Category Archives: information

The false dichotomy of engagement vs. broadcast (or why Pepsi sales are down)

To understand why Pepsi has now fallen behind both Coke and Diet Coke in sales for the first time in decades, let’s examine the tradeoffs between two communication choices: inbound customer engagement and outbound advertising messaging.

We’ve explained the Information Ecosystem before, a simple model showing how information flows (inbound or outbound) to any group (of a few or many). Spend 10 seconds examining the model above and intuitively you’ll see that communicators — advertisers, marketers, organizations, husbands and wives, parents and children — have four tactics at hand. You can broadcast outbound to many; pull research in from many; personalize outbound messages to a few, or engage in inbound communication from a few. Four paths, four tactics, all with their own value given your objective and audience composition.

The biggest mistake marketers make is falling in love with only one tactic. In the 1950s, broadcast was king, in a world where only outbound advertising at scale was possible and communicating with small groups or individuals was too costly. In the 1990s, some companies embraced 1to1 personalization as the future of all communications, eschewing broadcast advertising empowered by new databases that could record preferences of individual customers. Today, in 2012, many companies buy in to social media gurus who shout engagement is the new panacea.

But is engagement really at odds with broadcast messaging? Of course not. Both play a different role on the same field:

The colored circles on the Information Ecosystem above show the debate that often occurs in marketing boardrooms. We must do one or the other, the arguments go. Some see a world where consumers still watch 5 hours of TV a day and commute in cars for 2 hours, so mass-media advertising must work. Others see the shift to Internet, laptops, text, smartphones, apps, social networks and tablets, and think digital-based engagement and word of mouth propagation are the solution.

The truth is, for most companies, both points of view are right — because the dynamics coexist with each other.

When to pick engagement or broadcast

Engagement is a valid tactic if a few members of your audience (say, consumers) have higher value to you or influence over their peers. This variance was called by Don Peppers in the 1990s a “customer value skew,” and the steeper this skew, or range in difference among customers, the more sense it makes to treat different customers differently.

In financial services and airline bookings, where some customers bring much more money to the table than others, engagement makes sense; but for commodity products, or services that appeal to broad swaths of consumers, engagement is a tactic best reserved for emergency situations, a “Motrin Moms” meltdown where a company must be ready to swoop in if negative attacks scale rapidly. If your customers are really different amongst themselves, or have potential to be wildly influential, engage away; if not, downplay this tactic.

On the other extreme, broadcast push such as advertising is best for companies trying to send a message out to masses of customers who all may need relatively the same thing. This doesn’t mean everyone will want your product; but it does mean that even if you are targeting 5% of the population, the needs within that group are similar enough that outbound broadcast can stimulate demand. Education, awareness, interest, consideration are all dynamics driven by advertising to the masses, and the seeds for downstream word of mouth. Like a spotlight, you can target the outbound communications to small groups and do so with efficiency; but there is nothing wrong with pushing messages out to the masses since it is one of four valid communication pathways in the overall Information Ecosystem. The Super Bowl and Academy Awards got lots of chatter among consumers in 2012, and the starting point for both was a major television broadcast.

The lesson of Pepsi

Finding the balance is difficult. In 2011, PepsiCo slashed outbound ad spending on its Pepsi brand in half, down to $20.1 million, focusing more on social media engagement. In March of 2012, news broke that the Pepsi brand had fallen from No. 2 to No. 3 in sales behind Diet Coke — a huge black eye for Pepsi, this being the first time in two decades it trails two Coke brands. Now Pepsi has said it will boost 2012 ad spending up by 30%. “We need television to make the big, bold statement,” Massimo d’Amore, chief of Pepsi Beverages Americas, told the Wall Street Journal.

This is not to say Pepsi’s move toward social-media engagement was wrong; but it did err in overweighting engagement and gutting broadcast for what is, at core, a commodity product in a highly competitive category. Pepsi failed in its judgment because it did not evaluate its customer base value skew accurately — most customers have similar value to Pepsi (we can only drink so much a year) and a similar need (we’re thirsty), and few have influence over their peers’ beverage consumption habits. For a carbonated soda pop, treating different customers differently makes little sense.

The tactics of engagement and broadcast are not opposed to each other, and can fit in the same organizational marketing plan easily, provided the role of each is understood to manage customers in the appropriate manner. There is no ROI on being invisible in a marketplace that needs education; there is also danger in not responding to the small groups of influencers or customers with the highest value, so engagement may be required as well.

Do you need to tell everyone about a new thing? Or is there a steep customer variance in your target base that, if managed, could turn the tide of your business? Answer those two questions, and you’ll have an initial cut at how to invest communication resources.

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.

Understanding when engagement is, or isn’t, the answer

What would competing solely on information look like? And if you did battle competitors with information, is “engagement” the best way to do so? To understand when and how to compete with information, let’s walk through four simple competitive frameworks.

First, consider that while we live in an age of information, few management experts consider it the basis of market competition. The classic tenant of marketing is there are just three ways to compete: product-focused, operations/cost control, or customer solutions. Each is a choice, and companies within the same industry with similar products can elect to compete on a different dimension.

In 1995 Michael Treacy summed up the old model for competition, drawing heavily from Michael Porter’s masterwork Competitive Advantage, in his book “The Discipline of Market Leaders.” Competition, as backdrop, is defined beyond the cliche of company-fighting-company to a strategy that provides a serious advantage — a structural position that competitors cannot easily duplicate. Treacy’s model looked like this:

Apple, for instance, is a product-focused competitor. You don’t chat with @Apple on Twitter because Apple really doesn’t give a damn about engaging with customers. Steve Jobs was notoriously skeptical of customer focus groups, and while Apple does a brilliant job of managing vertical operations, its real gift is product innovation. Apple has built such amazing products that competitors, even armed with thin flash drives and aluminum, cannot easily displace Macs or iPads or iPhones. Picking one of the three angles of Treacy’s competition leads you to success because it brings focus to your organization. (And you can pick any angle you want; within the same computer industry, Dell is known for customer-solution focus with extensive segmentation marketing, while Acer focuses on operational efficiency to sell inexpensive computers.)

However, this old model misses a new competitive position: Information. Like a fish swimming in water not perceiving H2O around it, or early humans breathing air not realizing oxygen existed, for centuries businesspeople ignored the information flowing around their organizations; information didn’t really have a name until the 20th century. Upon our discovery, we then treated information as a simple fluid, like money or electricity, to be managed in inflows and outflows. The rise of information technology systems in the 1990s sought to reduce the noise (waste) of information input and transmission, and accelerate the dissemination of output, but all the while information was categorized as a force, an ether, a thing, about as negligibly important to macro competition as paper supplies or office furniture.

But in the past 20 years, information has become a vital, focal entity of its own. Information is no longer a subordinate throughput, but an end goal to be desired. Wired magazine co-founder Kevin Kelly writes in his brilliant book “What Technology Wants” that the interlinks of all technology tools — computers, car dashboards, GPS systems, bar codes, television programs, printed materials — have created a global network now with more complexity and contact nodes than the human brain. Kelly does not believe, as Ray Kurzweil does, that information is about to wake up in a singularity of artificial intelligence, but he does note within computer networks a small percentage of digital traffic has no identifiable originating source. Our global information system is talking to itself. Something in there is going on. Information, at some level, has come alive.

Demand is the magnet pulling information forward. Consumers around the world have a seemingly limitless hunger for more content. In the United States, television is still king, with the average human watching 4 hours and 44 minutes a day; mobile and Internet and social media use is rising, but rather than eclipsing TV and radio, those new digital streams are additive, with consumers taking in or sharing from more than two information devices at once. Office workers are migrating to 2 computer screens. The typical U.S. home has 3 television sets. We can’t get enough information, and now with YouTube and iPhone videocams and Facebook, we’re creating our own.

In this chaotic information explosion, confusion reigns. ABC, NBC, CBS and Fox were first challenged by cable, and now by millions of video streaming options on Netflix, Hulu, YouTube, Google and Amazon. Businesses have the opportunity to become leaders via information dissemination with tactics such as “content marketing.” Individuals can arise quickly to become “thought leaders,” gurus, new nodes on the information playing field.

If we want information as badly as products, service, and low prices, then information can be laid on a new grid as a focal point for competitive advantage:

Information is no longer a commodity like electricity or cash to be flowed and managed, but a choice for strategic warfare. Google, Apple, Netflix, Amazon, Zappos, Oracle, HP, SquareTrade, Ford, Tesla, AT&T are all companies competing with layers of information that help set their products apart. You don’t have to be in the information business running a search engine to use information to attract consumers; you can instead position yourself as the information leader in your space to add a new electromagnet for customer attraction. Competing on information is why our agency Mediassociates has this blog and why I spend late nights writing columns for Bloomberg Businessweek.

So: If you decide to compete using information, how do you do it? Different organizations have different customer structures, and your information flow has to support that framework. The first step is to map your “Information Ecosystem,” which breaks information down to its two basic characteristics:

1. Flow — whether information moves more often inbound or outbound
2. Scale — whether information is best deployed to a few or to many.

Flow and scale define the playing field for information strategy. Within the Information Ecosystem live four basic tactics, or information uses:

1. Broadcast. At the top right of the information flow/scale quadrant is broadcast, where information flows outbound to many parties. ABC, CBS and NBC were kings of this in the 1970s, but you’re likely broadcasting yourself if you use Twitter to send out “please click my blog post link” to 3,000 followers. Broadcast is a one-way ticket out, a selfish attempt to push a single message to as many people as possible. You need broadcast if you want to influence many to do one thing, or get many to receive one idea. The advertising industry, Hollywood, and yes, most social-media gurus are built on this model. Broadcast gets knocked about these days, but it is one of four completely valid information strategies, because at some point any organization has to influence the vast network around it.

2. Personalization. The inverse of broadcast is personalization — still an outbound flow, but a tailoring of information to the one or few people who receive it. Your Christmas cards,’s dynamically rendered e-commerce page, the direct mail on your counter are all attempts of various finesse to create the illusion of personal response; but it’s still an outbound push. Personalization is a valid strategy if you have many different constituent groups with varied needs, and if the cost of personalization is offset by corresponding sales increase via personalization. Netflix personalizes because the content presentation on its website is economical vs. the increased sales and usage customized movie recommendations generate; Nike would never personalize sneakers, because the marginal utility of custom shoes would not offset the high production costs.

3. Research. If a business model can leverage inbound flow of information from a mass of customers as a primary differentiator from competitors, research is the valid tactic. Typically this model only works for organizations that can repackage that group inflow as a key product, e.g. Pew, Arbitron, Nielsen, and Experian. However, many business-to-business consulting organizations such as McKinsey use inbound research as a key differentiator; management consultants who complete a deliverable for a European postal reorganization must also submit the findings to the internal knowledgebase, which can then be resold to other clients at hefty margins.

4. Engagement. And the last information strategy is the buzzword of recent years, “engagement,” the use of inflowing information from one or just a few customers. Engagement is valid only if your customer base has a high value skew — a wide range in value to you — or if small groups or individuals can wield great damage or gain to your organization. Ad agencies focus on engagement with their B2B client prospects, because one sale can build a new agency department. Financial service companies focus on engagement with their highest-value investors, because treating a Warren Buffett differently than Joe Sixpack can yield vastly different commissions. The more your customers differ in their needs from you and value to you, the more engagement makes sense. But as a core strategy, engagement only works if huge skews in customer value or influence are within your customer network.

When would engagement make sense? The table below shows the only scenario where engagement should be your core business strategy — where a few people can cause huge swings in your organization’s profits or public perception:

In this scenario above, a “few” have more value than the many — or a few have the ability to swing public perception about your company. Not every industry is like this — gas stations sell about one tank of gas each week to everyone — but others have enormous concentration of customer value or influence in their consumption base. Booksellers, airlines, high-end restaurants, hotels, coffee shops, and ad agencies all have some customers who use them much more than others, so treating this varied group in a different way provides value, differentiation, and competitive defense.

The engagement choice makes sense if a small group of customers could wield positive or negative influence across the majority of others. This is why big companies such as AT&T, Ford or Dell have built social media command centers to engage with a few people to prevent hot spots on the negative side (popular bloggers pissed at a product incident must be managed) and to encourage influence on the positive side (why not invite people with huge Klout scores to the next product launch?). But for many companies, this idea may be overwrought; Klout scores in essence are silliness, and the idea that a small group of bloggers/Tweeters might disrupt a massive business such as Pepsi, or drive huge lift in Pepsi soda and energy drink sales, is suspect.

It’s all a choice on how you compete. Pick your focus from product, operations, customers, or information. And if information is your weapon, pinpoint the corner of the Information Ecosystem strategy matrix that matches your customer structure. In your evaluation process, it is vital to distinguish information as a tool to be managed (and it must be managed by everyone) and as a weapon for competitive advantage (defined as going to market in a way that stymies competitors). Every organization may need a Twitter presence, research, broadcast, or some personalized content, just as you need a website; but information is only a strategic focus if its sets you apart in a way that builds barriers to competitor response.

If products, or low prices, or total service do it better, information need not be your focus.

Like customers, not all information strategies are created equal.

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.