling with a sample size proportional to the relative percentage for the country.

To collect the data, the store intercept survey type can be used (see McDaniel and Gates, 2008, p. 150). As a style of mall-intercept survey, it would share many of the same advantages and disadvantages. The interviewer can show proposed Wendy’s logos, explain and probe (p. 171). On the other hand, the respondent may be distracted, or in a hurry. Further, there is a greater opportunity for interviewers to select the people to interview in a non-probabilistic manner. Strict operational procedures should be defined.

References
Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

Hoovers (2009). Hoover's Profile: Wendy's International, Inc. Retrieved on June 7, 2009 from http://www.answers.com/topic/wendy-s-international

Johnson, E. (2009). Quantitative Research: Surveys & Sampling. Retrieved on June 7, 2009 from http://www.imc.wvu.edu/.

Keller, K (2008), Strategic Brand Management. Pearson/Prentice-Hall.

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Ruger at a Crossroads

noreply@blogger.com (George) — Sun, 07 Jun 2009 12:48:00 +0000

Strategic Opportunity for Sturm Ruger Firearms
Ruger is the apex predator in the revolver market in the United States but has little presence overseas. Moreover, its domestic market share is under fire from semi-automatic handguns. It has an opportunity to expand its sales internationally through revolver sales to Europe. In Europe, countries such as Finland, Norway, Sweden, Switzerland, Serbia and the Czech Republic have gun control laws similar to the United States (see Dodds, 2007, pp 1-2 or MacInnis, 2007, pp 1-2 or Wikipedia, 2009, pp 1-5). As an example, the U.S. has 90 guns per 100 citizens and Finland has 56. In Germany, a valid firearms license is required for each firearm that is owned. Nevertheless, even Germany represents a sales opportunity.

In its 10-K Report, Sturm Ruger & Co. states (see SEC, 2008, p 4) 94% of its firearms sales are to the domestic market. Their units shipped reported in the 10-K (p. 23) are

According to Motley Fool (2007, p 1) in its analysis of Sturm Ruger and Company, the competition in the U.S. firearms industry is fierce and comes from both domestic and foreign competition. They go on to say that the handgun market has constant growth but that Ruger lags the growth. Aggressive competitors like Smith & Wesson are taking market share from Ruger. They conclude that Ruger has no “strategic initiatives that could fuel the growth prospects.”

I have used the Google Trends service (www.google.com/trends) to analyze search engine requests for the word “Ruger.” What I found was fascinating. There is a significant overseas search interest in Ruger. I contend that search interest will translate into purchase intent. This is a largely untapped market for Ruger. I then compared Ruger with Glock. Here are the results.

It is similar with the other competitors and shows a surprising interest in Ruger overseas.

In-depth Interviews
Glock, Beretta and Walther are powerful international competitors to Sturm Ruger & Co. They do not have an appealing lineup of revolvers but instead have focused their attention on the semi-automatic pistol. I need to use in-depth interviews to find out the attitudes, beliefs and feelings of European consumers about revolvers versus semi-automatic handguns. Additionally, I need to define the parameters of Ruger’s relationship with the various European gun retailers, who may be competitors with each other.

Given the prevailing preference for European semi-automatics in Europe, I believe an in-depth interview is more appropriate than a focus group to find out attitudes towards revolvers. McDaniel and Gates (p. 127) say that such interviews allow the researcher to devote more time, to more deeply delve into an area, and “ to reveal feelings and motivations that underlie statements.” We need to know if handgun consumers in Europe would consider revolvers and why. The “if” will let us know if such a campaign is feasible, and the “why” will help set marketing strategic direction.

McDaniel and Gates go on to say that in-depth interviews allow research to explore “casual and tangential remarks,” and obtain insight into the main issue. Also, new directions of inquiry can be quickly and dynamically charted. The traditional discussion guide (p.117) of the focus group limits such flexibility.

Furthermore, one segment we will be interviewing is gun retailing. Here the members are competitors to each other and McDaniel and Gates (p. 128) note that in such a circumstance interviews are a better approach. We will need to discuss inventory, advertising and distribution strategies with them that they may not want to reveal in front of competitors.

I believe qualitative research is the best first step. According to Johnson (2009, p. 1), “It [qualitative research] obtains in-depth information on motivations, feelings and behaviors.” Wilkerson (2003, p. 26) says that qualitative research such as interviews allows for “broad and open-ended questions in hopes that the author would be able to capture any significant information” not in our preconceived notion of the issue. Johnson (2009, p. 3) goes on to say that in-depth interviews can reveal detailed aspects of consumer behavior. This makes qulaitative research the best first step in a campaign to introduce modern Ruger revolvers to Europe.

References
Dodds, Paisley (April 17, 2007). U.S. Gun Laws Draw Heat After Massacre. AP. Retrieved on June 7, 2009 from http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2007/04/17/international/i143553D58.DTL

Johnson, E. (2009). Focus Groups & Other Qualitative Methodologies. Retrieved on June 7, 2009 from http://www.imc.wvu.edu/.

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

MacInnis, Laurin (August 28, 2007). U.S. most armed country with 90 guns per 100 people. Reuters. Retrieved on June 7, 2009 from http://www.reuters.com/article/topNews/idUSL2834893820070828

SEC (2008). Sturm, Ruger Annual 10-K Report. Retrieved on June 7, from http://www.sec.gov/Archives/edgar/data/95029/000119380509000482/e605095_10k-sturmruger.txt

Wikipedia (2009). Gun Politics. Retrieved on June 7, 2009 from http://en.wikipedia.org/wiki/Gun_politics

Wilkerson, Kristen Courtney (2003). Cyber-Campaigning for Congress: A Cultural Analysis of House Candidate Web Sites. UT Austin Dissertation.

A Site for Statrats

noreply@blogger.com (George) — Sat, 30 May 2009 15:48:00 +0000

The Census Bureau is an external provider of secondary data. Their hefty Web site is a handy source of demographic data from the largest producer of statistics; it's high quality too. According to McDaniel and Gates (2008, p 72), secondary data is existing data that may have relevance to your research. They go on to say that “sources of secondary data include innumerable government agencies,” including, of course, the venerable Bureau of the Census.

A B2B Report: The Census Bureau ICT
Summary
The Census Bureau has a survey report on its Web site known as the Information and Communication Technology Survey (ICT). Its purpose is to make “available data on e-business infrastructure investment by nonfarm businesses.” It is a supplement to the Annual Capital Expenditures Survey. Microsoft makes significant sales to businesses and these are aggregated in the ICT supplement. Here is a press report on the ICT:

Press Release

and here is the actual report:

Full Report

It lets me see sales data and trends in the information technology B2B sector of the economy with separate segments for computer and communications. The most current data, published in February 2009, is for 2007. No one accused the Census Bureau of being speedy. The report is a series of hyperlinks that let me dig as deep as I want, and it even provides me with Excel worksheets of data so I can graph and chart according to my specific interests.
I hope Microsoft is making use of this survey Web report! Dell too.

Marketing Research Utility
I worry for Microsoft. It is in a Gambler’s Ruin competition with Open Source software, which strikes at the heart of Microsoft – its value add to the economy. Open Source offers for free the software that Microsoft sells and that is the basis for its enormous revenue stream. Gambler’s Ruin is a rivalry between two parties, one with a large, well-established position and the other with a small position but able to compete effectively on individual transactions. Of course, Microsoft is the house. Prudence would dictate they worry about the growth of Open Source.

They should worry too, according to the results of the Census 2007 ICT survey. This table from the bureau gives the raw data 2007 ICT Table 1a.

I have graphed it to show the growing problem.

The graph visually shows that computer hardware sales are growing faster than software sales. I used only computer hardware sales data, no communications gear. The difference may be the use of free Open Source software that does not have a sales transaction. The table below shows more precisely the problem:

I derived these from the Census data. As a side note, Linux (Open Source) demolished Sun Microsystems in business server rooms, and Sun is now defunct. Microsoft is fighting hard to maintain its share in the server room, and almost succeeding.

Microsoft has something else to worry over: the growth in software sales is declining year over year. I wonder what is going on in 2008 and today. Kuchinskas (2003, p. 2) reports that in 2000 Dell experienced declining growth in the educational market because of tightening education budgets. They responded with a database-marketing program to the education sector. The Census data above suggests that worse comes. The entire market may be tightening budgets.

Like Dell, Microsoft does monitor market trends using secondary sources like Census, but they also glean information from data mining. In this sense they are the exception to Krol’s observation (2006, p. 1) that technology companies were late to use data to drive sales. One of the selling points we highlighted in MS SQL Server was its data mining capability and how we used it at Microsoft. We could even link to document collections from places like Census.

Unfortunately, my free Census secondary data leaves me short. 2007 data was published in February 2009. Additionally, secondary data may be insufficient. It may not have the granularity I need for a certain conclusion. To get a better sense on my impending demise, I would need primary market research. However, it is worth noting that secondary data, like Census data, may alert the "researcher to potential problems and/or difficulties" (see McDaniel and Gates, 2008, p. 73).

A B2C Report: the Census Bureau E-Stats
Summary
The Census Web site has useful business to consumer information such as the E-Stats Report, (see Ebusiness 614). This report is the result of a commitment by the Census Bureau to measure the electronic economy. It has sales data on e-commerce activities by sector. The sectors are: manufacturing and merchant wholesaling ecommerce sales (considered to B2B) and retail and select service ecommerce (B2C) sales. The data of this report is available at 2006 Final Report.

The report gives more detailed breakdowns in its appendices that are located at Census 2006 Tables. One of interest is the select services (see Census 2006 Table 4). It shows the revenue vs E-revenue in select industry groups (identified by a NAICS code). The Federal Reserve Board uses this report to track the diffusion of the electronic economy (see Dinlersoz and Murillo, 2005).

Marketing Research Utility
Businesses that deal directly with the customer can use this report to track trends by NAICS industry group to see how fast ecommerce to consumers is growing in its industry. For example, one of the industry groups currently in select services is Arts, Entertainment, and Recreation Services and e-commerce revenue is growing 21.9% per year (latest eStats data is for 2006). A company like Domino’s Pizza can use such a trend to partner with a company in the growth sector to expand pizza delivery to the consumer.

In fact, they did, partnering with TiVo and NetFlix who are in the Entertainment ecommerce trend. Consumers who stream movies can order a pizza at the same time through technology in TiVo. Secondary data from Census Reports can tell Domino’s about growth opportunities. Behavioral targeting from TiVo can help Domino’s and other companies to grow their online business to consumers.

TiVo (2009, p 2) claims to have the most advanced capacity in the television industry to track behavior. Delany and Steel (2007, p. 1) note that Microsoft engages in behavioral targeting, and according to Jopling (2006, p 3-5), Microsoft has taken a commanding lead in IPTV technology. Microsoft is always looking for new industry segments to exploit, but the question for marketing research is which ones. The Census E-Stats report has useful data to tell us which NAICS codes have strong electronic diffusion. Also, as IPTV grows, Microsoft may eventually want to partner with TiVo and its advanced technology, to provide service to the Arts, Entertainment, and Recreation industry.

References
Delany, Kevin and Emily Steel (October 2007). Firm Mines Offline Data To Target Online Ads. Wall Street Journal.

Dinlersoz, EM and Hernández-Murillo, R (January-February 2005). The Diffusion of Electronic Business in the United States. FEDERAL RESERVE BANK OF ST. LOUIS REVIEW. Retrieved on May 30, 2009 from EBSCOHOST.

Jopling, Elroy (4 January 2006). Microsoft's Global Consumer Play Begins to Unfold. Gartner, id number G00136841

Krol, Carol (June 12, 2006). Connecting the data dots. Pro Quest.

Kuchinskas, Susan (Sep 2003). Data-based Dell. Adweek Magazines' Technology Marketing.
McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Tivo (November 2008). Q3 2009 TIVO INC Earnings Conference Call - Final. Fair Disclosure Wire (Quarterly Earnings Reports). Retrieved on May 30, 2009 from EBSCOHOST.

Cheskin Research

noreply@blogger.com (George) — Sun, 24 May 2009 15:13:00 +0000

My former employer, Microsoft, made extensive use of research to understand how to market to each information technology segment. The intent of such research was to help Microsoft establish more powerful social capital than its competitors. Social capital is existing, defined relationships that make transactions easy to accomplish (see Buchanan, 2002, 201-204). Cheskin Research was one of the companies that Microsoft used (see the Cheskin Web site).

Expertise and Methods
Cheskin is what McDaniel and Gates (2008, p 8) would call an applied research firm, one that helps companies better understand the market. Their specialty is multicultural markets in the US, which have grown faster than any other US consumer market. Cheskin applies a proven research process to help firms gain the insight they need into this area of explosive growth.

Cheskin also notes that the "general market" is showing increasing signs of reaching a tipping point on diversity - having powerful ethnic characteristics that will soon invalidate "general market" strategies. McDaniel and Gates (p. 9) observe that companies use firms like Cheskin to do programmatic research to understand “market segmentation, opportunity analysis, or consumer attitude and product usage studies” (see Cheskin on Opportunity).

Their clearly defined research process is very similar to the marketing research process described in the McDaniel and Gates text.

The first step is to envision or frame the objectives of the research (see Envision)
Next, explore to understand consumer needs, segment characteristics, and trends for both competition and the market (see Explore)

Third, create or evaluate the concepts born from the exploration. (see Create) This means that they additionally do Selective research (see McDaniel and Gates, 2008, p 9)

An important next step is to craft a well-told story. (see Inspire) McDaniel and Gates (p. 52) say that “this is a key step” because research “must convince management the results are credible.…”

Finally comes the solid innovation and differentiation for Cheskin, - for a fee they will also act as consumer advocates after the research phase has completed to assure consistency of management action with market need. They call this the Express service (see Express).

Adequacy of Web site
As you can see by the material at the end of the above links, the Cheskin Web site does a good job describing and promoting their services. Furthermore, their site has blogs and podcasts (see Cheskin Blog) and various articles of interest (for example their article on the ROI of Diversity). I also appreciate that their search function has both a directory as well as free text search (see Search). I can go to a topic area and look at only the subject of interest, avoiding the usual irrelevance of many returned results from free text.

How to Improve Web Site
That said, I don’t think they have the perfect site. It is incomplete. As an example, I searched their directory to find if Cheskin used panels and how they handled panel effects. I clicked on Methods and Techniques and the following was presented:

I used their free test search with no better result. Using Yahoo, I was able to find that Cheskin does conduct panels (see Living Room Panel). Dennis (2001, p 1) reports that research firms may create professional panelists who respond differently than the rest of us, the panel effect.

Another issue with the Web site is that it does not organize around customer profiles, but rather it is organized around Cheskin and its functions. In contrast stands the WVU Web site (see WVU Web) that does have customer profiles as well as functions. Each profile tab has content organized according to the interest and comfort level of the profile. University of Maryland is the same (see UM Web). Among others, Lisa Sanders (2007, p 1) advises Website designers to use the concept of “personas” when creating a site. Personas are ”archetypical characters [who] represent specific consumer segments.”

References

Buchanan, Mark (2002). Nexus: Small Worlds and the Groundbreaking Theory of Networks. Norton.

Dennis, J Michael (2001). Are Internet panels creating professional respondents? Marketing Research.

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Sanders, Lisa (4/9/2007). Major marketers get wise to the power of assigning personas. Advertising Age, 00018899 Vol. 78, Issue 15. Retrieved from EBSCOHOST on May 23, 2009

Everybody Got a Chevy

noreply@blogger.com (George) — Sun, 17 May 2009 17:06:00 +0000

This Impala ad is taken from Source magazine. The company, Chevy and the model, Impala were the original lowriders so there is a cultural history in the brand. True, the cars today are different than they were 40 years ago but still history does provide that cultural connection. You can still see the old Impala low riders on the streets today. By employing Hip Hop artists, Chevy reestablishes and reinforces that old connection; this is a ride for the hip.

The artists, Cadillac Don & J-Money did a series of videos on Chevy models. Here’s an example in a Chevy lowrider:

Peanut Butter and Jelly

The "Everybody Got a Chevy" series of videos features a different model in each. It ties in beautifully with print ads commissioned by Chevy employing the Hip Hop artists. The fact that the videos are not traditional video ads only reinforces the leverage in the print ads, since the music videos are now associated with the cars and they appear less mediated. I think we will see more and more non-traditional work federated with traditional.

Evaluation of The Black Swan

noreply@blogger.com (George) — Sun, 10 May 2009 14:55:00 +0000

Audience
The book is a rich resource for people who must make decisions in the face of uncertainty and incomplete information. It is written at an intuitive level so it does not require sophisticated training in mathematics or philosophy to understand. On the other hand, the subject matter is thoroughly presented. For practioners, its risk management implications cross-cut many business disciplines. For consumer behavior operators and academics, it has profound implications about the misuse of mathematical models.

The Black Swan by Nassim Taleb

Strengths
It is easy to misuse survey statistics and, according to Taleb, quite often done. He provides high-level guidelines that indicate if a statistical approach is questionable (see Implications section of this post). He also gives many aphorisms for how to think clearly and avoid common decision making mistakes. Here is a short sampling:

Focus on anti-knowledge, what we know as false instead of what we know. What we know is captive to the unknown, but if we disprove the justification for an effort we can save ourselves time and money (p. xxi).

The future will be less predictable but we still must predict (p. 203).

To escape the narrative fallacy, make testable predictions. (p. 72).

Favor experiments over history and theories (p. 83-4, 120).

Don’t focus. Uncertainty can come from any direction (p. 133).

Understand scalable and non-scalable variability

If we can predict people’s actions then they are automatons. Is this a valid (p. 183)?

Rank assumptions not by likelihood but by harm they can cause (p. 203).

Invest in preparedness, not in prediction (p. 208).

Seize asymmetric opportunities: low cost, high payoff activities even if the payoff has a low probability (p. 205).

Look to be broadly right rather than precisely wrong (p. 284).

Weaknesses
It would be easy to misinterpret this work as advocating a carelessness of futurity (for example, see EO, 2007, p3 in his review of the book on Amazon). Such is not the case. It is the realization that Rationalism is dead, Positivism is dead. What do we do now? Taleb is actually giving guidance on the most responsible approach for considering the future. This should be expressly stated: this is not giving up on our dealings with the future but a start on how to properly deal with it.

Information Sources
His could not be stronger. He has personally worked with Benoit Mandelbrot the leading fractal mathematician in the world. He makes extensive use of the work by Nobel Laureate Daniel Kahneman in the Psychology of Uncertainty. It’s the same for network theory, citing the seminal works of mathematicians Watts and Strogatz. Additionally, he brings his own hard earned experience in the trenches of international finance.

Implications for Consumer Research
Foremost, do question surveys and the validity of their statistical assumptions. Taleb notes that physical quantities such as height and weight are subject to some sort of Gaussian distribution (p. 33). Measures dealing with social matters are not usually Gaussian and if not, we have two choices: 1.) the use of Fractal mathematics if the problem is tractable; 2.) run experiments and analyze evidence if intractable.

How do we decide if the population measure is fractal-able? If the measure follows a power rule, in mathematical terms is self-similar, then fractal mathematics applies. A simple power law is the Pareto 80/20 rule, as discussed in last weeks post. If there is a power rule that applies then the distribution is fractal.

How has consumer research faired by universally applying a Gaussian distribution to social matters? As noted in last week's post, there are mixed results and one of the failures may be instructive. Consider New Coke.

Wilson and Ogden (2004, pp 30-1, 52-3) report that Coca Cola used both statistical survey methods as well as work with focus groups to decide if the New Coke campaign should be launched. They ran into a problem, the recommendations from each approach conflicted.

The conclusion drawn from the statistical surveys was to change the formula. The result from the focus groups was the opposite; change would be a big mistake. Coca Cola decided to discount the soft evidence from focus groups and go with hard data from proven mathematical statistics.

The measures were not physical attributes but opinions and beliefs. Based on Taleb’s work, we should question the applicability of Gaussian distribution assumptions to such measures. They may be valid, but maybe not. Wilson and Ogden conclude (p. 52) “survey research is becoming less credible as an accurate representation of publics….” Contrary to the hard data predictions, New Coke did not fair well.

A second and more positive implication is the explosive power of Internet marketing. Internet connections are fractal – a popular Web page is linked to by other pages, these pages in turn linked to by their interested parties, and soon you get a fractal like spider web of connections. This is the basis for viral marketing, which is fractal. Internet marketing can give us asymmetric leverage, where the Black Swan that occurs is positive for us. A classic example of the fractal explosiveness in viral marketing is Smirnoff’s Tea Partay (see Johnson, 2009, p. 26).

Hawkins, et al (2007, p. 249) note that viral marketing is an online strategy to generate buzz and word of mouth (WOM). Buzz is an idea contagion that “[creates] an exponential expansion of word of mouth.” It is low cost but they go on to say (p. 248) that such strategies must be used with care so no miscommunications diminish the brand.

Taleb (2007, p. 220) would say idea contagions are fractal as well as exponential. Fractal worlds are winner take all. They follow a scalable power rule, something like 10% of the videos capture 90% of the traffic, and 10% of that top 10% capture 90% of that 90%. In such a world the top 1% owns a lot, 81% in this example. For WOM marketing online, this means you front $600K to produce a video but most times it doesn’t hit, but when it does it can hit big.

Taleb advises us (p. 205) that living today requires a lot more imagination because it is a world dominated by extremes and the unknown. He goes on to say that consumer behaviorists should seize asymmetric opportunities where you make a series of small bets that you will lose for the occasional big payoff. This is the most effective strategy in the world we are rapidly becoming.

References
Cacioppo, John and Richard Petty (1986.) The Elaboration Likelihood Model of Persuasion. Retrieved on April 13, 2009 from the EBSCOHost database.

EO (April 25, 2007).Many important ideas, many flaws that detract from the message. Retrieved on April 14, 2009 from http://www.amazon.com/Black-Swan-Impact-Highly-Improbable/dp/1400063515/ref=sr_1_1?ie=UTF8&s=books&qid=1239724317&sr=8-1

Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

Johnson, Celia (March 6, 2009). 10 of the Best. BANDT-COM.AU. Retrieved on April 18, 2009 from EBSCOHOST.

Ortega y Gasset, Jose (1994). The Revolt of the Masses. W. W. Norton & Company.

Simon, H.A. (1960). Administrative Behavior: A Study of Decision-Making Processes in Administrative Organization. Macmillan.

Taleb, Nassim Nickolas (2007). The Black Swan. Random House.

Wallace, AFC (1963). Culture and Personality. Random House.

Wilson, L. and Ogden, J. (2004). Strategic Communications Planning For Effective Public Relations and Marketing, 4th Ed. Kendall/Hunt Publishing

Review of The Black Swan by Nassim Taleb

noreply@blogger.com (George) — Sun, 03 May 2009 21:16:00 +0000

Introduction
The Black Swan by Nassim Taleb is a skeptical view of the Rationalism employed in modern behavioral sciences. It is written with eloquence so that complex ideas and mathematics are made intuitively clear. It is particularly relevant for consumer and marketing research, which have continuously experienced embarrassing and costly failures such as New Coke, Life Savers Soda, Colgate Kitchen Entrees, Pond’s toothpaste, Clairol’s ‘Touch of Yogurt’ shampoo, Frito-Lay Lemonade, Pepsi AM, and Heinz’s All Natural Cleaning Vinegar.

Experienced industry professionals in leading companies did these projects. It is not just consumer research either, as American financial models have recently gone bust in a highly visible manner with the rest of the planet watching in total horror. Why the mixed results from research based on the Rationalist models?

Taleb gives a roadmap that not only explains the misuse of mathematics in such predictive attempts but also explains the fallacies of reasoning possible with Rationalism that lead to a false confidence in our undertakings and an understatement of the risk from random but material future events. The Black Swan is his metaphor for a risk from unknown events with consequential effects.

My review starts with Taleb’s recounting the numerous points of failure in Rationalist reasoning such as domain specificity, post hoc rationalization, the narrative fallacy, and silent evidence. It then explains the abuse of mathematics cited by Taleb starting with the circularity of statistics, and the pervasive but often invalid assumption that our distribution of attributes is non-scalable.

Examination
Nassim Taleb gives us a practioner’s guide to the pitfalls in Rationalist reasoning. He starts with the all too human tendency to wrongly translate an absence of proof into proof of absence concerning risk. His delightful example is a thought experiment with a turkey that is well fed and cared for by his human host. Using the inductive methods of Rationalism with day after day supporting proof, the turkey concludes that his human benefactors have his best interests at heart. There is a sudden “revision of belief” (p. 40) on the Wednesday just before Thanksgiving. Of human malice, the turkey had confused absence of proof with proof of absence regarding the risk he faced.

In the first section of his book, Taleb explains the common fallacies of Rationalism. These fallacies include (p. 50) the confirmation error, the narrative fallacy, and the distortion of silent evidence.

Confirmation Error
Taleb observes that the context of the information presented to us influences our thinking about that information (p. 53). The information does not stand on its own merit but that of its presentation context as well. Taleb calls this Domain Specificity, and Hawkins, et al (pp 299-300) call it contextual cues, and explain its impact on consumer behavior.

Another confirmation error is naïve empiricism (p. 55). This is the human inclination to look for support of our vision and to orient research with this positive frame of mind. It only takes past instances that confirm current proposals.

Narrative Fallacy
This is a predilection for simple explanations in place of complex truths. Taleb’s exposition uses a cognition model similar to the Elaboration Likelihood Model used in consumer behavior (see Hawkins, 2007, p 409-10). Taleb describes (p. 81) the cognitive model devised by the eminent psychologist Kahneman. This model organizes cognition into System 1 thinking and System 2 thinking. System 1 is intuitive and quick, relying on heuristic short cuts. It gives easy and obvious narratives but overemphasizes the emotional and the sensational.

System 2 is what we would characterize as central route processing. It is a derived sequence of thought. It is easy to retrace reasoning to rethink our strategy based on feedback. On the other hand, System 1 thinking is prone to narrative fallacies.

Narrative fallacies take several forms. One is Post Hoc Rationalization. This fallacy provides an artificial explanation of an event after the fact rather than establishing causal relationships during the event. Taleb gives the classic example (p. 65) of a group of consumers who each selected a pair of nylons from a set of twelve. A while later they were asked why they made their particular choice. The answers ranged from better color to better texture. The twelve pairs were in fact identical. Hawkins, et al (2007, p 326) report on a similar happening with Disney and Bugs Bunny.

Finally, the more randomness in information the harder it is to remember (p. 69). We therefore seek to summarize random information and impose our own order on it. We fold meanings into convenient dimensions of existing knowledge. This reduces the dimensionality making it less complex and so easier to store and retrieve. This makes the world look less random, and therefore less risky. This is why we tend to underestimate risk, especially risk that does not fit into our existing knowledge dimensions.

Distortion of Silent Evidence
History is a graveyard of Silent Evidence, as Taleb calls it. The simplification biases discussed above reduce complex evidence into convenient summaries. The omissions add to the silent evidence we ignore, which distorts our view of reality. The manifestation of silent evidence is a false sense of stability (p. 117).

The Scandal of Prediction
In the later sections of the book (pp 136-211), Taleb makes an intuitive case for why our predictive models fail. One critical aspect of a system being modeled is its scalability. In the behavioral sciences most ranges are assumed to be non-scalable. In other words, as you leave the mean, not only is the count less, but that it is increasingly less. This is a convenient assumption because it permits the use of statistical mathematics based on the Bell curve (a.k.a. Gaussian distribution) or a derivation of it.

This assumption about a Bell curve for our populations, as Taleb (2007, pp 229-247) argues, is “that great intellectual fraud.” This is not a true attribute of all the populations where behavioral scientists are applying statistical surveys in a wooden and perfunctory manner. He notes that while it is true for physical characteristics such as height and weight, it is usually not true for social measures. Ranges become scalable so the non-scalable assumption of the Bell Curve is invalid. Scalable system behavior leads to non-uniform concentrations rather than smooth distributions, they are thus Fractal. The rich get richer.

Fractal worlds follow a scalable power rule. As a simple illustration, Pareto found that 20% of the Italian population owned 80% of the land (p. 235), and the 20% of that top 20% owned 80% of that 80%. In such a world the top 1% owns a lot, 64% in Pareto’s case. Taleb also uses book sales as an example (p. 264). It does not follow a Bell Curve. It is fractal and follows a complex power rule. Because it is a fractal world it has winner take all, lop-sided distributions.

He uses height and wealth as examples of applying Bell Curve models in each world (non-scalable and scalable). For height, if you pick 100 people randomly, you will derive a meaningful understanding about the height of the population. Adding another person, the 101st, won’t measurably change the average or deviation, even if it is a tall person, say seven feet. This is the standard Gaussian system.

The social measure of wealth is different. If the 101st person you add is Bill Gates, the average and deviation is changed, appreciably. This is an extreme example to make a point, but Taleb discusses his days on Wall Street where non-scalable assumptions were made for scalable systems, which led to misunderstandings of risk and incorrect investment strategies. He shows how scalable systems are described by fractal mathematics.

Traditional mathematical modeling in social sciences, including behavioral sciences, is flawed. The process of employing mathematics starts with the Circularity of Statistics flaw (p. 269). We need data to know if the population is Gaussian or Fractal. But, we need to know if the population is Gaussian or Fractal to know how much data to collect to decide if it is Gaussian or Fractal.

Let’s say we can get by this problem. Then we encounter another problem for Gaussian distributions (p. 251). Gaussian models in pure mathematics are based on the assumption that each event is mutually exclusive. This is true of flipping a coin but not true in most social actions, where there is usually some cumulative advantage effect like learning. In other words, there should be improvement in the probability of a certain outcome over time because of the cumulative advantage effect of learning.

For the other case, if the model turns out to be Fractal rather than Gaussian, we still have problems (p. 272). Fractal mathematics for randomness does not yield precise answers. The Gaussian does and that is why scientists like to make Gaussian assumptions.

The next post will apply Taleb to consumer research.

References
Cacioppo, John and Richard Petty (1986.) The Elaboration Likelihood Model of Persuasion. Retrieved on April 13, 2009 from the EBSCOHost database.

EO (April 25, 2007).Many important ideas, many flaws that detract from the message. Retrieved on April 14, 2009 from http://www.amazon.com/Black-Swan-Impact-Highly-Improbable/dp/1400063515/ref=sr_1_1?ie=UTF8&s=books&qid=1239724317&sr=8-1

Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

Johnson, Celia (March 6, 2009). 10 of the Best. BANDT-COM.AU. Retrieved on April 18, 2009 from EBSCOHOST.

Ortega y Gasset, Jose (1994). The Revolt of the Masses. W. W. Norton & Company.

Simon, H.A. (1960). Administrative Behavior: A Study of Decision-Making Processes in Administrative Organization. Macmillan.

Taleb, Nassim Nickolas (2007). The Black Swan. Random House.

Wallace, AFC (1963). Culture and Personality. Random House.

Wilson, L. and Ogden, J. (2004). Strategic Communications Planning For Effective Public Relations and Marketing, 4th Ed. Kendall/Hunt Publishing

Marketing Blunder or Urban Myth?

noreply@blogger.com (George) — Sun, 26 Apr 2009 01:19:00 +0000

The cultural factors that can impact consumer behavior include language, demographics, values and nonverbal communications (see Hawkins, et al, 2007, p 40). A cultural faux pas can be an embarrassing experience for professional marketers. The best intentions can be rendered fallacious and instead of a positive projection of its brand, a company can appear like confused Martians.

Many gaffes are humorous and because of this there is also a set of urban myths that have been fabricated. To help avoid these, a literary search of myth busters should be done when reporting on marketing blunders. Here are three that are not urban myths you might find amusing.

Eat Elegancita
Hershey’s Elegancita candy bar is filled with caramel cream, cajeta in Mexican, and covered with chocolate. A popular ad campaign in Mexico was extended to other Latin American countries that spoke Spanish with unfortunate result. Cajeta in Argentina and Uruguay, who speak Castilian Spanish, is a slang term for a women’s vagina.

The singer Thalia tells all that she loves cajeta. (see Hoag, 2005, p 1). Hoag goes on to say “Such linguistic pitfalls, where a common word may be understood in a different way in different countries, happen with some frequency in Spanish.” A contributing factor: there are sixteen different dialects of Spanish (see Spanish Dialects and Varieties) .

This story withstands the scrutiny of an urban myth buster (see About Spanish). This guy does torpedo many other urban myths about marketing gaffes, including allegedly misusing the Spanish language. Nova Myth and Other Urban Myths.

Cultural Confusion at IKEA
Money Magazine (see Bad Translations) reports on IKEA, as does Brand Strategy (2003, p 1). The IKEA bunk bed for children is named Gutvik.

This is a homonym in German for Good Fxxx. Muy Bueno! Just the right name for a children’s product. The Urban Myth busters say that to be fair, the German words are Gut Fick, and the phonetics are slightly different. (see TV Tropes) However, they do cite IKEA for another misstep, marketing the Viren Toilet Brush (see IKEA Catalog) in Finland. The legendary runner Lasse Viren hails from Finland.

Hakkaa päälle, Pohjan poika!

I Could Not Love You More If I Loved Pepsodent Less
Dr. Monica Bolesta at the University of Maryland (2008, p 2) discusses how Pepsodent failed to launch its toothpaste in Southeast Asia because it emphasized the whitening aspects.
Pepsodent wrongly assumed the American cultural preference for white teeth was universal. In Southeast Asia, darkened teeth are considered more attractive and the locals even chew betel nuts to stain their teeth. The betel nut itself is considered a sign of love and longevity (see Betel Nut Smile).

The Culitvated Drink for Apes
Pavane is an upscale bitters distilled and marketed by Bacardi. According to both CNN Money (CNN Bad Translations) and Zouhali-Worrall (2008, p 1) in a Fortune Small Business article, product marketing became a cultural blunder in Germany. The German homonym Pavian means baboon.

References
Bolesta , Monica (August 22, 2008). Cross-Cultural Awareness: Avoiding Global Marketplace Missteps. Retrieved on April 3, 2009 from http://www.umuc.edu/departments/podcasts/podcasts_bep/content/shows/sh2008/transcript/Transcript_Diversity_Cultural_Awareness.pdf

Brand Strategy (May 2003). Global village idiot. Source:Brand Strategy; May2003 Issue 171, p39, 1/9p. Retrieved on EBSCOHOST.

Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

Hoag , Christina (03/08/2005). The Miami Herald. Retrieved on April 3, 2009 from EBSCOHOST.

Zouhali-Worrall, Malika (Jul/Aug2008). Watch Your Language! Fortune Small Business. Retrieved on April 3, 2009 from EBSCOHOST.

Smirnoff: Asymmetric Marketing with Buzz

noreply@blogger.com (George) — Sun, 19 Apr 2009 19:29:00 +0000

This week finds me in a gangsta kinda mood. So it was with Smirnoff when they commissioned this video gone viral: Smirnoff Tea Partay

Johnson (2009, p. 26) reports that Bartle Bogle Hegarty produced and released this made-for-YouTube video in August 2006. She has it ranked 6th in viral videos with 4.8M hits. She quotes Mel Peters, creative director at Citrus, about Smirnoff’s viral marketing:

“This is a great example of how the advocacy of followers can lead to an ongoing presence for a brand in this crowded space. That it continues to engage with the YouTube community is a testament to its success! “

Hawkins, et al (2007, p. 249) note that viral marketing is an online strategy to generate buzz and word of mouth (WOM). Buzz is an idea contagion that “[creates] an exponential expansion of word of mouth.” It is low cost but they go on to say (p. 248) that such strategies must be used with care so no miscommunications diminish the brand. Taleb (2007, p. 220) would say idea contagions are fractal as well as exponential.

Fractal worlds are winner take all. They follow a scalable power rule, something like 10% of the videos capture 90% of the traffic, and 10% of that top 10% capture 90% of that 90%. In such a world the top 1% owns a lot, 81% in my example. For WOM marketing online, this means you front $600K to produce a video but most times it doesn’t hit.

Chandler (2007, pp 27-9) also says viral marketing is fractal but he is more optimistic. With the advent of social media “the potential for viral, word-of-mouth marketing becomes enormous.” Not everyone is so optimistic.

Freedman (2006, p 81) quotes Dr. Patti Williams at Wharton that “the evidence you can go from online talk about a product to sales is really limited.” An example used is the movie Snakes on a Plane that had a lot of buzz online but a lot of fizz at the box office. To be fair, movies are one of the few categories where traditional advertising is more effective than word of mouth anyway, according to Hawkins, et al (p. 242).

Although not an optimist, Taleb says that living today requires a lot more imagination because it is a world dominated by extremes and the unknown. He advises us to seize asymmetric opportunities like this where you make a series of small bets that you will lose for the occasional big payoff. This is the most effective strategy in the world we are rapidly becoming.

Hawkins, et al (p. 246) say that other driving forces for word of mouth strategies are fragmenting markets and consumer skepticism. With all this said, I think buzz is no baseless fad. Unprecedented uncertainty invites unprecedented imagination. If you try to create buzz and keep persisting, every once in a while you become a playa like Smirnoff. In the meantime, you need to manage expectations.

References
Chandler, Doug (May 2007) Web 2.0: Buzzword or Bonanza. Electrical Wholesaling. Retrieved on April 17, 2009 from EBSCOHOST

Freedman, David H. (Dec2006). Everyone is chasing Internet buzz. But be careful. Online hype doesn't always deliver. Inc. Retrieved on April 17, 2009 from EBSCOHOST.
Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

Johnson, Celia (March 6, 2009). 10 of the Best. BANDT-COM.AU. Retrieved on April 18, 2009 from EBSCOHOST.

Taleb, Nassim Nickolas (2007). The Black Swan. Random House.

Analysis of Rolex and Movado Watch Ads

noreply@blogger.com (George) — Sun, 12 Apr 2009 01:24:00 +0000

Watches often do more than tell time. They can help a consumer define and project an image: sometimes for status and power, sometimes to convey style and cultivation.

High-end brands have such extraordinary demand these days; the wait list can be as long as two years to get a Jaeger-LeCoultre. Socha reports that Patek Philippe sold 28,000 watches and Jaeger-LeCoultre sold 50,000 in the Prestige category, while Rolex in the Luxury category sold 900,000 (Socha, 2007, 2008, p 1).

It is no longer rare for Prestige watches to sell in the high six figures. Business is booming and all Prestige manufacturers sell every watch they produce. Even the lower-tier Rolex line is benefiting from this trend. Murphy (2008, p 1) notes that sales were even better into 2008, and quotes that "A diamond watch doesn't sit in our shop more than a week."

The Prestige makers have established "heirloom quality."

Keller (2008, p 137) notes their mantra, "You never actually own a Patek Philippe. You merely take care of it for the next generation." So it is with Jaeger-LeCoultre. Here is their watch Queen Elizabeth received at her coronation. Not so with Rolex. Timex? A different kettle of fish altogether.

Rolex

Rolex watches have a divine heaviness. You would just not expect them to release a plastic Rolex. They reinforce this image of eminence with advertising and celebrity endorsements. Green (2004, p1) reports that Arnold Palmer was interviewed on playing his 50th Masters and, of course, endorsed Rolex. What’s more, Rolex is the 7th largest magazine advertiser in the world. Keller (p 137) notes that "Rolex watches retain their value better than almost any other type of good." However, they have not been able to establish the "heirloom quality" of the top brands.

Keller (pp 133-7) finds that Rolex is among the most "recognized luxury brands in the world." However, Rolex is positioned between the Prestige producers and the next-tier producers and so they have established the lower-priced Tudor line as a "fighter-brand" to keep Tag-Hauer, Movado and Citizen from encroaching into their niche.

I present for your consideration the following ad in the November 2008 issue of Vogue (see Illustration One). First attribute: it’s a two page ad for 30 words of text. This makes a statement; Rolex is an eminent player, worthy of your attention. The alluring model with classic features is the 77-year-old Carmen Dell'Orefice (see Rumbold, 2008 for a two page biography), according to Kathy (2008, p 1). Her ageless beauty underscores the timeless value of the Rolex she is wearing. The redundant headline reads, “Class is Forever”, but we have already gotten the message. Rolex wants to break into the heirloom niche so it can obtain high figures like the Prestige brands.

The body copy has important words – royal, diamond adorned, Stingray leather, and Black Sapphire. If there was reservation before, it is now dispelled: this is a watch like no other, made for royalty from only the rarest materials. It uniquely enhances your image. This professional ad will certainly appeal to the following VALS Segments: Innovators, Achievers and Strivers.

To Innovators, the beauty and class of Rolex is a valuable extension of their self. It reflects (see Hawkins, 2007, p 447), “a cultivated taste for the finer things in life.” To Achievers, the imminence of the Rolex brand appeals to their needs for (see Hawkins, p 448) “established, prestige products and services that demonstrate success to their peers.” Finally, Strivers can emulate the wealthy with a Rolex but they may end up with a Tudor model, the fighter-brand – cheap enough to compete with Citizens.

Illustration One (left page): Rolex, “Classic is Forever” Ad

Illustration One (right page): Rolex “Class is Forever” Ad

Movado and African Americans

Hawkins, et al (2007, p 167) say that “not all messages targeted at African Americans need to differ significantly from those targeted at other groups.” They qualify this rule with the caveat that incorporating black actors, models or spokespersons in the ad is important. A key segment in this audience is what Hawkins, et al call (p 164) “market leaders.” This group sees brands as communicating their unique self-image.

The Movado ad is also two pages, presenting prestige through this eminent use of space and disregard for cost. The two pages permit a flattering photograph of the attractive black actress Kerry Washington and the Movado watch as well. The body copy tells us about the acclaimed actress, and that the watch is available at fine jewelry stores. The impression is this watch is not a mass production pop-out that anyone can own. Noteworthy in the photo of the watch is the diamond studding, the gold accessorizing and the header “The Art of Design.”

The ad does not offer extensive body copy. Jérôme Lambert the CEO of Jaeger-LeCoultre sums up the advantage for this minimalism towards high-end audiences (see Lechevalier, 2009, p 1):

“The products are the real brand ambassadors; that’s our basic message. They have so much to say, and communication is a tool that loses so much of its efficiency when you overlay too many messages.”

The audience here, I think, is the VALS: Innovator segment. Image is important to them (see Hawkins, p 446-7). Brands act as an extension of self, and an expression of cultivated taste, and independence.

Many Innovators are emerging leaders. Kerry Washington is a good choice for the ad because she is an emerging film star (see Wikipedia, 2009, p1) with performances of note in Last King of Scotland and Ray Charles.

Zinkum and Hong (1991, p 352) conclude that advertising which fits with a person’s ideal self obtains a more favorable attitude toward the brand than if the had been more consistent with their actual self-concept. The Movado ad targets African-American women who are VALS Innovators and have affinity with Kerry Washington's attractive and successful image. One thing to help them establish their ideal is the Movado Esperanza watch, one that becomes an “extension of their personality” (see Hawkins, 2007, p 447).

Illustration Two (left page): Movado and African Americans

Illustration Two (right page): Movado and African Americans

References
Green, Barbara (6/16/2004). Rolex loyalist Arnold Palmer plays 50th Masters Tournament. National Jeweler;Vol. 98 Issue 12. Retrieved on March 30, 2009 from EBSCOHOST.

Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

Kathy (November 11, 2008).Rolex "Class is Forever" attention-grabbing ad. Retrieved on March 30, 2009 from http://boomermarketingnews.blogspot.com/2008/11/rolex-class-is-forever-ad-mixed-reviews.html

Keller, K (2008), Strategic Brand Management. Pearson/Prentice-Hall.

Lechevalier, Brice (2009). GMT. Retrieved on April 1, 2009 from http://www.gmtmag.com/en/11_int_lambert_lecoultre.php

Murphy, Robert (4/14/2008) FAST TIMES IN WATCHES: FIRMS SEE BOOM FOR UBER-LUXURY STYLES. Women's Wear Daily. Retrieved on March 30, 2009 from EBSCOHOST.

Rumbold, Judy (3:54PM GMT 11 Jan 2008) Carmen Dell'Orefice: eternal grace. The Telegraph. Retrieved on April 1, 2009 from http://www.telegraph.co.uk/fashion/fashionpicturegalleries/3364006/Carmen-DellOrefice-eternal-grace.html

Socha, Miles, (7/30/2007). Demand Soars for Six-Figure Watches. Women's Wear Daily. Retrieved on March 30, 2009 from EBSCOHOST.

Univ. of S. Miss (Fall 2007). The VALS Segment Profiles. Retrieved on March 30, 2009 from http://ocean.otr.usm.edu/~w481504/kfj/mcj231vals.html

Wikipedia (2009). Kerry Washington. Retrieved on April 1, 2009 from http://en.wikipedia.org/wiki/Kerry_Washington

Zinkhan, George M. and Jae W. Hong (1991). Self Concept and Advertising Effectiveness: A Conceptual Mode! of Congruency,Conspicuousness, and Response Mode. Advances in Consumer Research. Retrieved on April 1, 2009 from WVU IMC 612 Week 3 readings.

Applying Kracauer to Consumer Behavior

noreply@blogger.com (George) — Sat, 04 Apr 2009 20:14:00 +0000

Literature and art are modes of communication that provide a framework for understanding marketing communications and its influence on consumer behavior. Siegfried Kracauer was a cultural analyst and member of the applied social sciences group at Columbia University. His work laid the foundation for modern film criticism and he is the author of several works including Theory of Film: The Redemption of Physical Reality.

One of his foundation essays was on photography. First published in October 1927 in the Frankfurter Zeitung, Kracauer considered Photography to be one of his more important works. As editor, he also published the works of Adorno, Horkheimer, Bloch and Benjamin, the architects of what became known as the Frankfurter School. The University of Chicago republished the Thomas Levin translation of Photography in 1993 in its journal Critical Inquiry.

A summary of his article Photography can be found in this earlier posting. Photography is an analysis by one of the most powerful minds of 20th century sociology and film criticism. Most of the precepts it presents are now part of consumer behavior as well as modern film. Moreover, it is part of his larger body of work that is a framework for understanding groups and cultures and tools for discovering their nature.

Kracauer had a PhD in Architecture with significant training in sociology. To supplement his penetrating fusion of the two, he references classical figures such as Aristotle and Goethe among others. The work has been peer reviewed by three generations and has stood the test of time. It is still considered relevant enough to be published in a recent University of Chicago journal.

Several seminal points are made in the article. Visual communication is an art that requires care to eliminate clutter, and establish meaningful associations between the elements that survive the purge. This cannot be done mechanically.

A second point is that photographs do not represent reality. Neither does memory for that matter, because it is the association of what is in activated consciousness. This in turn permits irreality to be created in a subject or consumer. For example, Hawkins, et al (2007, p 326) report on a study that showed subjects presented with imagery were able to recall a childhood event of being at Disneyland and seeing Walt shake hands with Bugs Bunny, which is an impossibility.

A third point is that the meaning conveyed by a photograph is generally incomplete and may be inadequate depending on the skill of the artist. These points are incorporated into consumer behavior already and form the basis for work with conditioning, consumer inferences, memory interference, and memory’s role in learning.

Two final points are not widely applied to consumer behavior but should be. The fourth point is observing the quotidian aspects of the group or culture is the best way to understand the motives and attitudes of its members. The fifth point is that timeless work does not attempt to be contemporary.

How Kracauer Enriches our Understanding of Consumer Behavior
On photographs, Hawkins, et al (2007, p 305) tell us that the impact of visual images on consumers and their inferences from communications with visual images is becoming increasingly important. Page (2006, p 94) makes the more bold assertion that the concept of an image, and the connection of the elements in that image to each other and to the concept is the “fundamental action within an advertisement.” This being so, we should expect Kracauer’s insights into photography to have a reflection in current consumer behavior body of knowledge. They do.

First, photographs do not represent reality, and for that matter neither does memory, as Kracauer observed. Trachenberg (2008, p 113) demolishes the notion that photography represents reality. He says

“Today that simple idea of a light-based transparent nexus between photograph and a determinate past is undergoing radical reappraisal. The digital revolution, as probably everybody on earth now realizes, has eroded the old confidence in that transparency.”

Hawkins, et al say (p 305) that “Until recently, pictures in ads were thought to convey reality.” This has changed and now instead “They supply meaning.” Hawkins, et al (2007, p 282) provide support for the debility of memory as well. They argue that consumer awareness and attention are highly selective, and their interpretation is a highly subjective process. They offer this conclusion: “Thus reality and consumer perceptions of reality are quite often different.” They go on to say (p 328) that memory links fade over time.

Has there been a re-discovery of Aristotle’s Law of Contiguity, the idea of proximity begetting association? Hawkins, et al (p 301) assert that stimuli positioned close together are perceived as belonging to the same category. Page (2006, p 95) makes the next connection. She cites research on Pavlovian conditioning (a.k.a. Classical) that there is also a transfer of meaning with such associations.

Kracauer argues that a series of different photographs can influence the perception of each other through the overall context they create. The modern consumer behaviorists, Hawkins, et al (pp 299-300) explain the nature of such contextual cues. This can be other pictures on the same page in a magazine or the programming surrounding a commercial on TV.

As we might expect, the artistic assignment of meaning is widely recognized and applied. Its fallibility well discussed. Kracauer noted that composition according to a theme is what separates photographic art from mechanical and meaningless photography. Hawkins, et al (p 300) comment on the need to organize stimuli to help consumers react to and interpret our communications with them.

They go on (p 292) to insist that all good advertising must have a clear visual point of reference. They affirm the artistic focus recommended by Kracauer and declare it fundamental to advertising communications (p 290): “Any factor that draws attention to itself and away from the brand and its selling points has to be used with caution.”

Page (p 95) recommends a process she calls framing. Her frames constitute “principles of selection, emphasis, and presentation that organize the social construction of reality.” This is the elimination of non-message elements through emphasizing a meaning to organize our communication.

Analytical Trade-off in Kracauer's Approach
The great social psychologist, Karl Weick evaluated behavioral research according to “three inevitable tradeoffs:” the simplicity, accuracy and generality of the results (1979, pp 35-40). The first tradeoff is typical of activities mimicking the natural sciences, the attempt to be general and accurate while sacrificing simplicity. The second tradeoff, the case study approach, is accurate and simple but sacrifices generality. Finally there is the approach used by Kracauer, thought experiments (considered a valid form of inquiry: see Weick, 1979, p 38) as well as aphorisms from his observations and analysis. These are general and simple at the expense of accuracy. The trade-off Kracuaer chose should be kept in mind in reading any of his works.

Implications for Consumer Behavior of Kracauer’s Work
First, the behavioral sciences are at risk with their overreliance on statistical research methodology. Subject pretense is activated through participation in such research. Neumeier (2006, pp 110-11) cautions that such research is susceptible to the Hawthorne effect. He describes this as the penchant for people to act differently when they know they are under observation or being measured. Kracauer asserted that the everyday social activities of a group or its unembellished enactments like its literature and art reveal its nature without mediation and are better evidence for understanding its essence than its own pronouncements or the application of formal research techniques.

Wilson and Ogden (2004, pp 52-60 ) report on case studies of catastrophic failure in marketing campaigns based on statistical surveys, including New Coke. They present the following summary opinion with several supporting citations (p 30):
"Industry and academic opinion is that opinion surveys that measure behavior and predict behavior in isolation from the group are inherently flawed. Unless the measuring device is carefully designed and implemented, it may not measure the most salient opinion and the results may be misleading, causing costly strategic errors."

Taleb (2007, pp 229-247) provides further explanation and criticism (p 229 and following): “The Bell Curve, that great intellectual fraud.” Statistical distributions such as the Bell Curve are based on the assumption that the underlying population is non-scalable. In other words, as you leave the mean, not only is the count less, but that it is increasingly less. This is not a true attribute of all the populations where behavioral scientists are applying statistical surveys in a wooden and perfunctory manner.

A second and related implication is that the consumer research reaction to issues with mathematical surveys is to introduce “visual ethnography.” Brace-Govan (2007, p 735) says “visual ethnography offers marketers opportunities to gather appealing and pertinent data.” In view of Kracauer’s reservations, and his preeminence in the field of the visual arts, another and critical look must be made into the use of visual ethnography and interpretations based on it. Photographs do not represent reality.

A third implication is a view in the Humanities that the emotions and attitudes of a people can be found in their literature, music and art well before it is obvious to journalists or social scientists (see Kaplan, 2001, p 158). This is because the future lies in the uncomfortable and sensitive feelings of the present that cannot be expressed in a presentable narrative because it would contradict conventional wisdom. However, they can be expressed as a work of fiction or art whose popularity is an indicator of these transforming undercurrents. Review of art and literature is the approach recommended by Kracauer. This is also the viewpoint of the anthropologist, Wallace (1963, pp 101-3)

This can aid the discovery of latent motives in a culture or group. Such unstated motives are often driving forces in a culture but unlike manifest motives, are not directly presented (see Hawkins, 2007, p 375). Instead, indirect appeals through artwork are made. Latent motives according to Hawkins can be cracked with sophisticated analytical techniques, but an implication from the review of the Kracauer article is they can be discovered through a literature review also.

References
Brace-Goban, Jan (August 4, 2007). Participant photography in visual ethnography. International Journal of Market Research. Retrieved on March 26, 2009 from EBSCOHOST.

Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

Holbrook, Morris (June 1987). What Is Consumer Research?. Journal of Consumer Research. Retrieved from WVU IMC 612 Week 2 Readings on March 21, 2009.

Kaplan, Robert (2001). The Coming Anarchy. Vintage.

Kracauer, S and T Levin (1993). Photography. Critical Inquiry, Vol. 19, No. 3 (Spring, 1993), pp. 421-436. The University of Chicago Press. Retrieved from JSTOR at
http://www.jstor.org/stable/1343959 on March 2009. (If you do not have a JSTOR account, I can email you the article).

Lewis, Charles (1998). Advertising Photography. History of the Mass Media in the United States: An Encyclopedia. Retrieved on March 23, 2009 from EBSCOHOST.

Neumeier, Marty (2006). The Brand Gap. New Riders.

Page, Janis (Spring 2006). Myth & Photography in Advertising. Visual Communications Quarterly. Retrieved on March 23, 2009 from EBSCOHOST.

Taleb, Nassim Nickolas (2007). The Black Swan. Random House.

Trachenberg, Alan (Spring 2008). Through a Glass Darkly. Social Research. Retrieved on March 23, 2009 from EBSCOHOST.

Wallace, AFC (1963). Culture and Personality. Random House.
Wilson, L. and Ogden, J. (2004). Strategic Communications Planning For Effective Public Relations and Marketing, 4th Ed. Kendall/Hunt Publishing

Fear Appeal in Advertising

noreply@blogger.com (George) — Sun, 29 Mar 2009 12:50:00 +0000

LaTour et al (1996, p 2) say a fear appeal is a “psychoactive” ad that highlights an aspect of our “suboptimal lifestyles.” Their study shows a positive correlation between fear appeal and audience attitude towards an ad, and also that there are no ethical issues (p 6). They use (p 8) “deodorant failure” advertisements as an example of how fear appelas can be helpful communication.

Hawkins, et al (p 416) say that fear appeals use the threat of unpleasant consequences if a behavior is not altered. They single out bad breath. I am going to Platonify and say plaque falls into the same category of unpleasantness. Fear reduction is an effective agent to change attitudes, according to Hawkins, et al (2007, p 386, 408).

Several theories are in play, including the Theory of Reasoned Action (see Hawkins, et al, 2007, p 404). According to TRA, normative social beliefs are a major determinant in an individual about the appropriateness of a behavior. Social beliefs about bad breath, germs and plaque are leveraged in the Listerine ads. According to Gire (2003, p 1), the man who created Listerine, Gerald Lambert also developed the word "halitosis" to provide an advertising basis for discouraging bad breath.

With Listerine a consistent fear attribute is germs. Below is a Listerine ad from 1969. (click on image to enlarge)

And the following from 2009.

In both decades it is in the body copy. The headline further informs us of the manifest consequence of following a suboptimal lifestyle: back then we would have bad breath, today plaque. In both decades, the ads are what LaTour, et al (p 3) would characterize as “mild.”

Another theory is the Elaboration Likelihood Model (see Hawkins, p 409-10). It lines-up two consumer approaches to processing advertisements. One, central route processing is very cognitive and involves extensive information exchange between consumer and marketer. The other, peripheral processing uses more emotional cues and little or no cognitive processing.

In their paper "The Elaboration Likelihood Model of Persuasion", Cacioppo and Petty (1986, pp 1-2) clarify that they do not propose two mutually exclusive and exhaustive types but that central and peripheral represent positions on a continuous dimension ranging from high to low elaboration. I believe that along the elaboration continuum, the Listerine ads are on the peripheral side of the mean.

In the 1969 ad and also in the interesting TV commercial below, I think Listerine was trying a change belief tactic (see Hawkins, 2007, p 406) regarding the taste. They change the belief about the pungent taste of the product from bad to good, reasoning it would not be an effective germ fighter otherwise.

Here is an interesting look back to Morgan Freeman’s start in showbiz – he did TV commercials before movies. He is in a Listerine ad, explaining why the bad taste is good: Early Freeman Today, dealing with the taste is apparently not a need, or they don’t want to raise a red flag themselves about it.

Is it all ethical? Hawkins, et al (p 416) cite ethical concerns about "fear appeals based on social anxieties about bad breath...." LaTour, et al (1996, p 7) found no one in their studies considered fear appeals unethical. They even go so far to say such advertising can be helpful communications (p 8), and give as an example - deodorant failure, similar to bad breath. The Listerine ads, to me, fall on the LaTour side of the line and I do not think them unethical.

References
Cacioppo, John and Richard Petty (1986.) The Elaboration Likelihood Model of Persuasion. Retrieved on March 28, 2009 from the EBSCOHost database.

Gire, JT (2/10/2003). Attitudes & Attitude Change: Influencing Thoughts and Feelings. Retrieved on March 28, 2009 from http://academics.vmi.edu/psy/jg/chpt7-attitudes.htm

Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

LaTour, M, R Snipes and S Bliss (03/01/1996). Don’t be afraid to use fear appeals: an experimental study. Journal of Advertising Research.

Chocolate, sometimes nothing else will do.

noreply@blogger.com (George) — Sun, 22 Mar 2009 15:33:00 +0000

My Grandmother used to tell me that there’s no such thing as bad booze. I feel the same way about chocolate. There hardly seems a need to use advertising and conditioning for an obsession and so fetching a delight. Nevertheless, the major chocolate manufacturers and retailers use a combination of both classical conditioning and operant conditioning, but mostly classical.

Classical
Classical conditioning is the association of chocolate with an appealing stimulus. Hawkins, et al (2007, p 331) inform us that music, holidays and popular personalities are often paired in commercials with chocolate as part of classical conditioning. With chocolate, there is usually an undertone of romance.

Here is a Nestle’s :30 second spot on Youtube with many elements of classical conditioning. An ecstatic cellist. A woman, melting and open. How beautiful she is too. Enchanting music. Nestle's Alpine TV Spot

Latent romance in the popular commercial touched our need for objectification (see Hawkins, 2007, p 367) by having us view the behaviors of “others and [draw] inferences as to what one feels and thinks.” Showing affection in interpersonal relationships can also help satisfy our need for affiliation (p 371).

There is a dark side to chocolate too, an unstated sexual desire. Unstated motives are often driving forces in our culture but unlike manifest motives, are not directly presented (p 375). Instead, indirect appeals through artwork are made.

Hawkins, et al (2007, p 386) further report that “repeated exposure to positive-emotion-eliciting ads may increase brand preference through classical conditioning.” What is an example of such an emotion – they tell us: love. The 1989 commercial above was actually the apex of a multi-year campaign that started in 1986. Here is the Adam ad, notice the Maxfield Parrish theme (this one is a little louder): 1986 Nestle's TV Spot

Nestlé’s does not have a lock on chocolate advertising though. For their part Hershey’s follows suit with a more recent and similar Special Dark :15 spot (much louder): Hershey's :15 Spot

Here Hershey’s employs gold and copper colors to convey richness in the affective interpretation by the consumer, to supplement the same unconditioned stimuli we saw in Nestlé’s. Hawkins, et al (2007 , p 299) give a print ad example with a similar gold and copper color combination for a Godiva chocolate ad, but Hershey’s even gives us the words to associate with the product.

Hershey’s Kisses added a popular personality to the music, Thalia as she covered the Shirelle’s hit It’s in His Kiss: Thalia TV Spot

They also changed colors for the Christmas season and bell-rang a popular carol: Hershey's for the Holidays . Hawkins et al (p 332) use Christmas music as an example of eliciting the emotional responses characteristic of classical conditioning.

Hawkins and crew give other interesting examples of classical conditioning for chocolate candy (p 286): Reese’s Pieces product placement in the movie E.T. It was E.T.’s favorite food and its cinematic use in a natural way resulted in positive transfer to the product and sales jumped 6%.

In their Darwinian competition for attention, the chocolate makers are now exploring non-traditional venues. The response rate for advergames is between 16% and 45%. Additionally, customers spend an average of 25 minutes with our message. Blank (2001, ¶ 1) reports that Hershey’s Chocolate also experienced a phenomenal response rate with advergaming.

According to Ron (2002, ¶ 1), advergaming is a marketing device where the brand elements are an integral part of an online or computer game. Two academic studies have found that classical conditioning in advergaming produces most the most positive attitude (see Bailey, 2008, pp20-1 and Huang, 2005, p 1).

Operant Conditioning
Chocolate candy is a low involvement purchase. Duncan (2005, p 158) notes that conditioned learning is especially active in low involvement purchases. Gum and candy are the examples Duncan uses for low involvement products (p 140).

Operant conditioning works from the consequences of a purchase rather than through forming a positive stimulus for purchase. It rewards purchase “with positive outcomes,” according to Hawkins, et all (p 332) who also give an example of operant conditioning for chocolate candy. A free sample of chocolate in a candy shop resulted in a 25% higher purchase of chocolate. Tools of operant conditioning are free samples, discount coupons and sweepstakes (p 332). All are oriented to “secure an initial trial.”

Hershey’s used sweepstakes. Blank (2001, p 1) observes that the effective campaign used prizes ranging from Sony Play Stations, a one years supply of candy, a trip to Hershey’s Park, and daily prizes earned using the advergames – Reese’s Treasure Hunt and Reese’s Table Tennis. The sweepstakes was part of the advergame reported in classical conditioning.

Huang (2005, p 1) notes there is a secondary operant conditioning effect in advergaming, although the prime effect is from classical conditioning. Stokes, et al explain further (2008, p 9) “where reinforcement or punishment is used to promote specific behaviors,” advergames use operant conditioning to achieve desired behaviors.

Coupons and gift cards are standard fare also. See’s uses coupons as do the others, (See
See's Deals). Sweepstakes too (see See's Sweepstakes ).

References
Bailey, R (Summer 2008). TRAINED TO EAT: CHILDREN’S COGNITIVE AND
EMOTIONAL PROCESSING OF SNACK FOOD
ADVERGAMES. Univ. of Missouri. Retrieved on March 17, 2009 from http://edt.missouri.edu/Summer2008/Thesis/BaileyR-072308-T11745/research.pdf

Blank, C (August 6, 2001). Hershey's Online Push for Reese's Gets Sweet Response. Direct Marketing News. Retrieved on March 16, 2009
http://www.dmnews.com/Hershey39s-Online-Push-for-Reese39s-Gets-Sweet-Response/article/74093/

Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

Huang, Y (August 7, 2005). The Application of Learning Theory to The Study of Advergaming. Retrieved on March 17, 2009 from http://etdncku.lib.ncku.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0807105-020544

Ron, S (June 27, 2002). Inject Some Fun and Games Into Advertising. Direct Marketing News. Retrieved on March 16, 2009at http://www.dmnews.com/Inject-Some-Fun-and-Games-Into-Advertising/article/77963/

Stokes, B, S Seggerman, and D Rejeski (9/28/2008). Digital Games and the Social Change Sector (For a Better World). Retrieved on March 18, 2009 from

The Kennedy Center Offer

noreply@blogger.com (George) — Sat, 14 Mar 2009 21:01:00 +0000

I am a member of the Kennedy Center for the Performing Arts and I received direct mail and direct Internet e-mail offers to renew and upgrade my membership (see Kennedy_Center_Upgrade). The Kennedy Center presents plays, ballet, National Symphony Orchestra performances, and various workshops. Additionally, it has the Gift Shop and restaurant. I have made it a focal point for entertainment with friends and family when in DC. Ticket sales do not cover the Centers 3,100 stage performances a year and its ambitious educational activities; hence the need for members (donors), and its annual tin-cupping.

The offer has the price, my annual renewal at the current donation, a time limit (my current membership expires every August), no express guarantee or breakdown of use, but as Haigh and Gilbert (2005, p 108) note:

“Brands provide a guarantee of origin and quality;”

So the Kennedy Center brand is my guarantee that the money will be used to support the activities, and provide the benefits suggested. My first contact with the membership office was a phone call from them during which they sold me my membership initially. Here they did give a guarantee. The Kennedy Center representative gave me his personal, direct line to answer any questions or smooth out any difficulties I had with any benefits.

In the Internet e-mail, they give me the option of renewing with a phone call, or on-line. For the postal mail they also provided a return envelop. In neither case are mobile form factors considered. They do give me an option of upgrading my membership. The benefits are for higher levels add new perks to the benefits at lower levels. Here is the roster:

The additional benefits are an incentive but so too is identity congruence, the trait that “consumers’ behavior is often affected by what others [do]” (see Shang, et al, 2008, pp 351-2). Social influence is particularly effective in the case where the benefits of a transaction are ambiguous. The Kennedy Center appears to be using such incentive here.

Simonson (2005, p33) relates that including options in the offer can result in up-selling. This depends on the stability of consumer preferences and their insight into those preferences. I believe that donors fall into Simonson’s Category 3, those having stable preferences but lacking insight into those preferences. This is how the Kennedy Center is presenting the offer. No customized recommendation, although they have substantial demographic data. Customized offers can backfire with Category 3, as Simonson notes:

“Consequently, these customers may mistakenly accept customized offers or choice criteria that do not really fit their preferences, which leads to dissatisfaction.”

To explain why I place donors in Simonson’s Category 3, an understanding of the audience needs to be developed.

The Audience
Spiller and Baier (2005, p 97) admonish us to do market research to “determine consumer needs and wants.” Included here then is a study of charitable behaviors published in the Journal of Marketing. Reed, Aquino, and Levy (2007, p 189) found that individuals with high organizational status, low moral identity contribute money to high moral value organizations. Individuals with high moral identity want to contribute time but are chinchy with money. Here is a chart of their findings:

High moral identity is associated with idealism and low moral identity with pragmatism. A money donor’s high organizational status drives their time pressure.

A Syracuse University study furthers our understanding about the nature of donors. McNesby (2007, pp1-2) cites Who Really Cares by Arthur C. Brooks about charitable contributions. His findings are that contributors tend to be religious and conservative. Additionally, this religious and politically conservative cohort is 24 times more likely to contribute to charity than secular idealists.

Although it is an organization of artists, the Kennedy Center has an intuitive understanding of their donor audience that is reflected in the pragmatic appeal for donations (see Kennedy Center, 2008, p1) that lacks both do-goodism and change-the-world slogans. Here is their appeal instead:

"Generous support from Members like you enables the Kennedy Center to bring the finest performances to Washington D.C. and maintain its presence as the nation’s leader in arts education. "

Why Category 3? Kennedy Center donors have well defined preferences but with work and a busy schedule they do not have the idle time to actually think about these preferences.

Improving the Offer
The Kennedy Center does not customize the offer it presents to me. Based on the audience characteristics of donors who donate money as opposed to time, I have argued that their donor profile is what Simonson (p 34) categorizes as Group 3. He informs us that this group is prone to misunderstand customized offerings leading to dissatisfaction. Therefore, I would not try to improve the response with customized appeals to upgrade.

The nature of the offer’s creative appeal also seems to be an effective balance for the audience. As Spiller and Baier (2005, p 92) tell us, an emotional appeal targets the member’s wants, in this case an appeal to the noblise oblige of social status. However, a maudlin tone does not emanate from the offer, a reflection of the conservative nature of the audience. Neither does the creative appeal present opportunities for improvement.

Regarding the offer price, I think there is an opportunity to expand the revenue structure by extending the price segments to include a $60 donor level to either lapsed members or as a reach to potential donors. Spiller and Baier (p 95) instruct us that price elasticity is a critical aspect of offer pricing. Interested parties might be more inclined to become new members if it were easier to give and also a little easier on the wallet. Such a special offer can be made to them without undermining existing donations by using an emerging technology and exploiting our database.

Demographics of mobile phone SMS text users is younger and better educated. New technical venues may extend the reach of the Kennedy Center appeal for donations. Given the pragmatic and conservative nature of donors, my gut feeling is that a simple text message would have good effect. This hunch is supported by a web site mGive.com, and an article on the Everyday Giving Blog. As Carr (2008, p 1) concludes “Making a donation by sending a simple text message is convenient. This convenience is available to the 250 million mobile phone users in the United States alone.”

This is an avenue for the Kennedy Center to economically extend its reach for donations to candidates with mobile technology. The donation is added as a charge to the cell phone monthly bill. The campaign is then to select appropriate audience of conservative, religious pragmatists from organizations like AllMedia.Com, and send them a simple text message much like the Center Generous Support statement above through a service like mGive.com.

In addition, QR Codes can be used to integrate Kennedy Center print materials with its online assets. QR Codes are a special type of barcode that is optimized for use by mobile devices. Smith (2008, p 1) echoes the view of many. He observes that QR Codes and mobile form factors link print media with the Internet. By strategically locating QR Codes, mobile readers of Center print media can link to the Center Web site, getting pod-casts, steaming audio and video, Mobile Web pages, and other entertaining or informative communications.

Center print materials for the gift store will have QR Code to link to always up-to-date reference materials on the music, play, dance, or on the artists. By also forwarding users from the Center Web site to associated blogs, and community sites further information becomes available and communities of interest can be accessed from print materials.

By using a QR Reader, possibly a mobile phone, one can jump from the print world to the online world. This is unprecedented value for the customers of the store.

Say and Southwell (2006, p 262) notes that one key success factor with text messaging direct marketing is to guide actions with testing and evaluation. They take baby steps with an idea in a test, and through a comprehensive evaluation decide how to implement it. Permission is another critical success factor. They have devised a series of techniques for garnering permission (p 263). They caution against the temptation to treat mobile marketing as a “silo” or isolated channel. Integrated channel planning unleashes the full potential of mobile marketing.

Their article explains how First Direct was able to gain permission for extensive mobile marketing activity. Initial usage of text-messaging was to provide a convenience to customers, at the banks expense. This created a foundation of trust and a new point of view by the customer. They can use their mobile phone to increase their control over their money (p 263).

The same could be done at the Center. An initial benefit of notifications of new shows, ticket availability, specific seating availability for those on wait lists and so on. The advantage of subscribing to the text messaging is first notification and right to good seats when they come open, to get tickets to popular shows on popular nights, and other conveniences. Once we have a database of subscribers, we can start the mGive.com campaign for collecting donations.

References
Buchanan, Mark (2002). Nexus. Small Worlds and the Groundbreaking Theory of Network. W.W. Norton, New York.

Carr, Roger (May 17, 2008). Will You Text Message Your Next Charitable Donation? Retrieved on March 14, 2009 at http://www.everydaygivingblog.com/2008/05/mobile-giving.html

Duncan, Tom (2005). Principles of Advertising and IMC. New York: McGraw-Hill Irwin.

Haigh, D. and S. Gilbert (May 2005). Valuing not-for-profit and charity brands — real insight or just smoke and mirrors. Int J. Nonprofit Volunt. Sect. Mar. Retrieved on September 6, 2008) from EBSCOHOST.

McNesby, Mick (January 13, 2007).Charitable Giving In America: Is Advocacy Of Government Programs A True Form Of Charity? Ezines. Retrieved on March 14, 2009 from http://www.yoursdaily.com/culture_media/books/charitable_giving_in_america_is_advocacy_of_government_programs_a_true_form_of_charity

Reed II, Americus and Karl Aquino, & Eric Levy (January 2007). Moral Identity and Judgments of Charitable Behaviors. Journal of Marketing. Retrieved on March 14, 2009 at http://www.si.umich.edu/ICOS/Reed,Aquino,&Levy.pdf

Say, P. and J. Southwell (Jan-Mar 2006). Beep, beep, beep, beep, that’ll be the bank then – Driving sales through mobile marketing. Journal of Direct, Data and Digital Marketing Practice. Retrieved March 14, 2009 from EBSCOHOST.

Shang, Jen and Americus Reed, and Rachel Croson (June 2008). Identity Congruency Effects on Donations. Journal of Marketing Research. Retrieved on March 14, 2009 from EBSCOHOST.

Smith, Shawn (April 8, 2008). How QR codes could save newspapers from obsolescence. Mlive.com. Retrieved on March 14, 2009 at http://www.newmediabytes.com/2008/04/06/will-qr-codes-turn-newspapers-into-cash-cows/

Spiller, L and M Baier (2005). Contemporary Direct Marketing. Pearson/Prentice-Hall.

The Voices of Social Media

noreply@blogger.com (George) — Sun, 08 Mar 2009 00:16:00 +0000

A blog has one voice with a chorus of commentary. You post your message and others comment on it in separate replies but no one can change your original message. Yours is the voice initiating the tone and tenor of the communications. Your message is the focus and cannot be altered except by you.
On the other hand, a wiki has a community voice. Someone posts a message and, unlike with a blog, everyone can edit that post. Version control is usually present so previous versions can be retrieved and even differences between versions highlighted.

At my job, we are using blogs, and wikis for project management work; in our case web services projects. In fact, web services is being moved under public affairs in most organizations, considered more of a communication function than a technology support function.

Design reviews by client offices are done in blogs since we have superior knowledge of computer and communications systems. The design has one voice but the ability to comment by interested parties. Internally, we prepare a design using wikis. Everyone within my office has superior knowledge in different facets of a system to contribute to an overall proposal. When we have a proposed design we transfer the communication to a blog as a design review by external offices.

These approaches get buy in from both the internal staff and our external clients more so than traditional methods. The internal public experiences a more direct hand in preparing the design. The external public can see other s’ comments in parallel. Stultz (2009, p 11) says that

“But the blog rules for now. Solid relationships can be built by you and by corporations (again, you) based on honest, open dialog with superior content.”

Secondly, we are using txt messaging gateways as one method of broadcast communications for continuity of operations. Cell phone carriers, such as Sprint or Nextel, provide SMS gateways for the transfer of text messages from computer to mobile phone. These gateways are the foundation of the mechanics for an organization, be it an aggregator mobile marketing service or a commercial business entity, or government agency to implement a mobile communications broadcast. Wikipedia has a list of mobile phone SMS gateways by carrier (see SMS Gateways in Wikipedia).

All email messages broadcast as text messages to mobile devices go through such gateways to both verify permissions you set on receiving and allowing the messages through. As an example, assuming my phone number is 800-555-1213 and my carrier is Sprint, the Sprint SMS gateway is messaging.sprintpcs.com according to Wikipedia. So I could create an email on my computer that would be sent to the gateway by using the following as the To: address

8005551212@messaging.sprintpcs.com

The messaging gateway (messaging.sprintpcs.com) converts my email to mobile txt and in turn forwards it to the SMS client on my cell phone. This can also be done programmatically with a function like the one below to loop through a list of recipient mail addresses. In addition, the from-name can be changed to an email alias relevant to the receiver, so they don't trash the email right away as spam.

Duncan (2005, p 392), says an important aspect of mobile marketing is that “messages can be targeted not only by individual cellular phone number but also by time and location of targeted customers.” Critical here is permission of receiver. In their article Driving Sales through Mobile Marketing, authors, Say and Southwell (2006, p262) imply that mobile direct marketing, especially text messaging can be ruinous because “the mobile phone is almost certainly the most personal electronic consumer device.” In support of this warning, another researcher Alan Chappell (2006, p1) cites a study that found 80% of cell phone users would consider ‘mobile spam’ a reason for switching carriers. Direct Marketers who fall short with mobile etiquette risk bad public relations, hardship in the mobile media, and Say and Southwell believe that ultimately it can degrade a brand (p 262).

They must be in control. Stultz notes (2009, p 13) “Marketers are encouraging consumers to become part of the conversation; in fact, to control it. “ This is true for both social media and mobile communications technologies.

References
Duncan, Tom (2005). Principles of Advertising and IMC. New York: McGraw-Hill Irwin.

Chappell, A (March 19, 2006). Mobile Marketing & Opt-In (Chapell & Associates). Retrieved on March 7, 2009 at http://mmaglobal.com/modules/article/view.article.php/352

Say, P. and J. Southwell (Jan-Mar 2006). Beep, beep, beep, beep, that’ll be the bank then – Driving sales through mobile marketing. Journal of Direct, Data and Digital Marketing Practice.

Stultz, Larry (2009). Non-Traditional Media and Interactive Marketing.

Media Involvement

noreply@blogger.com (George) — Sun, 01 Mar 2009 15:33:00 +0000

What makes print inherently more involving than radio or TV?
Drewniany and Jewler (2008, p 210) say that radio is less inherently involving than print media because it is transient, listeners cannot go back and reread something. An advertisier is relying on their memory to record and playback the marketing message. Likewise Duncan. He says (2005, p 360), “Broadcast messages are fleeting.” They have the staying power of dayflies and can be just as annoying. Duncan further notes that customers can be doing something else while listening to radio or watching TV, especially during commercials when they get restive or jerk themselves back to reality to get a soda or something.
He notes these as weaknesses for TV and Radio (p 349).

When should a more involving medium be used?
The level of consumer involvement is an important consideration in media selection. Duncan (2005, p. 142) says that consumer involvement has two facets, relevance and perceived risk. He goes on to say (2005, p. 141), that relevance is key to determining the level of involvement, the extent to which a product or its message is pertinent and connects with a customer’s personal interests. Customers are more willing to invest pre-purchase energy in learning more about a relevant and more risky buy.

The Elaboration Likelihood Model by Cacioppo and Petty can provide a framework for analyzing the most effective balance in the media mix for marketing communications. Cacioppo and Petty define the primary relationships in persuasive communication as communication engagement and cognitive commitment.

According to the model, the greater our communication engagement with the other party the more likely that party is to use what the model calls central route processing, which is to say a great deal of message related thinking. Media appropriate for in-depth thinking and evaluation of the message should be used in such a case. On the other hand, if communication engagement is low, what the model calls peripheral cues are best. In this case, more attention getting media that do not necessarily lend themselves to protracted analysis would be a better choice.

Perceived Risk
Perceived risk may be difficult for advertisiers to identify. Perceived risk is related to unsatisfactory product performance and as noted above is related to consumer involvement. The level of risk may depend on context. Hawkins, et al (2007, p 550) give an example of buying wine. If you are buying for yourself, no big problem if it is unsatisfactory. The same decision, if you are buying for a dinner with a significant other, can be much riskier.

In some ways, a different context can make one product perform like a completely different product in response to IMC. Hawkins, et al (p 551) do give examples of products that generally have high perceived risk. They are classified by types of failure:

Social costs (e.g. new suit not appreciated by peers)

Financial cost (e.g. expensive vacation that had rain everyday)

Time Cost (e.g. auto repairs are not just cash costs)

Physical cost (e.g. interactions or side effects of prescription drugs)

It also seems intuitive that context may be ascertainable from the audience characteristics of the specific media companies employed. In these cases, advertisers should be able to make a good bet on risk level.

References

Cacioppo, John and Richard Petty (1986.) THE ELABORATION LIKELIHOOD MODEL OF PERSUASION. Retrieved on Feb 19, 2009 from the EBSCOHost database.

Drewniany, B and J Jewler (2008). Creative Strategy in Advertising. Wadsworth.

Hawkins, D., Mothersbaugh, D. and Best, R. (2007). Consumer behavior: building marketing strategy. New York: McGraw-Hill Irwin.

A Practical Guide to Market Segmentation

noreply@blogger.com (George) — Sat, 21 Feb 2009 21:46:00 +0000

In his article A Practical Guide to Market Segmentation, Paul Hague reviews the value of segmentation, outlines a ten-step process for successfully achieving market segmentation, and analyzes three approaches for performing that segmentation. Segmentation is a key strategy to improve our customer database efficiency. He (p 2) says that “Segmentation enables us to group together customers with similar needs so that we can bring together limited resources to best serve them.” He applies the Pareto rule to the customer base and concludes that 20% of our customers may provide 80% of the sales revenue.

He asserts (pp 1-2) that it makes sense to personally customize offers to these devoted customers, but it would be financially irresponsible to do so for the other 80% of our customer base who are small buyers. For this 80%, Hague has several segmentation strategies. Although he is discussing business-to-business marketing, such segmentation also makes sense for business-to-customer as well.

Steps three through eight are a description of the three overall approaches he considers for classifying a customer base including the advantages and disadvantages of each approach. Once a segmentation approach has been selected, the customer base should be grouped together using cluster analysis (p 5). He recommends that such clustering be done every “six to twelve months with current customers to ensure any changing needs are recognized and addressed.”

Implementation of the segmentation is usually done from a spreadsheet (p 5), which can vary in sophistication depending on the extent of the customer base. A different offer must be prepared for each grouping of customers, and it must use the characteristics of each group to fashion a customer value proposition. Hague warns (p 6) that salespeople have an instinctual belief that all customers are “price fighters.”

Three Theoretical Perspectives on Segmentation
His first segmentation strategy is business firmographics that he compares to customer demographics. A major issue with segmentation based on firmographics or demographics is that it is an obvious approach to all our competitors as well and so may not provide competitive advantage.

Another possible segmentation strategy is needs based, although we must be careful about changes in needs over time. This strategy requires more resources to do the necessary market research but (p 2) “Gets to the heart of marketing; that is the identification and satisfaction of customer needs.” Hague asserts that the actual need drivers will end up being simple or at least simpler (p3) than generally believed because of the “action of cognitive misers.” To analyze a customer base for purposes of needs segmentation, he recommends no more than ten need factors be used to categorize customers.

The last segmentation strategy he discusses is the middle ground in terms of effort. Behavior based segmentation finds an external behavior measure that reflects a hidden need. He gives an example of a behavior that can be used to categorize customers (p 5). Customer behavior regarding procurement vehicles is the example he gives and he has a simple two-behavior classification: 1.) a Request for Proposal (RFP); or the alternative 2.) a Request for Information (RFI). His experience is that the RFP customers are price focused and the RFI customers are more open to suggestions and less price driven.

Hague’s Main Conclusions
Hague drives home the main conclusion throughout the paper, and that is customers are different, they should be grouped according to the relevant characteristics of our relationship with them, and our marketing activities should form around those segments. He concludes (p 2) that this approach optimizes our application of scarce resources, and that the true test (p 6) of a good segmentation is that it brings in “business that is profitable.” Orienting the sales staff (p 6) is critical so that they understand the nature of the segmentation guiding their efforts, and that they cannot return to the “cozy life in which they are given free rein and any offer will do.”

For a complete précis of the article see Redmond Review of A Practical Guide to Market Segmentation.

References
Hague, Paul (n.d.). A Practical Guide to Market Segmentation. B2B International.