The end of the beginning Merlin Stone

When Churchill said it

“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

The Lord Mayor's Luncheon, Mansion House, "The End of the Beginning“ speech, November 10, 1942, after the Battle of El Alamein

The best health warning in history?

• “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back” John Maynard Keynes, The General Theory of Employment, Interest and Money (1936)

• Note, before marketing consultants were invented!

Marketing myopia

• Can you remember what the real lesson was? • Market definition?

• End of life innovation based on market misdefinition?

• Supplying means, not meeting the needs of ends?

• Not listening to customers or allowing them to determine value?

Marketing myopia, Theodore Levitt, HBR 1960

• History of every dead or dying ‘growth’ industry shows self-deceiving cycle of bountiful expansion and undetected decay e.g. • Railroads: example of industry whose failure to grow due to limited market view • In trouble not because need for passenger transport declined or because need filled by

cars, aeroplanes etc. • Leaders thought they were in railroad business, not transportation, flowered before they

died • Railroad-oriented, not transport-oriented, product-oriented, not customer-oriented

• To survive and grow, companies must define their industries broadly • Ascertain/act on customers’ needs/desires, not rely on longevity of their products

• BUT – how can you avoid • The wisdom of retrospect? (“The historian is a prophet looking backwards” Schlegel) • The narrative fallacy? (Interpreting past events as if they inevitably led to today) • Or the opposite – getting lost in the “fog of war”? (Clausewitz)

How? Ends and means?

• Ends-means theory developed by Gutman (1982)

• Explores consumer choice beyond superficial level • Emotional underpinnings that drive consumer’s decisions

• Consumers have 3 levels of product-related knowledge • Product attributes

• Consequences or outcomes of using product

• Broad goals or values satisfied by its use

• Attributes = means to an end

Attribute types

• Search vs experience • Search attributes can be assessed before purchase,

• Experience attributes can only be assessed after purchase/use

• Intrinsic attributes: Material, form, size, shape

• Extrinsic attributes : Enhance use or consumption • e.g. brand, packaging, price, warranties, delivery, installation, service, training, customer

assistance, repair

• Performance attributes: how well it does what it claims to do

• Abstract attributes: Subject to consumer’s judgment about other attributes • e.g. image, quality, durability, luxuriousness

Consequences/benefits

• Functional • Customer can use product to do something seen as necessary or desirable

• Experiential • Physical sensation & emotions/feelings during use

• Financial • Does it pay, save money

• Psychosocial • How consuming a product makes consumer feel about themselves

• Consumption can move consumer from current closer to ideal self image

End states (personal values)

• Decisions on benefits depend on personal values • How people believe they should act, think and feel e.g. when I buy products that comply

with social norms, I’ll be accepted by people who share those norms and feel better about myself (via social acceptance and self esteem)

• Other values • Security, obedience, belonging, social recognition, self-respect, self-controlled

• Love, true friendship

• Independence, ambition, achievement, sense of accomplishment, wisdom

• Comfortable life, cheerful, happiness, pleasure, fun, enjoyment, excitement

• Open-minded, peace, courage, equality, freedom, forgiving, helpful, welfare of future generations

Consumer behaviour

• Most consequences associated with attributes are directly or indirectly a result of consumer’s behaviour • By themselves attributes cannot have consequences

• Attributes alone have no consequences

• In deciding which product or brand to buy, consumer focuses on consequences (outcomes or experiences), rather than attributes • Products or product attributes not inherently important to consumers

• Consumers think about likely solutions to their problems when buying

How does all this apply to your world?

• Product/service attributes anchor meanings for consumers • Yield benefits that move them closer to vision of good life as per their personal values

• But ends-means theory assumes we know what the product is! Do we? • Is it a magazine, or an outcome of servuction (service + production)?

• Back to the theory – service dominant logic (Vargo and Lusch, 2004) • Service is the fundamental basis of exchange, not the product • Customer is a co-creator of value, together with supplier and its partners • Companies cannot deliver value but only value propositions • Customer are resource integrators and they determine value

• Co-creation leads us to • User-generated content • Alliances with users and partnerships with companies that know how to encourage them

Standing astride the channel

• Here’s a view • You stand aside a channel to fulfilment of desires

• That channel delivers a range of propositions: content, interactions etc.

• It’s customers who determine what value they’ll get from you and who put value on the transaction with you

• But what’s the story, inside the customer’s head

• You need to listen……

The story inside the customer’s head

• Myriads of possible stories, sometimes for same customer • Solace (including chocolate)

• Blue murder (escape from screaming kid to the world of celebs or your favourite soap)

• Sanity prior to flight departure or during flight

• Demonstrating connectedness/involvement to friends

• A present to someone who you really love

• The transaction is part of the experience, not a cost

• What do you know about stories? • How are the stories told, internally or to customers?

• What stories do customers tell to each other about the experience of buying/using?

• Are stories emerging i.e. new, not very defined?

• Do you understand them? Can you (re)tell them?

Is magazine concept is evolving to

• Unbundling into curated, flexibly-accessible information? • Information units, not articles

• Interaction with content producers?

• Added value items/content?

• Privilege & membership?

• Easy access & consumability (from delivery to digital)?

• Repurposing by supplier and customer?

• Broadening of interests and content variety, with trialling, dabbling

• Merging with other content e.g. video?

• Social content - YouTube not just videos, but views?

• Organising to avoid overload (subscriptions, benefits)?

The new customer journey

• Less defined and structured, more improvised and impulsive?

• More varied and flexible, in contacting, buying, subscribing, cancelling?

• More frequent? So is the consumer more sensitive to overload?

• Is the product mind-space, not a magazine or even content?

• What is the mind-space journey of those who have gone digital?

• What engagement with products and suppliers does the journey involve?

• When and how does the journey take place?

• What is the value of the journey?

The paradox

• Content has never been so plentiful, nor so plentifully consumed

• Often not the price, but user cost, that determines • Whether it will be consumed?

• How effective it will be in generating repurchase?

• Some paid content suppliers are suffering, but many are prospering

How? Reconstructing the basics?

• Brand conducts a dialogue, supported by logistics/operational interface • NOT just supplying content

• You need different relevant things to sell when you are engaged • And make it easy for the customer to choose and discuss them

• You may need to play more as a team

• The new team • Engagement/dialogue management supplier

• Media owner

• Consumer (viewer, listener, reader etc.)

• Advertisers & agencies – advertising, media planning, direct/interactive marketing etc.

• Intermediaries e.g. affiliates

The engagement/connection business

• Content is more valuable, sells for more if there are better (faster, smoother, more efficient, more automatic, more targeted) connections between: • Generators

• Consumers

• Intermediaries

• Advertisers

• Who knows about this? • Editorial?

• Engagement/dialogue management

• Intermediaries

• Affiliates

• Others?

What marketers of content can sell

• Own/3rd party content, including that extracted from virtual communities

• Information gathered from online experience

• Real things, perhaps by aggregation of demand, to ensure enough customers to justify stocking/selling

• Experience and participation in a virtual community

• Accessories for virtual communities

• Access to customers

• All connected?

Customer perspective (viewer, reader, listener etc.)

• You can now get exactly the content you want • No need to waste time and energy viewing/reading/listening to what you don’t want

• You don’t need to miss it any more

• You may get some free • The more you want free, the more you must pay via seeing/listening to ads and/or giving

information

• You have shown your willingness to pay a lot for content you really want

The customer journey

• How they access, use and may pay for content • Relationship versus one-off

• How they are recognised and exchange information with you/converse

• How they recommend, buy more

• Short term vs. long term journey

• Lots of learning by both sides

• Role of affiliates – the new ally/rivals = co-opetition • Those who provide content or access to it as core e.g. Google

• By-product: those who provide content not as core e.g. Amazon, YouTube, Apple

• But dividing lines are fuzzy, as these are new business models

New lamps for old?

EXISTING CONTENT NEW CONTENT

EXISTING AUDIENCES

NEW AUDIENCES

Market Penetration / BAU

Market Development - new consumers, new channels

Content Development - organic, partners, creative?

Diversification - new ground, go alone, with partner(s)?

Degree of Digitisation

Main options in audience management

• Maintain • Serve same customers, move content to digital

• Grow (increase reach) • Find new customers for existing content

• Deepen (increase relevance) • Find additional content for existing customers

• Diversify services • Move beyond content

• Provide easier ways of accessing content

• Increase ARPU • Combine the above

Revenue, content and pricing

• Main models • Classic advertising

• Subscription/relationship

• Transaction

• Content unit/bundle

• Detailed pricing models • Variable vs. fixed per customer

• Free allowances then pay

• Micropayments

• Revenue Drivers • Number of users on a content platform (critical mass)

• Level of consumer trust (of platform, advertisers and other users of it)

• User's willingness to pay for content or a specific service

How to grow revenue

• Segmented access • e.g. Allowing access to further items if exceeded free allowance, if via other channels

• Publishing brand to control customer access • Who owns the customer?

• Change in content strategy to allow premium pricing • e.g. freemium model

• Value added • Membership events • Engagement/listening • Access to archives • Discounts • Partnership deals • A savings club

Key metrics

• Number of customers • % of customers paying in any way • Revenue per (paying) customer

• Content usage and payment • Transaction breadth and depth • Overall and per customers • % usage paid (by subscription vs one-off) • How much paid per payer

• Total revenue • % of revenue direct from customer vs advertising • % of direct paid via subscription vs one-off

• Distributions of all of the above • Not averages but Pareto/segments

The ecosystem

• CRM to advertisers & final consumers

• CEM to consumers • Ones not identified as subject to CRM, but still need experience managing • Often a tiny proportion pays, it’s usually enough, but we’d like more

• Different sources of content: • Owned • 3rd party paid or free (open), legacy • 3rd party social • Social on own sites

• Different types of content • Un/structured, enriched content, moving/static, changeable by customer

• Networks and partnerships • Ecosystem including affiliates

Key delivery requirements

• Increase content consumption • Adjust content, leading to better customer engagement

• Increase digital ad revenue • Collect audience-segmentation information, leading to improved ad rates

• Optimise pay-wall thresholds • Use analytics to grow premium content revenues while minimizing ad revenue losses

• Increase broadcast/video viewership • Online/social/ratings data - find patterns & optimize channels to promote programmes

• Optimise pricing • Price ads accurately, taking into account audience reach across all channels

• Exceptional transaction experience • A legend to create loyalty

The end of the beginning Merlin Stone