Category: Interactive Marketing

Not your father’s advertorial

Every trend, fad and meme has its day and “branded content” is having its moment now that the New York Time’s Monday business section has discovered the phenomenon of publishers further blurring the lines between journalism and marketing in its piece on 4.8.13 by Tanzina Vega: “Sponsors Now Pay for Online Articles, Not Just Ads.” The usual publications are cited: Forbes.com and it’s “BrandVoice” (“Connecting marketers to the Forbes audience”), the Atlantic Monthly, Business Insider, Mashable just to name a few. I think a bigger trend is being ignored:  and that’s marketers going direct to readers and building their own audiences, cutting publishers out entirely except to rent their traffic and push clicks to their own media.
Forbes has taken its share of criticism for being one of the first old-school publishers to open up its digital pages to advertorial, but Chief Product Office Lewis D’Vorkin isn’t apologetic. His e-book on the Forbes.com editorial/advertising model is a convincing argument against the old church/state Chinese wall model of advertising-supported but segregated-independent-objctive journalism. In his treatise, D’Vorkin goes right after the old-school editorial purists and essentially wishes them good luck as they slowly starve to death while the old interruption model of advertising further withers under the impact of AdBlocker and Tivo-ad skipper technologies.

The Times article cites one dissenter, Andrew Sullivan, the former editor of the New Republic: “I am aghast at this…Your average reader isn’t interested in that. They don’t realize they are being fed corporate propaganda.”
Average reader? At least they’re reading and not rotting their brains with a diet of Bravo staged-reality shows about Real Wives and Hoarders. Getting into the sanctimonious mosh pit of editorial objectivity and journalism ethics is to enter into a surreal religious war on a pointless par with the dyophysite controversies of the fifth century: no one cared except the patriarchs and metropolitans but nevertheless wars were waged and people died.
The Internet Advertising Bureau and the Magazine Publishers Association have long been setting down the rules for making it clear to readers what is pure and impure. Putting tinted boxes around marketing content, sticking the word “Advertisement” atop the headline …. I ran into this issue as early as 1996 when Forbes.com sold daily content sponsorships and gave the advertisers a tall vertical unit we invented called the “Skyscraper.” The smarter sponsors used the space to run a story as opposed to an animated Punch-The-Monkey ad, and before long we had to revise our terms and conditions to ghettoize the more egregious offenders with the scarlet letter of “Advertising.”  Digital advertising models have long looked for the online equivalent of the little word “Advertorial” that magazines used to segregate special sections bought by the Economic Development Commission of Mississippi (“A State To Grow In!”) away from the serious, independent stuff. Now even Google News is trying to keep the sponsored stuff out of its pages.
I think the Times missed the bigger trend: marketers going direct to their prospective buyers by becoming their own publishers, producing their own media and using professional editorial placements only to rent names, just as marketers have been renting circulation lists for decades to drive their direct mail campaigns. Here’s some early manifestations and enablers of the Marketer-As-Publisher trend:
Corporate-in-house produced newsrooms: Ever since corporate websites became de rigeur in the 90s, corporate communications has always carved out a loney section of the brand’s main website to post press releases, executive bios, and the usual investor relations information. Now some are going right into the business of publishing stories – not the usual releases for the press, but content for the customers – under the rubric of corporate newsrooms. Best example I can think of is what Intel has been doing for years with its newsroom at newsroom.intel.com. Cisco also has a newsroom. These are being used as white paper libraries, curated collections of relevant industry news links, and original daily news and commentary, all backed up by some form of community/social participation function.
Branded partner produced content: these are sites produced in partnership with a media company. Intel is in a partnership with Vice.com called The Creators Project. Red Bull is also into it this sort of advertainment.
Online “magazines”: these are the digital evolution of the type of print product that companies such as IBM or the Four Seasons Hotel chain would hire Forbes Custom Publishing to produce and distribute to their customers. Now the digital version  of “vanity” magazines live under their own domain identity (vs. being an extension of the core brand’s domain like the Intel newsroom) Now they produce them with their own editorial staff. A great example is Adobe/Omniture’s CMO.com:
Enablers
Talent: A lot of inexpensive and talented business and B2B editorial talent displaced by the digital disruption in the their former newsrooms is available with some prominent tech talent crossing over to corporate gigs – and not in the usual PR/flak capacity but as corporate staff writers and editors. From the highest end of the mastheads with people like Fortune’s Rik Kirkland going to McKinsey a few years ago to edit the McKinsey Quarterly and oversee the firm’s editorial strategy to Steve Hamm, formerly of Businessweek, going to IBM to become a communications strategist, or Dan Lyons leaving Read, Write Web, Forbes, and the Daily Beast to join Cambridge digital marketing startup HubSpot…. the talent is out there looking for some relief from the churn and chaos of the traditional press and the sweatshop conditions of the blog networks.
Cheap tools: web development used to involve a lot of enterprise software licenses for content management, analytics, etc. Say goodbye to Vignette and Interwoven and hello to WordPress and Drupal. If the tools are good enough for AllThingsD and The Economist, then they are good enough to a corporate content marketing site. And they have the added appeal of being cloud/SAAS based so the more daring marketers can side-step the corporate web mafia and the CIO’s office with their brown-suited procurement standards and office of project management  and start publishing immediately.
Drivers: in closing, what’s driving chief marketing officers, heads of corporate communications, and digital marketers to launch their own editorial efforts?

First – developing an audience of loyal readers is no different that developing and attracting the attention of prospective customers and building loyalty among existing ones. Corporate content is about going direct to the right audience and cutting out the editorial middle-man.

Second – digital marketing is all about the content that a marketer pushes through the distribution channels available. YouTube for corporate video. Tweets, Facebook pages … this stuff demands a steady supply of fresh content and getting that content from an agency or third-party is like trying to perform surgery in a haz mat suit with robotic arms. Why depend on a third party when you can own the capability internally.

Third – agility. Corporate publishing is about reacting, not just to opportunities like tweeting about random blackouts during the Superbowl, but to crisis communications when every second counts. When your offshore oil platform catches on fire, the world isn’t going to the New York Times for your mea culpa and updates, it’s hammering on BP.com. (I’ll get into “dark site” production in a future post.)

So what? I think the immediate impact of corporate content isn’t journalistic ethics but the challenge it places on the professional service firms that  feed clients with editorial services. Namely the PR firms writing releases, CEO speeches, white papers, etc. and the digital agencies that build custom microsites and other digital initiatives for marketers unstaffed to handle the challenge of staying technically adept. And finally– the traditional and not-so-traditional “objective” press. They will either produce the content as a service to the corporate advertiser or see their former editors and reporters get hired away to do it under the more stable umbrella of a big organization with deep pockets. That the press is now selling the opportunity to publish corporate content next to their own reporting is a foregone conclusion. Hand wringing and saying one is ethically “aghast” is the personification of the cliché, “pride goeth before the fall.”

The Flipboard 2.0 Vanity Press

I’ve been digging into the market for custom publishing services for digital marketers, and hence have been focused on content management systems, distribution models, and other production tools to rapidly build and nuture a custom “magazine.”

Introducing my testbed for Flipboard’s new publishing tool: The Monthly Meconium (the name is a long story involving my penchant for weird words, one of which was turned back on me in 1981 when I was a bartender and given the nickname of “Mec” after sharing the definition of “meconium” with the day shift), a fitting title for a first effort at something that is destined to be flushed away.

The tool is a clipping service. One drags a “Flip It” applet into the Chrome toolbar and when you’re on some content worth sharing, you hit the little “+ flip it” button, add a little commentary, and it’s added to your personal FlipBoard magazine.

Flipboard, if you’ve been sleeping under a rock, is the amazing graphical, touch-friendly feed aggregator that takes all of your social feeds — Twitter, Facebook, Google +, YouTube, and Flipboard specific titles from publishers like GigaOm and AllThingsD — and brings them together in what has quickly become my favorite browsing app on my smartphone and my tablet.

There’s a bit of a Tumblr/Pinterest feeling to the whole experience. This isn’t a content creation tool as much as a curation took. Sort of a cooler updated version of a paper.li custom newspaper for a swiping, touch enabled experience.

I have no idea how to subscribe to The Monthly Meconium. I’ve been messing around with Flipboard trying to find my freshly launched effort, but nothing brings it up. I’m assuming it needs to be crawled, indexed, reviewed, and then listed by the Flipboard crew.

This should be standard fare for any reporter trying to build traffic to their stuff or for any digital marketing trying to build an audience to their brand’s content.

When I actually figure out how to subscribe I’ll up this post. In the meantime I’ll try to get more adept at the techniques and actually use it to share stuff of interest.

Update: Flipboard 2.0 is only available for Apple’s iOS – an Android version is coming, so I can’t even read my own creation. Nice to see Paid Content agrees with my opinion that this should cause a severe case of incontinence for publishers.

Corporate Journalism Revisited

Bob Page emailed me a link to this Harvard Business Review blog post about how advertisers need to act more like newsrooms.

Written by Newsweek/Daily Beast CEO Baba Shetty and Wharton Professor Jerry Wind, the post cites some marketing trends where companies are:

Nice sentiments, but in my experience, the reality of putting such sentiments into action is a lot more frustrating. Getting big organizations to be faster and more open is always going to be an exercise in frustration and patience. Bob wrote: “This “marketers as newsrooms” stuff from Intel, Red Bull, Liberty Mutual looks an awful lot like the kind of team you got started at Lenovo.”

I’ll take the compliment for trying to push the company to be more agile on its communications and media, but the frustrations occurred when two traditional conservative corporate communications edicts were invoked: risk and quality.

Risk is what a corporate communications department is designed to minimize. They plan the message, craft it, practice it, push it across the organization and limit the points where the media can engage. Rank and file employees can’t, and shouldn’t, talk to the press or randomly respond to social media. Even the CEO is given a speech written for him, carefully crafted down to every ad hoc joke and quip. External PR agencies and internal staff work together across product introductions, corporate messaging and investor relations, focused on cutting down the risk of leaks, illegal financial disclosure and embarrassing moments.

Risk aversion in corporate communications means slowing things down, stone walling, taking time to consider responses and reactions before blurting out something that isn’t signed off. This doesn’t work when a lynch party is forming over Christmas shipping delays and the CEO’s home phone number is being shared along with form letters for submission to the Better Business Bureau. The realities of modern crisis communications is that minutes, not hours, are crucial, and when a customer service team needs to wait 24 hours for corporate communications to reply with a sanitized, bland statement opportunities are lost and tempers inflamed.

Quality is what gets invoked when a digital marketing team tries to get a video onto the company’s YouTube channel.  Suddenly the brand team and the advertising creative people turn into critics, and cry foul when a cell-phone video of an engineer explaining how he revved up boot times for a new PC is put out there on the same day of a product announcement claiming the new laptops are faster to start up than the competitions. The official announcement may make the claim, but the customers want to know how and why, so pointing a video camera at the engineer and putting up a 60 second answer suddenly makes the purists invoke HD quality standards.

Here’s a video I challenged the team to shoot and post in a single day when I felt a product announcement lacked any substance or answers. This bummed some people out because of its low quality, but 80,000 views later, I’d declare it a success. It simply Kevin Beck interview Howard Locker on what he did to rev up boot times.

I maintain that if you’re in a complex business and have opened the doors to questions through corporate blogs, customer service forums, Facebook pages, etc.. you better be prepared to get something up in a matter of hours, not days.

 

One thing will never change and that is that corporate content is ultimately advertorial and as such, inferior to independently/  objectively produced journalism.

I’m going to take credit for coining the term “corporate journalism” back in 2000 when I was at McKinsey working on the  firm’s knowledge management system. My friend and colleague Rob O’Regan and I realized our purpose in life was to leverage our experience as business and technology reporters in prying out of taciturn consultants conditioned to maintain client confidentiality some meaningful insights that could be developed into “content” for the benefit of other consultants and their clients.

The act of interviewing — not media training where a PR person coaches a senior executive on how to spin a story — but actually probing an expert in the reporter’s equivalent of the Socratic method, produced some strong results: it forced the experts to clarify their jargon, realize when their points were obtuse, and understand what they considered interesting or important wasn’t necessarily so. But the public result of this process — a story in the McKinsey Quarterly, or a video series for client development — is still content with an inherent proprietary bias.

Yes, brands need to be more agile, corporate communications needs to be faster and more authentic, and old strictures of spinning messages and planning ad campaigns deserve to die.  But beware of flaks bearing the next new thing, it usually turns out to be unbearably bogus and contrived and designed to serve the best interests of the organization and its shareholders, not the public and its customers.

Suckers are born every decade but I’m out of here

I wanted to keep this to myself –if you don’t have anything nice to say, don’t say anything at all — but here is my contribution to the pile of B.S. spreading today on the occasion of Facebook going public.

Facebook is over, about to topple over under the weight of a spectacular overvaluation, mass indifference to financial fundamentals, and most importantly my sense of the growing indifference of the generation it was supposed to serve — college students.  Facebook was famously founded as a digital replacement to the printed freshman directories of the Ivy League but has become obese with the inane status updates and vacation bragging of those same students’ parents. My generation. The one’s who pored over the original class directories in the 1970s and “posted updates” on whiteboards glued to our dorm room doors.

Wall Street is selling scale today when the trigger is pulled on Facebook at 11 AM EST — that’s dot.com hyperbole for “lots of traffic” — and while your local investment club may be all atwitter with the prospect of buying some shares, and it’s fun to count the herd of new Facebook gazillionaires now shopping for new Colnagos and bespoke skinny jeans — the smart money has been cashing out for a long time in the private market and will continue cashing out quickly at the top.  This is not Microsoft in 1984 nor Amazon in 1996. This is not a long term bet on a significant new way of doing business or even communicating. This is an investment in the 2012 edition of CompuServe and MySpace: yet another walled garden ripe to get creatively destroyed by the next big technical thing lurking over that hill known as the future.

Future performance of Facebook’s stock depends on the company delivering profitable revenue and like Google, Facebook gets all of its money from advertising. Google builds semi-useful stuff and search is everything. Facebook advertising does not work. I managed Facebook campaigns for a Fortune Global 100 company and have first hand experience that … Facebook …. Advertising …. Does….. Not ….. Work.

General Motors figured this out, and picking the week of the IPO to announce Facebook ads aren’t working was simply perfect. Of course the counter argument from the social media douche bags is that “Facebook is all about authentic relationships and transparent conversations between brands and customers.” Consider the source, given that the SMDB’s make their bones selling their Facebook Unique Customer Karma and Emerging Digital services (you can figure out the forced acronym) to breathless CMOs who want audience, damn it, and the bigger the better.  And consider that the public relations/digital agency world is always first on any shiny object bandwagon (can you say SecondLife) and their current solemn obsession is reporting “Social ROI” as the rest of the faddish get obsessed with big data and analytics. (If you want to watch some fun navel gazing, play pissed-off CEO and ask a Digital PR person “How much is a Facebook Fan worth?”)

Companies, aka “brands,” obsess and fret about how many fans and likes they have; spend money on third-party tools like BuddyMedia to manage their presence, and set aside a slice of their digital advertising budget to buy good old display ads to run alongside the torrent of notifications and shared links that make up Facebook’s river of content. As I read elsewhere this morning, quoting Seth Godin (whom I never quote), “The Internet wasn’t invented for advertisers.”

Neither was Facebook.

Yet, in lieu of subscriptions or some twist on Warren Buffett’s theory of a toll booth on the only bridge over the river, where is Facebook’s money going to come from to sustain a valuation in the thin, thin air of $100+ billion ? If you know, then buy some stock. Me, I’m deactivating my Facebook account in honor of the TimeWarner-AOL/Prodigy/CompuServe/Groupon/Pets.com/WebVan of 2012.

Two weeks ago I began dinging every over-sharer on my timeline or wall or whatever the Zuckerborg called it this month. Goodbye pictures of glasses of beer, notifications that Ed was at LAX, weird R-rated bikini videos from people in Turkey and India I have never met and will never meet. Goodbye SocialCam. Goodbye Tweets. Goodbye to All That. Now …..

Goodbye Facebook and hello to less noise in my life.

 

Pimping one’s friends for a chance at the Golden Ticket

Why do efforts by brands to get me to “like” them on Facebook strike me as hopelessly shallow and stupid? There’s this totemic fetishism among marketers to show off their likeable prowess by tallying followers and fans like so many ears on a necklace around their necks.  And I guarantee you, there are more than a million social media marketing consultants and digital PR drones willing to sit on a conference panel or fire up a SEO optimized blog post and debate the “true value of a Facebook Fan.”

Acquisition strategies that involve baiting a trap with a sweepstakes or other freebie and then requiring the sucker to enlist others in their quest are as old as the hills and a throwback to tried and true email marketing tactics to build direct response database. “Refer a friend” is one step removed from the pyramid schemes that occasionally sweep through forgetful societies who are more than eager to enlist friends and family in their quest for riches. These Tupperware parties seem to be the heart and soul of Facebook marketing tactics.

And who cares if a “fan” gives a damn, the more the merrier.

So assume Amazon succeeds in driving me to the more-and-more loathed Facebook and induces me to “invite” three friends to also pile onto the “win a Kindle for yourself and three friend” come-on. What do they do with the names?  This reeks of some shallow brainstorm by a digital marketing agency who is going to declare a specious ROI victory when Amazon’s Facebook fans swells from A to B over the next few weeks. Then what? My “news wall” or “timeline” or whatever the Zuckerborg calls is begins to be ever after polluted with authentically cheesy brand tweets from some junior marketing drone? The fact the Endive Society of America shows up in my Facebook stream  every so often makes me wonder if the world has devolved to the point where it’s just more and more noise signifying nothing.

I know I’m overly cranky, and I know Facebook is the biggest walled garden of the moment, a pool of the world’s names so tempting to try to sell to, but as that pool gets shallower and shallower, and more polluted by corporate messages shuffled like so many jokers in a deck of family photos,  shared links to headlines, invitations to the latest Zynga MafiaFarm, I just want to stick my fingers in my ears, close my eyes, and rock back and forth to shut it all out.

I’m not a fan of anything I’ve ever purchased. I hate my refrigerator. My car only wants my money.  My endives wilt and my laptop likes to crash.

 

Awesome PC marketing for anti-PCs

From Google’s ChromeOS team:

Do Not Track: The Death of Metrics or Catalyst for Innovation?

It was a matter of time before the winds of regulation blew over the mysterious world of digital advertising and behavioral targeting, just as they blew out the telemarketing-junk call industry in the 1980s, email spammers in the 1990s, and pay-per-post blogola two years ago. I think it’s inevitable that the government will regulate online tracking and I believe the result — counter to fears it will decimate digital advertising — will be a much needed catalyst for innovation in online advertising.

From the 12.6.10 New York Times: “If the vast majority of online users chose not to have their Internet activity tracked, the proposed “do not track” system could have a severe effect on the industry, some experts say. It would cause major harm to the companies like online advertising networks, small and midsize publishers and technology companies like Yahoo that earn a large percentage of their revenue from advertising that is tailored to users based on the sites they have visited.”

Nothing gets the public’s libertarian hackles up like a threat to their privacy, even though 99% of them have no clue what constitutes identity and personal privacy in the digital age. The declared intentions of the Federal Trade Commission to crack down on online advertising use of tracking beacons, pixels or cookies is inevitable and has been brewing since 1995 when Mark Andreesen and  Netscape first introduced the cookie to great consternation and misunderstanding.

This is an old issue, one that tracks back to the mid-1990s and was embodied by the famous comment by Sun Microsystem’s CEO, Scott McNeally: “You have zero privacy. Get over it.” McNeally uttered those words at a time when the technology and media industries were trying to head off government regulation by forming the Online Privacy Alliance (OPA). Evidently self-regulation hasn’t been enough, and now the industry is on the brink of having some new regulations to conform to.

Let’s look at what the issue is and how things got to the point that the issue officially was blessed as the most significant story of the day in early December by the front page of the New York Times. The Wall Street Journal’s Julie Angwin gets the most credit for raking the privacy muck in a shrill series that is encapsulated on this page on the Journal’s site which is actually a very comprehensive and chilling catalogue of news about the state of digital privacy in modern America. While some critics like Jeff Jarvis have accused the Journal of being breathlessly alarmist and turning the practice of cookie-based advertising into the modern equivalent of Reefer Madness, the Journal has persisted, making it an inevitable outcome that sooner or later some bureaucrats and Congressmen would take up the  call and file a bill.

Let me attempt to simplify the issue in lurid terms: Web publishers and digital advertising companies are colluding to sneak  invisible tracking devices onto your computer which report back personal information about you so they can deliver targeted advertisements to you and share your personal information with marketers, and other interested parties.

The issue comes down to whether or not a web user has the right, by default, to ban the placement of  cookies or “invisible tracking pixels” on their PC when they visit a website or click on an ad. These cookies are  the digital equivalent of a tracking device snuck under the bumper of your car so your whereabouts can be tracked by the cops or enemy spies.

One of the most prevalent digital bugs or tracking cookies is the Adobe-Omniture 2o7.net tracker.  Omniture is a very powerful web metrics tool that web publishers and corporate web sites use to analyze traffic patterns and user behaviors.  Most major e-commerce sites use the tool and I’ve spent a lot of time in its dashboards analyzing metrics at CIO.com and Lenovo.com. This is an expensive tool, not something a typical Internet scam artist would use to hatch some evil plan, and it never reports back any personal information about site visitors. Your name, your address, your phone number, your social security number …. none of its transferred back to the analyst.

Yet the 2o7 tracking cookie it classified as spyware and a threat by most spyware scanners. Why?

Privacy is becoming a matter of degrees. While your name may not be passed without your knowledge, your IP address is. And someone with a subpoena and some diligence can, in theory, track you down to a specific geographical address. Your personal information — from your online medical records to your bank account numbers — all of it exposed and can be stolen by a criminal clever enough to trick you into parting with that information on a fake site or through so-called “social” engineering.  Identity theft is a very real threat online, and tends to trick the nontechnical, unsophisticated users the most.

But what does a ban on tracking cookies do to online advertising?

First, it will have an impact on re-targeting. This is where a site like Lenovo.com or Filson.com (two online retails I happen to visit occasionally) plant a tracker into your browser and then use it to trigger ads for their products when you visit other sites. So, if I go to Lenovo’s ThinkPad store and check out a T410S, I can usually expect to see a lot of Lenovo ads as I surf around to CNET, PC Magazine, and any other sites that Lenovo’s advertising agency deems appropriate to display the client’s ads on. Do these ads greet me by name? No. Are they intelligent enough to distinguish my interest in one product over another? No. Do they get progressively more aggressive in offering me a better price as time goes by? No.

In some regards, re-targeting is somewhat pathetic. It sounds semi-intelligent to follow a visitor around and throw more ads at them, but in reality you have to keep in mind one very real fact: online advertising is, for the most part, completely ignored by most users. Click through rates have been declining on most display (graphical) ads since they were introduced in the mid-1990s, and only so-called rich media ads featuring video or some form of dynamic multimedia are getting higher CTRs. We’re talking click rates under 1%.  Digital ads remain noise for the most part, and the only stuff that seems to have legs — witness the phenomenal one-trick pony known as Google — is contextual search advertising (which does not use tracking cookies).

As tracking and re-targeting comes under fire a few things will happen. First, advertisers will lose insight into the buying patterns or behaviors of customers, and selecting media for their advertising will become more difficult. Will advertisers regress to what is known as last-click attribution, where credit for a sale, registration or other “success event” be credited to the last ad or link the user  clicked before arriving in a store to make a purchase? Perhaps, but I think what will happen is the 2011 equivalent of New York City’s solution to the threat of being buried under too much horse manure in the late 19th century — technology (in NYC’s case the automobile) will simply cause the problem to become moot. Advertisers and agencies have been lazy and deceiving themselves that they have some semblance of intelligence in their metrics — which they laud as “behavioral targeting” – when in fact it’s ad insertion based on cookie triggers, nothing more. Take away the cookie and I guarantee some motivated entrepreneur will rush to the table with a new ad format that performs without them.

So, bottom line, bring on the era of regulation, punish the most egregious offenders, and stay tuned for the online advertising industry to evolve into a more intelligent form of advertising which has been overdue since the invention of contextual search ads by Bill Gross.

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Why it’s ridiculous to argue about ghost blogging »» Blogging best practices, corporate communications, ethics »» Schaefer Marketing Solutions: We Help Businesses {grow}

This weekend I received a LinkedIn query from an alumni group I belong to asking if anyone wanted some freelance work ghost blogging for some executives. The more I thought about it, the less annoyed I was at the concept.

Then I found this well argued post by Mark Schaefer about other corporate ghost writing examples and all my reservations faded.

“The chairman does not pen his own speech, yet nobody questions that they own it. They don’t write the shareholder’s letter in the annual report, yet this is deemed as authentic. Do you think Former GE Chairman Jack Welch sat there and pecked out his own book? And yet it is seen as his.”

via Why it’s ridiculous to argue about ghost blogging »» Blogging best practices, corporate communications, ethics »» Schaefer Marketing Solutions: We Help Businesses {grow}.

The urge to round up – the tyranny of the nines

My former colleague in marketing and current partner at Inventive Branding, Craig Merrigan, used to bemoan the use of the “ninety-nines” in pricing as an affront to intelligent customers. “If we think ThinkPad users are the most technically sophisticated PC users, then why do we insult their intelligence with RONCO pricing,” was his argument, a compelling one that would probably fail in testing as “just-below” pricing has existed for over a century, allegedly back to the invention of the first cash register. It has to work, right?

It’s kind of weird, from a psychological perspective, to look at the shopping impulse that would lead someone to chose a 99 dollar or 99 cent option over a round $100 or $1. Of course anyone would take the less expensive option when looking at identical items — a penny is a penny, a dollar is a dollar. Who wouldn’t? But what if the two options were dissimilar but close in value? Would a $39,999 Audi A3 be more attractive than a $40,000 BMW 3 series.  The more complex the item, be it a consumer durable like a refrigerator, or a non-durable like a steak, and the customer has to do some research to determine the specs and sorts the apples from the oranges. Is the $50 ribeye grass fed versus the $49.99 corn fed version? I’ll pay the penny and spare myself the cow’s antibiotics.

But standing alone, without an option, let’s say an Apple iPad (there really are no viable tablets yet on the market), is a $499 price point for the 16 GB WiFi model going to unleash my credit card from my wallet versus a $500 price that eeps it locked sanely away for the sake of my bank balance? One would assume Apple, a brand that prides itself on perfection in its details would shy away from just-below-pricing, but no, they too indulge. Could a competitor come out with a marketing campaign that said, “Let’s cut the bullshit. You’re intelligent. The  machine costs $500, screw the dollar”? I suppose so. But I suspect just-below-pricing is reflexive at this point, and coming out with rounded pricing would need to be baked into an overall campaign that presented the brand as one for thinking people not lulled or duped by stupid marketing jedi-mind tricks.

Now if say there was a viable competitor, and that competitor decided to market their device as a head-to-head competitor with identical specifications — let’s say a clone — then the differentiation needs to be part of the selling claim; as in either “Cheaper, ours is $499, you save a buck” or “Ours is better, you get 17 gigabytes for an extra dollar at $500”

Pricing theory is doubtlessly a dreary science that MBAs are tormented with, but what interests me is the human nature to round stuff up.

The New York Times has an interesting story on how some Wharton professors studied the batting averages of major league hitters and saw a remarkable jump in the population of .300 hitters — men who hit the ball successfully at least 30% of the time they came to bat. The study showed statistically that hitters put an extra effort into the waning days of the season to get those crucial hits that make the difference between being a .299 hitter and a .300 hitter. I suppose if I exercised my Society of American Baseball Research membership I could make the obvious point that .300 hitters have better leverage in their future contract negotiations, and with Sabermetrics putting a lot of value on VORP and PECOTA – (Value Over Replacement Player and Player Empirical Comparison and Optimization Test Algorithm) crucial metrics that bench marks the value of a player against the population of other playes and gives owners and management a much better benchmark for assigning value in making salary offers.

The Times article said:

“Two economists at the Wharton Schoolof the University of Pennsylvania, while investigating how round numbers influence goals, examined the behavior of major league hitters from 1975 to 2008 who entered what became their final plate appearance of the season with a batting average of .299 or .300 (in at least 200 at-bats).

They found that the 127 hitters at .299 or .300 batted a whopping .463 in that final at-bat, demonstrating a motivation to succeed well beyond normal (and in what was usually an otherwise meaningless game).

Most deliciously, not one of the 61 hitters who entered at .299 drew a walk — which would have fired those ugly 9s into permanence because batting average considers bases on balls neither hit nor at-bat.

Martinez said that “.299 doesn’t look as good as that 3 in front.”

When I am rowing on my ergometer I receive constant numeric feedback about my progress, along with a forecast of my final score for any particular piece of work — if I am rowing a pace of 500 meters ever two minutes, the machine will predict a 30-minute of score of 7500 meters. Obviously the incentive is huge to break certain round number milestones. An 8,000 meter half hour requires an inordinate effort of maintaining a 1:52 split throughout the 30 minutes. The point is that hitting or breaking round number milestones is a big incentive, no one wants to row a 7,499 meter piece over 30 minutes when a little extra effort will break the 7,500 barrier.

So if athletes put in an extra effort to avoid the “ninety-nines” why do marketers flock to it? There is something unfinished, oh-so-close-and-yet-so-far about being less than perfect, from being odd and not even, yet just-below pricing will never go away, even for sophisticated products aimed at sophisticated consumers.

I think it would be interesting for a brand to set itself apart from the herd by eschewing just-below and moving to round-number pricing — as long as it explicitly points out the irrationality of the nines and the insult to the intelligence of its customers.  In technology especially, where consumers have been hit with clock speeds of microprocessors and capacity of harddrives, the insistence on specifications as the primary claim, and not results is astonishing. Does a consumer know what the hell an Intel i7 processor does versus an i5 or an i3? One has to cite that genius of numerology, Nigel Tufnel, and just throw up their hands and say, “Mine goes to Eleven”

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