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How Retailers are Surviving the Downturn

2009-02-16T13:56:42Z

Our article in the Feb ‘09 edition of ESOMAR’s Research World. Grab your copy here.

How a passionate focus on value along with other basic approaches are helping retailers to survive and thrive during the downturn.

My, oh my, how things have unravelled.

Back in September, Research World looked at the impact of the downturn and the focus was on the collapse of financial organisations.

But now the focus has shifted to collapsing retailers, among them household names such as Circuit City in the US and Woolworths in the UK, one of the world’s oldest retailers.

What’s more, “Ten chains ‘face closure’ in 2009” declares a headline from a UK consultancy as a dismal prelude of the carnage to come.

In this Darwinian environment, retailers need to adapt or face the real prospect of death.

Global
It’s no surprise that the downturn has spread and is even hitting the high growth BRIC economies.

But, says Christopher Ruane, head of ?What If!’s retail innovation practice in China says that “The fundamentals in China are nowhere near as bad [as the West].” He says that Mercedes has enjoyed a good year, that Disney has successfully launched a premium-priced language learning centre, and that designer brand Marc Jacobs is opening a new branch “within 3 blocks of another Marc Jacobs store.”

Javier Medrano, VP marketing for Grupo Bimbo, one of the world’s largest bakery firms, concurs for Mexico and Latin America: “For the last two years the [Mexican] government has been campaigning against childhood obesity so a lot of companies are launching new products and lines…[thereby helping to stimulate the economy],” says Medrano.

Masstige
India, though, may be a BRIC exception. While still expected to achieve high single-digit growth, Piyul Mukherjee, director of Proact Research and Consultancy says that the number of stores in malls has mushroomed over the past five years, and that most “…are going to find it tough.”

That, says Mukherjee, is because the middle class have failed to embrace these new stores, many of which feature high-end brands such as Rolex and ‘Mango’. The result? They could well prove to be as much a victim of flawed business models as of the downturn.

Value, value, value
Perhaps predictably, consumers focus on value during harsh times. But what does that mean in practice?

In the West’s most mature economies, the focus seems to be on trading down, often to store or lower-priced brands. Gill Aitchison, president of global shopper & retail research at Ipsos, says that an Ipsos MORI study in late 2008 found that 61% of UK shoppers had started to buy more own label/store brands, while 26% had widened their repertoire of supermarkets to get better value.

Aitchison does, however, warn retailers to maintain their core offerings: “While shoppers are watching their spending, they still expect choice and variety. Therefore, full-service retailers who are limiting their stock and delisting products will see a decrease in shopper satisfaction. Discounters [e.g. Aldi, Lidl], on the other hand, who already have created expectations of reduced SKU options, will not suffer this.” In short, retailers that cater to both price and value seekers are expected to do particularly well in the current climate.

In fast-growing markets such as China, India and Mexico, where the growing middle class has developed an appetite for quality and variety, and where the effects of the downturn are far less severe, value is about more than simply price.

In China for example, foreign retailers Carrefour and Tesco do particularly well: “It’s partly about refinement, partly about quality, and significantly about safety – I can’t over emphasise how important product safety is in China, people are aware that food especially is often not safe here (eg. melamine milk scandal),” says Ruane.

And in Mexico, the search for value has led to a resurgence of local mom and pop stores: “A couple of years ago we really saw a slight decline in new traditional local stores opening. The supermarkets were offering really good value…but recently that’s been changing again because now people are now more conscious of prices, they don’t have enough money to spend for a week’s worth of products, they are buying two or three times a week in smaller quantities in smaller stores,” says Medrano.

Middle-squeezing
Vivek Sharma, group director, marketing strategy & insights at The Coca-Cola Company contends that during a downturn “it’s the middle men that get squeezed.” By which he means that retailers need to occupy a position of good value (e.g. Wal-Mart) or a distinctive niche (e.g. Whole Foods).

It’s the reason, he says, that Nielsen data shows that Wal-Mart and dollar stores are outperforming the likes of mid-market Target.

It’s also why the UK’s Woolworths is closing: “Woolworths sold a wide range of merchandise but never achieved a positioning of being the best at any one thing,” says Aitchison.

Foreign invasion
Western retailers have been making inroads into other countries for a while. And when they do, they need to be careful on the level of local adaptation.

Minimal adaptation can sometimes work. Ruane says that their influx in China has forced domestic retailers to “significantly raise their game, while other domestic retailers have gone to the wall. Price promotions and clean stores are much more common because of the impact of Tesco and Carrefour.” But, he says, Tesco and Carrefour have also adapted by installing wet markets (for selling fish etc.) to accommodate local preferences.

But foreign approaches don’t always work, however logical they may seem.

For example, Indian supermarket chain Big Bazaar has steadfastly eschewed the ‘clean and tidy’ look of Western supermarkets: “Big Bazaar knows that people like a mess inside, they don’t want clear, clinical aisles like in the West,” says Mukherjee. Big Bazaar also refers to the ‘bum-brush factor’ – they say that the moment bums fail to brush each other, sales go down!

GoMe, China’s leading electronics retailer, faced a similar dilemma a couple of years ago when US competitor Best Buy arrived. Best Buy decided to operate traditionally organised stores with clear information displays, in stark contrast to GoMe’s market-style setting devoid of information. GoMe was right, explains Ruane, because: “Shoppers tell us time and again that they don’t believe anything they read or hear in store. If they want an opinion they’ll use the internet and go onto a bulletin board or else seek a personal recommendation, even for a brand they trust.”

Medrano says that foreign retailers have had a mixed experience in Mexico. Wal-Mart successfully operates under four franchises: Walmart (hypermarkets), Bodega Aurrera (high discount), Superama (supermarket with a focus on higher quality and prices), and the members-only Sams´s Club. In contrast, rival Carrefour has exited the market.

And in the UK, German discounters Aldi and Lidl have made significant inroads, so much so that market leader Tesco has ‘copied’ their discount line as a defensive measure.

A successful retailer: Future Group
Mukherjee regards India’s top retailer, Future Group, as a significant success story, one that she expects to continue during the downturn: “…they have a whole bunch of [different] outlets…there’s a whole bunch of consumers out there who will always, whatever you may do, not really want to walk into a large supermarket because they say that’s not my scene.”

Future, she says, have seen off competitors by building a strong national presence under an assortment of value brands. Crucially, while competing brands focused on the middle class, Future targeted the lower middle class through its KB outlets, something malls initially resisted because they didn’t “want that kind of a crowd in the mall.” Malls soon relented once they realised Future’s power to drive footfall.

For now at least, the credit crunch has stymied the ambitions of competing players, both foreign retailers and domestic conglomerates such as Metro, Tata and Birla. The latter, says Mukherjee, “missed the bus on retail at a national rather than a local level,” by starting too late.

Future is now busy building its own portfolio of value brands across all the categories they sell, something they anticipate being very profitable.

A successful brand: Coca-Cola
Coca-Cola has been one of the more successful brands during the downturn. “We once again demonstrated our ability to perform consistently, delivering our eighth consecutive quarter of double-digit comparable earnings growth,” said CEO Muhtar Kent in last October’s trading update.

At the sharp end is Coke’s Sharma. He says that US consumers did not reduce overall grocery spending at first, instead choosing to reduce the number of supermarket trips to counter the sharp rise in fuel prices.

But now that the recession is starting to bite, consumers are trading down to cheaper brands and even eliminating certain categories altogether.

So how does Coca-Cola defend itself against price shopping? Sharma says by focusing on value: “People are starting to look more at value propositions…we look to provide the right price-pack offer and to reinforce our intrinsics.”

Two of those ‘intrinsics’, says Sharma, are the colour red and the distinctive contour-shaped bottles. The latter is now making a comeback in the US because “Whenever you come across Coke, we need to evoke those strong memories people have.”

If you read last month’s piece on ‘Buyology’, you will have seen the success Coke achieved from its sponsorship of TV’s American Idol. Coke’s seamless integration of red and the contour shape into the show was textbook marketing that resulted in very high brand awareness. Sharma modestly proclaims that Coca-Cola is “very happy with the program.”

Online
Despite the growth of online, retailing is largely still an offline story in many categories. In some categories such as financial products and services, electronics, books and digital products, online is significant. Beyond this, the Internet plays an important role in facilitating price comparison for value seekers.

An area of interesting development is China. It now has the world’s largest online population and “Chinese ecommerce has more or less doubled over the past year, albeit from a low base,” says Ruane.

Auctions are particularly popular. TaoBao, China’s answer to eBay, is driven by person-to-person sales of low ticket items. Delivery is extremely low cost due to the low cost of labour and the creative use of city subway systems.

Key barriers to growth include the limited availability of online payment systems, plus “Chinese consumers are much more visual and tactile than western consumers…and there’s a big concern about fake goods, particularly fake consumer goods,” says Ruane.

No Shit, Sherlock!
Shopper research, as distinct from consumer research, is a hot and fast-growing area, according to Ipsos’s Aitchison. This, she says, is because “…it helps retailers to pinpoint actions in store to recognise and counter the economic concerns that shoppers are feeling. And the beauty is, they are generally relatively low cost to implement, compared to advertising or deep price cuts.”

Sharma is testament to its importance within Coca-Cola: “I’ve been doing shopper insights for some years, but it is only relatively recently that we decided to [restructure teams]…my team is… focusing only on what we call commercial and franchise insights, which is all about trying to understand a lot more about the shopper as opposed to the consumer. And I have my colleague who is focusing a lot more on consumer insights. The key is ‘renewed focus’ on the shopper.”

Sharma concludes: “Some of these findings, it looks like these are obvious truths…one of my good colleagues likes to refer to them as NSS – No Shit, Sherlock!” But, he says, you didn’t know it was NSS until you saw it!

35 Picnic conference videos

2009-01-31T14:31:55Z

On Vimeo you can find no less than 35 videos of the Picnic conference. They are great.

My personal favourites (quite a few):

Jim Stolze: The virtual happiness project
“Virtual Happiness” is a research project that aims to provide insights on the relationship between internet usage and happiness.
- Jim Stolze specializes in new thinking on digital communication.

Matt Hanson: Celebrating Collaborative Creativity
Matt Hanson, a filmmaker, working on the open-source movie project A Swarm of Angels

Panel Discussion: Celebrating Collaborative Creativity
In this fast paced session, several examples of collaborative creativity are under review- what processes and business models appear? What changes will occur in the movie, music, ppublishing and advertising industry?
Moderator: Laurent Haug, entrepreneur and co-founder Liftlab
- Matt Hanson, a filmaker, working on the open-source movie project A Swarm of Angels
- Ton Roosendaal, founder of Blender, an open-source, cross-platform suite of tools for 3D creation
- Katarina Skoberne is the co-founder and managing director of OpenAd.net, ‘The biggest Creative Department’
- Pim Betist, a music lover and founder of Sellaband, an audience supported business model for bands.
- Eileen Gittens, founder and CEO of Blurb, has built a creative publishing platform that makes it easy for anyone to design, publish, share and sell real bookstore-quality books

Ben Cerveny: Can you see what I know?
Artists, scientists and designers are exploring a new world of software aesthetics and developing new languages for interactive and visual expression. How can we make information intuitively meaningful?
- Ben Cerveny is a strategic and conceptual advisor to Stamen, specialists in creative visualization. He is highly regarded experience designer and conceptual strategist.

Stefan Agamanolis: Dueling with Distance
Based on his work at MIT and Distance Lab, Stefan Agamanolis reports on hot trends in communication and connectedness that are doing battle with distance in unexpected ways, ranging from sports games you play over a distance to telephones crossed with flotation tanks.
- Stefan Agamanolis is the Chief Executive and Research director of Distance Lab

Matt Jones: The Emerging Real-Time Social Web
Matt Jones is a creative director and user experience designer who worked a Sapient and the BBC before founding travel service Dopplr

Jyri Engestrom: The Emerging Real-Time Social Web
Jyri Engestrom is a social scientist as well as the founder of the Finnish mobile presence service Jaiku, which was acquired by Google in 2007; his subsequent move to Silicon Valley resulted in his renewed attention to social processes in new media platforms.

Conversation the Emerging Real-Time Social Web
With ubiquitous internet connections and a surge of connected mobile services, slices of reality can be saved that people could not capture before. Saving and sharing our presence, we can feel those of others as well. We are on the verge of a reality with ’social peripheral vision’, in which ambient friendships flourish and life stories and life’s details are stored, shared and searchable.
- Matt Jones is a creative director and user experience designer who worked a Sapient and the BBC before founding travel service Dopplr
- Philip Rosedale is founder of the 3D online world Second Life and a pioneer in virtual worlds
- Addy Feuerstein is the co-founder and CEO of AllofMe, a service that allows you to create digital personal timelines form digital assests such as pictures, videos, and blogs.
- Jyri Engestrom is a social scientist as well as the founder of the Finnish mobile presence service Jaiku, which was acquired by Google in 2007

Younghee Jung: Design as a Collaborative process
New interactions develop into new design practices; new processes induce new forms of creativity. How can creators involve the peopele they want to create for in their work?
- Younghee Jung, a senior design manager at Nokia, shows how users are imagining new products.

Bill Moggridge: Design as a Collaborative Process
New interactions develop into new design practices; new processes induce new forms of creativity. How can creators invovle the people they want to create for in their work?
- Bill Moggridge is founder of IDEO, one of the most successful design firms in the world and of the first to integrate the design of software and hardware into the practice of industrial design.

Ethan Zuckerman: Surprising Africa
A presentation on vibrant and fast-moving tecnological and creative developments in cities and rural areas across Africa, from mobile naking to new communication patterns.
- Ethan Zuckerman, the co-founder of Global Voices, a research fellow at the Berkman Center, and a prodigious blogger interested in hte impact of technology on the developing world.

Conversation with Ethan Zuckerman, Helen Omwando and Binyavanga Wainaina: Surprising Africa
An update on vibrant and fast-moving technological and creative developments in cities and rural areas across Africa, from mobile banking to new communication patterns.
- Ethan Zuckerman, the co-founder of Global Voices, a research fellow at the Berkman Center, and a prodigious blogger interested in the impact of technology on the developing world
- Helen Omwando, head of market intelligence for Royal Philips Electronics
- Binyavanga Wainaina, Kenyan author and journalist

Clay Shirky: Here Comes Everybody
A revelatory examination of how the spread of new forms of social interaction enabled by technology is changing the way humans form groups and exict within them. Our age’s new technologies of social networking are evolving- and causing us to evolve into new groups doing new things in new ways.
- Clay Shirky is a leading Internet thinker, the author of Here Comes Everybody, and a sharp analyst of social media developments.

Wolfgang Wagener and Jared Blumenfeld: Eco Map
What can we do with an open source collaboration platform that enables citizens and business to see collective results of their actions?
- Wolfgang Wagener, Director, Sustainable Cities Connected Urban Development, CISCO and Jared Blumenfeld, Director, Department of the Environment, City and County of San Francisco

Euro Beinat: The Visible City
What if we could view an entire city from above, as if from an airplane - and see not only the buildings and squares but also all the human beings populating it, oudoors and indoors?
- Euro Beinat, professor of location awareness at Salzburg University, CEO if Geodan Mobile Solutions, and founder of the Senseable Future Foundation

Stan Williams: Tracking our World
CeNSE: The Central Nervous System for the Earth is based on the believe that nanotechnology has the potential to revolutionise human interaction with the Earth as profoundly as the Internet has revolutionised personal and business interaction.
- Stan Williams, HP senior fellow; director, HP Information and Quantum Systems Lab

Adam Greenfield: The Long Here, the Big Now, and other tales of the networked city
Future urban life will thrive on new modes of perception and experience, based on real-time data and feedback. What will the networked city feel like to its users? How will it transform our sense of the metropolitan?
- Adam Greenfield , head of design direction for Nokia and author of Everyware

Charles Leadbeater - We Think: The Power of Mass Creativity
The conflict between the rising surge of mass collaboration and the attempts to retain top-down control will be one of the defining battles of our time. An exploration of what this means for our culture, the way we work, government, science and business.
- Charles Leadbeater, thinker, famed policy advisor to former UK prime Minister Tony Blair, and author of We Think, a groundbreaking analysis of a changing world

Charles Leadbeater in conversation with Clay Shirky
The conflict between the rising surge of mass collaboration and the attempts to retain top-down control will be one of the defining battles of our time. An exploration of what this means for our culture, the way we work, government, science and business.
- Charles Leadbeater, thinker, famed policy advisor to former UK Prime Minister Tony Blair, and author of We Think, a groundbreaking analysis of a changing world,
- Clay Shirky, leading Internet thinker

(via Laurent Haug)

Replication versus imitation

2009-02-09T13:04:00Z

I attended the NESTA workshop run by Mark Earls, Johnny More and James Cherkoff on Social influence. There was lots to consider - complicated by the fact that every group exercise drew on general learnings but there (gasp) was no powerpoint or document - so you really needed to take notes or get something written to ensure you took something away. So I'm keeping my eyes open for blogs.

The last session allowed people to ask questions and to gather around them group to help them find the answers. So here's my output from the discussion. Conventional marketing draws on replication. Very Marshall McCluhan this - in the Guttenberg age - the printing press or the TV becomes the prevailing metaphor.

Markters want to create messages and replicate them - endlessly at low cost with utter fidelity.

Humans aren't like that - they aren't blank ciphers waiting to be filled. So when they interact and pass on messages - imitation not replication of the message is what they do. And the original message gets corrupted. Trouble is marketers who want to achieve social effects are still briefing for replication - they want predictable results.

The chinese whispers exercise - so simple but so eloquent demonstrated the dilemma perfectly - a sequence of 3 gestures was passed down the line. an embrace, knee slap and bum slap translated into a double kiss and bum slap by the end of the line. Another exercise: echochamber where a circle of us were each given someone to imitate on the other side of the circle -showed quickly how even slight trivial movements are magnified (or ignored) and bored people made up new moves to see how far their innovation could carry. Which makes humans very unreliable replicators but useful imitators. You need to change your goals and metrics though. In my little group we debtated the differences. This is what emerged - the difference between replication and imitation

                                                Replication                Imitation
                                                Programmatic            Organic
Underlying structure:                Rationalisation           Emotion
Communication model               Trumpet blast           Jungle drums
Medium of communication         Message in a bottle    Stir up the waves and follow currents
context                                     Context free            Context dependent
How to get traction                   Transmit the answer   Ask a good question - questions travel
Involvement of Medium            Medium carries           Medium translates and embroiders

Cathy Cawley introduced me to a new triangle - accuracy, low cost and coverage - you can't have all three. a lot to think about. The challenge is to take the client with us - if we have conceded accuracy the message in a bottle then does the client really want to pay to make waves with no explicit messaging benefit at the end of the process.?

Who influences who?

2009-02-09T15:18:42Z

We had a very interesting event this morning at Nesta on networks of influence with about 70 people co-facilitated by Mark Earls, Johnnie Moore and James Cherkoff.

The structure was very simple, but possibly rather groundbreaking for a Monday morning. We played a number of 'games' whereby we all lead, influenced, nudged, suggested in different ways and then talked about it afterwards. Doesn't sound that remarkable but it was.

Two particular examples stood out for me from the morning:

Firstly, we did a silent version of Chinese whispers. About 15 people stood facing one way in a chain, and then in pairs, transmitted a series of simple movements. Needless to say, as typically happens in Chinese whispers, the movements morphed significantly through the chain. Interestingly, and I stress we didn't have this incentive today, when this was tried in a big company with a £5000 incentive, they still couldn't get it right. So it's not just a case of concentrating hard. Messages or movements get changed, morphed, adapted, and we should not just tolerate this, we should embrace it. This is a hard pill for marketers or politicians to swallow. For me Jimmy Hendrix illustrates this point nicely by pointing out that the greatest compliment is when somebody copies your mistakes!
Secondly, we started another game whereby we paired off, by height as it happens. The task was to 'get your partner into the air as often as possible in 20 seconds'. This group of people broke out into almost spontaneous jumping as this cooperative strategy was obviously the most efficient and least painful. However, once again apparently this strategy is not often adopted quite so quickly if at all, and some impromptu wrestling can ensue if you’re not very careful. I guess this illustrates the difference between competitive and collaborative strategies nicely which I don't need to elaborate on further here.

In summary, I really enjoyed the session and I guess one of the big take aways for me is the value of trying these games, rather than just talking or reading about them. In many ways it was quite counterintuitive for me as I usually like to sit back, reflect, observe and supposedly rationally analyse what was going on. However, this morning taught me that a) we probably usually over think stuff and b) maybe we're not so rational as we think we are.

Amazing video on the relationship between creativity and play

2009-02-18T10:55:42Z

At the 2008 Serious Play conference, Ideo CEO Tim Brown made a fascinating presentation about the powerful relationship between creative thinking and play, which can now be found on YouTube. Here are some of the thought-provoking ideas that he shared.

multi-tasking is dead- long live single-tasking

2009-02-12T19:41:27Z

Doing great work these days with multiple stimuli fighting for your attention is almost impossible. To breakout of multi-tasking and the ADD workstyle you need some discipline and will power. Of course, it helps if you have a set of very clear instructions.

Via Caterina.net

Posted by Ed Cotton

Economic Distress and Fear

2009-01-15T12:14:30Z

This was the Quotation of the Day from January 12:

Part of the debtor mentality is a constant, frantically suppressed undercurrent of terror. We have one of the highest debt-to-income ratios in the world, and apparently most of us are two paychecks from the street. Those in power -- governments, employers -- exploit this, to great effect. Frightened people are obedient -- not just physically, but intellectually and emotionally. If your employer tells you to work overtime, and you know that refusing could jeopardize everything you have, then not only do you work the overtime, but you convince yourself that you're doing it voluntarily, out of loyalty to the company; because the alternative is to acknowledge that you are living in terror. Before you know it, you've persuaded yourself that you have a profound emotional attachment to some vast multinational corporation: you've indentured not just your working hours, but your entire thought process. The only people who are capable of either unfettered action or unfettered thought are those who -- either because they're heroically brave, or because they're insane, or because they know themselves to be safe -- are free from fear.

Quote is from The Likeness, a novel set in Ireland, by Tana French.

Predictably Irrational and relative value

2009-01-11T08:00:00Z

ABC Radio National's All in the Mind just broadcast an interesting interview with behavioural economist Dan Ariely, where he discusses some of his fascinating work on our cognitive biases and why we find it so difficult to judge what will benefit us most.

I'm pretty sure it's a repeat, but I mention it as I've almost finished the unabridged audiobook of his recent bestseller Predictably Irrational which is thoroughly excellent.

The first thing that strikes me is 'wow, you've done so much interesting research', as the book is largely about studies he has personally been involved with.

The second thing is 'damn, I wish I'd thought of that' as the studies are often cleverly conceived and tackle real-world corners of our reasoning and judgement.

The chapters on anchoring and on decoy options are particularly fascinating and he gives a vivid example of how decoy options work.

He notes that the UK magazine The Economist was offering a web only subscription for $59, a print subscription for $125 dollars, and a print-and-internet subscription also for $125.

It seems no-one would choose the print-only subscription - it seems obsolete - but its mere presence affects our reasoning and boosts the sales the more expensive option.

In a study to test this, Ariely gave participants the choice between these three subscription options, and to another group of participants, the choice only between web-only and print-and-internet subscriptions.

in the three option condition 16 people chose the internet-only subscription, none the print-only subscription and the other 84 chose the print-and-internet option.

As the print-only is obselete, it should make no difference whether it is part of the choice or not, when it isn't there, in the two choice condition, the reverse pattern emerged. The majority, 68 people, chose the cheaper online option, while only 32 took the print-and-internet option.

In other words, the print-only is a decoy and it makes us think that the print-and-internet option is a better deal because it has something 'free', when in reality, this impression is just created because we've just been presented with a decoy worse deal

This relates to one of Ariely's main points that he returns to throughout the book, that we tend to make relative judgements, and manipulating the context can skew our perceptions of value.

It struck me that this is how most people experience pitch and musical notes. A few people have 'perfect pitch' and can label tones without reference to other tones. I wonder if some people have 'perfect pitch' with regard to this sort of value judgements.

The Predictably Irrational website is also very good, where Ariely has a regularly updated blog and has created free video summaries of each of the chapters.

All come highly recommended.

Link to AITM interview with Dan Ariely.
Link to Predictably Irrational website.

How to Find the Right Chart Type for your Numeric Data

2009-01-14T07:36:49Z

Charts help you visualize numeric data in a graphical format but the problem is there are just too many types of charts to choose from. You have bar charts, bubble charts, pie charts, line histograms and so on.

If you are finding it hard to pick the right chart type for your type of data, this easy flow chart (available as PDF and JPG) courtesy Andrew Abela should help you make the decision quickly. Start from the center and take the route that best matches your data. Thanks Chris Lyons.

You may also want to check out Chart Chooser - an online tools that lets you shortlist charts visually. Chart Chooser is not as detailed as the above chart suggestion flowchart but the advantage is that it lets you download different chart types in a format that is ready to use inside Excel or Microsoft PowerPoint.

How to Find the Right Chart Type for your Numeric Data - Digital Inspiration

Psychology: The price of prejudice

2009-01-15T11:50:30Z

It’s what you do that counts—not what you say you’d do

NOBODY likes to admit an uncomfortable truth about himself, especially when charged issues such as race, sex, age and even supersized waistlines come into play. That makes the task of the behavioural scientist a difficult one. Not only may participants in a study be lying to those running a test, but they may also, fundamentally, be lying to themselves.

Prising the lid off human assumptions and hidden biases thus requires clever tools. One of the most widely deployed, known as the implicit-association test, measures how quickly people associate words describing facial characteristics with different types of faces that display those characteristics. When such characteristics are favourable—“laughter” or “joy”, for example—it often takes someone longer to match them with faces that they may, unconsciously, view unfavourably (old, if the participant is young, or non-white if he is white). This procedure thus picks up biases that the participants say they are not aware of having. ...

Forrester Research Wave Report Evaluates Online Community Technology Platforms

2009-01-14T02:33:18Z

Forrester Wave™: Community Platforms, Q1 ’09

As Peter Kim alludes, social media technologies and tactics are subordinate (by a long shot) to business relationship goals. That said, it’s reaffirming to see that Forrester Analyst Jeremiah Owyang’s evaluation of online community technology platforms rated Telligent Systems as among the top two. Our team at Clickable last year adopted Telligent’s Community Server to power our customer communities and team blog. Not surprising, I have some comments on this study, the community platform market in general, and Telligent, specifically. (Telligent graciously forked over the license fee so it could offer the report to everyone for free on its Web site.)

Community Platform Conundrum: Agency Versus Pure Product

Jeremiah says:

Despite the immaturity, we evaluated nine and were impressed with Jive Software and Telligent Systems who lead the pack because of their strong administrative and platform features and solution offerings….we applied over 60% of our weighted criteria based on what our clients tell us they want, a solutions partner that delivers strategy, education, services, community management, analytics and support.

The customer “wants” of strategy, education and services make sense, but they concern me and it’s important to unpack them further. Here’s why: those are typically agency and professional services attributes. If you speak with veteran entrepreneurs across technology and professional services, one thing is clear: a company CANNOT SIMULTANEOUSLY BE a product-technology company and a professional services company. You have to be primarily one or the other because there’s a conflict of agenda. The agency mindset is to deliver highly customized solutions for individual customers. But too often long-term product innovations and investments suffer because the model is biased to reward the customized services versus a better, scalable product. There are some hybrids, but they are rare. Many of the most successful technology companies are, in fact, agencies — once you look under the hood or into the books.

Why We Selected Telligent: Because It’s Really A Platform ‘Product’

At my company, we selected Telligent precisely because it was a proven, robust workhorse, powering many of the highest trafficked communities. But we also selected Telligent because it was a product company — NOT an agency with proprietary technologies that form the root of a consulting shop. For us, Telligent was the platform that seemed most likely to work out of the box, scale, iterate and improve according to customer feedback, and stay in business.

I underscore “stay in business” because we’re likely to see most of the community platforms go defunct and retreat into a pool of consolidating agencies; there are just too many of them with little differentiation. The differentiation most often is on flavor of strategy consulting, and that’s a fundamentally separate offering (and one we didn’t want). This was foreshadowed by Jeremiah:

Many an entrepreneur has realized this community opportunity, when I started to cover this market there were 8 vendors on my list, today the space now boasts 100 vendors and it continues to grow.

I believe this Forrester Wave report will not only drive discussion of the enterprise community platform market, but will accelerate the inevitable classification of winners, losers, agencies, and pure product companies — not to mention those consolidations.

How Telligent Can Improve

But Telligent is not perfect. I wish Telligent would figure out a way to broaden and open-source it’s developer and app community the way WordPress blog platform has. Hey Telligent, if you’re listening, try to be more like WordPress! You’re stable and scalable, but we need faster innovation and more plug-in and play capabilities. Hopefully that recent $20 million cash infusion from Intel Capital will help. If anything, it will ensure their existence over the next few economically challenging years.

Buyology: Sound Science or Wishful Thinking?

2009-01-18T12:29:07Z

Our article in the Jan ‘09 edition of ESOMAR’s Research World. Grab your copy here.

Martin Lindstrom’s new book and company, Buyology, hope to kick start the next wave of neuromarketing. Will they deliver?

We talk to Martin Lindstrom from his New York City hotel.

Just hours after Barack Obama is elected US President, Lindstrom is getting ready to leave the US for his European book tour, the US tour having generated over 700 articles, including many in the mainstream press and an appearance on the couch of TV’s The Today Show.

It’s his bid to popularise the business book: “I realised that no one reads business books any more…what people, including business people, really read is novels…that’s the style I’ve tried adopting in Buyology.”

And the book is indeed a pleasant, easy read. But that’s one of the criticisms levelled at it by the Bob Barocci, CEO of the Advertising Research Foundation, who apparently dismissed the book in an Advertising Age article by saying that the ARF did not review “pop” books.

Notwithstanding that, the book has received widespread praise and is a bestseller.

So, just what is Buyology all about?

The experiment
“Buyology,” according to Lindstrom’s website, “unveils the results of marketing guru Martin Lindstrom’s pioneering three-year, $7 million dollar study that used the latest in brain scan technology (fMRI and SST) to peer into the minds of over 2,000 people from around the world. The shocking results will reveal why so much of what we thought we knew about why we buy is wrong. Buyology rewrites the rules of marketing and advertising.” Bold claims indeed.

Lindstrom’s inspiration came from a 2004 study by Dr. Read Montague, director of the Human Neuroimaging Lab, who wanted to understand why Coke remained dominant despite Pepsi’s success in taste tests.

These tests were conducted using conventional research and so Montague decided to see if neuromarketing would reveal something different. Sure enough, after examining brain activity, Montague concluded that people weren’t making brand decisions based on taste but on the emotional impact of the brand, and that since Coke was more successful than Pepsi at ‘implanting’ the impression of a quality brand, it had ultimately won peoples’ affections.

Although this conclusion was not universally shared, according to David Penn, MD of Conquest Research, the study did inspire a number of enterprising companies into this space. Penn has taken a close interest in neuromarketing.

One of the inspired was Lindstrom, and he set about designing his own study.

Hypotheses
Aware of the ethics surrounding the use of neuromarketing, and being an unproven technique, Lindstrom was careful to choose a topic for his study that would ruffle as few feathers as possible: “You will always find critical voices no matter how deep you go into things. What I tried to do was to…go into areas where we could be fairly safe about the conclusions we could draw.”

One area that intrigued him was why public policy measures seemed to have little impact on discouraging smoking. He figured neuromarketing could give him the peek into the parts of human behaviour that traditional research couldn’t reach, namely the sub-conscious.

So, armed with an extensive contacts book of wealthy corporates, he began his drive for sponsors. But even he, a globally successful figure in strategic marketing, found it difficult to raise the $7m needed. The issue: corporates were frightened off by the ethical issues around neuromarketing.

But through dogged persistence he managed to convert enough of them. And with eight out of ten product launches failing within three months, you can probably understand why corporates were keen to get involved with something that could improve the odds.

Let’s look at a couple of key things he found.

Tobacco
Lindstrom’s work on smokers confirmed what he believed – that health warnings on tobacco boxes have little impact on smoking behaviour. The results applied whether the warnings were subtle (US) or more brazen (e.g. photos in the UK).

However, he discovered something he hadn’t expected: that rather than deter smoking, warning messages actually encouraged cravings. Completely counter-intuitive, he naturally asked the researchers to re-check the results.

Lindstrom offers an explanation. He believes that as people get used to warnings, they start to perceive them as images rather than text. The ‘image’ then becomes strongly associated with the brand or product. And because the product in question generates positive feelings (cravings), so do any associated images.

It’s the reason why, e.g., the Silk Cut tobacco brand tried to ‘own’ the association with a sheet of purple silk before the advertising ban started; in subsequent tests, 98% correctly attributed purple silk to Silk Cut.

Based on these conclusions, public policy seems to have failed dismally.

Product placement
As the effectiveness of conventional TV advertising deteriorates, product placement is on the rise: “It will be the number one way, I think the concept of the television commercial is dying.”

But based on the study, Lindstrom believes that product placement itself fails much of the time: “We’ve gone from a stage where you feel that just because you’ve put your logo [in the program] you’ve done your job. Well, guess what? You’ve done the opposite job instead.”

He cites the work done with American Idol, the popular TV show. Ford and Coke are two key sponsors. Both pay the same fee and yet Coke achieves far higher brand recall.

Why? Lindstrom reckons it’s because Coke has integrated the brand more deeply and seamlessly into the show. Coke is sipped by the judges. Furniture evokes the shape of its bottles. There are Coke-red walls. And Coke airs commercials during the breaks.

In contrast, Ford chooses to just run conventional ads. during the breaks with no intrusion into the programme itself (except for a logo placed out of context – logos are less important than brand associations such as images, colours, smells, sounds).

The surprising finding is that not only does Ford get much lower recall than Coke, Ford’s recall actually declined as a result of the sponsorship!
Bizarre? Well, Lindstrom says that effective product placement has a “double-barrelled” impact: (a) brand recall goes up, and (b) recall of other brands goes down. It’s as though the brain has limited capacity such that making memory space available for one brand reduces the space available to others.

No doubt these findings will cause some discomfort in the automaker, as well as with advertising agencies charged with product placement.

Efficacy
Lindstrom says that ad. agencies are generally sceptical of Buyology. Notable exceptions include Saatchi’s Kevin Roberts, author of Lovemarks, the book about increasing the emotional quotient of brands.

There are other neuro-sceptics. Among them is Conquest’s Penn (although he remains open-minded).

Penn maintains that the reason neuromarketing failed to advance much since 2004 is a failure to understand that the 2004 Pepsi study showed correlation rather than causation (something the study’s authors were at pains to point out). It did not prove – as some neuromarketers have since claimed – that there is a ‘buy button’ in the brain.

As Professor Lawrence Parsons of Sheffield University puts it: “This is the problem with all neuroscience. We don’t really know what we are seeing when we watch the brain work. Is it the thing itself – the thought, the flash of insight – or just an aspect of it, the bark rather than the dog? We’re just not at the point where we can answer these big interpretive questions.”

While Lindstrom accepts that neuromarketing still has to prove itself, he says that the Pepsi study was generally convincing. He maintains that the main reason neuromarketing failed to advance much was ethics: “After interviewing 300 people on this topic, most felt the main issue was ethical….it was a real struggle to raise the money…no one wanted to be associated with the study, but now sponsors are happy to go public.”

To satisfy any doubts there may be about his study, Lindstrom has offered to open it up to scrutiny: “…under the circumstances that we are working against the same agenda.” He has already shown it to Millward Brown and Ipsos and says they are “…incredibly positive towards the study…and fairly comfortable about it.”

The end of research as we know it?
In 2004, Lindstrom believed neuromarketing would make traditional research techniques redundant. Having completed the study he still holds the view. But being more aware of the shortcomings of neuromarketing and issues around market acceptance, he believes the process will take longer. But dominate, he believes, it will.

This is where neuro-sceptics are bound to have an issue. Penn strongly believes that neuromarketing will never be able to survive without complimentary qualitative (the ‘what’ will always need the ‘why’).

Penn has taken a different developmental route. For example, acknowledging that traditional research lacks sensitivity, he has developed a non-invasive, non-verbal questioning method (Metaphorix) that avoids both conventional pitfalls and the issues with neuromarketing. Lindstrom acknowledges this as a useful contribution but remains a steadfast supporter of neuromarketing nonetheless.

In fact, he has established Buyology Inc., a New York-based neuromarketing company with the intent of maturing the discipline as fast as possible, so as to help bring down costs (from $250,000 to around $60,000 a project) and reduce timings (one part of Lindstrom’s study took two years to develop).

He anticipates that Buyology will have a marked impact over a two-year period, but that more significant change may take at least a decade: “By significant change I mean that one format or another of neuromarketing is going to be implemented or used in almost every major campaign activity for major brands in the world. At least thirteen out of the largest 100 US brands are using neuromarketing in their strategy implementation right now. I know that because I work for these companies.”

In the end, one is left with a clear impression of Lindstrom – that of an entrepreneur hell bent on seeing his vision realised. What’s ambiguous, however, is whether he really believes neuromarketing will replace traditional research.

When Innovation Thrives: IKEA

2009-01-08T17:10:20Z

Hub Magazine carries an indepth feature on innovation at IKEA. In the article the marketing chief of IKEA US, Bill Agee, talks about how an attitude of independence from the rest of the pack means fresh design and better products. An extract:

Hub: How does IKEA encourage a culture of innovation?

There is absolutely an expectation at IKEA that, with our flat organization structure, everyone contributes. Whoever you are within the IKEA organization, you’re expected to contribute your ideas — your new ideas, your old ideas or whatever it may be — and every idea is welcome.

That means that many more innovative ideas rise to the surface, get watched, and actually get executed than in a traditional, hierarchical organization.

The other thing is that we’re a very process-oriented company, meaning that we have three basic processes: creating, communicating and selling the home-furnishings offer.

Each of these three processes has a matrix structure, so that there is somebody like me, a matrix partner, who is responsible for “communicating the offer” in every country in the world. We are equals and we are in constant communication, which means ideas can spread very quickly.

Hub: How does that work with product development?

When it comes to product development, we are extremely innovative because we are operating on our own. We’re not part of the furniture industry here in the U.S., although we do a lot of manufacturing here now. We’re not part of the design community in Sweden, although we have a lot of designers from there.

Our independence has a lot to do with our innovation because we don’t know any better. I’m sure everybody is working in oak this year when it comes to bedroom sets, but we’re working in pine. What the heck is that all about? We feel that we are, to a certain extent, operating outside of standard operating procedures.

By Piers Fawkes | © PSFK, 2009. | Article Link | Comments | More stories in: Home & Garden, Retail">Home & Garden, Retail and ikea, innovation, Retail">ikea, innovation, Retail

How Hasbro And Mattel Killed Interest In Online Scrabble

2009-01-07T20:20:17Z

We've been chronicling just how badly both Hasbro and Mattel screwed up in responding to the massive success of Scrabulous on Facebook. The ridiculously popular application was attracting over 500,000 users every day and (amazingly) making Scrabble cool again, pumping up sales of the physical board game. But, of course, the intellectual property lawyers freaked out and said "this must stop." The resulting legal threats and lawsuits created quite a lot of backlash and anger (and a boycott of Hasbro games). Venturebeat is now looking at the aftermath, and shows that the fight effectively killed all momentum for Scrabble on Facebook. Part of the problem may be that the game is now fragmented, with a Hasbro version serving some countries, a Mattel version serving others and the Scrabulous makers' "modified" Wordscraper on the market as well. The end result is that each has significantly fewer users than Scrabulous had. In fact, the monthly number of users pales in comparison to the daily number of users that Scrabulous had. Great way to kill a wonderful (free) promotion that was attracting thousands of new fans to the game.

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2009: The year of "the designful company"

2008-12-23T03:23:30Z

As long as we're talking about design, let me suggest another book. One of the books for 2009 (yes, already) that I highly recommend is called The Designful Company: How to build a culture of nonstop innovation by designer and branding guru Marty Neumeier. Marty understands that we're all very busy, so he designs his books to make a big impact in less than 200 pages. His previous best-sellers — Brand Gap and Zag — are provocative, informative, and inspirational books that I use every semester in my Marketing classes, etc. Like his previous books, The Designful Company is a lesson in simple, clear, and beautiful presentation that complements the content. This is not a graphic design book, but rather a why and how design matters book for leaders and future leaders (including educators, managers, etc.).

Innovation and design are key in the transformation of any organization, of course, but everyone says "innovation" matters. The term has become a mere platitude, a sort of tag-line for many organizations. But in part three of the book Marty explains how to actually build a culture of change that embraces design by focusing on 16 key levers such as weaving a story, bringing design management inside the organization, introducing parallel thinking, recognizing talent and creativity, and many others. One of the levers of change that I found particularly interesting (obviously, given what I do for a living) was the lever #8: "Ban PowerPoint." That is, ban the awful, death-by-PowerPoint approach in favor of a presentation method which is more engaging and powerful. If you have an innovative company that truly understands design and creative collaboration, then you have to abandon the dull, lifeless, and typical PowerPoint experience for compelling stories and conversations that are visual, simple (without being overly simplistic), and memorable.

Marty Neumeier on presentations today

"PowerPoint has become a full-blown epidemic.
Tragically, the victims are company values such
as collaboration, innovation, passion, vision,
and clarity."

"If you want buy-in, give PowerPoint a rest.
Substitute more engaging techniques such as
stories, demonstrations, drawings, prototypes,
and brainstorming exercises."

"If a business is a decision factory, then the
presentations that inform those decisions
determine their quality: garbage in, garbage out."

Below: A couple of sample slides from The Designful Company that illustrate Marty's idea.

Three tips for better presentations from Marty Neumeier
Here are three design rules that Marty says they use at Neutron "to turn slide shows into beacons of clarity."

1. EDIT TO THE BONE. "Most slide presentations collapse under the weight of words." Use as few words as possible on a slide (and make them big), this insures that the ones you use will be read and understood says Marty.

2. USE PICTURES. Use visuals were words on a slide just can't cut it. "...whenever you feel the text in your presentation can’t fully support your key points, insert a picture."

3. KEEP IT MOVING. "It’s better to break slides into bite-sized ideas—usually one idea per slide — than to squeeze everything on one slide. Slides are free, so use them freely. It’s preferable to see a hundred slides that move at a fast clip than be forced to stare a single slide for more than a minute."

• Checkout Marty's firm Neutron located in San Francisco.

Note: The archive of the Safari webcast is now available (they ask for a name and email only to watch it). I put the slides up on Slideshare too. I mentioned Marty's book in the presentation but Webex had problems showing all the slides in sync (and some were skipped), but the archive will still be useful for some of you (I hope a download option will be coming from Safari too).

Note 2: Marty and I have the same publisher and I received the reviewers copy early on, but that's not why I recommend this book. I only recommend books I believe in, period (regardless of the publisher).

Note 3: Merry Christmas and Happy New Year to you all! I'm getting on a plane in a few hours bound for San Francisco from Kansai, hoping to change at SFO and get to Portland by Tuesday night. Portland is in the middle of a long snow storm and freeze; hope I make it to Portland. I'll be staying downtown for a few days until it warms enough to make it to the coast it looks like. I think this is going to turn into my favorite Steve Martin Movie. Update: Made it to Portland. Made it to the beach.

Looking towards 2009+

2009-01-06T12:33:00Z

First and foremost: all the best wishes for 2009 for you and your loved ones! It's that time of the year again: my Reader is full of good posts on the trends for this year and beyond. Last year, I had a post on the technologies that may reshape our Industry, find it here. Now I have to honest: I've been struggling with the 2009 trends. Only because of the Dutch blog molblog.nl did I come across the trend maps of Ross Dawson. He already posted the last version before Christmas, but hey, should you not have seen this before, take a look! Ross and his team made similar trend maps for 2007 and 2008 and now there is the Trend Blend map for 2009+. You can also click on the picture above to download the original pdf version ...

I like it how they added the Red Herrings and the Global Risks, in fact, I particularly like the risk of "People taking trend maps too seriously"

;-)

So maybe I won't come up with my own trends this year, and I'll simply take the best of Ross and the rest... How do you see the Industry evolve in 2009?

Animals That Lie

2008-12-24T03:07:28Z

A NY Times article about the biology of deceit notes that among primates there's "a direct relationship between sneakiness and brain size." It offers this story:

chimpanzees or orangutans in captivity sometimes tried to lure human strangers over to their enclosure by holding out a piece of straw while putting on their friendliest face.
“People think, Oh, he likes me, and they approach,” Dr. de Waal said. “And before you know it, the ape has grabbed their ankle and is closing in for the bite. It’s a very dangerous situation.”

Apparently dolphins are also capable of deceit:

After dolphin trainers at the Institute for Marine Mammals Studies in Mississippi had taught the dolphins to clean the pools of trash by rewarding the mammals with a fish for every haul they brought in, one female dolphin figured out how to hide trash under a rock at the bottom of the pool and bring it up to the trainers one small piece at a time.

My cat is definitely capable of deception. Sometimes she'll pretend to be sleeping, but when you walk by her, Whack!, she gets you with her paw.

Comments

Mind Reading and Neuromarketing on 60 Minutes

2009-01-06T21:53:30Z

by: Roger Dooley

CBS aired a lengthy segment on “mind reading” that offered quite a bit of good information on how various labs are using fMRI to determine what people are thinking. Reporter Lesley Stahl began the piece at Carnegie Mellon University, where profs Marcel Just and Tom Mitchell are doing amazing work in which they use a computer to predict what object someone is thinking about (See CMU Computers Read Thoughts.)

The Creator Economy

2008-12-31T19:11:51Z

I am listening to Paul Saffo talk on the KQED program Forum. He is talking about what we might see coming up in the next few years. He discusses what he calls the ‘Creator Economy’ based around the simultaneous creation and consumption of value. He thinks of this as the evolution of what was once the producer economy, where scarcity was the controlling factor, and then became the consumer economy, where sales and marketing was the dominant idea. I have been wondering about this idea recently and see it as a natural extension of Robert Wright’s Non-Zero thesis. As our communication networks grow so does our ability to create new kinds of value.

The early examples are Google, Facebook, Twitter, Wikipedia, Threadless. These all rely on their ability to generate participation and through that create individual and group value. I wonder what it takes for more of our physical products and services to follow this same path?

Saffo talks about everything from new religions, the various dialects of capitalism, the future of robots and the winners and losers from global warming. It is worth checking out. Here is the link.

Objectified trailer

2009-01-05T19:06:26Z

Gary Hustwit has just released the trailer for his new film Objectified, all about industrial design. Based on a similar format to the successful Helvetica, he interviewed a number of designers working around the world including yours truly. Objectified will launch in the spring but you can see the trailer at Gizmodo.