Imagine this: you are the local country head of a global, billion-dollar investment bank. Through weekly conference calls and updates, you know that your company is facing a cash crunch due to a worldwide seizure in the credit markets, and you are nervous about the company’s future. Business, however, must go on. One day, your regional boss instructs you to market a new series of financial products, to be distributed through local banks to retail investors. The financial products are themselves quite complicated and, in your opinion, rather risky, as they are essentially bets that companies will or will not go bankrupt. However, taking a look at the prospectuses and the marketing material, you see that they are couched in investor friendly phrases designed to give the impression they are safe and secure, as they are backed by the full faith and guarantee of your own bank. Your regional boss tells you to launch the products ASAP and is breathing down your neck every day for sales. Meanwhile, your own questions about the health of your own company are swatted away. What do you do?
In my last column, I explained how both the smart and ethical thing for a company to do in a crisis was to act swiftly and communicate clearly to affected customers. However, not everyone who reads this column is a company boss! What if you, a regional head or the marketing director, are given instructions contrary to ethical standards, such as an order to sell tainted milk powder where health standards are lax, or to market risky bets as safe financial investments? What are your options?
Just do your job. You may try to assure yourself and say, I’m only doing my job. Whether that is a good defense in a trial (yes, you have to start thinking in such terms) depends on your seniority in the company or your level of knowledge of the company’s policies, products and potential wrongdoings. I would say the moment you know what is going on, you can forget about this option. Also, you have your posterity and your afterlife to consider!
Compromise. This is especially attractive when any harm caused is debatable or quasi-legal. (“The fine print clearly says customers may lose all their money.”) So, in the banking scenario, while your unethical colleagues are selling Lehman Minibonds to pensioners, you target richer ones who can afford to lose a couple of hundred thousand. I don’t really think much about this option: it’s very difficult and it’s not worth it. By definition, you are compromising your ability to hit your targets, and for what upside?
Quit. Walk away. Life is not worth getting into moral scrapes which can imperil your career and, well, your soul. Throw in your resignation letter, try to get a waiver on your notice period, pay the company back if necessary, because the longer you work in a ethically imperiled company, the greater the risk of that peril extending to you. However, as Jeff Skilling, the former CEO of Enron discovered, even resigning did not save him from prosecution.
Blow the whistle. Time to burn your bridges and go to the authorities. Nowadays, even this option has various ways of doing it – from writing an anonymous memo to the boss (as Sherryn Watkins did in Enron) to going directly to the press (Citizen Nades would be your man) or, if you really want to protect yourself, going directly to the prosecutor’s office and striking a deal, in exchange for immunity. Just make sure your deal is airtight and agreed in the presence of your lawyer, and that, this being Malaysia, the company you are informing on doesn’t have, well, certain political connections, in which case your only option would be the opposition party.
If the above four choices all do not sound very appealing, its because they are not. Each has their difficulties and one’s choices would depend on one’s actual circumstances and ethical limits. The important thing to balance is doing the right thing, but also preserving your career and your personal reputation. Its easy falling into a hole. Climbing out is hard. Climbing out and staying clean is even harder.
As seen in theSun, 30th October 2008.
Thursday 30 October 2008
Monday 20 October 2008
Marketing and Crisis Management
Imagine this scenario: you are the boss of a company manufacturing infant milk powder. One day, your head of marketing and head of product quality come to you with some grave news: a hospital has contacted the company informing them that 10 babies in their ward have contracted kidney stones, and that the one common factor in all of them is that they had been consuming your brand of infant milk powder. Your head of product quality cannot explain why and he needs time to investigate the situation. Your head of marketing, after having faced a mounting number of angry calls from customers, wants to know what to do next, as, every day, your company is shipping out 90,000 tins of milk powder to retailers and exporters. What do you do?
Crisis management 101
We should be fortunate if we, through the course of our lifetimes, never have to be put in such quandaries. ‘Tough’ armchair marketers who like to talk about strategy and grabbing market share can freeze and wilt during times like these. Chances are, however, that a problem of this nature is bound to hit sooner or later, especially in mass consumer market food companies. How a company’s management and its marketing and communications department reacts to it can effectively determine its fate.
The important elements of crisis management are:
1) recognising a crisis early and dealing with it swiftly;
2) establishing regular and daily communications with customers and the public, through media sources;
3) updating the public on the company’s response and the steps being taken to arrest the crisis;
4) not focusing on blame, or culpability, and just doing all that can be done to protect its customers and, therefore, its brand, its reputation, its very future.
In the case histories of crisis management, these are the best practices that have pulled companies through those difficult times – examples include the Tylenol poisoning crisis of 1982 and, recently, the Mattel lead paint crisis of 2007.
Nothing is more important than item 1 – acting early. Just as in the case of an earthquake or a tsunami, it is worthwhile imagining a countdown clock starting the moment it happens… every second that ticks away without anything being done means more lives are lost. In the case of Sanlu, it seems it had plenty of chances to start managing the crisis – as early as December 2007, some report. But by ignoring or burying its bad news, it actually sealed its fate. Doing this tells the public that your management would choose its own image and reputation over that of the lives of its customers. Its probably fair to say that from being the No. 1 market leader in China, Sanlu is now quite finished.
As for steps 2 to 4, the various Chinese companies affected should borrow a leaf from their own political leaders. From the winter storm crisis to the Sichuan earthquake of 2008, Chinese leaders at the highest levels had been perceived to be actively involved in doing their best to solve the problem, with even Premier Wen Jiabao making appearances at crisis hit areas and addressing victims directly.
Crisis management 201
Let’s try another scenario: you are the local country head of a global, billion-dollar investment bank. Through weekly conference calls and updates, you know that your company is facing a cash crunch due to a worldwide seizure in the credit markets, and you are nervous about the company’s future. Business, however, must go on. One day, your regional boss instructs you to market a new series of financial products, to be distributed through local banks to retail investors. The financial products are themselves quite complicated and, in your opinion, rather risky, as they are linked to financial derivatives such as Credit Default Swaps (CDS’s). However, taking a look at the prospectuses and the marketing material, you see that they are couched in investor friendly phrases designed to give the impression they are safe and secure, as they are backed by the full faith and guarantee of your own bank. Your regional boss tells you to launch the products ASAP and is breathing down your neck every day for sales. Meanwhile, your own questions about the health of your own company are swatted away. What do you do?
Unlike the first dilemma, where doing the ethical thing – responding quickly – helps save the company, this second dilemma is a lot harder, as doing the ethical thing actually harms the company. Resolving this is beyond the limits of this column. Which is why it’ll be continued, 3 weeks from now. See you then!
As seen in theSun, 8th October 2008.
Crisis management 101
We should be fortunate if we, through the course of our lifetimes, never have to be put in such quandaries. ‘Tough’ armchair marketers who like to talk about strategy and grabbing market share can freeze and wilt during times like these. Chances are, however, that a problem of this nature is bound to hit sooner or later, especially in mass consumer market food companies. How a company’s management and its marketing and communications department reacts to it can effectively determine its fate.
The important elements of crisis management are:
1) recognising a crisis early and dealing with it swiftly;
2) establishing regular and daily communications with customers and the public, through media sources;
3) updating the public on the company’s response and the steps being taken to arrest the crisis;
4) not focusing on blame, or culpability, and just doing all that can be done to protect its customers and, therefore, its brand, its reputation, its very future.
In the case histories of crisis management, these are the best practices that have pulled companies through those difficult times – examples include the Tylenol poisoning crisis of 1982 and, recently, the Mattel lead paint crisis of 2007.
Nothing is more important than item 1 – acting early. Just as in the case of an earthquake or a tsunami, it is worthwhile imagining a countdown clock starting the moment it happens… every second that ticks away without anything being done means more lives are lost. In the case of Sanlu, it seems it had plenty of chances to start managing the crisis – as early as December 2007, some report. But by ignoring or burying its bad news, it actually sealed its fate. Doing this tells the public that your management would choose its own image and reputation over that of the lives of its customers. Its probably fair to say that from being the No. 1 market leader in China, Sanlu is now quite finished.
As for steps 2 to 4, the various Chinese companies affected should borrow a leaf from their own political leaders. From the winter storm crisis to the Sichuan earthquake of 2008, Chinese leaders at the highest levels had been perceived to be actively involved in doing their best to solve the problem, with even Premier Wen Jiabao making appearances at crisis hit areas and addressing victims directly.
Crisis management 201
Let’s try another scenario: you are the local country head of a global, billion-dollar investment bank. Through weekly conference calls and updates, you know that your company is facing a cash crunch due to a worldwide seizure in the credit markets, and you are nervous about the company’s future. Business, however, must go on. One day, your regional boss instructs you to market a new series of financial products, to be distributed through local banks to retail investors. The financial products are themselves quite complicated and, in your opinion, rather risky, as they are linked to financial derivatives such as Credit Default Swaps (CDS’s). However, taking a look at the prospectuses and the marketing material, you see that they are couched in investor friendly phrases designed to give the impression they are safe and secure, as they are backed by the full faith and guarantee of your own bank. Your regional boss tells you to launch the products ASAP and is breathing down your neck every day for sales. Meanwhile, your own questions about the health of your own company are swatted away. What do you do?
Unlike the first dilemma, where doing the ethical thing – responding quickly – helps save the company, this second dilemma is a lot harder, as doing the ethical thing actually harms the company. Resolving this is beyond the limits of this column. Which is why it’ll be continued, 3 weeks from now. See you then!
As seen in theSun, 8th October 2008.
Wednesday 17 September 2008
In Defence of Touts
Picture this: you arrive at a busy, rather decrepit looking airport. You haven’t got your flight yet, so you are trying to buy a ticket back home. Looking up, you expect to see a board showing the departure times, flights and check-in counters of all the planes leaving today. Instead, all you see are flickering lights and paint peeling off the walls. In front of you are 40 different sales counters, each staffed by one person waving to you enthusiastically to book your flight ticket with his or her company. You have never heard of 90% of the companies. They are waving at you even though they don’t even know where you’re going.
Substitute the words ‘airport’ for ‘terminal’ and ‘flight’ or ‘plane’ for ‘bus’, and you get a picture of what happens daily at our bus terminals across the land, from Puduraya to Larkin to Sungai Nibong.
Is it any wonder that touts flourish in such conditions? A Malay daily reported recently that bus ticket touts can earn up to RM5,000-6,000 a month, despite the job being illegal. Typically, they earn RM200 a day, from commissions of RM2 to RM5 paid for by the bus companies. That tells you something, doesn’t it? The powers that be may hem and haw and tell passengers not to buy from touts, but the fact that they can have such decent earnings means that there is a real need and demand for them, from both the passengers and the bus companies themselves!
It’s always the same story. You arrive at the bus station, a little stressed because you want to catch as early a bus as possible. You’re possibly tired, and the prospect of combing through the different stalls looking for the right bus at the right time to the right destination puts you off. The young man who approaches you asking you “ke mana? Singapore? Penang?” could be either a lifesaver or a scammer – your inclination to buy a ticket from him depends on how knowledgeable, tired or desperate you are. Whatever the case, he promises to lead you to the right company, using the best bus, leaving at the best time. So you take your chance with him. What happens next depends on your luck and the honesty of your tout.
Nature, politics and markets all share a same trait – they all abhor a vacuum. If a need is not met, or is met badly, by the government and its regulatory agencies, you can expect private sector agents to provide an immediate alternative. A tout earns his living on the basic inefficiencies of the agencies and terminals regulating and facilitating bus transport – their inability to provide good infrastructure (clean, well-lit, comfortable terminals which are pleasant to wait in) and basic information (departure and arrival times) to match willing customers and eager bus companies. Since they can’t, or won’t do it, the tout assumes their place, a one-man matcher of supply and demand.
Before companies can engage in marketing, the markets themselves have to function effectively. It says something about the market for bus travel in Malaysia where one of the chief strategies of some bus companies is to engage armies of young men to sell their tickets illegally. Sure, most of these companies are using the touts to bypass the terminals (and their surcharges) altogether and pick up their customers on the roadside, but think about it: what is Puduraya providing anyway? A clean, organised, well-lit, airconditioned environment, with plenty of seating? If it was, these touts wouldn’t have any business.
To prove the point, look at those bus companies plying the direct KL-Singapore route - they generally avoid stopping at Puduraya and have online or phone ticketing services available; that is, they built their own infrastructure in the absence of it being available for them.
So touts are here to stay, as long as Puduraya remains Puduraya (dark, dingy, hot) and transport regulators have other agendas other than the efficient matching of buyers and sellers in mind. Perhaps we should just legalise touting and regulate them – after all, we only want them to be honest so that customers don’t get duped or led around in circles or get made to wait longer than is necessary.
Sounds wacky? Apparently, its about as wacky as the idea of a big screen showing consolidated bus departure and arrival times…
Printed in theSun, September 17th, 2008. PDF version here.
Substitute the words ‘airport’ for ‘terminal’ and ‘flight’ or ‘plane’ for ‘bus’, and you get a picture of what happens daily at our bus terminals across the land, from Puduraya to Larkin to Sungai Nibong.
Is it any wonder that touts flourish in such conditions? A Malay daily reported recently that bus ticket touts can earn up to RM5,000-6,000 a month, despite the job being illegal. Typically, they earn RM200 a day, from commissions of RM2 to RM5 paid for by the bus companies. That tells you something, doesn’t it? The powers that be may hem and haw and tell passengers not to buy from touts, but the fact that they can have such decent earnings means that there is a real need and demand for them, from both the passengers and the bus companies themselves!
It’s always the same story. You arrive at the bus station, a little stressed because you want to catch as early a bus as possible. You’re possibly tired, and the prospect of combing through the different stalls looking for the right bus at the right time to the right destination puts you off. The young man who approaches you asking you “ke mana? Singapore? Penang?” could be either a lifesaver or a scammer – your inclination to buy a ticket from him depends on how knowledgeable, tired or desperate you are. Whatever the case, he promises to lead you to the right company, using the best bus, leaving at the best time. So you take your chance with him. What happens next depends on your luck and the honesty of your tout.
Nature, politics and markets all share a same trait – they all abhor a vacuum. If a need is not met, or is met badly, by the government and its regulatory agencies, you can expect private sector agents to provide an immediate alternative. A tout earns his living on the basic inefficiencies of the agencies and terminals regulating and facilitating bus transport – their inability to provide good infrastructure (clean, well-lit, comfortable terminals which are pleasant to wait in) and basic information (departure and arrival times) to match willing customers and eager bus companies. Since they can’t, or won’t do it, the tout assumes their place, a one-man matcher of supply and demand.
Before companies can engage in marketing, the markets themselves have to function effectively. It says something about the market for bus travel in Malaysia where one of the chief strategies of some bus companies is to engage armies of young men to sell their tickets illegally. Sure, most of these companies are using the touts to bypass the terminals (and their surcharges) altogether and pick up their customers on the roadside, but think about it: what is Puduraya providing anyway? A clean, organised, well-lit, airconditioned environment, with plenty of seating? If it was, these touts wouldn’t have any business.
To prove the point, look at those bus companies plying the direct KL-Singapore route - they generally avoid stopping at Puduraya and have online or phone ticketing services available; that is, they built their own infrastructure in the absence of it being available for them.
So touts are here to stay, as long as Puduraya remains Puduraya (dark, dingy, hot) and transport regulators have other agendas other than the efficient matching of buyers and sellers in mind. Perhaps we should just legalise touting and regulate them – after all, we only want them to be honest so that customers don’t get duped or led around in circles or get made to wait longer than is necessary.
Sounds wacky? Apparently, its about as wacky as the idea of a big screen showing consolidated bus departure and arrival times…
Printed in theSun, September 17th, 2008. PDF version here.
Wednesday 27 August 2008
Big Radio Killed The Radio Star
A cryptic banner ad appeared recently on a popular online local news web site, asking viewers whether they were “sick of Malaysian radio”. A click on the ad led to an online survey which posted various options of why one might be sick of Malaysian radio, including “too much phone-in contests”, “playing the same music over and over” or “an unduly high interest in Hollywood gossip”.
Whoever the ‘perpetrators’ of this ad and survey are and whatever good they may get out of it, I wish them all the best. For me, being three years into my thirties, I am no longer sure whether my musical tastes have changed over time due to the state of Malaysian radio or my own internal, autonomous ‘evolution’. Because, in truth, I can’t listen to any English radio station here in Malaysia for more than 10 minutes before switching to the soothing confines of my in-car MP3 player (unless, of course, I need traffic information delivered to me via the sexy husk of Priscilla Patrick).
To some extent, I’m not blaming anyone for this. Musically speaking, its tough being in one’s thirties. You can’t let go of the character-defining music of your teens and early twenties, yet you want to stay connected to the popular music of the day (even though most of it makes you cringe or gag) because of the need to be relevant and feel “young”. But seriously, there is something about Malaysian radio which makes this dislocation harder to bear.
For the youth-oriented stations, the Malaysian predilection to R&B, hip hop and rap, so evident on all our competing stations, leaves me a bit cold, not because I don’t like the genres, but because their best forms would have, well, zero chance of ever getting any airplay (how many times have YOU heard Dr. Dre on Malaysian radio?). Usually what gets played is the crowd-friendly bleah variety. The same goes for pop and rock. For the older-oriented stations, their idea of musical variety does not mean varied, different musical styles and sub-genres, but rather 20 years of bubblegum pop. I mean, seriously, how many times do I need to hear the Backstreet Boys, Jon Secada and Rick Astley in a year?
Funnily enough, my flight from this bubblegum land has found me in strange waters. Lately, its been classical music for me, especially since the birth of our baby girl. Unfortunately, Astro’s Opus only works at home (you need a decoder), which is fine for baby, but there’ll be no in-car classical music for me unless I happen to be in Johor and get it beamed from Singapore. In fact, whenever I am back there, I switch between three Singaporean stations: the aforementioned Symphony 92.4, the BBC’s World Service and the irreverent non-state owned 91.3FM. On the drive back home to KL, when the signals of these three stations start to fade into static (somewhere around Pagoh), I actually feel rather like I am leaving civilisation.
The point I am trying to make is not that radio stations should cater to my whims and fancies (although that would be nice) but to make the point that I am only a small instance of a larger trend, that this is a new era of fragmented demographic, cultural and social groups manifesting themselves in even more fragmented musical and programming tastes; an era where most people’s iPod playlists are longer than a radio station’s; an era where more new music can be found on the Internet than on the radio; an era where I believe niches are getting smaller and smaller, and therefore, Big Radio should be getting smaller and smaller.
So, let me provide not just one business model for a new radio station, but three, all centred on the Klang Valley, given its distinct demographic difference from the rest of the country.
a) A free-to-air classical music station
Target demographic: arts lovers, highbrow types, retirees, M2H residents, LiteFM listerners, babies
Programming: opera, classical, contemporary vocals
Advertiser shortlist: Contemporary arts events, baby products.
b) Expat Radio
Demographic: the Klang Valley expat community and the more liberal English-speaking local population
Programming: call-in programs (expats need to vent sometimes and complain about their host country), and whatever musical tastes they have (say, Keith Urban for the Aussies and David Hasselhoff for the Germans… I’m kidding, ok?)
Advertiser shortlist: just pick up a copy of Expat magazine. Or The Peak. Or Tatler.
c) Campus Radio
Demographic: local, international and foreign students in the Klang Valley
Programming: college or local bands, student interest radio-zines, allowing space for free-form expressions by students themselves
Advertiser shortlist: any youth-oriented products and services would apply.
Advertisers and marketers all over the world know that successful marketing is all about focus, focus, focus. It would be great if our media owners or - better yet - the regulators of our media owners appreciated this fact.
Appeared in theSun, August 27th 2008. epaper link here.
Whoever the ‘perpetrators’ of this ad and survey are and whatever good they may get out of it, I wish them all the best. For me, being three years into my thirties, I am no longer sure whether my musical tastes have changed over time due to the state of Malaysian radio or my own internal, autonomous ‘evolution’. Because, in truth, I can’t listen to any English radio station here in Malaysia for more than 10 minutes before switching to the soothing confines of my in-car MP3 player (unless, of course, I need traffic information delivered to me via the sexy husk of Priscilla Patrick).
To some extent, I’m not blaming anyone for this. Musically speaking, its tough being in one’s thirties. You can’t let go of the character-defining music of your teens and early twenties, yet you want to stay connected to the popular music of the day (even though most of it makes you cringe or gag) because of the need to be relevant and feel “young”. But seriously, there is something about Malaysian radio which makes this dislocation harder to bear.
For the youth-oriented stations, the Malaysian predilection to R&B, hip hop and rap, so evident on all our competing stations, leaves me a bit cold, not because I don’t like the genres, but because their best forms would have, well, zero chance of ever getting any airplay (how many times have YOU heard Dr. Dre on Malaysian radio?). Usually what gets played is the crowd-friendly bleah variety. The same goes for pop and rock. For the older-oriented stations, their idea of musical variety does not mean varied, different musical styles and sub-genres, but rather 20 years of bubblegum pop. I mean, seriously, how many times do I need to hear the Backstreet Boys, Jon Secada and Rick Astley in a year?
Funnily enough, my flight from this bubblegum land has found me in strange waters. Lately, its been classical music for me, especially since the birth of our baby girl. Unfortunately, Astro’s Opus only works at home (you need a decoder), which is fine for baby, but there’ll be no in-car classical music for me unless I happen to be in Johor and get it beamed from Singapore. In fact, whenever I am back there, I switch between three Singaporean stations: the aforementioned Symphony 92.4, the BBC’s World Service and the irreverent non-state owned 91.3FM. On the drive back home to KL, when the signals of these three stations start to fade into static (somewhere around Pagoh), I actually feel rather like I am leaving civilisation.
The point I am trying to make is not that radio stations should cater to my whims and fancies (although that would be nice) but to make the point that I am only a small instance of a larger trend, that this is a new era of fragmented demographic, cultural and social groups manifesting themselves in even more fragmented musical and programming tastes; an era where most people’s iPod playlists are longer than a radio station’s; an era where more new music can be found on the Internet than on the radio; an era where I believe niches are getting smaller and smaller, and therefore, Big Radio should be getting smaller and smaller.
So, let me provide not just one business model for a new radio station, but three, all centred on the Klang Valley, given its distinct demographic difference from the rest of the country.
a) A free-to-air classical music station
Target demographic: arts lovers, highbrow types, retirees, M2H residents, LiteFM listerners, babies
Programming: opera, classical, contemporary vocals
Advertiser shortlist: Contemporary arts events, baby products.
b) Expat Radio
Demographic: the Klang Valley expat community and the more liberal English-speaking local population
Programming: call-in programs (expats need to vent sometimes and complain about their host country), and whatever musical tastes they have (say, Keith Urban for the Aussies and David Hasselhoff for the Germans… I’m kidding, ok?)
Advertiser shortlist: just pick up a copy of Expat magazine. Or The Peak. Or Tatler.
c) Campus Radio
Demographic: local, international and foreign students in the Klang Valley
Programming: college or local bands, student interest radio-zines, allowing space for free-form expressions by students themselves
Advertiser shortlist: any youth-oriented products and services would apply.
Advertisers and marketers all over the world know that successful marketing is all about focus, focus, focus. It would be great if our media owners or - better yet - the regulators of our media owners appreciated this fact.
Appeared in theSun, August 27th 2008. epaper link here.
Saturday 9 August 2008
What's in a Number?
The PIKOM PC Fair just blew through KL over the weekend. For those of you who missed it, or who have never gone for one, it’s a veritable bazaar of the latest and greatest in technology consumer products.
Faced with a bewildering array of computers, laptops, camcorders, digital cameras, printers, PDAs and their attendant accessories, the average consumer can be forgiven some confusion in choosing what’s right for him. Relying on the salesman for edification – while he is spouting rapid-fire Cantonese and brandishing his product in your face – sounds more like a recipe for uninhibited expenditure than careful product comparison..
The problem is worsened by the industries’ usage of numerical specifications. To paraphrase a well known saying, there are lies, there are damned lies, and then there are specifications.
Numbers never lie…
A curious thing often happens in the marketing of products: someone somewhere latches on to a product specification, something which has a number attached to it, and starts to emphasise it beyond all proportion in the promotional literature. That leads to an “arms race” of sorts, as rival manufacturers are sucked into this competition and need to retaliate with their own numbers.
The megapixel (MP) controversy is an excellent example. Consumers go around proudly brandishing their new 10MP cameras saying its so sharp and so clear. Actually, as photographers can tell you, megapixels have little to do with sharpness, clarity, or even the size of the image you want to blow up. As Ken Rockwell notes in his blog kenrockwell.com, if you want to shoot sharper pictures, have better technique, and if you want to print a larger print, stand further back when you take the shot. Stand 100 feet back and you can print a billboard with an ordinary 5MP camera.
I think its because marketers, especially consumer marketers, are pressured to accomplish two things: to sell and to simplify. The problem occurs when complex products are over-simplified by the marketing department in order to make the job of selling easier. The quantitative aspects of the product specifications, being easier to understand, start to replace the qualitative aspects of the product.
…but they only tell half the story
Certainly a 200 gig hard drive is better than a 100 gig hard drive, of course, but the key thing is that its better, ceteris paribus, “all things remaining the same.” In the tech business, all things rarely remain the same.
The tendency for consumers at exhibitions like PC Fair is to go spec-comparing. I think this is a big mistake. I’d rather go test-comparing. Nothing beats getting your hands and fingers on the product, working the interface, and bashing it about to simulate the real world.
To give an example, these are the “soft”, qualitative attributes I look for when it comes to laptops/notebooks:
• Keyboard layout and comfort. I can’t emphasise this enough. Nothing frustrates me on a notebook more than a non-intuitive placement of the ‘Home’, ‘End’, ‘Del’ and ‘Ins’ and arrow keys, since I use these a lot.
• Heat management. It is understandable for laptops to heat up and start to burn your laps (should you still be one of the few people in the world to take the term “laptop” literally), but when they start to burn your wrists too, it’s time to get another one.
• Screen brightness and lifetime. Bad laptops start to lose their shine, literally, after a few months or years, when the LCD backlight starts to fade. Its tough on the eyes and the bad thing is, you don’t even notice until its too late and your eyes have suffered for too long.
Now, do you see any of the above traits marketed by the notebook companies? Of course not, they’re just not as sexy as “2 gig RAM” and “1.6Ghz processor”.
Thread Counts
If you think it’s only the tech industry that creates these sorts of non-informative specification arms races, think again. For instance, would you say a 800-thread count cotton bed sheet is better than a 300-thread count cotton bed sheet?
You should know the answer to that one. If you don’t, you can Google “thread count” and find out for yourself.
Appeared in theSun, 8th August 2008. e-Paper link here.
Faced with a bewildering array of computers, laptops, camcorders, digital cameras, printers, PDAs and their attendant accessories, the average consumer can be forgiven some confusion in choosing what’s right for him. Relying on the salesman for edification – while he is spouting rapid-fire Cantonese and brandishing his product in your face – sounds more like a recipe for uninhibited expenditure than careful product comparison..
The problem is worsened by the industries’ usage of numerical specifications. To paraphrase a well known saying, there are lies, there are damned lies, and then there are specifications.
Numbers never lie…
A curious thing often happens in the marketing of products: someone somewhere latches on to a product specification, something which has a number attached to it, and starts to emphasise it beyond all proportion in the promotional literature. That leads to an “arms race” of sorts, as rival manufacturers are sucked into this competition and need to retaliate with their own numbers.
The megapixel (MP) controversy is an excellent example. Consumers go around proudly brandishing their new 10MP cameras saying its so sharp and so clear. Actually, as photographers can tell you, megapixels have little to do with sharpness, clarity, or even the size of the image you want to blow up. As Ken Rockwell notes in his blog kenrockwell.com, if you want to shoot sharper pictures, have better technique, and if you want to print a larger print, stand further back when you take the shot. Stand 100 feet back and you can print a billboard with an ordinary 5MP camera.
I think its because marketers, especially consumer marketers, are pressured to accomplish two things: to sell and to simplify. The problem occurs when complex products are over-simplified by the marketing department in order to make the job of selling easier. The quantitative aspects of the product specifications, being easier to understand, start to replace the qualitative aspects of the product.
…but they only tell half the story
Certainly a 200 gig hard drive is better than a 100 gig hard drive, of course, but the key thing is that its better, ceteris paribus, “all things remaining the same.” In the tech business, all things rarely remain the same.
The tendency for consumers at exhibitions like PC Fair is to go spec-comparing. I think this is a big mistake. I’d rather go test-comparing. Nothing beats getting your hands and fingers on the product, working the interface, and bashing it about to simulate the real world.
To give an example, these are the “soft”, qualitative attributes I look for when it comes to laptops/notebooks:
• Keyboard layout and comfort. I can’t emphasise this enough. Nothing frustrates me on a notebook more than a non-intuitive placement of the ‘Home’, ‘End’, ‘Del’ and ‘Ins’ and arrow keys, since I use these a lot.
• Heat management. It is understandable for laptops to heat up and start to burn your laps (should you still be one of the few people in the world to take the term “laptop” literally), but when they start to burn your wrists too, it’s time to get another one.
• Screen brightness and lifetime. Bad laptops start to lose their shine, literally, after a few months or years, when the LCD backlight starts to fade. Its tough on the eyes and the bad thing is, you don’t even notice until its too late and your eyes have suffered for too long.
Now, do you see any of the above traits marketed by the notebook companies? Of course not, they’re just not as sexy as “2 gig RAM” and “1.6Ghz processor”.
Thread Counts
If you think it’s only the tech industry that creates these sorts of non-informative specification arms races, think again. For instance, would you say a 800-thread count cotton bed sheet is better than a 300-thread count cotton bed sheet?
You should know the answer to that one. If you don’t, you can Google “thread count” and find out for yourself.
Appeared in theSun, 8th August 2008. e-Paper link here.
Wednesday 16 July 2008
Malaysia's Brand Unpopularity Index
Last year, the Association of Accredited Advertising Agents (4As) and Interbrand collaborated to compile the “Top 30 Most Valuable Brands” in Malaysia. All 30 brands were local in origin, and were ranked according to brand value, a concept that incorporates financial information when calculating the value, reputation and strength of a brand. The accumulated value of the brands (including heavyweights such as Maybank, Petronas, Maxis and Astro) was calculated to be RM56.6 billion.
All that is very well for CEOs to pat themselves on the back, but for marketers-on-the-street like you and me, their utility is rather questionable. I mean, if I have a couple of billion ringgit in the bank and one day I have a sudden itch to buy the Maybank brand (just the brand, mind you, nothing else), I guess I know which table to look up. But until that day comes, I think I’d rather find something more useful.
Brands, Love and Hate
As a marketer, I’d rather know how much my customers love my brand or hate it. Now, love or hate is rather hard to quantify, but its still a worthwhile venture. After all, don’t you think the adoration that Apple customers have for the company and the brand has something to do with its high Share Price/Earnings ratio? And wouldn’t you say the loathing that most tech consumers have for Microsoft might have something to do with the anti-trust lawsuits brought against it in the USA, Europe and now, China?
However, gauging love and hate has been hard to do. Interviews and surveys are notoriously unrealistic contexts to get people to say what they really feel. Fortunately, there’s the Internet.
Our methodology
There are as many ways to express your disdain for something, your utter lack of respect for its features and its worth, as there are languages. In BM, you can say something is kayu, as in “referee kayu”. In English, there’s “sucks”. As in, “Beckham sucks at everything except free kicks”. Its such a simple, evocative, and for our purposes, extremely useful term.
We used Google to conduct the search “(brand name) sucks”, with all of the 4A’s Malaysian Top 30 brands, to see the number of results that got returned. This search captures the exact two words appearing together in sequence, so that we get actual complaints about the brand on the Internet.
Then, we clean up the data a little bit by eliminating repetitions, and also disqualifying brands whose names are too generic to be captured (such as DiGi, TV3 and Giant). For those brands, we restrict our searches to websites in Malaysia to ensure the actual brands are being referenced, not other things (“TV3 sucks” might refer to a news channel in Norway, for instance, but not for a website hosted in Malaysia).
You could call this research a form of Netnography, but a lurking, pure observational form. With this data, we then compile…
The Brand Unpopularity Index (BUI)
All that is very well for CEOs to pat themselves on the back, but for marketers-on-the-street like you and me, their utility is rather questionable. I mean, if I have a couple of billion ringgit in the bank and one day I have a sudden itch to buy the Maybank brand (just the brand, mind you, nothing else), I guess I know which table to look up. But until that day comes, I think I’d rather find something more useful.
Brands, Love and Hate
As a marketer, I’d rather know how much my customers love my brand or hate it. Now, love or hate is rather hard to quantify, but its still a worthwhile venture. After all, don’t you think the adoration that Apple customers have for the company and the brand has something to do with its high Share Price/Earnings ratio? And wouldn’t you say the loathing that most tech consumers have for Microsoft might have something to do with the anti-trust lawsuits brought against it in the USA, Europe and now, China?
However, gauging love and hate has been hard to do. Interviews and surveys are notoriously unrealistic contexts to get people to say what they really feel. Fortunately, there’s the Internet.
Our methodology
There are as many ways to express your disdain for something, your utter lack of respect for its features and its worth, as there are languages. In BM, you can say something is kayu, as in “referee kayu”. In English, there’s “sucks”. As in, “Beckham sucks at everything except free kicks”. Its such a simple, evocative, and for our purposes, extremely useful term.
We used Google to conduct the search “(brand name) sucks”, with all of the 4A’s Malaysian Top 30 brands, to see the number of results that got returned. This search captures the exact two words appearing together in sequence, so that we get actual complaints about the brand on the Internet.
Then, we clean up the data a little bit by eliminating repetitions, and also disqualifying brands whose names are too generic to be captured (such as DiGi, TV3 and Giant). For those brands, we restrict our searches to websites in Malaysia to ensure the actual brands are being referenced, not other things (“TV3 sucks” might refer to a news channel in Norway, for instance, but not for a website hosted in Malaysia).
You could call this research a form of Netnography, but a lurking, pure observational form. With this data, we then compile…
The Brand Unpopularity Index (BUI)
The attached table shows the abbreviated results of the index, some of which are obvious, and some, downright surprising.
First of all, I could not resist the temptation to include “streamyx”, Telekom Malaysia’s broadband product brand, even though it did not feature in Malaysia’s Top 30. I did so because I think one would be hard-pressed to find a more loathed brand in Malaysia. With a score of 10,500 among worldwide web search results and 1,440 in Malaysia web search results, it is far and away the most unpopular Malaysian brand online, and it seems to be growing in unpopularity by the day.
Among the Top 30 Brands in Malaysia, the top 5 most unpopular brands online are (in order) Astro, Maxis, Proton, Celcom and AirAsia. Maxis is a bit of surprise, but the results are unmistakable: with 397 and 174 incidences of the phrase “maxis sucks” recorded worldwide and in Malaysia respectively, it is the clear leader in online complaints as far as mobile telcos go, with about twice as many complaints as the next most unpopular brand, Celcom.
Some other interesting insights include the fact that the most unpopular banks in Malaysia are Maybank, CIMB and RHB, in that order, and that complaints about Proton outweigh Perodua by a factor of approximately 15 to 1.
Caveats and Objections
Of course, there could be some objections to this methodology. Let’s list them:
1. High market share and large number of users leads to higher incidences of complaints. It might be argued by Maxis, for instance, that all this shows is that more people complain about Maxis because more people are using Maxis than others, which gives the impression that Maxis is more unpopular when in actual fact, on a per capita basis, Maxis has fewer complaints per customer.
Answering that is simple: we can weight the complaints on a market share basis, and adjust the scoring accordingly. Now, given that the number of complaints for Maxis outnumber Celcom by about 2 to 1, it would mean that Maxis' market share would have to be twice Celcom's for its complaints to be proportionate. Anyone know Maxis' market share right now? :-)
2. English and Youth Centric. This scoring only reflects English users and more importantly youth users, since youth are more likely to use the word “sucks” or, in fact, use the Internet.
No argument there. We are talking, however, about the English Internet-using public, which is a pretty important demographic. Moreover, this scoring can be adapted to other languages as long as a term can be found that is as efficient and ubiquitous as the term “sucks”. As the Internet gets more ubiquitous, it should become more representative of the population at large.
Listening in
As we trawl through the online complaints, we get a sense of the inherent issues which plague each brand, voiced by customers who simply want to vent (sometimes anonymously) their frustration. Some of these complaints are one-off but some of them sound a recurring note, such as the fact that Astro has no toll-free customer line, that the Proton Waja’s power windows are the work of the devil, and that it is AirAsia’s delays that have generated the ill-will.
Far more important, I believe, for management and marketing executives to listen in on these customers venting than to congratulate themselves on achieving a brand value of RMx million. Listening to theses voices can result in changes both simple and fundamental, from quickly identifying problems in certain products or processes, to, who knows, complete changes in strategy.
For more details on our Netnographic report, email me. Knowing the problem is halfway to knowing the solution!
Too edgy for theSun apparently... rejected by the News Editor!
Wednesday 25 June 2008
An Open Letter to AirAsia and Firefly: Why LCC's should adopt "Standby"
To Tony Fernandes (CEO, AirAsia) and Eddy Leong (CEO, Firefly):
Hey, I have a question for you two. Are low cost carriers (LCC’s) interested in goodwill to customers? Should they be? After all, some might say a low, low price is goodwill enough, while others might say, you can never have too much of it from your customers.
I’ll get to the point. LCC’s are famous for one thing – low prices – but notorious for another – no changes. To be precise, both Firefly and Air Asia allow itinerary changes, normally 48 hours before departure, but charge RM50 for the privilege. If you want to change within 48 hours of your departure, too bad, you’ll have to buy a new ticket.
We don’t know how much LCC’s collect from such “punishment” fees, but it has left some of us feeling LCC’s have made it a point of profiting from people’s mistakes, a science of making passenger’s losses their gains. Its bad for customer goodwill, and I humbly offer a small way for LCC’s to regain some of it back.
Both your airlines have a standard industry practice of prices going up as capacity reduces or as time gets nearer to departure, based on a proprietary formula. The challenge to maximising revenue involves striking a balance between getting the best price per seat filled, and filling all seats, since your seats are 100% perishable – i.e. their value drops to zero the moment the plane takes off and their cost cannot be recovered. Selling empty seats just before the plane takes off, even at RM1 per seat, in theory, helps to offset the cost of that flight.
This trick is being used by, of all people, MAS, which unlike you two is a Full Service Carrier (FSC). MAS is using this argument to justify its RM0 promotion – just paying the fuel surcharge is helping MAS to offset losses from its otherwise empty seats. MAS is also saying that it is selling seats that would have been unsold anyway, presumably based on mined historical data showing spare capacity on such flights. It says it is therefore not cannibalising from its full-fare paying customers. I won’t go into the details of this perhaps arguable line of reasoning, but I will argue that just as MAS is taking a leaf from the LCC playbook, so can the LCC’s borrow a trick from the FSC’s sleeve. Its called “Standby”.
“Standby”, in the FSC sense, is a way of dealing with the problem of no-shows. No-shows are people who book flights but don’t show up, and is more a FSC’s problem than a LCC’s, since FSCs allow bookings without making payment, while LCC’s have no such thing. “Standby” passengers are people literally waiting at the airport for no-shows so they can get on board and fill those seats.
I would argue for LCC’s to adopt “Standbys”, but to adapt it to an LCC form of usage. I know what you guys are worried about: you’re worried people will wait until the last minute to book, taking a chance that prices might get lower by going on “Standby”. You’re also worried about not making enough from business travellers, who are willing to pay top dollar for last minute flights. I’m here to soothe your profit-making nerves. Just adopt the “Standby” rule for ticketed passengers only who want to switch to an earlier flight, and charge them a nominal admin fee for the privilege to do so (and by “nominal”, I mean less than RM50).
You see, people make mistakes one time or another. Why hold them to account, when you can help them rectify it, make a little profit and leave them happy? Allowing only ticketed passengers to go on Standby for earlier flights eliminates the purported fear of opportunists, helps to reduce losses from empty seats, allows you to re-sell seats that had been paid for, and generates goodwill for passengers who would like to fly a bit earlier and are willing to pay (within reason) for their mistake.
There are of course other questions, such as when precisely to open the Standby window, how far in advance can the ticket be, how much to charge etc. I’ll leave that to you smart guys. After all, I’m just a poor passenger, writing this at the Coffee Bean in Bayan Lepas after having waited 5 hours for my flight because Firefly didn’t let me board an earlier one even though it was clearly not full. 5 hours which robbed me of any goodwill I might have had flying to and from Subang, but which enabled me to finish this column giving you guys free, unsolicited advice.
Just another passenger’s loss turning into your gain, I suppose.
As seen in theSun, 25th June 2008. PDF version here.
Hey, I have a question for you two. Are low cost carriers (LCC’s) interested in goodwill to customers? Should they be? After all, some might say a low, low price is goodwill enough, while others might say, you can never have too much of it from your customers.
I’ll get to the point. LCC’s are famous for one thing – low prices – but notorious for another – no changes. To be precise, both Firefly and Air Asia allow itinerary changes, normally 48 hours before departure, but charge RM50 for the privilege. If you want to change within 48 hours of your departure, too bad, you’ll have to buy a new ticket.
We don’t know how much LCC’s collect from such “punishment” fees, but it has left some of us feeling LCC’s have made it a point of profiting from people’s mistakes, a science of making passenger’s losses their gains. Its bad for customer goodwill, and I humbly offer a small way for LCC’s to regain some of it back.
Both your airlines have a standard industry practice of prices going up as capacity reduces or as time gets nearer to departure, based on a proprietary formula. The challenge to maximising revenue involves striking a balance between getting the best price per seat filled, and filling all seats, since your seats are 100% perishable – i.e. their value drops to zero the moment the plane takes off and their cost cannot be recovered. Selling empty seats just before the plane takes off, even at RM1 per seat, in theory, helps to offset the cost of that flight.
This trick is being used by, of all people, MAS, which unlike you two is a Full Service Carrier (FSC). MAS is using this argument to justify its RM0 promotion – just paying the fuel surcharge is helping MAS to offset losses from its otherwise empty seats. MAS is also saying that it is selling seats that would have been unsold anyway, presumably based on mined historical data showing spare capacity on such flights. It says it is therefore not cannibalising from its full-fare paying customers. I won’t go into the details of this perhaps arguable line of reasoning, but I will argue that just as MAS is taking a leaf from the LCC playbook, so can the LCC’s borrow a trick from the FSC’s sleeve. Its called “Standby”.
“Standby”, in the FSC sense, is a way of dealing with the problem of no-shows. No-shows are people who book flights but don’t show up, and is more a FSC’s problem than a LCC’s, since FSCs allow bookings without making payment, while LCC’s have no such thing. “Standby” passengers are people literally waiting at the airport for no-shows so they can get on board and fill those seats.
I would argue for LCC’s to adopt “Standbys”, but to adapt it to an LCC form of usage. I know what you guys are worried about: you’re worried people will wait until the last minute to book, taking a chance that prices might get lower by going on “Standby”. You’re also worried about not making enough from business travellers, who are willing to pay top dollar for last minute flights. I’m here to soothe your profit-making nerves. Just adopt the “Standby” rule for ticketed passengers only who want to switch to an earlier flight, and charge them a nominal admin fee for the privilege to do so (and by “nominal”, I mean less than RM50).
You see, people make mistakes one time or another. Why hold them to account, when you can help them rectify it, make a little profit and leave them happy? Allowing only ticketed passengers to go on Standby for earlier flights eliminates the purported fear of opportunists, helps to reduce losses from empty seats, allows you to re-sell seats that had been paid for, and generates goodwill for passengers who would like to fly a bit earlier and are willing to pay (within reason) for their mistake.
There are of course other questions, such as when precisely to open the Standby window, how far in advance can the ticket be, how much to charge etc. I’ll leave that to you smart guys. After all, I’m just a poor passenger, writing this at the Coffee Bean in Bayan Lepas after having waited 5 hours for my flight because Firefly didn’t let me board an earlier one even though it was clearly not full. 5 hours which robbed me of any goodwill I might have had flying to and from Subang, but which enabled me to finish this column giving you guys free, unsolicited advice.
Just another passenger’s loss turning into your gain, I suppose.
As seen in theSun, 25th June 2008. PDF version here.
Friday 6 June 2008
Comparative Advertising
Years ago, the makers of Top, a washing detergent, ran a TV ad which emphasised one of its features: it was more “liquid” in viscosity and therefore would not clog up or develop residues in customers’ washing machines, unlike an unnamed but extremely obvious competitor. Some time later, the makers of Dynamo, another brand of washing detergent, ran ads which criticised an “other” washing detergent as comprising of “mostly water” and therefore did not have good cleaning power! This continued for a few months, much to the amusement of the TV-watching public, unaccustomed to over-the-air spats between rival consumer brands.
Of course, none of these commercials ever directly named the competing brand, and that is the norm, if not the law. Comparative advertising, in which competing brands are explicitly mentioned and compared, is not expressly legal here in Malaysia, whereas it is legal (under guidelines and restrictions related to avoiding misleading disclosures) in Europe, United States, Canada, Australia and many other developed countries.
Pros and Cons
The argument against comparative advertising is that lesser-known brands are riding on the reputation of the more well-known target brands when making comparisons to them. Even if the claims are truthful, they constitute a form a trademark violation. Nevertheless, it has been judged in the West that the pros far outweigh the cons. The United States’ Federal Trade Commission (FTC) asserts that comparative advertising is “a source of important information to consumers and assists them in making rational purchase decisions”. It also “encourages product improvement and innovation, and can lead to lower prices in the marketplace”.
I certainly agree. Nowadays, with Malaysia being a developed and open consumer market, I believe our priority is to give consumers more freedom to choose, and to reduce the barriers to entry for new business players. Certainly this would be helpful in combating the inflation currently sweeping through our economy.
Comparative advertising, Malaysian style
However, without amendments to our Trademarks Act (such as those done in the UK and Australia), few companies would ever dare to embark on a comparative advertising campaign here. Still, we have seen in recent years an increase in comparative advertising of an indirect sort: witness Tesco’s advertising of their lower prices, compared with two “other” hypermarket market chains (with the “other” written in their respective font types!), and Digi using two different coloured ducks compared with their yellow ducks to signify the other 2 mobile telcos.
To me, it’s kind of like making faces at the class bully when he’s not looking, and acting normal when he turns around – fun and naughty, perhaps, but ultimately pointless.
Who should do it
Let’s imagine that if comparative advertising was legal, who should use it and how should they use it? Typically, it would be new entrants or companies with low market share, but let’s highlight two examples:
- Companies seeking to exploit overvalued or overpriced brands, such as generic drug companies who are free to produce copies of drugs whose patents have expired (e.g. “proven to work just like Lipitor – for half the price!”). Lipitor’s patent expires in 2010, in case you’re wondering.
- Companies’ whose products need visual side-by-side comparison of performances with competitors to create effective differentiation (anybody who saw the video comparing the 4WD systems of the 2001 Nissan X-Trail and the 2001 Honda CR-V knows what I’m talking about!).
Two elements of success
Comparative advertising campaigns have to achieve 2 elements to be successful: first, overcoming customer scepticism over the blatantness of your comparative claims by making sure the comparison appears fair and unbiased; and second, ensuring the whole ad does not backfire by reinforcing the brand recall of your targeted, competitor brand.
Probably the most famous case of comparative advertising is the Pepsi Challenge, run in the USA in the 1980’s. Consumers were challenged to blind-taste Pepsi and Coke, and name the one they preferred. Those that chose Pepsi consistently outnumbered those that chose Coke, a fact trumpeted by Pepsi for years and which helped it steadily erode Coke’s market share in the 1980’s. The “Pepsi Challenge” even became a buzzword for a confident, in-your-face, “let’s see who’s better” kind of confrontation.
Only many years later did Malcolm Gladwell in his book ‘Blink’ point out that the kind of “sip test” done in the Pepsi Challenge favoured the sweeter flavour of Pepsi, whereas a real “drink test” would even out the odds, given that the cloying effect of excessive sweetness would have time to build and thus make the less-sweet Coke more preferable. By that time, Pepsi had long climbed to being a respectable rival to Coke in the soft drink wars.
I did say you only have to appear unbiased, didn’t I? ;-)
Saturday 10 May 2008
The Baby Has Landed
Ever since my daughter was born 6 months ago, I’ve had many questions from my bachelor buddies about how it feels to be a father. To be honest, my mumbled answers have dissastisfied even me, as I’ve been unable to fully articulate the impact of fathering a child. Nothing like a deadline to spur the effort, though, so here I aim answer this, by presenting how one household moves, overnight, from one demographic check box to another.
I’m speaking, of course, of moving from DINK (Dual Income No Kids) to DIWK (Dual Income With Kid). Personally, I prefer the typical Malaysian variation of DIWK, which is DIWKOM (Dual Income With Kid, One Maid). But more on that later.
Bye, bye, disposable income
The concept of disposable income, long a treasured hallmark of the DINK household (treasured among marketers who target them anyway), needs to be, well, disposed of. Somewhere between the Avent bottle steamer and the Graco car seat-stroller combo, the idea of disposable income got tossed out with last night’s used Mamy Poko diapers. Disposable income used to be something we as a couple would spend on ourselves, as a treat. The problem is, when one has a kid, one has to think on behalf of a 5 kg bundle of limbs and gurgles whose needs, in the eyes of baby product marketers, are limitless.
I’d written in a previous column that all consumer decisions were motivated by either fear or greed (“Dealing with Fear and Greed in Marketing”, The Sun, 19th September 2007), but the intensity of this exploitation in baby products gets taken up a few notches: those who worry about SIDS or “cot death” can purchase Respisense monitors which detect and warn parents within seconds of baby not breathing, while parents who want the next Einstein on their hands can splurge on Japanese flash card systems that cost more than RM2,000 per set!
Faced with this onslaught, new parents quickly learn a few skills or risk slipping into debt: the first is bargain-hunting (“Diaper promotion at Jusco! Must go!”), and the second is a more nuanced form of prioritising. I’ve noticed that more mature parents recognise that while a newborn certainly brings in new expenditures to the household, baby’s needs are actually quite simple and revolve around 5 basic areas: sleeping, eating, bathing, playing and passing motion. Ensuring these proceed smoothly, and that baby is healthy, remains the main priority.
Outsourcing and consultants
No dual income household, except perhaps with the help of kind grandparents, can afford to care for baby without some domestic help. Having a stranger enter your lives to care for your most precious possession sounds anathema to a lot of people, but to an increasing number of working couples, there is little choice. In management-speak, my wife calls it “outsourcing the non-core functions” – the aforementioned eating, sleeping, bathing, passing motion and playing. That sounds horrendous, of course, but that principally is what baby is doing with the domestic help when mom and dad are away earning the money to ensure these activities go on!
Another corporate parallel is the bringing in of “’outside consultants” in baby care. To some more traditional households, this is still the grandparents and grandparents-in-law, or assorted well-meaning and experienced aunties. However, an increasing number (ourselves included) turn to a select few books in the booming baby-raising self-help book market. This often leads to tension when the advice differs from traditional sources: aunties have been known to somewhat sarcastically remark, during one of baby’s occasional caterwauls, “So what does ‘The Book’ have to say?”
A Different Mindset
The upshot of all this is that the consumption of a DIWKOM household comes to resemble less the agglomeration of 2 different consumers’ utility within a DINK household, and more of a corporate unit which maximises overall capability. A brief explanation is required.
Utility, which stands for pleasure, happiness, fun, is the basic unit of ecnomics – we buy goods and services to maximise our utility. But the basic kernel of economic development – whether of individuals, families, societies or nations – is that of capability, an approach pioneered by Amartya Sen, the Nobel prize-winning economist. Capability development is about being capable of doing more through a process of being more learned, more long-lived, saving time, or being more wealthy.
Put simply, there is no better incentive to capability development than having your progeny stare at you googly-eyed every day before you go to work. Parents need to take a long hard look at themselves and ask, what kind of environment do we want for our child, and what can we afford? The answer, of course, is, you try your darndest to provide the best you can.
Economic studies have long shown that married individuals outperform singles in wages and overall cumulative lifetime earnings. I assure you, my single friends, that while this may be true, it is more out of necessity rather than any God-given talent or smarts. So if you really want to get rich, stop messing around with your life, get married, and have a baby!
As seen in theSun, 7th May 2008. PDF version here.
I’m speaking, of course, of moving from DINK (Dual Income No Kids) to DIWK (Dual Income With Kid). Personally, I prefer the typical Malaysian variation of DIWK, which is DIWKOM (Dual Income With Kid, One Maid). But more on that later.
Bye, bye, disposable income
The concept of disposable income, long a treasured hallmark of the DINK household (treasured among marketers who target them anyway), needs to be, well, disposed of. Somewhere between the Avent bottle steamer and the Graco car seat-stroller combo, the idea of disposable income got tossed out with last night’s used Mamy Poko diapers. Disposable income used to be something we as a couple would spend on ourselves, as a treat. The problem is, when one has a kid, one has to think on behalf of a 5 kg bundle of limbs and gurgles whose needs, in the eyes of baby product marketers, are limitless.
I’d written in a previous column that all consumer decisions were motivated by either fear or greed (“Dealing with Fear and Greed in Marketing”, The Sun, 19th September 2007), but the intensity of this exploitation in baby products gets taken up a few notches: those who worry about SIDS or “cot death” can purchase Respisense monitors which detect and warn parents within seconds of baby not breathing, while parents who want the next Einstein on their hands can splurge on Japanese flash card systems that cost more than RM2,000 per set!
Faced with this onslaught, new parents quickly learn a few skills or risk slipping into debt: the first is bargain-hunting (“Diaper promotion at Jusco! Must go!”), and the second is a more nuanced form of prioritising. I’ve noticed that more mature parents recognise that while a newborn certainly brings in new expenditures to the household, baby’s needs are actually quite simple and revolve around 5 basic areas: sleeping, eating, bathing, playing and passing motion. Ensuring these proceed smoothly, and that baby is healthy, remains the main priority.
Outsourcing and consultants
No dual income household, except perhaps with the help of kind grandparents, can afford to care for baby without some domestic help. Having a stranger enter your lives to care for your most precious possession sounds anathema to a lot of people, but to an increasing number of working couples, there is little choice. In management-speak, my wife calls it “outsourcing the non-core functions” – the aforementioned eating, sleeping, bathing, passing motion and playing. That sounds horrendous, of course, but that principally is what baby is doing with the domestic help when mom and dad are away earning the money to ensure these activities go on!
Another corporate parallel is the bringing in of “’outside consultants” in baby care. To some more traditional households, this is still the grandparents and grandparents-in-law, or assorted well-meaning and experienced aunties. However, an increasing number (ourselves included) turn to a select few books in the booming baby-raising self-help book market. This often leads to tension when the advice differs from traditional sources: aunties have been known to somewhat sarcastically remark, during one of baby’s occasional caterwauls, “So what does ‘The Book’ have to say?”
A Different Mindset
The upshot of all this is that the consumption of a DIWKOM household comes to resemble less the agglomeration of 2 different consumers’ utility within a DINK household, and more of a corporate unit which maximises overall capability. A brief explanation is required.
Utility, which stands for pleasure, happiness, fun, is the basic unit of ecnomics – we buy goods and services to maximise our utility. But the basic kernel of economic development – whether of individuals, families, societies or nations – is that of capability, an approach pioneered by Amartya Sen, the Nobel prize-winning economist. Capability development is about being capable of doing more through a process of being more learned, more long-lived, saving time, or being more wealthy.
Put simply, there is no better incentive to capability development than having your progeny stare at you googly-eyed every day before you go to work. Parents need to take a long hard look at themselves and ask, what kind of environment do we want for our child, and what can we afford? The answer, of course, is, you try your darndest to provide the best you can.
Economic studies have long shown that married individuals outperform singles in wages and overall cumulative lifetime earnings. I assure you, my single friends, that while this may be true, it is more out of necessity rather than any God-given talent or smarts. So if you really want to get rich, stop messing around with your life, get married, and have a baby!
As seen in theSun, 7th May 2008. PDF version here.
Wednesday 16 April 2008
Educating the Market
The idea of educating customers is a bit of a conundrum. First of all, businesses survive on an asymmetry of information or of capability – because I as a business know something or can do something you can’t, you as a customer have to pay me for my product or service. Why would a business expend resources to reduce that asymmetry by educating customers at all, even in the most minor way?
Getting from Baffled to Buyer
That question is answered for me every time we participate in a product exhibition, which we are doing over the course of 3 weekends this month. As purveyors of solar lighting, we use these exhibitions to showcase our wire-free solar-powered lighting for homes, gardens, parks and municipalities. Most customers can understand that solar lighting is a convenient and cost-saving solution, but when we remind them that there still remains the necessity of changing the batteries within the lamps every 1 to 3 years (depending on the application), many a time they return a blank stare which reads: “you mean there are batteries in there? I thought this was solar.”
This requires a short lesson in photovoltaics, the process of solar electrification and charging of batteries for use at night, when the sun has set. Most Malaysians reference solar technology with water heaters, which use a different solar thermal process using vacuum tubes that does not require batteries.
Education therefore is a must, because while one can never underestimate the ignorance of people, one should also not underestimate their ability to learn quickly, given proper information! For new product category openers especially, to convert the universe of ignorant prospects to knowledgeable customers, education is therefore required and can be quite a large expense. The usual route is to sponsor workshops or buy advertorial space or ply the convention route, educating customers face-to-face.
Getting from Cheapskate to Snob
There is another case where it serves a company’s interest to invest in educating customers, and that is to educate them on how to be more discerning when it comes to the product category. Premium suppliers tend to do this a lot more. Ever notice that, within the diamond trade, those who extol and are eager to teach the “4 C’s” – cut, clarity, colour, carat – are the premium retailers? Naturally, they would be more eager to highlight to you such factors, which help to differentiate and price their diamonds higher.
Sometimes, though, you don’t have to go overboard on this process of education. Oral-B toothpaste, for example, is so expensive it boggles the mind: a 100ml tube costs over RM10 when other brands, weighing in at twice the volume or more, cost about RM5. A phone call to the company hotline yielded 2 explanations: the Oral-B brand name is “trusted and respected” (uh, okay), and that each tube has a 0.375% content of “stannous fluoride”, which presumably is great for teeth and very expensive.
While the phone call didn’t leave me very convinced, one cannot doubt that the marketing formula works. Unlike the competition, the Oral-B packaging is subdued, with no cartoon elements, no big bold letters, just simple, plain, almost medical themes. Coupled with the high price, it should be sufficient to signal to discerning customers its better quality.
Forums - the new frontier
Nowadays, customer education can happen even with no effort made by the company. Curious customers congregate voluntarily on the Internet in online forums, sharing what they know about your product and searching for clues or tips on using them. A friend of mine who recently bought a German car discovered a rattling noise emanating from the passenger door and decided to go online to a forum in search of answers. The good news is, he discovered a community of others with the same problem; the bad news is, all off them reported it would cost too much to fix and were grousing about it!
For those businesses in a position to do so, creating an online forum alongside their usual standard web site is a simple and cost effective way to manage the education of and communications to their more enthusiastic customers. (It sure beats having them complain elsewhere!) Just be prepared to interact more with potentially unhappy ones.
The ultimate business differentiator
There’s an old saying in business that goes: “The more you tell, the more you sell.” The willingness to educate your customers so that they can make informed decisions is the true mark of a responsible business that is confident its products and services bring value to its customers. In that sense, it does not matter whether the company is at the premium end or not, it should invest in education as long as its wares are competitive in the marketplace.
Appeared in "The Sun", April 16th 2008. PDF version here.
Getting from Baffled to Buyer
That question is answered for me every time we participate in a product exhibition, which we are doing over the course of 3 weekends this month. As purveyors of solar lighting, we use these exhibitions to showcase our wire-free solar-powered lighting for homes, gardens, parks and municipalities. Most customers can understand that solar lighting is a convenient and cost-saving solution, but when we remind them that there still remains the necessity of changing the batteries within the lamps every 1 to 3 years (depending on the application), many a time they return a blank stare which reads: “you mean there are batteries in there? I thought this was solar.”
This requires a short lesson in photovoltaics, the process of solar electrification and charging of batteries for use at night, when the sun has set. Most Malaysians reference solar technology with water heaters, which use a different solar thermal process using vacuum tubes that does not require batteries.
Education therefore is a must, because while one can never underestimate the ignorance of people, one should also not underestimate their ability to learn quickly, given proper information! For new product category openers especially, to convert the universe of ignorant prospects to knowledgeable customers, education is therefore required and can be quite a large expense. The usual route is to sponsor workshops or buy advertorial space or ply the convention route, educating customers face-to-face.
Getting from Cheapskate to Snob
There is another case where it serves a company’s interest to invest in educating customers, and that is to educate them on how to be more discerning when it comes to the product category. Premium suppliers tend to do this a lot more. Ever notice that, within the diamond trade, those who extol and are eager to teach the “4 C’s” – cut, clarity, colour, carat – are the premium retailers? Naturally, they would be more eager to highlight to you such factors, which help to differentiate and price their diamonds higher.
Sometimes, though, you don’t have to go overboard on this process of education. Oral-B toothpaste, for example, is so expensive it boggles the mind: a 100ml tube costs over RM10 when other brands, weighing in at twice the volume or more, cost about RM5. A phone call to the company hotline yielded 2 explanations: the Oral-B brand name is “trusted and respected” (uh, okay), and that each tube has a 0.375% content of “stannous fluoride”, which presumably is great for teeth and very expensive.
While the phone call didn’t leave me very convinced, one cannot doubt that the marketing formula works. Unlike the competition, the Oral-B packaging is subdued, with no cartoon elements, no big bold letters, just simple, plain, almost medical themes. Coupled with the high price, it should be sufficient to signal to discerning customers its better quality.
Forums - the new frontier
Nowadays, customer education can happen even with no effort made by the company. Curious customers congregate voluntarily on the Internet in online forums, sharing what they know about your product and searching for clues or tips on using them. A friend of mine who recently bought a German car discovered a rattling noise emanating from the passenger door and decided to go online to a forum in search of answers. The good news is, he discovered a community of others with the same problem; the bad news is, all off them reported it would cost too much to fix and were grousing about it!
For those businesses in a position to do so, creating an online forum alongside their usual standard web site is a simple and cost effective way to manage the education of and communications to their more enthusiastic customers. (It sure beats having them complain elsewhere!) Just be prepared to interact more with potentially unhappy ones.
The ultimate business differentiator
There’s an old saying in business that goes: “The more you tell, the more you sell.” The willingness to educate your customers so that they can make informed decisions is the true mark of a responsible business that is confident its products and services bring value to its customers. In that sense, it does not matter whether the company is at the premium end or not, it should invest in education as long as its wares are competitive in the marketplace.
Appeared in "The Sun", April 16th 2008. PDF version here.
Tuesday 15 April 2008
Marketing in an Election Campaign
The Malaysian General Elections of 2008 have come and gone and the results are there for all to see. Doubtless they are being analysed with a fine-tooth comb by political analysts, but I thought it would be interesting to review a few of the marketing tools deployed - whether consciously or unconsciously - and the challenges faced by the various parties and candidates in the campaigning that are similar to those faced by marketers.
Positioning
Arguably one of the concepts that created the discipline of marketing as we know it, positioning is about placing your company or your product in the mind of the purchaser, relative to other competitors and competitor features. For BN, the banners and ads were everywhere, and every where, they said the same, consistent message: “Security. Peace. Prosperity.” BN’s TV ad campaign had “testimonial” style monologues about how Malaysia was a harmonious and free society under the BN.
Effective positioning requires an understanding of the market being targeted and your own existing image within that market. Amongst the educated urban voters of Malaysia, the videos came across as over-produced and somewhat strained. The campaign was cynically derided as scaremongering, and urban voters overall seem to have responded negatively. In hindsight, however, there seems little the BN could have done differently, thus elegantly representing a classic marketing dilemma: when you’re number 1, you have less freedom to re-position yourself and you need imagination and daring to do so.
On an individual basis, DAP candidate for PJ North Tony Pua positioned himself through speeches, blogs and interviews as an intellectual heavyweight relative to his BN opponent, that he would be an effective policy maker who would be able to bring some rigour to debates in parliament, and therefore much more than an MP who simply catered to the basic needs of the constituents. This must have struck a chord with the educated, relatively affluent neighbourhood of PJ North, given the results that came out.
Emotional vs. Rational
The BN took out numerous ads in both TV and print media, highlighting development achievements and economic statistics. Attention was drawn to, among others, subsidised health care, GDP growth and the provision of JPA scholarships to non-Bumiputras since 2000. While it certainly may have swayed some voters, it ignored a basic tenet known to experienced marketers: purchasing, like voting, is often an emotional decision. Something about the mood on the ground, especially in the states that went over to the oppposition, was misread and ignored in the churning out of statistics and figures which were un-meaningful to the man on the street. It’s like telling your customers that your new model baseline car has improved its 0-100km/h performance from 12.9 seconds to 11.5 seconds. Big whoop.
Consumer apathy
Marketers are faced with a constant challenge of consumer apathy; for politicians, sometimes even more so. As one lady commented to me during a dinner party last week, “I’ll register to vote when there is someone worth voting for.” Not a sentiment to be sniffed at: this election, there were 10.9 million registered voters, but there were still over 4 million unregistered voters. Couple that with an estimated turnout of 75% and you have about 7 million eligible voters out there who didn’t care to vote for anyone, for one reason or another.
I think the appropriate marketing analogy is about product categories prior to being ignited by product “blockbusters”. For instance, there was bottled water before there was Evian, and there were sexual enhancement drugs before there was Viagra, but look what they did to the category after they launched. In this case, a political candidate “blockbuster” combines vigour, charisma and inspiration, and it takes a politician like Barack Obama to smash both electoral roll register and donation records. In the absence of that blockbuster, the voters/consumers will simply stay at home, literally.
Marketing can only do so much
This might sound like heresy coming from a writer of a marketing column, but all marketers know that sometimes, it doesn’t matter how much is spent in a promotional campaign or how well executed it is if the product does not deliver or is perceived not to deliver on its promise. In fact, the phrase “a triumph of marketing” is often used disparagingly about a product which is successful beyond what it is entitled to be, according to objective measurements of its benefits. In this case, BN certainly needed one such triumph but the campaign that was created could not turn the tide of disaffection that had grown over the last 4 years.
Appeared (?) in The Sun (? date). Sorry, was in South Africa at the time, and didn't catch it.
Positioning
Arguably one of the concepts that created the discipline of marketing as we know it, positioning is about placing your company or your product in the mind of the purchaser, relative to other competitors and competitor features. For BN, the banners and ads were everywhere, and every where, they said the same, consistent message: “Security. Peace. Prosperity.” BN’s TV ad campaign had “testimonial” style monologues about how Malaysia was a harmonious and free society under the BN.
Effective positioning requires an understanding of the market being targeted and your own existing image within that market. Amongst the educated urban voters of Malaysia, the videos came across as over-produced and somewhat strained. The campaign was cynically derided as scaremongering, and urban voters overall seem to have responded negatively. In hindsight, however, there seems little the BN could have done differently, thus elegantly representing a classic marketing dilemma: when you’re number 1, you have less freedom to re-position yourself and you need imagination and daring to do so.
On an individual basis, DAP candidate for PJ North Tony Pua positioned himself through speeches, blogs and interviews as an intellectual heavyweight relative to his BN opponent, that he would be an effective policy maker who would be able to bring some rigour to debates in parliament, and therefore much more than an MP who simply catered to the basic needs of the constituents. This must have struck a chord with the educated, relatively affluent neighbourhood of PJ North, given the results that came out.
Emotional vs. Rational
The BN took out numerous ads in both TV and print media, highlighting development achievements and economic statistics. Attention was drawn to, among others, subsidised health care, GDP growth and the provision of JPA scholarships to non-Bumiputras since 2000. While it certainly may have swayed some voters, it ignored a basic tenet known to experienced marketers: purchasing, like voting, is often an emotional decision. Something about the mood on the ground, especially in the states that went over to the oppposition, was misread and ignored in the churning out of statistics and figures which were un-meaningful to the man on the street. It’s like telling your customers that your new model baseline car has improved its 0-100km/h performance from 12.9 seconds to 11.5 seconds. Big whoop.
Consumer apathy
Marketers are faced with a constant challenge of consumer apathy; for politicians, sometimes even more so. As one lady commented to me during a dinner party last week, “I’ll register to vote when there is someone worth voting for.” Not a sentiment to be sniffed at: this election, there were 10.9 million registered voters, but there were still over 4 million unregistered voters. Couple that with an estimated turnout of 75% and you have about 7 million eligible voters out there who didn’t care to vote for anyone, for one reason or another.
I think the appropriate marketing analogy is about product categories prior to being ignited by product “blockbusters”. For instance, there was bottled water before there was Evian, and there were sexual enhancement drugs before there was Viagra, but look what they did to the category after they launched. In this case, a political candidate “blockbuster” combines vigour, charisma and inspiration, and it takes a politician like Barack Obama to smash both electoral roll register and donation records. In the absence of that blockbuster, the voters/consumers will simply stay at home, literally.
Marketing can only do so much
This might sound like heresy coming from a writer of a marketing column, but all marketers know that sometimes, it doesn’t matter how much is spent in a promotional campaign or how well executed it is if the product does not deliver or is perceived not to deliver on its promise. In fact, the phrase “a triumph of marketing” is often used disparagingly about a product which is successful beyond what it is entitled to be, according to objective measurements of its benefits. In this case, BN certainly needed one such triumph but the campaign that was created could not turn the tide of disaffection that had grown over the last 4 years.
Appeared (?) in The Sun (? date). Sorry, was in South Africa at the time, and didn't catch it.
Tuesday 11 March 2008
A test of solidarity: forming a Shadow Cabinet
When the dust settles, the euphoria dies down and we all go back to our business, I hope the opposition led by the PKR does one thing: form a Shadow Cabinet.
I don’t mean to say this is an easy thing. It’s not. In fact, let me articulate how difficult it is: the opposition parties have 82 seats in parliament giving them 37% of the total seats. PKR has 31 seats, DAP has 28 and PAS has 23, meaning to say that none of the component parties has even an outright majority within the Opposition, even though PKR has the most number of seats. Trying to craft together a Shadow Cabinet, presumably one led by PKR, would mean that the other 2 parties are willing to play ball. The resulting Shadow Cabinet needs to be competent but must also be seen to be inclusive in terms of parties, of race, of religion and of State representatives. The mere effort of trying to form one may precipitate internal splits within the Opposition coalition.
Nevertheless, a Shadow Cabinet must be formed. It will force the issue of whether the opposition can effectively devise their own method of power sharing in the appointment of Shadow Ministerial positions. Having a Shadow Cabinet provides a serious and effective platform for the Opposition to call out policies or projects proposed or executed by the BN, and provides avenues for leadership positions within the fledgling opposition movement.
Most important of all, having a Shadow Cabinet also enforces to the Malaysian public that the Opposition is serious about grabbing the reins of the government eventually and that, following this political tsunami of 2008, the tide does not roll out too far back in the next general election!
There should be no question that the opposition party with the most number of seats in Parliament, which is PKR, should have the honour of forming this Shadow Cabinet, just as its leader has the honour of being Leader of the Opposition. Moreover, since the real Cabinet has grown into a multi-headed hydra in the preceding decades, it might be a good idea to have a Shadow Cabinet much leaner than the real one, combining some dubiously created and rather ineffective ministries.
As a concerned public citizen who welcomes true multiparty democracy, I do want a viable opposition and an improved BN that a viable opposition would bring. In this way, the people will ultimately benefit. Having a viable, functioning, competent and critical Shadow Cabinet will be one step towards achieving that goal.
Since this election started as a groundswell from the people, I would like now to ask everyone: who would you nominate for Ministers in this new Shadow Cabinet, amongst the MPs and leaders of of the Opposition?
I don’t mean to say this is an easy thing. It’s not. In fact, let me articulate how difficult it is: the opposition parties have 82 seats in parliament giving them 37% of the total seats. PKR has 31 seats, DAP has 28 and PAS has 23, meaning to say that none of the component parties has even an outright majority within the Opposition, even though PKR has the most number of seats. Trying to craft together a Shadow Cabinet, presumably one led by PKR, would mean that the other 2 parties are willing to play ball. The resulting Shadow Cabinet needs to be competent but must also be seen to be inclusive in terms of parties, of race, of religion and of State representatives. The mere effort of trying to form one may precipitate internal splits within the Opposition coalition.
Nevertheless, a Shadow Cabinet must be formed. It will force the issue of whether the opposition can effectively devise their own method of power sharing in the appointment of Shadow Ministerial positions. Having a Shadow Cabinet provides a serious and effective platform for the Opposition to call out policies or projects proposed or executed by the BN, and provides avenues for leadership positions within the fledgling opposition movement.
Most important of all, having a Shadow Cabinet also enforces to the Malaysian public that the Opposition is serious about grabbing the reins of the government eventually and that, following this political tsunami of 2008, the tide does not roll out too far back in the next general election!
There should be no question that the opposition party with the most number of seats in Parliament, which is PKR, should have the honour of forming this Shadow Cabinet, just as its leader has the honour of being Leader of the Opposition. Moreover, since the real Cabinet has grown into a multi-headed hydra in the preceding decades, it might be a good idea to have a Shadow Cabinet much leaner than the real one, combining some dubiously created and rather ineffective ministries.
As a concerned public citizen who welcomes true multiparty democracy, I do want a viable opposition and an improved BN that a viable opposition would bring. In this way, the people will ultimately benefit. Having a viable, functioning, competent and critical Shadow Cabinet will be one step towards achieving that goal.
Since this election started as a groundswell from the people, I would like now to ask everyone: who would you nominate for Ministers in this new Shadow Cabinet, amongst the MPs and leaders of of the Opposition?
Friday 15 February 2008
Why Store Brands Don't Work
One of the prevalent anxieties of the day is inflation, that the prices of products and services, especially basic foods and household products, will spiral out of control. Having spent this lunar new year in my home town of Johor Baru, I heard on the radio that the prime minister of our neighbour Singapore had this bit of advice in his new year message for his fellow citizens – choose house brand products over branded products in order to reduce the cost of daily expenditures. A follow up survey of lower- to middle-class consumers, however, reported that only 5 out of 10 people would purchase house brand items, and of that, predominantly only non-food items, even in the face of inflation.
We learn, therefore 2 things: one is that socio-economic micro-management is still alive and well amongst the leaders of our neighbour down south! More relevant to this column, however, is another insight: that pricing and the human psyche have a more complex relationship than given credit for.
Nobody knows their wine
A recent study by academics at the California Institute of Technology highlights this. In the experiment, 20 volunteers were given 5 sips of wine each. The volunteers were told that the 5 sips of wine corresponded to 5 different wines at 5 different price levels, from $10 to $90 a bottle. However, what the volunteers did not know was that they were actually only being served 3 wines – and that 2 of the wines were being served twice, once with a fake price and another time with its true price.
While sipping their wines, the volunteers also had their brains scanned to monitor the neural activity in the medial orbitofrontal cortex - an area of the brain believed to encode pleasure related to taste, odors and music.
The result was simple and stark: inflating the price of the bottle enhanced a volunteer’s pleasure at drinking it, as shown by the neural activity from the brain scanners. When the experiment was repeated without price information to the volunteers, they reported differences in ratings in line with the 3 “real” wines and no difference between the ones served twice – which means pricing was the key variable which affected their pleasure cortices.
And if you still think that’s because lay people don’t know their wines, the experiment was duplicated with volunteers from the Stanford University Wine Club with similar results.
Evolutionary explanations
Most media reporting on this research have basically homed in on the simple extrapolation: in certain products, you can make your customers enjoy them more, simply by increasing the price. The Economist, however, probes deeper into the question of why this occurs, drawing from evolutionary perspectives. In conversations with Dr. Antonio Rangel from the research team, it is postulated that pricing is an efficient mechanism for learning quickly from the collective wisdom of the community: what is good is in higher demand and therefore has a higher price; in the case of what is bad, the opposite is true.
This is the same mechanism which explains why queues that form around eating outlets, whether they be humble rojak vans or high-priced doughnut stores, tend to lead to even longer and longer queues. “If there are so many people eating there, then it must be good,” goes the collective wisdom.
Another possible explanation is that higher priced, exclusive products provide avenues to show off, projecting a higher status and, of course, increased mating opportunities – the “power and sex” argument. This would explain how certain establishments can get away with charging exorbitant figures for set meals, especially on Valentine’s Day, with customers still claiming to have enjoyed the experience.
Marketing implications
Either or both of these explanations may be true. The Economist’s review of the research ends on a coy note: “[this] research also has implications for retailers, marketing firms and luxury-goods producers. It suggests that a successful marketing campaign can not only make people more interested in a product, but also, truly, make them enjoy it more.”
BMW owners out there can certainly attest to the cerebral pleasure of seeing a well-produced BMW ad on TV, complementing the visceral pleasure of actually driving one. But since this column started with the house brand discussion, let us end with 2 somewhat rhetorical questions on their effectiveness:
1) If a retailer chooses to sell house brand items (such as tissues, canned food, water and other necessities), is it pursuing the best strategy by packaging it in bland, plain, boring colours which signal “cheap, cheap, cheap” to customers, therefore robbing them of any sensory pleasure or confidence in the product, no matter how small?
2) In this era of food scares, lead and cadmium contamination, does a retailer have any business selling anything that is unbranded and brought in by a margin-hungry purchasing department buying directly from China manufacturers without a quality program in place? The bottom end of the market is sometimes as dangerous a place to be as the top end.
Retailers out there, good luck. Solving this problem may boost your profits while serving the greater good of reducing inflation.
We learn, therefore 2 things: one is that socio-economic micro-management is still alive and well amongst the leaders of our neighbour down south! More relevant to this column, however, is another insight: that pricing and the human psyche have a more complex relationship than given credit for.
Nobody knows their wine
A recent study by academics at the California Institute of Technology highlights this. In the experiment, 20 volunteers were given 5 sips of wine each. The volunteers were told that the 5 sips of wine corresponded to 5 different wines at 5 different price levels, from $10 to $90 a bottle. However, what the volunteers did not know was that they were actually only being served 3 wines – and that 2 of the wines were being served twice, once with a fake price and another time with its true price.
While sipping their wines, the volunteers also had their brains scanned to monitor the neural activity in the medial orbitofrontal cortex - an area of the brain believed to encode pleasure related to taste, odors and music.
The result was simple and stark: inflating the price of the bottle enhanced a volunteer’s pleasure at drinking it, as shown by the neural activity from the brain scanners. When the experiment was repeated without price information to the volunteers, they reported differences in ratings in line with the 3 “real” wines and no difference between the ones served twice – which means pricing was the key variable which affected their pleasure cortices.
And if you still think that’s because lay people don’t know their wines, the experiment was duplicated with volunteers from the Stanford University Wine Club with similar results.
Evolutionary explanations
Most media reporting on this research have basically homed in on the simple extrapolation: in certain products, you can make your customers enjoy them more, simply by increasing the price. The Economist, however, probes deeper into the question of why this occurs, drawing from evolutionary perspectives. In conversations with Dr. Antonio Rangel from the research team, it is postulated that pricing is an efficient mechanism for learning quickly from the collective wisdom of the community: what is good is in higher demand and therefore has a higher price; in the case of what is bad, the opposite is true.
This is the same mechanism which explains why queues that form around eating outlets, whether they be humble rojak vans or high-priced doughnut stores, tend to lead to even longer and longer queues. “If there are so many people eating there, then it must be good,” goes the collective wisdom.
Another possible explanation is that higher priced, exclusive products provide avenues to show off, projecting a higher status and, of course, increased mating opportunities – the “power and sex” argument. This would explain how certain establishments can get away with charging exorbitant figures for set meals, especially on Valentine’s Day, with customers still claiming to have enjoyed the experience.
Marketing implications
Either or both of these explanations may be true. The Economist’s review of the research ends on a coy note: “[this] research also has implications for retailers, marketing firms and luxury-goods producers. It suggests that a successful marketing campaign can not only make people more interested in a product, but also, truly, make them enjoy it more.”
BMW owners out there can certainly attest to the cerebral pleasure of seeing a well-produced BMW ad on TV, complementing the visceral pleasure of actually driving one. But since this column started with the house brand discussion, let us end with 2 somewhat rhetorical questions on their effectiveness:
1) If a retailer chooses to sell house brand items (such as tissues, canned food, water and other necessities), is it pursuing the best strategy by packaging it in bland, plain, boring colours which signal “cheap, cheap, cheap” to customers, therefore robbing them of any sensory pleasure or confidence in the product, no matter how small?
2) In this era of food scares, lead and cadmium contamination, does a retailer have any business selling anything that is unbranded and brought in by a margin-hungry purchasing department buying directly from China manufacturers without a quality program in place? The bottom end of the market is sometimes as dangerous a place to be as the top end.
Retailers out there, good luck. Solving this problem may boost your profits while serving the greater good of reducing inflation.
As appeared in "The Sun", 15th February 2008. PDF version here.
Wednesday 23 January 2008
Pricing Your Service Optimally
The following is a transcript of an interview with Professor Irene C. L. Ng, Associate Professor of Marketing, Director of the Centre for Service Research and Head of Postgraduate Studies at the School of Business and Economics, University of Exeter, UK, who is back in her native Malaysia for regional conferences and lectures.
Gabriel Ng (GN)
Thank you for taking the time to speak with me, Professor.
Professor Ng
(Prof Ng)
My pleasure.
GN
We’re here to discuss your new book, “The Pricing and Revenue Management of Services: A Strategic Approach”, recently published by Routledge in their ‘Advances in Management and Business Studies’ series.
Prof Ng
Done your homework, I see.
GN
Always. Let me get right to the point: your research in this book is exclusively about services. Why? What makes services so different from products, that you want to highlight them in your book?
Prof Ng
There is very little understanding of pricing generally and even less for services as they are usually intangible, perished upon production, simultaneous in consumption and production and often inconsistent in delivery. Services that exhibit such characteristics pose a huge challenge to pricing.
GN
Your book features 11 service strategies for higher revenues through pricing and revenue management, probably of most interest to marketing practitioners. Care to take us through a few of them?
Prof Ng
That’s quite a bit to go through and I’m afraid we won’t be able to fit all that needs to be said. Suffice to say that they provide managers with innovative ways of pricing. The book is part of the Routledge ‘Advances’ series so you would expect cutting edge service strategies to help companies get ahead.
GN
Hmm. And here I thought that “First world services at Third world prices” was all one needed to know about a service strategy here in Malaysia.
Prof Ng
Only if you want to be less profitable! Services have a big potential to increase their revenues. Some of the companies whom I work with, and who have traditionally been in manufacturing, are now earning greater revenues from services. For example, Rolls Royce revenues are 54% from service, and BAE Systems are also 50% service. What they, as well as other companies, hope to understand is how to price based on value and how to grow their revenues from service.
GN
So who do you think in Malaysia would have the most to benefit from reading your book? Don’t be shy, now, you could be identifying potential customers.
Prof Ng
Any company interested in value-based pricing and innovating in service.
GN
Not rising to the bait, I see. Fine, then. Why is it so difficult for service firms to price optimally?
Prof Ng
Unlike goods, services are often sold before production/consumption, so it’s often sold in advance. This implies that risk and uncertainty is always associated with the pricing of services, and having to price while taking into account customer perception of risks in purchasing services makes it even more difficult. Marketers still think that cost-based pricing is still the way to go. In services, cost is meaningless – almost all of it has been sunk and are fixed costs and marginal costs are negligible. The way to price services is based on value, moderated by the capacity of the service.
GN
Like Air Asia? The ticket prices increase as the capacity fills up?
Prof Ng
That’s only the capacity half of the story. The other half (value-based) is still not well understood which is a large part of the 11 strategies in the book
GN
Sometimes, when I’m on an Air Asia flight that’s full, I feel like standing up and asking everyone what they paid for their flight, just to compare and see. What do you think about that?
Prof Ng
The power of value-based pricing is that customers are willing to pay different prices. No one is holding a gun to their heads. In the end, they buy at the price they are willing to buy, whether at $5 or $100. Understanding how to price a service from a value perspective helps firms increase revenues and make customers happy too. It might sound like its too good to be true but the book will explain why and how.
GN
Last question: I’m a columnist and therefore a service provider. How do you think I should increase my revenues?
Prof Ng
You have a limited capacity to write, time-wise. If you have 4 publishers vying for your time, your revenues should increase as your capacity reduces, if you price it right. However, you also can choose what you wish to write about, and if your content contributes value to the publisher, you will also be able to increase your revenues. Capacity-based and value-based pricing have tensions, and you should know how to manage the tension optimally for your own benefit!
GN
Hmm. I was thinking, “Ask for more money”, but I guess that’ll do! Well, that’s all the space we have for this week. Thanks for your time, Prof!
Disclosure: Gabriel Ng has worked in consumer marketing for 8 years, but has been Professor Irene Ng’s brother for much longer. Find out more about Professor Ng’s new book, her research and her consulting work at the University of Exeter at http://www.ireneng.com.
Unedited version of column that appeared in "The Sun", 23rd January 2008. Edited PDF version here.
Wednesday 2 January 2008
New Year’s Resolutions for the Malaysian Marketer
It’s the new year, and you, dear marketer, are still bleary from all the partying over the weekend. Now you’re drinking copious amounts of Americano while trying to drag your fuddled brain back to lucidity, pretending to read this newspaper. The idea of new year’s resolutions is laughable at this point. Fear not. Here they are for you, carefully selected from observations of some marketing gaffes of 2007.
- I resolve to responsibly oversee the copywriting on my print advertising if I am qualified or have it professionally vetted if I am not, and not to surrender it to my MS Word’s spell and grammar checker. Not everybody can come up with bad copy that sounds good, like Samsung’s “World Best” tagline of yesteryear.
- I resolve not to schedule the same radio ads for more than 2 weeks in a row, and certainly resolve to pull the plug after 1 month. Especially on peak hour morning shows when repetitive radio ads are as annoying as the slow traffic on Jln Tun Razak.
- I resolve to strenuously encourage my marketing and sales executives to change their strange adopted English first names to something less cringe-inducing. I am referring to those who call themselves, for instance, Coma Tan, or Season Wong or Winky Teh.*
- I resolve not to cave in to my CEO’s sometimes off-hand, uninformed and unhelpful pronouncements when vetting ad campaigns, in spite of my appointed advertising agency’s strenuous efforts to actively solicit them. I resolve to do my level best to end the era of egocentric ad campaigns in my lifetime.
- I resolve not to use billboards that can be seen from the North South highway which are not run by Big Tree since they are, well, not on the North South highway. (Unless they are waaay cheaper and are legible for at least 3 seconds by a person with 6/6 vision driving at 110km/h, so what if they are lurking at the edge of oil palm plantations).
- I resolve not to copy the Petronas TVCs since they are in a class of their own and my efforts would seem pedestrian in comparison.
- I resolve not to pander to my advertising agency’s penchant for constructing ads which appeal to “opinion leaders” which are invariably modelled after their A/X clad, pinot-noir drinking selves and have very little to do with the Malaysian public.
- I resolve to try originating my brand propositions and messaging in Bahasa Malaysia or in Chinese and then only translating them to English, since Nielsen reports that only 4% of the Chinese population and 2% of the Malay population speak English as their most often used language. Of course, that might end up breaking resolution #1 (please see above). Life, after all, is a series of trade offs.
- I resolve to try to incorporate some number crunching rigour to my marketing budget, such as those fancy marketing ROI tools being bandied about around town by some ad agencies and consulting firms, and also to make sure any allocation for purchasing them comes on top of my existing budget.
- I resolve to stop using scratch cards or fake “winning lottery tickets” in my promotional mailers because, while they are depressingly effective, they do so much to bring down the dignity of what it means to be a human being.
There you go. Now, email me who you think “inspired” those resolutions above and I’ll send you a mystery gift. ;-)
* These are not real people and any resemblance to any person, living or dead, is unintentional and coincidental. And also, well, slightly tragic. Although I must admit “Winky” is kind of cute.
(as seen in "The Sun", January 2nd 2008. e-paper link here.)
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