Tag archives: marketing
The Marketing Sandbox
Posted by Shaun Abrahamson on Friday, 18 March 2011
Games used to be about consoles and phones and farm-related status updates on Facebook. But games have already moved into other areas that impact our purchases of everything from airline tickets to 1950s era office chairs on eBay.
The idea of a game layer for the world, seems very plausible. In fact if the game layer involves using mechanisms to cause new behavior, the game layer is most definitely already here – its just that most marketers aren’t thinking of themselves as game designers, yet.
Loyalty versus Deals deathmatch
Groupon has fast become the king of deals. It uses a simple combination of game mechanics to create irresistible offers:
+ the qualified “free lunch”: get 50% off! (but only if 100 people agree to the deal)
+ communal gameplay: only 53/100 have agreed so far, get your friends!
+ countdown: hurry, only 2 days and 1 hour left!
It’s JUST these game mechanics and an e-mail list (and a massive sales team) that keep Groupon running. SCVNGR believes they have a counter-measure to discounts to induce loyalty using a different set of mechanics around leveling up, fittingly called, “Level Up”.
Marketers are game designers
Groupon and SCVNGR are just the latest to take advantage of game mechanics. At the core, game mechanics are nothing new: they’re about understanding individual and group behavior and creating systems to get specific outcomes as a result of these insights.
Marketers should feel right at home, right?
Actually, marketers already design much more complex games. They get to draw on libraries of game mechanics from how people might respond to a story, to A/B tested copywriting in e-mail. Loyalty systems keep me from switching to a cheaper ticker because now I get special treatment in security lines. Social media added a host of new mechanics to cause behavior in people that causes other behavior in other people, so complexity has gone up again.
No wonder marketers get the feeling they may be missing opportunities – how could one possibly choose the right mix of approaches to changing behavior to get an optimal result?
How do I know it will work?
At the end of Seth’s session, 3,000 people frantically gestured to one another and began trading pieces of colored paper. It looked a little like the trading floor behind a TV announcer explaining a sharp equities sell-off.
The objective – work together to win a game, by organizing ourselves to create patterns using different colored cardboard sheets. There were a few rules, a clock, and a clear objective.
At the outset, if you had polled the room, my guess is most people would have voted against a successful outcome. Yes, after 60 seconds, were were done. #epicwin
More experiments, fewer attempts to plan
Too often I encounter the following.
“We want to do something innovative”
[insert untested idea that might cause desired behavior here]
“How well will this work?”
“I’m not sure, but we have a way to test it”
“Oh, what else do you have?”
Seth could have tried to model and analyze what might have happened when 3,000 played a new game. But it was cheaper and more conclusive to simply run the game on a small scale as an experiment. Real-world evidence trumps survey data every time.
Developers have been using this strategy for years, working and playing in sandboxes: places designed to test ideas and understand what works.
Maybe its time for a marketing sandbox?
[If you want to learn more about the SCVNGR panel at SXSW, we liked the thoughts from The Guardian and Made by Many.
Top Image: SCVNGR founder Seth Priebatsch doing behavior hacks on 3,000 of us at his SXSW keynote. ]
Posted in: Serious Play | Tagged: game mechanics, marketing, marketing sandbox, scvngr, sxsw | No Comments
Advertising in a new world
Posted by lramella on Wednesday, 25 February 2009
I’ve been doing some recent thinking about advertising – in particular, I’ve been thinking about how slow the advertising world has been to adapt to the new realities of media. This thought is of course incredibly troubling as media at its core is an ad-supported business. I fundamentally believe that advertisers have not figured out how to solve this new media “problem” and remain tied to the idea that traditional advertising can continue to deliver big results.
Advertisers need to start thinking “out of the box” about the best way to reach consumers online – as Susan Wojcicki, VP, Product Management at Google put it in her great post, advertisers need to start “getting the right ad to the right person at the right time.” This makes all the difference. I’ll let Susan and her post take it from here: http://googleblog.blogspot.com/2008/09/ad-perfect.html. - Leah
Posted in: Leadership, Learning, Research | Tagged: advertising, google, marketing | No Comments
WWW = Win Win Win
Posted by Shaun Abrahamson on Friday, 30 January 2009
The last 2 weeks in Tokyo have been wonderful. There are more than a few posts worth of material, but today helped to bring together a number of threads I have been trying to pull together.
In short WWW = Win Win Win. Because when organizations set out to collaborate with others: they win, their customers win and the people they collaborate with, win too. We talked a little about how others outside your organization might be able to help you grow your business and also about Obama, who did so many things to make it easy to help his campaign.
So here are some more ideas on this theme, direct from Tokyo.
Lets start with UNIQLOCK
Saneel has been raving about this since we arrived in Japan and I admitted that it was not installed as my screensaver. He couldnt figure out how I had been telling time.
Today we were fortunate to hear from one of the founders (team of 2) of Projector, who created UNIQLOCK for Uniqlo.
It turns out that this is much more than a beautifully crafted, award-winning, fan-generating, entertaining timepiece.
Lets take a look at some numbers. Today there are more than 61,000 UNIQLOCK widgets installed on blogs around the world. More than one year after its launch, it continues to produce steady interest. And this doesnt account for installed desktops.
But whats more interesting, is how this came to be. The folks at the projector worked on an earlier project, involving dance, called Mixplay (shown below). Mixplay came about when the good folks at Projector saw the dancers and reach out to them to collaborate. As they put it “the were interested” in their work and this led to the collaboration. Which in turn led to 1.5m views on youtube and lots of active discussion and a realization that bloggers were picking up the video, too.
[youtube=http://www.youtube.com/watch?v=XSdhDyPhyiU]
This then laid the groundwork for some of the creative in UNIQLOCK, but also the promotional and distribution strategy. UNIQLOCK is made available as a, you guessed it, a clock widget. And since it constantly updates, its unlike other widgets that get boring and removed. And so bloggers get something slick continuously updating content, Uniqlo gets traffic and sales and potential customers get to be entertained (and tell the time). Win. Win. Win.
[also, organizations like Circ De Soleil were brought in - they got awareness, UNIQCLOCK and the bloggers got more original content ]
So what is Pecha Kucha?
This idea was started in 2003 by Mark Dyson and Astrid Klein. As Mark desribes it -
Architects are boring
So why not give them 20 seconds for 20 slides? This way, you see the work, sans boredom. Excellent. But they never expected Pecha Kucha nights to be running in 160 cities. The numbers tell the story of steady growth in interest in the last few years or so (“pecha kucha” on google trends). Other than the local event promotion in Tokyo, they never did anything to push it along – more people started showing up and then asking to host it elsewhere.
We did everything wrong
Says Mark of their approach. But he feels positive, that if they werent open to collaborators, the idea would never have left their event in Tokyo. The only real agreement is to ensure that there was one person representing Pecha Kucha in each city.
Mark is amazed by the growth in interest, because they just have sought to promote it and yet is continues to spread. The format is even being used by some at Davos. But the core remains a willingness to work with and support whoever is interested and willing to help.
Whats interesting, is the way real events have results in the spread of a presentation format and the creation of a presentation forum for work that might not have any good forum otherwise and it emerged on its own, with very little support other than the maintenance of the site (and now responses to requests for interviews).
Maybe your city is on the list – if not, why not get it started.
Pecha Kucha continues to spread indirectly build awareness for Astrid and Mark. Across the world, presenters get a new forum to share the work and ideas. Attendees get to see one anothers wonderful work. Win. Win. Win.
Finally, an idea that could inspire 1 billion people this year.
In 2007 5m people did it. In 2008 the number was about 50m in 35 countries. And in 2009, the target is 1b people in 1000 cities, who will turn off their lights for an hour to focus awareness on energy and environmental issues.
Its a non-for-profit, with minimal budget, growing globally, rapidly, using various means to get more people involved. And also providing a focal point for business to do something positive (and benefit by association). Hopefully we all win, as we get more people to act in ways that can reduce energy consumption and the associated environmental impacts. The stakes are high, but we are hopeful that this is well on the way to Win. Win. Win.
There a few more cases that need explanation: A cosmetics brand used mobile to engage with a few thousand early adopters to help them develop and launch a product. Over a 3 year period they went from idea to 8m unit sales working tightly with their community. Then there is Graniph who partnered with artists to create T-Shirts and build their business while they increased awareness for artists. More to come.
Posted in: Creative Process | Tagged: collaboration, Crowdsourcing, marketing, Social Media, Word of Mouse | No Comments
How Obama’s Presidential Campaign Can Change the Marketing of Products
Posted by lramella on Tuesday, 20 January 2009
On Inauguration day, it only makes sense to reflect back on how our new leader became President. As is evident, a number of things were remarkable about the 2008 Presidential campaign, and many experts have reported on the adoption and widespread use of technology in determining the final outcome. Few, however, have focused on what the Presidential campaign can teach marketing and PR professionals about effective brand building. Indeed, Barack Obama’s Presidential Campaign, if viewed through a marketing lens, resulted in a perfect two-year “product” launch that created a consistent “slogan” or brand message, an empowered and passionate “consumer” base, and confirmed the importance of extended brand relationships. The Obama team even now has a wealth of consumer information with which to continue to grow the brand in Washington.
When Obama announced his intention to run for President in February 2007, there was little belief that he could actually win even the Democratic nomination. He first had to beat Hillary Clinton for the Democratic ticket, which at the time was viewed as a nearly impossible task. It was akin to Apple taking on the music industry a few years back – everyone knows how that turned out. Obama quickly established a consistent campaign slogan – “Change We Can Believe In” (later slightly altered to “Change We Need”) – and surrounded himself with a loyal team who recited this mantra at every possible moment. This consistent brand message throughout the entire campaign provided both a rallying point for his consumers and an effective counter to his entrenched opponents who argued that he did not have enough experience. It also provided the campaign with a brand “mission (1)” that appealed to their consumers, in sharp contrast to other candidates who changed their mantra with every speech.
In addition, Obama and his team realized more than any prior political campaign in recent history that a grassroots community of consumers could be built through the use of technology. Obama met early on with Mark Zuckerberg, the founder of Facebook, to discuss ways to mobilize his campaign. Four years earlier, Howard Dean’s campaign established the Internet as an effective way to fundraise and communicate. By 2007, political consumers had caught up with technology, and indeed, the Pew Internet & American Life Project found that 46 percent of Americans used the Internet, e-mail or text messaging to get information about the 2008 campaign or to mobilize others – more than the 34 percent who read newspapers daily, the 39 percent who watch cable news or the 29 percent who viewed network TV news. The Obama campaign first built a database of brand supporters (essentially an Internet-enabled direct mail list) that the campaign then mobilized for fundraising; voter registration drives, phone banks, videos on YouTube, and posts on every social networking site. Obama and his team effectively created and empowered a core of brand consumers online to then spread the product message throughout a broader community.
Finally, a key component of building any brand is responding quickly and effectively to criticism (negative “reviews”). Once again, the Obama campaign effectively tackled bad reviews the moment they surfaced. During the course of the campaign, the minister at a church Obama attended in Chicago, Reverend Jeremiah Wright, made a number of speeches that contained harsh racial rhetoric. Obama himself admitted to having been a member of Reverend Wright’s congregation, but immediately distanced himself from Reverend Wright. His campaign realized it was not simply enough to distance one’s self, but that any negative publicity must be addressed head-on, and that the Obama brand must prove that it can maintain its message and rise above the negative press. Obama effectively did both by tackling the difficult issue of race in his famous speech on March 18th – the video of this speech has been viewed more than four million times on YouTube (2).
To conclude, there are a number of key takeaways from the 2008 Presidential Campaign marketing and PR professionals:
Be consistent – Companies that provide a consistent brand message that conveys the core of their product maintain a loyal base of consumers. The message does not change with trends (it may modify slightly, as when the Obama campaign changed from “Change We Can Believe In” to “Change We Need”), but is flexible enough to be widely embraced over time. Think of Nike’s iconic “Just Do It” or Microsoft’s recent “I’m a PC.”
Build local, and then go global – Obama’s campaign was effective in part because it started at a grassroots level, and built from the ground up. A number of passionate, early adopters act as a tipping point and an effective testing ground for brands. Obama was able to put his product and his brand message out there, and receive instant feedback from a small, core group.
Empower and engage your consumers – The best consumers feel actively engaged with a brand (their feedback is valued, they contribute to spreading the brand message and they assume some level of brand ownership as in the case of the campaign’s MyBO website), and develop a passion for their product. These consumers provide feedback, reviews and spread brand awareness. The Obama campaign also leveraged new technologies and social media to make it easy for their consumers to feel empowered. People these days are happy to engage but they need to be able to do it in less than five minutes.
Actively respond to negative reviews/bad press – Negative reviews are often underestimated by companies. An extreme example of a company not responding to negative reviews and bad press is The Sharper Image, which is now going through a messy bankruptcy partially related to poor product reviews. In a desperate move to boost sales in 2004, the company became an early retailer of air purifiers, in particular the Ionic Breeze purifier. By 2005, air purifiers accounted for 28% of the Sharper Image’s sales. A Consumer Reports article that year, however, stated that the Ionic Breeze purifier could be a health hazard for consumers as it released small amounts of ozone while in use. Sales of air purifiers for the Sharper Image tanked, and the company did little to respond to consumers about this particular product – there were few alternative options offered, no “bring your purifier back” campaigns, and indeed, not even an open apology to loyal consumers. Instead, the Sharper Image funneled efforts into suing the manufacturers of the Ionic Breeze. Clearly, the Sharper Image bankruptcy is more complicated, but there is no doubt that a failure to respond to poor product reviews added to the company’s demise. Of recent note, companies like Dell are now actively responding to product criticism on outlets like Twitter. New technology can be an effective tool for marketing professional to instantly respond to any bad “press” regarding a product.
Brand relationships do not end with a “purchase” – Brands need to move beyond the point of sale as the ultimate goal. Brands that extend their consumer relationship beyond the purchase and into daily life guarantee future success. Now that Obama has secured the Presidency, his campaign did not end – consumers receive emails asking for input, details of current Cabinet appointments, information about upcoming events, and opportunities for community engagement. One can only imagine that with time, the Obama brand’s database of consumers will be a powerful tool for change in Washington. – Leah
(1) Grove, Lloyd. The World According to David Plouffe. Portfolio Magazine. December 11, 2008. http://www.portfolio.com/views/columns/the-world-according-to/2008/12/11/David-Plouffe-Interview#page6
(2) Talbot, David. How Obama Really Did It. Technology Review. September/October 2008. http://www.technologyreview.com/web/21222
Posted in: Learning, Politics, Social Media | Tagged: Brand building, marketing, Mobile, mobile data, Product Development, Product launch | 3 Comments
In Twitter We Trust
Posted by Shaun Abrahamson on Thursday, 4 December 2008
One tool to rule them all, one tool to find them, one tool to bring them all, and in the darkness bind them.
Apologies to JRR Tolkien.
Twitter is doing for realtime, curated information, what Google has done for all the rest. I played with Twitter at first and then didnt use it for a while. And then I found some funny, useful, people to follow such as @saneel, @37signals, @jeffjarvis, etc. And suddenly it was part of my online routine.
Google Trends illustrates this nicely (I helped the dip) – it didnt catch fire initially, but…
There are more charts, showing similar trends. But perhaps the Twipping point, was Mumbai (sadly).
I first noticed news on Mumbai as I clicked through my various news sources. And then the Huffington Post (thanks) directed me to Twitter’s Mumbai feed. Since then, the Twitter feed has been my starting point for updates. Multiple sources chronicled Twitter’s role alongside local TV coverage, in providing up to the second updates. On a more personal note and for a good specific example, just take a look at @vineetgupta’s Mumbai related Tweets.
Before Mumbai, I had a similar experience during the US elections earlier this year. Twitter featured a link to the election feed and the commentary, links to news, etc were more colorful than the mainstream coverage (granted we were following online, since we chucked regular TV sometime back).
Now there are a growing number of useful applications that help you get more from Twitter (although its still not clear what Twitter’s business model is). From analytics to easier Tweeting on your iPhone. And there is no shortage of practical advice , guides and even comandments on how to use Twitter for fun and profit.
So why is Twitter so great? Tim O’Reilly has a good list of reasons to love Twitter. He gets to the heart of what makes it useful and likely to be successful.
I think of Twitter this way - V.S.R.S.S. - Very Smart Real Simple Syndication.
The smarts come from the fact that in a Mechanical-Turk-like fashion, everything depends on people (yes, there are some bots, but nobody is making you follow them). As folks who are in the business of news can tell you, its really hard to know whats important without an editor (Techmeme, a staple of automation, recently added an editor). Twitter is the ultimate wire-feed – all you need to do is pick your sources.
So how do you know who is worth following? Increasingly, like the barrage of social-booking buttons, I expect you will see more “follow” or “tweet this” buttons. Also, there are already some tools which do various types of parsing of the feed – if people with lots of followers, are leaders, then these are they, according to Twitter Grader. Twitterbuzz is Digg-like, pulling the most referenced URLs from the ether.
And then there is Retweeting for which I couldnt find a good tool, but some interesting insights on the subject. This might just be the piece that emerges as something akin to hyperlinking – more retweets for a tweet increases its value and similarly, more retweets for a user will likely do something equivalent to improving their “Pagerank” if such a formal metric ever emerges for Twitter.
It seems like Twitter may be doing for social media what Google did for search – yes – much useful goodness for fun and profit. Specifically, aside from being fun, its delivering things like leads (dare I say revenue?) according to folks like Hubspot(notice post to Twitter link on slideshare). I’m curious to see where it goes and hopeful that we can work with our clients and portfolio companies to benefit from it.
Oh yes, lest I forget, you can follow me at http://twitter.com/shaunabrahamson.
Update: John Battelle weighs in on how Twitter changes how we search, resulting in realtime conversations. Interestingly, I just tried to understand an exchange regarding Blackberry Bold between @jowyang and others. (I’m for the Bold). Realtime reviews? Its happening – the brand reps just need to get into the fray now.
Posted in: Social Media | Tagged: Analytics, marketing, Social Media, twitter | No Comments
Examples of customers as the best partners
Posted by Shaun Abrahamson on Thursday, 30 October 2008
We enjoyed Groundswell because it combines careful analysis and practical examples. And so when Josh Bernoff cpublished Groundswell Award Winners, we were excited to see what the winning companies were doing.
Many people we work with want to know how they can better work with their customers and how they can use technology to facilitate this. The winners are great examples, but also provide simple ways to think about what specific actions you might take.
Josh divides the winners into revealing categories – Listening, Talking, Energizing, Supporting, Embracing, Social Impact and Company Transformation (my favorite). Whether you are just starting to think about the relevance of social networks or blogs or trying to reorganize your company, there are examples for almost any type of business.
Posted in: Uncategorized | Tagged: Crowdsourcing, groundswell, marketing, Social Media, social technology | No Comments
Method Products – Marketing Methods & Product Management
Posted by Shaun Abrahamson on Tuesday, 9 September 2008
What can we learn from the most valuable and fastest growing brands. We discussed 37Signals which might be a little esoteric given their focus on business software.
But Method Products makes, among other things, soap and cleaning products, so this should have broader appeal. And perhaps more interestingly, we found a few similarities to 37Signals in their approach, despite their very different business (I am sure 37Signals users, are clean, too).
A brief history of fighting dirty
Method was inspired by the realization that most cleaning products such as Windex, Tilex, etc were born in the age of mass marketing – in the 50s. They almost seem like they would be perfectly at home in an episode of Madmen. So the questions then – what should updated cleaners look like?
The founders, Eric Ryan and Adam Lowry don’t seem to be the guys who dreamed that one day they would make soap. But they did feel very strongly about a few things and they asked a lot of questions. Why would I use poison in my home, to clean it? Why couldn’t I create better, more environmentally friendly products? Why should a more environmental product not work as well as traditional products? How do people feel about cleaning their homes and how has it changed? Eric Ryan goes into great detail in this aaaa.org 2007 video summarized nicely, here.
The result is not the conventional solution-for-a-problem product or a new marketing approach, but an emerging new culture of cleaning. A cleaner way of cleaning. A better way of cleaner being. Actually, lets look at some of the numbers.
In 2006, according to Inc Magazine, Method Products was ranked the 7th fastest growing company. In 2007 it had slowed a little to only 508.4% growth, in business, known more for its flat or declining growth. Method competes against some of the best known players in the cleaning business such as P&G and Unilever. And as a clever calculation suggests that their competitors spend more on their toilet paper than Method spends on the advertiting ($15m vs $3m in 2006).
So how is Method managing to spread like the germs they vow to destroy?
They have a better product. Better for your health. Better for your home. Better for the environment. Better to look at. And yes, it will still clean. maybe even better. But when you throw the packaging away it wont live on to damage the envionment. And they seem like they dont take themselves too seriously – maybe you’d like to be invited to one of their parties.
This doesnt just happen. The team recognized that cleaning has changed and rather than the old approach to storing products under the kitchen sink or hiding them in a closet, you might be inclined to leave them out. So why shouldnt they look alot better? Like perfume or other high end “lifestyle” goods?
Coming out of the closet (or out from under the sink)
Method focuses on Style + Substance. The ubstance comes from a commitment to research and find better ways to make their products better for homes, people and the planet. And their style, in some part comes from a well known designer - Karim Rashid.
As a result of their partnership, their products look like nothing else on the surrounding shelves – like placing a laptop next to a typewriter or they might say – placing a Mac next to a PC. In other ways it echoes Apple’s experience with the Mac – it just looked like it belonged to a different time. It held the promise of being better and different. So does Method.
As Method sees it. Design is media. I love that and couldnt agree more. What best about it – people pay for your product and show if off in their homes! It a fashion accessory from something which used to be hidden away. What? Now that is a a real “media buy”. Someone pays you and gets you attention.
The design angle probably also helped with their first distribution deal through Target. So the design focus had the additional benefit of enthusing their retail partners (particularly since not much was forthcoming in the form of media spend, for the startup company, but more on that in a bit).
Advertising without advertising
From the beginning, Method has approached advertising, differently. Their first tiny budget went towards a booklet that told their story. They approached advertising like a media a publisher might. They became a publisher to sell a story- their story. And they chose a book, because there was a lot to tell. And as people learned about what they were doing, they would become “people against dirty”. In 2008 they published Squeaky Green, which they sell, which explains what they stand for and how to detox your home. Again redefining the “media buy”.
When they had the chance to buy outdoor, they decided on a “pop-up” store in places like New York and San Francisco, to better introduce the Method products and values. And they have worked with retailers to unify their product displays in retails stores in ways that others cannot (because the various soaps and cleaning products have little or nothing in common with one another), under the theme of Method Home. So in effect they create mini-stores within the retail environment.
Perhaps most interestingly, in 2007 Eric Ryan stated that within 3 years Method planned to stop buying media. Their plan is to make use of the media they have. For example, they might spend $200k on a new design. $200k in media buying doesnt get the much, but a great design could get them much more. So their marketing budget includes design and media buying so the two compete for effectiveness. And design appears to be winning by their mesasures of effectiveness.
And then of course, they have advocates to tell the story for them – the people against dirty.
For the people (against dirty)
From the beginning, the response to Method’s products was somewhat unusual. It doesnt occur to most people to call or mail the cleaning product manufacturer and let them know how much they love them. But this is in fact what happened.
And today, Method is focused on their community against dirty. They look to them as the ultimate evangelists, unpaid but rewarded in various ways. They spread the word on everything from products themselves to educational ideas about making homes more healthy. They help bring Method Products to more homes. They think of their customer differently – they are Advocates. And they treat them that way. They share press releases with them and product samples. They treat them as an extension of the company.
By the people behind the people against dirty
The organization reflects the company beliefs. Creative talent is drawn from a variety of disciplines including packaing and industrial design. And ideas are shared openly so that others in the company can comment and build on them, on large “wiki boards”. Even the elevator is designed to emphasize that you are going somewhere different.
Much like some other innovative companies, they design for themselves. They hire their customers, literally. Prototypes are available in Methods’ office bathrooms with requests for feedback. And they dont succumb to Not Invented Here (NIH) syndrome – when they saw a great idea for oncentrated soaps in Japan – they didnt hesistate to “borrow” the idea and make it their own.
The organization contrasts with their much larger competitors. Teams are led by product managers versus marketing managers. Teams sit as PODs working on a product, versus being grouped into functional specialties. And they company has built a number of other cultural elements including ways to ensure that they are hiring the right talent – you need to do a homework assignment and explain how you will keep the company wierd.
Posted in: Uncategorized | Tagged: advertising, design, DGPSA, marketing, method | 2 Comments
37Signals – a Media-Software-Community Organization
Posted by Shaun Abrahamson on Sunday, 24 August 2008
37Signals started out life in 1999 as a traditional web design agency. Over the last few years, they abandoned their traditional consulting work and focused on the development of online software services for small business use (or the Fortune 5 million, as they like to call them).
But 37Signals is much more than your average software vendor. They have figured out how to efficiently acquire new customers, build a loyal following of end users and developers and rapidly grow a business with 10 people, while taking off Fridays.
A brief history of experiments with revenue models
37Signals constantly challenges assumptions and so are comfortable looking at multiple options for a viable profitable business. As the company has progressed, they have taken their ideas of simplicity and small scale, beyond design and software development to all aspects of their business.
Early on they experimented with a simple service called 37express, a simpler, quicker way to engage the 37signals team on small, short focused design projects. To better communicate their ideas, they published the 37signals Manifesto to explain their approach to design and backed that up with the 37Better Project in which they redesigned well known sites such as PayPal, Google and Fedex.
A little later, they shared the core code they named, Ruby on Rails, which they had used to create their first products. It has a loyal following and has been used to build some of the best known Web 2.0 properties. This has helped catapult 37Signals to celebrity status among developers. But giving away software is not a revenue model, or is it? More on that later.
Finally, in recent years, the company has launched a series of software services, beginning with BaseCamp. These services have over 1m users, according to the company. Many users do not pay and since the company is mum about revenues, one has to rely to some extent on revenue estimates to understand the financials.
Perhaps most interesting, is that the company has experimented, while remaining profitable. And they have largely rejected outside funding (with a special exception for Jeff Bezos). All this with only 10 (or fewer, earlier on) people!
Much has been written about their products, their blog or even the individuals, but what is most intriguing to us, is how efficiently the find new customers and serve them.
Very efficient customer acquisition
37Signals well built and designed services may explain why people use them, but how do they find them? As Jason Fried, 37Signals co-founder assured me, via a short e-mail exchange, 37Signals doesnt do advertising but do use every opportunity to talk about what they do and how they do it.
37Signals claims:
94% of Basecamp customers and 96% of Backpack customers surveyed said they would recommend the products to their friends, family, and colleagues.
It would be interesting to see the Net Promoter score for the service, versus competitors, but their own survey results, suggests that word-of-mouth is super strong. My personal experience probably reflects another acquisition path – I worked with a client, who was using BaseCamp and after a few weeks began using it for other projects. So the software itself provides a good platform for introductions and “try-before-you-buy” experience.
Once you begin using the software, you understand what the fuss is about. Its certainly not for everyone – in the same way that a Sports Coupe might not serve the needs of family road trip. But for the target audience, its beautifully simple. So I dont hesitate to recommend it for our projects or anyone else doing similar work.
More recently 37Signals began an affiliate program. Some might see this a sign that other promotional techniques are losing steam, but in my opinion, this simply builds on the core word-of-mouth mechanism, enabling those who recommend, to get paid.
Behaving like a media company
Each day 75k readers consume the 37Signals corporate blog, Signal vs. Noise. That doesn’t include their separate product blog that provides updates on issues, new features, etc. 75k is respectable given the focus, particularly when you consider specialty web properties such as www.core77.com (design) that seems to have a similar number of uniques or www.marketingprofs.com (online marketing) that has a little more readership. On a stand-alone basis, Signal vs Noise might be an interesting online media property.
But most specialty online media properties are unlikely to match 37Signals, as a publisher.
Their latest book, Getting Real, defines 37Signals approach to design, promotion and even how they organize themselves. In fact they lay out their approach to promotion. The book is free to read online, but the PDF has sold over 30k copies. And there is a softcover, too (sales are not disclosed).
In addition, 37Signals also runs an ad-network (not sure if they use it) that targets designer-centric properties. And also hosts a job board, again targeting designers. Most recently, 37Signals has embraced video in the form of 37Signals Live.
Organizing communities
Signal vs Noise and 37Signal’s Live, provide platforms to interact with the community. However, there are some more tangible interactions happening with existing users and developers.
In effect, the growing community of 37Signals users, API developers and Ruby on Rails developers combine to significantly increase the effective size of the 37Signals organization. Like the unofficial salesforce providing positive word of mouth, the user community also helps to refine and evolve the offerings and perhaps even the core business approach.
Support is not outsourced or handled by a separate organization. Amazingly 37Signals team of ten people handle support request directly! This means that issues should surface quickly and good ideas should find their way to the people who can respond to them.
37Signals has added APIs and this has, in turn, spawned a rapidly growing suite of Extras. Growing a developer community in this way, is astonishing because communities are typically supported by much larger organizations. The continued growth of the service helps. But for many developers, it is likely the transparency of the organization that makes them comfortable committing valuable development resources to integrate with 37Signals. This will likely establish 37Signals as a platform for growth of other software products and provide another source of ideas and feedback for their offering.
Ruby on Rails established 37Signals credibility as developers. And the software has its own growing community, projected to grow to 4m over the next 5 years. Like Linux, the framework is chosen over alternatives from much, much larger companies. And, like Linux, it virtually ensures a core group of smart contributors to help nurture, refine and evolve the framework.
There is lots to learn from 37Signals. But perhaps the most valuable lesson – question your assumptions. Why advertise, when you can mobilize an effective sales organization for free, using your customers? Why wait for media coverage, when you can be your own media organization? Why grow your organization needlessly, when you can leverage a community to everyone’s mutual benefit?
The 37Signals team have gone against conventional wisdom in the name of simplicity, purposefully ignoring advise, deals, feature requests and money. And they are better for it.
Posted in: Uncategorized | Tagged: 37signals, advertising, customer support, DGPSA, marketing, promotion, startup | 3 Comments
What makes Zara work?
Posted by Shaun Abrahamson on Saturday, 16 August 2008
Its funny you ask. Below is the answer, nicely spelled out, thank-you-very-much.
I am currently trying to understand, as part of a larger research project, how a company that does little to no advertising (from what I can establish they spend .3% of sales versus 3-4% spent by their competitors), is ranked as one of the fastest growing brands. Oh yes, and they recently surpassed Gap (after passing H&M 3 years ago) to become the worlds largest clothing retailer.
Back to the image. Inditex, Zara’s parent, published this in their 2007 annual report. Its actually part of a more complex machine, highlighted in the upper left of the image. But we wont worry about that. What is interesting to me, is where they are focusing to enable them to build an industry-beating brand.
Customer at the center
As the picture shows. But everyone says this. According to Inditex, they focus on taking customer requests from the store and move it through the process of design and manufacture as quickly as possible.So each time they interact with customers there is potential for new inspiration. Its not clear exactly how this happens, but it is clear that new products hit the store twice per week, enabling them to respond quickly to new trends and ideas.
Zara only distribute in their own stores, as they want to control the entire experience with the customers. This too is highlighted in the image. From site selection and window displays to store architecture and service, the store is where Zara invests most, according to its 2007 annual report.
The store is the company’s main image vehicle
Zara has been expanding with openings in the world’s largest cities. Zara is very comfortable adapting prize locations and buildings to their needs, as you can see from these examples.
Projects are designed individually to take maximum visual and functional advantage for the store, by turning each establishment into a special place.
Approach to design and manufacturing
While competitors such as H&M outsource their production, Zara situates its 200+ designers alongside the manufacturing process – by collocating design and manufacturing, they are able to speed time to market. Zara is unmatched in the speed with which they take product to market (Harvard Business Review).
Openness
This is something Intitex is proud of, going to lengths to explain various ways in which it interacts with society at large and enables clear visibility into its activities.
At a tangible level this means it tracks on site visits and measures interaction with the media in a variety of ways. Metrics may be the key to understanding that Zara’s success is not just about one thing – it perhaps best reflected in the enormous number of metrics used to understand how the company performance in areas ranging from human rights in countries in which is does business to levels of waste produced for each garment created.
These types of measures are laid out in the annual report. And increasingly, these measures are not from Inditex themselves. In the same way that their financial are audited they have a range of 3rd party audits to help them better understand everything from how they are implementing their “code of conduct” to how they rank on a variety of sustainability indices.
All the details matter. In 2007 the company switched all store shopping bags to d2w which will result in plastics degrading (to water, CO2 and biomass) within 1-2 years versus 400.
Back to the question of how the company manages without advertising. Certainly the store experience has garnered them great “word of mouth” (I’ll need to come back to this and see if I can put some numbers against this claim, but Google clearly shows the trend in interest, which has ultimately been reflected in sales, too). And their first to market capability has to help too. But its clear that the magic of the machine, is the result of lots of moving parts and a focus on controlling the complexity which results from making these parts work together. In some ways this seems to follow the Apple script – control more of the key pieces that need to work well together, for example hardware and software or the in store retail and customer support experience.
Posted in: Uncategorized | Tagged: advertising, architecture, design, DGPSA, fashion, marketing, Product Development, retail, zara | 4 Comments
Do great products and services need advertising?
Posted by Shaun Abrahamson on Wednesday, 9 July 2008
Why are we fascinated by how companies grow without advertising? Well, we work with early stage companies who need to acquire new customers as efficiently as possible and reduce the need to raise more money to grow.
There are a range of fundamental changes enabled online that expand the range of options for companies wanting to grow in new an interesting ways. For example, Roelof Botha, of Sequoia Capital talks about key concepts underlying the success of PayPal and Youtube (Zappos is on the list below). We have talked about word of mouth before (and the impact of its ongoing documentation online via product reviews). We dont think this is the only thing powered brand growth, but certainly a powerful part of the new suite of tools which reward great product and service experiences and make them easier to find.
So we have set about identifying companies that spend little or no money on advertising, to understand how they have managed to grow. For now we aren’t limiting ourselves to a specific industry and we are going to attempt to cover large public companies as well as early stage private ones.
Following is an initial list of companies, along with a short summary of why we picked them, beginning with the behemoths:
Google - sits atop the pile, according to the Brandz 2007 ranking (pdf). But Google doesn’t spend very much relative to its rivals and most of its spending has been for its enormous recruiting efforts.
Starbucks - may be experiencing some headwind in the slowing global economy, but it has spent even less than Google historically, running a TV ad for the first time at the end of last year in the US.
Zara - the Spanish retailer, spends just .3% of sales on advertising versus 3-4% for rivals. It uses its retail stores and rapid product turnover to do the communicating.
Amazon - famously cancelled ads in favor of free shipping and appears to be reaping the benefits today. Its online ad spend, goes mainly to Google.
Some other megabrands under consideration are spending much less on advertising than competitors, or spending when they don’t seem to need to. These include: Porsche, Samsung, Nintendo, Costco, eBay, Harley-Davidson.
On the not-so-mega, but loved-and-respected-scale, here are some for consideration:
Zappos - is spending what it might have spent on advertising, on customer service.
Newegg - has built an almost $2b in sales, while focusing on keeping its community of tech users happy.
BitTorrent - reviled by the media industry, but downloaded an unprecedented number of times around the world.
Ducati - took a page from the Harley book and focused in its loyalist Ducatisti to jumpstart sales.
Tupperware - party anyone?
In-N-Out Burger – revenous fan base, underground menu. Its a secret society. Hold the ads.
Method Products – interview reveals how Method invests more in their products and less in talking about them to create another Inc star.
Kiehls – give away samples, no ad dollars.
Trader Joes – the “Trader Joe’s Fearless Flyer” circular is the only communications spend.
Zipcar - a new form of transport.
And finally, on the smaller startup scale, some companies we are considering, that you may or may not be familiar with
37Signals – celebrated for simple products and word of mouth.
Daylife - created a showcase and drew a crowd.
Meraki – connecting people together is a good way to spread the word.
Sigg - where did the Swiss water bottle makers come from?
Orb Audio – small speakers, big sound. And a commitment not to spend on anything except making speakers.
Denim Therapy – never replace your jeans, just repair them.
We’re just getting started, so lots of research to do. The list is likely to grow and change and we’ll start to dive into how each of these companies work their magic.
Posted in: Uncategorized | Tagged: advertising, brands, DGPSA, marketing, media spending, Word of Mouse | 2 Comments