Narratives in Marketing

What is narrative in marketing?
According to David Aaker, retired marketing professor from Haas School of Business and now a partner at Prophet, this can be best answered by showing a perfect example of masters of narratives, The Republican Party. Narrative is about having a coherent theme in every communication, repeating the same message over and over. Narrative starts with correctly framing the message and choosing words that reinforce this framing. Take the case of some of the republican causes:

1. Death Tax, Not estate tax!
2. Pro Life
   
3. Tax Relief
   

David Aaker, spent an engaging hour with a small group of students. His favorite answer for a question is, "you know I have written a book on that, have you read it". Which is true, he has written several books which are arguably seminal works on Branding and Marketing strategy.

Gas Tax benefits do not trickle down

Presidential candidate John McCain called for gas tax holiday over the summer months. The idea is that reducing taxes increases the disposable income people have and will lead to higher consumer spending which leads to income growth as a function of Keynesian multiplier. McCain is correct in that this is like a fiscal stimulus which will lead to expansion.

Gas Tax is not a percentage of gas price we pay at the pump. It is fixed at 18.4 cents per gallon. According to 2007 data, US consumes 388.7 million gallons of gas a day. Rounding it to 400, this translates to a lost revenue to the Government over this tax holiday to be, $6.6 billion.

The first question to ask with any fiscal stimulus package is, "How are you doing to fund it?"
One way would be to reduce Government spending. In the election year, even the self described fiscal conservative like McCain would not agree to cut in spending. So this would be deficit funding. Right on the heels of $145 billion fiscal stimulus approved by the Congress, the additional tax reprieve will hurt the deficit.

Another important question McCain should ask is, "What is the source of the gas price increase?". Unlike previous oil price shocks the source of the current shock is the higher demand for oil from China and India. So reducing the gas tax may entice the US consumer to consume more gas, increasing the demand further and hence the price at the pumps, creating effects that are opposite of what McCain wants.

The other source of the gas price increase is the weak dollar. Since US is a net Oil importer, it has to pay more of its weak currency and that gets passed on to the consumer. An increased consumption due to gas tax holiday may funner more US dollars to the oil producing countries, there by decreasing net exports and hence shrinking the economy.

It is very easy to see that McCain and his economic team understand this and know full well this is not going to happen. They also know that the democratic candidates would come out strongly against this tax holiday. This is just a way to get political mileage with more ammunition to describe his opposition as tax happy spenders.

A perfect application for Squidoo lens

I found a perfect application for Squidoo lens, or I should say, Squidoo lens is a perfect tool for the task I had in hand. I created a LinkedIn group called Boulder Net, to bring together professionals in Boulder. I needed a website for this group but I did have the time or resources to buy, design and constantly update one. I wanted the website to be a place holder and dynamically updated with a collection of RSS feeds relating to events, jobs, startups in and around Boulder. The main purpose of this website is to feed users to the LinkedIn group. Nothing more.

Squidoo fit the bill perfectly and more. I created a lens in no time and added several RSS feeds. For something that is not searchable, (you can't even search for groups within LinkedIn, let alone Google) now there is a link from a site that is as good as professionally done and with valid and current content.

There is just absolutely no excuse these days for not having a great website.

Changing Consumer Behavior: Heinz in India

Indians are used to ketchup that flows easily from the bottle. No tapping on the sides or the bottom of the bottle. The well known Indian ketchup brand is Maggi (owned by Nestle). Its viscosity is very low and it almost pours out. Heinz ketchup is much thicker viscous than anything Indians are used to. Heinz could have changed their product to match the expectations, instead they decided to train the consumer, change their behavior to accept Heinz for what it is. Instead of masking the difference they showcase it, trying to get the consumer accept it. See the following Ads. (You may want to lower the volume)




The punch line is, "takes a while to come out".

I wonder how they decided that reducing product variability in different markets is more important than meeting the consumer taste.

From the Web2.0 Class

The first session spent a lot of time on Free. I said my willingness to pay for web services is $0. The new book by Chris Anderson is pushing this idea of Free. You can listen to NPR interview with Chris Anderson, editor-in-chief of Wired magazine, Kevin Rose, founder of the social bookmarking site Digg, and Brad Feld, a venture capitalist, in which they talk about the cost of offering online information to millions of people — free of charge.

The concepts being pushed are, the basic version is free, users pay with their attention, information, or a third party pays.

The General Public

The general public plays in the middle. By definition they show no extreme sentiments, passion nor do they get agitated. They do not complain when someone professes to speak on their behalf. The general public has no original ideas or principles it is willing to stand behind and stamp its name on it. The general public will not set fire to SUVs or bomb abortion clinics. The general public does not think much about Tibet or China and will not come out to protest the Olympic Torch run.

Only the extremists find it preferable to ignore their day to day responsibilities and take on what they consider to be higher goals.

So anyone can describe their feelings and ideas in ways that suit them. Politicians do. Take for instance the Olympic protests and the Chinese Government's response. (from NYTimes)

The news conference was apparently intended to address Sunday’s protests in London. Ms. Wang blamed the disruptions in London on a “few Tibet separatists” and described their actions as the work of saboteurs. She said Beijing’s Olympic organizers “strongly condemned” the Tibetan protesters.

“The general public is very angry at this sabotage by a few separatists,” she said. “During the torch relay, we met with some disturbances, but we believe that all the peace-loving people in the world will support the torch relay.”

Mr. Wang is correct in describing the protesters but he claimed to represent the general public, describing them as "very angry".

The general public does not care.

Death by million posts

How difficult is it to produce that one more blog post?

Could the last post you and I wrote be the last one we would ever write?

Is there a pricing model from Miroeconomics we can apply to blogging?

Is your blog meant for transactional readers or relationship readers?

The New York Times talks about the difficulties in driving users and hence generating revenue from blog posts. With no barriers to entry, infinite supply, zero switching costs and customer loyalty, and limited number of reader-hours blogging is taking its toll on those who blog for money.

The very fact that reader volume is unpredictable and determined by when the post hits the blogosphere relative to other posts points to world of "transactional readers" and not "relationship readers". The latter is also known as subscribers to the RSS feed. Blogging for the transactional readers is unproductive, the marginal cost of producing one more post is way more than the marginal traffic (revenue) from that post. Since the probability that any single post can generate positive revenue is zero, the marginal revenue is zero as well.

If it is anything Microeconomics teaches us worthwhile, it is the concept of marginal costs and revenue. It is unpardonable to produce at marginal cost higher than marginal revenue.

On the other hand, going after relationship readers is a different game. The marginal revenue from one additional post is not the additional traffic and Ad clicks it generates but how much it adds to your credibility as an expert which gives a justification to your current subscribers for subscribing to your feed and for the transactional readers to become your subscribers. Note however that in relationship model, the marginal revenue is sill zero. But you are not producing and selling one post at a time. You are selling your expertise as a whole and it is irrelevant whether or not a single post brings in readers.

Once you realize this, there is no more pressure to produce in volume or beat others to break a news. There is no need for "toiling under great physical and emotional stress created by the around-the-clock Internet economy that demands a constant stream of news and comment" (NYTimes).

The other way to look at relationship blogging is to see it as an output of the work you did to gain and improve your expertise. This means that blogging is all fixed cost and zero marginal costs. Since the marginal cost and the marginal revenue are equal (of course, they are both zero) this is the right profit maximizing point to be.

But how do you recover your fixed cost when marginal revenue is zero? The pricing scheme that models the relationship blogging is Two-Part-Tariff. When the readers subscribe to your blog they pay the one time entry cost. You earned your revenue by gaining a share of their mind, time and space in the RSS reader. By charging this fixed price and a unit price of zero you have captured all you can from any single reader.

It is not difficult to see which model is better to pursue.

Attending a Course on Web2.0 Marketing

For two Sundays in April, (one of which is tomorrow) I will be attending a Web2.0 Marketing class at Haas School of Business, UC Berkeley. This course is taught by Andreas S. Wegend, who had worked for Amazon and as a Assistant Professor at NYU Stern School of Business.

I hope to learn more about the analytics and do some nice cases.

I will write more on these topics in the coming days.

My Willingness to Pay for web services: $0

The concept of Willingness To Pay (WPT) is meant to convey what price a consumer is willing to pay to buy a product and still be left with a positive value. The idea of profit maximization is to price a product in such a way to extract every bit of value from the customer that they will be indifferent between choosing and not choosing the product. In a much broader sense Chris Anderson calls this "Free! Why $0.00 is the future of business".

I have not paid any for any of the web services I have been using. Search, blog, group collaboration, my own social network, surveys, documents, spreadsheets, etc.

Now when a new service that is marginally effective aims to charge me for using it, the choice is easy. Unfortunately the price of web services is now their marginal cost, $0. Anyone thinks otherwise has not got their business model right.

Biased Expectations

Before you make the big decision to quit your job to start your own venture or to move to a different city to start fresh, be aware of the highly biased opinion we have about our abilities. The very trait that defines an entrepreneur, unbridled optimism, works against them preventing them from interpreting the data in an unbiased manner.
Wharton professor Gavin Cassar says,
"It's been shown in many studies that people are overly optimistic. Individuals form an inside view forecast by focusing on the specifics of the case, the details of the plan that exists and obstacles to its completion, and by constructing scenarios of future progress."

Even when the entrepreneurs use metrics and accounting systems to budget and forecast, their self bias make them overestimate the opportunities and diminish the risks. As Cassar says, "it is important to recognize that financial projections of success are merely projections based on beliefs, which are sometimes based on overconfident or optimistic assumptions".

The other aspect that leads one to quit the current job and enter self-employment is due to incorrect estimation of costs, more specifically ignoring the opportunity cost of doing so. Focused on the earning possibilities and the project cost of making those earnings, individuals ignore the income they were leaving behind and whether the new income compares well against what they were letting go. The opportunity cost is not just your pay check, it includes the health insurance,4 01K matching, holidays and vacation pay and other fringe benefits.

The question is, when the startup bug bites you would you recognize the need to do the costing and earnings estimates right?