All About Apps: Part 5. Branded Apps

Apple opened its App Store in July 2008. Three years later, nearly half a million apps have been developed for its iOS platform. About half as many apps have also been developed for its rival Android platform. Independent developers are not the only one building apps for these two platforms. In their companion are businesses and other organizations that see mobile devices, from smartphones to tablets, as an increasingly important communication channel and mobile apps as a new and exciting opportunity to communicate directly with consumers and the public, and to do so in a more meaningful manner. Their participation has led to a growing number of what is commonly referred to as branded apps.

What Are Branded Apps?

Branded apps are distributed by organizations, often businesses, for marketing purposes whether to connect consumers with their brands (e.g., Audi A4 Driving Challenge, iFood Assistant by Kraft and Trailhead by North Face) or to help them search and shop for products and services (e.g., Zillow Real Estate, Kayak HD, eBay Mobile and Chipotle Ordering). As such, each is visibly associated with a specific brand. Branded apps fall broadly into 2 types: entertainment and utilities. Either way, they are about providing an emotional connection with a brand through an entertaining experience and/or some useful services.

Branded Entertainment Apps

These are time-killer, using a characterization by Deloitte Consulting (2011). They are mostly games. They provide a one-off promotion effect that can deliver huge spikes in customer engagement and hence lead to a significantly large number of downloads. Below are some examples.

  • Audi A4 Driving Challenge is a free iPhone app that lets users imagine themselves driving an Audi. It offers users five simulated race tracks of varying difficulty. Users can control the Audi by using its accelerator and brake pedals shown on screen, and steer left and right by turning the iPhone. The game keeps track of elapsed time and, as users improve their performance, lets them drive more powerful models of the A4.
  • Zippo Lighter is another free iPhone app that lets users customize the look of their virtual lighters and simulate the reactions an actual Zippo would have to movements and conditions. Jerk the iPhone to the left to open the Zippo; shift it to the right to close it; and flick on the Zippo to light it. The app can even recreate flame movement by recognizing bursts of air blowing into the microphone. It is popular with young concert goers who would hold up a virtual Zippo lighter appearing on the iPhone, instead of a real lighter, for those so-called Zippo moments.
  • Barclaycard Waterslide Extreme is also a free app. It piggybacks on a BarcllayCard TV commercial for its contact-less payment technology in which an office worker rides a water slide through the city and back to his home (instead of using the bus or a subway like other workers); along the way, he slides through a grocery store, picks up a banana and pays by swiping his contact-less Barclaycard and then pays for his subway ticket just by swiping the card again. In the app, game players experience the extreme water slide, gliding through cool modern cityscape as day turns into night, collecting objects and avoiding obstacles, and earning more points as they gain speed. The game app has become so popular that Barclaycard follows up with a roller coaster version of it.

Branded Apps: Audi A4 Driving Challenge, Zippo Lighter and Barclaycard Waterslide Extreme

Branded game apps face certain challenges. Firstly, they have to rely on their intrinsic entertainment value, rather than the underlying brand, to drive downloads (Deloitte, 2011). It can be difficult to ascertain whether users are even aware of the brand when interacting with these game-type branded apps. So, brand recall can be an issue. One study finds game apps less successful than informational apps in focusing user attention on the brand, encouraging personal connections with it and thus shifting user purchase intention (Bellman et als, 2011). Secondly, user interest tends to fade quickly when the novelty of a game wears off. It can therefore be difficult for a branded game app to sustain on-going interactions between targeted consumers and the brand. Thirdly, keep in mind that games make up the largest category of apps. It can be quite a challenge for any app to get noticed in such a crowded segment.

Branded Utility Apps

These apps are designed to simplify specific routines or tasks such that they can get done as effortlessly as possible and in some interesting fashion to consumers. The latter characteristic means some elements of entertainment can be present and useful even though the entertainment experience these apps offer is not as intense as that of pure entertainment or game apps. Utility apps tend to be evergreen apps. Lacking the excitement normally found in entertainment apps, they often take more time to build a large user base but once there their popularity and usage can be sustained much longer. Below are some examples.

Branded Utility Apps: Kraft iFood Assistant, Nike+ GPS and Chipotle Ordering

  • iFood Assistant is a branded app from Kraft – a confectionery, foods and beverage conglomerate. Originally available for iPhone in 2008 for $0.99, the app is now also available for Blackberry, Windows Phone 7 and Android devices, plus a Lite version (free) for iPhone. It reaches out to a broader consumer base beyond Kraft’s traditional audience of women. It gives users access to a library of instructional cooking videos, 7,000+ recipes, which can be browsed by category and occasion, lets them add the ingredients (many of them made by Kraft) to a shopping list, and helps them find nearby stores carrying Kraft products with a store locator. The app also includes CRM registration options, fully integrated with kraftfoods.com, that let users create, share and save their recipes and shopping lists.
  • Nike+ GPS is an iPhone app for $1.99. Using GPS and accelerometer, it enables users to visually map their run and monitor the time, pace, distance and calories burned. It comes with a “Challenge Me” feature, whereby users can challenge themselves to increase their pace or distance, relatively to their previous runs. Through a platform on the Nike+ website, users can share their run history with friends via the site, Twitter, or Facebook,and connect with other runners in a community of 3 million members.
  • Chipotle Ordering is a branded app, which is available for free on Apple App Store. Using location-based technologies, it enables customers to select a nearby Chipotle Mexican Grill restaurant, customize their items, enter payment details and pick up their orders, all from their iPhone. It also offers customers the convenience of saving their favorite Chipotle meals online and those of friends, family or coworkers.
  • Liberty Mutual Mobile-Claims is a free app available for both iOS and Android platforms. It guides customers through a streamlined claim process for an automotive accident, which may include collecting contact and insurance information from the other driver, taking a photo of the damage, mapping the location via GPS and sending the report. It also lets customers conveniently access Liberty Mutual’s Mobile eService website and manage their policy directly from mobile devices.

  • ZipCar is a free app, available for both iOS and Android platforms, from the company that offers its members quick, cheap and hassle-free car rental on short notice. The app amplifies the ease of Zipcar’s rental process. It guides users through the reservation process, locates nearby cars, and contacts customer support. It does even more with capabilities like remote locking, unlocking and honking the horn when a user needs to find a Zipcar car in a parking lot.

The main challenge for branded utility apps is how to evolve continuously to stay fresh while maintaining a delicate balance between utility (“getting things done effortlessly”) and entertainment (“in an interesting fashion”). Competing with hundreds of thousands of other apps for user attention and download is also a challenge. While non-game app categories are not as crowded as game category, they are still very crowded nevertheless.

How Are Branded Apps Doing?

Data indicates a receptive audience for branded apps. Among iPhone users, 70 percent have downloaded an app from a well-known brand; 26 percent would download an app from a well-known brand they like if it is introduced and another 34 percent would strongly consider doing so; only 7 percent would definitely or probably not download it. An overwhelming majority of users download branded apps from the App Store directly onto their iPhones and only 7 percent go through iTunes to download apps (AdMob, 2009). Some branded apps have become mega hits, e.g., Audi A4 Challenge got 3.5 million downloads (early 2010), Barclaycard Waterslide Extreme and Zippo Lighter 10 million each (January and June 2011, respectively).

Downloading Branded Apps -- Findings from

Unfortunately, users’ experience with branded apps in general has fall short of their expectations. According to a survey by EffectiveUI, 38 percent of mobile app users are not satisfied with most of the apps available from their favorite brands. Nearly 70 percent agree that a branded app can give them a negative perception about the brand if it is not useful, helpful or easy to use. In fact 13 percent have avoided downloading apps from a brand due to a previous bad experience with another app offered by that brand (Brand Apps Today, 2010). The result is that very few apps have gained enough market traction to have meaningful marketing impacts. Going by the number of downloads, 80 percent of the apps by consumer and health care brands in a study were downloaded less than 1,000 times while less than 1 percent of them had more than a million downloads (Deloitte, 2011). Successes, if measured by downloads, are relatively few.

The Question Is Mostly “How”, Not “Whether”

Despite a generally disappointing record to date, being shied away from having a branded app may not be an option for many companies. More than three-quarters of mobile app users expect all brand name companies to have a mobile app to make interactions with the brand easier (eMarketer, 11/22/2010). In retailing business, an overwhelming percentage of users consider mobile apps as useful for shopping activities such as getting money-off coupons, viewing current in-store specials, getting driving directions to the nearest store, and scanning product bar codes for information (eMarketer, 12/15/2010). The question for most businesses is therefore not whether (to have a branded app) but how (to use one or more branded apps effectively).

Utility, not novelty

It has been documented that novelty (as product, process and even business model innovations) can be a source of value creation (Amit and Zott, 2001) and hence user attraction. However, with more than half a million apps currently available, they can hardly be considered as a novelty, not any longer. They must stand on their own merits.

A branded app must be designed to offer some real utility, e.g., solving a problem for users (e.g., creating a shopping list with Kraft iFood Assistant, or filing an insurance claim via Liberty Mutual Mobile Claims) or providing genuinely meaningful features (e.g., waving a virtual lighter with Zippo Lighter, mapping and monitoring a run, and connecting with friends and the runner community with Nike+ GPS app, or remotely locking, unlocking and honking a ZipCar car). This applies to entertainment-type branded apps as well as utility-type apps. After all, even game apps are not intended to entertain users for the sake of entertainment but rather to capitalize on the intense and engaging atmosphere of a game to foster users’ deep connections with the brand (e.g., Zippo, with more than 500 million lighters sold to date, as an American cultural icon going back to wartime Germany and Vietnam).

Usage, not just downloads

User connections to a brand will not materialize without frequent usage of an app long after it is downloaded. Yes, the number of downloads is important. Nothing else can happen without an app being downloaded first. But this is only the starting point in building user connections to a brand. Whether users come back to an app time after time is a more accurate indicator as to whether they actually like it and are having a positive brand experience.

Statistics show that only 20 percent of users return to a free app after the first day of download, however; after 30 days, only 5 percent of them are still using the app; the fall-off rate is slightly steeper for paid apps (Northcott, 2010). Quite disappointing to say the least. Contrast that to successful Kraft iFood Assistant – more than 60 percent of users who have downloaded the app since 2008 are still interacting with it today. In marketing jargon, branded apps are about both customer acquisition and retention, not the former alone.

Mobile apps, not mobile websites.

Apps are for mobile devices with relatively limited computing power, screen size, storage capacity and connection speed. Mobile device users, being on the go, are not interested in surfing the Web; rather, they like to get a task at hand done rapidly, conveniently and in some enjoyable manner. There are certain tasks for which they prefer using mobile apps, and there are others for which browsing the web would be a preferable alternative.

In the retail environment, for example, users find it useful to have mobile apps for getting money-off coupons, viewing current in-store specials, getting directions to the nearest store, scanning product bar code for information and registering loyalty ID at checkout (eMarketer 12/15/2010). On the other hand, they prefer using a web browser to mobile apps for researching products, comparative shopping, reading customer ratings and reviews, and searching for products with key words (eMarkketer, 11/22/2010). Companies must not make the mistake of designing their branded apps to replicate their corporate websites. Instead, they should prioritize and be very selective about which content and functionalities each branded app should have.

Apps in general, not just branded apps, are a relatively new phenomenon. Little is understood about their usefulness in business and marketing, e.g., how consumers actually think about and use branded apps. Some trials and errors are inevitable in figuring out the right content and functionalities for a branded app.

Unique hardware features

Smartphones, tablets and some other mobile devices (e.g., iPod Touch) have several hardware features that are not commonly available on personal computers. Besides being highly portable, they are typically equipped with touch screen, video and still-picture cameras (often on both front and back of the device), speakers and microphone, GPS, digital compass, accelerometer, proximity and ambient light sensors, wi-fi connectivity and, with some exceptions, cellular phone capability. Mobile apps can therefore deliver many functionalities that make them particularly useful and/or engaging. Liberty Mutual Mobile Claims app utilizes GPS to let users report the location of an accident, camera to take pictures of damages, and cellular capability to submit a claim on the spot, all from their smartphone. Chipotle Ordering and ZipCar apps use GPS to help users locate nearby restaurants or cars. Zippo Lighter app simulates virtual flame movement by detecting the air being blown into the microphone. Nike+ GPS app makes use of the iPhone’s accelerometer to measure the user’s running distance and its GPS to map the route. A report by Deloitte (2011) indicates intensive use of some unique functionalities is likely to give a branded app significantly higher likelihood of success (77 percent for accelerometer, 61 percent for GPS and 59 percent for camera).

Promotion absolutely essential

All the investments in time, efforts and money to develop a branded app will not pay off unless consumers are aware of its existence and become interested in its utility and entertainment value. With hundred thousands of apps out there, this will not happen without a plan to promote it.

Consider this: consumers find non-branded apps by searching the app store from their mobile devices (58 percent) or through their friends and family members (45 percent); for branded apps, they rely much less on these channels (21 and 28 percent, respectively). Promotion undoubtedly needs to take on a more important role in spreading in getting consumers to know about branded apps.

Appvertising for a branded app can be placed in other popular apps. AutoWeek did that with its app on 3,000+ apps through AdMob network in November 2009 to move the app’s ranking into the 10th position in the news category for iPhone (O’Leary, 2010). Capitalizing on other promotional campaigns already in place can give a branded app some needed visibility. BarclayCard’s Waterslide Extreme app piggybacks on its TV commercial that features a worker using a Barclay card while riding down a water slide. Although it is not that unique from a game perspective, it becomes an immediate hit (over 10 million downloads and 16 million engagement minutes) with app users by reminding them popular TV ad. Besides these, more “traditional” channels (e.g., PR and corporate website) can also be used.

In brief, while the future of mobile business and marketing looks bright and that of branded apps appears promising, a well thought out game plan for these apps is a must for any chance of success.

B2B or not B2B: That Is No Longer a Social Media Question

Is there a place for social media in business-to-business (B2B) marketing? Up to a year or so ago, it might have been worthwhile pondering that question. Today the question is no longer whether or not. Rather it is how to best utilize social media in B2B marketing. A survey by White Horse finds 86 percent of B2B firms are using or having a presence on social media, compared to 82 percent for business-to-consumer (B2C) firms. They are not as actively engaging in social media activities, however — 45 percent of B2B firms have a basic presence (e.g., a Twitter or Facebook account,and/or a company blog) but no significant marketing activities (day-to-day engagement) on social media, compared to 26 percent of B2C firms. There is still a lack of executive buy-in among B2B firms (one in three B2B firms reports low executive interests, compared to one in eleven B2C firms). While both types of firms cite insufficient personnel to maintain social media activities as the most serious obstacle, B2B firms are several times more likely than B2C firms to prefer traditional marketing methods and to perceive social media as not relevant to their business. Being newcomers to social media, one in three B2B firms is not measuring how successful its social media efforts are, compared to one in ten B2C firms. In brief, B2B marketers are interested and have tiptoed into social media but they are not quite there yet.

The need to utilize social media is just as great for B2B firms as they are for B2C firms.

  1. In the B2B world, professional networking is everything — who you know and who they know form a web of relationships. Online social networks (OSNs) can be excellent tools for connecting with others. They are no longer heavens just for teens and college students. A majority of users on Facebook, LinkedIn and Twitter comprises of people 35 years of age or older.
    OSN users by age
    Source: “Who use Facebook, Twitter, LinkedIn and MySpace”, Paul Kiser’s Blog
  2. B2B marketing is not about lifestyle and personal interests as much as it is about helping customers to get their jobs done better. That means extending to them the B2B firm’s knowledge and expertise in the form of relevant, credible and useful content (e.g., white papers, case studies, product demo videos and webinars). Social media offer B2B marketers new opportunities to aggregate, share and co-create content with customers. Content provides the substance that attracts and engages prospective customers at various touch points. It turns simple network connections into rich social interactions that help build business relationships.
  3. B2B customers are also real people. They increasingly use social media at work and in their daily life, be that reading blogs, watching YouTube videos, staying in touch with friends on Facebook, or uploading presentations  to Slideshare.net. In that regard, the demarcation line between doing business and being a consumer, or that between B2B and B2C, is becoming harder to detect.
  4. Whether in B2B or B2C, listening to what is being talked about the firm and its brands is a must. Marketers are no longer the only one with a megaphone and in a commanding position to control their brand messages. Anyone else can blog, share with their 100+ Facebook friends or create YouTube video about their experience with the firm’s products and services. Letting negative blog posts, comments or videos spreading around without addressing their inaccuracies or customer grievances can be a costly mistake and failing to listen to customer suggestions can mean lost opportunities.

 

Once B2B marketers buy into the idea of utilizing social media, the next and more challenging question is what can B2B marketers do with specific social media tools? There are many tools and covering them all in this blog post would be impractical. Fortunately, Base One offers a relatively comprehensive drawing that depicts the B2B social media landscape. Click on it will lead you to a larger image where the details can be zoomed in and explored.

B2B Social Media Landscape

Just take a quick look at some tools.

  • Among content-centric tools, Slideshare.net is a good place for sharing presentations with information-hungry prospects whose decisions can be influenced by informative content; and do not overlook YouTube for product demo videos. Quite often, the firm may have already produced these presentations and videos; so, all it takes is to sign up with these sites and upload the content. Blogs are well-recognized as a marketing tool but not yet widely used in B2B (only 50 percent of B2B marketers have used blogs, compared to 75 percent having used LinkedIn, according to eMarketer). They are a great way to put a human voice on a cold corporate website. They can be enormously effective — 71 percent of B2B users rate blogs as “very influential” in identifying and defining needs, 74 percent in identifying potential suppliers and 75 percent in final selection of a supplier.
  • Most often overlooked is Wikipedia, which is among the five most visited websites and a main source of knowledge for many prospects. B2B marketers should create, maintain and/or contribute to entries on their firms, products or the underlying technology and business processes.
  • Among the connection-centric tools, LinkedIn — the OSN for professionals — is the most obvious and widely popular with B2B marketers (3 out of 4 having used it). Do not overlook Facebook and Twitter. “[I]f LinkedIn is your business suit and Facebook is business casual, then Twitter is your business social networking cocktail hour, the place where you go to casually and informally interact with potentially thousands of others. Whereas LinkedIn tends to be a more latent form of engagement, Twitter is (or can be) very much in real-time” (Paul Chaney, 2009). Surprisingly (or perhaps not surprisingly), B2B buyers rate Twitter and Facebook more than LinkedIn as “very influential” in identifying and defining needs (67, 60 and 51 percent, respectively), identifying potential suppliers (81, 69 and 46 percent) and finally selecting a supplier (77, 87 and 54 percent).
  • There is a bonus for using social media: they help boost search engine rankings. Such rankings are largely driven by the volume of high-quality inbound links a website receives. A key element in optimizing websites for search engines is to get more links. Engaging with users on social media sites such as Facebook and Twitter can drive in lots of links from these sites, hence can boost search engine rankings. Nearly half of B2B marketers indicate their social media activities as having positive effects on their  search engine performance (eMarketer, 09/17/2010).

Looking forward, it is anticipated that “B2B spending on social media [is] to explode” (eMarketer). Besides increased spending on paid advertising (e.g., banners) on OSNs, a sizable portion of spending will go to  toward other social media initiatives such as creating and maintaining a branded profile page, managing promotions or public relations outreach within a social network, and measuring the effect of a social network presence on brand health and sales. Quite interestingly, there is a marked difference in social media usage between B2B marketers under 30 years or so of age and those older (Base One, “Buyersphere”). As those 30s and under move up the corporate ladder in the years ahead, expect even more changes in social media usage in B2B marketing.

Resources

  1. B2B Marketing Goes Social: a White Horse Survey Report (2010).
  2. Base One, “B2B Social Media Landscape” and “Buyersphere: Survey of B2B Buyers’ Use of Social Media” (2010).
  3. Who use Facebook, Twitter, LinkedIn and MySpace“, Paul Kiser’s Blog, (April 1, 2010).
  4. eMarketer, “Is B2B on Board with Social?” (March 13, 2010), “B2Bs Tap Social to Boost Search” (September 17 , 2010), “B2B Spending on Social Media to Explode” (June 1, 2010).
  5. Paul Chaney (2009), The Digital Handshake: Seven Proven Strategies to Grow Your Business Using Social Media, John Wiley & Sons.

Using Social Media Is Not the Same as Using Social Media

Yes, you read it right. No typo here. Just because some marketers employ social media tools such as blogs or online social networks (OSNs) does not mean they capitalize on the potential power of social media.

In general, social media are earned media where marketers participate in ongoing, many-to-many conversations (dialogues), engage consumers for their insights, and earn their interest and trust with which to build relationships and brand loyalty. These conversations can be initiated by either marketers or consumers. They cannot be treated as another marketing channel owned and controlled by marketers (an earlier post “Markets are conversations“). By contrast, traditional media are usually paid media (e.g., TV and radio commercials, magazine ads, and paid key word search) or owned media (e.g., corporate websites) with which marketers can broadcast (in a one-to-many fashion) their well crafted monologues (a.k.a. advertisements). Consumers have very few, if any, opportunities to interact or contribute their own messages.

Putting an advertisement on a popular blog or Facebook does not amount to using social media. It simply treats these social media as “media” – a channel of marketing communication paid for by marketers; there is nothing “social” about it. Likewise, maintaining a corporate blog or creating a product page on Facebook does not by itself amount to capitalizing on the power of social media if the company simply uses these media to continue publishing its product information, brochures or press releases. In such case, it treats these media simply as owned media (it does not own Facebook of course, only its Facebook product page). It only use these media as social media when a corporate blog or Facebook product page is designed to support social interactions – engaging consumers in a meaningful conversation and letting them bring more friends into it, allowing them to share their consumption experience and contribute content, and/or crowdsourcing product design ideas.

Here is my key takeaway. What distinguishes between social media and traditional media is not the technology or means of communication (e.g., analog vs. digital, or Web 1.0 vs. Web 2.0 era software applications, or whatsoever). Rather, it is the marketing mindset that shapes the information flows (many-to-many vs. one-to-many), underlies the relationship between the senders and receivers of the messages (dialogues vs. monologues) and defines the nature of the media used (e.g., paid and owned media vs. earned media). In other words, it is not which media they are but how they are used that determines whether a marketer is using social media.

There’s an App for That

Note: I wrote this blog  post almost a year ago on a different platform (which is no longer conveniently accessible). The lessons are just as valid now as they were back then. So, I like to repost it here.

I wonder if you watched Steve Jobs unveiled the iPad yesterday. I did for the most part. But I am not “blogging” about the iPad here. Instead, I simply want to use the iPad (or for that matter, the iPhone and iPod Touch) as a vehicle to discuss about complementarities, the value webs (or networks) and value co-creation, and their ramifications on business strategy.

It is worth noting that Steve Jobs did not simply showcase the hardware (iPad) but also the possible content (e.g., photos, the NY Times and ebooks), entertainment (e.g., music via iTunes) and applications (e.g., games and other applications via Apple Apps Store) available for the iPad. This is increasingly the case for many information- and technology-based products and services. Such a product creates not much value by itself but much much more when being made available with other complementary products. What can you do with the iPad without the content, entertainment and applications offered by other publishers, media sources and software developers?

Lesson #1think not of a standalone productbut rather of a bundle of offerings or even a platform (iPad plus iTunes and Apps Store).

When complementary products and services are offered together, they enhance one another’s appeals; the value of the whole system or bundle is greater than the sum of its parts. Complementarities therefore indicates a condition of increasing returns in which the adoption of one element has a higher payoff when one or more complementary elements are simultaneously adopted. The more consumers find the apps on the Apps Store appealing, the more interested they would be in having an iPad, iPhone or iPod Touch. In fact, “there’s an app for that” has become the selling point for these Apple products.

Contrast Apple iPod with Microsoft Zune. The latter product has received high marks for quality hardware in many product reviews. Its sale volume has been meager however, despite the financial clout of Microsoft. There are simply not that many apps for Zune and the Zune Marketplace, unlike Apple iTunes Apps Store, attracts far few more visitors and buyers. For prospective iPod, iPhone and iPad challengers, it is the apps as much as the hardware that will determine their success.

This new reality necessitates a shift in strategic thinking from the value chain to the value web. In a traditional value chain, a firm competes by occupying those links where it can add more value at a lower cost. Strategy becomes equated with strategically positioning the firm along that chain of value-adding activities. Value creation focuses on transforming objects. The value thus created lies in the resulting products themselves. However, as complimentarities among products and services become the source of value, the value chain concept proves less useful in uncovering value and analyzing value creation. A firm succeeds only by finding complementary technologies, products and market participants it can network together to co-create value.

Lesson #2Value co-creation focuses on mediation (i.e., facilitating interactions and collaborations) among the networked participants.

The value thus co-created lies not only in the product itself but also in complimentarities among the products and services. The value of Google Maps lies not as much in the database of geographical mapping information as in Google’s ability to attract a large and growing number of map-based applications. Likewise, the value of the iPad is not as much in the device itself but in Apple’s ability to attract a large number of publishers, media companies and software developers to make their content, entertainment and applications available to iPad users.

The shift from value creation along a value chain to value co-creation through network relationships also coincides with a shift from production of goods (in the physical world) to the provision of service (more prevalent in the digital world). The latter necessitates a shift from the goods-dominant (G-D) logic of value to the service-dominant (S-D) logic. In the G-D logic, producers and consumers have distinct roles; the primary focus of the firm is on the production of goods to be sold to customers. In the S-D logic, their roles converge; the focus turns to interactions between the two sides, not simply to facilitate transactions but also to offer an experience unique to individual customers.

Lesson #3Value is ultimately derived with participation of the beneficiaries (often the customers) through use, and is thereby essentially ‘value-in-use’ as opposed to ‘value-in-exchange’.

Think of YouTube, Flicker and Facebook, just to name a few. Without user active participation, they cannot even exist. The locus of value creation then moves from the ‘producer’ and market exchange to a collaborative process of co-creation between parties.

The next time, if some one says “there’s an app for that”, I hope you would also think of serious strategic marketing stuffs like multi-sided markets and platforms, complementarities, value co-creation and S-D logic.

On a lighter note, there are times (such as now — December in snowy Michigan, and thinking of sunny Florida Keys) when “there is no app for that”.

CRM Goes Social

It is a well-known fact that CRM implementations have had a relatively high rate of disappointing results. While still trying to address these poor results, marketing and strategy planners now have to address a new set of challenges: the rise of social media, which has radically altered the relationships between businesses and consumers. Social media have enabled consumers to communicate among themselves and greatly curtailed marketers’ ability to control the messages and information about their brands and products.

Why CRM Must Go Social

Consumers can now produce and share their views and creative content, and connect with one other online with ease. Social media give them a mighty megaphone with which to tell the world their experience with product X or brand Y. As a result, the influence from traditional marketing communication channels has become increasingly negligible. Consumers can educate themselves over the Internet through their connections in social networks, blogs, discussion forums, chat and more. Consumer-to-consumer communication becomes frictionless such that it is no longer one-to-one, but rather many-to-many. Messages, good or bad, can spread so widely and so fast just like viral infection. All of these take place on Twitter, Facebook, YouTube and other social media that lie completely outside any company’s control.

CRM, as we knew it, is ill-equipped to utilize social media for building and managing customer relationships.

  • CRM was conceived and developed in an era of information asymmetry. Communication followed a one-to-many pattern. Companies were able to tightly control the information and image about themselves, their products, brands and services as they could use their communication channels to simply broadcast their marketing monologues.
  • The mindset underlying CRM implementation was “command and control” – customers would interact directly with the company in a controlled manner across multiple, well-managed touch points. Much of the information available to consumers was marketing messages (e.g., advertisements, product brochures and web-page content) being produced by the company.
  • CRM therefore optimizes relationships around the company, not its customers. Although the goal of CRM is to provide a single view of individual customers and manage one-to-one relationships with them, its implementation in the Web 1.0 era often focused on automation of front-office tasks. At its most basic level, CRM is a fancy contact database. It lets sales representatives view “profiles” of their accounts, capture deal information, track performance, communicate with contacts, and share information internally with sales managers and other members of their account team.

In this social media era, the term CRM (“customer relationship management”) has become a misnomer, argues Maria Ognewa (2010), Director of Social Media at Attensity. After all, the company no longer controls or manages the relationship; the customer does. To remain effective, marketing must become engaging and conversational, and CRM (or any other term you prefer) must get social.

Social CRM Defined

Social CRM, also known as CRM 2.0, capitalizes on technology and utilizes social media tools. However, it is none of these. Rather, as described by leading CRM expert Paul Greenberg (2009), it is “a philosophy and a business strategy, supported by a technology platform, business rules, processes and social characteristics, designed to engage the customer in a collaborative conversation in order to provide mutually beneficial value in a trusted and transparent business environment. It is the company’s response to the customer’s ownership of the conversation” (emphasis added). Or more briefly (as in a “tweetable” definition), it is “the company’s response to the customer’s control of the conversation.”

Social CRM vs. Traditional CRM

Social CRM does not replace traditional CRM, but augments it instead. Customers can still interact with the company through conventional media (e.g., phone, postal and electronic mail). Social CRM extends traditional CRM capabilities with social networking capabilities – marrying the company’s existing systems and customer touch points with data provided by user-contributed content and communities. It taps social media to first understand consumers’ perceptions and then takes actions within those outlets to improve the standing of the company and its products. Consider online sales, for example. They account for only 10 percent of total retail sales; the remaining 90 percent still remains offline. Yet social networks influence more than 40 percent of all offline sales.  The challenge for marketers is to determine how best to leverage the collective intelligence inherent in social networks and effectively evangelize the company’s products, services and/or brand propositions through social media. These media are like traditional touch points such as call centers, sales organizations, partner portals and marketing applications. There is one key difference, however. With social media, the company must engage and join in ongoing conversations as participants, not as overseers.

Differences between social and traditional CRM have been widely discussed (see “Notes” below). I highlight a few of them here.

Traditional CRM v. Social CRM

  • Specific-department responsibilities vs. enterprise-wide engagement. The responsibilities for building and managing relationships under traditional CRM implementation reside with specific departments. By contrast, customer engagement under social CRM must be enterprise-wide. That means empowering employees, especially those facing customers, to engage customers and prospects on social media channels within well-defined usage guidelines.
  • Company-defined channels vs. customer-driven channels. Under traditional CRM implementation, the firm selects and manages the contact points (e.g., company’s website, customer help desks, email) through which it interacts with its customers. Its single view of each customer is built upon the data collected from such interactions. Under social CRM, the number of possible channels for engaging with its customers has multiplied many folds (e.g., traditional contact points, plus online social networks, blogs, tweets, video sharing, etc.). Few of them can be defined and managed by the company. Instead, many of them are determined by customers, organized on the ground up and/or managed by third parties. They can easily move on to other channels when feeling such engagement lacks authenticity.
  • Operationally-focused vs. people/community-focused. Businesses typically turn to CRM to improve communication between sales and marketing operations, and to improve data-access so as to positively impact decision-making. Toward this goal, traditional CRM focuses on operational effectiveness and its impact, both internally and on the customer, whereas social CRM is all about people and community – joining conversations with consumers on relevant online communities and build the kind of reputation needed to maintain credibility and trust.
  • Data-driven vs. content-driven. Traditional CRM grew out of the need to store, track, and report on contact data and other critical information about customers and prospects. Social CRM is growing out of a need to attract the attention of those using the Internet to find answers to their problems by providing right content, and just enough of it, in formats that are easy for them, whether blog posts, podcasts, YouTube videos, or Webinars. Offering compelling content is a key pillar of social CRM strategy. The aims are to convert content into conversations, extend these conversations into collaborative experiences, then to transform these experiences into relationships.
  • Process-centric vs. conversation-centric. Traditional CRM focuses on implementing and automating processes to ensure the proper activities and tasks would be performed by the appropriate people, in the correct sequences. Although processes are still essential for a successful social CRM strategy, conversations with consumers looking for help in solving their challenges are at the heart of it. The goal is making it easy for consumers to find the company (through its content – a comment left on a blog post or following the company on Twitter) and invite it into a conversation on their terms.

Social or Traditional, It’s CRM

It is quite easy to get carried away by all the talks about how different social CRM is from traditional CRM and how much things will have to change. Let us not forget that social CRM is supposed to bring together the company’s CRM and social media capabilities. Customer information and insights from social media engagement must be brought together with customer data from traditional CRM system into a single view of the customer. Likewise, social media initiatives must be integrated with traditional customer service and support to be effective. Leading vendors of CRM systems and services such as SAP and Salesforce.com seem to understand this. They are investing in integrating CRM with networking platforms such as LinkedIn, Facebook, and Twitter. Hopefully, we will once again talk about CRM, not social vs. traditional CRM.

Notes

  1. Paul Greenberg, “Time to put a stake in the ground on Social CRM”, PGreenblog, (July 06, 2009), URL: http://the56group.typepad.com/pgreenblog/2009/07/time-to-put-a-stake-in-the-ground-on-social-crm.html
  2. Dion Hinchcliffe “Using social software to reinvent the customer relationship”, Enterprise Web 2.0 Blog, (August 18, 2009), URL: http://www.zdnet.com/blog/hinchcliffe/using-social-software-to-reinvent-the-customer-relationship/699?tag=mantle_skin;content
  3. Brent Leary, “Traditional CRM vs. Social CRM”, (June 2009), URL: http://technology.inc.com/software/articles/200906/leary.html
  4. R. Wang and J. Owyang, “Social CRM: the New Rules of Relationship Management”, Altimeter, (March 5, 2010), URL: http://www.slideshare.net/jeremiah_owyang/social-crm-the-new-rules-of-relationship-management
  5. Bob Warfield, “A social CRM Manifesto: How to Succeed with the Social CRM Virtuous Cycle”, Helpstream, URL: http://www.slideshare.net/Helpstream/a-social-crm-manifesto-how-to-succeed-with-the-social-crm-virtuous-cycle

Lessons from Mr. Splashy Pants

While writing by blog post “Markets are Conversations” , I found a very interesting presentation on TED. It is a story about an anti-whaling campaign which Green Peace tried to personify by having the public to name the humpback whales being tracked. Surprise!!! The most popular name was “Mr. Splashy Pants”, not exactly what Green Peace was hoping for. Still it worked in the end; the campaign successfully stopped the targeted whaling expedition. You can find out the rest of the story from the embedded video clip below.

What can we learn from Mr. Splashy Pants?

From the bottom up, not the top down. Social media is of the people, by the people and for the people. No company or institution owns it or can control it. “Mr. Splashy Pants” was not the kind of name Green Peace expected. Delay tactics to wait for more “thoughtful” cultural names to emerge did not work. “Mr. Splashy Pants” still won the naming contest by a wide margin; there was no close second place.

Level playing field. Done right, it costs little or nothing to mobilize people via the Internet. Social media empower users, making them collectively as powerful as, if not more so than, institutions.

OK to loosen up control. It is the end result, not the ability to command and control the media, that matters. Galvanizing people’s passion for the humpback whales so as to halt the targeted whaling expedition, not finding some thoughtful names (simply a means to some other end),  was the result that Green Peace was looking for. delivered that sought-after result.

Be genuine, honest and upfront. The name “Mr. Splashy Pants” won handily even if it was, from the standpoint of Green Peace, not culturally “meaningful”. Being genuine, it touched the people’s feeling at some personal level and stirred up the people’s passion for the humpback whales.

Is (User Generated) Content King Kong?

Among the three elements of the 3Cs business model, content is the one that has undergone the most profound change in recent years. The rise of social media has allowed Internet users to create and distribute content with ease. User generated content (UGC) now shares the stage with commercially developed content (CDC) that once ruled the world of Web content. Will content, or more precisely UGC, actually be king this time? If not, what will it be?

What is UGC?

UGC is also known as consumer-generated media (CGM). It refers to the materials created and uploaded to the Internet by non-media professionals, be them product reviews on Amazon, seller ratings on eBay, photos on Flickr, videos on YouTube, bookmarks on Delicious.com, or user profiles on Facebook. It has been around in one form or another since the early years of the Internet such as examples include the bulletin boards on portal websites like Yahoo and AOL and “product rating” websites in the 1990s. Over time, it has evolved to encompass blogs, wikis and media-sharing, social-networking, and virtual world sites, and has become a dominant media and one of the fastest growing forms of content on the Internet. In 2006, UGC sites attracted 69 million users in the United States alone, and in 2007 generated $1 billion in advertising revenue. By 2011, UGC sites are projected to attract 101 million users in the U.S. and earn $4.3 billion in ad revenue (IAB, 2008).

Practically all social media applications (from blogs, social bookmarking sites and wikis to online social network sites) enable some form of UGC. An effective way for classifying UGC is to do so according to the motivations for users to contribute content and the level of communal involvement in doing so. The motivations can be either rational or emotional. Rational motivations may include sharing knowledge with the world (knowledge sharing) and advocating a particular stand toward an issue (advocacy). Emotional motivations may include building social connections with friends, relatives, or other Internet users (social connections) or entertainment (self-expression). Users can contribute content through individual efforts or group collaboration (Krishnamurthy and Dou, 2008). The entries on Wikipedia are collaborative efforts of tens of thousands of contributors from around the world who are motivated by a desire for knowledge sharing. User profiles on online social network sites such as Facebook are created by individual members who seek connections with friends online. Massively multiplayer online role-playing games (MMORPG) such as World of Warcraft involve a very large number of players who interact with one another within a virtual game world. They are found to prefer socializing online to offline and have very strong emotions when playing these games.

While there are many types of UGC sites, for branding purpose, marketers should pay close attention to three specific types.

  • Review sites. They are where consumers share their brand experiences in order to help others make more informed purchasing decisions, making them an important place for marketers to have a voice. Most review sites focus on a specific product/service category (e.g., CNet on consumer electronics, Edmunds.com on automotive, and TripAdvisor on tourism). They are generally well moderated and can be very brand friendly to the company that respects their culture and is willing to participate.
  • Blogs. Blogging has been around in one form or another since the mid 1990s, but it was the launch of Open Diary (the first site to provide blogging software and the first to facilitate user comments) in 1998 that turned blogging into a UGC phenomenon. Letting readers reply to blog entries, thus allowing interactions between bloggers and readers and among readers, is the hallmark of blogging and UGC in general as well. It should be noted that blogging today is no longer for users only. Among the rank of bloggers are many salaried professionals (e.g., huffingtonpost.com), marketers and corporate CEOs.
  • Media sharing sites. They tend to be specialized by content formats such as photos (e.g., Flickr, Photobucket and Smugmug), videos (e.g., Youtube, Metacafe and Dailymotion) and presentations (Slideshare.net and Scribd). The huge audience of some of these sites such as YouTube and their popular media formats, particularly videos, can get brand messages, good or bad, spread extremely far and fast.

Advertising on UGC Sites

This is still an uncharted territory. Much is yet to be experimented and learned. Below are a few more common practices. They involve placing commercial messaging in and around the content or by becoming a part of the content itself.

  • Video Ads. One common method is “pre-roll” video — a short ad that runs before the video itself. Another method is “overlay” ad, which pops up about 15 seconds into a video and only covers the bottom one fifth of the screen. The ad disappears after a few seconds if the user does not click it. If the user does select the ad, the main video will pause, and the video ad will play; once the ad has ended, the video will resume. The idea behind this method is ensure the ad does not interrupt the user’s viewing experience. Some UGC sites, including YouTube, now prefer this “overlay” method over “pre-roll”.
  • Conversation targeting. Marketers can target specific conversations that are relevant to their brands, be them on some blogs, online communities or social networks. They can then add their “voice” (e.g., product or company information, press releases, and experts’ opinions) or place their ads next to these conversations. A camera producer, for example, may try to identify widely read blogs about photography whereas a sport apparel producer may look for some online forums on physical fitness. They may utilize the service of some third-party specialists in finding not only the most relevant conversations but also the most influential.
  • Custom communities. Marketers can build custom communities that provide an online hub for brands — entertaining and engaging consumers through relevant content, interesting games, useful applets, or exciting contests. They may use off-site advertising to drive consumers to these communities, where these consumers participate and pass along interesting or valuable content to others. A variation of custom communities is dedicated channels for specific brands on content-sharing sites such as YouTube.
  • Brand profile page. Marketers can create profile pages for their products or brands on social networking sites such as Facebook. On such pages they can offer relevant and interesting content, from demonstration videos to widgets that let site members include these pages in their “friend” network or tag themselves as a “fan.”
  • Widgets. Some marketers now make available branded widgets for users to download onto their computer desktops or embed in their blogs or profile pages and through these widgets to import some form of live content. American TV network ABC, for example, offers a series of widgets around its popular primetime shows such as “Desperate Housewives”, “Grey’s Anatomy”, “Ugly Betty” and “Dancing with the Stars”. These embeddable widgets let fans add exclusive ABC.com content to their blogs, web pages and social networking sites. Each widget includes video clips, photos, news alerts and links back to ABC.com’s media player for viewing of full episodes.

Kong: a King Gone Wild

With the rise of UGC, is content fit to be king? To put it differently, is the notion of “content is king” any closer to reality in the UGC era  than it was in the CDC era? Survey data from the OPA shows Internet users spend the largest share of their time online at content sites (39.6 percent), far ahead of communication (24 percent),  community (20.6 percent) and other sites (e.g., commerce and search at 10.9 and 4.5 percent, respectively). Back in 2003 when data on community sites was not available, they spent more time at communication sites (47.3 percent) than content (33.6 percent) and other sites. Content sites are those designed primarily to provide news, information and entertainment (e.g., CNN.com, ESPN.com and MapQuest). Community sites are those combining UCG with communications in order to foster relationships between individual members and groups of members (e.g., Facebook and MySpace). Communications sites and those designed to facilitate the exchange of thoughts, messages, or information directly between individuals or groups of individuals (e.g., Yahoo! Mail and AOL Instant Messenger). Commerce sites are those designed for shopping online (e.g., Amazon and eBay). Search sites those scanning the Web to provide prioritized results based on specific criteria from user requests (e.g., Google Search and Yahoo! Search). Essentially, content-rich sites are where consumers have been spending their time at, then or now, despite the growing popularity of community/networking sites such as Facebook.

Website traffic statistics (Alexa, 2010) seem to confirm the predominance of content. Four of the top-ten sites globally are content sites (e.g., YouTube, MSN, Wikipedia and Blogger); the remainder includes four search sites, two of which (Yahoo and Baidu) are content-rich, a community and social network site (Facebook) and a communication site (Tencent QQ – a Chinese instant messaging site). For marketers it is clear that they can ignore the content element only at their own perils.

Utilizing UGC sites for marketing communication is not without its challenges, however. UGC sites are by nature a freewheeling exchange of opinions and points of view, in which an advertiser is expected to be just another participating voice. Marketers can no longer broadcast one-way messages at their audiences in a carefully planned and controlled environment. Instead, they must now engage in conversations that are initiated, maintained, and “owned” by consumers. They need to surrender some degree of control over the brand messages. That carries a level of uncertainties and risks much higher than what most marketers are accustomed to (see my other post: “Markets Are Conversations”).

So while content may turn out to be king this time, it is likely a different sort of king: King Kong. Like the infamous ape made in Hollywood, UGC can be wild and unpredictable; meanwhile its raw strength can be overwhelming. Recall the Chevy Tahoe online video contest discussed in an earlier post (“Markets are Conversations”).  The beast can be quite destructive but controlling it is equally impractical. Ignoring the beast does not make it go away either. Perhaps with a new mindset radically different from the traditional “command and control” approach, marketers can meet King Kong (or rather UGC) face-to-face. A different ending, less tragic, this time?

References

  1. Alexa (2010) “Top Sites”, at: http://www.alexa.com/topsites (accessed July 7, 2010).
  2. Online Publishers Association (OPA) (2010) “Internet Activity Index (IAI)”, at: http://www.online-publishers.org/page.php/prmID/421 (accessed July 7, 2010).