In a post on my own blog yesterday, I wrote about how companies should not think about how to leverage social media as a new channel for doing marketing, but instead realize how social media has transformed the marketing game. I promised to expand on the topic and decided it made more sense to move the conversation to the marketing 2.0 community so we can continue this discussion until way after this post will have disappeared below the fold.

In yesterday’s post I said:

Social media is what transformed the rules of marketing. By providing a platform of participation to your employees, customers and prospects, social media has changed the fundamental pillars of the marketing game. Not only have the rules of game changed, so have the players, the scope, the tactics and the added values - to use the game theory elements of the game.

I further said that the end goal of marketing - creating a customer - had not changed.

Let’s take a quick look at the different elements of the marketing game and how they changed.

The New Rules

1. People do not want to hear from companies anymore
2. People want to hear from other people

Some people will argue that this has always been like that, and they are right. The problem is that prior to this platform of massive participation called social media becoming commonplace, you could not hear from other people in a scalable way - and so you had to listen to what companies were telling you.

The New Players

• Customers
• Employees
• Prospects

Except for competitors not being on the list, it sounds like the old players - doesn’t it?

The difference is what Clay Shirky calls “here comes everyone” in his latest book - which is a must read if you are in marketing. It is not just the employees that are in your direct line of command who are playing key roles in your decision making processes, it is all employees. And it is not just your largest customers, or those you pay to advise you, who will participate in your decisions - it is all of them, including people who have not yet bought from you.

The New Scope

The scope of marketing for many old school marketers was everything pre-sales. Many corporate marketing executives are not even in charge of product innovation - where you bring the voice of the customer back into the process of defining your next offer.

The new scope of marketing is everything pre-sales all the way to post sales customer support and new product innovation. And that for global tribes of people who talk to one another instead of just those who bought from you.

The New Tactics

• Business communities
• Social media & social networks
• People-speak and authenticity
• Speed of response

Those are big changes in how marketing departments will have to think and work in order to create new customers. No more corporate-speak, no more interrupt-based marketing programs, and no more targeting. It is now all about attracting customers, building relationships and trust by helping them and letting them help one another, and leveraging the tribal nature of people.

Is this how the marketing tactics should have been all along? Absolutely! But how many companies were doing that when they did not have to? Almost none.

Now they will have no choice if they are to survive.

The New Added Values.

• People’s attention
• People’s trust
• Talent in employees and customer champions
• Externalized business process that include employees, customers and prospects
• Retell-able stories to market with you customers instead of at them

So out are the switching costs, the better mousetraps, the big advertising budgets, marketshare and other added values that determined your marketing competitive value in the marketplace before social media shifted the power away from companies and into individual’s hands.

Summary

So while the end goal of marketing has not changed, the game you play to get to that end goal has forever been transformed. You can argue that whatever marketing 2.0 becomes is what marketing should have been all along, as I did before, but the reality is that for most companies it never was like that because they did not have to.

And the changes that need to happen are so fundamental that many will not make it.

In brainstorming with some friends and colleagues (including my partner Lois) on the future of marketing, and indirectly during conversations and presentations at the Conference Board meeting on Marketing Effectiveness (with other posts on the conference here and here), the question came up of what the role of a corporate marketer should be in a large multi-brand company.

What do you do when you are not directly connected with the product, the brand or the revenue? Think GE and NBC, Disney and ESPN, Pepsi and Gatorade, or Eli Lilly and Cialis. As long as the business units are doing well, there may be very little perceived value in what corporate marketing has to offer to the business units. In some cases you may wonder what brand people are actually buying – are they buying an NBC product, or are they buying a specific show? It is clear that the GE brand does not affect buying behavior – but does the NBC brand actually influence a show’s buying behavior?

Regardless of whether NBC or the NBC shows are the main brands, how does the corporate marketing group at GE proves its value to the subsidiaries in such a way that it can be impactful? (And note that I am using GE as a fictitious example – I have no idea whether there are frictions or any such problems as described here between corporate marketing and the subsidiaries.) One way could be by accepting that the only role they can play is an advisory role – and then strengthen that position. They could surround themselves with a center of excellence in marketing and then share the acquired knowledge with marketers in the subs, who probably do not have enough time for thought leadership and education. Another could be for them to become a friend/ally with the local marketing departments to make sure that they do not get marginalized into a tactical position, but that they instead get a key strategic seat at the executive table which marketers should occupy at any company. Remember Peter Drucker’s saying - “Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

In some companies the marketing role of the parent company is important. In the case of Eli Lilly for example, which presented at the Conference Board meeting yesterday, the two key brand-attributes for doctors, their “primary buyers” as prescribers at this point, are – do they trust the product/drug and do they trust the company it is coming from. So if corporate marketing does not deliver, and doctors lose their trust in the company, then the brands could have to spend up to 4 times as much as competitors to gain the same number of market share points. In this case the role of corporate marketing is self-evident. Now when the inevitable shift toward consumer-driven drug selection comes, that whole picture may very well change. Individual consumers may base their decisions on the trust they have in the product and the trust they have in the community which recommended it to them – so in effect diminishing the role of the trust they have in the company, and thus that of corporate marketing.

So is bigger better?

The reason why corporate communications no longer works is not all that different from why traditional marketing communications no longer works.

Whether your internal culture encourages it or not, there is an emerging infrastructure of participation that enables democratization of participation for all employees - with or without your consent or employee snooping techniques.

They enable conversations that are much more powerful than yesteryears water cooler conversations or the inevitable rumor mills. If your corporate communications slogans don’t live up to reality, as is often the case with employee empowerment stories that are not backed by policies or budgets that truly empower people, they will be outed in an instant.

Thankfully for employees, and especially younger ones, there are some large company visionaries, like BT’s CIO JP Rangaswami, who get that and who encourage the proliferation of the platform of participation, which enables employee empowerment, within their corporate walls.

[While I am not a big fan of cross-posting, I thought it would be appropriate to cross-post this post with Emergence Marketing as I have had part of my recent community-based thoughts here]

Based on research in the field of virtual communities, most business thinkers will agree that there are 4 fundamental pillars to successful communities - content, members, member profiles and transactions. If managed properly, these 4 dynamics can lead to economics of increasing returns that characterize most successful communities. The more members you have, the more content they will create. That in turn will increase the value to the community members and attract more members. If you capture information about your members and you make it easier for them to find stuff in the community based on their profile, the higher the value of the community to the members and the more members you will attract. It’s easy to understand the workings and to get the benefits of the dynamics of increasing returns that happen in successful virtual communities. Many of those were first described by business thinker and management consultant John Hagel in Net Gain more than a decade ago.

There are other aspects that drive and define communities, such as the social and technology infrastructures of communities as well as the business processes that they support. But none of those characteristics have the power to create the positive value creation loops that the original four can.

While most successful communities will have a mix of all of the ingredients - we can characterize communities by their dominant dynamic.

First there are content-based communities, where members interact with one another primarily in the context of content - either consumer generated or licensed/acquired. News sites or blogs are communities that would fall in this category.

Then there are communities that are primarily member-based. Member-driven communities can take on many different forms. Brand communities like the Harley or the Ducati communities are clearly member-centric communities, even though some companies mistakenly think that the brand is at the center of those communities, and not the members. Networking communities like LinkedIn and Facebook are clearly communities that have members at their core. Many developer communities in the tech world also fall within this category.

Lastly there are transaction-centric communities. eBay and Amazon.com come to mind when talking about those communities.

Of course, all of those communities have content, and all have members, and most have transactions - it’s just that they are more heavily tilted towards one of the community ingredients than another. And in some cases communities with the same end-goal can take on very different forms. Brand communities could also be set up as content-centric communities or as transaction-centric communities. Customer support communities or developer communities could also be started as content-centric communities - and perhaps evolve into transaction-centric communities.

The reason it’s important to understand the different types of communities is because of the requirements to get them started. You cannot start a member-centric or a transaction-based community without a critical mass of members or offerings - something most companies do not have. Without a critical mass of members or offerings, there will not be enough content generated (i.e., customer reviews, etc.) in order to make the interaction for the community members valuable. So if you have a total potential number of users ranging in the hundreds, you will never be able to set up a vibrant customer support community as Intuit. Microsoft or Apple can. That does not mean that you cannot leverage customer support communities, it means that you have to start them up as content-driven communities. Instead of relying on the community members to re-write your manuals and to create meaningful FAQs, you may have to hire a few people to kick-start the process on a for-hire basis.

While the economics of increasing returns may be somewhat diminished with a smaller number of members and some hired guns, they are still very much present. Most likely they will handily beat the economics of diminishing returns that most business practitioners face when trying to interact with customers and prospects in the old-fashioned interrupt-driven way.

[While I am not a big believer in cross-posting, I thought it would be worth cross-posting this post with emergence marketing as I had some other posts on community building earlier]

Some of these thoughts have been triggered by the many conversations I have had the pleasure to have as part of the Community Effectiveness Study that we are conducting with Deloitte and the Society of New Communications Research. Some of the preliminary results of this study will be discussed at the Society for New Communications Research Forum in two weeks and more detailed results will be unveiled at the Community 2.0 Conference in May.

As a senior research fellow with the Society for New Communications Research I can extend a special discount to some of my friends who want to attend the forum. Email me if you want to attend at a special rate (francois [at] emergencemarketing [dot] com). Note that there are also 1/2 day flex passes available for those who can’t attend the full event.

Yesterday I reported on some research done by MIT behavioral economist Dan Ariely on how people have two different evaluation frameworks - one based on social norms and one based on market norms.

When people fall into a situation of evaluating a transaction in the market realm, they look at it from a cold and calculated perspective - “what am I getting in return for what I am giving, right now?” When they evaluate a transaction in a social framework, they look at it from an emotional and social norms based point of view - “it does not matter what I am getting in return for my help now, it just feels good to help out.” Giving people monetary incentives, no matter how small, can trigger the switch from one mental framework to another. So offering to pay your neighbor to help you out may not have the desired impact. You may be better off by giving them a gift or nothing at all.

Which leads to the issue of the value that we are getting from our customers when we give them a monetary incentive to help us out. If we are asking them for feedback on a new product and we pay them, will we get a different set of recommendations than if we only attract those users who are passionate enough to give us feedback on a voluntarily basis? If we do market research and pay people for the information they share or the time they spend with us, is that information as good as if we create an environment in which participants use their social norms to evaluate the value exchange - for example the ability to help peers by sharing lessons-learned and worst practices with them?

The research indicates that the value may be different. If you pay me to give you ten ideas I will give you ten ideas - whether I feel passionate about them or not. If I evaluate the transaction based on social norms I will make sure that the ideas I give you will really help you - they are the ones I really care about and which I believe will increase the adoption of your product.

What do you think? Do you have examples to share?

Many proven marketing processes, like lead generation, branding, PR, and product innovation, are increasingly hard to achieve with any degree of predictability - both in terms of measurable results as well as costs.

The reason for this is that some of the context in which we market products and services has gone through a fundamental transformation, enabled by a participatory technology infrastructure. But unlike what some marketing pundits are claiming - not all the marketing fundamentals have changed. In fact there may be more fundamentals that remained the same than those that changed.

Sticking to the 4P’s, which may be somewhat obsolete, and adding a fifth P for people as some have started doing, we can quickly understand what changed and what did not.

Product

We still have products and services at the center of every marketing activity. And while new tools have enabled us to design products differently - incorporating feedback and ideas from people who are not necessarily within our corporate boundaries, leveraging social motivations in getting people to help us build open source products, etc. - the fundamentals of product management have not changed all that much. At the end of the day, you still need to pick the winning set of features that will make your product successful.

A question one can ask if whether people buy the product because of the product itself, or because of the experience that comes with it, or perhaps because of the “personal identity” that comes with the use of your product. But while this is an interesting question, and while people most likely do not buy the product because of the product itself, whatever the answer is, it is nothing new.

Price

Products and services still have prices. One of the main changes in the last decade or so is that some companies have found successful business model to support a new price point that buyers seem to be addicted to - FREE. Other than that, there really has not been that much change in the field of pricing. And unlike what economists or marketing pundits will lead you to believe, the supply side (the vendor/manufacturer) still very much controls the price the customer is willing to pay for a certain product.

Promotion

So your message is no longer getting through to your target audience. Some people say that attention is the “new” scarcity. An article on the subject said:

“Psychologists tell us that the mind is under a continual bombardment of ideas, all of which are trying to make an impression on it. The prospect, therefore, does not sit around with his mind a blank, calmly waiting for someone or something to capture his attention without a struggle. The salesman enters a field already well occupied and must fight for the undivided attention that is a successful sale.”

…but wait - this was written in Modern Man in 1918! So attention scarcity is not something new. It may be harder, with more competitors vying for what may be a little more collective attention that in 1918 - but it is not a new phenomena.

We of course have way more channels through which we can reach our prospects. But the increased targeting capability that comes with it should make it easier to get our message through to the right person, not harder.

Place (distribution)

Place has a new meaning. Your product no longer needs to be in a physical location in order to be bought. It can now have an ubiquitous presence as an online offering - either in an online store or as paid search term. But that just means that you have additional distribution channels at your disposal - it does not change the fundamentals of distribution strategy.

People

Here may be the biggest misnomer in terms of change. Sure we now have tools that allow us to tune in and tune out things more easily. We may now have a participatory infrastructure that gives everyone a voice, one that turns everyone into a producer. But our brain has been shaped over millions of years to be the way it is today, and the same is true for many of our social norms. Nothing will change the way we evaluate our contributions nor the way we make buying decisions in a few years - it’s just hardwired.

So what changed then?

If so many fundamentals stayed the same, why is it that we can no longer get predictable results with our traditional marketing programs?

For starters, some of the pain may be self-inflicted - think of spammers who killed email marketing or corporate liars who undermined the trust that we have in big corporations and government (although the latter may in fact not be something new either).

Maybe what happened is that consumers are now empowered to call out and shut out bad marketing behaviors that we’ve had all along - people never wanted to be interrupted, they never wanted to be treated as idiots, and they always hated the fact that companies were not listening to them. They just had no channel to let us know that.

So what marketing 2.0 becomes may in fact be what marketing should have been all along.

And some people knew this a long time ago - check out those quotes from the late Peter Drucker as an example:

• “Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”
• “The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself. “
• “The most important thing in communication is hearing what isn’t said.”
• “Quality in a service or product is not what you put into it. It is what the client or customer gets out of it.”

That is what marketing 2.0 is becoming…except that he made some of those statements more than a half century ago…

We hope you will enjoy and join this ongoing conversation on where marketing is going.

There’s a lot of buzz about online communities, but how much business value are they providing – and how are companies measuring success?

In order to provide some answers to this questions, and in a partnership between Deloitte, The Society of New Communications Research and Beeline Labs, we are conducting a research project on how companies measure progress and success within their business communities.

If you are involved in managing online communities for your organization, you are invited to participate in the 2008 Online Community Effectiveness Study. To take the online survey, go to: http://www.communityeffectiveness.com.

Results of the survey will be freely shared in May to all who are interested in this subject.

We are building a new thought leadership community around the future of marketing. For now this site is under construction…I you would like to be notified when the site will go live or would like to participate, please email info@marketingtwo.com.

Thank you - Francois