Category Archives: strategy

Forget ads. Plan with The Information Ecosystem.

Six years ago, as enthusiasm over a new thing called “social media” began to crest, Pepsi went big on social. In 2011 PepsiCo slashed outbound advertising on its Pepsi brand, and redirected communications budgets to Twitter, Facebook, and other inbound social community management. That didn’t go so well. By March of 2012, sales of Pepsi had slumped  and for the first time in two decades Pepsi fell, embarrassingly, to the No. 3 soda brand behind both Coke and Diet Coke.

Inspired by Pepsi’s error, that year we conceived a framework called The Information Ecosystem — in essence, a strategic game board that explains how your brand should communicate to, or engage with, customers. It has two basic information systems — the “flow” of communications outbound or inbound from customers, and the “scale” of information being used by many or a few. All communication either goes out or in, and it’s either for a handful or huge crowds. Map communication strategies into each corner of that ecosystem, and we get four intuitive tactics:

  • Broadcast — not just TV, but here defined as any mass medium “broadcasting” outbound to large groups of people.
  • Personalization — another form of outbound messaging, but this time tailored to a few.
  • Research — the inbound analysis of communications from groups.
  • Engagement — the inbound communications from one person, or just a few.

The Information Ecosystem framework was a hit, because it showed that different communication strategies have different uses. Advertising strategist Faris Yakob was kind enough to publish our theory in his 2015 book “Paid Attention: Innovative Advertising for a Digital World,” commenting that “the important thing to remember is that each task requires the right approach or mix of approaches. Not every problem can be solved with the same solution set, which is a challenge for many agencies, who too often assume that their primary product is the optimal solution.”

But let’s revisit what this means. First, this ecosystem is not just about media tactics.

Yes, various media platforms can be plotted above in different ways. Some, such as Facebook’s social network, can be used in all four areas (for inbound research or organic engagement, and outbound personalization or mass-market communication). But the real value of this model comes from mapping where your customers fit in the ecosystem:

  • C1: Customers in group “C1” have different needs and varying financial value to you. Strategy: Personalization. Why? Your customers need different things, and if you can personalize to the most valuable customer micro-segment, you’ll maximize profits. For this customer group, investments in personalization are required. Examples include real estate, financial investing, travel, fashion and luxury goods. There’s a reason why airlines have numerous loyalty schemes, boarding segments and seating assignments. That lady up front needs something special, and she’s worth a lot more than you.
  • C2: These customers, group “C2,” have similar needs and rather static financial value. Pepsi drinkers go here. A casual Pepsi drinker might imbibe three sodas a month, and a heavy loyalist 30 Pepsis, but that 10:1 ratio really is not enough to justify the expense of personalization. And all these customers want the same thing — a sweet drink. So take out a TV ad or run an OOH campaign; your strategy is to Broadcast outbound messaging to a mass audience. The lower costs of mass media will simply get the job done.
  • C3: For inbound communications, marketers who wish to understand what drives a common need use Research. Inbound inputs from masses are gathered and sliced, but the result is typically a product-centric view, collating the needs of a group around a given sales item or media goal. Nielsen ratings evaluate who watches show A or listens to radio station B; comScore ranks who watches website C; qualitative or quantitative research uncovers which customers will buy product D. Consumers’ financial values may vary greatly, but research is focused on understanding common needs.
  • C4: Engagement is the wild card of the matrix, the area for inbound customers with very different needs — and best if your customers have a range of value. The temptation for marketers to rush into this quadrant is enormous; who would not want to provide individualized answers to any customer question, in an effort to both solve problems and sell products? But this Engagement strategy works best when your customer base wants many different, nuanced things, and provide enough profit to justify the expense. At this point, you can easily see where Pepsi’s rush into social went awry. One-on-one social engagement is not needed when all a customer wants is a sweet sip.

Which brings us to the final question: which inbound and outbound strategies go together?

Ah, sharp readers will have guessed — it all revolves around your customer base analysis. If your customer group varies in what they need, outbound personalization should be matched with inbound engagement (C1 and C4); our agency, for example, works with a fashion e-commerce brand that combines hyper-targeted, personalized outbound advertising with high-touch inbound human service. For customer groups where the needs are varied, and where some have extremely high value, this combination is powerful. The only caveat is to make certain one portion of your customer base provides enough financial value to your business to justify this micro-segmentation and personal service.

But if your customer group contains similar needs, outbound broadcast mass media can be matched with inbound research to great effect (C2 and C3). Traditional research segmentation studies can be used to direct cable television schedules. ComScore ratings will tell which websites have the greatest reach among the largest slice of your target. Analyzing what makes one large group tick is enough to push out messaging that reaches the same large group at the lowest media cost.

Of course, this is all just Step 1

There are of course many layers of nuance behind this Information Ecosystem strategy. Broadcast media are becoming more targeted; addressable TV, for instance, can reach households down to the PII level with personalized commercial breaks based on your past shopping behavior, and technical advances in some digital billboards can recognize the demographic composition of the audience viewing them. Social can be used for research, and research can be used to identify niche group needs. As media outlets advance to the future of Minority Report, communication lines will bleed across all channels.

Which is why this model is useful. As you plan your communications strategy, it’s worth starting with an analysis of just how unique, or common, your target audience is. That one question will help you model whether you should invest in personalization and engagement, or simply research how to go for mass communications scale.



The top 10 ideas anyone ever had for marketing (or why Apple doesn’t use a Twitter account)


If you plan campaigns, you’re likely awash in data, reports, presentations, requests, vendors, staff issues, email, deadlines and ideas. It’s all so damned complex. If only you had the right framework to coherently forge a path through it all.

Well, you do. Here are 10 of the greatest business frameworks we’ve discovered for planning business growth. We lean on one at least every day. Consider this a refresher on valuable logic tools to help you clarify your marketing strategy.

1. The Pareto Principle — The basis for understanding that in business, like life, not all things are created equal. Vilfredo Pareto was a late-1800s economist who noticed that about 20% of the population of Italy owned about 80% of the land. This “80-20 rule” occurs in most groups of resources, where a small fraction contribute the greatest value. About 20% of people at a party have 80% of the fun. About 20% of your customers give you 80% of your profits. Once you accept the tragically undemocratic fact that “not all customers or products or employees” are created equal, you can begin focusing on the smaller group that drives real value to your business.

2. Five Forces Model — Pan out to all of your business, and you face much more than just competitors. Michael Porter, business guru of Harvard Business School, has posited there are five forces in the business landscape: industry competitors whom you fight with daily; upstream suppliers; downstream buyers or customers; substitutes; and new entrants. You have to watch the entire landscape of these “five forces” to compete. Kodak, for instance, was blindsided by the “new entrant” of digital cameras that, despite Kodak inventing the technology itself in 1975, 30 years later made its old film business fade away.

3. Competitive Advantage — This was Porter’s second big idea (he wrote a book with this title) and while the term “competitive advantage” is tossed around today lightly as business jargon, what it really means is finding a profitable, sustainable position against the five forces above. Porter suggested there are four competitive advantage positions: on the customer side, you can go after (a) narrow or (b) broad targets, and on the product/service side, you can either focus on (c) lowest cost or (d) differentiation. Pick (a) or (b) and add it to (c) or (d), and you have a competitive plan. But you have to pick one spot; if you try to do everything, you end up “stuck in the middle,” the competitive version of warm porridge. Apple Inc. has a competitive advantage today in that it goes after a broad customer target with a clearly differentiated line of products. Walmart has a different focus, offering the lowest possible prices to a broad audience. Don’t kid yourself that speaking the words “competitive advantage” does the trick; you must focus your entire business on staking out a real competitive position.

4. Discipline of Market Leaders — This was an evolution of Porter’s competitive advantage concept by Michael Treacy and Fred Wiersema. These authors suggested there are actually three areas of competitive focus: Product innovation (think Apple); operations excellence (think Walmart or USPS, offering low costs due to efficient supply chains); and total customer solution (think ad agencies, who will do almost anything for clients). By “discipline,” Treacy and Wiersema meant your business needs the guts to stick to one of these strategies. You can’t build the most incredible product and drive down all costs and focus on incredible customer service at the same time. This explains why Apple, a product wizard, doesn’t have a Twitter account — it doesn’t need to worry much about fawning customer service.

5. Positioning — Moving to advertising, “Positioning” was the greatest brand book ever written. It grew out of a series of articles by Jack Trout in the late 1960s that noted consumers, awash in advertising, can only remember a few brands in any product category in their head. How many watch brands do you know? Hm, Rolex, Victorinox, Timex… unless you’re really into watches, you might not be able to name more than six brands. Consumers stack these few brands up on mental ladders, and a marketer who wants to capture a consumer’s attention must grab a “position” on these rungs. A classic example was Avis who in the 1960s chased car-rental leader Hertz by stating in its ads “Avis is only No. 2. We try harder.” The Coke-Pepsi marketing wars of the 1980s were a classic positioning battle. Political candidates constantly strive to “de-position” opponents. Positioning involves numerous tactics for grabbing mindshare or pushing competitors aside; if you haven’t read the slim book, go get it.

6. 1to1 Marketing — In 1993, former ad executive Don Peppers wrote a book with Martha Rogers that was the opposing viewpoint to “positioning.” Peppers suggested that customers, not products, should be managed, and thus the goal for marketers was to build a one-to-one relationship with each customer. Instead of market share, Peppers and Rogers wrote, businesses should go for “customer share.” They outlined an entire philosophy on how to do this, noting that different customers have different values to a business (Pareto’s old idea), and different customers need different things. The payoff is when a business learned enough about a customer to customize a product or service in response, thus locking in loyalty. This idea took off thanks to the new computer databases of the 1990s that held reams of information on customers, allowing marketers for the first time to interact with customers, record their history, and provide mass-customized service response. ( with its radical personalization emerged in this period.) The 1to1 theory infused the Customer Relationship Management software craze that led us to databases today. Peppers and Rogers missed the 2000s’ advent of social networks that changed the business-customer dynamic from one-to-one to many-to-one, but their ideas were ahead of their time.

7. Price Framing — Go to the movies this weekend and buy candy, look closely at the strange box, and you’ll see price framing in action. In 1980 Richard Thaler invented behavioral economics by publishing the paper “Mental Accounting Matters,” suggesting consumers are really bad at judging value, and so make mental accounting decisions in their heads that can be guided with “price framing.” This explains everything from product “sales” to Omaha Steaks packaged with mashed potatoes. If you see a dress on sale for $50 marked down from $250, you might jump to buy it … not considering the initial “$250” price point is an illusion. The clever retailer has simply given you a reference price of $250 to “reframe” your perception of the $50 real price. Cost savings, product bundling, and price obscurity are all tactics to reframe pricing to make it more appealing. That box of candy in the theater comes in an unusual shape for good reason: by “reframing” the packaging to obscure the price for the candy inside, the movie theater has made it hard for you to determine if it is a good deal.

8. Gartner Hype Cycle — The analyst group Gartner has built a practice around a simple idea: new technologies are met with increasing expectations, followed by a trough of disillusionment, until eventually we all settle down and realize the truth is somewhere in the lukewarm middle. If you had an iPhone two weeks after launch, kids would line up around the block to see it; now, it’s just another ho-hum phone in your pocket. Gartner taught us not to get too excited by new technology or media, but not to scoff too hard, either. Think of this next time someone tells you to buy a 3-D printer.

9. Lean Startup — A relatively simple but revolutionary idea from consultant Eric Ries, who says toss out the business plan and instead launch your business with rapid prototypes, fast feedback from customers in the market, “minimally viable products,” and an ability to “pivot” to new ideas that will really take hold. Ries posits that it is pure arrogance to assume your initial product idea is good, and instead you should include customers at every stage of product development to ensure success. Give them rough drafts; listen; change based on what they say. This clever idea seems logical until you realize how few businesses do it.

10. Whatever You Think — Let us know, we’re open to new frameworks, too.

So there you have it. Not all customers are created equal. There are more forces than just direct competitors at work. Your business needs to stake a clear competitive structural position, and your marketing must also capture a brand position in customers’ minds. You can play with pricing to influence people, and you should include customer or market feedback at each stage, especially early stages, of growth. And through it all, be careful about believing the hype.

It’s not an MBA, but it’s a start.

Strategy requires that you make a choice

Harvard Business Review is a thick, fibrous magazine, a green spinach of publications that when you pick one up at an airport newsstand provokes the clerk to do a double-take at the $16.95 price. Seventeen bucks? Really? Why does one magazine cost so much?
Quality, in fact. In the September 2012 issue, HBR unveils “Bringing Science to the Art of Strategy” — a simple and insightful framework for making the business cliche real. “Strategy” is too often tossed around as a buzzword, but the authors of this bit — who include A.G. Lafley, former CEO of Procter and Gamble — explain that strategy is simply about making a choice.
“Why do the operations managers in most large and midsize firms dread the annual strategic planning ritual?” the authors begin, and then answer it’s because most organizations get mired in data, analysis and issues without framing the discussion in terms of choices that drive action.
Chess is a game of strategy, and to play you have to move the pieces. You have to think of different outcomes, and then choose each piece, and then decide its direction. Running an organization requires the same actionable choices.
The authors provide an insightful framework for listing, and selecting, your strategic choices:
  1. First, don’t list “issues” in your discussion, but instead define “choices.” For instance, imagine your profits are down. A typical management offsite might prioritize that issue, and then brainstorm all the reasons why. But reframing “low profits” as a choice means coming up with options that move the problem. Say: (a) you could create new products with higher margins, (b) you could raise prices on current products, (c) you could drop supply costs on current products, (d) you could enter a new market with higher-margin products, (e) you could exit a sector with low-profit products, or (f) you could acquire another company that has higher margins. In general terms, list your major choices.
  2. Second, generate strategic possibilities. Look at the chess board, and don’t think of where you are now, but where you possibly could be tomorrow. Don’t be critical in this stage, simply imagine different futures. Say for (c) above, in one future you drop supply costs, so a strategic possibility is you find a new inventory supplier at the same quality levels with lower material or labor costs. As you list possibilities, be sure to include the status quo, where you are now, because staying in one place is a choice as well — and standing still can hurt you as the competitive market moves past you.
  3. Third, list the conditions required for success for each possibility. For (c) above, dropping supply costs, you must find a supplier in India; manage communication, time-difference, cultural, currency, and negotiation issues; assure quality control; test the products; have customers willing to pay for this new product. If all of those conditions could be met, the strategic choice is an option. If someone is critical in this stage, reframe it as a condition. “We don’t know any firms in India!” becomes “For this future scenario to work, we would need to find firms in India.”
  4. OK, OK, in step 4, now you can be critical. For each “condition” that must be met, define the barriers. This includes prioritizing barriers and designing tests to see if the barriers hold true. Because you are likely to have long lists of barriers, the authors suggest starting with the biggest, thorniest ones — if those fail, you can toss out the possibility.
Bravo, you are now ready to make the choice. Lafley and team tell the story of P&G going through this process in the late 1990s to solve the problem that while it had successful beauty products, it was missing millions in the profitable beauty care sector. P&G considered acquisitions and various brand options before deciding to move Oil of Olay upmarket from a perceived stodgy cream for old ladies to an upscale beauty product. It wasn’t enough to define the issue and list the problems; P&G had to make a choice from several possible paths forward. In less than 10 years the revitalized Olay brand was generating $2.5 billion in yearly sales.
You don’t play chess by analyzing the pieces and describing them. You have to decide where to move on the board. Thanks, HBR, that was worth seventeen bucks.