02/16/12

Byron Sharp: debunking the myths of marketing 3/3

brands that grow

[This report has been published in instalments, type bit.ly/sharpgrow in your browser location bar to display  the piece in its entirety]

myth number six : the 80/20 rule always applies

This isn’t a myth per se, but the numbers don’t quite add up. Sharp, on the basis of numbered evidence once again, shows that Pareto’s Law does apply but real numbers based on observation are closer to 50% for most brands and never reach 80%. This reinforces the need to acquire more customers.

myth number seven: advertising doesn’t sell

Sharp shows on the contrary that advertising has a clear (but mostly long-term) impact on sales… Provided your product is distinctive enough and that your campaigns follow a few simple principles amongst which:

  • reaching all by categories
  • no lapses
  • clear brand links
  • easily noticed and remembered

myth number eight: price promotions increase sales in the long term

That one is far less counterintuitive I find. Price promotions are quite effective in boosting sales. Evidence produced by Byron Sharp shows that promotion have no or little effect on long-term sales. Sharp sees little rationale for maintaining price promotions over time apart from maintaining a relationship with retailers.

myth number nine: loyalty programs are effective

In fact, loyalty programs work a little, but their impact on loyalty is minimal and in some cases, brands won’t even feel the true effect at all for many external reasons. My friend and colleague Prof Christophe Benavent from the Paris University has been a long-time contender that loyalty programs don’t work. He’s actually quoted in Byron Sharp’s book as well. One may have the vague feeling that conclusions might be different whether one looks at airlines for instance, or a company like AMEX which has built its distinctiveness upon its loyalty program (I even chose to get an AMEX card a few years back which is coupled with my airline frequent flyer program and I have transferred the entirety of my purchases to AMEX) but evidence is required before one makes any rash conclusion.

Overall, I really enjoyed Sharp’s approach which is based on fact rather than fiction, even though some of the most counterintuitive conclusions would benefit from a serious data update. I definitely recommend you buy this book and place it on your bookshelf.

Byron Sharp’s blog is available at http://marketinglawsofgrowth.com/

… to be continued

[This report has been published in instalments, type bit.ly/sharpgrow in your browser location bar to display  the piece in its entirety]

02/14/12

Byron Sharp: debunking the myths of marketing 2/3

brands that grow

[This report is being published in instalments, type bit.ly/sharpgrow to display  the piece in its entirety]

myth number two: heavy buyers matter, light buyers don’t

That is false too. A customer base is like a long tail , with few repeat buyers and a vast majorty of light or very light buyers; but the sheer mass of the latter makes their category very important in fact. These people are those which brands must convince over and over again if they want to succeed.

myth number three: targeting works

That one is really puzzling I must admit. Sharp points out that despite marketeers’ efforts in trying to “differentiate” through targeting, brands end up sharing “normal – looking” customer bases and those customer bases are supposed to be interchangeable. This is – once again – said to apply across all categories and countries. Yet, luxury products for instance, cannot be afforded by all. Sharp’s point is that segmentation within a subcategory doesn’t exist. It may exist between subcategories however. This item would however, in my mind, require further investigation.

myth number four: cannibalisation is a bad thing

According to Sharp’s findings, it’s not! What matters here, is not whether brands are differentiated, but whether they are “distinctive” (that is to say easy to recognise from others).

myth number five: consumers by preferred brands

Sharp contends that is just the other way round. One tends to favour one’s own choices; some sort of post justification of one’s own purchases in fact (I bought this, therefore I like it; or, I’m used to buying this etc.) That point he adds, also applies to iconic brands like Apple and Harley-Davidson. Basically, he means that Apple customers aren’t in any way, more loyal than PC clients for instance.

This chapter is probably the most difficult to sell. There is so much hype about Apple products that things do get very irrational. Sharp may well be right, but the evidence he uses to show that this is the case are rather outdated. Beside, Apple’s overwhelming success has, recently, put so many companies in such a bad position (Nokia, Sony Ericsson to name a few, not to name hp which withdrew from the Pocket PC (then Smartphone) market which it hugely dominated only a few years before). The evidence given here is a bit outdated on the one hand, and debatable on the other. This chapter requires therefore more investigation, even though mine Sharp may well be onto something (for other myth busting regarding Apple on this blog, click here).

Byron Sharp’s blog is available at http://marketinglawsofgrowth.com/

… to be continued

02/8/12

Byron Sharp: debunking the myths of marketing 1/3

brands that growOnce in a while, a business book appears which changes your perception on things for ever. Such business books are inspirational (Crossing the chasm in 1992 for instance), some are critical (such as Scott Berkun’s myths of innovation) and some just take you back to basics. This is the case with Byron Sharp’s “how brands grow” (Oxford – 2010), an opus which unfortunately didn’t get enough attention and is even sometimes wrongfully dismissed as scientific claptrap. I must admit that I enjoyed the book thoroughly, even though some of its conclusions did puzzle me a bit. I suppose that these will lead to more investigations, since some of the evidence presented in the book and some of the conclusions based on such evidence (mostly in chapter 7) are very counterintuitive. Here is what I learned and would like to share with you regarding this book.

[This report is being published in instalments, type bit.ly/sharpgrow to display  the piece in its entirety]

Marketers are used to believing their own stories but often fail to check the facts. This is what Byron Sharp and his Ehrenberg Institute have done and their conclusions can be summarised as follows:

myth number one: loyalty matters, acquisition is less important

How often do we hear that it is more worthwhile to retain existing clients rather than acquire new ones? Well… as far as I am concerned, almost on a daily basis. Sharp shows that this is wrong, that churn depends – mostly – on the size of your customer base and that customer acquisition is of paramount importance. This is what is known as the double jeopardy law: “sales are lower because they have fewer buyers who buy the brand less often”. That law, besides, applies to all sectors, and all countries. As a consequence of the double jeopardy law, it is not cheaper to retain an existing customer than acquire new ones. Acquisition, CRM pundits must be eating their hats now, is not an option, it must even be a priority for brands.

… to be continued

05/31/11

blog writing: the slow and subtle art of pondering

Or how not to jump to hasty conclusions in just one step

A few days ago, I came across a piece on Bnet on which there was a mention of Sun Tzu‘s “the Art of War” in not very favourable terms. I therefore asked the Vincent Berthelot, who is very well versed in Oriental culture (he is even fluent in Tai), to write something up for us. Here is his comment, 100% devoid of political correctness.

By Vincent Berthelot, translated by visionary marketing


photo cc (some rights reserved) by AlphaTangoBravo / Adam Baker)

Very often, I have been annoyed by the tendency to superficially squeeze management tips into constrained lists such as “five key marketing techniques”, or even “how to succeed in social media in 12 steps”. Alas, this is a gimmick which has being quickly imported from America by many a Continental blogger. Let’s admit we all wrote at least one piece in that manner, but abusing this method leads to stereotypes and facile conclusions.

When Yann asked me to review a BNET article which falls into that category, I could not resist the urge to stop everything I was doing in order to write something up on that subject. The incriminated piece is won by Geoffrey James, subtly entitled “seven vastly overrated business books”.

In that blog post, James puts together in the same basket, some of the bestselling US management books of the past 20 years and celebrated writings such as Adam Smith’s “The Wealth of Nations” and Sun Tzu’s “The Art of War”. This very list shows the seriousness and hindsight behind the author’s methodology.

Reading that piece online will force you to click on as many internal links as possible so as to maximise traffic; after all, this is serious marketing stuff, don’t get mistaken! Geoffrey James also adds profound comments such as that Adam Smith could not possibly surmise the invention of the modern multinational or of computers and that Sun Tzu’s book is mostly useful if you are planning to play computer or board games only.

Of course, I admit that business and war, at least on the surface of it, have little in common and that Sun Tzu’s advice belong to another time.

I would in fact recommend that James’s list be updated to include his point of view on Marcus Aurelius, Clausewitz, Machiavelli and a few others. Books such as Sun Tzu’s are not meant to be utilitarian, just like your average management book, and they have to be read with different eyes too. They aren’t meant to deliver “recipes”, and since his words cannot be directly applied to your marketing strategy either. Continue reading

01/10/11

Emulex is driving convergence in the data centre

Our last but one visit in the Silicon Valley on November 18 was with Emulex, and we were greeted by Steve Daheb, CMO & SVP business development and Shaun Walsh, VP Corporate Marketing

backgrounder

199_1019 The Emulex vision is about the fact they realised that networks were about to converge for the first time:  data networks used to be separated from storage networks. With the event of 10Gb ethernet we are seeing things converge. Emulex is a 30-year company founded in 1978, based in Costa Mesa, Calif. with 960 employees. Emulex works with HP, IBM and all other major companies. Emulex is also a great partner of Blade Network Technologies’ which we have visited previously.

There are 2 product lines at Emulex: 1) host servers 2) back-end storage which is a legacy business for Emulex. Emulex has a legacy business in Fibre channel (a technology used to build SANs in which Cisco and Brocade are leaders).

Recently, Emulex acquired ServerEngine, which with they have worked for 2 years. They closed the deals with HP and IBM with ServerEngine and Emulex is winning quite a few deals in which their chips are equipping OEM 10 Gb Ethernet equipment and 9 out of 10 tier 1 OEMs have picked them for convergence (some exclusively, some not), amongst which HP, Dell, Cisco, Fujistu Siemens and IBM. A big part of the company is already working on what will come next and will be delivered in 2012 and 2013.

the data centre of the future

A lot of enterprises are still at the crossroads with data, email and storage networks all considered 3 distinct networks. With this kind of architecture, customers are compelled to upgrade their data centres and cost is a big issue. A second step is to “move everything into virtual data centres and this is where we are today” Shaun added.

But in the last 24 months, we have seen the rise of converged fabric-based computing as announced by HP (Flexfabric), IBM (virtual fabric) and Cisco. Convergence is happening, for server virtualisation, switching, storage and adapters (LOMs i.e. LAN on Motherboard).  These past 24 months, convergence has been flavour of the month and is showing the way forward.

from servers to blades and lastly … to “cookie sheets

cookie-sheets The 10Gb Ethernet is a new inflection point which is a sign for innovation, and such innovation is made flesh with 4 main trends which Steve described here. These 4 trends are defining the future of data centres:

  1. data is growing at an increasing rate and this is driving huge demand in bandwidth,
  2. IT priorities are based around how one can deploy more quickly,
  3. cost drivers are prevalent: lower capex/opex and data centre consolidation,
  4. technology trends such as “cloud computing” which necessitate a convergent environment, mostly for SMEs.

Behind these 4 trends, Steve described 3 business drivers which are impacting the way that data centres are being architected.

  1. SMBs an remote office data centres
  2. enterprise hybrid data centres: a mixture of internal data centres for data privacy and public cloud applications for cost reasons
  3. hyper scale data centres

Data is growing at a staggering compound annual growth rates of approx. 50%. More users mean more transactions and convergence is therefore required. 9m servers will be shipped in 2010, 1m+ will be of the new breed, Shaun said and he added that we are moving from servers to blades and now what Shaun called cookie sheets because they are so thin.

from a networks point of view, what is driving change?

199_1025

Steve described the 5 reasons for change in the data centre from the network perspective:

  1. the explosion of devices which will eventually lead to the replacement of the laptop, and the explosion of content and transactions,
  2. new technology is being brought to the edge – as the new stuff being brought by Riverbed – and more intelligence is needed in the data centre,
  3. video, web-enabled mobile is boosting traffic so much so that switch port shipments are rocketing up wit happrox. 60% CAGR (see above photo),
  4. security is also a huge driver,
  5. network traffic is not only driven by consumers but also enterprises, with mobile acces to applications on mobiles.

the data centre of the future requires a new networking model

Emulex sees his role as that of a leader in that move into convergence, partnering with BNT, VMWare and all their OEMs.

the management mind meld book available for download

management mind meld
If you want to know more about the Emulex vision, we recommend you download their online e-book “the management mind meld”

you can also follow Emulex on Twitter at @emulex

Converged networking results in an overlap of network and storage administrators’ responsibilities. This guide explains networking and storage basics to help each administrator better understand the changes resulting from converged networking and how it will impact their role in the data center.