BIRGO Davidson!

A key reason to select a particular business partner is to win some unique advantage: share in their pipeline, build on their expertise, innovate your offering. But for some kinds of "partners", the real advantage is reinforcing your brand. Nike and Apple are these kinds of partners. They are different sectors (apparel and electronics), but they own a very similar kind of space in our brains. (BMW and Apple also are partners, for the same reasons.) This proximity of brand location strengthens each brand. Often these kinds of partners are called "constellation partners".

I've been thinking about the Davidson College Cinderella story in their run-up to the NCAA Final Four, which they executed to perfection until the final seconds of a game against Kansas. Just getting to the Elite Eight was great, though, for a school of 1700, of which half are women. All the students are incredibly bright and well-rounded. I know -- I went to Davidson and magically got accepted (they never noticed that I was only pretending to be as wonderful as the other kids ... ).

Davidson was a demanding institution, but with its Honor Code and eating house system, it offered an ethical and social system that reinforced its humanities-oriented curriculum perfectly.

I never followed its sports. Until this season.

Now, I feel -- really, honestly feel -- even more proud of the school, if that were even possible. NCAA tourneys are dominated by big schools, with big players, who are segregated from the main student body, held to different standards academically, and who bring the schools untold amounts of money in various ways. Davidson: small program, smaller players, and they are expected to do their homework and maintain their GPA. And, from all reports, the Davidson Wildcats team is filled with smart, capable students who do math and econ as well as they dribble.

I mention all this because a key part of our experience of brands is whether we are proud to be associated with them, and passionate about talking them up. If they are great brands, or great companies, we bask in their glow. In fact, BIRG (basking in reflected glory), or BIRGO as I prefer it (basking in the reflected glory of others), is a term of art in marketing and branding circles. It describes the phenomenon of appropriating a brand to be part of one's own identity, when that brand is loved or respected. A classic study showed that college students, after their teams lost, would describe the team using the word "they", but when the teams won, would describe the team as "we". It's unconscious. But it's real.

So, in the midst of the Davidson NCAA magic, I found myself thinking that we did well. In reality, I had nothing to do with it.

Let me bask a bit longer, though. Please. I'll return to reality soon enough. In the meantime, you can Google "BIRG" or "CORF".

Back from Singapore

I spent three days doing a training in Shanghai (along with an international Customer Management awards program), then went to Singapore to teach a CEM and new customer management models with UNI Strategic, who did a nice job of putting together the sessions.

I had a great group, I think a perfect fit for the seminar: experienced, facing challenges, and looking for organized ways to improve their customer engagement.

As I was flying back, I finally had a moment to pull the plastic bag off my latest issue of Harvard Business Review, and there was a perfect article on customer management issues in service companies. It goes to the heart of business model trade-offs that define/support the brand, and therefore the profit model, that companies must choose.

One point made in the article is that services companies -- and they include Wal-Mart as an example -- have to make choices about what they will excel at, and what they will not emphasize. Again, this is a theme we covered. But recall our Wal-Mart in Germany case study, and how it showed that Wal-Mart's traditional strengths either didn't work for them, or were undermined by a poor customer experience design, or both. The question I pose is this: When you are designing a customer experience strategy, to what extent must you build in globalization? Can you create a "branded experience model" that works globally, or must you vary the model depending on the local conditions (hierarchy of values, etc.)? If you vary it locally, to what extent do such variations undermine your brand?

Got some examples? How is Carrefour doing it? Tesco? Apple? Procter & Gamble?

Limits to the Voice of the Customer?

Apple doesn't do focus groups. Here's an article that purports to explain the reason.

The reasons that the article's explanation rings hollow:

1. "Apple doesn't do focus groups." Does this mean they don't care about the customer?

Apple starts its innovation process with the question "What do we hate?". This implies an opportunity for the market to love what Apple makes. But for Apple, it isn't just about getting rid of things people hate. it's about making people LOVE what Apple makes.

How does Apple know that people will love what they make? They've built in a culture that looks at the world as their customers do. Wisdom of crowds (within Apple) has replaced the traditional focus group. It works because of Apple's fanatical devotion to making outrageously great products based on putting together two basic pieces of information: Where's the opportunity to create a major impact for customers in their interactions with computers; and what has Apple got that can leverage that opportunity. It's not just about their intellectual property (although they leverage their OS and frameworks across iPhone, iPod and the Mac now). It's about their core competencies in product design, development, secrecy, operational and supply chain excellence -- and their ability to focus.

2. Employees are obsessed.

Are they obsessed with the "product", or with something beyond the product? I would argue they want the product, in part and in toto, to generate a sense of outrageous delight -- in the customer. Which means that the obsession is really about creating customer delight. Here, it's not just a technology product, it's something more HUMAN that Apple is creating. It's art. The reason I don't believe that employees at Apple are obsessed about making great products is that the people at Microsoft probably feel they're equally obsessed. The difference has to be in Apple's culture of framing product excellence within this idea of delight.

3. They cull products.

Perceived value is a shifting measure. Does Apple measure it? I don't know. But they do know that the efficient organization releases the resources it had been spending on an OLD value offering in place of a new one. It's Darwinian. And you can't do it willy-nilly -- why jettison products that have a lot of life in them? Apple must at some point do a calculation about when they have to start the next round of innovation -- and in what direction -- based on balancing the value of keeping a product and tossing it aside. It's zen to let go of things. It's good business, too. But how do you know when? What do you optimize? Again, it goes back to Apple's culture. What decision will let them drive the one key measure that is the spine of their culture?

What will make people deliriously happy?

Sure, focus groups aren't always the best way to innovate. Steve Jobs has said that you can't ask customers what they want when what they want hasn't even appeared around the corner yet. So, there are limits to gathering the "voice of the customer". But Apple, despite it's claim to be a product company, is really a customer delight company. Good thing. It's the customers who have generated your cash reserves and your high market cap to book value.

Broken Egg

Broken Egg
Originally uploaded by pictor ignotus

In honor of Citibank's acquisition of Egg.

Approprability and experience framing

A while ago I posted a Naturally 7 performance captured on the Paris metro. It makes your neck tingle -- and it's not just the performance, it's the audience's increasing involvement in it.

Contrast that with this performance, by young violin virtuoso Joshua Bell, playing in the Washington DC metro system.

What's the difference? Why don't people respond to Bell as they did to Naturally 7? Is it the music? Or something else? HINT: Appropriability and experience framing is the title of this posting.

Appropriability: This is a term often used in multinational business strategy, and in innovation discussions. But the key customer-centered way of defining appropriability is simple. Do you offer a product or service that is both different enough to entice the prospect, and welcoming enough to encourage an imaginative - or even physical - experimentation with your offering?

Here's an example. You go to a flea market and see an overwhelming sea of products for sale, for cheap, but of unknown quality and with zero organization. That's far less appropriable for you than going to a smaller flea market that specializes in some of the things you like to buy, and then finding the right table, with the right sales people on the other side. The information they provide is rich and complex. They may be personable. They may well empathize with your interest in what you're trying to buy. And you can touch what's on the table. That environment is much more appropriable for you. Some of these characteristics are the small, microscopic parallels to what can make a big company successful in a multinational context: focus, richness of context, well-framed experience, trained employees that show empathy ...

This is but one example of what can facilitate -- or impede -- a consumer's ability to appropriate parts of the experience you're providing. Research shows that US consumers can be usefully divided into one of several "consumer styles". (These vary by culture, although some overlap exists.)

And as for framing. I'll leave a full discussion for another day, but consider the Joshua Bell video. What is the true beginning and end of the experience, physically, and in time? What's the value frame surrounding a street musician with his violin case open? These are some of the components that frame an experience. If it's not framed, it's hard to engage in it, and it's really hard to remember it.

Think about it, and how you might change the frame to make sure that Joshua Bell's incredible talent to interpret the world's most beautiful music, is appreciated -- even appropriated.

Interesting stuff!

Comments welcome!

When customer value management destroys customer value

One of the practices typically employed by CRM consultancies and larger companies is something called customer value management. In a nutshell, CVM defines a customer by his or her "profitability". This is sometimes difficult to asses, since you have to track operational and marketing costs per customer (or make some educated guesses), and then allocate those costs against your per customer revenue. The simple calculation of revenue minus allocated costs can get you started. You can also look at the odds of keeping customers year over year, coming up essentially with the financial equivalent of a decaying pile of uranium (same math predicts half-life). The greater the odds of keeping customers, the more the impact of their profitability (or lack thereof) will have on firm performance.

So, the idea is to make the best customers (most profitable customers) as loyal as possible, and to diminish the negative impact of so-so customers and worst customers (money-losing customers). Some firms even promote "firing" the money-losing customers.

Sounds all good in theory.

But here's a PERFECT example of how customer value management can create major headaches for companies, not to mention that the company in the article -- a financial services firm named Egg -- forgot the first rule of business. If your customer has a share of wallet that you do not yet own, figure out how to own it. In short, if you've got unprofitable or less-than-ideally profitable customers, maybe you're just engaging them incorrectly.

Egg bought by US-based Citigroup for £575m.

UPDATE:
I've been thinking about all this. The key thing for banks is to make money off what they lend to you, or on the fees they can charge you. In the article, essentially Citi is using the CVM strategy of "firing the least profitable" customers because these customers pay off their credit cards. From a "get corporate value fast after this Egg acquisition" point of view, that makes sense.

BUT.

Look at the potential for total lifetime customer value for these "low profit" customers. How do they pay off their credit cards? With earnings. Perhaps they pay them off because the personally value having low debt. Perhaps they pay them off because they can, but not necessarily from a desire to be debt-free.

In either case, Citi has a segment it can market to. First, for those people who don't want to have a lot of debt, and have excess cash to pay of their credit cards, Citi could approach them for investment accounts, pitching these as "a better way to save money." This appeals to the value of building equity, not debt. As for the other segment that doesn't necessarily value building equity or eliminating debt (even though their behavior is to pay off their credit cards), the pitch might be a lifestyle one. Get more life out of your dollar. That might mean vacation accounts, for example. Or continuing education accounts.

But, these creative approaches aside (and they'd be hard to implement at Citi since I bet their marketing/product folks don't speak the same language as their accounting/finance folks), Citi still has a fundamental problem with their new Egg acquisition.

Pissed off customers.

And that means brand equity will drop. And that means the intangible asset value of the acquisition is dropping, like an egg.

Splat.

The Abrams Tank -- JJ Abrams' secret weapon is an unopened box

And a keen eye to real storytelling.

Cloverfield Viral Marketing

I mentioned the Cloverfield viral marketing campaign in my prior post. In the meantime, I've been doing a lot of research on effective viral marketing and have surprised how few people -- even the experts -- understand how to make such marketing actually work. My analysis is coming together as a new module that I'll be vetting with experts and then teaching in Singapore and Shanghai this quarter.

Part of what makes viral marketing so interesting is the post-modern commenting-on-the-commenting-on-the-thing that brings out the creativity of the fans and of the news media. These comments and creative riffs create another input into the network of opinions so crucial to reinforcing and spreading the "word".

The challenge, of course, is to make sure that the ultimate marketing goals are advanced: to promote a branded product or concept effectively. Snakes on a Plane, that famously used a viral marketing program, created a lot of online chatter, but the product itself was just terrible by most people's comments.

I don't think we're in that situation with JJ Abrams. He is one of the few auteurs in Hollywood who gets it. Case in point: His analysis of why Jaws was a great movie, which he revealed at a recent TED great ideas conference. Hint: it's not the shark scenes.

Viral Marketing - at its best?

Here's a widget being used to promote the upcoming movie Cloverfield, which has had a steady drumbeat of viral marketing hooks thrown up on the web - invented companies doing imaginary projects that are opposed by fake environmentalists, with bogus news stories about scientists, deaths and scandals. It's been masterfully orchestrated. I have a few problems with the way it's been executed, but overall it matches the best practices for viral social media - on a grand scale, with some very clever, savvy design and gamesmanship.

Paris public transportation strike: How to get around.

With all the buses off the streets, perhaps this is the best way to get around Paris today.

Street marketing. Authentic. Scaled on YouTube.

Marketers, take the lesson.

What happened one night on the Paris subway.

Questions:

1. Why does this work as a viral video?
2. What was its impact on the people on the subway? How did that impact develop?
3. Was that impact captured?
4. How many video sources were there?
5. Who edited them?
6. How was the soundtrack synchronized?
7. Does the video "feel" spontaneous?
8. How much planning and direction were required to make this "feel" spontaneous?
9. Does the video seem authentic, in that sense of "non-contrived" and "from the heart"?
10. Why is this method of promotion more trustworthy than other planned/managed promotions?
11. What guarantees did Naturally 7 have that the video would be viral?
12. How did their choice of venue help their efforts to be viral?
13. Is Naturally 7 bigger in Europe or in the US? Why?
14. The five forces of CEM in this context are: YOU (with your own values, demand for utility, and cultural associations), networks of opinion, networks of data, your experience of Naturally 7's brand in general, and your direct experience interacting with or engaging with Naturally 7's products.
a. Which force in this case builds the most trust in Naturally 7's ability to deliver?
b. Which forces are therefore less important?
c. To what extent is Naturally 7's video playing positively on your own values, cultural associations and demand for "utility" (hey, I can "get" this video and "use" it for some valuable purpose)?
d. Is "cool" useful?
e. Is engaging in "cool" things affirming of one or more of your values?
15. And the biggest question of all: Why does this performance work so well on a subway? Don't people normally try not to engage entertainers on a subway?

Interest rate cut! Great! Ummm ... well, maybe great.

Interest rates were on their way up in the US, in part to stem inflation. You see, if money costs more to borrow, then less will be borrowed, and less cash will be available to drive up prices.

But the subprime mortgage crisis, plus a sluggish housing market, put pressure on the US (and other countries around the world), to put cash into banks to cover credit and debt shortfalls. It also put pressure on the US to lower interest rates so the housing glut doesn't lead to a recession.

And so, interest rates were hacked down .5 percent a few days ago. We can worry about inflation later, I guess some US financial types thought.

But the problem is global. What we do in the US is felt around the world. Lowering interest rates means our bonds yield less to long term investors. We rely on these investors to keep us in cash to run our government, fund our military operations, and much more. We need the cash generated by these bonds.

We also need the dollar to be considered a de facto "gold standard" (pardon me) for currency pegs, to help reduce uncertainty in key export/import pricing.

So it's a bit concerning that Saudi Arabia has not adopted a similar interest rate cut, and is considering allowing its currency to float relative to the US dollar. As this article from the Telegraph (UK) says reports, "This is a very dangerous situation for the dollar," a statement made by the currency chief at BNP Paribas.