Amazon – Should Amazon Open Retail Stores?

Please forgive me on being late on this subject, but I would like to return to some of the rumours that were floating around previously in February (2012).  Namely, Amazon reportedly has plans to open a retail store in Seattle before the end of 2012.  The said store would stock high-margin items such as Kindle e-Readers, Kindle Fire and a plethora of accessories – from cases to lights to screen protectors.  Moreover, as Amazon’s own publishing division grows further and multiple stores are opened, the stores could also stock books.

So is this a good marketing strategy for Amazon?

Before debating if they should open a retail store – with the intention of eventually having national changes across the US – I believe that if they do open a store the firm definitely needs to only stock Kindles and related high-margin products.  Stocking physical books, would incur far too many overheads to be worthwhile and confuse the overall theme of the stores.

There are definitely compelling reasons for Amazon to open stores.  One only has to look towards Apple’s success and their retail store design to see lots of lessons that Amazon can learn from the Apple stores.  Ultimately, I think that there are three marketing benefits that Amazon will gain from having its own stores:

1)  Product  Engagement

Firstly, by having a boutique-styled store Amazon can show case its Kindle products – and potentially a smartphone later this year.  Given one of the challenges for online services is reducing the tangibility of their product offering, if consumers could try-out products in store they would be much more willing to make large purchases.

Further to this,  it would help to speed up the adoption rate of Kindles.  Currently, the firm relies on early adopters spreading word of mouth.  However, by having Kindles on show for prospective customers to try, qualms and worries about reading on a screen that customers may have can be quickly over-come; also, having a physical store would help target older customers.

2) Improve Customer Service

There are a number of benefits that customers would gain from having the store: order products online and collect in-store, customer returns service and even a Genius Bar-inspired customer support desk.  Not only would these facilities allow Amazon to compete in the physical world against Best-Buy, Target and Wal-Mart, these are services that help augment their products with added-value.

This is in-line with CEO Jeff Bezos’ vision of ‘Building premium products at non-premium pricing’.  So in order to compete against Apple – which it is competing more and more directly as it launches its own technology products (See  Cloud below) – they need to offer the same level of service, without the huge price-tag.  Moreover, as Amazon’s own range of electronic devices gains popularity, there will be a greater need for after-sales service.

 

3) Brand Engagement and Publicity

As I mentioned in a previous post about Apple, a lot of their new product success comes down to lavish product launch events that generate lots of free press coverage.  It also lets customers show their devotion towards the Apple brand.  Amazon could potentially use the same strategy, which would work well for future tablet computer – and even smart phone – launches.

But, I can see two potential drawbacks of opening the stores.

Firstly, is copying Apple a good idea?

Of course, Amazon does not have to mimic Apple stores – albeit they probably will – but ever since the rumours emerged the two firms have been up for direct comparison.  Microsoft has launched stores and have been criticised – somewhat fairly – for copying Apple.  Also, Amazon do not have sufficient own-brand hardware to truly fill out a retail outlet.  This could be overcome by stocking other electrical goods – such as laptops, TVs and digital cameras, but it would weaken the differentiation between Amazon stores and general electrical retailers.  This is what Microsoft stores currently suffer from (see video below) by stocking diverse hardware brands.

 

Secondly, will a retail presence damage Amazon’s brand identity?

Amazon currently has the second highest retailer brand value of $28,665m (the firm is behind Wal-Mart who has the highest retailer brand value).  Accordingly, to the world Amazon is known as the world’s largest online retailer.  But what will the company be known as afterwards?  To many outside the US, this brand identity will remain the same; however, opening retail outlets does confuse its brand identity.  By having an online and offline presence, it just becomes more and more similar to its competitors and loses differentiation.  Moreover, as the firm will be in closer competition to other electrical retailers (Bestbuy, Target, Wal-Mart) and any short-comings in its offline service will be scrutinised against them.

What is the overall verdict?

Despite the issues I have just highlighted, I think that, on the whole, it is a good strategy.  Primarily because it supports Amazon’s related diversification strategy and potentially will allow it to offer greater customer service, which will make future technological product’s more likely to be adopted by consumers.

But there is a slight catch-22 dilemma: Amazon does not yet have sufficient own-brand products to open a viable store based on their high-margin and tech products.  But in order to successfully launch such products, such a smartphones later in 2012, they would probably need a physical retail presence.

I will be monitoring Amazon’s diversification plans over the year and another Amazon post will be coming on why cannibalising your own sales might be a good strategy – keep informed by subscribing!

© Josh Blatchford, author of Manifested Marketing, 12/04/2012

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Research in Motion – How Branding Can Save BlackBerry

As you may have heard Research in Motion (RIM) is not having the best of times, to say the least.  The firm made a loss of $125m for the first 3 months of 2012 and had a decline in net profit for the full financial year of $2.2bn.  Moreover, this comes amongst major organisational change, with co-chief executives Mike Lazaridis and Jim Balsille only having resigned in January of this year.  Clearly,the new CEO, Thorsten Heins, has to make some serious strategic and marketing decisions.

The first of these decisions has been to focus less on the consumer market and focus more on their core – or orignal customers – of business executives.  It is important to note that RIM is not abandoning consumers, as many report, and there is plenty of opportunity to turn the business around.  The firm simply hopes this business-orientation will mean it will compete less directly with the likes of Apple, HTC and Samsung – to name a few.

Other business writers have already discussed whether or not this is a viable strategy.  Many have criticised it:

‘RIM chose a strategy based on how easy it would be to execute rather than how successful it would be’ – Macworld.

Others have said that the firm should focus on consumers, as that is where the revenue growth is.

But marketers have come out in favour of targeting business users.  According to the Elaboration Liklihood Model, for a high-involvement product like a mobile phone, it is the ‘Steak’ or the ‘Sausage’ (the core product) that persuades people – or businesses – to purchase a BlackBerry.  Whereas, the ‘Sizzle’ (branding and advertising), is less persuasive.  David Taylor, argues that BlackBerry phones have become all Sizzle and no Sausage.

The general consensus that BlackBerry phones, the core of the product,  are the problem has led to many business writers primarily focusing on the features and innovations that future phones need (see Sydney Morning Herald and Mobile Opportunity). But I think the critical issue is branding.

So to clarify there are the following combination (depending on market and whether to focus on the Sausage or Sizzle) of strategic options:

Blackberry’s current position is strategy 3 (see below), and has announced a return to strategy 2.  Which will hopefully allow it to use a combination of 2 and 4 in the future: keep its products up-to-date and add profitable value through marketing.

However, I think the strategy Blackberry needs is initially strategy 1, and then move to have a combination of strategy 1 and 4 once it has revitalised its product range.

Hence their strategy should be in three stages:

1) Look to consumers’ needs to develop new product features = improving the Sausage;

2) Use branding to target business users with these new product features = improving the Sizzle.

3) Ultimately, these two improvements will allow RIM to use Laswell’s (1948) triple appeal to encourage business customer’s egos to choose BlackBerry (this will be returned to later).

(There should be no debate about targeting consumers vs business users or having Sausage vs Sizzle – they need to be good at all four to compete in a saturated market.)

1) Improving the Sausage:
Now, this might seem contradictory to target business users by focusing on the needs of consumers.  But an underlying assumption that others seem to have made is the belief that consumers and businesses have different needs.  I strongly believe in order to be able to appeal to business users, the firm must firstly target consumers.

Part of BlackBerry’s problems is that they have attracted lots of teenage consumers (see graph, from Ofcom, below) who use the phone’s keyboard to send text messages – or use BlackBerry messenger – easily and quickly.  But this was once a feature that appealed to business users for sending emails.

At the same time the iPhone has become more popular among business users than BlackBerries:


So it would seem that BlackBerry have become popular among teenagers by making a phone designed for business use; and that Apple have become popular among business users by making a phone designed for consumers.  Therefore, both market segments must have converging needs.

Hence – and please hear me out – the features that BlackBerry needs to implement  are consumer-orientated even if it means loosing short-term brand identity with business customers.

This, like I said, is because consumers and business users actually have similar needs (after all, executives are only human!)

I would suggest the following changes to be made:

1) Introduce touchscreens for all phones – better for users playing games and watching videos;

2) Move to Android or Windows Mobile operating systems – allows more apps to be downloaded;

3) Ditch the keyboard – makes the device more portable/allows larger screen depending on the phone design.

Obviously, these would only allow BlackBerry to maintain market share in the consumer market, as these features are nothing new/innovative, but that would still be sufficient to improve their products for business customers.

The next part of my proposed strategy is taking the new Sausage and giving it a business-orientated Sizzle.

2) Improving the Sizzle:

Unfortunately for BlackBerry, as mobile phones are public necessities, the choice of brand is highly influenced by reference groups.

Therefore the trend of teenagers adopting the phone looks set to continue:  as teenagers seek self-verification goals within social groups, if they own a BlackBerry they believe they will popular;  as business users seek self-enhancement goals, they can improve their esteem if they own an iPhone.

According to Heider’s (1958) balance theory, teenage users of BlackBerry phones has changed  consumers attitudes towards BlackBerry

Original attitudes towards BlackBerry:

There used to be a strong positive connection between business users and BlackBerry and, as a public necessity, this was highly evident to potential consumers who could associate business men with the BlackBerry brand.

Thus anyone who believes that their actual sense of self is a business person, or their ideal self-concept is to be a business person, they would purchase a BlackBerry as it would be seen as appropriate group behaviour to be a business person, whom they have favourable attitudes towards.

Current attitudes towards BlackBerry:

Now, however, there is a strong positive connection between teenagers and BlackBerry.  Consequently, those who like BlackBerry for business reasons must also view teenagers positively or in the same light as BlackBerry.  Thus, if they saw teenagers unfavourably there is a good chance they now also see BlackBerry negatively.

So, in order to improve the brand or the Sizzle, BlackBerry need to get business users to start using their revitalised phones again and also act as opinion leaders.  They can replace teenagers with business people, as personifiers of the brand, by using any or all of these strategies:

1)  Use opinion leaders as the target market segment – approach select businesses directly and offer to supply their firm with company phones for free.  Using high-profile firms with a corporate reputation, such as IBM, would help re-condition consumers to associate BlackBerry and business people.  Ideally, BlackBerry needs to pair being a successful business person/company with using their phones.

2) Create opinion leaders – offer a referral scheme for work colleagues in professional jobs.  For instance, a BlackBerry customer, who uses the phone for personal use and work, can ‘introduce’ a colleague and they are both rewarded with BlackBerry Playbook tablets.

3) Use opinion leaders in marketing communications – RIM need to use advertisements that feature opinion leaders, whether or not it is clearly scripted.  This has recently been used by rivals HTC to target a youthful segment:

In addition to using word-of-mouth communications, I recommend RIM taking an upward brand stretch to make the product more exclusive:

1) Bring out a new brand name – this new brand name should be used to categorise RIM’s phones that are designed for business users; the existing BlackBerry name/devices should be left to target emerging markets as low-tech and cheap smartphones.

2) Premium price – to reflect the overall positioning of the new line of RIM phones for business people, they need to become a status symbol and, in our Western society, this can be easily done with a premium price.

Thus, by now RIM should have improved their Sausage with features consumers want, and, dressed it up with Sizzle to give it a business brand image.  The third and final step is to combine these seemingly polar strategies into a triple appeal.

3) Creating a triple appeal

According to Freud our personality consists of an Id, which seeks immediate pleasure (naughty side), a Superego that seeks to conform to societal expectations (nice side) and an Ego that balances the two.

In order to create a triple appeal RIM must appeal to the Id, Superego and Ego; this will have been done by giving their phones consumer features with a business brand image.

The appeals to the Id include: ability to download apps, play games, watch videos on a larger screen.  But conversely these can be viewed to also satisfy the Superego: download productivity apps to use on commutes and business trips, ability to play games is an indicator of hardware quality, larger screens makes emails easier to read.

Ultimately, these are easy to balance by the Ego through positioning the new phones as ‘naughty but nice’.  This is very important because there are two situations that RIM should sell their new range of business smartphones

1) Allow them to go on sale through consumer retail outlets to target business customers who want to use the phone at work and for personal uses.

2) Selling directly to firms.  Here the triple appeal is still important even in B2B markets.  Namely, although the deciders and purchasers within the firm will want the order for the Superego benefits, they will be heavily influence by others in the firm who subconsciously want the phone for its more fun/consumer benefits.

Further to this, the triple appeal strategy needs to be communicated explicitly to consumers, as well as being ‘baked-in’ to the product.  This means featuring the triple appeal in advertising, as successfully done by Aero chocolate and Maltesers (it is chocolate, but a ‘lighter’ option).

Thanks for reading a second in-depth post in a row!  To summarise: I think RIM need to make the phones better consumer experiences, use reference groups to target business users and combine everything to create a triple appeal.

What do you think they should do?  Leave your comments below.

© Josh Blatchford, author Manifested Marketing, 06/04/2012

P.S Happy Easter :)

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Apple – An introduction to Marketing Strategy

This company almost needs no introduction.  Although I am not really a fan of their products, there is no denying the huge success of Apple: the technology company now has the highest market capitalization in the world at $573 billion, which is more than Microsoft and Google’s valuation combined; the firm is the most admired company in the world; and the Apple brand value is worth $153.3 billion alone.  The list is simple endless…

Having only briefly spoken about Apple before, this post will show how the firm’s success is based on simple marketing concepts.

The Product Life Cycle (PLC)

Apple’s iPod is a textbook example of how to manage the PLC from introduction through to decline.

The PLC consists of 4 stages: New Product Development, Introduction, Growth, Maturity, Decline.  But it is the introduction and maturity stages where Apple’s marketing ability really shows.

What sets Apple apart from every other technology company is how it utilises its Apple stores to create over-the-top product launch events and generate free publicity.  Every time Apple launches a product (not just iPods), all employees make an effort to ensure each customer is congratulate the new owners.  It is simple but effective:  thousands queue outside – even camping out for several days – just to experience a product launch by Apple.  This is entirely unique to Apple – one cannot even imagine consumers showing the same amount of passion for a Microsoft product.  The stores are simply great for free PR.

As the maturity stage is the most profitable time of PLC, it is crucial to extend this period to be as long as possible and delay a decline in sales.  This is very much true with the iPod.  The iPod has already experienced massive growth; now sales are stagnant and predicted to decline.  Hence, Apple continuously roll-out extension strategies, updating the iPod with more features, more colours, larger memory, faster processors, a smaller size – anything to keep on getting a short-term sales boost.  The cumulative effect of these short-term updates is that, combined, they actually increase long-term sales – see this great infographic on how the evolution of the iPod has grown sales.

Apple also recognise that decline is inevitable – one day they will have to stop selling the iPod.  But they are more than prepared for this – the iPhone is almost a direct substitute for the iPod, while the Apple Store is becoming more and more orientated to iPad and iPhone users.

Product Development

Product development is just one of the growth options in Ansoff’s Matrix, but perhaps the most effective for global brands.

As you can see (above), product development involves launching a new product to the firm’s existing customers.  If you, like Apple, already have a global presence, in major markets, and understand your customer inside-out, it arguably offers the best trade-off between risk and reward.  By launching the iPad, iPhone and operating systems to the same audience Apple builds up integrated customer relationships across multiple platforms and therefore creates brand loyalty.  This increases the likelihood of new products being a success.  Conversely, Google’s innovations have high failure rates.

The effect on sales of this product range filling strategy has had a cumulative effect on Apple’s sales growth:

The Boston Consulting Group Matrix/ Product Portfolio Management

The famous BCG matrix classifies a firm’s product portfolio into four strategic business units (SBU): Stars, Question Marks, Cash Cows and Dogs.  Within each SBU, there are again four potential strategies to take: build market share, hold market share, harvest (reduce investment) and divest (phase-out).

Star:  This would be the iPad because it has a high share of the rapidly growing tablet market.  As the iPad is in its growth phase of the product life-cycle, the product is beginning to lose its first-mover advantage as other manufacturers begin to launch their own tablet devices.  Hence, Apple should invest heavily into marketing the iPad in order to grow sales to maintain their share (sales need to grow at the same rate as overall market sales to maintain market share within a growing market).  But in the future, when market sales become stable, Apple should harvest the product to turn it into a Cash Cow to fund other SBUs.
Question mark: Despite Apple’s best attempts, PCs with Microsoft operating systems still continue to dominate the PC market.  Much of this is down to strong business-to-business marketing and high switching costs for businesses and consumers, alike.  Apple could potentially used three strategies for their Mac software:

1) Divest – this could allow Apple to devote more time on their most profitable products, but it is highly unlikely as the Mac is part of the firm’s brand identity.

2) Build – Apple could potentially invest lots and lots of resources to try to turn Macs into a star, however even with Apple’s huge cash pile, it is questionable if it is even possible to beat Microsoft-powered PCs.

3) Hold – this is the most likely strategy.  Apple will probably continue to develop new Macs and support existing customers, however investments will be kept at a minimum and be target towards the iPad.

Cash Cow: Apple’s source of steady flows of income are clearly the iPhone and the iPod; both the MP3 and mobile phone market have reached saturation and Apple has a high share of both these markets.

As the iPod is reaching the decline stage of the PLC, Apple is beginning to harvest the product.  That is, slowly reducing investment in marketing iPods to increase their profitability; by generating more cash, further investments can be made into question marks or stars.

In the future, Apple will probably only maintain their market share of the iPhone. It is a highly profitable to generate sales from existing customers from upgrades, which can be almost guaranteed after a consumer invests heavily in downloads from the app store.

Dog: Lastly, Apple TV – a device that allows media files in iTunes to be played on a TV – has never really caught-on.  By launching a second and third generation, Apple have shown they are committed to building sales.  However, unless the overall market for digital media receiver grows, it could be more profitable to divest the product.

Competitive Positioning

Apple have a clearly defined premium strategy: they offer more benefits for a higher price.  According the Value Proposition Matrix (above), any of the white squares are competitive strategies.  But, I personally believe a ‘more for more’ position is perhaps one of the more effective.  This is because it is highly profitable and hard for competitors to copy a premium identity.

Developing a premium, or luxury image, is incredibly hard for both new and existing brands.  Hence, it is highly unlikely any of Apple’s competitors will risk undertaking an upward brand stretch and gain a premium status.  Moreover, this type of branding allows a premium price tag to be attached to any product – regardless of the quality – with an Apple logo, allowing the firm to make huge gross margins.

This heavily links into Micheal Porter’s famous generic strategies:

A firm’s scope can be either to target a niche market (narrow scope) or a mass market (broad scope); and their strategy can be based on low-cost, or differentiating themselves, with additional benefits, from their competitors.

Apple has been very clever with their choice of strategy, depending on the product.  Initially – and for a long time – the firm used a Differentiation Focus strategy while Apple only sold Mac computers.  The firm was very niche and was targeting Innovators and Early Adopters:

According Everett Roger’s Diffusion of Innovations theory and Kotler, those who adopt new technological products act as opinion leaders and brand evangelists who spread word-of-mouth promotion about your product.  This then attracts the Early Majority, where the bulk of sales comes from.

After Apple used a Differentiation Focus strategy and masses of consumers where becoming more aware of the Apple brand, the firm has moved towards a pure Differentiation strategy.   This is seen by the iPod and iPhone that are used by wide range of consumers.

Many firms make a mistake these days of not targeting the Innovators and Early Adopters – they try to immediately win huge sales.  Seth Godin (and I) believe this is a poor strategy:

Branding – Corporate Branding / Family Branding

If you have read my previous post on Proctor & Gamble, I am a very strong believer in the power of corporate branding.  This is where a single brand image of the firm is used to promote their range of products, rather than developing a brand for each product category.  Apple is a great example of this.

Apple’s own brand values – innovation, simplicity, style – have been consistently emphasised across all of their products.  These have even been personified by former CEO Steve Jobs’ personality.

This is highly beneficial to the firm because it makes new product launches much more likely to be successful; it seems that Apple could launch an iWhatever and consumers would buy it.  Moreover, Apple customers have been so conditioned to Apple brand values that it is naturally assumed a new Apple product will be any of the above brand values.

Further to this, Apple also benefits from something called the ‘Halo Effect’.  This is where a customer purchases/likes one product from a firm and is then interested to try out other products the same company has to sell.

As the graph shows, after a big rise in iPod sales in 2003/4, Mac sales also started to pick up more significantly.  Many think this is down to the Halo Effect – consumers enjoy their experience so much with their iPods they decided to fully ‘make the switch’ to Mac computers.  It has been found by Apple Insider that almost 20% of Mac sales have come from once PC owners who first purchased an iPod.  More recently, the same Halo Effect is occurring because of the iPad

To reiterate: it is because Apple has such a good corporate brand that consumers believe if they like one product by the company, they will like all of their products.

Services Marketing

Although I have already blogged about the Genius Bar, it is worth mentioning it again here as it provides a good lesson in services marketing.

Ever since the end of WW2 services marketing has been given growing attention by businessmen and academics.  Now, in the 21st Century, offering additional services to a product has become a major source of competitive advantage and brand differentiation.  Apple, for example, achieves differentiation from other technology firms through having retail outlets that allow them to provide superior customer service.

The Genius Bar, offers Apple customers face-to-face technical support; a very welcome change to poor after-sales service provided by their competitors.  This helps augment their products and support their ‘More for More’ competitive positioning, hence it is an important way to add value to Apple products.

In addition to enhancing their value proposition, it gives Apple an unrivaled chance to practice interactive marketing – engagement between employees and customers.  Where as other technology firms often only practice external marketing, Apple can use interactive marketing to enable customers bond with the firm.  This is helped by the fact that employees are – or at least perceived to be – brand ambassadors that truly believe in what they are selling.

Marketing Communications

Lastly, there is no point in doing any of the above unless consumers know about it.  However, it is hard to say what makes great campaigns.  But one thing is sure: they have to be original.  There is no real strategy or science behind it, but Apple have managed to get it right on so many occasions:

I hope I have managed to cover the main theories, and used Apple to help explain these, but if I have missed anything out please let me know in the comments below.  I also hope I have highlighted how important the Apple stores are to the firm’s success as I feel this is something that is often overlooked by other business writers.

And thank you for reading the whole post!

© Josh Blatchford, author of Manifested Marketing, 29/03/2012

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by Josh on March 29, 2012  •  Permalink
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Quick Update

Hi readers!

I just wanted to quickly bring to your attention 2 things:

1)  The Manifested Marketing Facebook page is now live!  In addition to posting updates on the blog, I will be running competitions, sharing marketing news and engaging with fans via the Facebook page.

2) I have launched a more official service for providing coursework feedback under the ‘For Students’ page.  Feel free to get in contact with any help or questions you have related to studying business or marketing at any level, from anywhere in the world.

Thanks for your interest in the blog – March has been such a successful month!

Josh

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Aston Marketing Society Event – Agathe Blanquart from Shell

Agathe Blanquart is Global Retail Category Manager at Shell. According to Forbes, Shell is the fifth largest company in the world by sales; and Agathe has progressed from being a graduate trainee to overseeing retail outlets, product launches and marketing campaigns for the firm. She recently came to visit Aston Marketing Society to give a talk on effective communications and media selection, one of the foundations of effective marketing.

http://static5.businessinsider.com/image/4fb9b914bddec04940741b00-400-300/royal-dutch-shell.jpg

Here are Agathe’s four key points from her talk:

1) Tell a story to achieve your objectives

This was particularly true when newspapers will be used as a marketing channel. For instance, in the launch of Shell Fuel Save, using celebrity endorsements from Andrew Flintoff and newspaper features all had a purpose beyond communicating the launch of the product. They told a story by sharing fuel saving tips with consumers and reported fuel-testing experiments conducted with Andrew Flintoff that created interest from readers.

2) Measurement of media will identify gaps in delivering your message

Through out the campaign, plans for measurements need to be in place to assess the effectiveness of the campaign and to adjust plans in light of new information. This is linked heavily to point number 4.

3) Be honest and avoid a reputation damage

As the infamous BP oil spill has highlighted, having an solid corporate reputation is crucial in a world where consumers are becoming more and more knowledgeable about the brands they purchase. Therefore, when using TV advertisements – where doing so you have to be selective on how you buy your time – it was decided to emphasise the brand more than the product (see below).

4) Follow up your campaign with a smaller one to refresh consumer’s minds. This is where point number 2 becomes important – not only can you consolidate the previous communications, you can correct any messages that have been interpreted incorrectly by consumers. Another piece of advice this links to is the power of support media and smaller channels that, when combined, become very influential. For example, Shell used mobile billboards on lorries, promotional products (air fresheners, which actually benefited consumers) and blogger’s engagement to augment their core campaign.

© Aston Marketing Society 12/03/2012

Written by Josh Blatchford, also editor of Manifested Marketing

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Starbucks – Relationship & Services Marketing

As I am sure you will know, coffee shops have huge amounts of competition – the ‘product’ they sell is literally a commodity.  This has meant that the major cafes have had to augment their core product with a differentiated brand image, as seen with Costa Coffee, or diversify the range of services provided, like Starbucks have.  Neither of these strategies seem to have provided Starbucks or Costa Coffee with a significant competitive advantage over one another.  This may explain Starbucks’ latest tactic (below).

The basic idea is that orders will be read out by calling the customer’s name rather than their drink. The aim of this is to develop a deeper connection with customers, and therefore improve loyalty

Initially I thought this was a really good idea.  However, now I have had a few days to think it over, I am not so sure anymore; I think the ad might be good, but not for the obvious reasons.

Firstly, why this might not be such a good idea:

All the coffee shops have long had a tactical level of relationship marketing by using a simple loyalty card scheme.  But as this is easily copied by competitors, it is necessary to go one step further and offer social benefits and bond with customers.  This is what Starbucks have done right?  So this must be a good thing?  Not Exactly.

To offer true social benefits, employees must actually get to know customers over-time; not just ask for their name.  Asking for their name to put on the drink is a very artificial social bond.  I have talked previously consumers’ intelligence being insulted by marketing, and I think Starbucks’ latest decision is very patronising to their customers.  In fact, the only people who will enjoy it might be the elderly, who – from my experience as a Barista for Costa Coffee – love to chat.


Furthermore, this is just asking for trouble and bad publicity.  It would be no surprise to hear in a few months time that someone has pulled a Bart Simpson-esque prank on a Starbucks branch.

There is also huge potential for daily mishaps to occur.  This latest strategy has already been used in the US.  And bloggers have been quick to share some of their funny encounters with Starbucks employees.  As the blogger (link above) highlights, employees are constantly mis-hearing or spelling names wrongly (picture above).  Hence, the whole idea of this interactive marketing strategy – which is to connect employees and customers – is counter-intuitive.  Simply, the strategy in-fact highlights that there is little, or no, relationship between Starbucks and its customers.

So, you may be asking, if the whole idea of using customer names fails at its purpose, what is it good for?

Well in fact it is the campaign(the ad promoting this service change), I think, is good .  This is because it highlights Starbucks’ brand identity and positioning.  Namely, the ad shows that the company does care about improving their service.  Albeit they might have failed,  it lets customers know that the company is trying to innovate, do things differently and ultimately provide them with a better experience.  And that is definitely a good thing.

Overall, I do not think this is going to be successful, long-term move from Starbucks.  But, I do admire their campaign and I am sure giving away free lattes was a great loss leader to sell more expensive cakes and confectionary in the short-term.

Let me know what you think in the comments below.

© Joshua Blatchford, author of Manifested Marketing, 16/03/2012

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http://manifestedmarketing.com/2012/03/16/starbucks-relationship-services-marketing/

Interview – Denys Zhadanov from Readdle

I had the opportunity to interview Denys Zhadanov,  co-founder of Readdle.  Readdle essentially sells iOS business and productivity applications, such as PDF Expert, Readdle Docs and Scanner Pro.  Denys has taken Readdle from a small start-up company, to having a customer base of 3.5 million users and being valued at tens of millions of dollars.  I (JB) was able to ask Denys (DZ) his views on marketing.

JB: Many companies try to encourage all their employees to be ‘marketers’, in the sense that they are all passionate about what they make and believe in their products. Is this true at Readdle? If yes, how has this benefited the company?

DZ: It is quite hard to encourage someone to like something. The attitude towards the company and the product must come from the heart of a person. Therefore, hiring the right people is very important. “Hire slow, fire fast”, they say. People at Readdle are indeed passionate about the products they are working on. This attitude comes from the co-founders and creates a great working atmosphere in the company. That is why we have top-notch products and great customer feedback.

JB: As a tech company, it is natural for Readdle to use lots of digital communication channels for marketing. But what would you say are the most effective and provide the greatest ROI?

DZ: Being a marketing director at Readdle, I can talk endlessly on this topic. Yes, indeed, we are doing e-business here, so 95% of the communications are digital. E-mail marketing is definitely one of the most effective channels for us in terms of ROI. However, favourable mentions by the major media such as BBC, Wall Street Journal, Wired etc. have brought tens of thousands of users.

JB: There are lots of start-ups in the recession that are really struggling to secure funding. If a company has literally no money to spend on marketing or agencies, what options are available to such a start-up? Do you believe that companies need large budgets to be great at marketing?

DZ: Just ship a good product in time. If it is really good – it will sell itself. Try to avoid funding at least at the early states. Angel investors are not so “angel” after all. PR agencies? Are we back in 2008? Just hire the right marketing guy so he can handle all the work. Don’t underestimate the power of social media and personal connections.

JB: I know that you are about to start a PHD and already have a masters from Aston University. Do you believe that education has helped you to become a better marketer? How beneficial is networking while you are at university?

Yes, education has definitely helped. No doubt here. It enhanced me with the ability to learn and to be agile. To be honest, university is the best place for networking. So guys, go and meet new people like it is the last day of your life.

JB: This blog is mainly read by university students studying in business, is there anything you would like to say to them?

DZ: We are currently looking for smart and tech savvy person to help me run marketing activities at Readdle. So if you like marketing, innovations, Apple, social media, content creation and think that you can ride a pink unicorn – drop me an e-mail denis@readdle.com.

During the internship you will definitely enhance your business and marketing skill. Moreover, your CV will look better, which is always helpful in your further life journey. Who knows, maybe you will have 1% shares when we IPO ;)

JB: Lastly, I am aware that you have recently been head-hunted and turned down a very lucrative job with an undisclosed firm. What has made you stay at Readdle? Do you believe a firm’s greatest assets are its people?

DZ I really love what we do, what I do. I sometimes dream about Readdle reviews on websites, that is how much I work. I was at Readdle from the very beginning, when it was a small company with 4 people in a rented flat. Now we have super cool office and 25 smart folks on board. The juicy valuation also makes me smile and do a jellyfish dance sometimes. I believe that there is a huge opportunity for us to achieve even better results.

I turned that job offer down because the industry is dying and..I love Readdle. Did I already say that 2 times?

Steve Jobs was right saying “never settle down”.
Make sure you do what you love.
“Stay hungry, stay foolish”.

© Josh Blatchford, author of Manifested Marketing, 2/03/2012

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Converse Shoes – Celebrity Endorsement or CSR?

Converse, the American shoe company, may have been founded over 100 years ago,but does this mean that their marketing efforts lack innovation?

Converse have just launched a free-to-download song, ‘DoYaThing’, that is the collaborative work of the Gorillaz, Andree 3000 and James Murphy.  The song was recorded in Converse’s own studio called ‘Converse Rubber Tracks’.  This studio is completely free for up-and-comming artists, who have unlimited, and free, access to the recording facilities.

According to Converse’s Chief Marketing Officer (CMO), Geoff Cottrill, this a way for the company to give-back to the creative consumers who adopted the ‘Chuck Taylor’ shoe, which brought fame and fortune to the company.

Essentially, Converse claims this is Corporate Social Responsibility.  However, one could easily argue it is a very elaborated celebrity endorsement.  Either way, lets take a look at why both strategies make good marketing sense.

Without reading too much like a university lecture, it is interesting to understand how celebrity endorsements work.

It is essentially based on the theory of classical conditioning.  The simplest way to explain it is that using a celebrity endorsement ‘pares’ consumers perceptions of the celebrity to a brand so that they become ‘conditioned’, in the long-run, to associate the brand to the same set of feelings they have for a celebrity idol.  (Google classical conditioning, if you want an overly-complex explaination!)

Having said that, I personally believe that celebrity endorsements are not very effective anymore and they undermine the intelligence of consumers.

But I do think Converse shoes have avoided this trap by making sure the endorsement has a meaningful significance and actually makes sense.  For instance, as well as the song driving traffic to their site, they have allowed the Gorillaz to design some limited edition converses:

Source: http://www.highsnobiety.com/news/2012/02/09/converse-x-gorillaz-spring-2012-footwear-collection/

Hence, I do think that this use of endorsements to align the brand is more effective than the generic endorsements seen by others.  Namely, perfume and fashion ads that just rope in the latest celebrity that want to make some quick money.

In contrast, one could argue that Converse and music already share common brand values, such as creativity.  Meaning that the collaboration is actually appropriate.  Moreover, they are not forcing musicians to wear Converses for PR coverage.  In fact, musicians want to engage with Converse (as seen by the creation of songs by new artists and shoe designs by Gorillaz); this makes the endorsement seem much authentic.

But is this CSR if musicians and the company are getting so much out of this?

Their CMO is very adamant that it is all about ‘giving back to the community’.  But it is not hard to see that CSR provides the business with better PR and more website traffic.  This raises another question: is right to use CSR for marketing/ use marketing to ‘show-off’ a firms CSR?

Some business writers, such as Carrol, would argue that CSR takes different forms and that Converse are not being philanthropic as they are not simply giving away to a cause – they are instead  integrating profit-making/marketing and CSR together.

However is this integration right?  Micheal Porter believes so: CSR should even be integrated into a firm’s value chain.  But, fundamentalists – in particular Milton Friedman – think that integrating the two is inefficient and advocates a separation of CSR from profit-making.

Whatever your opinions of CSR are, I think ultimately this is a good marketing idea.  Which, as someone who is often skeptical of celebrity endorsements, is something that has surprised me.  I am sorry if this has sounded a lot more academic(ish) than my usual posts – which to be fair are already quite theory-based.  But it is quite nice that a recent topic has come-up in a same week I have learnt about relevant theories.

© Joshua Blatchford, author of Manifested Marketing, 27/02/2012

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by Josh on February 27, 2012  •  Permalink
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Posted by Josh on February 27, 2012

http://manifestedmarketing.com/2012/02/27/coverse-shoes-celebrity-endorsement-or-csr/

Aston Marketing Society Event – Andrew Barnard from 18 Feet & Rising

This week, the Aston Marketing Society had Account Director, Andrew Barnard discuss the success behind his agency ’18 Feet & Rising‘ in his talk called ‘How 9000 took on 9,000′ . The London agency was only founded on the 1st of January 2010, with the intention to become the agency of the decade. But, since then, 18 Feet & Rising have won multi-million accounts including Nationwide, LOVEFiLM and Selfridges; even beating Saatchi & Saatchi in pitches.

I think the key take-home points, that encapsulated the success of his agency, was ‘Action, conversation, emergence’. These are three characteristics that make ’18 Feet’ different from any other agency.

 

‘Action’ refers to the fact that the agency does not get bogged down in the planning and strategy of their ideas. Although these are very important parts of their agency, they are very keen to start producing creative ideas and concepts even before they have won an account; this is called ‘Prototyping’. Showing, clients sneak previews of drafts is a great way to entice them, and ultimately win accounts.

 

‘Conversation’ is all about the social side of working in the agency; Andrew stressed the importance of emloyees collaborating with each other. Hence, companies and agencies alike need forums where everyone can generate ideas – this includes both formal and informal channels, which work in conjunction to facilitate creativity.

 

Following on from this, ‘Emergence’ builds upon collaboration. This is all about allowing people freedom to do their job without constraints. This an important part of Andrew’s role as an Account Director – he must make sure their client is satisfied, while allowing the creatives to work their magic.
 
Besides the talk itself, it was a great networking opportunity – Andrew took a lot of the society for drinks at Gosta Green and was a great guy to meet with very interesting views on advertising.

 

© Joshua Blatchford, author of Manifested Marketing 22/02/2011
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by Josh on February 22, 2012  •  Permalink
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Posted by Josh on February 22, 2012

http://manifestedmarketing.com/2012/02/22/aston-marketing-society-event-andrew-barnard-from-18-feet-rising/

Aston Marketing Society – Marc Mendoza CEO

As part of a mini-series I will be blogging/reviewing/summarising numerous events that the Marketing Society at Aston University is running throughout the forthcoming term.

The aims of this are two-fold:

1) These speakers provide very insightful marketing advice that students beyond Aston University could really benefit from

2) If you are lucky enough to be able to attend in person, hopefully this can open your eyes to what you are missing out on.

These are highly valuable events, primarily because the society have worked incredibly hard to arrange industry experts to come in person and give talks to Aston University students.  Notable events have also included speakers from Mccann Erickson, Saatchi & Saatchi and Cogent Elliot.  As you can see this a truly unique opportunity you can only experience at university!

The most recent event, in February 2012, featured Marc Mendoza, CEO of MPG Media Contacts.  Mr Mendoza has managed to rise through the ranks to become head of a top London agency.  Click here to see the huge clients they have worked with.

I think that there were two key lesson’s to be learnt from the talk:

1)  Digital and e-marketing really is becoming more and more important.  Mr Mendoza really could not stress enough how important e-marketing has become to his firm.  This is highly relevant to students as he went on to explain that over 90% of MPG Media Contacts’ job vacancies are in digital marketing. So it almost goes without saying that if you are a bit of geek and enjoy your marketing, you stand a much better chance of finding a future job if you develop your e-marketing skills.

2) The key point that I personally took away from the session – and could even relate to – was “Never let anyone down”.  When Mr Mendoza elaborated further, he talked about how trust is as essential to have between an agency and their clients, as this influences industry word-of-mouth and, therefore, ultimately determines the reputation of his agency.

This can even be applied to working relationships between individuals; effective co-ordination depends on open and honest communication.  Simply, “Do what you said you would do,” – if this is no longer feasible tell the person and explain how you will make it up to them, rather than let them down, and 9 times out of 10 they will understand and forgive you.

Outside of Mr Mendoza’s ‘lessons’ the Q&A session was great and such a rare chance to speak to a CEO.  This is something students really need to take advantage – one final year student even asked for help with his coursework!  What was great though, is that Mr Mendoza was more than happy to help out.  Networking chances like these are simply unmissable in my opinion (he has now been added to my linkedin contacts).

If you like the sound of this event, then you may be interested in the society’s next event featuring Jonathan Trimble, Managing Partner of 18 Feet & Rising.  His talk is titled ‘How 9 people took on 19,000′ and takes place on Thursday 16 February in MB204, so come a long to the event or subscribe to the blog to read my summary.

 

© Joshua Blatchford, author of Manifested Marketing, 10/02/2012

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http://manifestedmarketing.com/2012/02/10/aston-marketing-society-marc-mendoza-ceo/

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