The main job of an organization is to create value, according to Peter Drucker, one of the greatest business thinkers of the 20th century.
In today’s uncertain economic environment, most marketing investments (for example, branding campaigns, various initiatives, etc.) need to be vetted by the finance department, and in general, must show a strong Return on Investment (ROI) in order to be funded. Therefore, it is important for marketing professionals to be able to intelligently discuss true value creation from a financial context. I’ve created an acronym as a mnemonic to help remember how a company creates WIDER levels of value.
WIDER stands for:
W = Weighted Average Cost of Capital (WACC; pronounced ‘Wack’)
Rather than get into the particulars of how to compute a company’s WACC, the main point to know is that it is a weighted average of the company’s cost of debt (e.g., bonds floated at 7%) and equity (e.g., investors require a return of 12% given the perceived risk of the business).
Each of the terms is weighted depending on the capital structure of the company (for example, debt is 20% and equity is 80%). The WACC is also called the discount or hurdle rate and is often used to discount cash flows in capital budgeting decisions.
With all of that said, if a company is not getting a return on its capital that is higher than the cost of that capital, they are destroying value vs. creating value.
If you know your company’s WACC, and a project’s internal rate of return (IRR; an annualized rate of return, taking into account both the amount of money invested and the length of time it has been invested), then you can determine whether value creation is happening from a financial standpoint (IRR should be > WACC).
For each marketing investment (e.g., initiative, project, etc.), try to understand the WACC that your company is using and the different ways that it might be able to lower this hurdle rate (e.g., restructuring capital costs, mitigating project risks, etc.)
I = Investment
An investment by nature is generally non-recurring, long-term oriented, and is often one option among many. A company can create value by making investments in projects that have an IRR (or ROI) that is greater than their WACC. A company may want to have a portfolio of investments (e.g., global branding campaign, segmentation study, etc.), each having a particular risk-reward profile (e.g., some have an IRR of 50% or 20%, etc.), as long as they are each above a company’s WACC.
In making a case to your senior leadership team to obtain funds, make sure that your marketing initiative/investment has an IRR that more than clears your company’s hurdle rate.
D = Divestment
In general, a company should divest of units or projects that are negative value creators. This analysis entails a basic cost/benefit justification. If a company’s funds cost 10%, and it has myriad projects and/or units that are returning 6%, it will eventually run out of current funds and/or have difficulty raising new funds (e.g., stock offering) given its value destroying behavior.
As another example, if you rent a property for less than your mortgage payment on that property, you are not creating value for yourself nor acting in an economically sustainable manner. In general, the key message is to divest of projects/units that are destroying value or find ways to quickly increase your investments return.
E = Efficiency
Find ways to make your current capital (e.g., marketing investments) work more efficiently or productively. If you can cut costs, increase cash flows, and/or increase turns (e.g., inventory/asset turnover), then you can use your current capital in a more productive manner.
This process comes down to making sure that each marketing project/investment is operationally managed in an effective and optimal manner. When presenting a business case for a marketing investment, detail how the project will be run, the controls that will be put in place, and the track record of the resources that will hit the budget and timeline targets.
R = Return
If companies are going to beat the market averages and their peer group, they need to go after high return projects/investments. Marketing campaigns that pursue new, large customer segments and/or growing and substantial markets could produce the high returns that your company needs to break out of the pack and/or achieve new levels of growth.
As stated above, high return projects tend to be of higher risk, but if managed well, and situated within a diversified investment (projects/units) portfolio, they are essential for hitting stretch targets and giving marketing a new, growth oriented, order of magnitude focus.
Conclusion
In summary, the above acronym can be used to initially evaluate current and future marketing investments within an organization. If companies are to ultimately survive, and the marketing department is to be viewed as financially accountable, then understanding hurdle rates and project returns is essential for making a tenable, cogent business case for new marketing initiatives.
In synthesizing my previous article with this one, value creation can be viewed as both perceived costs and benefits from a customer’s perspective, and from distance above WACC from an internal company perspective.
Both perspectives are needed to justify large marketing investments in today’s uncertain economic environment, or at any time for that matter.
Wednesday, June 29, 2005
Thursday, June 16, 2005
Online Services marketing
Services Marketing Is Moving Online—Are You?
Services marketing efforts have to be done online not because a few marketing consultants and strategists say so —but because the clients and prospects are online and their online experiences are influencing all buying decisions.
In a recent study by the Wellesley Hills Group, found that about 98% of buyers visited the vendor’s website before making their purchase decision. Approximately 50% stated that their online experience did, indeed, affect their purchasing decision. According to the Association for Online Retailers, in 2004 approximately 40% of adults with Internet access researched a potential product purchase online.
This makes it necessary for services marketers to focus on web to sell everyting from high tech services to complex industrial products and for business-to-business services.
Service companies—even those that are beginning to embrace marketing as a part of their strategy—seem woefully slow to embrace the march to the World Wide Web. Most common reasons for inaction:
Humbug: "We don't sell our services online. We aren't a soft drink company. We don't need ads. We don't need to create a 'Web site experience'."
These people simply don't understand and don't believe... and don't want to.
Fix My Web Site: "Yes, we're getting serious about our marketing. Can you help us fix our site? We don't think it looks good."
This is the equivalent of saying, "We need to get serious about our marketing. Let's redesign and rewrite our brochure." Yes, it may be necessary. But it's not sufficient.
Ready, Aim, Aim, Aim... Retreat: "We have talked about doing more online. And then talked some more and more...."
The decision-making process in most 50-person service firms is slower than in a $500 million dollar company. They simply can't get out of their own way and allow themselves to implement a serious change to their marketing or business-development initiatives. And because online efforts are so challenging to them, they retreat to less-confusing ways: buying some ads in the local business journal, sponsoring a trade show, redesigning their brochure.
Break the Chains
To break free of old patterns of behavior and embrace new ways of acting, companies often need a significant or galvanizing event: a merger, a massive drop in sales, a major technological advance in their industry.
When it comes to marketing online, it is unlikely that there will be some major event to set your company in a new direction. But don't be fooled. A sea change has happened, and it's up to you to take advantage of it before your competitors use it to take advantage of you.
Here are four arguments you can use to help your firm break free of your marketing and decision-making quagmire and boldly enter the new world of online marketing:
1. Your buyers are online
As noted earlier, services buyers are headed online to evaluate your services. But it's not just evaluation: your potential customers are reading your articles (or articles about you) on online trade magazines; they are attending Webinars to help them make business decisions; they are reading your white papers online; and more and more they are expecting to see online videos describing you, your services and the successes you've had with other clients.
2. Marketing is now a two-step process
Whatever offline marketing you are doing—from direct marketing to advertising to speaking to PR—the first stop most buyers are making is your Web site.
When they get to your Web site, it can either draw them in further to your services and the promise of working with your firm, or it can confuse them—even upset them—and drive them away.
So if you're wondering why your direct mail isn't working like it used to, or if your event attendance is down, take a look at your site. Is it helping or hurting your marketing efforts?
3. The time for marketing strategy has arrived
Even in the recent past, marketing at a services firm consisted of having a nice brochure and handing it out when your rainmakers went on new business development meetings. So, as "let's hire a marketing person" became the call at many service firms over the last decade, the firm leaders immediately set their new marketing hires on the tasks of "redoing the brochure, getting our name out there through ads, updating our proposal template, and fixing the Web site."
And so, these mostly junior people jump right in on the graphic design and ad placement process. Unfortunately, "the graphic design-as-marketing" parade has gone by. It simply isn't enough any more.
Marketing at service firms should be approached not by asking "How should we do marketing," but "How do we want to grow? And what do we need to get done to reach these goals?" If you start here, you'll find you need your junior marketing people to execute the more difficult work of finding new customers, engaging them with marketing, helping to close new business and keeping existing customers happy and buying.
In 2005, this means you not only need to be online but also need to be doing the right things online for the right reasons: in other words—strategy.
4. Brand and response marketing converge
The previous three arguments can be summed up as "If you don't do this, you're in trouble." But it's not all doom and gloom. Online marketing creates a wealth of opportunities for above-average growth and success for firms willing to take advantage of it.
One of the best opportunities is the potential of combining your direct response marketing and your brand marketing into one integrated experience. Online, your branding experience (what you want customers to think about you) and your direct-marketing tactics (what you want your customers to do as a result of your marketing) are converging.
For example, you place an online ad in a top online trade e-newsletter that your customers read regularly. This helps your brand recognition as tens of thousands of potential buyers see it.
But you don't just place the ad; you also make an offer for a white paper on a topic that's important to them. They go to your Web site and form an immediate impression about you. If it's good, they stay and download the white paper. If it's not good, they are gone in 15 seconds.
If your marketing strategist is doing the job right, the customer entered your Web site on a landing page specifically designed to boost the percentage of people who stay on the site and download the white paper.
Let's assume they download your white paper. Next week, they read it and find it interesting and informative so they go back to your site to download the other two white papers there. To get these other white papers, they need to register on your site, which they're willing to do because they liked the first white paper. They read the second white paper and say to themselves, "This is very helpful. If we do need these services, I'm sure I'll loop this company into the process."
In your thank-you-for-registering email, you invite them to a Webinar (online seminar) that your firm is presenting next week. They register online and attend, along with two colleagues.... And the enticement into your firm and its services continues.
For our purposes here, it's not important exactly how it plays out; it is important that this is how online marketing is working for many of your potential clients these days. They are online and looking for your services. Are you ready for them?
Services marketing efforts have to be done online not because a few marketing consultants and strategists say so —but because the clients and prospects are online and their online experiences are influencing all buying decisions.
In a recent study by the Wellesley Hills Group, found that about 98% of buyers visited the vendor’s website before making their purchase decision. Approximately 50% stated that their online experience did, indeed, affect their purchasing decision. According to the Association for Online Retailers, in 2004 approximately 40% of adults with Internet access researched a potential product purchase online.
This makes it necessary for services marketers to focus on web to sell everyting from high tech services to complex industrial products and for business-to-business services.
Service companies—even those that are beginning to embrace marketing as a part of their strategy—seem woefully slow to embrace the march to the World Wide Web. Most common reasons for inaction:
Humbug: "We don't sell our services online. We aren't a soft drink company. We don't need ads. We don't need to create a 'Web site experience'."
These people simply don't understand and don't believe... and don't want to.
Fix My Web Site: "Yes, we're getting serious about our marketing. Can you help us fix our site? We don't think it looks good."
This is the equivalent of saying, "We need to get serious about our marketing. Let's redesign and rewrite our brochure." Yes, it may be necessary. But it's not sufficient.
Ready, Aim, Aim, Aim... Retreat: "We have talked about doing more online. And then talked some more and more...."
The decision-making process in most 50-person service firms is slower than in a $500 million dollar company. They simply can't get out of their own way and allow themselves to implement a serious change to their marketing or business-development initiatives. And because online efforts are so challenging to them, they retreat to less-confusing ways: buying some ads in the local business journal, sponsoring a trade show, redesigning their brochure.
Break the Chains
To break free of old patterns of behavior and embrace new ways of acting, companies often need a significant or galvanizing event: a merger, a massive drop in sales, a major technological advance in their industry.
When it comes to marketing online, it is unlikely that there will be some major event to set your company in a new direction. But don't be fooled. A sea change has happened, and it's up to you to take advantage of it before your competitors use it to take advantage of you.
Here are four arguments you can use to help your firm break free of your marketing and decision-making quagmire and boldly enter the new world of online marketing:
1. Your buyers are online
As noted earlier, services buyers are headed online to evaluate your services. But it's not just evaluation: your potential customers are reading your articles (or articles about you) on online trade magazines; they are attending Webinars to help them make business decisions; they are reading your white papers online; and more and more they are expecting to see online videos describing you, your services and the successes you've had with other clients.
2. Marketing is now a two-step process
Whatever offline marketing you are doing—from direct marketing to advertising to speaking to PR—the first stop most buyers are making is your Web site.
When they get to your Web site, it can either draw them in further to your services and the promise of working with your firm, or it can confuse them—even upset them—and drive them away.
So if you're wondering why your direct mail isn't working like it used to, or if your event attendance is down, take a look at your site. Is it helping or hurting your marketing efforts?
3. The time for marketing strategy has arrived
Even in the recent past, marketing at a services firm consisted of having a nice brochure and handing it out when your rainmakers went on new business development meetings. So, as "let's hire a marketing person" became the call at many service firms over the last decade, the firm leaders immediately set their new marketing hires on the tasks of "redoing the brochure, getting our name out there through ads, updating our proposal template, and fixing the Web site."
And so, these mostly junior people jump right in on the graphic design and ad placement process. Unfortunately, "the graphic design-as-marketing" parade has gone by. It simply isn't enough any more.
Marketing at service firms should be approached not by asking "How should we do marketing," but "How do we want to grow? And what do we need to get done to reach these goals?" If you start here, you'll find you need your junior marketing people to execute the more difficult work of finding new customers, engaging them with marketing, helping to close new business and keeping existing customers happy and buying.
In 2005, this means you not only need to be online but also need to be doing the right things online for the right reasons: in other words—strategy.
4. Brand and response marketing converge
The previous three arguments can be summed up as "If you don't do this, you're in trouble." But it's not all doom and gloom. Online marketing creates a wealth of opportunities for above-average growth and success for firms willing to take advantage of it.
One of the best opportunities is the potential of combining your direct response marketing and your brand marketing into one integrated experience. Online, your branding experience (what you want customers to think about you) and your direct-marketing tactics (what you want your customers to do as a result of your marketing) are converging.
For example, you place an online ad in a top online trade e-newsletter that your customers read regularly. This helps your brand recognition as tens of thousands of potential buyers see it.
But you don't just place the ad; you also make an offer for a white paper on a topic that's important to them. They go to your Web site and form an immediate impression about you. If it's good, they stay and download the white paper. If it's not good, they are gone in 15 seconds.
If your marketing strategist is doing the job right, the customer entered your Web site on a landing page specifically designed to boost the percentage of people who stay on the site and download the white paper.
Let's assume they download your white paper. Next week, they read it and find it interesting and informative so they go back to your site to download the other two white papers there. To get these other white papers, they need to register on your site, which they're willing to do because they liked the first white paper. They read the second white paper and say to themselves, "This is very helpful. If we do need these services, I'm sure I'll loop this company into the process."
In your thank-you-for-registering email, you invite them to a Webinar (online seminar) that your firm is presenting next week. They register online and attend, along with two colleagues.... And the enticement into your firm and its services continues.
For our purposes here, it's not important exactly how it plays out; it is important that this is how online marketing is working for many of your potential clients these days. They are online and looking for your services. Are you ready for them?
Tuesday, June 14, 2005
E-Mail Marketing for High Tech Companies
E-Mail works great for niche services or new services that can be marketed to the current customers. If the new services are an extension to the existing serives, then email marketing is a great way to generate customer interest and create the right environment for the actual sales pitch.
To do this, One needs to implement an email marketing campaign using the permission-based email marketing service. Note the importance of permission-based email, sending an unsolicited
e-mail is a sure-fire way to earn your customer’s ire & is counter productive.
The best plan is to implement an email direct mail campaign to your current customers who are currently not buying the new service from you but are buying similar service from others. Offer them a good deal on the new service, which is better and offers more, for a bit more money.
This the upgrade will be beneficial to your current customers but the trick will be to communicate this is in attractive and well-written emails that explain the benefits of the new service levels. My advice on how to plan and implement such an email marketing campaign?
To do this, One needs to implement an email marketing campaign using the permission-based email marketing service. Note the importance of permission-based email, sending an unsolicited
e-mail is a sure-fire way to earn your customer’s ire & is counter productive.
The best plan is to implement an email direct mail campaign to your current customers who are currently not buying the new service from you but are buying similar service from others. Offer them a good deal on the new service, which is better and offers more, for a bit more money.
This the upgrade will be beneficial to your current customers but the trick will be to communicate this is in attractive and well-written emails that explain the benefits of the new service levels. My advice on how to plan and implement such an email marketing campaign?
- Segment customers in our database so you send out customized emails that speaks directly to the individual customers situation. That is if they are buying service X and you want them to also buy service Y, send a different email then if they were buying service A and you want them to also buy service B.
- Offer the current customers a special lower price on the new service, which is valid with a year agreement. The discount is based on the principle of lower cost of customer acquisition, and the savings is passed on the customer. This builds a better relationship with the customer.
- Think through the best and likely most beneficial upgrade/upsell path for each current account type and group of customers. This upgrade path idea should be thought through very thoroughly.
- Send out an email to only part of a segment, track results such as click through rates and how many actually buy the service, modify the message if needed, then send out to another batch. I'd hate to send a message out to all customers will account type X and then determine that the message had some flaws.
For example, send out a message to a random 10% of a segment. Measure the results. If needed, adjust the email, send to another random 10% of the segment. Measure the results. Do it again. Pick the most effective email and send the rest of the segment. Repeat with each segment. - Possibly send out more than one email. Start by sending out one email which talks about one new/additional service. If there are multiple services, that can be mentioned in a subsequent email after the initial pitch. Although there are several new services/Products, One should be very focused in the emails to just have each customer upgrade one step up from where they are now. If you choose to put we put all the services/products in the email, it will confuse and clutter up your customer and will fail to win the customer’s mindshare. Do not clutter these emails with too much information.
- Lastly, use an email management software that makes things easier to manage and work with if basic email software like MS Outlook or Lotus Notes does not meet the requirement.
Thursday, June 09, 2005
Differentiation by Direct Response Marketing
Differentiation for ASIC providers by Direct Response Marketing
In a world where everything is becoming commoditized, the key to success becomes differentiation. That's becoming more difficult to achieve, and one of the reasons is that it's relatively easy to put up a Web site.
An entrepreneur is looking to find an ASIC provider. An Internet search for "Application Specific Integrated Circuit" produces 2 million+ hits, but Open-Silicon nor eSilicon or LSI or IBM are listed on the first page. Given the fact that there are major well established companies and startups which offer ASICs, It is a huge challange to build a substantial differentiation on Internet. Even when a potential customer looks at the company’s website, they are all just about the same. So what's going to make a startups plan stand out and succeed?
Perhaps the biggest differentiation in building an ASIC business is service. That retains customers, gets them to buy again and inspires them to become apostles for you. If the service is exceptional, they may even become customer champions-one who would market for you.
But what kind of differentiation helps you acquire customers in the first place if your product or service appears to be a commodity?
Offer - You can differentiate with your offer.
Outstanding offers are a means of differentiation that tie to the product or service. They'll raise your response rate considerably, but expect lower conversions and less loyalty.
Unusual guarantees are differentiating. By offering on time delivery guarantees or first time silicon success guarantee, your offer stands out. Offering Lifetime RMA support are even more clutter-busting.
Since ASIC is a product and a service, the offer involves a tie-in to a product, service or IP (Intellectual Property) that stands out by itself. Partnering with TSMC or ARM or IBM or Synopsys could make a big difference in your success in acquiring customers.
You may also want to consider partnering with other service providers - a non-compete agreement which can generate a portion of revenue to the alliance partnet instead of diverting it to other competitors. For example, ASIC vendor can partner with a firmware developer or a design service house. That puts a "complete solution" spin on the company, and it is differentiating. But it won't necessarily increase response rates. But creates a strong differentiation for the firm in marketplace.
Media - Media utilization may be differentiating in a few senses. Obviously, if you are in media that your competitors aren't using, you stand out. Again, that doesn't mean higher response—sometimes when you pioneer new media which reaches your customer, you're reaching your audience in an effective way. However, in ASIC world, all competitors are using all the popular media and utilizing a new media can be easily copied.
Media weight - Media weight i.e., advertising, certainly differentiates. The question is what does it do to cost per acquired customer? If not handled smartly, it can skyrocket acquisition costs. ASIC marketers, can use the press releases and technical conferences lower their acquisition costs and get a substantial differentiation.
Markets - Targeting markets which the competitors are not targeting is highly differentiating. However, this may backfire if that is niche market. In general, having competition in the market helps business - but makes differentiation difficult.
Creative - You can also differentiate with your creative. This can't be self-reflexive creative, calling attention to itself. It has to be creative that makes prospects/customers heroes in an unusual way. Dangerous as it is, humor can also work to differentiate when there's a commodity product or service involved. Humor in technical world works less effectively than fear. Fear or challenges of deep sub-micron design, uncertanity of integrating diverse types of 3rd party IP can be used creatively in the message statement.
Away from the direct response arena, however, creativity rules. Because of the way it is done and the weight it is given, it works. When you receive a innovative email, you have a different attitude toward it.
So what does our ASIC startup do to differentiate hisoffering? It surely will involve media, a tie-up with a premier partnet, an unusual guarantee perhaps? And thats when marketing's real work begins.
In a world where everything is becoming commoditized, the key to success becomes differentiation. That's becoming more difficult to achieve, and one of the reasons is that it's relatively easy to put up a Web site.
An entrepreneur is looking to find an ASIC provider. An Internet search for "Application Specific Integrated Circuit" produces 2 million+ hits, but Open-Silicon nor eSilicon or LSI or IBM are listed on the first page. Given the fact that there are major well established companies and startups which offer ASICs, It is a huge challange to build a substantial differentiation on Internet. Even when a potential customer looks at the company’s website, they are all just about the same. So what's going to make a startups plan stand out and succeed?
Perhaps the biggest differentiation in building an ASIC business is service. That retains customers, gets them to buy again and inspires them to become apostles for you. If the service is exceptional, they may even become customer champions-one who would market for you.
But what kind of differentiation helps you acquire customers in the first place if your product or service appears to be a commodity?
Offer - You can differentiate with your offer.
Outstanding offers are a means of differentiation that tie to the product or service. They'll raise your response rate considerably, but expect lower conversions and less loyalty.
Unusual guarantees are differentiating. By offering on time delivery guarantees or first time silicon success guarantee, your offer stands out. Offering Lifetime RMA support are even more clutter-busting.
Since ASIC is a product and a service, the offer involves a tie-in to a product, service or IP (Intellectual Property) that stands out by itself. Partnering with TSMC or ARM or IBM or Synopsys could make a big difference in your success in acquiring customers.
You may also want to consider partnering with other service providers - a non-compete agreement which can generate a portion of revenue to the alliance partnet instead of diverting it to other competitors. For example, ASIC vendor can partner with a firmware developer or a design service house. That puts a "complete solution" spin on the company, and it is differentiating. But it won't necessarily increase response rates. But creates a strong differentiation for the firm in marketplace.
Media - Media utilization may be differentiating in a few senses. Obviously, if you are in media that your competitors aren't using, you stand out. Again, that doesn't mean higher response—sometimes when you pioneer new media which reaches your customer, you're reaching your audience in an effective way. However, in ASIC world, all competitors are using all the popular media and utilizing a new media can be easily copied.
Media weight - Media weight i.e., advertising, certainly differentiates. The question is what does it do to cost per acquired customer? If not handled smartly, it can skyrocket acquisition costs. ASIC marketers, can use the press releases and technical conferences lower their acquisition costs and get a substantial differentiation.
Markets - Targeting markets which the competitors are not targeting is highly differentiating. However, this may backfire if that is niche market. In general, having competition in the market helps business - but makes differentiation difficult.
Creative - You can also differentiate with your creative. This can't be self-reflexive creative, calling attention to itself. It has to be creative that makes prospects/customers heroes in an unusual way. Dangerous as it is, humor can also work to differentiate when there's a commodity product or service involved. Humor in technical world works less effectively than fear. Fear or challenges of deep sub-micron design, uncertanity of integrating diverse types of 3rd party IP can be used creatively in the message statement.
Away from the direct response arena, however, creativity rules. Because of the way it is done and the weight it is given, it works. When you receive a innovative email, you have a different attitude toward it.
So what does our ASIC startup do to differentiate hisoffering? It surely will involve media, a tie-up with a premier partnet, an unusual guarantee perhaps? And thats when marketing's real work begins.
Building a Business Intelligence System
Business intelligence systems have traditionally been built with "structured" data - data that has a known format record. While building a business intelligence system is still a daunting exercise, finding the data within a source record has never been the primary challenge.
Unstructured data from such sources as forms, e-mail or documents - contains a great deal of information that can be usefully employed in a business intelligence system. Some of this information is vitally important. The Enron and related scandals have made the location and retrieval of unstructured data - in the form of e-mails and corporate documents - a business process that can determine the very survival of a corporation.
The Sarbanes-Oxley Act has greatly spurred the extension of structured database management systems into the realm of content management - the addition of unstructured data objects into the safe harbor and support of an enterprise database. Sarbanes-Oxley requires corporations to be able retrieve any data (especially documents and e-mail) that pertain to the reliability of a corporation's financial statements. Database vendors are scrambling to deploy enterprise-class content management solutions that ensure compliance with this politically sensitive and highly visible legislation.
To date, tools used to build business intelligence systems have been developed independently of those designed to solve content management problems. However, the two are beginning to merge. This article discusses the challenges to merging the technologies and provides an example where the two can be merged to solve an organizational problem
The Nature of the Problem
Unstructured data from such sources as forms, e-mail or documents - contains a great deal of information that can be usefully employed in a business intelligence system. Some of this information is vitally important. The Enron and related scandals have made the location and retrieval of unstructured data - in the form of e-mails and corporate documents - a business process that can determine the very survival of a corporation.
The Sarbanes-Oxley Act has greatly spurred the extension of structured database management systems into the realm of content management - the addition of unstructured data objects into the safe harbor and support of an enterprise database. Sarbanes-Oxley requires corporations to be able retrieve any data (especially documents and e-mail) that pertain to the reliability of a corporation's financial statements. Database vendors are scrambling to deploy enterprise-class content management solutions that ensure compliance with this politically sensitive and highly visible legislation.
To date, tools used to build business intelligence systems have been developed independently of those designed to solve content management problems. However, the two are beginning to merge. This article discusses the challenges to merging the technologies and provides an example where the two can be merged to solve an organizational problem
The Nature of the Problem
Finding data in an unstructured document is a challenge. Several examples illustrate this challenge:
- The source document is paper, not electronic. Insurance, medical and human resource forms are often paper-based. Note that the data of interest, in this case, is reasonably structured. Its position on the source document can be spatially located.
- The source document is structured - as in example 1 - but it is already in an electronic form. A Web technology such as XML may be used.
- The source document is electronic, but the data of interest is not structured. E-mail and word processing documents fall into this category.
- The source document is paper, and the data is unstructured. There is no electronic representation of the document - perhaps a historical document prepared before the advent of word processing.
- The source is a "blob," not a document - such as pictures, voice or video.
It is useful to classify unstructured data as one of two types: "structured/unstructured" (types 1 and 2 above) and "unstructured/unstructured" (types 3, 4 and 5).
In type 1, the location of the data of interest to our business intelligence system is known - if we can only bridge the gap from paper form to electronic form.
Type 2 is the easiest, from a data extraction point of view. The data is really no different from a traditional, record-oriented source of a business intelligence system. It is electronic and it is form-based (structured).
In types 3 and 4, we have a greater challenge. Even if the source document is already electronic (type 3), we cannot spatially locate the data of interest in the document - that is, the data we want is not always on a certain line and at a certain position within that line. Type 4 has all the problems of type 3, with the additional complication of being on paper.
Types 3 and 4 are text-based, implying that some form of text processing or text mining might help us find the data of interest.
Type 5 seems the most difficult of all, since the source is impervious to common data- or text-processing techniques. This type of data is undoubtedly the source of great interest to intelligence agencies and is probably currently the focus of intense research efforts.
Until recently, content management and business intelligence capabilities have been developing in parallel. There has been relatively little effort - or motivation - to integrate these two areas before now.
How Can this Problem be Solved
The electronic sources of data for this enterprise database present a well-understood exercise of integrating structured data from multiple sources into an integrated database. Of course, saying that the problem is well understood does not mean that it is "easy." There are a myriad of technical and business challenges in the extract, transform and load (ETL) process that have to be addressed to ensure the resulting database meets enterprise objectives.
The harder problem is capturing data from the forms - there are millions of them - and converting the image of data into digital data. However, once this problem is solved, the problem becomes "easy" again - the paper-based data can now be integrated into the enterprise database using a variety of ETL techniques.
The solution to this problem requires the involvement of a third information technology discipline, which has also been developing in parallel to the other two (ETL and content management) - scanning technologies.
Paper management has long been a problem for large enterprises. Insurance companies are probably at the forefront of this process, due the paper/document intensive nature of many of their business processes. Companies such as Xerox and Kodak have long served this market. These vendors have developed scanning technologies that can quickly turn paper into an image - and, equally important from the business intelligence perspective - produce meta data that enables one to find a document easily. Examples of commonly used meta data include SSN, name and form ID.
These "image vendors" also provide data conversion technologies - for example, a data entry operator can use a light pen and inform the computer of the coordinates of the SSN field on the form. The conversion technology can read the field and convert it to data.
Much of this data conversion process is manual, however. Depending on the nature and business complexity of the conversion, it may be cheaper or more reliable to employ two technicians to transcribe the same field and then compare the results.
There are usually two outputs from this conversion process - the scanned image and the converted data. Frequently, the scanned image needs to be retained - often for evidentiary purposes in case the form becomes involved in legislation. The content management components of the database are responsible for storing this data, indexing it with the appropriate meta data, and - perhaps most importantly of all - retaining a paper trail. Sarbanes-Oxley and DOD 5015.2 impose strict requirements on this document management process. Database vendors are continuously upgrading content management functionality - particularly the records management components - to meet these requirements.
The second output - the converted data - is typically a flat file. For seasoned designers of a business intelligence system, this flat file becomes an input for an ETL process.
Conceptually, at least, we are done. We have a solution to the types 1 and 2 problems. We have used three previously unrelated technologies - structured data management, unstructured content management and image scanning/conversion technologies - to create an integrated solution to the problem of integrating structured and unstructured data into an integrated, enterprise database.
Practically speaking, however, there are a number of issues that need to be addressed. One in particular, in the case of this client, is the issue of data primacy. Retirement data obtained from a paper document may conflict with that obtained from an electronic source.
A second significant problem is that the structure of a form changes over time. For example, a form to capture the particulars of a new employee hire will change, as the enterprise needs to know something new or different about new employees. Affirmative action data is but one of many examples. The addition of new data means that the position of the new data has to be captured - and possibly causes a position shift of other data on the form. Data positionality is almost transparent in relational data sources, but a significant and ongoing concern in document capture and conversion.
Types 3 and 4 problems may be solved by integrating text mining technologies into a similar architecture as described in this article.
Wednesday, June 08, 2005
Does 4 Ps apply to Semiconductors?
With the advent of e-Commerce, Internet, globalization & low cost communication several leading thought leaders declared that the era of the 4 Ps is effectively over. The new thinking is that product, promotion, price and place are no longer key to providing sustainable differentiation.
Does this imply that 4-Ps do not apply to high tech products such as semiconductors?
The answer simply stated is "No". To explain, I will talk about the relevance of 4-Ps in high tech product such as semiconductors.
Sure globalization has changed the game for all players. New competition has emerged from China, Korea, Malaysia and India. New contract manufacturers of semiconductors have emerged in China and design companies in India. New global brands like SMIC, Amkor, ASMC etc, are emerging and taking dominant form.
Customers are now more savvy, information-driven and have more choices than ever. Many established companies and industries are under threat from this new competition. Yet the established companies (e.g., Intel, TI, IBM, AMD, Broadcom) are not only surviving in global economy, they're thriving. Some are regional players and others span worldwide empires.
A common denominator for these semiconductor companies is that they leverage the power of the marketing mix (4 Ps) to achieve new heights, capture new markets and grow revenues at astronomical rates. Some are mastering one aspect of the marketing mix, some are attempting to be dominant in all of them. But one thing is certain—differentiation can still be created from the 4 Ps.
Product
While the global economy has made rapid time-to-market an imperative, especially since competitors are quick to copy good ideas, there's still competitive advantages to be found in innovative products. The consumer is looking for products that capture the imagination, or sometimes just plain work better than alternatives. One of the main bastions of differentiation in semiconductors is product design.
Broadcom, a leading networking semiconductor provider, would be an ideal example. Broadcom created an effectient ethernet MAC chip - which was Cisco was looking for. With in next few years, Broadcom became a leading networking semiconductor provider - riding high on product innovation.
Today, Broadcom is still the leading supplier of ethernet MAC chips - while industry gaint Intel still trails Broadcom. Product innovation is the key for Broadcom’s success.
In another example, Apple computer has emerged from a has-been to one of the hottest product companies in the past 10 years. One need look no further than the iPod for a dominant product.
iPod has 92.7% market share in the MP3 player market. Incredibly, the closest competitor struggles with a mere 3% of the market. With a simple-to-use operating system that is truly intuitive, and small ear-bud headphones that could be considered the best on the market, the iPod is far and away not only the market leader but also the market favorite.
Apple doesn't win because it has a product that no one can copy. Indeed, Dell's DJ, Creative's RIO and other MP3 players are arguably very similar in features. Industry watchers also see a challenge to the iPod's dominance with cellular phones that play MP3 files.
While competitive devices swarm into the marketplace, Apple will keep winning in the marketplace because the iPod captures our imagination. It brings the universality of music into a compact device that's so easy to use—the owner's manual can be thrown in the trash. This year alone, according to the Apple Insider, Apple is challenging its retailers to move over 100,000 iPods a week!
Two simple examples, Broadcom and the red-hot iPod, prove that Product can still win in the marketplace.
Promotion
When it comes to promotion, there's probably no one better at promotion than Intel Corp. It's aggressive branding and joint marketing ensured that Centrino was a big time success. Intel has mastered the art of branding, selling to end customers through carefully articulated promotion of its products. TI follows another approach towards promotion. The company works closely with cell phone manufacturers such as Nokia, Samsung etc, also works with software developers and supplies an entire platform of semiconductors and associated software support to win a customer. Working closely with all the members in the cell phone supply chain helps promote TI chips. This strong working relationship between vendor and customer has helped TI maintain its leading position even while competing with Intel. Intel's cell phone chip "Manitoba" has failed to get any significant market penentration even after 2 years in the market.
Price
Pricing decisions are rarely easy, and in fact are most often complex. In the semiconductor industry prices based on customer’s volume demand and bargaining power - ensures that different customers get different pricing.
Semiconductor gaints Intel & TI helps vendors like Dell, HP and Nokia manage risk and forecast demand for their products based on customer buying patterns. The more data - past sales, seasonality, technology changes, etc., are made available to pricing decision makers, the more pricing can be adjusted in near real time to maximize revenues.
Pricing can take on a new dimension when seeking new market opportunities. Let's turn again to Apple Computer: Marketing professionals at Apple saw that the price point of $299 for an iPod, or $249 for the iPod mini, was reasonable for most consumers. Market research, however, showed that a whole new segment of buyers would jump on board at $99 for an Apple MP3 player. Hence, the Apple iPod Shuffle was born.
Small, sleek and hip, the Shuffle is a flash player that gives users the ability to hear music files in order of download or in a random format. Walt Mossberg of the Wall Street Journal notesthat the Shuffle is "a good product that will enlarge the iPod's appeal, especially with kids, people on low budgets, or people who work out. I imagine some existing iPod owners will also buy Shuffles as sort of add-on players. And the iPod juggernaut will roll on."
In the marketing mix, "price" does not necessarily mean "cheapest." There are plenty of enterprises across the globe selling products and services at premium prices. One popular example is Intel’s Pentium-4 Extereme Edition. Intel sells these chips at a premium price - whose main customers are teen aged kids!!
In this age of commoditization and cost reduction, companies are feverishly trying to figure out how to lower their costs and in many instances are turning to the outsourcing of labor, production and even design. And while those might be good strategies to stay competitive on cost, pricing strategies should not be overlooked.
Companies should be asking their customers "What product/service would you want to buy from me—and at what price?"
Place
While many enterprises have long looked at product, pricing and promotion as ways to expand revenues, one of the strongest strategies in the marketing mix is place. There are many companies that have mastered the art of distribution, although few of them have achieved competitive advantage.
Intel Corp, with its market directly to consumer model and extensive challel partners based sales strategy, is commonly cited as one of the best examples of dominating a retail channel in semiconductors. The company is bent on expanding its brand, ubiquity and availability - and uses "place" as a key competitive differentiator.
Internet, low cost telecommunication and rapid flow of information cannot replace the need to be close to the customer. Firms need to have sales offices near customer locations. Often Field Application Engineers are sent to customer locations to work closely with customer’s engineers to develop new products. Customers for semiconductors do not necessarly expect their vendors to have offices near by, but they expect a close and extensive application support from the vendor - which can be provided either by having a sales/customer support office nearby or by having their engineers work at the customer’s location.
In semiconductors, "place" is much broader than simply having sales office. It's also optimizing the supply chain. An effective supply chain can be the difference between a barely profitable company and one that dominates. Getting the right product to the right place at the right time and at the right price ultimately increases customer satisfaction and prevents money from being left on the table.
Placement is still a winning strategy. Going forward, companies that have mastered distribution channels and can supply those channels with a high-touch support will enjoy the upper hand in the battle with competitors.
Mastery of the 4-Ps
Some of the enterprises profiled in this article have mastered one of the 4 Ps; others, such as Intel, Apple, are enjoying advantage in two or more aspects of the marketing mix.
Success does not come easily, however. The strategy, while plain and simple, is difficult to execute. The winning strategy, and mastery of the 4 Ps, requires for an enterprise to know the customer.
Connecting to customers needs is essential for success. Customer connectedness is a pervasive attitude across the enterprise that is genuine, real and consistent. It's not enough to have the lowest price, the locations, the best product or the best promotional strategies. Mastery of the 4 Ps requires deep customer intimacy. Intel, Broadcom, TI, Nvida etc, know their customer, customer’s needs and have mastered the art of exceeding those needs.
Mastery involves asking which of the 4 Ps is most important to the customer and then assessing what can be delivered—profitably. For gamers, low prices are not the issue, performace is. Intel is therefore able to charge a premium price for its fastest processors.
Customers care about quality service, convenience of getting the required support, and a quality product.
The 4 Ps aren't dead—not even close. Differentiation can still be squeezed from the marketing mix. To win in the marketplace, an intense and intimate knowledge of the customer is required in a way that no competitor can match. That understanding must then be applied in a relentless focus on the elements identified by the customer as most important.
Talk to customers, engage customers, live and breathe them. Then use the marketing mix to satisfy them.
Does this imply that 4-Ps do not apply to high tech products such as semiconductors?
The answer simply stated is "No". To explain, I will talk about the relevance of 4-Ps in high tech product such as semiconductors.
Sure globalization has changed the game for all players. New competition has emerged from China, Korea, Malaysia and India. New contract manufacturers of semiconductors have emerged in China and design companies in India. New global brands like SMIC, Amkor, ASMC etc, are emerging and taking dominant form.
Customers are now more savvy, information-driven and have more choices than ever. Many established companies and industries are under threat from this new competition. Yet the established companies (e.g., Intel, TI, IBM, AMD, Broadcom) are not only surviving in global economy, they're thriving. Some are regional players and others span worldwide empires.
A common denominator for these semiconductor companies is that they leverage the power of the marketing mix (4 Ps) to achieve new heights, capture new markets and grow revenues at astronomical rates. Some are mastering one aspect of the marketing mix, some are attempting to be dominant in all of them. But one thing is certain—differentiation can still be created from the 4 Ps.
Product
While the global economy has made rapid time-to-market an imperative, especially since competitors are quick to copy good ideas, there's still competitive advantages to be found in innovative products. The consumer is looking for products that capture the imagination, or sometimes just plain work better than alternatives. One of the main bastions of differentiation in semiconductors is product design.
Broadcom, a leading networking semiconductor provider, would be an ideal example. Broadcom created an effectient ethernet MAC chip - which was Cisco was looking for. With in next few years, Broadcom became a leading networking semiconductor provider - riding high on product innovation.
Today, Broadcom is still the leading supplier of ethernet MAC chips - while industry gaint Intel still trails Broadcom. Product innovation is the key for Broadcom’s success.
In another example, Apple computer has emerged from a has-been to one of the hottest product companies in the past 10 years. One need look no further than the iPod for a dominant product.
iPod has 92.7% market share in the MP3 player market. Incredibly, the closest competitor struggles with a mere 3% of the market. With a simple-to-use operating system that is truly intuitive, and small ear-bud headphones that could be considered the best on the market, the iPod is far and away not only the market leader but also the market favorite.
Apple doesn't win because it has a product that no one can copy. Indeed, Dell's DJ, Creative's RIO and other MP3 players are arguably very similar in features. Industry watchers also see a challenge to the iPod's dominance with cellular phones that play MP3 files.
While competitive devices swarm into the marketplace, Apple will keep winning in the marketplace because the iPod captures our imagination. It brings the universality of music into a compact device that's so easy to use—the owner's manual can be thrown in the trash. This year alone, according to the Apple Insider, Apple is challenging its retailers to move over 100,000 iPods a week!
Two simple examples, Broadcom and the red-hot iPod, prove that Product can still win in the marketplace.
Promotion
When it comes to promotion, there's probably no one better at promotion than Intel Corp. It's aggressive branding and joint marketing ensured that Centrino was a big time success. Intel has mastered the art of branding, selling to end customers through carefully articulated promotion of its products. TI follows another approach towards promotion. The company works closely with cell phone manufacturers such as Nokia, Samsung etc, also works with software developers and supplies an entire platform of semiconductors and associated software support to win a customer. Working closely with all the members in the cell phone supply chain helps promote TI chips. This strong working relationship between vendor and customer has helped TI maintain its leading position even while competing with Intel. Intel's cell phone chip "Manitoba" has failed to get any significant market penentration even after 2 years in the market.
Price
Pricing decisions are rarely easy, and in fact are most often complex. In the semiconductor industry prices based on customer’s volume demand and bargaining power - ensures that different customers get different pricing.
Semiconductor gaints Intel & TI helps vendors like Dell, HP and Nokia manage risk and forecast demand for their products based on customer buying patterns. The more data - past sales, seasonality, technology changes, etc., are made available to pricing decision makers, the more pricing can be adjusted in near real time to maximize revenues.
Pricing can take on a new dimension when seeking new market opportunities. Let's turn again to Apple Computer: Marketing professionals at Apple saw that the price point of $299 for an iPod, or $249 for the iPod mini, was reasonable for most consumers. Market research, however, showed that a whole new segment of buyers would jump on board at $99 for an Apple MP3 player. Hence, the Apple iPod Shuffle was born.
Small, sleek and hip, the Shuffle is a flash player that gives users the ability to hear music files in order of download or in a random format. Walt Mossberg of the Wall Street Journal notesthat the Shuffle is "a good product that will enlarge the iPod's appeal, especially with kids, people on low budgets, or people who work out. I imagine some existing iPod owners will also buy Shuffles as sort of add-on players. And the iPod juggernaut will roll on."
In the marketing mix, "price" does not necessarily mean "cheapest." There are plenty of enterprises across the globe selling products and services at premium prices. One popular example is Intel’s Pentium-4 Extereme Edition. Intel sells these chips at a premium price - whose main customers are teen aged kids!!
In this age of commoditization and cost reduction, companies are feverishly trying to figure out how to lower their costs and in many instances are turning to the outsourcing of labor, production and even design. And while those might be good strategies to stay competitive on cost, pricing strategies should not be overlooked.
Companies should be asking their customers "What product/service would you want to buy from me—and at what price?"
Place
While many enterprises have long looked at product, pricing and promotion as ways to expand revenues, one of the strongest strategies in the marketing mix is place. There are many companies that have mastered the art of distribution, although few of them have achieved competitive advantage.
Intel Corp, with its market directly to consumer model and extensive challel partners based sales strategy, is commonly cited as one of the best examples of dominating a retail channel in semiconductors. The company is bent on expanding its brand, ubiquity and availability - and uses "place" as a key competitive differentiator.
Internet, low cost telecommunication and rapid flow of information cannot replace the need to be close to the customer. Firms need to have sales offices near customer locations. Often Field Application Engineers are sent to customer locations to work closely with customer’s engineers to develop new products. Customers for semiconductors do not necessarly expect their vendors to have offices near by, but they expect a close and extensive application support from the vendor - which can be provided either by having a sales/customer support office nearby or by having their engineers work at the customer’s location.
In semiconductors, "place" is much broader than simply having sales office. It's also optimizing the supply chain. An effective supply chain can be the difference between a barely profitable company and one that dominates. Getting the right product to the right place at the right time and at the right price ultimately increases customer satisfaction and prevents money from being left on the table.
Placement is still a winning strategy. Going forward, companies that have mastered distribution channels and can supply those channels with a high-touch support will enjoy the upper hand in the battle with competitors.
Mastery of the 4-Ps
Some of the enterprises profiled in this article have mastered one of the 4 Ps; others, such as Intel, Apple, are enjoying advantage in two or more aspects of the marketing mix.
Success does not come easily, however. The strategy, while plain and simple, is difficult to execute. The winning strategy, and mastery of the 4 Ps, requires for an enterprise to know the customer.
Connecting to customers needs is essential for success. Customer connectedness is a pervasive attitude across the enterprise that is genuine, real and consistent. It's not enough to have the lowest price, the locations, the best product or the best promotional strategies. Mastery of the 4 Ps requires deep customer intimacy. Intel, Broadcom, TI, Nvida etc, know their customer, customer’s needs and have mastered the art of exceeding those needs.
Mastery involves asking which of the 4 Ps is most important to the customer and then assessing what can be delivered—profitably. For gamers, low prices are not the issue, performace is. Intel is therefore able to charge a premium price for its fastest processors.
Customers care about quality service, convenience of getting the required support, and a quality product.
The 4 Ps aren't dead—not even close. Differentiation can still be squeezed from the marketing mix. To win in the marketplace, an intense and intimate knowledge of the customer is required in a way that no competitor can match. That understanding must then be applied in a relentless focus on the elements identified by the customer as most important.
Talk to customers, engage customers, live and breathe them. Then use the marketing mix to satisfy them.
Tuesday, June 07, 2005
A Broader View of Offshoring
Many Western execs see only cost savings when they can learn so much more from Chinese and Indian companies Offshoring has been a hot topic in recent months, as Western companies have cut tech labor costs drastically by shipping such jobs to countries like China and India. But the trend means more than just job loss at home or short-term wage arbitrage for the West. In their book The Only Sustainable Edge ($25, Harvard Business School Press), John Hagel III and John Seely Brown argue that the rise of the tech industry in China and India will lead to the creation of formidable overseas competitors. The advantage has less to do with sheer population figures, they say, and more with the differences in how these new powers do business.
Brown is the former director of Xerox's Palo Alto Research Center. Hagel, a former McKinsey & Co. consultant, is the author of several books on the Internet and competitiveness. Recently a group of editors and reporters from BusinessWeek sat down with Hagel to discuss how the East is changing technology in business, and what Western companies can do to keep up. Following are edited excerpts from that conversation:
Q: What was the idea behind the book?
A: I think executives are viewing offshoring much too narrowly. John Seely Brown and I had been collaborating on some broader, strategic questions. The book is primarily targeted to business executives. The fundamental theme is that companies should be shifting how they see strategic advantages. If I have a particular skill, fine. But the real source of advantage going forward comes from figuring out how to build on that capability and refresh it more rapidly than anyone else.
Q: So what's an example of a company that has this dynamic?
A: There's one we focus on in the book, called Li & Fung, in China. Li & Fung works with clothing designers. Calvin Klein, for instance, will tell them what its new line of fashion is, how many units it needs at what price points, and where the distribution points are. It takes care of everything else. Their initial advantage was being able to access a lot of different suppliers and orchestrate their activities. But over time, they've recognized that the value they can provide is to help their partners become better at what they do. It's not just figuring out what a particular customer needs and organizing the right set of resources. For example, cutters will start to have conversations orchestrated by Li & Fung with weavers, and say, you know, if you wove the yarn in a particular way, it would make our cutting operations a lot more efficient. And so they'll have these kinds of interactions [and] deepen their skills at what they do -- to coordinate their activities better -- that's one example.
Q: Couldn't you make the counterargument that their true competitive advantage is sitting within a nation of 1.2 billion people who do this kind of work in textiles at the lowest cost? It's really a geographic advantage?
A: You could certainly make that case, and there's an element of that. Their partners are located in 35 different countries around the world. So a lot of it has to do with geographic proximity. If you're dealing with an apparel designer in Europe, you want to have operations that are closer to the end customer than China would be. But it's also about creating the flexibility of organizing these resources.
One of the interesting stories around Li & Fung was: Immediately after 9/11, they had a fair amount of their operations in countries like Pakistan that were at high risk in terms of political instability. Within three weeks they had moved all the operations that were time-sensitive out of the Pakistani partners and into countries that were more politically secure. That degree of flexibility [in reaction to] unanticipated events is a skill set that most Western companies don't have.
Q: Which Western companies have been good examples of that ability to be flexible?
A: There are relatively few. Cisco Systems on their customer-relations side has thousands of very specialized channel partners. They'll work with the customer to configure systems, qualify the needs of the customer, and then they'll decide which of their thousands of partners are appropriate to serve that particular customer. Nike has also done a good job of orchestrating a similar global process network. It's focused on identifying very specialized providers of the various materials and on how they're assembled into shoes.
Q: You say giants like India and China take over innovation and come back to compete on Western soil. But isn't the vast majority of science research and technical innovation still performed in the U.S., Europe, and Japan?
A: A large amount of technical innovation is still occurring in the West. I think what's driving the innovation in countries like China and India is much more of a boot-strapping mentality of, again, rapid incremental innovations. That tends to argue against basic research and long-term research investments and [focuses] much more on: What can I do quickly to build my capability and add more value? And increasingly, what we're seeing are large companies in the U.S. and Europe setting up research facilities in China and India to do advanced research. What happens is the pattern that we saw, for example, in software development in Bangalore. Initially, U.S. companies came into Bangalore to do software development, but over time the people that were trained in those facilities set up their own ventures. Entrepreneurship took root. Now those companies are competing against the U.S.
Q: So what are some of the things Western companies should be learning from offshoring?
A: Rather than doing it purely as wage arbitrage, where you're just looking for contract low-wage labor, think about it as a way to access distinctive skills, in a much more distributed fashion -- and focus on partners who can build their skills much more rapidly. If you talk to most Western executives about emerging markets like China and India, they'll say they're strategically important. "They're real growth engines," and so forth. We think that's accurate. These markets are providing a catalyst for product innovation and process innovation. Either you're the attacker, or you're going to be attacked by companies with more innovative products.
Brown is the former director of Xerox's Palo Alto Research Center. Hagel, a former McKinsey & Co. consultant, is the author of several books on the Internet and competitiveness. Recently a group of editors and reporters from BusinessWeek sat down with Hagel to discuss how the East is changing technology in business, and what Western companies can do to keep up. Following are edited excerpts from that conversation:
Q: What was the idea behind the book?
A: I think executives are viewing offshoring much too narrowly. John Seely Brown and I had been collaborating on some broader, strategic questions. The book is primarily targeted to business executives. The fundamental theme is that companies should be shifting how they see strategic advantages. If I have a particular skill, fine. But the real source of advantage going forward comes from figuring out how to build on that capability and refresh it more rapidly than anyone else.
Q: So what's an example of a company that has this dynamic?
A: There's one we focus on in the book, called Li & Fung, in China. Li & Fung works with clothing designers. Calvin Klein, for instance, will tell them what its new line of fashion is, how many units it needs at what price points, and where the distribution points are. It takes care of everything else. Their initial advantage was being able to access a lot of different suppliers and orchestrate their activities. But over time, they've recognized that the value they can provide is to help their partners become better at what they do. It's not just figuring out what a particular customer needs and organizing the right set of resources. For example, cutters will start to have conversations orchestrated by Li & Fung with weavers, and say, you know, if you wove the yarn in a particular way, it would make our cutting operations a lot more efficient. And so they'll have these kinds of interactions [and] deepen their skills at what they do -- to coordinate their activities better -- that's one example.
Q: Couldn't you make the counterargument that their true competitive advantage is sitting within a nation of 1.2 billion people who do this kind of work in textiles at the lowest cost? It's really a geographic advantage?
A: You could certainly make that case, and there's an element of that. Their partners are located in 35 different countries around the world. So a lot of it has to do with geographic proximity. If you're dealing with an apparel designer in Europe, you want to have operations that are closer to the end customer than China would be. But it's also about creating the flexibility of organizing these resources.
One of the interesting stories around Li & Fung was: Immediately after 9/11, they had a fair amount of their operations in countries like Pakistan that were at high risk in terms of political instability. Within three weeks they had moved all the operations that were time-sensitive out of the Pakistani partners and into countries that were more politically secure. That degree of flexibility [in reaction to] unanticipated events is a skill set that most Western companies don't have.
Q: Which Western companies have been good examples of that ability to be flexible?
A: There are relatively few. Cisco Systems on their customer-relations side has thousands of very specialized channel partners. They'll work with the customer to configure systems, qualify the needs of the customer, and then they'll decide which of their thousands of partners are appropriate to serve that particular customer. Nike has also done a good job of orchestrating a similar global process network. It's focused on identifying very specialized providers of the various materials and on how they're assembled into shoes.
Q: You say giants like India and China take over innovation and come back to compete on Western soil. But isn't the vast majority of science research and technical innovation still performed in the U.S., Europe, and Japan?
A: A large amount of technical innovation is still occurring in the West. I think what's driving the innovation in countries like China and India is much more of a boot-strapping mentality of, again, rapid incremental innovations. That tends to argue against basic research and long-term research investments and [focuses] much more on: What can I do quickly to build my capability and add more value? And increasingly, what we're seeing are large companies in the U.S. and Europe setting up research facilities in China and India to do advanced research. What happens is the pattern that we saw, for example, in software development in Bangalore. Initially, U.S. companies came into Bangalore to do software development, but over time the people that were trained in those facilities set up their own ventures. Entrepreneurship took root. Now those companies are competing against the U.S.
Q: So what are some of the things Western companies should be learning from offshoring?
A: Rather than doing it purely as wage arbitrage, where you're just looking for contract low-wage labor, think about it as a way to access distinctive skills, in a much more distributed fashion -- and focus on partners who can build their skills much more rapidly. If you talk to most Western executives about emerging markets like China and India, they'll say they're strategically important. "They're real growth engines," and so forth. We think that's accurate. These markets are providing a catalyst for product innovation and process innovation. Either you're the attacker, or you're going to be attacked by companies with more innovative products.
Branding on Internet
How do you turn your Internet real-estate investments into a thriving Brand?
Make sure you have a strategic approach to reaching your customers.
Ask anyone to cite the strongest brands on the Internet. Google, Dell, Amazon.com, e-Bay, Yahoo! and America Online will top the list. The world's most famous brands Intel, Microsoft, HP, Cisco - high-technology companies with big commitments to the Internet will not make the cut. The most recognized brands on the Internet exist, well, only on the Internet itself.
In the early days of the World Wide Web, newcomers just elbowed their way in. They did not have advertising budgets - indeed, many did not have budgets at all. They survived on the buzz created first by Internet surfers, then by the media.
Fast forward to 2005: Businesses have discovered cyberspace. Technology giants Intel, Cisco, Microsoft have spent millions on Internet - to create a strong brand name & presence. While spending big bucks to create a strong brand name is feasible for established companies, small firms or startups have to innovate to create their brand name and a strong brand presence.
All companies, competing now against tens of thousands of Web sites, need more than a buzz to create a significant presence. Word-of-mouth is no longer sufficient to get the word out; Traditional advertising plays a large role. Television, radio and print have to be used to complement the web site.
Strong brands have to be seen everywhere, with their Web site featured on television advertisements, radio and stationery. Integrate all modes of brand communication with a sense of purpose to create a strong brand.
INVESTMENT FOR BRANDING
The cost of creating a Web brand is escalating quickly - ranging from $1.5 million to $3 million, according to Forrester Research. Competing with an established brand can push those figures into the stratosphere. Entrepreneurs may have to spend big but also change their brand-building strategies.
ADVERTISING IS NOT ENOUGH
Most users today log on for one of two reasons: To get practical information such as the product detail or to shop. A survey conducted on the Web last year that 80 percent of the people logging on for information to a site said they would like to buy the products in future. Thus web presence creates a virtual sales channel.
The need to sell in cyberspace has challenged many industries. Some manufacturers have no experience in selling directly to customers online but see one-on-one relationships as simply invaluable. High tech services companies can secure future sales by using online presence as means to communicate with customers. Firms can send targetted message to their customers online.
Just providing exhaustive information about their products can help future sales of capital goods.Xilinx, for example provides extensive information on its programmable chips on their website. This helps to win mindshare of potential customers and thus capture and engage a large audience.
WHAT THE CUSTOMER WANTS
To succeed, the top levels of a company must know what they have always needed to know: what their customers want from a Web site. Successful companies know this. One common theme among successful executives is a genuine interest in what happens in cyberspace. They go into their own sites, and competitors' sites, on a regular basis.
"Everyone at this company spends a lot of time on the Internet,"said Mr. Parker of CDnow. "We know what's out there. The Net is not a part-time job; it's not something you just dabble in."
Successful Internet managers are obsessed with streamlining the process. They know how many clicks it takes to get the required information, and how long it takes them to respond to e-mail. Companies have to optimize the number of clicks for customers to get where they want to be. For Example, CDnow ran a test that measured exactly how many clicks it took to get online consumers to purchase. The group then worked on consolidating steps to eliminate the unnecessary work and got from 20 clicks down to 10. That gave an immediate competitive advantage.
While it is not easy or cheap, Yet to build brands in cyberspace, companies will have to let go of some of the thinking that has been holding them back. Senior managers must embrace the medium with gusto. They must realize that interactivity on the Internet does not mean a fun game, but sell-through marketing. They must become closely involved in all aspects of the company's Web strategy.
Point and Click Your Way to Success
Make sure you have a strategic approach to reaching your customers.
Ask anyone to cite the strongest brands on the Internet. Google, Dell, Amazon.com, e-Bay, Yahoo! and America Online will top the list. The world's most famous brands Intel, Microsoft, HP, Cisco - high-technology companies with big commitments to the Internet will not make the cut. The most recognized brands on the Internet exist, well, only on the Internet itself.
In the early days of the World Wide Web, newcomers just elbowed their way in. They did not have advertising budgets - indeed, many did not have budgets at all. They survived on the buzz created first by Internet surfers, then by the media.
Fast forward to 2005: Businesses have discovered cyberspace. Technology giants Intel, Cisco, Microsoft have spent millions on Internet - to create a strong brand name & presence. While spending big bucks to create a strong brand name is feasible for established companies, small firms or startups have to innovate to create their brand name and a strong brand presence.
All companies, competing now against tens of thousands of Web sites, need more than a buzz to create a significant presence. Word-of-mouth is no longer sufficient to get the word out; Traditional advertising plays a large role. Television, radio and print have to be used to complement the web site.
Strong brands have to be seen everywhere, with their Web site featured on television advertisements, radio and stationery. Integrate all modes of brand communication with a sense of purpose to create a strong brand.
INVESTMENT FOR BRANDING
The cost of creating a Web brand is escalating quickly - ranging from $1.5 million to $3 million, according to Forrester Research. Competing with an established brand can push those figures into the stratosphere. Entrepreneurs may have to spend big but also change their brand-building strategies.
ADVERTISING IS NOT ENOUGH
Most users today log on for one of two reasons: To get practical information such as the product detail or to shop. A survey conducted on the Web last year that 80 percent of the people logging on for information to a site said they would like to buy the products in future. Thus web presence creates a virtual sales channel.
The need to sell in cyberspace has challenged many industries. Some manufacturers have no experience in selling directly to customers online but see one-on-one relationships as simply invaluable. High tech services companies can secure future sales by using online presence as means to communicate with customers. Firms can send targetted message to their customers online.
Just providing exhaustive information about their products can help future sales of capital goods.Xilinx, for example provides extensive information on its programmable chips on their website. This helps to win mindshare of potential customers and thus capture and engage a large audience.
WHAT THE CUSTOMER WANTS
To succeed, the top levels of a company must know what they have always needed to know: what their customers want from a Web site. Successful companies know this. One common theme among successful executives is a genuine interest in what happens in cyberspace. They go into their own sites, and competitors' sites, on a regular basis.
"Everyone at this company spends a lot of time on the Internet,"said Mr. Parker of CDnow. "We know what's out there. The Net is not a part-time job; it's not something you just dabble in."
Successful Internet managers are obsessed with streamlining the process. They know how many clicks it takes to get the required information, and how long it takes them to respond to e-mail. Companies have to optimize the number of clicks for customers to get where they want to be. For Example, CDnow ran a test that measured exactly how many clicks it took to get online consumers to purchase. The group then worked on consolidating steps to eliminate the unnecessary work and got from 20 clicks down to 10. That gave an immediate competitive advantage.
While it is not easy or cheap, Yet to build brands in cyberspace, companies will have to let go of some of the thinking that has been holding them back. Senior managers must embrace the medium with gusto. They must realize that interactivity on the Internet does not mean a fun game, but sell-through marketing. They must become closely involved in all aspects of the company's Web strategy.
Point and Click Your Way to Success
- The technology for building a Web site is the easy part; it's the strategy that makes many companies stumble. Here are a few guidelines for creating an effective Web presence.
Make sure all senior managers are on board and intimately involved in the Internet strategy. The setup and running of the site may be centralized, or even outsourced, but executives should know exactly what the site is trying to do and how well it works from a practical standpoint. A site with glitches should not be allowed to launch, no matter how "cool"it is. - Make technological improvements slowly. This may sound counter-intuitive, but many in the Web universe have older computer equipment and software and need ease of access more than they need bells and whistles.
- Guide customers to information quickly. Every extra click needed - and the concomitant delay - presents a chance of losing the customer.
- Leverage existing expenditures on brand-building as much as possible. A corporation's Web address should be listed on television commercials, stationery, shopping bags and receipts. Sales people should recommend the Web site to customers.
Friday, June 03, 2005
Fighting Commoditization of Brands
By Arun Kottolli
Introduction
We are living in a conusmer era. Companies, eager to sell their products to customer have created millions of brands. In consumer goods, there are more than 60,000 brands in India alone. In industrial goods, for every product, there are atleast 3-4 brand of products which offer similar functionality, look and feel. The commoditization of brands has made it increasingly difficult for the customer to perceive the differences between a certain brand and that of the competition. The study claimed that 86% of brands in multiple categories tended to have the same key attributes. In a recent article in the Harvard Business Review, Brand Confusion, Jack Trout and Kevin J. Clancy maintain that, brand indifferentiation is already a fact. What is interesting about this is that it measures the levels of similarity by sectors. In ASIC industry for example, the maximum level of similarity perceived between brands is between Open-SIlicon and eSilicon.
If we bear in mind that the main objective of any brand should be to differentiate itself at all costs, we can see the size the problem. The problem is so important that even the branding gurus are beginning to use the term superbrand or powerbrand to designate the strongest or those with a greater power of attraction than others. This is the proof and acceptance that there is a hierarchy within brands, what we could call a level of branding, that is to say brands within brands.
From Branding to Brand Management
As is well known, brands were originally created in order to be able to differentiate what we offer from what the competition offers. We "branded products" it to avoid confusion and help people to remember, identify the manufacturer and aid the choice of purchase. This progressively involved equipping the product offered with attributes which converted it into the favourite choice of the purchaser. We thus began to have companies which offered products and companies which offered brands or, in other words, products with an additional differentiation which made them more competitive. This process is just the starting point of what is now known as Branding.
The problem is that, like any strategy, sooner or later it is also discovered and used by our competitors, which leads us to the current situation: lots of brands, we could even say too many. Brands which are sometimes almost pointless, brands which, instead of helping the customer to choose, complicate the purchase enormously, brands which do not provide anything and which in the end are perceived as mere commodities.
Is this then the end of Branding? The answer is quite the opposite. It represents the sophistication of the discipline, the true birth of Brand Management. It is relatively easy to give our product a name, to get a spectacular logo designed for it and to devote ourselves to repeating (insistently) this brand in numerous exposures to the customer. It is something quite different to capture the essence of the product offered, to conscientiously create an attractive, different personality, full of meaning for our potential customer, and to connect it on an emotional level to our brand, providing it with a certain magic. This is indeed a much more complex process that is called brand strategy.
Brand Strategy involves giving the brand a very clear power of attraction, a set of relevant, unquestionable meanings which achieve a space not just in the head but also in the heart of our customers. A strong brand should fulfil three basic objectives:
- Information
- Differentiation
- Seduction
Information because it should tell us something about the product offered that is intelligible and decipherable: "I have to understand the proposal of basic value or what the product offered consists of."
Differentiation because what it tells us should be perceived as different by the purchaser or, in other words: "I understand what you are telling me and I think that it is something that the others haven’ told me."
Seduction because this is the raison d’ of any brand. The first two are in the service of the third: in the end a brand has to tell us something that we consider to be interesting and that ends up seducing us. And seduction is something very subtle.
There are currently numerous brands in that have reached the first stage. They have succeeded in getting us to recognize their logos and we see their advertisements. They have succeeded in getting us to know more or less what they offer but they have not seduced us. They are there, in our mind, but when it comes to buying we do not feel that irresistible, emotional attraction that drives us to clearly opt for one of the participants.
We should not confuse Communication with brand creation or management. The objective of Communication may be to achieve renown for what we offer, but we have to define the brand, to know what to communicate, what to say in our communication plan. In short, what meanings, values and personalities are important and distinguishing. The objective of Brand Management is to maintain the consistency and strength of the brand so that it can be adequately exploited. This should be the work of a good brand manager.
Fighting indifference
It is possible that there is already an enormous group that has ceased to believe in the so-called traditional brands. The brands that have become stuck with classical management models of the characteristic-profit type. Or brands that talked to their consumers from a pedestal, with a certain arrogance. Or global brands which have lacked sensitivity to detect small local opportunities, emotional moments that can represent the difference that we are seeking.
We have, however, also been able to witness the appearance of new brands based on the management of experiences as a means of differentiation, with a clear definition of meanings and an excellent transmission of the same, full of creativity. New strategies that have managed to find a niche among the big supercompanies. An analysis of these new brand management models may give us clues as to what the new Brand Management will be like.
1. An emotional as well as a real offer
If we are going to work on the brand we can take it for granted that we have already worked on the product. Nothing can aspire to be a brand without first having managed to be a good product or service as a minimum prerequisite to compete. The first thing that can differentiate a seductive brand from its undifferentiated competitors is therefore how charged with emotion our product is. This does not refer to elaborate emotions such as falling in love with our brand of shampoo, but rather to pleasant sensations, desire, attraction, greed, a longing to buy it almost as an impulse without the need to rationalize it too much. If our brand is clearly differentiated, it will certainly have this emotional part that distinguishes it from the rest and obtains the sale, because it has been said that a brand is made up of a good basic product plus a good dose of magic.
Think of a Intel Pentium processors, Cell Phones from Nokia or Services from IBM.
2. A feeling of community
The true success of a brand does not consist in engraving a logo on a product but rather in giving rise to a certain similar experience for a group. The customer portfolio is the most valued asset of any company. The community of sympathizers with our brand is what we really manage to obtain this asset.
Harley Davidson is one of the few brands that have literally succeeded in tattooing themselves on the skin of their consumers. Its managers organize meetings, festivals and even rallies in which the Harley users share their experiences. This is not just a powerful Relational Marketing strategy, but also constitutes one of the main sources of information for the company. Apple is another brand that has known how to manage its community of followers and has used it to emerge from an important crisis.
3. The values within the consumer
We are increasingly well trained and informed in today’ world. And we are less and less willing to buy a symbol-brand which simply lists values to which we should aspire. In this new social setting we will not just increasingly opt for socially responsible companies, but also for products which have a positive effect on our environment and share our values and concerns.
Brands such as Google and its digital Library project, or how Star Bucks has capitalized on its "Fair Price for Farmers" campaign, are examples of how to achieve a direct and emotional connection with your consumer.
4. Our communication goes further
One of the phenomena that can be observed is the desire that some brands have to communicate like other brands. Think for a minute: our main objective when it comes to considering our communication should be to stand out and to seduce. On the other hand the first thing that we do is to try to adopt the code of the competition. We all feel more at ease without breaking the rules of the sector’ game, but only the brands that communicate in a different manner manage to impress, to go beyond the medium that we are using to position themselves in the minds and hearts of people. This is the exercise of every night on prime time, and the barrier that very few brands manage to pass.
When the code in vodka was to talk about its origin and elaboration, Absolut focused on the appearance of the bottle. When the code in aviation was to show smiling air hostesses and passengers wearing ties, Iberia surprised us with babies. When Telefónica Móviles was talking about technical characteristics and price, Amena presented young people dancing.
5. The obsession with small details
Another characteristic of new brands is their obsession with detail. An insignificant detail can have a tremendous impact on the perception of our product. These are details that sometimes communicate much more than big campaigns: an original sachet of sugar with the coffee, a small bag for the sales receipt, a small sweet, a smile, a certain smell on entering a shop, a pleasant tune, numerous small details that denote a big difference.
There are brands that think in terms of massive strategies and handle gigantic resources and brands that communicate ‘ not concerned about costs, I’ concerned about your satisfaction’ and recognize the impact of small details, those that often generate word-of-mouth, surprise, a smile. Those that succeed in positioning the brand in our list of preferences.
We therefore believe that the model of shouting from a pedestal in just one direction is coming to an end. The brands that are appreciated listen to the consumer, to the customer, to the guest experience as some even call it. Communication should become a dialogue and there are new supports, media and technology that transfer part of the power to the consumer in order to let them give their opinion, make a counter-offer, propose... even to make a harsh judgement on the decisions of the big brands.
Before communicating and transmitting, however, we need to define. Three very important elements make up the product we offer: what it is, what it does and what it means. If we cannot complete and define each of these dimensions we do not have a strong brand. All products talk about what they are, and nowadays we are rarely differentiated by what we do. To think in terms of brand management is to consider the creation of meanings.
Therefore Actimel does not sell fermented milk but the ability to strengthen your defences against external aggressions, a VW Beetle is much more than a compact car, a Palm is almost like a Game Boy for adults, a Hallmark card is the possibility to communicate a feeling, Evian is the purest, most crystal-clear water in the world, Disney sells you eternal youth, and a BMW is for those who know how to appreciate the subtle difference between driving and ‘driving a BMW’
Tell us how much magic your product communicates and customers will tell you whether you have a powerful brand.
Thursday, June 02, 2005
Wednesday, June 01, 2005
Successful Online Branding
Successful Online Branding
Introduction
To promote their brands, advertisers can choose between a huge number of different media channels, including newspaper and magazine advertisements, direct mail, and television and radio advertisements. Some years ago, the introduction of the Internet promised the beginning of a new branding area:. Suddenly many companies spent huge amounts of money on the modern media channel, however, often failing in turning their online branding efforts into success. Consequently, the Internet was disdained and regarded as risky choice to promote a brand. However, with the further growing presence of the Internet, marketers show the tendency to give the modern media channel a second chance.
The question is if it still makes sense to use the Internet as an alternative to traditional channels with all the failures already in place. Is it possible to successfully promote a company’s brand in the online space at all?
The Internet as Differentiating Factor
In advertising, differentiation became a golden rule to gain an advantage in the growing competition for consumers’ attention on and preference for a company’s brand. Offering a variety of different features (e.g. online account servicing, interest based attractions designed for children) and a huge potential of creativity, the Internet inspired marketers to use it as new branding and advertising tool. Though some companies at first questioned the relevance of brands in cyberspace, advertisers were soon taught that the need for brands can be even higher in the online medium than it is in traditional channels. Being confronted by similar products from many often unknown providers, consumers rely on the strength of brands which possess a meaningful, clear and trusted set of values and attributes, facilitating their online purchase choices.
By Arun Kottolli
Introduction
To promote their brands, advertisers can choose between a huge number of different media channels, including newspaper and magazine advertisements, direct mail, and television and radio advertisements. Some years ago, the introduction of the Internet promised the beginning of a new branding area:. Suddenly many companies spent huge amounts of money on the modern media channel, however, often failing in turning their online branding efforts into success. Consequently, the Internet was disdained and regarded as risky choice to promote a brand. However, with the further growing presence of the Internet, marketers show the tendency to give the modern media channel a second chance.
The question is if it still makes sense to use the Internet as an alternative to traditional channels with all the failures already in place. Is it possible to successfully promote a company’s brand in the online space at all?
The Internet as Differentiating Factor
In advertising, differentiation became a golden rule to gain an advantage in the growing competition for consumers’ attention on and preference for a company’s brand. Offering a variety of different features (e.g. online account servicing, interest based attractions designed for children) and a huge potential of creativity, the Internet inspired marketers to use it as new branding and advertising tool. Though some companies at first questioned the relevance of brands in cyberspace, advertisers were soon taught that the need for brands can be even higher in the online medium than it is in traditional channels. Being confronted by similar products from many often unknown providers, consumers rely on the strength of brands which possess a meaningful, clear and trusted set of values and attributes, facilitating their online purchase choices.
Deriving from its unique characteristics, the Internet provides several key advantages. First of all, advertisers can utilize its interactive nature to build top-of-mind awareness among customers. Computer maker Sun, for example, utilizes the business websites to communicate with corporate buyers.
The Internet furthermore possesses the feature of relevance in so far that it is more efficient than other channels in reaching people that are part of a market of specific interest like computers for business needs.
Websites are able to combine sponsorships with editorial, making use of their relationships to users to link their needs with the branding goals of advertisers. The Internet can also be used to increase brand awareness all over the world.
Marketers soon were convinced by the Internet’s huge potential for success. End of 1998, consumers’ e-commerce attitudes forecasted a tripling of e-commerce activity for the up-coming year. The online medium was thought of as a simple way to create a differentiated image with little efforts to develop a variety of online resources. However, only several months later the problems of many advertising companies to succeed in cyberspace proved the opposite. The following paragraph will explore the reasons for the online failures, and thus will address the question if the Internet should be blamed for this negative result.
Don’t Forget about the Basics
Online companies in specific, a huge number of advertisers provided ‘marketing plans that assumed brand loyalty could be built in a quarter’. More problematic, advertising companies merely concentrating on capturing online users and their dollars, were ‘overlooking the simplest marketing remedies’, disavowing years of consumer and advertising research. A lot of money was spent on Internet marketing initiatives however missing any specific target.
Though there were reasons to question the old rules – with the Internet offering new
business models and media options – it was soon realized that only those firms which
practice tried and true marketing and branding practices will prosper.
Advertisers should not forget about the basics of marketing, since they retain much of its value, ‘even if how and where we apply it has radically changed’. Besides considering general issues in branding, including the competitive advantage of strong brands, and the role of the consumer.
It is recommended that advertisers to pursue the following steps to successfully promote their products online:
- Development of a clear vision
- Extensive research on consumers
- Formulation of an attractive value proposition
- An appropriate communication campaign to retain previous customers and acquire new ones.
Beyond advertisers’ disregard of basic marketing principles, many companies’ internal organizational structure lacks to properly address online objectives. With branding constituting a complex process involving a number of different organizational parties – ‘from the top of the corporate structure to the individuals that are actually interacting with customers’ – the question remains who actually is responsible for the online activity of a company.
The management of e-businesses is in general shared by three departments: information
technology, marketing, and communications. However, getting organized remains a
major problem, with companies struggling with the common organizational phenomenon
Of "everyone being in charge and no one being in charge". Resulting from the lack of consensus are diverse problems – ranging from slowness in exploiting the online medium, due to endless debates over the most appropriate e-branding business model, to companies confusing users with hundreds of websites – that are severely affecting the future of a company’s e-business. Being confronted with an impatient online community, firms are advised to concentrate their efforts on an appropriate organizational structure, if they plan to survive in cyberspace.
Another problem is a severe disconnect between how customers find new web sites and where companies are focusing their branding investments. Though consumers’ top choices in discovering new websites are represented by search engines and recommendations from friends, marketers were observed to spent most of their budget on banner ads, newspaper, television and radio. In addition, many firms neglect to use powerful mechanisms, like sponsorships on other sites, in spite of their ability to reach a considerate number of users.
Summarizing above findings, advertisers are facing serious problems in cyberspace.
The next paragraph addresses these difficulties by presenting and explaining the most important principles companies have to take into consideration to successfully brand online.
Driving Online Branding to Success
Branding, constituting one specific part of e-marketing, can be understood as the inspiration of people "to think or feel a certain way about a product in the hopes of inducing or increasing product purchase and loyalty".
In cyberspace, marketers face new and different challenges and opportunities. However, the rules of the Old World are still true and should not be neglected. Spending a lot of money alone is no guarantee for success. Rather, the development of a powerful brand requires money, analysis, planning, execution, and time.
The following key branding principles show brand managers how to build a robust brand on the Internet and thus how to be successful in the online branding business:
- Defining the Brand
- Selecting the Brand Strategy Framework
- Developing Specific and Achievable Goals
- Operationalizing the Brand
- Leveraging the Features of the Internet
- Monitoring the Brand’ Performance
- Caring for Your Customer
Defining the brand: The first crucial step to successful e-marketing is investing time and energy in gaining a thorough understanding of your brand, involving its meanings to potential consumers, its relationship to competitors’ brands, and the brand’s role in the market. Marketers need to bring these key branding elements with them when they enter the online space.
Selecting the brand strategy framework: Depending on a company’s products, brand
managers can choose between three basic frameworks:
- Conglomerate brand strategy – the company’s brands stand on their own, e.g. Procter &
Gamble with independent brands like Crest and Tide - Corporate brand strategy – a more dependent relationship between the company and its brands, e.g. brand IBM and its various divisions like IBM's MQ series, DB2, and Z-Series.
- Master brand strategy – very close relationship as every brand name includes the corporate brand name, e.g. Intel Pentium, & Intel Centrino.
Developing specific and achievable goals: Different objectives demand different
strategic approaches. It is therefore recommended to distinguish between specific branding goals, for example:
- Awareness – effective online and offline advertising and public relations are required to distinguish a company’s brand from the crowd
- Message association – to get customers to associate a company’s message with its products, marketers have to guarantee high frequencies of simple, uncluttered ad units or sponsorships of content tied to a brand's message
Leveraging the features of the Internet: Branding in cyberspace offers advertisers
unique opportunities allowing them to strengthen brand affinity. However, the diverse
Web programs and tools have to be fully understood and used in consistency with the
company’s branding strategy to guarantee a successful branding result. The following features are most important for online branding success:
- Search engines
- Permission email
- Personalization
- Word of mouth
- Affiliate networks
Monitoring the brand’s performance: With brands showing a dynamic nature, their online performance needs to be monitored and measured on a regularly basis. This process reveals whether a brand remains of relevance for the customer and informs marketers in time if steps have to be taken to improve the brand’s performance. The monitoring part of the branding process should not be neglected since it is important to track progress, so you can justify efforts and expenses for future branding actions.
Caring for your customer: A key component of any brand experience is the quality of customer service and support. A sound understanding of the company’s customers is a critical prerequisite in achieving such service excellence.
It becomes a necessity to increase the frequency of communication with online users by
establishing dialogue systems like focus groups and quantitative studies. In addition, the online experience should be easy and logical in order to delight users and encourage repeat site visits. Therefore, good website usability is a key to satisfy online customers. Comparing established brands with pure players, furthermore found that the online experience is of higher importance for a mature brand. Consumers expect according experiences – often making no distinction between the brand in cyberspace and in the real world.
Though confronted by a rapid changing technology, marketers can face the challenges of the online world by pursuing the above key branding principles. Branding on the Web, they will gain a deeper understanding of the diverse unique opportunities of this modern media channel. Online advocates, for example, suggest specific solutions that will help companies to further distinguish them from their competitors.
Conclusion
In recent years, many companies failed to use the Web as a new and different media channel, often resulting in their online extinction. Should the Internet be blamed for these catastrophes?
The possible reasons for online failures are usually: ‘neglect of basic marketing rules’, ‘internal organizational structure’, and ‘disconnect between consumer behavior and branding investment’ – demonstrating that the negative consequences were not caused by the Internet, but rather by some marketers’ inappropriate behavior. To successfully use the Internet for their branding purposes, key principles must be followed and that should prevent failures on the Web and ultimately lead to online marketing success.
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