Tuesday, April 28, 2009

Thinking point: Brand value and advertising

Just because you "branded" it a success, doesn't mean it was a success. Who exactly does anyone think they're kidding?
Northprint branded a success, despite 60% drop in visitors
Simon Nias, From printweek.com, 28 April 2009

Last week's Northprint trade show passed muster, according to visitors and exhibitors, despite a significant drop in the numbers of both.

I read once that advertising is the tax you pay for a suboptimal product. Google is the "No 1" brand. When was the last time you saw an ad or got a direct mail piece for Google? Microsoft is the No.2 Brand. I think I saw some Microsoft ads on the TV just the other day.

It's the difference between a value chain economic model and a user network economic model. In a value chain, you make Your platform ubiquitous then charge rent for using it. In a user network economy your users make your platform ubiquitous, then you charge other people to keep it afloat. People who have money willingly give it you, because the value is the network.

The Microsoft model was awesome in a world of information and software scarcity. They built the best software to manage information. But that was then, this is now. Information is not scarce. Software is not scarce.

What is still scarce are big enough server farms and printers. Both of those installations make it easy (for those who have the people and stuff) and hard (for those that don't.) The most reliable way to get to decent margins is to exchange "easy for me, hard for you" for money or attention.

That's why the printernet could get to good margins. That's why Google can invest it's money in continuous focused product development without wasting much money on blablabla advertising. It's also the reason that most printers are completely correct in resisting the marketing pundits' call to do "marketing."

Everyone knows that what creates new business is word of mouth. Everyone also knows that what creates great brands at the very minimum cost is the expectation of better products in the future. It's the reason Apple is so very cool. No doubt in order to get a decent margin on a dressed up commodity MP3 player, advertising has some role to play. But if the iPod didn't deliver even more than it promised, that would have been money flushed down the drain, instead of getting great margins.

Consider the brands of the players in the Print space. Which vendor delivers more than they promise and can be expected to do so, month after month, year after year? HP? Xerox? Kodak? Oce?

I come from commercial print, so I don't know how this plays out in MPS. But in commercial print, the view from my little constrained corner of the world, focused continuous product improvement is EFI, CREO and the folks at Xerox who do the special paper stuff.

The other source of continuous growth and improvement in Print comes from outfits like Sandy Alexander, The ACE Group, Motherall Printing, National Bindery and BOPI. The only one that sent me a direct mail piece is BOPI. I don't remember if I read it. But I did once fly out to Bloomington to see their operation. The boss and the sales manager both had exactly the right DNA.

Focus and the right DNA has a marginal cost of zero.
If your marginal cost is zero, once you make your nut, you can earn good margins and build a brand that is not subject to "impairment costs," whatever that's supposed to mean aside from a book keeping entry. Nor do you have to "defend your brand" from silly adolescents posting YouTube videos or disgruntled employees starting viral screeds on the blablabla o sphere.


  1. It is inevitable for things of this sort to happen, especially in today's time. Whether you have a large company or not, I think product managers should really take a look into their Product Opportunity Gap (POG) and really see if they can make a difference or not. Many calculations have to be taken into consideration when looking at the company at an All-Around perspective. Judgment's cannot necessarily be made upon feelings rather logic. Being a business man and reading this, I sincerely think a better alternative could be formed. But, if not, then instead of worrying about losing money, unravel some sort of 'secret plan' to your organization to help boost confidence and productivity rate. That's my personal opinion.

  2. Exactly! It is inevitable. Business judgments should always be made on logic and scientific thinking - common sense, systematically applied.

    And worrying never helped anything. Plus it's usually based on very noisy signals so often it's not even justified.

    But what's Product Opportunity Gap? I assume it means figuring out who needs your product and why they need it.

    The problem that I see is that good smart people are trapped in bubbles at the top of the pyramid. The real energy of any global comes from the people who focus on what exceeds customer expectations. It's why I have so much respect for the great sales people. It's not just that they make rain, it's because they are usually the "smartest" people about the customer people in the company.

    My two cents on the "secret plan." There probably isn't a secret plan.

    The only "plan" that makes sense to me is in the form of "If this happens, then I will do that. If that happens, then I will do this." The goal is always the same: give customers more than they ask for, keep fixed overhead as low as possible, make sure the comp is aligned with the desired behavior.

    I don't believe that a "plan of action" that has more than a three month time horizon are worth the meetings it takes to them out. The world is going to be different 3 months from now.

    But at the exact same time you need a vision of where the whole ship is heading, 1 year out, 3 years out and 10 years out.

    The goal of action at the top of the pyramid in a public global is always the same: invest capital, especially human capital, very carefully so that the investments create more value than their cost. Cut SG&A to the absolute minimum but take firing people off the table. Get all the incentives lined up correctly. Keep scanning the horizon for danger and Black Swans.

    Then a constantly update collection of "if this, than I do that."

    But mostly it's about execute, execute, execute. And stop being distracted by irrelevant bullshit.