New research from Professor Olivier Toubia featured in the current issue of Columbia Ideas at Work demonstrates the power of viral marketing. Working with Aliza Freud ’01 (EMBA), who is the founder and CEO of the social media platform SheSpeaks, Toubia examined how influencer communities can promote and track viral product buzz.

The case study
The research centered on OPI nail products. “They were a very traditional brand and wanted to tap into consumer insights and advocacy,” says Freud. Using the SheSpeaks online community, samples of the new nail product were mailed to 10,000 self-declared beauty enthusiasts. The same women also received coupons for future purchases. Meanwhile, OPI also placed traditional coupons and ads in magazines and newspaper inserts. The result? The viral campaign outperformed the print campaign by 1200%. “It’s not surprising,” says Freud. “There is a much deeper engagement online than flipping through a magazine.”

What does this mean for marketing?
In the past five years, brand marketing has changed dramatically with the emergence of social networking. Current research, such as the data from Toubia and Freud, is backing that up. Freud, who spent 10 years at American Express in marketing and product management, says that marketers are in the rapid evolution phase of brand strategy.

“Brand managers need to change their way of thinking,” she says. “Historically, marketing has been a one-way communication and brands tried to stifle or control conversations about the product. Today, it is very different — it’s a two-way conversation between the brand and the audience.”

“In the future, managers will care much more deeply about these opportunities and make consumer conversations integral to their marketing program,” continues Freud. “They can engage with consumers online and capture a lot more information.”

Photo credit: Will Vanlue

Today, one of TED’s offspring — an independently organized local version called TEDxEast — is taking place in New York City. Professor William Duggan, author of Strategic Intuition and co-author of The Aid Trap, written with Dean Glenn Hubbard, and Naif Al-Mutawa ’03, founder of The 99, are among the speakers at the inaugural event. Other speakers include author Suzy Welch, 10-10-10: A Life-Transforming Idea; Scott Heiferman, CEO of Meetup; and Chris Elam, artistic director of Misnomer Dance Theater. Ed Rashba ’04 and Melek Pulatkonak ’02 helped organize the event.

TEDxEast is streaming live from the City Winery in New York City from 1 to 6:30 p.m. ET on November 6. Check back soon for video clips from the event.

You’ve heard about companies using TweetDeck to tweet on Twitter, updating their Facebook status while feeding into FriendFeed, and building buzz to bolster conversation on their blogs. But if you don’t understand what any of this means, and consider yourself a marketer, then 1) you are not alone and 2) you need to understand what all of this is about.

Social media as a communications channel is the New Big Thing for marketers. So what do you need to do to stay ahead of the curve and make sure your social media initiatives are successful at your company? Let this article be your starting point.

1) Launch, Track, Learn, Evolve, Rebuild

Don’t skimp on reporting. Everything in the online space is trackable — so track it. Launch initiatives quickly and then use the information and results that are gathered to learn and continue to evolve your platforms. Some of my greatest insights and strategic program adjustments have come by really diving into the numbers.

As a student in the Executive MBA program I recently completed a class called Decision Models, which is focused on how to structure information to support managerial decisions. I had little exposure to these areas before, but I was able to use the classroom knowledge immediately in my job. I used the models and applied them to my results to help inform funding allocations. You might consider doing the same thing.

Powerful in its simplicity, yet worth emphasizing — in social media it is critical to launch quickly, track results, continuously learn, iteratively evolve, and periodically rebuild your entire system.

2) Leadership Support and Empowerment

The success of social media programs can be influenced by the degree of leadership support and decentralized decision-making inherent in the process. To me, leadership support means two things: 1) empowering employees and 2) encouraging new ideas by involving social media gurus.

First, empower employees. Senior leaders in most traditional companies are digital immigrants and they are still getting up to speed on these new channels, they need to have trust in the digital natives — the thinkers who have come of age in the digital era. Smart leaders will empower the digital natives to make decisions as they themselves learn the ropes. In time, it is likely that companies which support employees to deliver on new social media initiatives will be the clear winners and innovators. Take, for example, the story of P&G, which is recognized for pioneering sponsored advertising in soap operas when TV was the next big thing.

Secondly, involve social media experts. It is challenging to launch company “firsts” in social media, even if you are working with people who have a can-do attitude and are empowered to drive these initiatives forward. Employee burnout and retention can happen with social media, just as it can with any other creative endeavor. Whether as a leader or peer, continually identifying and retaining people who are skilled in social media will help serve any establishment seeking to make inroads in this space.

3) Form Progressive Partnerships

At its heart, social media is about people and relationships. You can say this applies for anything in marketing, but I believe it is especially true for social media.

In the beginning, the process is about finding and retaining the right employees who are resilient, can work within internal processes, and who are also willing to challenge the ideas when appropriate. However, quickly, this evolves to fostering the right external partnerships. At OPEN Forum, we are fortunate to partner with big brands, small brands, and individuals’ brands. We partner with major online publications like Mashable, experts like Guy Kawasaki, and sponsors like FedEx, along with some of the best and brightest small business owners out there — our customers. (Also, on a personal note about relationships, it’s especially nice to work with another Columbia Business School grad, Julie Hansen ’03 (EMBA) of The Business Insider.)

Through listening and remaining open to opportunities with our partners, we’re able to exchange value organically, in a way that creates efficiencies and opportunities for all. As an example, we frequently meet with small business owners to find what is working for them and what they need (including my own personal experience consulting for SweetRiot, one of our small business retail customers). We help drive their business growth by offering advice, and they come to better understand the value of our products and services so they use them more — it’s a win-win situation. Do this authentically and consistently and you will win. I will leave you with a final thought — whether you are a digital immigrant or digital native, it’s imperative that marketers realize that social media is the business strategy — not just a part of the business strategy. So, keep this in mind as you start to get social and you will be truly successful. If you have any questions, feel free to tweet me at @brianlenhart.

Photo credit: Mike Paradise

“How do we make decisions under uncertainty?” Professor Wei Jiang posed the question to an audience of students last week during orientation. The question not only referred to the lecture’s topic — the financial crisis — but was offered as a framing device for students as they begin core classes in the MBA program this week.

“This will be the most important skill you can develop,” she said.

A new orientation module focused on the financial crisis was created this year to give new students an overview of the causes and issues of the crisis and provide key questions that connect it with upcoming courses in the core. In her lecture, Jiang considered different aspects of the crisis including international policy, behavioral bias, compensation structure, government regulation and risk models.

The module is part of a larger initiative by the School to use the financial crisis as a vehicle to foster integrative thinking in business training. Another element of that initiative is the creation of a new cross-discipline class, which will launch in Spring 2010, on the future of financial services. During the past summer term, former chief legal officer of Lehman Brothers, Thomas Russo, taught a half-term course looking at the crisis.

“Look ahead as well as look around you,” Jiang told students at the end of her lecture. “Think in terms of tradeoffs and equilibrium.”

Photo courtesy of Columbia Business School

About one-fifth of the adult population in the United States experiences some kind of mood disorder, with about 6 percent of the population suffering from severe mood-related disorders. The most prevalent instances fall into one of two classes: depressive disorders or anxiety disorders. But why do some people develop depression during very stressful times while others develop anxiety disorder? The answer may lie in regulatory fit and regulatory engagement.

My work on motivational systems recognizes a distinction between the two different types of basic preferences that people exhibit when pursuing their goals, each corresponding with a distinct regulatory state.

People who tend to make decisions and pursue their goals in an eager way, seeking opportunities for advancement, operate in a promotion state. Promotion people are more likely to consider a number of courses of action and exercise a greater willingness to take risks. People who are motivated primarily by cultivating safety and security as they pursue goals operate in a prevention state; they are intently concerned with avoiding errors and less likely to consider a wide variety of options.

When a promotion person operates in an environment in which there is a lot of innovation and risk taking, her environment fits her regulatory state. If you put that same promotion person in an environment where most of her colleagues are vigilant and slow to take risks, she’ll have a hard time operating in the prevailing prevention state — it’s a nonfit for her promotional motivation system. Conversely, when a prevention person finds himself in an eager, risk-taking work culture, she’s in a nonfit environment. (You can read more about the underlying research and its management and marketing applications in Columbia Ideas at Work.)

Depression versus anxiety

I’ve long been interested in why some people fall into depression and others develop anxiety disorder. And I believe that the logic of the two regulatory states, prevention and promotion, can account for these two very different reactions to stress.

Depression and anxiety both represent failures in goal pursuit — depression is a failure in promotion pursuit, while anxiety is a failure in prevention pursuit. When life isn’t going well, people with a promotion focus become sad and discouraged; people with a prevention focus become anxious, tense and worried.

To more fully understand how the promotion and prevention regulatory states inform depression and anxiety, I’ve investigated the role that engagement plays in intensifying how we value the activities we take part in and the goals we pursue.

Engagement is a way of understanding value — how much people value an activity or goal. And engagement is directly related to intensity. Typically when someone’s engagement in an activity or in pursuit of a goal increases — under fit conditions — intensity increases. Sometimes obstacles to goals can make us engage even more intently in what we are doing — and as a result, a goal can become more highly valued; sometimes obstacles cause us to disengage in what we’re doing, and goals and rewards become devalued.

Under fit conditions, both motivational types are engaged. But promotional people decrease their engagement after failure, while prevention people increase their engagement after failure.

When people with a promotion focus fail, they become less eager, and become sad and discouraged. They are no longer enthusiastic — and that’s a nonfit for promotion, there is less of the eagerness that fits their system. The nonfit causes a promotional person to disengage, and that deintensifies all the positive things in life. Loss of interest in even the good things in life is the major symptom of depression.

Prevention is the exact opposite — when prevention-focused personalities fail in prevention, they become more vigilant, anxious and on guard than ever. In prevention, the increased vigilance fits their system — so they actually become more engaged, intensifying all the negative things in life. All the negatives become more negative — which is precisely the main symptom of generalized anxiety disorder.

This work represents the first time in psychology that there has been a theory for why depressed people lose interest in everything and why anxious people generalize their anxiety to everything: they are reacting differently to failures in their distinct regulatory states with respect to both regulatory fit and engagement, which deintensifies positives in one case and intensifies negatives in the other.

If failures in promotion and prevention do account for the two major symptoms of depression and anxiety and explain why they are different, what does that imply for treatment? Tim Strauman of Duke University and I have received a grant from the National Institute of Mental Health to consider this question. Our hypothesis is that by increasing engagement for promotional personalities you can make life’s positives once more positive, and by decreasing engagement for prevention personalities you can deintensify the negatives. We intend to pursue new interventions in therapy that directly address the differences in engagement.

Photo credit: Yoel Ben-Avraham

Why do we love our iPhones so? Of course the reasons for the gadget’s immense popularity are many, but consider this: the device’s interface — complete with colorful pictures and icons — may activate the part of our brain associated with emotional processing, and that, in turn, may lead to greater consumer preference for the best-selling phone.

In a new study published in the Journal of Consumer Research, Professor Leonard Lee, with his colleagues Dan Ariely at Duke University and On Amir at the University of California San Diego, found that decisions made with emotional processing, such as a gut decision, rather than cognitive processing (analyzing the pros and cons) tend to be more consistent. And consistency is, after all, what we humans really crave. Indeed, there is long-standing evidence in social psychology that we aim for consistency across all our beliefs and attitudes.

“How happy or satisfied we are by our preferences is driven by consistency to some extent,” says Lee. “When we use emotional processing to make decisions, we can actually be more satisfied with our choices.”

Lee found that certain attributes elicit more emotion-based decisions. For example, a color photo of an object rather than black and white text describing its features provokes more emotional, and thus more consistent, decisions in people. He also found, in another study, that some products might naturally elicit more emotional processing than others.

“Even if the product is essentially utilitarian and elicits more cognitive processing, we can put a more emotional layer on it so we can better elicit emotional processing,” says Lee.

For marketers and product designers, the implications are manifest — the big, shiny red button will outperform that wonky features list when it comes to giving consumers a choice that they will feel satisfied with.

“For many consumer products, it makes sense for marketers to use as many affective cues or emotional cues to elicit consumers’ emotional processing rather than just listing all the features of a product, which might induce greater cognitive processing,” says Lee.

Photo credit: David Pham

In mid-May the European Commission fined Intel $1.45 billion as part of an anti-trust lawsuit, ruling that the microchip company had skewed the competition — namely with rival Advanced Micro Devices (AMD) — by offering rebates to computer manufacturers in exchange for exclusive distribution contracts.

Supporters of the Commission’s decision hope that the ruling will make the microchip market more competitive — and thus more innovative. However, research from Professor Brett Gordon and Ronald Goettler from the University of Chicago based on data collected from the two chipmakers suggests that in the case of Intel, less competition, not more, would lead to more innovation.

In their research, which was recently featured in Ideas at Work, Gordon and Goettler found that the company would have innovated more quickly if it had not been in competition with AMD. How might this be possible?

First, as the world’s only microprocessor developer, Intel would have pricing power in the market, allowing it to charge more for its products. The increased profit margin would allow Intel to invest more money in research and development, which would result in a higher rate of innovation.

Second, as the sole microprocessor developer, Intel could potentially put itself out of business if it didn’t innovate often enough. If, for example, Intel sold a microprocessor today, it is unlikely the same customer would purchase another microprocessor unless the new processor was more technologically advanced. This provides another incentive for Intel to innovate rapidly.

Read the complete article about this research in Ideas at Work.

Photo credit: Uwe Hermann

From left to right: John O’Shaughnessy, Mac Hulbert, Morris Holbrook, Don Lehmann, Noel Capon

Last weekend, faculty and current and former students gathered for Morrisfest, a “not-so-stuffy” academic conference to honor marketing professor Morris Holbrook, who is retiring after 35 years of teaching. Public Offering spoke with Holbrook about the evolution of research on consumer behavior.

Marketing professor and consumer behavior scholar Morris Holbrook dispels the notion that “evil German scientists” were responsible for early forays into consumer behavior research.

“As part of the fallout from World War II, a number of psychoanalytically trained researchers came here from Germany. They weren’t licensed to practice, so they got jobs in advertising agencies doing motivation research, figuring out the deep underlying repressed needs of consumers and how they could be manipulated to sell more Cornflakes,” says Holbrook. “But that approach was attacked on the basis of a kind of ethics. It was disgraced and abandoned and went into hibernation.”

In the early 1980s — after marketing research began to adopt a decision-oriented perspective — the qualitative science of consumer behavior was back, this time with Holbrook leading the scholarly pack. He says it was a natural response to the field’s direction, which had become overly focused on the “rational economic behavior model.”

“We said, ‘Wait a minute! What about all the irrational stuff, the daydreams, the fantasies, the feelings, emotions, misperceptions and biases?’” Holbrook says, recalling the shift to the more experiential approach.

“We started focusing on various aspects of consumer emotion and the hedonic aspects of consumer pleasure and the aesthetics of consumer behavior,” he says. “[The rational model] was omitting so much of people’s real emotional connection to the consumption experience and the other kinds of value associated with the experience.”

He adds, “Today, people have assimilated that into their thinking. It’s not news anymore … and it’s kind of caught on and the management guru types have embraced it. It’s very much related to various notions that branch off from it like branding.”

Read more about Holbrook’s research in Ideas at Work.

Photo courtesy of Eric Johnson

For the National Football League, the off-season is anything but uneventful. From the frenzy surrounding the league’s annual draft to decisions about the league’s Collective Bargaining Agreement to the question of whether to expand the regular season to 18 games, these warmer months are crunch time for the world’s most successful and popular sports league.

In an April 23 talk with students sponsored by the Sports Business Association and led by Matthew Hill ’09, NFL Commissioner Roger Goodell discussed many of the major issues currently facing the league.

On increasing the marketing push behind the NFL Draft.
“People have a great interest in our game. And we’ve tried to show that the game isn’t just on Sundays and Mondays in the fall, that there’s a game in the offseason, as well. It’s in how teams prepare for the coming season, how they select players, evaluate players, how they manage the salary cap, how they train. All of that goes into how successful a team will be. What we’ve tried to do is expose the fans to that.”

On renegotiating the NFL’s collective bargaining agreement.
“The CBA is at the core of our economics. Sixty percent of our gross revenue goes to players. That’s a pretty good business for the players. For the owners, particularly in this climate, it’s a risky proposition. And I think that’s what they want to evaluate — how do we get better recognition of the costs associated with creating that revenue? Obviously we have significant TV and media contracts, but more and more the revenue is being created on the local level with stadiums. In New York, the stadium across the river is going to probably cost $1.8 billion. That’s all privately financed. That risk in the marketplace is one that the owners have to bear; the players don’t bear that. But they’re the biggest beneficiaries.”

On playing regular season games outside the United States.
“International growth is important to us. Up until three years ago we had a different strategy — we invested in NFL Europe. What the fans eventually realized is that it wasn’t the best quality product. And when we played preseason games there, they understood it then, too. So we said, listen, we can’t sell to our international fan base what we couldn’t sell here in the United States. So we started taking regular season games there. And this year we sold out 90,000 tickets in the UK, in a terrible market, nine months in advance — in four hours.”

On expanding the NFL’s regular season schedule to 18 games.
“What we’re trying to do is what most organizations are trying to do: create greater value for our customers. It’s no secret that the quality of our preseason suffers because many of the more prominent players don’t play and because the games don’t count toward the regular season standings. We’re charging our customers for that, and I think it’s wrong for us to do that to our fans. We can create the same high quality programming and content in the regular season with only two preseason games. So the question is, can we convert two of the preseason games to regular season games so you will get a higher quality product for the same value? But we have to determine the unintended consequences of that, and that’s why I haven’t taken a position on it yet.

Photo credit: Ryan Lejbak

Only days before the Indian Premier League is set to begin its month-long second season in South Africa, a different sort of cricket tournament concluded at Columbia Business School. Last night, Cluster C's Team 11 nabbed the winning spot in Case Competition 2009.

Sponsored by the Dean’s Office, the Chazen Institute, the Samberg Institute and Columbia Case Works, the event was Columbia Business School’s first ever case competition. The winning team was awarded a check for $2,400.

This term’s case, The Launch of the Indian Premier League, followed Lalit Modi as he endeavored to build a domestic cricket league in India. The league plays a new form of the game that lasts about three hours and which is more compatible with television. The league’s eight teams are based in Indian cities in a model similar to American professional sport leagues.

“Almost no one gave the new cricket league a chance when it was first conceived,” says case author Professor Rajeev Kohli about how he became interested in the story. “But not only was it successful, it became a phenomenon around the world. The case centers around why that is so.”

Kohli says there are three keys to IPL’s success:

1. The players: “There was great clarity in Modi’s mind that the first issue was the players. He created the right incentives for them so [joining the IPL] would be financially lucrative for every top player in the world.”
2. Securing broadcast rates: “The payment structure was based on a long-term (10 year) contracts with clauses for ratings. The broadcasters had the right incentives to take risks and to make the product right for a prime-time audience in a country where most households have a single televisions set.”
3. Glitter factor: “Once the [Bollywood] stars showed interest, the league became a very glamorous mix of cinema and sport. Suddenly all the industrialists said, ‘We want in, too.’”

“By providing the right incentives, structuring the broadcast rates and bringing in glamour, and attracting women and children into the audience, Modi was able to create demand,” explains Kohli.

How will this season’s South Africa location affect the league’s success? The IPL had to move the 2009 tournament out of India due to ongoing security concerns surrounding national elections.

“It is a disappointment, but in balance it is the best thing that could be done at this time and keeps the players safe,” says Kohli. “My hunch is that they won’t be much affected because it is a media event, and South Africa also has many cricket fans.”

Photo credit: SJ Jagadeesh

Want to have a hand in the success of Manchester United, the world’s preeminent soccer franchise? Forget traveling across the pond or even tuning your television to the next big match — all you have to do is pay your taxes.

The economic downturn has done what even David Beckham could not: transform professional soccer into an American institution.

Just take a look at the jersey of star center forward Wayne Rooney (pictured). In addition to the Manchester United logo and the Nike Swoosh, the famed red uniform prominently carries the logo of AIG, the insurance giant famous for paying out bonuses to its top executives after receiving a multi-billion dollar bailout from the U.S. government.

Now, Manchester United doesn’t put logos on its jerseys for free. AIG has to pay the team more than 56 million quid for the exposure, and it’s a good bet that those payments are continuing.

This means that U.S. taxpayers, like it or not, are financially supporting Manchester United — and thus have a stake in how well it performs this year.

So how is our team faring this year?

Just a few weeks ago, Man U sat proudly atop the English Premier League. But its once-significant lead in the standings has shrunk dramatically. On March 14, the team lost 4-1 at home to rival Liverpool. The following Saturday, Man U saw two of its players ejected in a 2-0 loss to Fulham, and later lost its number one ranking. On Sunday, playing without a suspended Rooney, Man U reclaimed a marginal lead in the standings by eking out a 3-2 thriller against Aston Villa.

Though the team’s recent struggles can hardly be blamed on its partnership with AIG, the situation does teach us a valuable lesson about the dangers of co-branding. Joining with a seemingly strong brand may improve a firm’s short-term fortunes. However, in this increasingly volatile world management should think very carefully before staking its company’s reputation on a relationship with a third party over which it has very little control.

But while things may look very challenging for Man U, the team still has a chance to win the English Premier League, the FA Cup and the European Champions League — in addition to the Club World Cup and the English League Carling Cup, which it has already pocketed.

A victory for Man U is a victory for the U.S. taxpayer — in spirit, at the very least — so let’s all give cheer for Manchester United, America’s Team. If we’re going to be backing them financially, let’s make sure we get our money’s worth.

Noel Capon is the R.C. Kopf Professor of International Marketing at Columbia Business School. He is author of Managing Global Accounts and The Marketing Mavens; his high-value, low-price marketing textbook, Managing Marketing in the 21st Century, is available at www.axcesscapon.com on a pay-what-you-think-it’s-worth basis.

Photo credit: toksuede

Did you “Elf Yourself” last holiday season? OfficeMax’s seasonal marketing campaign featured a viral Web component which allowed customers to superimpose an image of their own face on an animated dancing elf. According to Internet tracking service comScore, more than 17 million people visited the Elf Yourself Web site during the 2007 holiday season. But did all of those unique visitors translate into increased sales? The answer is not really: the company’s reported total sales in Q4 2007 were down 2.6%. The economy’s slide hasn’t helped either; in 2008, OfficeMax reported that its 2008 Q4 earnings were down more than 14%.

Ava Seave, an adjunct associate professor in Finance and Economics, recently blogged about the correlation between viral marketing success and sales totals. Seave suggests that marketers examine traditional metrics to gauge the success of their campaigns. She writes:

Viral marketing can decrease acquisition costs for new customers because your current customers essentially endorse your product when they send along a game or video they think is funny or interesting, and, of course, is associated with your product.

However, the acquisition cost calculation needs to be done over time, since a viral marketing campaign almost never leads to direct sales from that game or video viewing. The right goals for a viral campaign should be a lot more old school: Does this campaign generate leads and does it help with brand recognition?

Judging a viral campaign’s success for lead generation is straight forward — count the number of the leads that close and judge the quality — i.e. total revenue — of the new customers. To count, how many leads land on the registration form and actually fill in the information, and how many abandon? What percentage of leads make a transaction? What is the cost of the lead and the cost of the order?

Compare these statistics to all your other sources, naturally. Does this campaign help with brand recognition is a harder question to pull out a quantitative answer. You can point to the number of downloads or pass-alongs as new exposures to your brand, and we assume exposure will lead to recognition. You also could look at what terms are put into search engines that lead to your site and determine if this indicates the effectiveness of the campaign.

Photo credit: Judy Baxter

How can marketers adapt to this challenging economic climate? Professor Don Sexton offers three keys to success.

Do not use an axe to make cuts
In a down economy, the worst thing you can do is make across-the-board cuts. If you go in with in axe, you will most likely make some real mistakes. Think more carefully where your outlays are. How do you determine what you get back from marketing expenditures? You must first understand the long-term value of your customers to you and the costs involved with finding and keeping them. If you go by your gut you will have a problem. This applies to which type of media to use, such as deciding between social media and more traditional types of media, and to whom you direct your marketing efforts.

Help your customers find value
Don’t just say “we feel your pain.” Think about what you can do to help and find ways to partner with your customers. For example, I recently heard about an auto dealership that will give you a loaner if you need to get to a job interview. It’s not a major outlay for the dealership but it shows they care about their customers. The point is not just the thought but the action behind it. What you do with your customers now will affect your performance in the future.

Marketers must also rethink how to delight customers. You want to satisfy customers but make sure the balance between costs and value is correct. Don’t cut costs so much that you are pulling down value to the customer more than any costs you save and don’t add value so much that your costs increase more than the additional value you are providing. We call this “value engineering.”

Perceiving is believing
Marketers need to be more transparent to consumers. For example, even if the $400 million that Citigroup reportedly spent on the naming rights for the new Mets ballpark is a good idea — and that is debatable — Citi still must consider how people will perceive that expenditure. Someone unfamiliar with how branding works and why such a move might make sense may wonder why their taxes (via bailout money) and fees/interest they pay the bank are being used to put a name on a stadium instead of helping them. That kind of perception can have a negative impact. No company is immune to such scrutiny. These days marketing actions are public and will be discussed. Companies should be sure that people are going to understand the motivation behind its actions. They really have to think about what signals they are sending with every marketing action they take.

Don Sexton is the author of Marketing 101, Branding 101 and Value Above Cost: Driving Superior Financial Performance with CVA®, the Most Important Metric You’ve Never Used.

Photo credit: Harlem Lands

It’s a common situation: a Hollywood blockbuster, panned by critics, racks up huge box office sales while a critical darling struggles to find an audience. But is this disparity the result of the considerable marketing and promotional backing these blockbusters, or do average moviegoers simply have bad taste?

According to research by Professor Morris Holbrook, the answer is the former. In a study featured in Ideas at Work, Holbrook compared the opinions of professional critics with those of regular moviegoers but controlled for market-related phenomena such as advertising, trailers, number of opening screens and promotional appearances by the stars of the film.

Holbrook found that, absent of the influence of marketing and promotional campaigns, moviegoers expressed views similar to those of professional critics. In fact, they were five times more likely to exercise “good taste” than Holbrook suspected.

People will always flock to theaters to see the latest Hollywood blockbuster regardless of what critics have to say, but according to Holbrook, “If you take away the contaminating influence of the marketplace — advertising dollars, promotional budgets and putting a movie on every screen in every shopping mall — you find that people actually do like what’s good.”

For more information on Holbrook’s research, see “A Question of Taste” in Ideas at Work.

This post contains an update.

Retailers have been stunned by how abrupt the change in the economy has been and that it has happened across all strata of consumers. It is most pronounced in the luxury sector. As recently as seven or eight months ago, luxury thought that it was invulnerable, but that is not true.

Many luxury customers are aspirational and are vulnerable to downturns in the economy. The core customer with essentially unlimited disposable funds may no longer find it fashionable to behave as they had in the past. Irrational exuberance may not return and people may not seek to live beyond their means, choosing a more conservative lifestyle. Now, the customer is saving for the first time in many years, and this recession will leave a lasting mark on consumer behavior.

Jobs, confidence are lacking
Retailers are one of the largest sectors of the economy. They are very large employers. When business declines, retailers stop hiring. Layoffs soon follow. We’re seeing this across the country. Laying off large numbers of people creates a cascade of breakage. This impacts consumer confidence; everyone knows someone who was laid off. Stores begin to close. That is very visible. At the end of the day, if people don’t have jobs, there is no recovery and that’s the end of it. The consumer has to be viable, which means jobs and a rise in confidence. Many people with viable jobs become increasingly fearful of losing their employment. We’ve gone from irrational exuberance to irrational fear.

It’s good to be different
This downturn creates powerful opportunities for organizations to emerge if they can successfully differentiate themselves. Retailers with notable products and services can create enormous energy and value. Two examples are Apple and Amazon. Apple has a highly differentiated product and a selling environment at retail that is incomparable. Their market share will continue to climb as long as they continue to satisfy their customers’ needs and wants. Amazon aggregates assortments of merchandise in an on line setting that is the best in the world and continues to acquire more and more market share. They invested in an esoteric device, the Kindle, and surprise! It looks like a $1.4 billion business next year.

On the other hand, retailers with little or no forward strategy like the department stores, who have been playing out a “Last Man Standing” end game have little likelihood of future success and vitality. Layoffs in this sector are a tragic and ineffective expression of survival. You can’t use reductions in force as a strategic blueprint. It creates enormous disruption and leads to more crises downstream.

Good news for the shopper
Currently there is an enormous excess of inventory in many retailers supply chains because of recent extreme and unanticipated shortfalls in sales. These excesses will have to be liquidated. Retailers are dumping inventory, canceling what they can and avoiding buying forward product. In the next year we’re going to see fewer stores, less inventory overall in stores and less discounting because of less inventory. Prices will come down because consumers will expect more value and will be less willing to play the high-low game as they have in the past.

This economic downturn, recession if you will, is likely to continue for at least 12 to 18 months and maybe longer. I believe that when it is over the retail landscape will be very different than it is today.

UPDATE (2/25/09): Follow up from the Retail & Luxury Goods Conference. Keynote speaker Robert Burke said, “I don't think the department stores are completely dead and I don’t believe luxury is over. … It became overused and ambiguous terminology.” View the complete video (part 1, part 2) of his speech. -CN

Photo credit: Christopher Chan

The success of Slumdog Millionaire, which won Best Picture at the Academy Awards on Sunday night, is the a perfect storm of marketing memes in India. The movie’s fairy tale plot, its focus on youth, celebrity and television, and, ultimately, the transcultural nature of its fame are the very things also driving success stories in advertising and branding in India today.

Marketing professor Gita Johar, who recently moderated a panel at the “Branding in China and India: The Reality and the Future” symposium, said that the panelists concluded that the biggest trends in advertising are the size of the youth market — 40 percent of the population is less than 20 years old — and the role of television and celebrity advertising, particularly as aspirational messaging.

“[Younger consumers] are confident, articulate and looking for brands that have some meaning for them,” Johar said about the panel discussion on the success of celebrity endorsements. “Storytelling is appealing to them.”

The panel also discussed the relationship between the growing acceptance of Indian products and items outside the country and their increase in brand value inside India.

“Now we are taking things from East to West,” Johar said. “Indian-based content is doing well abroad and that success abroad validates it back home.”

However, as transcultural products and stories become more popular, there are still distinctly local aspects to branding and advertising in India. The panel discussed the need for firms to quickly innovate products targeted to base of the consumer pyramid, as knock-off competition is strong, and to utilize off-beat media, such as megaphones and wall painting. Johar said the panel also discussed the shift to using local talent for creative and agency work.

Rembrandt, it turns out, is a great teaching tool for business leaders. Not as cautionary tale — the painter had notoriously bad money management skills — but rather as an expert on symbolic communication.

Executives from the Columbia Senior Executive Program (CSEP), gathered at the Frick Collection on a recent Monday morning to learn how to better use symbols as leaders by looking at how master artists, such as Rembrandt, used symbolism in their paintings.

The class was a unique collaboration between CSEP’s director, Professor Paul Ingram, and the museum’s chief curator, Colin Bailey, that was part of the month-long executive education module on organizational alignment.

“When you draw your own conclusions from a story or symbol,” Ingram said in his lecture, “you are engaged in the creation of the message, you are active in creating meaning. That affects commitment.”

Consider direct versus symbolic communication: direct missives — such as a mass email — are fast and clear, they create authority and allow little room for misunderstanding. However, they are not very powerful messages; the more people who receive the message, the less power the message contains.

“Direct communication can be cheap talk,” said Prof. Ingram. “It doesn’t have much credibility.”

Symbols, however, require an investment from both the sender and the receiver of the message. That, said Ingram, makes the message all the more meaningful. The reader — and in the case at the museum, the viewer — is an active receiver. Take Rembrandt’s 1658 Self Portrait (pictured above), which was part of the day’s lesson: what is the meaning of the staff in the artist’s hand, the vestment-style clothing, the colors used? (Listen to Frick audio guide)

“There is no one right answer,” said Mr. Bailey. “There are only ways to appreciate the sophistication of what’s being communicated.”

Image courtesy of the Frick Collection.

In 2009, change is not just a buzzword — it’s a top priority for many organizations and individuals. And according to Professor Eric Johnson, major change need not be difficult or expensive. Often, Johnson says, change can start by simply looking at how an organization — or a consumer — utilizes default settings.

“There are many defaults that affect you, and you don’t even realize it,” says Johnson. “An unchecked box is a default.”

Research by Johnson and Daniel Goldstein of the London School of Economics has shown that default settings have the power to affect change on a wide range of issues, from consumer purchases to organ donations. Take the example of buying a new car. A customer completes an online car configurator and is shown features that match her preferences, such as the option for a sporty three-spoke steering wheel with a high-horsepower engine. These adaptive defaults serve to align product and consumer as closely as possible. In a different study, a default for organ donation can account for a 16-50% increase in transplantations performed in a country, they found.

However, in addition to changing a desired outcome by checking or un-checking a box, a default also promotes change in user behavior.

“Defaults change the way you look at choices. It is as if you owned the default, and you have to decide what are the advantages and alternatives,” says Johnson.

In a recent article in Harvard Business Review, Johnson, with co-authors Goldstein, Andreas Herrmann and Mark Heitmann, discuss how to best design defaults. The first thing to consider is who is designing them.

“[Default settings] are a decision that is strategic and goes to the bottom line,” says Johnson. “But the decision is too often made by the IT person or the person doing the page design. It is an essential characteristic of a Web site. It’s part of a larger view that site architecture has a large influence over consumer behavior and that’s not something most firms and consumers anticipate.”

And that decision making need not require any overhead, says Johnson. “The beauty of defaults is that they can be changed by simply editing a couple of lines of HTML.”

To learn more about Professor Johnson’s research on defaults, see “Defaults make a difference” in Ideas at Work.

Much like the brick-and-mortar American mall, where dozens, if not hundreds of shops are clustered together, social commerce sites such as eBay, Amazon and ZLiO.com bring together online shops via links.

Research from Professor Olivier Toubia, conducted with doctoral student Andrew Stephen, shows that having a relatively large number of links directed to a shop benefits that shop. They also found, more surprisingly, that when shops link to each other, there is a net positive effect — even though this may seemingly increase competition. “It makes sense to link to other shops, even though you’re sending customers away,” Toubia says. “It helps more than hurts, because in most social networks people link back.”

Read more about Toubia’s research in Ideas at Work.

Barack Obama did not go to business school, but he will win the U.S. presidency because he understands the core principle of developing a market strategy — the positioning statement. Similar to how L’Oreal became an industry leader by telling a consistent story to its customers (“Because You’re Worth It”), Barack Obama has offered voters a consistent message: “The Change We Need.” It’s everywhere: in his speeches, in the advertising, and in the placards held his by supporters at campaign events. By contrast, John McCain’s message has been inconsistent and confused.

As any marketing student knows, the positioning statement has four elements: customer target, competitor target, value proposition, and reason to believe. Obama’s customer targets are the specific voters he is trying to attract: young and first-time voters, African-Americans, Hispanics, Democrats, Independents. Obama is not concerned with mainstream Republicans or the religious right, reflected in his decision to make little effort in heavily red states such as Texas, Oklahoma and Kansas. His competitor target is also pretty clear — it’s not McCain, but rather George W. Bush. How many times has Obama reminded us that “John McCain voted with President Bush over 90% of the time”? Obama’s advertisements even depict McCain confirming that assertion (video).

Obama’s value proposition, “The Change We Need,” is clear and resolute, but from the start his main problem has been establishing the reason to believe. Why should anyone think that a first-term senator from Illinois with minimal executive experience can handle the most powerful office in the world? Sure, he’s an excellent speaker and has a credible record in Illinois, but president of the United States?

The answer is threefold: first, he has run a highly disciplined campaign that has been consistently on message; to put it another way, he has stuck to his value proposition. Second, his selection of Joe Biden as his running mate has shored up his foreign policy credentials. Third, in all three presidential debates, Obama showed himself to be intelligent, capable, and thoughtful about just exactly what needs change, and how he would go about implementing it.

John McCain, on the other hand, has got his marketing all wrong. Independents hold the key to the election, but McCain chose the right wing of the Republican Party as his customer target, evidenced by the selection of Sarah Palin as his running mate. McCain’s competitor target is clearly Senator Obama, but he might have done better running against Congressional Democrats, thinking, “Things don’t look good for Republicans in the House and Senate, but a McCain presidency will keep a lid on the Democrats’ excesses.”

McCain’s real problem, though, has been his value proposition. What is it, you ask? Well, there are a few to choose from: war hero, bipartisan, courageous patriot, conservative, straight-talker, and experienced leader. While each of these is credible on its own, there is no cohesive narrative or consistent value proposition. One moment, McCain’s a war hero, the next he’s an experienced political leader, and then later he’s a bipartisan trying to build consensus on immigration. The shoot-from-the-hip, overnight decision to select Sarah Palin, the suspension of his campaign and his personal attacks on Obama have destroyed whatever coherence a voter might try to construct. Just compare all of this to the resolute consistency of “The Change We Need.”

So what should we take away from this presidential race? First, I would like to award Barack Obama an Honorary Honors grade for the marketing core course at Columbia Business School. John McCain is receiving an Honorary Fail, but he can turn this into a Low Pass by submitting an analytic paper on the role of positioning in the market strategy. Second, and more generally, the market strategy is at the core of any successful business strategy. Check with your own marketing department. If they cannot articulate a coherent positioning statement, then you have a problem!

Noel Capon is the R.C. Kopf Professor of International Marketing at Columbia Business School. He is author of The Marketing Mavens; his marketing textbook, Managing Marketing in the 21st Century, is available FREE online at www.mm21c.com.

This is the second in a series of posts from the International Development Club.

Each semester, the International Development Club (IDC) matches student teams with organizations around the world to work on over a dozen consulting projects. The aim is to put together teams that can apply the business thinking that we study at CBS to help organizations that work to improve lives across the developing world. At the same time we want to provide students with the opportunity to gain exposure to working in the field of international development. We have served a wide range of clients (PDF) that includes foundations, non-profit organizations, multilaterals, non-profit consulting firms, social entrepreneurs and for-profit businesses that have a positive social or environmental impact.

Teams work from New York with their clients throughout the semester and travel to visit them during breaks with support from the International Development Consulting Project Travel Fund from the Social Enterprise Program. Donors include the program’s advisory board members and Deutsche Bank. Each team is matched with a project advisor that provides mentorship throughout the project. Project advisors are typically international development practitioners, consultants at firms here in New York, or CBS faculty members.

But where do IDC projects come from? In the past, the IDC has sourced projects from organizations that have experience working with students or from organizations that we have partnered with in the past. A number of projects each semester also come together as organizations are networked with the IDC.

This semester the IDC is working to restructure its projects program to relaunch as a branded pro bono consulting group in the spring semester. The new structure will raise the profile of the important work that our members are doing and help us to source more and higher quality international development projects each semester. Additionally, the relaunch aims to:

1. Source a balanced portfolio of projects each semester that matches student interest in geographies, industries and organizations
2. Increase impact for client organizations by consistently providing high quality deliverables
3. Identify an advisory board to advise and oversee the student-run group
4. Create ongoing relationships with the most exciting clients in order to have a pipeline of high-quality projects
5. Create ongoing relationships with project advisors who can provide appropriate mentorship to teams semester after semester

The IDC Projects team is hard at work preparing to relaunch for the spring semester. However, we urgently need a name for this exciting new IDC initiative. The name should capture the uniqueness of the IDC brand and be fitting of an MBA student-run pro bono consulting group that works with some of the most innovative organizations in the field of international development. With a community full of consultants — not to mention aspiring marketing gurus and budding entrepreneurs — there must be one of you out there who can come up with the perfect name for the new group! Submit your ideas online here by Friday, November 7th. If you have more than one, please feel free to share them all.

The International Development Club aims to cultivate passionate leaders who aspire to make a global impact by applying cutting-edge business thinking to development issues. The IDC offers consulting opportunities with enterprises throughout the developing world, a speaker series and an annual Washington DC careers trip. Last year, the IDC spun off Microlumbia, the first student-run microfinance fund of its type.

Dateline: London

I think to really understand the ramifications of what happened, you just had to be there. At London’s Heathrow Airport that is.

On Thursday March 27, I took British Airways’ (BA) day flight from JFK to Heathrow. On Saturday I was due to talk about customer value to a group of high-level strategic account directors at a global software company. I planned to tell them that success in value delivery would guarantee customer satisfaction and enable them to retain and grow their customers, increase profits, and lead to greater shareholder value. I relaxed in my Club World backward-facing seat and concentrated on the task ahead.

On Thursday evening I landed at Terminal 4; little did I know what was unfolding at Terminal 5.

Terminal 5 was BA’s long-planned new $8.6 billion state-of-the-art facility at Heathrow. CEO Willie Walsh was on hand at 4 a.m. when the first flight arrived early from Hong Kong.

After that, everything went downhill. In a word, BA’s baggage-handling operation failed. Apparently, the system had functioned well in a 2,000-passenger test, but could not handle the 40,000 who that day crowded into the terminal.

By the following mid-week, BA had cancelled over 300 flights, 40,000 pieces of baggage had been separated from their owners (many sent overland to Italy for resorting), and thousands of passengers did not reach their destinations. To make matters worse, Britain’s aviation regulator reacted swiftly to stranded passengers’ complaints that BA failed to provide hotel rooms, in possible breach of European Union requirements.

In a stroke of genius, the Terminal 5 debacle occurred just three days before an open-skies agreement between the U.S. and Britain came into force. In addition to increased competition from European airlines flying from the U.S. to continental destinations, BA would now have new U.S.-based competitors at Heathrow. Continental, Delta and Northwest Airlines each offered flights on day one. Some analysts’ estimates of BA’s losses from canceled flights, additional costs, and reduced future bookings approached $100 million; Goldman Sachs downgraded BA shares to sell.

So what lessons can we learn from BA’s experience?

First, service businesses are tough to manage. Operations occur with the customer in close proximity and problems are quickly highly visible — very different from a factory making products.

Second, sophisticated systems are great when they work, but when they fail, disaster is close behind.

Third, when you put in sophisticated systems, test, test and then test again; it may take time and it may cost money, but consider the alternative!

Fourth, customer satisfaction depends on the difference between expectations and performance. BA had so hyped its new terminal that any failure hurt even more.

As for me, when I arrived back at terminal 4 on Saturday afternoon, British Airways could not get me on their JFK flight. The agent sent me to Virgin Atlantic where I gratefully accepted one of the few remaining Premium Economy seats to Newark. The counter clerk cheerfully phoned New York so I could change my car service pick up and I headed for the gate. As I was boarding, the gate clerk told me there was a change — an upgrade to Upper Class. Thank you Sir Richard!

Footnote: The following Wednesday, British supermodel Naomi Campbell was reportedly taken off a Los Angeles-bound BA flight and arrested. Apparently Campbell became agitated when told one of her two bags had been misplaced.

You can find Noel Capon’s new marketing planning workbook, The Virgin Marketer, and his textbook, Managing Marketing in the 21st Century, at www.mm21c.com.

Prof. Bernd Schmitt moderated the panel “How to Build an Asian Brand into a Global Brand” at the Pan-Asian Reunion in Hong Kong on Oct. 24. The panel included Yuzaburo Mogi ’61, Chairman and CEO, Kikkoman Corporation; Dong Bin Shin ’81, Executive Vice Chairman, Lotte Group; and Daniel Mingdong Wu ’96, CFO, Focus Media.

Public Offering: What differentiates a global brand from a local one?

SCHMITT: A global brand is planned and marketed on a global scale. A global brand is also available in all key markets around the world. Moreover, there is a high level of consistency to a global brand. The product will be largely the same (except for minor local variations), the visual identity (logo, signage and name) will be identical and communications will be designed for a global market. The classic global brands — which mostly come from the U.S., like Coca Cola, McDonald’s or Starbucks — exemplify such global branding. Local brands, in contrast, are only known in certain markets. They may have close connections to consumers in those markets but frequently they are seen as being of lower quality and not as contemporary as global brands.

PO: What is the best way a brand can build from local to global?

S: Professional management and a clear vision are needed. Brand builders must have a global vision and global aspirations for the brand and then set up the right organizational structures for managing a global brand. In addition, the company must understand consumer preferences. People in different markets differ in values, attitudes and behaviors. For understanding consumers in different markets, consumer research is key. Commissioning a global segmentation study is a good starting point.

PO: What is an example of an Asian brand that has transformed successfully into a global one?

S: One of the participants in my panel at Columbia Business School’s Pan-Asian Reunion in Hong Kong, Mr. Mogi, has such a brand: Kikkoman. Originally, Kikkoman was a local Japanese brand. Now, the brand stands for soy sauce worldwide. When you produce a soy sauce, it helps, of course, to be from Asia. A Western soy sauce brand would not have the same credibility.

PO: What are some other successful Asian brands?

S: There are numerous other Japanese brands in consumer electronics and in the car business, for example, and other businesses. In cosmetics, beauty and fashion, the global consumer knows Shiseido, or Issey Miyake and Yohji Yamamoto. In Korea, there is Samsung, which, by the way, has outperformed Sony in brand value according to the latest brand valuation studies. Then, there is Singapore Airlines, one of the greatest airlines in the world. So, by now, there is no shortage of Asian brands that are known globally — and more will be coming soon.

PO: Which brands should we look out for in the future?

S: Mr. Shin, the executive vice chairman of Lotte, another executive on my panel in Hong Kong, is currently building Lotte, which recently entered China and Russia, into a global brand. I also expect more global brands coming out of China soon, and not just brands like Lenovo that that were bought but brands that were home-grown, so to speak. In China, executives from established companies, entrepreneurs and the government are all strongly focused on building global brands.

Photo credit: Peyri Leigh

Professor Noel Capon has something in common with his students: he thinks the price of textbooks has gotten out of hand. “It’s a serious social issue,” he says.

Capon likens the landscape of the textbook industry to that of the airline industry in the 1950s and ’60s, describing it as a “cozy oligopoly” in which the different players “compete for authors and over the quality of the books but not on price.”

To help ease the financial burden, Capon is allowing students to pay what they wish to use the online version of his text Managing Marketing in the 21st Century. The pay-what-you-wish model was made famous by the band Radiohead, who allowed customers to download their most recent album, In Rainbows, for what they thought it was worth. The print version of the text, which sells for $45, is priced about $100 less than its competitors.

Capon hopes that the unconventional pricing strategy will cause the major textbook publishers — such as Pearson Education, McGraw-Hill and Cengage — to lower their prices. In this respect, he likens Wessex Press, which publishes Managing Marketing and which is owned and operated by Capon, to Southwest Airlines.

“Thirty years ago, in came Southwest with a very efficient, low price model, offering a safe ride in a new aircraft but without all the frills,” Capon says. “Well, I’ve come in with a book that doesn’t have a lot of frills but which is very much to the point and which is a very serious marketing book.”

Though Capon is unsure of how much revenue he’ll secure from the online version — he’s also donating 50 percent to college scholarship funds — he hopes that the new pricing model will give instructors cause to consider using his text.

“It’s a way of getting my book into the hands of as many people as possible,” Capon says of the model. “The major barrier I’ve had to overcome is the reluctance of instructors to switch books. By taking the price of the online version to zero, instructors who weren’t interested at the old price are going to have to give my book a serious thought.”

Capon hopes improving the book’s readership will benefit Columbia Business School, as well. “Columbia has arguably the world’s leading marketing division, but we’ve never been strong in the textbook area. I’m hoping that this move, if it’s successful, will strengthen the School’s position as having the world’s leading marketing division.”

Capon’s colleagues are taking notice. Michael R. Czinkota, Ilkka A. Ronkainen and Michael H. Moffett, authors of Fundamentals of International Business, have published the new edition of their text with Wessex. While Capon “wouldn’t rule out” taking on similar projects in the future, he plans to remain focused on his day job, teaching at Columbia Business School and writing his own books.

When asked about being referred to as the “Radiohead of textbook authors,” he only laughs. Capon, who hails from Southampton in southern England, says, “I’m fine with that. They’re British, after all.”

It’s been just two months since Google rolled out its new Web property “Knol” to much confusion, ill will among advertisers and derision for the worst brand name of all time. Many have asked whether we really need another Wikipedia.

Last month, Google announced another seemingly-redundant product: it’s new Web browser, Chrome. And at the end of this month, Google will launch the much-anticipated Android-based G1 smart phone.

Why develop a new Web browser? (Especially when Google has been spending heavily to invest in the open-source Firefox browser.) Is this a sign that Google’s culture of a million innovations has gone off the deep end? Are there too many engineers with too much “20% time” on their hands? Or is there a far-reaching strategy behind this?

I’m leaning towards the latter.

The Future is Cloudy

We are in the midst of a huge shift towards “cloud computing” — where we store our files and software on the web rather than on our personal desktop machines. This shift began for consumers with services like Flickr, Facebook, and YouTube; it’s now moving to online applications like Google Docs and Zoho, which may make Microsoft Office a thing of the past. Utility-like Web services have also been designed for corporate consumers, first by pioneers like Salesforce.com (which offers a database you can access through the Web), and now by Amazon and IBM. As I’ve written previously, this shift raises the stakes in the browser wars.

But what’s the advantage of Google entering the browser market itself instead of just continuing to support the successful and well-designed Firefox?

An Operating System Built for Web Apps

Google argues that Chrome is not just another browser but rather an attempt to build the next-generation environment for the future of cloud computing. In other words, Chrome aims to be a operating system for the next wave of Web apps that Google is developing.

It will need to be if Google really wants to challenge licensed-software companies like Microsoft. Many of Google’s current Web apps offer the promise of thrilling functionality (incredibly easy collaborating on Google Docs, the ability to work offline with Google Gears). But most are still trapped in a “Beta” version with limited applicability.

With the Chrome browser, Google may be able to make its Web apps more robust, so that they can really compete with Microsoft for the future of the personal computer space.

Chrome Smells a Lot Like Android

We’ve seen this play before from Google, except now it’s in the mobile phone space. With much advance buzz over the last year, Google has been developing its next generation operating system for smart phones – called Android. Google’s competitor in the mobile phone space is not Microsoft but Apple, maker of the iPhone. And industry observers have been waiting to see if the Android operating system will allow phone makers like Samsung and Nokia to roll out an “iPhone killer.” The first phone running on Android is expected this fall from HTC.

Open vs. Closed

With both Chrome and Android, Google is betting on the open-source model for innovation, which built the Linux operating system and the Firefox browser. By contrast, Microsoft Office and Apple’s iPhone are both built on closed, proprietary systems.

Open vs. closed is a big debate these days. Techies love to extol the virtues of the open source movement. But Apple’s success shows the potential strength of closed innovation, which allows for a seamless user experience. Closed innovation is why iPod+iTunes were able to break the deadlock on digital music (winning the trust of record labels and creating an intuitive buying experience online). Closed innovation allowed Apple to create the first Web-enabled phone that actually works in the U.S. (too bad Apple couldn’t build its own phone network, too, rather than use AT&T’s).

But Apple has not always been able to hold on to the success of its innovations. Windows stole Apple’s thunder (and huge market share) by copying the best design elements from the Mac. What’s to keep Google from swooping in like Microsoft did and copying the iPhone design (which has solved the key problems for a smartphone in the U.S. market)? Can Google grab the best ideas for their Android phone platform, allowing Samsung, HTC and others to dominate the smartphone market? Will the diversity of an open ecosystem triumph over Apple in the end?

Betting on Google’s Strategy

What’s clear now is that Google is pursuing a two-pronged strategy aimed at a future of cloud computing. They will use Chrome as an operating system to challenge Microsoft in the world of PCs, laptops and netbooks. And they will use Android to establish an alternative Apple in the realm of mobile devices. With both prongs, they are using an open innovation approach with many partners to challenge established market leaders.

It’s an audacious strategy. And it’s probably too early to tell if will succeed.

Right now, I’m hedging my bets. When people ask what me, “Which operating system do you use?”, I answer, “All three.” My mobile platform is iPhone, my laptop platform is Windows and my cloud platform is Google. But I’m open to see who comes up with the next great idea.

Columbia Business School and the Center on Global Brand Leadership are hosting the BRITE Workshop on Online Communities on Oct. 16.

Photo credit: Google]]> Thu, 16 Oct 2008 13:42:40 EDT ]]> Marketing Media and Technology

On NPR’s On Point program recently, there was a wide-ranging discussion of business jargon (“bizz words”) — how these terms arise, when they can be helpful, when they obscure meaning, when they come to mean everything and therefore nothing and also when they signal a real change in the culture.

One bizz word was cited for imbuing real meaning in a previously silly word: widgets. These are little programs that run on your Mac dashboard, your iGoogle portal or your Facebook homepage, and are often developed by an army of independent programmers.

The interviewee on NPR mentioned the popular iPhone Apps Store as a home to widgets such as games, navigators and news feeds. Which begs a question I’ve been puzzled by: just what is the difference between a widget and an app?

I got to the bottom of this by talking to Joshua Keay, founder of Magnetism Studios, who has created some very successful widgets for the Mac dashboard and apps for the iPhone Apps Store, including Tile Sudoku, CityTransit and FileMagnet.

So is an app just a renamed widget? A bit of clever branding from the marketing geniuses in Cupertino?

No. According to Keay, there is a technical difference, although it’s mainly seen on the programmer’s side. A widget is web based, running on Javascript and XML, languages of the Web that are read by browsers. An app is compiled code residing on your device written in a programming language that is read by operating systems — like the Objective-C language (for Apple products) or Java (for Google’s Android phone project).

Many of these apps that Magnetism and others have designed add clear enough value that you could wonder why Apple didn’t do it themselves. Didn’t they know half the world would want Sudoku on their iPhone? Perhaps. But by opening their platform up with a software developer kit (SDK), Apple was able to embrace the “jailbreaking” hackers who had threatened to undermine the first generation iPhone, and stimulate a much broader range of features than they could develop themselves. The challenge, though, may be filtering through all this choice.

“When Apple reached 2,000 dashboard widgets, suddenly there was a big quality-versus-quantity issue — there were a lot of widgets that were only half-baked and finding the good stuff was surprisingly difficult,” says Keay. The iPhone Apps Store already has over 1,400 offerings less than a month after it opened. As open platforms like Facebook, Android and the iPhone lead to vast numbers of apps and widgets, users may need new tools to filter through the noise and customize the right set for them. Social bookmarking or search might be of help. But companies like Netflix have found that building really good recommendation engines can be very tricky.

All of these things are surmountable.

There are certain practices that take place in the for-profit world that can benefit us in this sense. For example, strict accountability, transparency and financial purity are the kinds of things that, like it or not, Sarbanes Oxley has taught us. I think a lot of this can be applied to the nonprofit world.

Having said that, for the most part people work here because they believe in a noble cause and want to do good works. As we borrow some of these techniques in the for-profit world, we have to be very mindful of making sure that we don’t turn antiseptic and lose our soul and our heart.

We do amazing things every single day. We’re filled with heroes here, and it’s so easy to feel inspired. In my former life I definitely worked for companies with higher purposes, but at the end of the day you’re counting widgets, you’re counting dollars. Here, we’re counting lives impacted — it’s extraordinarily inspiring.

The conversations at the Red Cross are so different than the conversations that go on in the corporate world. Here, we ask: How do we galvanize people from 42 states to get into Iowa and help people clean up after the flood? How do we get enough emergency response vehicles to drive around with hot meals to keep these people fed? How many people can we shelter in high schools and dormitories?

So when I say we have to revitalize the brand, I don’t mean redo or replace. We don’t want to change what the brand stands for, since it’s such an international treasure. You see that red cross and think: help is on the way. I don’t want to change that. I just want to turn it into something hip and exciting. Part of that involves becoming more consumer-focused. Here, it’s all about putting our brand in front of people so that they donate time, money and blood.

UNICEF is a good example of brand revitalization. And I think when you have a beautiful legacy, it shouldn’t be that hard. Our favorability and affection rating is highest among 18 to 34 year-olds, so we just have to tap into that and make it so that the Red Cross becomes part of the fabric of the way they become philanthropic. That generation is so in tune with community service. They want to change the world, and we just have to let them change it with us.

Gail McGovern ’87 was named President and CEO of the American Red Cross on April 8, 2008. In both 2000 and 2001, Fortune magazine recognized her as one of the 50 most powerful women in business. She is a graduate of the Executive MBA Program at Columbia Business School.

Yasmina McCarty ’08, a graduate of the EMBA-Global program, was a recipient of the Cartier Women’s Initiative Award last year in recognition of GreenMango, a company she developed with business partner Nandini Pandhi.

On May 31st, my business partner Nandini and I got the call we had been waiting for all month. It was from Echoing Green, an organization that provides seed funding and support to social entrepreneurs with “bold ideas for social change.” This year the fellowship had been ridiculously competitive, with nearly 1,500 organizations applying for just 20 available spots. When we learned we were one of the lucky 20, irrepressible smiles rose to our faces and we danced for joy around the apartment. It was an honor to be included with such an inspirational group of individuals.

But what exactly is a social enterprise? And how are we delivering on our bold idea for social change?

Last Saturday, I had my weekly conference call with a top strategy consulting firm that generously donates their time to support GreenMango. While we were talking about GreenMango’s revenue model and customer segmentation, our consultant realized exactly how “bottom of the pyramid” GreenMango is.

“Yasmina,” he said, “why on earth are you focusing on these businesses making a few dollars a day? Have you come here to run a business or do some charitable work? Creating a viable business with this customer segment is damn difficult. Damn difficult. And I’m really not sure you can pull it off.”

Indeed, building a social enterprise is one of the toughest things I have embarked on yet. And of course, it’s not just me who finds this challenging. McKinsey’s recent global survey of 4,000 executives in 116 countries found that 84 percent embrace the idea that a corporation has some social role in addition to its responsibilities to its shareholders. Just three percent of these executives think they are doing a good job delivering this social aspect.

Our vision is to build an organization that delivers financial returns to its investors, provides a positive workplace for its employees and increases the income of millions of low-income entrepreneurs. The customer element is a challenge but to me, tenable; it’s the core of our business. There are millions of informal entrepreneurs in developing countries — carpenters, tailors, electricians, plumbers, mechanics, embroiderers — who struggle to grow their businesses because they are invisible. GreenMango is an affordable marketing platform for them to promote their business and find new customers locally.

Now add in the benefits for our employees. We are operating in India, where staff turnover last year was 40 percent (i.e., nearly half of the country changed jobs). To counter that, we have built a dynamic environment: we spend for staff development and training and have clear career paths. We invest into our employees not only because it’s good for them, but also because it’s good for us. Year to date, we have had zero percent attrition.

Finally, we come to the third tenant of our vision: Delivering an excellent ROI for our investors. Our model is generating revenues but in order to succeed, we must deliver a high level of profits quarter after quarter.

Only time will tell if we can pull off all three elements of our plan.

In the end, of course, there is no clear definition of a social enterprise. And the longer I work at building GreenMango, the more I believe it is just the sum of the many small decisions I take every day. To what lengths will I go to ensure our employees are taken care of? How far will I challenge our team to find ways to serve the poor and semiliterate? How far will we push ourselves to find a revenue model that works at the bottom of the pyramid but delivers topline profits to our investors?

At our EMBA Global graduation, we were challenged and inspired with this quotation from George Bernard Shaw: “The reasonable man adapts to the world. The unreasonable man adapts the world to himself. Therefore progress rests upon the unreasonable man.”

Pinpointing your location on a Google map is only the beginning. The iPhone 3G, coming out July 11, offers a platform for a wide variety of new location-enabled applications ranging from plain-vanilla navigation systems to more sophisticated location-enabled social networks and comparison-shopping tools.

Since the implementation of e-911 legislation in 2004, there have been major developments in the world of consumer-facing location-based services (LBS), many of which will be entering the market in the year to come.

To many, the idea of a phone that gives your location away to a third party is a scary proposition — but why?

LBS in a variety of forms has transformed B2B operations and infrastructure profoundly in the past 25 years (think just-in-time inventory-management and -procurement systems). No one challenges the merits of these systems, which save time and money and improve efficiency. Yet the widely adopted consumer touch points for this technology have been limited to passive activities, like viewing where your J. Crew packages are with FedEx.

While the hypothetical case of walking by a Starbucks and getting pinged with a coupon for a Frappuccino may seem invasive to some, the proposition is mainly flawed and elicits such a reaction because the value proposition is so weak.

As a data point about a consumer, location adds the critical dimension of relevance to an endless array of consumer-facing services. Imagine being able to shop for the best deal on a camera in midtown by using the location-enabled Web browser in your phone to link to real-time inventory-management systems at Best Buy and Circuit City. Or to instantly find out where you can get a reservation for sushi in Soho by accessing Open Table’s mobile Web site, giving you real-time access to restaurant-reservation systems in the blocks around you. It’s not just a marketer’s dream: LBS can save you money on the things you actually want and provide valuable, relevant information you actually need at the moment when you’re making a decision.

Those LBS-enabled service providers who can find the magic mix in their service offering in exchange for your location not only will be able to deliver value to the end users but also will be able to engender loyalty for enhancing consumers’ lives in real time, in a way that the fixed internet can never compete with.

The numerous issues that LBS faces in reaching such an ideal service offering will be discussed on Friday, July 11 at “The Focus on the Locus,” hosted by the Columbia Institute of Tele-Information.

Photo Credit: Li]]> Mon, 7 Jul 2008 15:28:58 EDT ]]> Marketing Media and Technology

This article is a dedication to Professor Morris Holbrook, who taught me to appreciate music holistically. I will always hold him as a prime example of someone who learned to juggle music with academics, and did both with so much grace. He thought nothing of the sacrifices one makes in order to pursue one’s passion wholeheartedly.

Professor Holbrook did a series of studies on music, mostly to understand the role music plays in shaping the way most of us think and feel about nonmusical things. He once told me that he found that most adults form their preferences for musical styles and formats in their early to mid-20s.

Knowing scores of relatives who took to appreciating classical music well into their 40s, I questioned that observation, until he gently guided me through the reasoning of the human mind in its quest to categorize musical stimuli early.

He taught me that the groove gets set much earlier than we realize. In effect, our minds become comfortable with the structural characteristics of a preferred music form much earlier than the emotional meanings associated with it, which in turn are affected by life situations and experiences. A fascinating idea.

As I think back to the musical styles, songs, artists and records that I treasure the most, I realize that the music I heard while taking the commuter train to work in Mumbai shares pride of place with the concerts I had attended at the time, all of which I encountered in my early 20s!

I had started listening to Carnatic music at the time, a preference that has now burgeoned into a dangerous obsession. I had also started listening to Miles Davis and, for some inexplicable reason, to Cat Stevens. And I hoarded my Ilaiyaraja mixed tapes like a smuggler with new-found gold. These favorites continue to dictate my evaluations of other artists and styles.

I have yet to meet someone younger than 30 who does not compulsively listen to music of some form. Be it classical, pop, jazz, reggae or the ubiquitous film music, young people are exposed to every style and format of music, faster than the combined might of the recording industry and the information highway can provide.

And it is important for the industry and for musicians of all genres to realize that these experiences are forming “grooves” in the young that will inform what they listen to in their older years. As a musician, I can see that this is perhaps a responsibility, and also a position of tremendous privilege. It is a call to communicate to younger audiences more meaningfully, developing a dialogue that will deepen their interest in and craving for music that is both contemporary and representative of a cultural identity that they are proud to espouse.

It is also a call for more composers and creators of original sound. As ever, I maintain that younger Indians are endowed with tremendous creativity, and are capable of advancing the body of musical content we currently enjoy. New sounds that reflect individual compositional style should be judiciously interwoven with themes that reflect today’s mood and preferences.

And this does not mean resorting to the sort of risqué lyricism that predominates popular music. Traditions can be retold with grace, and stories that embody cultural heritage can be told through younger perspectives just as well as they have been by voices of the past.

When I think of Professor Holbrook sitting in his office at the business school, playing jazz on his makeshift keyboard suite, I think of the word “bliss.” There is a secret to all this, he used to say — to be able to understand the vagaries of the corporate world, make sense of academic politics and maintain one’s passion for a language that goes beyond the corporeal requires perfect balance. It requires being able to understand ancient stories but tell them in a way that is entirely new, infusing old themes with entirely new music and boldly pushing the envelope forward. And keeping one’s focus on the young people, for they will decide what will become of the world we know. It is this focus that will keep the music we make from going out of style.

© Indian Express

What if you could make diamonds in a lab that are indistinguishable from mined diamonds? An article in this month’s Smithsonian magazine describes chemical vapor deposition (CVD), a process allowing chemists to make diamonds that even experts with a loupe can’t tell apart from the real ones.

Is this having any affect on the diamond market?

Says Professor Ketty Maisonrouge, a luxury market expert:

This process is not brand-new, and more important, lab diamonds are sold at the same price as the real ones, so it won’t have much of an immediate impact on the market. Also, people are still suspicious of lab-grown diamonds and don’t consider them “the real thing.”

And as we know, the price of diamonds is not really related to scarcity — there are a lot of diamonds out there. But somehow, the price of diamonds keeps going up anyway. This is because of the mystique around diamonds. Any luxury product, even when it’s not a diamond, is sold because people are buying the product’s heritage; they buy the story, they buy legitimacy and they buy quality. And with a mined diamond, you get all those things.

However, it is very possible that a product like this might impact other industries, because as the article mentions, diamonds aren’t only used in jewelry. This might eventually lead to repercussions in the jewelry field, but it’s not going to change the dynamics, at least in the foreseeable future.

This post is part of a series following the “Pre-MBA World Tour,” organized by Shoaf and members of the class of 2010.

Dubai is clearly one of the fastest-growing cities in the world. Just compare a satellite image of five years ago with that of today. What was once a small desert city along the gulf coast is quickly becoming a large metropolis with miles of skyline and hundreds of man-made islands emerging from the Arabian Gulf.

What is most fascinating about this rapid growth is that it’s not based on slow economic progression. It’s based on the decision of a single ruler who has realized that the emirate’s oil reserves may be gone someday and he needs to diversify the framework of his economy . . . and quickly.

To understand what is happening in Dubai, simply take a blank sheet of paper and use your imagination to design a brand-new city that would rival any of the world’s largest — including New York, Los Angeles or London. And then, find a way to build it within 10 years.

In Sheikh Mohammed bin Rashid Al Maktoum’s design, he subdivided the city into several economic free zones intended to be the world’s hub for nearly every major industry. Some of these zones are designed for the services sector (e.g., Media City, Internet City, International Financial Center, etc.), while others are designed for education and liberal arts (Knowledge City, etc.).

Another important component of Sheikh Mohammed’s plan was to establish Dubai as the most visited tourist destination in the world. In order to attract tourists, he commissioned several iconic attractions (such as the World, the Palm Islands and the Burj Dubai) that would give tourism magnets such as the pyramids or the Eiffel Tower a run for their money.

Right now the population in Dubai is nearly 1.5 million (and it’s estimated that only 15 percent are actually Emirati citizens), and there are hotels and housing developments being built with an expectation for more rapid growth.

The obvious question is: If you build it, will they come?

Fortunately, much of this investment seems to be trickling down into every level of the emerging market economy, and everyone in the system seems to be making a lot of money. This new land of opportunity is creating such a huge demand for jobs and materials that it’s attracting top talent and capital investment from all around the world.

The other important component of this economic plan is that the large sovereign wealth funds and government agencies have two bottom lines: profit and GDP growth. From what we can tell from visiting with several of these organizations, Dubai is probably experiencing a real estate bubble, but it is still on a fast track to becoming one of the most fascinating and diverse cities in the world.

Next Stop: Mumbai

Photo Credit: .EVO.

Even as U.S. consumers are trimming spending, Coach chairman and CEO Lew Frankfort ’69 is going on the offensive, according to an interview in the WSJ. Frankfort has opened nearly 30 stores in China and has plans for 50 more. He is also broadening Coach’s consumer base by introducing more high- and low-end styles.

Will this dilute the brand? Here’s what Professor Bernd Schmitt told Public Offering:

Judging Coach’s approach by the traditional standards of “Perhaps we are decreasing the overall image and prestige of the brand by making it too widely available” is not necessarily the right way of looking at it.

The concept of luxury has been changing over the years. The old “elitist” concept of luxury, which is high-priced, hand-crafted goods manufactured in Europe, is not the only concept anymore. Luxury nowadays is much more associated with lifestyle, with doing innovative things, doing something special for the consumer. And “special” can mean various things — it can mean using high-end materials or using low- and high-end materials together or bringing the brand close to where the consumer lives.

Coach’s approach makes a lot of sense to me. What Coach is saying is that while you of course need a presence in all the major cities where luxury products are bought — the world cities for example, including New York and Hong Kong and Tokyo and certain European cities — you also need to bring the luxury product to other cities where consumers live and shop, so as not to make the consumer come to you.

At Columbia’s BRITE ’08 conference in February, Mike Hemingway of Ogilvy discussed how his company has helped Dove build a PR, social media and viral video campaign aimed at fostering conversation and community around a new definition of beauty — one that runs counter to the narrow, air-brushed definition of mainstream fashion.

Here’s a 90-second clip from his talk:

It turns out that Dove’s refreshingly atypical beauties from its print campaign (freckled, wrinkled, flat-chested, large-thighed, etc.) may have been. . . airbrushed!

The scoop came out in a New Yorker profile on airbrush maestro Pascal Dangin, igniting commentary in the blogosphere and advertising press.

Anyone in the advertising field knows that minor photo correction is standard. But had Unilever betrayed the very values of authenticity that the entire Campaign for Real Beauty was based upon?

In an Ad Age article, an Ogilvy spokeswoman expressed doubt that any significant alterations were made. But in the New Yorker, Dangin is quoted as saying “It was. . . a challenge, to keep everyone’s skin and faces showing the mileage but not looking unattractive.”

But even if Dangin’s account is true, is that really hypocritical? After all, Dove’s message was that a freckled/wrinkled/etc. woman can be as beautiful as anyone else. Not that she shouldn’t be well lit, sharply dressed. . . and using Dove products.

What matters is the customer’s opinion, however, and the airbrushing story has the potential to tarnish a powerful brand image.

It also highlights the importance of transparency in an age of blogs and the growing flow of information among and between customers. Media companies, like newspapers and record labels, have been hit hardest by this technological change, but the revolution is also impacting consumer packaged goods like Dove.

As Clay Shirky writes in his new book on social media, Here Comes Everybody:

We are plainly witnessing a restructuring of the media businesses, but their suffering isn’t unique, it’s prophetic. All businesses are media businesses, because whatever they do, all businesses rely on the managing of information for two audiences — employees and the world.

In an age of interactive media, managing that flow of information will get harder and harder.

When the tire was first announced in 2005, a few of my colleagues and I were so taken with the concept — a tire that could run for as much as 120 miles with a flat, eliminating the need to store a spare tire — that we’ve used it in our classes as an example of how a company can innovate by eliminating features that some customer segments view as either negative (having to store a spare takes up space and costs more fuel) or a neutral (we don’t notice it and don’t care about it).

This was a big-bet innovation for Michelin, intended to overturn the industry in the same way that their introduction of steel-belted radial tires did nearly 60 years ago.

What went wrong?

While it isn’t fair to retroactively criticize the approach Michelin took to introducing this innovation, there were some trouble signs early on:

A BusinessWeek article from 2004 notes that the PAX tires don’t fit into conventionally designed vehicles. To use them, cars must be equipped with a specially designed chassis and wheels and, once converted, can’t take regular tires. What that means is that to get the tires replaced, customers must find an authorized PAX service center to repair or replace the tires.

The lack of compatibility with preexisting infrastructure also proved to be a contributor to the product’s undoing. Although the company enjoyed some success, including having PAX tires come standard on Honda’s 2005 Odyssey Touring minivan, other firms failed to adopt the practice. PAX, as it turned out, was not a huge advancement over other run-flat technologies; it required specialized equipment and systemic changes, and was launched into a category that turned out to be a niche. This situation was a far cry from the promise of a tire that would revolutionize driving habits and totally change the industry.

Frameworks could have helped anticipate obstacles

We always advise companies launching innovations to consider not just the technical performance of the product (or service) but the whole chain of experiences customers go through in the course of being customers. With a tool called the consumption chain, we suggest that companies work all the way through the total customer experience — from awareness of need all the way through search, selection of a provider, payment and so on through final disposal.

Clearly, the PAX system let customers down at some of these vital “links” in their consumption chains. They faced difficulty getting the tires replaced and repaired, and evidently the competitive separation between PAX and other run-flat tire designs didn’t overcome those problems.

Another tool to employ when thinking about the launch of new offerings is to consider all the factors that may cause delay or resistance. This involves systematically thinking through all the reasons that a customer might not be willing to adopt an innovation. One of the most serious of these roadblocks occurs when adoption requires changing expensive, embedded systems. (You can read more about this in a book I cowrote called Market Busters.)

The PAX tire shows once again that if a product is going to be incompatible and require specialized handling to repair or replace, it also better have earth-shattering benefits (think iPod). Otherwise, people will never overcome their reluctance to change away from the conventional.

During spring break we traveled to Ghana with the mission of developing a marketing strategy that would increase tourism and investment in Kumasi, Ghana’s second largest city. Our goal was to collect information and make the necessary contacts to help us implement our recommendations.

Kumasi, as part of Columbia’s Millennium Cities Initiative (MCI) is working on a number of projects in infrastructure, health and education that will hopefully bring the city closer to the Millennium Development Goals (MDGs). Our project is a key component of that effort due to the obvious benefits that the increased economic activity can bring to the city.

The first lesson we learned might seem obvious, but is very important: You can’t market a product you don’t know. The many hours we spent reading reports on Kumasi and browsing what was available online didn’t give us much of an idea of what we discovered in the end.

What we discovered was a city with a rich history as the capital of the Ashanti Kingdom and the home of many local crafts such as Kente cloths and Adinkra prints. We also learned about areas with untapped tourism potential such as Lake Bosomtwe and the Bomfobiri Wildlife Sanctuary. On the business side, despite all the challenges, we found a local administration working to improve the infrastructure and we discovered some intrinsic advantages of Kumasi over other cities in Ghana.

Even though it is the second largest city in Ghana and has more than a million inhabitants, Kumasi has serious infrastructure challenges surrounding its road network, electricity, water and Internet (getting our emails in Kumasi took a painfully long time). Many businesses complain that the centralization of government services in the capital, Accra, is a heavy burden to their productivity.

The team has been working hard on the project and we are in the process of developing an actionable set of recommendations for the city that we think can make a difference. The rest of the team — Kenny Hsu, Dario Cacciatore and Andre Le — will travel to Kumasi again in May to formally present our proposal and to start working with the project stakeholders to help Kumasi achieve the MDGs.

This consulting project was supported by the Social Enterprise Program’s International Development Consulting Project Fund, for the Earth Institute at Columbia University.

Does Barack Obama have a better shot at beating John McCain than Hillary Clinton? The answer may lie partly in whether voters are looking for honesty or competence in their candidate. And one clue to how candidates are perceived is the shape of their face. Babyfaces (large eyes, small nose, high forehead and small chin) are judged to be more honest than mature faces, but also as more naïve and perhaps less competent.

A survey of 150 Columbia undergraduates found that they perceived all three presidential hopefuls as having somewhat mature (rather than baby) faces; however, Obama was judged to have a significantly less mature face than Clinton. Consistent with the face stereotype, he was also perceived to be more honest than Clinton.

So is Obama likely to have a better shot at beating McCain than Clinton? Not so fast. In our survey, judgments of babyfaceness were negatively correlated with competence. In other words, the less mature the face is perceived to be, the less competent the candidate is judged to be.

And while Obama and Clinton are rated as equally competent when the question is asked directly, Clinton’s and Obama’s faces could cue voters to perceive Clinton as more competent.

The ultimate question is whether honesty or competence will dominate the election this Fall. Our survey found that George W. Bush was rated to be both dishonest and incompetent (this was a Democratically skewed sample), but judgments of his competence were significantly lower than judgments of his honesty.

In this situation, Obama has two winning strategies. First, make the issue of honesty crucial in the election by highlighting instances of dishonesty in the current administration. And second, provide strong cues to competence so that the face-shape cue is not used to form competence judgments.

What about Clinton? Given her low honesty ratings (even lower than McCain’s), she needs to downplay the importance of honesty and hope that her face helps legitimize her claims of greater competence.

In a recent Wired article, editor Chris Anderson creates a useful taxonomy of new business models, leveraging the idea that some aspects of the offering are free to the end user (although someone in the economic ecosystem is making money).

The different models he lists are:

The freemium. In this model, basic versions of products (such as software) are given away for free, while premiums and upgrades are offered for a price. This works because the cost of providing the basic version is generally pretty low while the profits on the upgraded version are substantial.

A clever version of this is currently offered by Classmates.com, a social networking site that provides information about people you attended school with. I’ve been bombarded recently with come-ons from this site, suggesting that I find out who signed my “guest book.” But to find out this interesting information — you guessed it — you have to subscribe and take out a “premium” membership. I find that irritating. And no, I haven’t bought.

Advertising. This is probably the best known of the “free” models and has formed the basis for many traditional industries, from newspapers to television. The places where advertising dollars are spent have radically changed, and this has shifted the economic underpinnings of many industries while creating a boom for others. The core idea is that advertisers will pay to get your attention, regardless of the ”free” offerings you actually came to consume.

Cross-subsidies. These are the traditional loss leaders well known to retailers. The idea here is that you give away one product (or portion of a product) in the pursuit of charging higher prices on others — examples are money-losing sale offers in the supermarket, low-priced CDs at Wal-Mart or toasters at the bank. They are all provided to get you to buy the more expensive offers.

The key assumption here is that customers are open to cross purchasing — not always true. When Wal-Mart went into Germany, for instance, they discovered (much to their dismay) that German shoppers are happy to engage in “basket splitting” — meaning they will go to multiple stores and scoop up the low priced items only, rather than buying everything from one place. Wal-Mart eventually had to make a rather humiliating exit from that market.

Ironically, business books fall into this category too. Very few people make a lot of money on business-book sales — instead, the real money comes from speaking and consulting work.

Zero-marginal cost. Software distributed over the web and digital music fall into this category. While there is a cost to create the initial offer, the cost of distributing it broadly is very low.

And sometimes the free good is actually a come-on for another item. For instance, while it may be impossible for a singer to limit the distribution of songs in digital form, they may make their money on concert sales (a variant on the cross-subsidy idea).

Labor Exchange. In this model, marketers offer you something for free in exchange for you providing them information or assistance. Anderson uses the example of Google providing “free” directory assistance because they can use the calls to improve their voice-recognition technology, potentially opening the way to a huge market down the road.

Gift economy. In this model, things are given away for free out of altruism or because people simply enjoy doing the work required to create the goods. The classic examples here would be open-source software and Wikipedia entries. People voluntarily create and consume the free good.

While there is still room in the economy for premium-priced real goods, the “free” based business models are becoming a force to be reckoned with.

Among the implications of the free economy? There are a few that business people should keep in mind:

First, when many aspects of an offering are free, premiums are going to be placed on those aspects that are scarce or expensive. While you may be able to get free lectures on YouTube, for instance, people will still pay for the in-person experience of a real, live, class because that in-the-moment experience is irreplaceable.

Second, don’t be greedy — you may find that you have to give away a lot to keep your core offerings relevant and of interest to your target customers.

Finally, be open-minded. While you may find that you can no longer make money on certain aspects of your business, there may be surprising opportunities to capitalize on relationships in other ways.

But a huge shift has taken place in consumers’ choices and the fluidity with which they move between them. Nowadays, McDonald’s is as likely to compete with Starbucks for a diner’s time and dollar as with another burger joint (“Do I want a quick bite with fries? Or maybe a sandwich and latte?”). NY–to–DC commuters are not just picking between Delta and United, but considering the Acela train as well. And book lovers can skip the bookstore for Amazon.com — or even skip the book itself, opting for something from an RSS feed, a podcast or a Kindle. Companies no longer compete in functional product categories, but within the contexts of consumer needs and experiences: a casual meal, a productive commute, a thoughtful read.

This was the argument put forward by Sirius to the Department of Justice in its bid to acquire XM, its sole competitor in the field of satellite radio.

From a traditional view of competition, this would be an open-and-closed case of free-trade infringement. If Sirius buys XM, it will be the only satellite radio game in town. Zero competitors equals zero choice for consumers and an anticompetitive monopoly — right?

But Sirius argued that its real competition is not XM, but all the other options consumers have for incorporating audio and media into their drive time: from hi-def radio, to MP3 players (my 2007 car came with a plug where my iPod fits right in), to cellphones and backseat DVDs.

Today, the Department of Justice announced that it had accepted Sirius’ argument and is greenlighting the acquisition (still to weigh in: the FCC). Antitrust regulation is still vital to preserving competition, but for many areas of the market, the scope and dynamics of competition have expanded greatly. Watch out Starbucks: even McDonald’s is starting to offer lattes of its own.

In the mid-1970s, Christopher Lovelock, then an assistant professor at Harvard Business School, wrote three cases on Federal Express. These cases became wildly popular among marketing faculty, are among Harvard’s top-selling cases and have been taught to MBA students in introductory marketing classes around the world. (At Columbia, we still use the Federal Express (B) case in our core marketing class because of the marketing lessons that it imparts.) But in the early days, when it was struggling for recognition and profitability, the exposure to tens of thousands of potential customers that Lovelock’s cases gave FedEx was arguably an important element in its success.

Christopher Lovelock died late last month at his home on Cape Cod. He left the full-time academic world in the mid-1980s for a successful career as author, teacher and consultant, but continued to accept visiting appointments at major business schools. He became a leader in services marketing and his books are widely used in business schools and service organizations around the world.

But Christopher will probably best be remembered for his 50 or more marketing cases, some of which are still on bestseller lists a quarter century after they were first published. He had a remarkable ability to capture the marketing challenges that companies face at critical junctures in their development. In addition to Federal Express, my favorite is the Southwest Airlines series, also from the 1970s. Here Lovelock shows the visionary Lamar Muse, CEO of fledgling Southwest Airlines, as he must develop a market strategy to combat the then voracious Braniff Airlines.

FedEx, Southwest Airlines and many other organizations whose marketing challenges Christopher Lovelock captured went onto great success. Marketing faculty around the world owe him a debt of gratitude for providing them with teaching materials that generate student excitement and offer deep insight into the real world of marketing.

The ongoing battle for the Democratic nomination illustrates the three keys to brand success today: a great experience, consistent messaging and an emotional appeal.

Just like the bottled water and tissue paper categories, there is little differentiation to be found among the candidates’ product features (tax policy, education, the economy, etc). So experiential qualities will hold sway: leadership, consistency, inspiration. As the race continues across the country, voters are enjoying the ride — showing up in throngs not only to vote, but to take part, live, in the experience. (The voting booth as destination store!)

Barack Obama had to build a new brand from scratch, so he was forced to be extremely disciplined in his message (commentators have even commented on the consistent use of his signature font). Hillary Clinton started with high brand awareness, but in trying to modify her established image, she had to deploy a variety of messages, which her critics took to be brand confusion (e.g., a New York Times op-ed listed “Soft Hillary, Hard Hillary, Misty Hillary — Let’s-Get-Down-in-the-Dirt-and-Fight-Like-Dogs Hillary”).

Clinton’s latest comeback shows that her brand has done best when it’s had an emotional appeal — whether her coffee-shop moment in New Hampshire, or her Ohio advertisement that set her familiar argument of foreign-policy credentials in starkly emotional terms (the sleeping child straight out of a Nyquil commercial). Obama’s brand has generated strong emotional resonance by tapping into voters’ dreams and aspirations.

Where is this battle of the brands headed? Possibly to an eventual cobranded merger, with the dominant brand at the top of the ticket. Which brings up a classic question of brand architecture: Would the consumer be swayed by the synergy of two brands? Or opt for the purity of an undiluted brand: John McCain?

In a similar spirit, Capon’s Customer-Centric CEO Index (C4I) is a simple measure of your firm’s degree of customer orientation.

There is scarcely a senior executive today who doesn’t recognize the importance of customers to the firm’s financial health. Relationships with customers drive the firm’s top-line performance; hence the role of NPS in trying to understand the customer-firm relationship.

My concern is broader; I want to understand the degree to which the organization as a whole puts customers at the center of its activities and is committed to using its entire set of resources to deliver customer value. What could be a better basis for determining your firm’s degree of customer orientation than the behavior of your CEO?

So, the C4I is very simple: C4I = the percentage of time your CEO spends with customers. Consider some polar opposites: for example, C4I = 0 and C4I = 30.

We could label the C4I = 0 CEO as the bureaucratic manager, internally focused and presiding over the entire organizational apparatus. Far from being central to the CEO’s concerns, relationships with customers are something to be delegated to the marketing or sales departments. Organizational layers shield this CEO from the realities of the marketplace — from competitors, customers and customers’ customers. Lack of firsthand customer interaction means that the firm likely makes all critical customer-oriented decisions at lower organizational levels. Alternatively, if the CEO does make these decisions, they are based on information filtered through the organization.

By contrast, a C4I = 30 CEO is highly engaged with customers. In B2C, some CEOs spend time on customer-complaint phone lines; former Southwest Airlines CEO Herb Kelleher was famous for interacting with passengers; and Terry Leahy, CEO of British retailing giant Tesco, and Mickey Drexler, CEO of J. Crew (formerly CEO of Gap), frequently walk around their stores talking with customers.

C4I = 30 CEOs recognize that the firm’s revenues are probably based on an 80:20 distribution — 80 percent of revenues generated by 20 percent of customers. In B2B, or in B2C where channel entities are increasingly important, powerful customers play an ever more critical role in deciding the firm’s future. C4I = 30 CEOs use direct customer input to help plot the firm’s strategy — recall Lou Gerstner’s early days at IBM as he met with customers in the process of developing the strategy that would turn IBM from a lumbering and declining giant into a preeminent industry player. And a few years ago, EMC’s CEO Joe Tucci changed his firm’s direction only after meeting with the CEOs and CFOs of customers’ customers.

Furthermore, as strategic/key/global account management practices become more widely entrenched, the potential roles for customer-driven CEOs become increasingly obvious. Hank Paulson was an obsessively customer-focused on-the-road CEO at Goldman Sachs, and Larry Ellison is Oracle’s point person at major customer General Electric. Other CEOs, like Sam Palmisano at IBM, are ready to directly engage with customers to close a deal or redirect a contract that was headed for a competitor.

The message should be clear. As IBM’s Thomas Watson Sr. famously said, “Nothing happens until a sale is made.” Even if you only half believe this statement, you must ask the question, “What is my CEO doing directly to help make this happen?”

As a starting point, I suggest you figure out your CEO’s C4I score. If it’s in the doldrums, you owe it to your firm and the shareholders to do what you can to inch it upward. CEOs, take note!

Professor Capon is author of Key Account Management and Planning, Managing Global Accounts, and The Marketing Mavens. His new textbook, Managing Marketing in the 21st Century, is a quarter the price of most competitive offerings; see www.mm21c.com.]]> Wed, 12 Mar 2008 16:06:42 EDT ]]> Leadership Marketing Organizations Facebook users sent a strong message to the company in November: don’t share our online buying information. But how valuable is this information among friends?

Research by Professors Gita Johar (CBS) and Andrew Gershoff (Michigan) concluded that while our close friends have influence over our purchasing decisions, these same friends are no better than acquaintances in knowing our tastes.

Still, online recommending agents are capitalizing on the assumption that friends know us best.

“We want to believe that we are important to others, particularly to others we care about,” the researchers say. “From a normative standpoint, you’d be better off not trusting your friends as much, because they don’t know you as well as you think.”

Yet in many organizations, Small Think rather than Big Think prevails. Managers are stuck in a thinking mode characterized by inertia and resistance to trying out the unknown. Those charged with developing strategy stick with the status quo, the same old procedures, planning tools and strategy maps, even when they fail to produce bold ideas.

To break out of this mold, it is key that we question our deeply held assumptions — the sacred cows of a business — and develop alternatives to them. That's what Samsung has done in consumer electronics by focusing on customer experiences rather than on technical product features alone, thereby challenging Sony and quickly turning itself into a creative powerhouse. That’s what Dove did when it challenged the entire beauty industry with its Campaign for Real Beauty, featuring ordinary women of all ages, sizes and shapes. That’s what is happening at the Metropolitan Opera. The Met is no longer just an opera stage in New York: it broadcasts its opening night live in Times Square, has made deals with Sirius Satellite Radio and beams its Saturday afternoon performances into movie theaters worldwide.

Pulling off bold strategies that change markets requires leadership through every step of strategy development, planning and implementation. But the first step for companies who aspire to thinking big is to look beyond the conventions of their own business.

Kill those sacred cows!

This year, advertisers paid $2.7 million for each 30-second slice of air time, but you didn’t have to turn on your TV for a minute to catch them. YouTube, AOL and MySpace provided online sites where you could watch the entire roster of ads and vote on them. I’m sure Professor Bernd Schmitt wasn’t the only marketing guru to cancel his annual Super Bowl party this year as a result (Schmitt went to a classical music concert and caught the ads online, like me).

But did the Super Bowl ads really make the transition online — to the new world of networking sites, user content and interactive media? Leading up to the game, there was much buzz about how advertisers were “exploring new ways to bring their ads online. . . to make [their] steep investment go further.” (WSJ)

But almost without exception, the advertisers failed to use their TV ad as a jumping-off point for an online experience — one that could be more interactive, engaging and potentially sales-driving. (A notable exception was the super tacky GoDaddy.com, which created a “censored ad”that you had to go to its site to watch.) Even user-generated ads were on the decline, with a single Doritos spot.

Instead, the ad agencies fell back on their old habits of telling 30-second “stories” about a brand, hoping that a tale of goofy cavemen, noble clydesdales or aphrodisiac peanuts would make you think their brand was “funny,” “inspiring”or “irresistible.”

When I spoke last week to advertising legend Bob Greenberg, CEO of R/GA, he wondered whether there was still much to be gained in broadcasting such multimillion-dollar “metaphors” when consumers have shifted to a more interactive media experience.

We’ll continue the discussion this week as part of the BRITE ’08 conference and CMO summit on branding, innovation and technology at Columbia. Bob and other marketing leaders from G.E., SAP, Fox and more will be discussing what the new models are for building brands in an age of interactive media.

For now, I’d give the Super Bowl ad lineup a B+ on creativity, and a D- on catching the new media paradigm.

Regarding my first choice, it might help you to know that a quarter century ago I bought a Macintosh, and then a Mac Plus, and I’ve probably bought every other Macintosh product since. Indeed, I’m writing this blog post on a MacBook Pro, and in customer lifetime value terms I’m just the sort of customer that any company would love to have.

But that’s not why Apple is my first choice. I’m choosing it because Apple, more than any other company, exemplifies what Peter Drucker said about business: at root, only two things really matter — marketing and innovation. Apple excels in developing offers that customers love to purchase, and it has not been afraid to diversify away from its home base in personal computers. The iPod is quite a distance from the Mac and the iPhone is even further, but they are still electronic products; the successful iTunes service represents a quite different growth vector. And then consider the Apple Stores. The received wisdom was that Apple was crazy to go direct to consumers through retail. How wrong was that wisdom? The revenues per square foot from Apple Stores are the highest of any U.S. retailer, in large part because the service is out-of-sight. Just check it out for yourself and, while you’re at it, see what happened to Apple’s stock price in 2007.

Nintendo
Years ago I was pretty good at Pong and Pac-Man, but I haven’t touched a video game since. My image of the game player is male, 16 to 24, the high school or college student locked in his room alone for hours on end, while the affairs of the day like schoolwork and family meals just pass him by. He may connect with someone online, but it’s a pretty lonely existence.

Over the years we’ve seen the competition — Nintendo, Sega, Sony and Microsoft — each developing ever more complex games to keep the player glued to his screen even longer. But now there’s the Wii from Nintendo. Sure it’s a video game, but so different in concept and with a value proposition that speaks to the entire age range. Forget the solitary game player — the Wii is for the whole family, and lets baby boomers and older relive their youth.

At Thanksgiving, I played tennis for the first time in years. Sure, my 10-year old relative played like Roger Federer in giving me a drubbing, but the sense of family was exceptional. So, Nintendo is my second choice for top marketer of 2007; it figured out a customer need and used its technological resources to make an unbelievably compelling market offer.

Monsanto
But not all great marketers address consumer markets. My third choice is quite different and may be controversial. In the past several years Monsanto has run into considerable public relations trouble in Europe as consumer–based movements have worked to block its genetically modified seeds. But around the world farmers know only too well the damage caused by a wide variety of bugs: crop yields go down and their earnings suffer. Monsanto has targeted farmers in the United States, Latin America and Asia — regions that are increasingly using the company’s seeds to grow their crops. Of course, Monsanto has had some luck — as oil prices have risen and the demand for organically based alternative fuels has grown, the pressure on crop yields has increased. Monsanto has the products to make that happen and, as with my other choices, the stock market has rewarded its efforts.

So there you have it — Apple, Nintendo, Monsanto. What unites these firms is a fierce focus on delivering customer value and securing differential advantage.

Now, take a look at your own corporation — is your CEO leading a similar drive? When your senior leaders understand that all that really matters is marketing and innovation, then your firm will be a candidate for my top three marketers of 2008.

Professor Capon is working to reduce the obscenely high price of marketing textbooks by offering Managing Marketing in the 21st Century as a new low-price/high-value alternative at www.mm21c.com.

With Virgin Galactic (VG), Richard Branson is trying to change that. Last Wednesday at the American Museum of Natural History, throngs of reporters were on hand to capture the unveiling of his prototype spacecrafts, which are being built to send everyday people — 100 of them by 2009 — into space.

Also in attendance at the event were 28 students from Professor Ketty Maisonrouge’s luxury markets class. They had special permission to be there for a different reason — to do marketing research on VG and the space-travel industry. The students met privately with Branson and Brian Binnie, who piloted SpaceShipOne’s second Ansari X Prize flight.

And the following evening on campus, a group of future VG “astronauts,” along with VG president Will Whitehorn and other senior VG executives, met and talked with the students for five hours.

“This was really one of these rare moments in life when you feel that you are somehow a small part of a historic event,” said Maisonrouge.

This is the first marketing class at CBS — and likely the first class anywhere — to take on space tourism. Students will examine what is at stake, the history of the Virgin Galactic brand and the quantitative and qualitative research surrounding these markets. They will present a marketing plan to Virgin Galactic executives in April.

“We are working in an industry that doesn’t exist yet, so to be part of these first steps is really a privilege,” said Maisonrouge. “I really feel that the students are sharing in the passion and enthusiasm for this project, and it will definitely be an amazing semester.”

Rebranding initiatives are becoming more common among nonprofits — particularly educational institutions — as these organizations adopt marketing strategies that previously were used only in the for-profit world.

Possible reasons for this shift? Increased global competition may be putting pressure on nonprofits to better distinguish themselves from similar organizations. And the Internet is providing easy outlets for messaging, along with examples of the value of a solid branding strategy.

But as nonprofits move toward for-profit strategies, how do they balance promoting their brand with promoting their underlying altruistic mission? (The Red campaign comes to mind). And are there limits to how far brand managers should go to adopt what have traditionally been for-profit tools?