T.J. Prebil

The Multiplier Effect

Thursday, March 25th, 2010

To date, the value of television, radio, periodicals and websites has been measured by viewers, listeners, subscribers and visitors, respectively. Superbowl ads run at a premium because of the anticipated number of viewers.

With the rise of “Web 2.0” and social media, however, a new valuation standard has emerged, something I refer to as the Multiplier Effect. The Multiplier Effect suggests that the value of an interactive media property is a function of both the number of total users and “relevant” connections each user has within a particular service.

Let me digress for a minute. Before the rise of the internet, a concept called the Network Effect was used to describe products or services that became more valuable when adopted by greater masses of people. As noted by Adam Penenberg in his book, Viral Loop, a Network Effect occurred when the telephone was introduced. “The more people who own a telephone, the more valuable an added line is to each person already on the network.” The same is true today for eBay and many online social networking sites.

But what’s unique about networking sites, as compared to eBay or telephones, is the potential for an exponential variable called the Multiplier Effect whereby the value of a property grows both by the number of users and by the number of “relevant” connections.

For example, eBay, with millions of users, has built a significant competitive advantage as a result of a Network Effect. It would be nearly impossible for another organization to compete with eBay. However, since eBay buyers and eBay sellers only connect, communicate and transact when a purchase occurs, no “relevant” and ongoing connections exist. Sure, there are some exceptions.

On the other hand, take Facebook. With over 300 MM registered users, who use the service to interact and communicate with “relevant” connections, the company benefits from both a Network Effect and the Multiplier Effect which, in my opinion, adds tremendous value to the service.

Let’s assume that every Facebook user is connected to 75 other people within the site. Where traditional media valuations and the Network Effect bases Facebook’s value is on the total number of users (300 MM), the Multiplier Effect argues that, because of exponential compounding, Facebook is actually responsible for facilitating 22.5 billion 1-to-1 relationships (300 MM x 75 connections).

When I worked on founding a business called LifeFuze – an idea similar to Facebook that never officially launched – the Multiplier Effect was used to gauge the potential value of the service.

One could argue that MySpace also benefited from the Multiplier Effect. And it has, but MySpace, and others (e.g. Classmates), focused too much on niche (e.g. school connections) or loose (e.g. bands) affiliations. As a result, this impacted the percentage of “relevant” relationships that each user established on these services.

LinkedIn and Twitter both benefit from both Network and Multiplier Effects, and I’m sure other services will continue to emerge. I, for one, think there’s a lot of potential to create a Multiplier Effect for business-to-consumer relationships, which consists of far more than simply “friending” or “following” on Twitter or Facebook. Side note: I still have a few ideas so, if anyone happens to read this and is interested in learning more, send me an email.

How to monetize the Multiplier Effect is tricky and I don’t have any clear answers or suggestions. What is clear though is it’s no surprise that Facebook is where it is today. By focusing on relevant relationships, the service continues to benefit from a Multiplier Effect.

Unavoidable Advertising

Wednesday, March 24th, 2010

The picture above was my view for an entire cab ride yesterday. At eye level, less than a foot away from my face, a 10” interactive LCD screen rotated advertising messages. Granted, I had the option to turn off the ads, but the screen couldn’t be completely shut down, or ignored for that matter.

I see far too many intrusive formats like this. Be it online, in bathrooms, elevators, and cabs, the advertising industry looks to exploit any opportunity to disrupt someone’s time and attention. Imagine having to look at similar screen on your next flight or train ride into the city. I’m sure someone’s already thinking about this.

In an increasingly interactive world, I don’t believe in overly disruptive methodologies.

The Theory of Interactivity

Thursday, March 18th, 2010

In an earlier post, I mentioned that I’d be revisiting some of my research from years of studying emerging interactive marketing trends. Today, I’d like to introduce my Theory of Interactivity which, according to my journals, dates back to October 20, 2005.

While not as revolutionary as Einstein’s Theory of Relativity or as scientific as other breakthroughs, the Theory of Interactivity definitely has merit, in particular as it pertains to the evolution of the marketing and advertising industries.

Basically, the theory states that as media channels continue to increase in interactivity, businesses would be wise to learn to work with consumers instead of against them. In other words, businesses need to learn to “pull” consumers into more direct relationships rather than continue to “push” messages at them.

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Start with Why

Monday, February 1st, 2010

I just finished reading Simon Sinek’s Start with Why: How Great Leaders Inspire Everyone to Take Action and, in my opinion, it’s one of the most profound business books that I’ve read in years. In a nutshell, the book explores why some people (e.g. Martin Luther King Jr. and the Wright Brothers) and organizations (e.g. Apple and Southwest) are more innovative, more influential, and more powerful than others.

As a marketing professional it wasn’t hard to draw upon personal experiences to embellish the book’s themes. For example, my former employer, an e-commerce startup, had a great story. The founders, who had been in the industry for years, saw a need to offer a more flexible, more advanced, and more responsive solution than had existed to date in the market.

As the company’s senior-most marketing professional, this story was the foundation upon which I developed the company’s marketing strategy and marketing plan. And though my work wasn’t the only ingredient for the company’s success, capturing the company’s sense of “why” and aligning it with a cohesive marketing strategy certainly factored into the company’s explosive growth.

In contrast, one of my former employer’s clients always struggled to gain traction. The company, which sold software, didn’t actually produce anything. Instead, through licensing deals, they repackaged other company’s products and sold them under different names. It was clear that this client’s only objective was to make money. Granted, all businesses need to make money, but without a story, a passion, or sense of purpose, it’s exponentially more difficult to market, sell, and relate to customers, as was the case for this particular client.

Start with Why, though positioned as a leadership book, provides a lot of great insight for marketers, and it’s definitely worth reading!

What is Marketing?

Wednesday, January 27th, 2010

With all the media frenzy these days over everything “social,” some unanswered questions from past work experiences, and out of general curiosity, I recently found myself asking what is marketing?

This should be an easy question for me to answer. After all, I have a degree in marketing, I study marketing, I follow marketing, and I enjoy marketing.

However, with the overwhelming hype of tactical solutions combined with the fact that marketing is often looked upon as a back-office function, I’ve been a little perplexed lately.

So, I started looking for answers. Along the way I read Marketing by Patrick Forsyth, Duct Tape Marketing by John Jantsch, re-read Permission Marketing by Seth Godin, and conducted some online research. To my surprise, other than the traditional The 4 P’s (i.e. product, price, place, and promotion), there was little consensus on the definition of marketing.

For example, marketing guru Philip Kotler noted: “Marketing is the business function that identifies current unfulfilled needs and wants, defines and measures their magnitude, determines which target markets the organization can best serve, and decides on appropriate products, services, and programs to serve these markets. Thus marketing serves as the link between a society’s needs and its pattern of industrial response.”

The late Peter Drucker said: “marketing is looking at the business through the customers’ eyes.”

John Jantsch, author of Duct Tape Marketing, defined marketing as “getting people who have a specific need or problem to know, like, and trust you.”

A website called The Entrepreneur Network noted that marketing is “everything you do to place your product or service in the hands of potential customers.”

While all of these definitions are correct, in my opinion, none fully captures the role of marketing and its significance within today’s organizations. Therefore, I thought a new definition of marketing was in order.

Several weeks ago, I posted an update entitled The Essence of Business. In it, I indicated that almost every business that exists today shares a common goal: to increase sales. And while there are thousands of ways for organizations to increase sales, they all fall into one of three categories:

• Find new customers.
• Entice existing customers to spend more.
• Entice existing customers to spend more often.

With this premise, a more representative definition of marketing would be: “the resources and activities that companies utilize to achieve their goals.” In other words, marketing is utilizing company resources – people, money, and technology – to attract new customers and to monetize relationships with existing customers.

This definition not only captures the different perspectives noted above but also how branding, customer experiences, product innovation, customer input/feedback, social media, email marketing, product pricing, channel management, customer segmentation, and promotional activities – all marketing-related tasks – factor into helping companies achieve their goals.

What do you think?

Tired of Loud TV Commercials?

Wednesday, December 30th, 2009

The volume of many TV commercials seems to have increased significantly recently. Though this practice has been around for years, the new decibel levels have me reaching for the mute button faster than late Billy Mays can introduce himself.

To me, this trend wreaks of desperation. Advertisers – notorious for becoming more aggressive when a channel does not perform as expected – are clearly not happy with the current results and have sought a solution to ensure their messages are heard.

It appears that consumers are fighting back though. Earlier this month, California Democratic Representative Anna Eshoo wrote the Commercial Advertisement Loudness Mitigation Act (or CALM). The Act mandates that TV commercials be no louder than the programs in which they appear.

For the sake of everyone’s eardrums, let’s hope that CALM passes soon!

Advertising Agency Awards

Tuesday, December 22nd, 2009

This post was originally published on www.InspiredConceptsInc.com.

I follow several interactive advertising agencies on Twitter and over the past month or so I’ve noticed quite a few tweets regarding industry awards. For instance, one agency just won a best-in-class design award, another was touting a creative accolade, and a third agency – a candidate for digital agency of the decade – was pandering to voters.

Awards are powerful distinctions that companies can use to win business, maintain relationships, and gain positioning on competitors. A company listed as great place to work or recognized for its superior customer service, for example, can leverage such acknowledgments to support its core business functions (e.g. attracting employees and maintaining customer relationships).

When it comes to advertising agency awards, however, there seems to be a disconnect between the agency’s objectives and a client’s goals. For instance, industry awards tend to emphasize “creativity” while barely touching upon the overall effectiveness of the project. In other words, advertising industry awards rarely focus on how an agency actually helped a client achieve its goals.

David Meerman Scott touched upon this in his book The New Rules of Marketing & PR when he noted that in the past “it was more important for the ad agency to win advertising awards than for the client to win customers.” Based on the tweets I’ve received recently, it appears that many in the advertising industry have not read his book.

In an effort to help advertising and digital agencies adjust to the new rules of marketing, I recommend that the industry adopt the following award categories:

• The “exceeded client’s objectives” award
• The “achieved the most sales” award
• The “generated the most leads” award

Ideally, these new awards would become the advertising industry’s Best Picture, Best Actor, and Best Actress awards, while relegating creative and design awards to Best Adapted Screenplay or Best Costume Design. It’s likely that my suggestions will fall on deaf ears but these new categories would not only prioritize objectives but also provide agencies with awards that can actually be used to support their core business functions (e.g. winning business on merit).

Branding Throughout an Organization

Wednesday, December 16th, 2009

This post was originally published on www.InspiredConceptsInc.com.

Mary Beth Kemp, Principal Analyst at Forrester Research, had an interesting blog post the other day about the role of Chief Marketing Officers (CMO). While most would assume that a company’s corporate branding strategy, by nature, is primarily the responsibility of a CMO, Ms. Kemp notes that branding must penetrate all facets of an organization’s structure.

Because a company’s brand is no longer defined entirely by traditional elements (e.g. logo, design, and creative), but instead a combination of traditional elements and customer experiences, successful branding requires the collective effort of any department that interfaces with customers, clients, prospects, vendors, suppliers, and channel partners.

Where sales, customer support, IT, accounting/finance, R&D, and legal may each interact with external parties in one way or another, marketers have the most complete view of a company’s branding strategy. Therefore, it is their responsibility to coordinate positive branding experiences throughout the entire organization.

What is Branding?

Tuesday, December 15th, 2009

This post was originally published on www.InspiredConceptsInc.com.

Seth Godin had a great post this past weekend on branding. Where branding has often been associated with logos, product packaging, or creative advertising campaigns, Godin offers this definition:

A brand is the set of expectations, memories, stories and relationships that, taken together, account for a consumer’s decision to choose one product or service over another. If the consumer (whether it’s a business, a buyer, a voter or a donor) doesn’t pay a premium, make a selection or spread the word, then no brand value exists for that consumer.

This reminded of the book Groundswell where authors Charlene Li and Josh Bernoff noted that a company’s brand is “whatever its customers say it is.”

Historically, businesses have looked at their branding as tangible elements that they control. With the rise of social media, however, where customers not only has a voice, but also a microphone and an audience, companies no longer control their brand. They can influence, guide, and make branding decisions, but they are no longer in complete control.

Smart companies have known this for years. They understand that every touch point with customers – sales, customer support, and marketing tactics etc – influence how a company is perceived and valued. In fact, in today’s world, service, transparency, honesty, and authenticity are likely to have more impact on a company’s brand than a fancy logo or a funny TV commercial.

When planning your company’s branding strategy, keep in mind that every touch point with customers is a branding opportunity; an opportunity to strengthen or to weaken the relationship.

The Problem with Retweeting

Friday, December 11th, 2009

This post was originally published on www.InspiredConceptsInc.com.

Retweeting – the process of sharing tweets you’ve received with people who are following you on Twitter – is a powerful feature that can help content producers virally grow their audiences. Most businesses and professionals, therefore, have a vested interest in producing “retweetable” content.

Recently though, a few sources that I follow have been retweeting in excess. For instance, over the past two months, retweets accounted for more than 30% of one company’s updates. While there is certainly a time and place for retweeting, businesses need to be cautious of becoming overly reliant on regurgitating content. Excessive retweeting is counterproductive to any social media strategy.

Case in point, in Crush It, Gary Vaynerchuk, of Wine TV Library fame and a social media legend, claims that one of fundamental keys to success in social media is producing “quality content.” He didn’t develop an audience of 848,324 followers on Twitter by retweeting. If you want to build an audience, focus on creating quality content, not on being an information conduit.

Furthermore, as marketing professional, I follow more than one source in the industry. This is common across many verticals and affinities within Twitter. Because of this, I frequently receive redundant Twitter updates, one from the originator and the other from the retweeter, usually within a few minutes. Companies need to exercise restraint when riding on the coattails of other sources. Continuing to retweet the same sources that your audience already follows makes you less relevant.

As a side note, it would be great if Twitter could develop a technical solution for this situation (e.g. don’t send retweets to my account if I’m already following the main source).

Businesses and professionals will be successful in social media by focusing developing great content. Retweeting when used sparingly is fine but in excess (e.g. as percentage or your total updates) it can be detrimental to your strategy.

What are your thoughts on retweeting? Is retweeting 30, 40, or 50% of your content too much? What guidelines would you recommend for others when it comes to retweeting?