Experience Manifesto

The Role of Design in an Economic Downturn | The Customer Experience Labs

There's a very good piece at the Customer Experience Lab about the role of experience in a down economy. Here's an excerpt that talks about the Apple stores:

There are some and my personal favorite is an analysis in BusinessWeek from May 2001 (Sorry Steve, Here’s Why Apple Stores Won’t Work) where the author outlines why Apple’s new retail outlets are not going to be successful.

[The] Problem is, the numbers don’t add up. Given the decision to set up shop in high-rent districts in Manhattan, Boston, Chicago, and Jobs’s hometown of Palo Alto, Calif., the leases for Apple’s stores could cost $1.2 million a year each, says David A. Goldstein, president of researcher Channel Marketing Corp. Since PC retailing gross margins are normally 10% or less, Apple would have to sell $12 million a year per store to pay for the space. Gateway does about $8 million annually at each of its Country Stores. Then there’s the cost of construction, hiring experienced staff. “I give them two years before they’re turning out the lights on a very painful and expensive mistake,” says Goldstein.

     

The pundits have been wrong, here are some of current numbers that show the success of the Apple retail stores (found here and here):

Twenty percent of Apple’s revenue comes from the Apple Store

Apple made $1.25B at the Apple Store in the fourth quarter of this year, which is 42 percent more than last year

Apple makes $4,000 per square foot of Apple Store surface area every year

Reflecting on this example we can see that even though analysts and journalists believed that this is not the right way to go, it was obviously (or maybe luckily) a successful move. In a recession it is easy for everyone to predict the failure of new products, services or distribution channels. The article additionally shows how much you should rely on others to estimate the success of new products or services.

I love this quote from their post:

The world doesn’t need another social network which is merely a clone of Facebook, LinkedIn or Xing. What is needed in challenging economic times are transformational products and services that provide value to customers.

I've added this blog to our blog roll, so take a little time and see their other articles. It'll be worth your time!

The Role of Design in an Economic Downturn | The Customer Experience Labs.

What America's Funniest Home Videos can Teach Us About Content

I was watching the Today Show this morning and they had a segment on the latest viral sensation, a web site showing video of cute things sleeping. Of course, I wasn't able to find a link on the Today Show web site, but fortunately I found it anyway and it's posted below in case you haven't seen it. And like that previous web sensation from a few weeks ago -- that puppy cam thing -- I'm sure that this web site will be hot for a while and then it will fade away. Well, maybe this one will stay a little longer, since it didn't help that those puppies started to grow and then got adopted!

But as I thought about the whole viral thing and I was reminded of a TV show that lots of folks must watch, it's just been renewed for it's 19th year. According to Wikipedia:

Produced by Vin Di Bona (with co-executive producers Todd Thicke and Michele Nasraway[3], it is currently the second longest-running entertainment program on ABC.

For close to 20 years, America's Funniest Home Videos has been the pre-curser for youtube. In fact, I don't know why Vin Di Bona didn't launch the whole online video thing years ago, he'd be even richer then he probably is today. I mean, AFV really has been working as youtube for two decades! According to their official web site:

In its 19 seasons to date, America's Funniest Home Videos has given away over $10 million in prize money and evaluated more than half a million videotapes from home viewers.

I was actually surprised that they only viewed half a million videos, I would've actually thought it would've been a higher number over 19 years. But, if they've given away $10 million, they've probably made people more money on AFV then anyone's made on youtube.

But there's a bigger point here. youtube and viral video's aren't a new phenomenon. We've enjoyed watching cute animals sleeping and guys getting hit in the balls for almost 20 years already on AFV. Millions of people watch it every week. In it's peak, 38 million were watching AFV on Sunday night. Today it seems to be getting about 7 - 9 million viewers on a Sunday night, but who knows how many people are watching it in reruns, etc., so it's still got a hefty viewership. So, the demand for consumer generated content is there and it's been there for close to 20 years.

But, there's demand for it maybe once or twice a week. Notice there's no AFV channel, showing videos of cute animals and balls flying into crotches 24 hours/day. And it's really funny to watch for short periods of time. But, we can't really watch that kind of user-generated content for really long periods of time.

So, yes, we will watch content in new ways and on new devices. And we'll watch silly, short videos. But, at the end of the day, we like watching well done content. I'm not necessarily saying professional, because I'm not sure that it has to be created by professionals. But it has to be good, tell a story of some kind and tell it well. Otherwise we'll give it an hour on Sunday night, but we'll look for real content the rest of the week.

And that's why Hulu has been so a huge success. Really, we like watching good content. So UGC will always have a place, I don't think it'll ever replace well done content in the future.

AFV - America's Funniest Home Videos - Primetime - Home - ABC.com.

CUTE THINGS FALLING ASLEEP.

EW goes inside ''America's Funniest Home Videos'' | America's Funniest Home Videos | Television News | TV | Entertainment Weekly.

MediaPost Publications - Department-Store Decline: It's Not The Economy - 01/05/2009

Another good report on the state of retail, this one from MediaPost. As we've written about before, retailers need to create better experiences that differentiate themselves from one another, rather then create homogenous environments that all look the same and all have the same merchandise mixes. As we wrote in a piece for the Retail Advertising Conference last year, our walk through the luxury domain of the upper East Side showed that many of the stores up there were just “soulless, glorified, two-dimensional web sites; products are presented passively to consumers with no retail-as-theater.” Who wants to spend time — and money — in a retail environment like that?

Only 6% of consumers did most of their shopping in stores like Macy's, JC Penney or Dillard's this year, compared to 15% in 2000. And the tens of millions of ad dollars spent trying to hype Black Friday, and get shoppers to spend earlier in the season? The "Ninth Annual National Shopping Behavior Study" finds that it had practically no impact.

"The problem is that these stores have relied too heavily on the things shoppers care least about, like coupons, loyalty programs, delayed payments and contests," says John Rittenhouse, chairman of Cavallino Capital, which sponsored the study. "And they've neglected the basic rules--the things consumers say always matter, like having the merchandise they expect in stock, having helpful people staffing the store, and a customer-friendly return policy." (Emphasis mine)

As a result, shoppers avoided stores: Only 51% visited any department store this holiday shopping season, compared to 57% last year, 60% in 2006 and 63% in 2005.

In a second MediaPost article today entitled Analyst to Brands: Stick to your Knitting, Landor Associates Chief Marketing Officer Hayes Roth made several excellent points:

“When the market turns south, the business in quality socks goes up. Maybe you're buying a luggage tag from Coach rather than the thousand-dollar purse; people want to be seen as frugal to a certain extent, less flashy."

"If you look back eight years ago, the iPod emerged after the economy last hit the skids; it was an example of an inventive product that had something to offer in a compact mode and was a hit," says Roth. "So I'm a big believer that in times like these both tried-and-true brands that stick to their knitting and don't get thrown off course, and brands that emerge with a better idea will fare well.

"What we are saying is that brands can't get thrown off the track. If you have done your homework on your brand, are clear about who your customers are, are determined to deliver on that brand promise and don't cut corners on brand fundamentals, you will stay the course. You may have to reduce margins and some services but the core brand promise you cannot walk away from."

Retailers are no different in this sense then brands. The go go years of the past created an environment where people just copied on another, without any real thinking about what or why they were copying. So today, we’re left with a lot of brands that look alike that have no real sense of differentiation. And consumers, being the smart folks they are, can see that.

Lastly, I want to make this point again. For years, most brands have acted indifferently at best to their customers. A while back, we wrote this at the start of the banking crisis:

It does beg the question as to how much loyalty Northern Rock created with it's customers before this all began. Too many brands use a crisis as the first real time they reach out to say "Hey, we're here for you. Help us get though this and we'll be there for you when it's all over." But when the crisis is over, they go back to business as usual. Do you think they'll offer to drop the interest rates on their mortgages for people who leave their money where it is? Or will they send your nasty notes when you're a day late with your mortgage payment?

You know, since I started reading about all of this, I can't help but think about Jimmy Stewert and the Bailey Savings & Loan. I can just picture him stuttering as he asks people to leave their money in the bank because it'll be safe. Trust me, he says. I live here too and I'll take care of you.

So take a look at what you’re doing at retail and, if it looks like what everyone else is doing, get your resume together. You’ll be looking for a new job in the not-too-distant future.

Click here to download the full article we wrote for the 2008 Retail Advertising Conference.

MediaPost Publications - Department-Store Decline: It's Not The Economy - 01/05/2009.

MediaPost Publications - Analysts To Brands: Stick To Your Knitting - 01/05/2009.

Experience Manifesto: 2009 Social Media Predictions.

SarahLacy.com: OpenTable: So Web 1.0 It Hurts.

Sarah Lacy wrote a good blog post about OpenTable today, a service that honestly, I haven't used much myself. Trouble with having a 7 year old, we just don't go out to dinner to restaurants where we care about reservations. Sad, but true. But, I really loved what she had to say about Zappos and the importance of building for your customers first. Far too many companies are run for their investors first and then everyone else second. I think companies like Zappos show that if you focus on doing a great job for your customers, investors will be happy too.

As I said above, I get all this. And I get the climate during which OpenTable was founded. But compare the attitude to that of Zappos; a company founded at the same time and under the same harsh scrutiny. Zappos's core competency is customer service, even to the detriment of the company's bottom line. Zappos is doing about $1 billion in annual revenues-- the company could clearly cancel free overnight shipping and returns and move its call centers off-shore and have a beautiful balance sheet Wall Street would drool over. But its management actually gets what building a company for the long haul entails. (Emphasis mine)

Mark my words: In ten years Zappos will be a far bigger, far more relevant business than OpenTable. Because while the convenience of booking a reservation online is great, it's not so great that you can ignore the users that make it all possible. I've long hoped Yelp might get into this game. I know they'd never get in the console/software business, but maybe there's another way to use the Web to solve the reservation problem. A quick Compete graph shows by focusing on community, the far younger Yelp has grown to 20 million uniques, per month, while OpenTable spent the last year flat at around 1 million.

SarahLacy.com: OpenTable: So Web 1.0 It Hurts. .

50 Strange Buildings of the World | Village Of Joy

Came across this web site from a Twitter post (trying to remember who posted it!) and was excited to see the Egg make the list. It used to house the Empire State Youth Theatre Institute (now the NYS Theatre Institute), where I was an intern in 1980, I think. Yea, while the rest of my friends interned in cool places like London & Rome, I took an internship in Albany. But, at the time, it was one, if not the, hottest children's theater in the world and that's where my passion lied. And working for the theatre in Albany is what lead me to Disney, since I wanted to create a similar theatre there and almost did. Spent two years at WDW in Orlando doing the WDW Youth Theatre Club before getting hired by the Arts Council, which took my life in an interesting direction and helped me end up where I am today. I really had a great time working at the theatre, in addition to getting to do some cool shows. And it is a damn cool building!

50 Strange Buildings of the World | Village Of Joy.

MediaPost Publications - Happy New Year? Retail Tanks, 73,000 Stores Could Close - 01/02/2009

More bad news from the world of retail. Thinking we'll be getting more calls then usual from retailers looking to create a new kind of retail experience to make better use of the real estate they have.

After the worst holiday sales season in 40 years, up to 73,000 retail establishments could close in the first half of 2009, according to the International Council of Shopping Centers. Together with plummeting consumer confidence, also reaching its lowest level in decades, this news heralds a retrenchment in consumer spending in 2009 without recent precedent, experts say. The ICSC prediction follows a net loss of about 33,000 retail establishments in 2008, with 148,000 total closings offset only partially by a smaller number of openings.

ICSC pointed to the plans of national chains like Sears and Talbots-- already in motion--to close hundreds of unprofitable stores, as well as the bankruptcy or liquidation of big chains like Circuit City, Linens'n Things, Mervyn's and Sharper Image. This wave of closings and bankruptcies will result from two adverse trends coinciding: The credit crunch is making banks especially leery of lending to troubled businesses, coupled with a sharp reduction in consumer spending.

MediaPost Publications - Happy New Year? Retail Tanks, 73,000 Stores Could Close - 01/02/2009.

360 Degree View: Case Study: Retail "Free Riding" Hurts Technology Adoption

Just came across this blog today and they had a great story about Sylvania's challenge in creating a better marketplace for color TV's. Funny to read about a brand that used to be in the forefront of its industry and no longer seems to occupy that position. At any rate, I loved their conclusion at the end. Nice to know that our position on creating better retail experiences was actually determined by the Supreme Court! They have a number of good articles on the blog, so after you're done reading this full article, make sure you spend some time reading their other articles.

Territory protection was an essential element of the franchise strategy. Without it, a Sylvania retailer in one geographic area might free ride on a franchised retailer in an adjacent geographic area, by using lower prices to steal consumer sales away from the local franchised retailer (who would presumably have higher costs from investing in the new consumer experience in areas such as product education, in-home trial, repair service, etc.). Within three years, Sylvanias’ national share had doubled, with share in high priority geographic areas reaching as high as 15%.

But in 1977, a renegade Sylvania retailer entered an adjacent territory in which it was not authorized to conduct business, advertising significantly lower prices to those offered by the local Sylvania retailer. Sylvania promptly terminated its entire business relationship with the offending retailer, who sued on antitrust grounds.

In one of the most discussed and debated antitrust cases in history, the U.S. Supreme Court upheld Sylvania’s right to protect its products against intra-brand price competition. The court found that competition between brands – its primary concern – could actually be lessened when consumers lacked the retail experience required to discriminate between manufacturers. Put positively, the court determined that by offering a differentiated retail experience, consumers would be in a stronger position to make informed choices, and inter-brand competition would increase. (Emphasis mine)

360 Degree View: Case Study: Retail "Free Riding" Hurts Technology Adoption.

MediaPost Publications - WOM: Real People Win Deals, Corporate Blogs Spin Wheels - 12/30/2008

As you know if you're a regular reader of this blog, I'm not always really crazy about the whole idea of WOM marketing. You can go to here to get a good primer on our thoughts if you're not familiar with them. But our basic thinking is this:

WOM is not a tactic or strategy by itself. It is the outcome of doing something really well.

So yes, people respond to other people telling them that a product or service is good. Isn't this how product messages got out for thousands of years before mass and now social media came into play? But, at the end of the day, the product and/or service has to be worthy of WOM and that's the only way to do it well!

My concern about turning WOM into a marketing discipline is that we lose what makes it work. Too many clients/agencies start at how can we make a cool WOM campaign and not enough of them start by asking how we can make something that people truly want to talk about. And by focusing on the wrong end first, we will devalue the entire idea of WOM.

This video was done as a spoof, but it's actually something that has gone on in liquor/tobacco advertising for years, when people in bars pretended to be interested in you simply to get you into a conversation about the brand they were pitching. It's also an idea that was part of the book Pattern Recognition by William Gibson.

Sure, that video is very funny, but what does it mean for advertising? Having a 7 year old (Sydney), I frequently think about the world we're leaving to our children on many levels and certainly, how our work in marketing/advertising will impact how she lives in the future. And I do worry that our manipulation of WOM will create a world where Sydney has to somehow check everything she's told by people just to make sure it's not just a sales pitch.

So, WOM has always worked in the past and will always work in the future. It's not really all that new, we just have better ways to track it today. But it won't work if people believe it's something that our industry has manipulated so that it has little or no validity to the audience. Advertising is when someone pays to get their marketing message out. That's not WOM. WOM is a natural outcome of brands, big & small, doing really cool things organically and authentically. If it's manufactured, people will know and, at best, it will have a short term impact. The truth will almost always prevail!

Word-of-mouth marketing remains one of the most effective marketing channels--provided that it's done well (Emphasis mine), according to two new studies from DEI Worldwide and Forrester Research.  

Consumers don't put much trust in corporate blogs or social network profiles, but will readily listen to people--even if they are employed by the company selling the product--provided that they are open about their mission and relationship to the company.

DEI commissioned a study by OTX, a consumer research and consulting firm, which surveyed 500 Americans over the age of 13 from August 8-13. The study showed that 67% of consumers are likely to pass along information from an actual ("real live") brand representative to other people, and 57% are likely to take action based on that information--if it is believed to be accurate. Sixty-two percent of consumers felt that information received from a brand representative was more valuable than advertising or promotional materials.

In addition, DEI found that 70% of consumers have used social media--including networks and chat--to get information about a brand or product, and just over one-third have then passed that information along to others.

Of this second cohort, 60% once again used social media to propagate the information (that's about 20% of the total). DEI is also launching a social media analyzer tool on its Web site that allows marketers to see how their target audiences respond to different social marketing channels.

Consumers are far more skeptical of information insinuated into social media but lacking the personal touch, according to another study from Forrester Research, which found that just 16% of consumers trusted corporate blogs. A mere 18% trusted corporate social network profiles.

By contrast, 77% of consumers say they trust emails "from people you know," and 60% said they trust consumer reviews.

MediaPost Publications - WOM: Real People Win Deals, Corporate Blogs Spin Wheels - 12/30/2008.

Experience Manifesto: Goodbye, Mary*.