International Marketing: Harnessing innovation in developing countries

The greatest recession since the great depression has taught us many lessons, not the least of which is the strength and potential of developing economies, where so much management innovation is taking place. I recently read a special report on The Economist about business innovation in developing countries. The article talks about the way companies in countries like China, India and Brazil are becoming the new hotspots for R&D and for rethinking business practices. This is no surprise for me. Having spent the first years of my career in Venezuela, one of the strongest economies of Latin America and a particularly attractive market in the region, I have seen first hand how obstacles like poor infrastructure and politics, as well as promising growth can make innovation a priority for companies there.

With mature economies showing slow growth and consumption especially hit because of the recession, global companies are depending more and more on developing markets as a source of growth. Some markets are especially attractive because of increasing income levels. Venezuela, for example, was an especially attractive market earlier this decade because of increased oil wealth and a drive to consumption that is common in that culture and also common sense, as inflation is so high that saving money in a bank account means losing money. Chavez has increasingly made business harder for companies there in the past few years.

But despite the attractiveness of emerging markets, there are also many challenges, and a section of this report does a good job of pointing them out. First of all, infrastructure can make distribution and operations almost impossible. From poor roads to deficient communications or utilities, being able to distribute products or establish supply chains can be extremely difficult. There’s also the subject of autocratic governments, corruption and bureaucracy. This has been the biggest challenge in Venezuela in the past 11 years, as Chavez’s government has seized factories, buildings and inventory from local and foreign companies, with no compensation in sight.

Another important issue, that is particularly interesting for me as a marketer, is how poverty and poor distribution of wealth can affect consumer behavior, and consequently product development, pricing, distribution and marketing communications. As I mentioned in my previous post, though Venezuela has been one of the richest countries in South America because of its oil wealth, corruption and a decaying education system has led to increasing poverty levels, which some say is as high as 80%. But what is particularly striking is how people living in with different income levels can have such different ways of spending money and obtaining goods. Values and lifestyles can vary strikingly between people living in the middle class and those in the lower income levels, as researchers from a poverty research center (Proyecto Pobreza) at Andres Bello Catholic University (UCAB) have discovered. I had a sociology professor that said that in Venezuela instead of social classes, we had parallel universes. He referred to the fact that people start families earlier and have many more children when they have lower incomes and that even making priorities in life can be very different depending on income levels. Though this is clearly an exaggeration, marketers have to understand that consumer behavior can be very different depending on your target segment.

Marketers in that country have discovered that people who live on low incomes usually live in the moment, making do with what they have in their purses. Unlike the middle class, which spends a big part of income on private schools and housing, the lower income groups often live in shacks or poorly constructed homes, which they may have built themselves on land that they invaded. Decaying public education means that children may not grow with the ambition or the academic level to enter a university, even though some of the best in the country are public and tuition is free. Tomorrow is uncertain, so when they have a little money left over, they are happy to spend it. This makes them an important target of some high-ticket items like BlackBerry handsets and expensive athletic shoes, both which are indispensible items for social acceptance. While the middle class may splurge on a car as a means to protect their money from inflation (which last year was over 30%), someone with low income may scratch to buy a smartphone legitimately or get one from a black market of stolen phones and then pay a cheap, prepaid plan to make use of the BlackBerry Messenger service instead of paying for SMS packages. Without a home computer or phone line, smartphones become an important source of communication.

Household items are also bought and used differently. Middle class families may buy goods at wholesale stores like Makro, but lower class groups often buy from a local “bodega”, which is a tiny shop that sells food in small amounts. For example, Coke can be bought by the glass, poured from 2 L Coke bottles. Shampoo can be bought in 1-portion bags, which are sometimes packaged by the store owner. And when it comes to marketing communications, it is important to understand their Carpe Diem philosophy.

In my experience, local companies and foreign companies who understand these challenges have only been able to succeed when adapting to these changes. From careful segmentation and changes in their supply chain, marketing communications and product lineup to courting governments and rethinking their relationships with local stakeholders, taking advantage of these markets means rethinking the business. It means thinking on your feet. Working in a country like Venezuela means being eternally flexible and inventive. Some say Venezuelan doctors are highly coveted abroad because they learn to work with such difficult conditions (hospitals may have poor technology, constant interruptions in energy supply and usually need patients to buy and bring in materials like gauze, gloves, blankets, syringes and medicines). As a former journalist in a time of political violence (particularly against reporters) and political upheaval (coups, nationwide strikes and massacres all in just a few years), it has also taught me to think quickly and accept and adapt to change easily. It is clear that more and more companies are understanding this. The results will likely be innovations in marketing and business management, which we will be learning more of in the future.

Human vs. Environmental Sustainability: Can we reduce poverty while protecting the environment?

Does reducing our impact on the environment conflict with feeding millions of people living in poverty around the world? As sustainability becomes an increasingly important issue around the globe, one fear is that changes in food production taken to protect the environment could only worsen or simply result unfeasible in a planet where such a large percentage of people live in poverty. For example, the use of fertilizers, pesticides and the economies of scale achieved by growing food in large plantations (which often means clearing forests) allow farmers to produce cheaper foods for people who live on just cents a day. But harmful chemicals and clearing native plants harm soils and local ecosystems.

However, when local species are combined with an understanding of local culture and consumer demand, opportunities arise to tackle both problems. I had the opportunity of learning about a project that did just that in the jungles of Venezuela, for an article that I wrote for VenEconomy magazine.

Though Venezuela is one of the top producers of oil in the world and therefore one of the richest and most powerful in Latin America, corruption, poor governance and a crippled education system have led to a poor distribution of wealth and high poverty rates (around 50% according to the World Bank, though other sources say that it’s as high as 80%). In that country, the poorest communities are the native tribes, who generally live in secluded areas with little access to energy, clean water, health and education, and food. Besides poor infrastructure, the fact that many tribes choose their nomadic traditions also makes it difficult to supply them with food or teach them to harvest their own foods. But a local foundation called Fudeci, that is part of the country’s Academy of Sciences, has designed solutions that thrive despite these obstacles.

In their Sustainable Agricultural Production Systems (SIPRAS in Spanish), scientists have been able to teach tribe members about plants that are native to the Amazon jungle and provide nutritious fruits, which can be consumed by humans or fed to livestock. Because the plants are adapted to the soils, climate and thick tree covering of the Amazon, the tribe members don’t need to worry about the labor-intensive or expensive tasks of clearing forests, using fertilizer or constantly watering the crops. These qualities also make the impact of this food production minimal on the environment. The group has also taken advantage of the close ties among tribe members to teach them how to make small shelters for Royal Ducks, which are native to the Amazon and can be sold for high prices in countries like France. Instead of paying workers, the tribe works together to build the shelter and is taught how to care for the ducks. The foundation also works with university students in different fields, who are studying Amazonian fruit to see if they are apt for sale outside the jungle, as a way to provide more income to these communities. Engineering students are considering simple technology like fruit peelers that would make it easier for the tribes to process the fruit in order to turn them into feed for livestock.

Despite the fact that there has been success with a few tribes, large-scale rollout is difficult. Like so many innovations in sustainable agriculture around the world, limited budgets and political barriers have kept the projects working on a small scale. But projects like this prove that reducing hunger and protecting the environment don’t necessarily have to be rivals.

Deciphering the ‘How-To’s of Social Media Marketing

Social Media is the hot topic of marketing these days. As a recent MBA graduate specializing in Marketing Management, I’ve followed dozens of webcasts, webminars, white papers, news stories and how-to lists online and at offline events. When it comes to a new, and promising trend like this one, there are two profiles of people that spur the buzz on. On one hand, you have the people who feel baffled about it and are looking for information everywhere they can. On the other you have the dozens of people (startups, independent consultants, established agencies, you name it) that say they know it all.

But after hearing so many self-termed experts telling people what to do, I continue to feel that the conversation is based on tactics (like: On Twitter, leave enough characters for a retweet of your post, i.e. RT@yourname) and not enough is being focused on high-level strategy.

I want to use this post to summarize the three most valuable lessons I’ve learned in the past year about Social Media Marketing, from all those online and offline sources. This is BY NO MEANS a “how to” of social media, and I am not an expert, but an interested follower of how SM can change or at least add to marketing strategies. If you’re a marketer, a lot of this language should be familiar, because after all, though SM Marketing is a sign of large changes in the way consumers are relating to companies, products and issues around them, a lot of the marketing basics apply and add to the way we can use SM.

1. Is Social Media Marketing a paradigm shift? Yes and no. There are two different levels to this question. On one hand there is the medium itself. Unlike offline (and some online) forms of marketing communication, it is interactive, immediate and doesn’t have the regional limitations that, say, an event or print campaign may have. However, it is still a medium, or several forms of media, if you consider how different one social network can be from another. As such, there are particular ways to create content for it, as well as limitations. Adapting to a new medium is not easy. Do you remember how the importance of TV changed things at the advertising firm in “Mad Men”? But some changes are easier than others. Static websites were easy for print media firms because they resembled printed pages, but the constant, immediate feedback of Social networks can be very difficult for companies who are used to keeping full control of communications and just putting out the occasional fire if a reporter had something negative to say about their brand.

This two-way communication has led so many of the people I’ve heard to say that this is a whole new world, and that marketers should scrap what they knew about marketing before. In my opinion, that couldn’t be farther from the truth. As my Internet Marketing professor, Paul Cubbon, reminded us, a lot of the Marketing basics apply in eMarketing, and even in Social Media. It is more important than ever to do proper segmentation and positioning; to understand your customer’s needs, which customers you are looking for and how you can add value. In a world where so many things are free and finding a competing product is as easy as opening a browser or using a mobile app, it is more important than ever to know the customer well enough to create true value for them.

But there is a second and more fundamental level of change. It is in the way that we as marketers relate to our customers. In traditional marketing, a marketing research firm presents information about the customers, their habits and the media they consume. These insights influence (or at least should influence) the four Ps: the product itself, pricing, communications and distribution. With the proper customer service center set in place, complaints come in through an 800 number or a “Contact us” page on the website. Maybe a salesperson will come in with some feedback. But many times all these sources of information are handled by different people and few reach the marketing managers. If there is a big issue or a new product, a news release or press conference would be organized.

But now, customers are becoming involved in all of these steps. I remember when a press release was a document that took days (maybe weeks) to be finished, while it passed from the agency to the corporate client, who passed it on to its marketing departments, legal, HR, etc. Now, the viral spread of information necessitates an immediate response, and not all companies are prepared or see the negative potential of that, as United Airways learned with its United Breaks Guitars issue. Confronting an issue like this and the other implications of an ongoing conversation with customers requires a level of training that not all current marketers have, and that some executives say could turn them into a “lost generation” of marketers.

2. A new relationship: This new relationship is far more direct, immediate and demanding than ever before. It is a change in the way consumers (or even business customers) relate to a product, brand and company and how they relate to each other. People who rant online about an experience expect a response, and really soon. They know the power of spreading negative reviews about a company, especially if they do it in a catchy way, like the writer of “United Breaks Guitars” did. So companies that don’t respond can find themselves in terrible trouble, difficult to contain and expensive to respond to (advertising and PR expenses). But companies that react fast can become legends. Virgin Atlantic has become a great example, but catching complaints made in midair by customers on Twitter and sending a flight attendant to respond immediately, or having a representative waiting for the customer just after landing.

SM Marketing means a change in all the 4Ps and related disciplines, like market research, operations, post-sales service and sales. Clever companies are using social networks as a way to gain insights about their customers. I recommend the examples used in the book “Groundswell”, which is by far, the best book I’ve read on the subject. SM can be a different form to communicate with and receive instant feedback from customers about ideas and products. Customers are happy to give ideas, help each other and spread the word about ideas, products and news that they like, which can have a surprisingly attractive ROI (“Groundswell” includes several ROI calculations). This new way of relating to each other can be a great way of spreading the word about a product, but also a new form of behavior that should enter your calculations of how to reach customers, what their life is like and how you should create value.

Apart from the actual conversation itself and the technical details, there is one very important lesson to learn on this subject. Transparency is crucial. The web has given customers more tools than ever to research about your company, product, etc., and SM gives them the tools to share what they find in very short amount of times. I’d recommend beginning a SM project by addressing these issues and preparing your team (and all your company) for honest and transparent conversations, rather than just paying big bucks to an agency for a pretty site and running to the PR agency for conflict management when it’s too late.

3. Rethink the funnel: The biggest change of SM and the internet is that they change the customer touchpoints from the biggest part of the funnel (awareness) to purchase intent, to the purchase itself. It can change everything, especially pricing, as I’ve mentioned in previous posts about the iPad and eBooks. The question is, how can we use these tools to our advantage? And remember that SM is just one element of your company’s Integrated Marketing Communications. So think that even though a person may find out about a product or service from a friend’s Facebook profile, other elements like events, a well-built website for your product/company and search engine optimization are ways to move the person down the funnel, making their lives easier and adding value to them. In a time when a person can scan a barcode and compare products and prices, you can’t take chances. Mobile and location-based applications also have huge potential and will continue to be merged with SM applications to create even more possibilities (like Foursquare has already done).

In conclusion, both of the extremes that I mentioned above are partly right. SM has great potential and harnessing it right can lead to great success, by spreading the word, containing negative word of mouth or getting better ideas for better products. But as a relatively new form of communication, it is still tricky and the rights and wrongs are only starting to be understood. The key is to remember that marketing basics like segmentation, positioning and integrated marketing communications planning are still essential, but that customers have started a new way to relate to products, brands and the world around them, and that this two-way conversation is here to stay.

Where to find more:

Books: “Groundswell” and “Grown Up Digital”. “The Long Tail” has some key ideas about niches which can be applied to Search Engine Optimization and SM initiatives.

Webcasts: The AMA has good podcasts on the subject, and their Webminar earlier this year was one of the most useful events I’ve attended –online or offline. AdAge has good case studies.

Twitter: I share ideas I find interesting on my feed @alicemchacon, and feel free to look at some of the people I follow. Quite a few write a lot about SM Marketing and eMarketing in general.

§ Blogs/Websites: Mashable is a great resource. There are also great groups to follow on LinkedIn with discussions on the subject. There are lots of great blogs out there. One way to find new ones is to see the ones posted by SM fans on Twitter. They are my best RSS feed.

Poverty and Violence- The vicious cycle

I just finished reading the book "Las Mujeres en la Guerra", a series of testimonials of women who have been affected by Colombia's guerrilla warfare, written by journalist Patricia Lara. It's a great glimpse into the lives of women who were part of the guerrilla and paramilitary groups, as well as those who have been kidnapped by the guerrilla, and family members hurt by the war. It's an excellent book and I only regret that, as far as I know, there's no English translation of it.

Reading this made me realize once more how close poverty and violence can be. The guerrilla groups were formed at a time when the Cuban revolution and communism was thought to be, by some, models of a life of equality in a country with so much poverty. But their civil war, which has lasted over four decades, has not come close to that. Like the Cuban revolution, it has led to generations of violence, death and the violation of human rights. Lara uses stories of different guerrilla groups and the paramilitaries. When you listen to each view, you realize how horrible the "ends justifies the means"-attitude of these groups have been. The paramilitary groups appeared as a form of defense of poor farmers (but also rich land barons and drug lords) against guerrilla groups who killed, kidnapped and looted in the countryside to fund their cause. Massacres have been common, and done by both guerrilla and paramilitary groups. For groups who were created with the illusion of eliminating poverty, how could they end so many lives? They have resorted to long kidnappings, and even rounding up a town in a church and setting them on fire.

As a Venezuelan, I am especially touched by this story. Though Venezuela has been the "rich neighbor" of Colombia and other countries in the Andes Region (the north area of South America) because of its oil wealth, we have not solved poverty. On the contrary. Poverty increased during the peaceful years of the second half of the 20th century, as the Venezuelan government reaped the wealth of oil more than ever before and the country enjoyed the peace and freedom of democracy, in a time when most of South America was dominated by dictatorships.

And under Chavez, for all his talk of ending poverty, wealth, economic progress, and most importantly, human rights, have struggled. Chavez has used oil wealth to give away money, but hospitals and public schools have little funding overall. He is a savvy communicator, and picks a handful of pet projects to put money into and film in his weekly radio and TV show. But it breaks my heart to see so many young people still so far from being able to start a real, prosperous career, and start a family later in life. Teenage pregnancy is higher in Venezuela than some sub-Saharan African nations.

But most of all, this book me makes me think how Chavez and his so-called socialist agenda is also tied to violence and a lust for power, much like guerrilla and paramilitary leaders in Colombia. He is a good friend of the guerrilla, which he purportedly funds and sends arms to. He also believes in violence, and has political prisoners, dead protesters and closed TV and radio stations to show for it. The saddest and most enraging for me is to think that his real end is not so much poverty, but power. He has said he will rule until he is over 100 years old. His family already controls much of the country, including businesses... no complaints of capitalism and "neo-liberalism" there from him.

Violence can never be a means to an end. Equality is a beautiful end to aim for. But instead of using violence as a mean, how about creating opportunities by not spending on pet projects inside and outside of Venezuela, corrupting the army to stay in power, and imprisoning the opposition? How about funding all schools and hospitals, and not just the ones manned by Cuban doctors, who put aside the talent of Venezuelan doctors? Education, health and incentives to the private industry should be the means. I pray to see that day in Venezuela.

*The book is about the Colombian civil war and does not mention Chavez

iPad & publishers: The pricing dilemma… and what a dilemma it is

I have to make a confession. Though my background is in Communications, the P that most fascinates me when it comes to eMarketing is Pricing. And I’m especially interested in seeing how tablet-like devices like the iPad, eReaders and smartphones will change the pricing game on the internet, which is dominated by free content and applications.

The internet has changed the rules for pricing, and not necessarily in a way that benefits companies. Ironically, one of the industries that has suffered the most in these past 15 years, since the Internet became increasingly mainstream, is also the industry that set the rules in the first place: The media/publishing industry.

When the internet began to become mainstream, the average, not-very-technologically-savvy user used the internet to look for information. Content was king. So companies that already produced content found it easy to become some of the most visited sites: Newspapers, magazines and television stations. Media companies have long relied on what economists call two-sided markets. On one hand, there are the readers, who usually pay a low, subsidized fee to read the content via newspaper subscription, cover price, etc. In the case of public TV, no fee is paid by viewers at all to view content. The media companies make the lion’s share of their profits from advertisers.

The biggest mistake made by the media conglomerates was to believe that the internet was just another media channel. (Of course, it is hard to blame them for not having seen the possibilities of the medium, which still surprises us with its possibilities). These companies tried to beat each other and gain as many readers as possible by giving the content away for free, seeing display advertising on the web as the next big thing.

Clearly, a lot has changed. In the age of Web 2.0 (some even say we’ve moved onto Web 3.0), users are less interested in just reading content online, and are increasingly seeking interactive experiences like creating content themselves and interacting with each other on Social Media sites, chat applications and games. Offline, media and entertainments have suffered, as more people entertain themselves online. Last year, during the recession, media and entertainment companies especially felt the blow. Popular magazines like BusinessWeek and Forbes have made headlines for nearly going out of business, and other niche magazines have been shut down completely. As readership and viewership of traditional media channels fall, advertisers have found new ways to engage users, and more and more of their campaigns consist of communicating with them directly, and not through ads, but in the form of web-based and mobile apps, email coupons and interactive campaigns.

A fresh start?

Media companies and book publishers are hoping that the increasing popularity of mobile devices like the iPad will give them a fresh new start. Even before the iPad had been launched, some publishers even had demos of tablet versions of their magazines and websites. Their hopes are based on two assumptions: that more and more users will be reading content through reading applications on mobile devices like tablets and eReaders, and less and less through browser-based services; and that the revenue model adopted on these mobile devices will be more like eReaders, where users pay for almost all the content they use, as opposed to browsing on the web, where they usually read for free.

But both assumptions are big questions marks. It seems very feasible that mobile devices will continue being increasingly popular, especially in developing countries, where mobile phones are becoming the main channel for internet connection, especially among a new generation with more disposable income in India and China. But most mobile devices include a browser, which has become an indispensable feature on smartphones and even on the new generation of eReaders. While apps can restrict the source and type of content used, browsers (and especially search engines) open a world of possibilities for news, videos and images (much of which is free). And GenYers and those large, promising emerging markets really love free stuff. They’re also increasingly technologically savvy and better at finding content on the web.

The second assumption may be even shakier. The Kindle has become the model for eBook distribution. Though Amazon and its competitors offer free books, most of the content is not free. Amazon has two sources of revenue (as will Apple with its iBooks): the revenue from the hardware (the eReader) and from the content (the eBooks). The second is shared with the publishers. With more users on mobile devices, publishers are hoping that iBooks will be to content what iTunes was for the music industry. But there are some key differences that will make this very difficult. First, music is pretty cheap on iTunes, with singles around $0.99, enticing users to download quick, quality-guaranteed tracks on iTunes, rather than risk viruses and long download times on pirate applications. But eBooks will be a lot more expensive. Even if iBooks tries to compete with Amazon on book price, books would be around $10. This might not seem much if you’re an avid reader with an income that allows you to spend on books continually. But consider that a huge portion of iTunes users are price-sensitive students who buy as many used things as they can… including books. Second, eBooks have a series of barriers to adoption that are hard to overcome, as I mentioned in a previous post. News articles have an even tougher challenge: there’s so much of it free online. And like I mentioned, two key markets in the coming decade for devices (and content) like this are very price sensitive: the now twenty-something GenYers and the booming middle class in emerging markets.

What to do?

The truth or fallacy of these assumptions will be proved in the next few years as mobile adoption increases, and especially as devices like tablets and eReaders, which are still niche products, break into the mass market. But if publishing companies really do think that the iPad and eReaders are the only salvation for their industry, then it’s likely that we’ll continue to see more cities without a paper newpaper and the great names of the media industry disappear.

Jumping on the iPad wagon is one great way to innovate. But it can’t be the only one. These companies will have to reconcile free and paid content, which is not an easy job to do. The New York Times is a perfect example, with its confusing attempt at price discriminating for its content beginning next year. News sites will also have to find a way to create original content, which they can better control, if they don’t want readers to jump on the web and find some other source reporting on the same event. And like so many companies in the age of social networking, media companies will have to find new ways to relate to audiences and distribute and receive information, to avoid becoming one of 3,000 search results on Google.

iPad: a New Hope for Marketers?

It’s a great time to be a marketer, especially if you’re a young and digitally-savvy GenYer like myself. Though advertisers and publishers are concerned about an increasingly fragmented audience and the “death” of traditional media, technology is putting tools in our hands that we’ve never had before, and allowing us to be creative in new ways.

The iPad is seen as a ray of hope by analysts and executives of the media business. Even though the gadget hasn’t been distributed to reviewers yet and we know little about its capabilities and limitations (much less how it will be received when it goes on sale in March), publishers have already been creating tablet editions of magazines and newspapers, with the hope of finally recovering the lost revenue of the last decade, when news has been given out for free on the net.

What does the iPad mean for marketers? I’ll focus on two issues: Mobile marketing and pricing.

Mobile Marketing

In past blogs, I’ve written about opportunities in mobile marketing and how mobile advertising, content and applications will become increasingly important as smartphone adoption increases. This will be even more important in developing countries, where mobile phone penetration is growing at much faster rates than PCs, especially among lower income and price sensitive groups.

Mobile marketing is not just about SMS and smartphone apps. WiFi connections in eReaders and tablets (even in mp3 players like iPod Touch or gaming devices) are changing the way we think of the P of Placement. Shopping is increasingly being done on the go, using the internet or even SMS and Bluetooth. For some companies, like magazine and book publishers, it’s changing the Ps of Product and Price too. The increasingly digitally savvy users are also requiring marketers to rethink positioning and segmentation. And this doesn’t just refer to the GenY smartphone addicts, but to all age groups, including seniors, who were found to be the group that shopped most online, according to a recent report.

Tablets like the iPad are considered especially promising, because they continue the trend towards convergence of devices. With the smartphone (and especially since the iPhone), the mobile industry has been on the edge of its seat, waiting for the mythical device that will bring it all together. But after seeing Job’s demonstration of the iPod, I feel like we’re farther from reaching that convergence. And that might actually be a good thing.

Smartphones are currently the most converged device. They can call, send sms, browse the net, use location-based services, play music, games, video… One of their selling points- their portability (small size)-, is also an obstacle for other uses like reading, watching videos on a bigger screen, typing long documents, etc. These are the strengths of a tablet like the iPad and eReaders. But the iPad is too large and heavy to carry around, not to mention the keyboard you’d have to carry with you. And you can’t really use it as a phone. It is also not as comfortable to read from as an eReader like the Kindle. eReaders, who were the stars of CES, use a special ink that make them easy to read, but is still only available in black and white, and don’t play videos. Alas… you get the idea.

Why do I think it’s a good thing? As a consumer, I do like to have to carry the least possible amount of gadgets (especially since smaller purses are coming back in style ;-) ). But there are some features that I’m just not willing to sacrifice to accept a single device. I love smartphones, and own a BlackBerry, but also love apps and have an iPod Touch, which is great with it’s built in WiFi and GPS. I’m not too excited about tablets yet, but I guess it’s too soon. For reading, I really really really want an eReader, but as I mentioned in a previous post, the price point of over $200 seems like to much for a black and white device that really only does one thing.

As a marketer, having a single platform would reduce development costs for apps, advertising and ecommerce, but the different capabilities of each device can be appealing and more suited for different products. The Absolut Drinkspiration app is a great way to engage consumers and take advantage of the GPS of the iPhone, when they are in a bar, showing it off to their friends, while racing apps like the one developed by Audi are more likely to become popular on the iPad. Browsing capabilities on all these devices also allow users to take advantage of links and find common content on websites and social media sites.

In my next post, I’ll look at the implication that the iPad has on one the trickiest P of internet and mobile marketing: Pricing.

I'll be posting news about the iPad and Mobile Marketing on my Twitter Feed: @alicemchacon

eMarketing in Action: Online Marketing Plan for Kafka’s Coffee and Tea

As I mentioned in previous posts, I have been working on an eMarketing plan for a local café called Kafka’s Coffee and Tea as part of my Internet marketing course in my MBA program. The business, which is scheduled to open in the first quarter of 2010, is run by Aaron Kafka, a young coffee enthusiast who wants to have coffee shop where the menu is simple, but the quality of the beverages is outstanding.

Like many young entrepreneurs in the business he has several challenges. First, though he is opening in a great location –a central hub of transit and businesses –he has several coffee shops in the vicinity which will mean tough competition. He is opening in the same location as a very well-known neighborhood café called Lugz. This café was damaged by a fire in early November which destroyed nearby buildings and has pushed the opening date of Kafka’s back by several months. Finally, he has resource constraints. Besides a limited budget, he is pretty much running the show on his own. That means he will likely have limited time to Tweet and write blogposts, but even less time to plan the overarching marketing communications strategy.

A fellow classmate of mine, Prasanna Raviraj, and I, began with the basics: what marketing objectives will drive our strategy? The first one is clearly creating awareness for this new brand. The second, inducing trial. Because Kafka is focusing on quality of products and service in the store, this second objective is especially important. Third, customers need to come back for repeat purchase. We also tried to think who our target customers are. Some groups that are likely to be target customers are commuters and people who live nearby. Demographically, we could split them up into students, professionals (workers) and families.

Then, we began looking at some of the eMarketing tools out there. The list was so long, it was overwhelming. To filter down the ideas, we looked at feasibility of resources (time and money) and at what tools would make sense for the type of consumers that Kafka is trying to attract. We came up with a three-phase plan. Creating a roadmap makes it easier for Aaron to plan and execute the communications. It also spreads out investment. Stage one will take place from now and until the first few months after the opening of the café. Stage two will take place in the next 6-12 months. Stage 3 could occur as far out as one year after launch, depending on how the mix of eTools has worked so far. We also recommended that he take on an intern to help him with the workload. A young student will have the technological savvy and time to keep the different forms of communication current.

Aaron still has several months before the store opens. Feel free to make any comments and suggestions on this plan!

Emarketing for SMBs

When small companies, cash-strapped and with huge setup bills think about marketing, they increasingly look to online marketing. For a lot of people, eMarketing = Free. Unfortunately, it’s not that easy. Online strategies can be a great way to reach customers in a more personal way, building a relationship with them that large corporations often leave out of their massive ad budgets. But online marketing mediums, including the sexiest of them all –social media –are far from free, as I have been learning with an eMarketing plan that I’m designing for a local Vancouver business.

The biggest challenge small businesses face is resources… and I don’t mean just money. Many small companies (under 100 employees) may have a small, if any, marketing team. The marketer may be the owner, and he or she may not be trained to design a marketing plan that can guide the way. The key of success in any marketing communications campaign is in the essentials (which are also the hardest part of all): segmentation, choosing target markets and positioning. These essentials affect all the business, from the product to the pricing and distribution. But it can make or brake advertising and promotions, whether it’s on a billboard or on a Twitter feed.

The second scarce resource is time. Social Media success is a lot harder than people think. There are no rules, and putting too much time and money into wrong strategies can make other aspects of the business (like bad customer service or a faulty product) give you a bad name. In some cases, it can become so big that it can even jump to media, like the "United Breaks Guitars" video on Youtube. That I wrote about in a previous post.

My advice: if you're a small business and thinking of Social Media as a strategy then you need to:

1.) Analyze who your customer (or who different segments are) and what their lives are like. What do they want to talk about or read about? When will they be tuning in?

2.) Make sure your feed engages them in different ways and is not always a sell message, but a conversation about topics that fit your brand and their lives (people want to see tweets that excite them, not buy, buy, buy, as successful strategies by SMBs show)

3.) Make sure you have someone who can spend enough time Tweeting or uploading content to the SM pages and feeds, so that your messages don't get buried in their newsfeed and you keep that online relationship through time. Also, make sure this person can speak "social media" language - that is, casual and in the tone of your audience.

Marketing eBooks: Breaking into the mass market

In my last blogpost I mentioned some of the biggest barriers to adoption for eBooks:

• There is no physical ownership of the book and no bookcases to show off
• There is no “touch and feel” of the book, which is especially important for hardcovers
• Consumers fear that reading on screen will be tiring
• Very high prices for e-readers, added to ongoing spending for eBooks

How will manufacturers of eReaders and distributors of eBooks get past this? I’ve outlined some ideas to overcome these barriers:

1. Go offline to get users online: As I mentioned in my previous post, one of the exciting things about eBooks is that all 4Ps of marketing take place mostly online. However, in such a new market and with a gadget that is competing with such popular consumer electronics like touchscreen mp3s, portable video game consoles and smartphones, companies have to go offline to get online customers.

eReaders are an experiential product. I told my story of how seeing an eReader piqued my interest in the category for the first time. It broke my main fear: that the screen would be like computer screens, which are very tiring. The reader I saw was a Sony eReader and one of the bigger ones. However, by actually seeing it, I could appreciate how handy it is for taking on trips. Though there is a lot of hype online about the product, it will not reach the mass market until people see other people using it. eReaders need the “white earbud effect” of the iPod. As more iPod users climbed on the bus with white earbuds, people became curious about the gadget. Though mobile apps have proved very successful for Barnes and Noble, you can’t tell if the person on the bus is playing a video game, checking emails or reading an eBook on his BlackBerry. How to do this? I suggest:

a) Improving distribution: Where is the eReader section in my local electronics shop? Is it even available in electronic shops in the city? I don’t think I’ve ever seen one in a store that I can play with. According to the Forrester study that I mentioned in the last post, distribution is one of the challenges for the market, which industry players are trying to improve. Big chain stores like Best Buy are also training personnel about eReaders, so they can be more useful to holiday shoppers.

b) Samples: Manufacturers won’t like this at all, but one suggestion is to plant samples of their products among users that are representative of their target groups. If they can show the gadget to their friends or just use it in a place where they will be seen by others, it can give target customers the opportunity to dispel myths, ask questions, and interact with the product.

2. Segment the market: Segmentation of the market doesn’t seem very clear. Students are an interesting target, because they need to read so much and love gadgets. But they are also price sensitive and until most textbooks can be read on them (and hopefully at a fraction of the price), it is unlikely that they will adopt, unless there is a steep price drop. Travelers are also an intuitive target. They have a lot of downtime, and only so much of it can be spent on the laptop and phone (especially because radios have to be turned off during flights). They also have to pack light and would appreciate a wide choice of books instead of the typical paperbacks you can find at airport bookstores. But with so many electronics already (laptops, smartphone, mp3 player), why carry another gadget? Also, WiFi downloads would become a must on all devices, or even a data plan, which is still being worked on by manufacturers. One interesting target are users who want to purchase books in other languages but don’t want to pay expensive shipping costs or higher prices in the local market. A friend recently told me she is very interested in buying one, but would really like the opportunity to see one before she picks the brand. In her case, buying eBooks makes sense because she can buy English-language books from Amazon, without paying the expensive shipping to Mexico. She also doesn’t have to wait months to have it delivered. This would only work for English-language books, at least until enough eBooks are available in other languages and eReaders have better distribution.

3. Lower prices: This is the single most important factor for widespread adoption, according to academic studies I’ve seen during my MBA. eReaders have an additional hurdle to high prices –they are competing (whether they like it or not) in the consumer electronics category. As mobile devices, including phones, video game consoles and mp3 players continue to converge, holiday shoppers will be deciding among the whole category when choosing a gift. Imagine my dilemma: should I buy a smartphone ($99-$200) which does a LOT of things, including an eReader app or an eReader that goes for over $149 and ONLY reads books. I’d have to pay significantly more to get WiFi service. And additionally, I’d have to purchase books, because –let’s be realistic –there’s only so many of Google’s 500,000+ free books that I really care to read. Kindle-level premiums will leave it in the “early adopter” phase for a long, long time. Especially considering that most users expect to pay closer to $99 for an eReader (according to Forrester’s study). Some analysts say consumers are expecting prices as low as $50. Because prices are so high, some analysts expect adoption of eReaders to follow the trend of digital cameras: it will take a decade to reach widespread adoption (and now these cameras are being replaced by mobile phones).

Analysts expect the eBooks industry to continue to grow. I’m sure that it will, considering the growing interest in consumer electronics. But I’ll keep waiting for that eReader that will cost close to $99 and have WiFi and that I can hook up a data plan to (or at least my cell phone, so I can get the data plan from there). I hope I don’t have to wait much longer.

If you’re curious about eReaders, here’s a good review of current products by David Pogue, from The New York Times: http://video.nytimes.com/video/2009/11/19/technology/personaltech/1247465674780/pogue-friends-2009-holiday-guide.html

eBooks: Reinventing an industry

When you mention Internet marketing, people immediately think of search marketing, brands on Twitter and email newsletters. In other words, it’s usually the P of Promotion that jumps to mind. When asked to think of other aspects of marketing online, people will think of online shopping, or the P of Place (distribution). But some industries have been changed entirely –that is, all four Ps have been changed as they move online.

One case is eBooks. The product itself is mostly a digital experience, with the exception of the hardware used to read it with –an eReader like the Amazon Kindle or laptops and mobile phones. Its distribution is also an internet experience. Users can either buy them from a provider like Amazon or Barnes & Noble, or download them from Google. Until now, eBook communications depended heavily on online mediums, with online advertising, PR and word of mouth being key drivers in this niche industry. Pricing also follows the standard models of digital downloads: most of the money is made from hardware sales and the books themselves are priced lower in digital form, or may even be free.

Until now, the market has remained a niche. Though the Kindle has some devoted followers, the mass market has not adopted eReaders yet. Some market analysts say that may change soon. Forrester predicts that eReaders will be a “breakout success” this holiday season, stating that lower prices for hardware, more titles and hype around new products will push sales. Forrester expects sales of eReaders this year to jump to 3 million units (Emarketer.com shipment estimates for 2008 are close to 1 million). But despite the excitement, there are some important barriers to adoption to consider and issues with other technologies that will influence adoption.

Barriers to adoption

The most obvious barrier is the trade-off that consumers will have to make when using an eReader. EReader manufacturers and eBook distributors highlight convenience: whether it’s the Kindle, nook or your mobile phone, you can read on the go without the weight of a book (especially if it’s a hardcover). If you’re traveling or away from a store, you can just buy books through an internet connection.

But what are people losing? First of all, the experience of owning a book and a library. Books are often emotionally-involved purchases and can be a sign of status. Showing off a bookcase full of Tolstoy and Shakespeare makes many people happy. And though technically you “buy” eBooks, Kindle users were shocked to see that Amazon actually erased books from their Kindles earlier this year, because the company that was distributing them did not have the rights to distribute them. Though Amazon refunded them, this raised discussions about ownership of digital content.

There is also the touch and feel of the book, especially hardcovers. As someone who loves to cook, I wouldn’t trade my cookbooks for eBooks even if they cost one-fifth of the price. There’s nothing like having that heavy hardcover on the counter and flipping through recipes in my free time.

Another issue is the display. I’ve thought of downloading the Barnes & Noble app for BlackBerry, but then I think: “I spend so many hours watching a screen as it is, why would I do this to myself?” However, everything changed when I actually saw an eReader. I was sitting in a bus stop and a girl was reading a book using a Sony eReader. The E-Ink technology that the Kindle, Nook and Sony eReaders have is actually a lot more reader-friendly than most computer and mobile phone screens. That was the experience that made me really, really want one.

But I was faced with the fourth issue: eReaders are very expensive. When you realize that they can cost the same as a BlackBerry or iPhone, often require subscription or ongoing purchases or eBooks to be worthwhile and that they don’t have nearly as many functions as most smartphones (or touch screen mp3 players like the iPod Touch) then you wonder if it’s worth investing so much in them. Manufacturers have realized this and are dropping prices. But according to Forrester, most users think that they have to be around $99 (the cheapest ones available right now are refurbished first-generation Kindles for $149). Considering all the subsequent expenses that an eReader brings, it makes sense. Even if you consider this as a replacement for buying books, it can still be cheaper to share books with friends and borrow some titles from libraries –two functions which eBooks can’t provide.

The fifth issue is that many publishers still refuse to convert to the online model, so best-sellers like the Harry Potter books are not available for download on any format.

In my next post, I’ll give some ideas on how online distributors and eReader manufacturers can overcome these barriers.

Where do Podcasts fit in a company’s marketing communications strategy?

I’m a big fan of podcasts. I subscribe to 15 podcasts and listen to one or two a day during my commute. But as an MBA student I wonder about the business model behind podcasts and if they will prove to be valuable marketing communications tools, considering that they still reach only a small amount of users.

Some companies have been adding podcasts to their marketing strategy. News and entertainment companies have been using it as an additional source of revenue. BusinessWeek, for example, creates a weekly podcast by interviewing the journalists that wrote its cover story, and names the sponsor at the beginning. Other media companies use it as a promotion for its full, paid episodes.

Non-media companies have been using it as an entertaining and educational way to create customer loyalty. Lowes and Home Depot have step-by-step guides for do-it-yourself projects and using tools and gadgets around the house. Besides the obvious pitch for their products, podcasts are a way to become a trusted voice for consumers, especially if the podcast is targeted enough to reach a niche of followers that will find value in podcasts vs other media forms.

But podcasts are not necessarily cheap to make, especially for companies that are not in the business of making media content in the first place. Most companies that make them are careful about editing and have high quality videos. Most podcasts are also free, which means that consumers don’t pay for them. Companies have been trying to find creative ways to make a business model out of them, from joining a podcast network that provides individual podcasts sponsors to combining free and paid episodes and throwing in HD or other perks for paid subscribers. But the advertising model is not very profitable, according to a report published earlier this year by research firm E-Marketer.com. Podcasts come in 22^nd place in the list of most-viewed forms of online and offline media, and adspend is also very low. This could change in time, if podcast meet optimistic growth expectations and manage to move from a niche following into a more mainstream product.

Professional insights

To get some feedback from marketers who are actually using podcasts as part of their strategy, I began a discussion on LinkedIn. One marketer said she has found them especially useful for internal purposes like training and to explain complex ideas which would be difficult to understand in written form. Another professional said that it has been a good tool to create awareness about his business and get new customers. He says that podcasts have grown his business by 300% in the past two years (he says he measures growth through podcasts by tracking clicks on the links to his website and by asking new customers where they heard about the business).

In a coming blog, I’ll use podcasts as part of what I see as a successful internet marketing strategy for a company in one of the industries that I’d like to work in after my MBA: Consumer Goods.

Book Review:”What would Google Do?”

As someone who avidly follows online conversations about marketing, it seems that everywhere I go online, marketing professionals are trying to figure out how to incorporate online marketing to their integrated marketing communications strategy. But it seems like over 75% of the time the buzz and excitement seem to hover around one online phenomenon: social media marketing. Though I’m a huge fan of social media, I’m surprised that so little of the online discussions I see are directed towards the most exciting change that the internet brings to marketing: a complete transformation of the business model of so many industries.

This is why I picked “What Would Google Do?” by Jeff Jarvis for my assigned book review for my Internet Marketing class (part of my MBA at the Sauder School of Business, UBC). Jeff is not a marketer, and doesn’t speak like an MBA. But his book is easy to read and does a good job of exploring what the world would be like if many traditional industries adopted the business models of Google and other successful Web 2.0 companies. It’s business as we know it turned on its head.

Jarvis’s book has two sections. The first one lists the “Google Rules”, like the new, interactive relationship with the customer. This is the world where a bad review on Youtube goes viral and can live to haunt you for months on end, as United Airlines learned last week (see my last blog). Other rules include the new architecture built around the link, collaboration and the new economy built around free-to-users and sponsored and mass niches vs. mass media.

The second section is an exercise of applying elements of Google’s business model to different industries like media, retail, manufacturing, finance and public health. Like Jarvis, I was also a journalist, so I would like to give you my points of view on his pitch about the changing media business model.

Media 2.0

Jarvis imagines newspapers that really don’t have much of news or paper anymore. Instead of monopolizing the right to write news, he imagines news sites as a platform where people can find information created by thousands of users: blogs, social media sites, etc. He advises them to learn to listen to what people have to say. Namely, to allow collaboration and two-way communication –an area in which traditional mass media outlets have done very poorly. He recommends forgetting the idea of a mass market and focusing on niches.

He does not clearly state how the revenue model would work (would users pay?) but mentions advertising. Earlier in the book, he titles a section “free is a business model”. With that he refers to giving content away to users and charging advertisers.

But this may be easier said than done. It’s true that many of the traditional media giants have had a terrible time adjusting to new media. At most, giants like The New York Times have a web site with lots of videos and interactive graphics; they link to blogs and allow comments on their articles; they also have discussion forums, which encourage public discussion on a topic like Room for Debate. But in essence it is still controlled by its own journalists and it’s pretty much business as usual.

But in the middle of the Great Recession and a foreseeable decline in readership, media companies are facing decline so rapidly, that they are beginning to realize that they must reinvent themselves or die. Some have died or are agonizing. Conde Nast has shut down some of its publications this year and two of the biggest business magazines, Forbes and BusinessWeek have slashed employees and are looking to cut costs further after losing a third of their advertising spend this year. According to industry experts, advertising won’t return after the recession.

The problem with free

There are two issues about Jarvis’ suggestion for media that I believe may not be viable, at least for the time being. First of all, free content won’t necessarily bring in enough revenue, especially because online adspend fluctuates so much during bad economic times and online advertising is increasingly being spent on social media sites. This trend away from media websites and onto social media sites is understandable, considering that people are spending more time online and less on webpages like newspapers. As a GenYer, I admit that I’ve found out about more breaking news from my Facebook newsfeed than from newsmedia sites this year. Low ad revenue is even making an entertainment hit like Hulu to consider switching to a subscription model. News companies, including the New York Times, have been looking to replicate the success of the Financial Times in charging for content. Funny enough, Google is planning to create a tool that will help newspapers charge for content.

The second issue is that as traditional media outlets lose power, other sources will have to emerge to create a sense of “official” and “credible” information. Though blogs are increasingly becoming a trusted source of information, Google search results can be baffling. It is hard to discern between the true and the false in a Wiki. Government and other institutions will have to find a way to become trusted sources of information in a sea of disinformation. Having been a journalist, I remember the rigor of our research. Granted, not all journalists are ethical in their sourcing or framing of information. But when you say “I saw it on CNN” or “I read it in the paper”, it sounds like fact. That’s not the case of saying “I saw it on this blog that Amy had posted on her Facebook profile”… or worse yet, a RT (re-tweet) on one of the 2,000 feeds you are following on Twitter… I believe that the need for a credible voice will continue to exist. The question is whether media companies will be able to continue being that voice. To do it, they will have to transform and adapt their business models in order to resonate with a younger, more diverse and geographically disperse online audience that loves free stuff.

The Science of Success

Who doesn't want success? And better yet, who wouldn't want to know the formula for it? I recently read the book "Outliers: The Story of Success" by Malcolm Gladwell, which attempts to do just that: to explain the logic of success.

In a nutshell, Gladwell says that success is an equation of having the right skills and talent + being in the right place at the right time + cultural and socioeconomic background + hard, hard work.

Gladwell uses a variety of proof points for this, some of which include hockey (he's Canadian) and Bill Gate's story. The title refers to a statistical concept: those few people who are far from the average (and he's referring to the ones at the very top of the charts). Anyone who's had some basic training in statistics knows that in a normal distribution (bell curve) most of the people will be in the center. So a first conclusion is that it is difficult to be really, really successful; that is as successful as Bill Gates.

So what can people closer to the top of the bell curve do to move farther out? Obviously not everyone can be at the right place at the right time, like Bill Gates was in the 1970s. But knowing our qualities, advantages and disadvantages and really understanding our industry and trends in our global world could pave the way to very successful careers, especially for people with my profile: GenYers who are educated, technologically savvy, globally connected and aware and passionate to make a change in the world.

What have I learned from this book? First, I have had a chance to understand the advantages and disadvantages of my cultural background. For example, I've had the experience of growing up in a country where solving problems from scratch and being resourceful is a strategy for survival (consider doctors operating without modern equipment or my experience of working during a national strike, when gasoline was scarce and public transit is practically inexistent in some areas). For me, there is always plan B and C and D and E. I am also flexible with resources and used to changing circumstances. Being Latin American makes me an innate people person. I make relationships easily and working with others nurtures me. At the same time, being from the Andes Region of Venezuela, and the daughter of especially hardworking parents who have worked for North American firms, I learned the principles of hard work very early in life and adapted easily to North America.

I was born in a culture where women are often the center of the household and in a family where women were expected to be as educated, smart and outspoken as men. Since I learned to read a map (around 7 years of age), I was the official map-reader of the family on our trips and they trusted me completely. This made me strive to be better and I rarely led my family astray on our road trips. This showed me to take on responsibility early and to voice my opinions even in the presence of high-level management -which can be difficult for many Venezuelans, who tend to be very hierarchical.

The next step for me? A brilliant opportunity.

The Science of Success

Who doesn't want success? And better yet, who wouldn't want to know the formula for it? I recently read the book "Outliers: The Story of Success" by Malcolm Gladwell, which attempts to do just that: to explain the logic of success.

In a nutshell, Gladwell says that success is an equation of having the right skills and talent + being in the right place at the right time + cultural and socioeconomic background + hard, hard work.

Gladwell uses a variety of proof points for this, some of which include hockey (he's Canadian) and Bill Gate's story. The title refers to a statistical concept: those few people who are far from the average (and he's referring to the ones at the very top of the charts). Anyone who's had some basic training in statistics knows that in a normal distribution (bell curve) most of the people will be in the center. So a first conclusion is that it is difficult to be really, really successful; that is as successful as Bill Gates.

So what can people closer to the top of the bell curve do to move farther out? Obviously not everyone can be at the right place at the right time, like Bill Gates was in the 1970s. But knowing our qualities, advantages and disadvantages and really understanding our industry and trends in our global world could pave the way to very successful careers, especially for people with my profile: GenYers who are educated, technologically savvy, globally connected and aware and passionate to make a change in the world.

What have I learned from this book? First, I have had a chance to understand the advantages and disadvantages of my cultural background. For example, I've had the experience of growing up in a country where solving problems from scratch and being resourceful is a strategy for survival (consider doctors operating without modern equipment or my experience of working during a national strike, when gasoline was scarce and public transit is practically inexistent in some areas). For me, there is always plan B and C and D and E. I am also flexible with resources and used to changing circumstances. Being Latin American makes me an innate people person. I make relationships easily and working with others nurtures me. At the same time, being from the Andes Region of Venezuela, and the daughter of especially hardworking parents who have worked for North American firms, I learned the principles of hard work very early in life and adapted easily to North America.

I was born in a culture where women are often the center of the household and in a family where women were expected to be as educated, smart and outspoken as men. Since I learned to read a map (around 7 years of age), I was the official map-reader of the family on our trips and they trusted me completely. This made me strive to be better and I rarely led my family astray on our road trips. This showed me to take on responsibility early and to voice my opinions even in the presence of high-level management -which can be difficult for many Venezuelans, who tend to be very hierarchical.

The next step for me? A brilliant opportunity.

Succeeding in the green market II: Marketing Strategy

In part one of this series on marketing green products (below), I gave some insights on consumers and their perceptions regarding green products. Now I will share some recommendations for going to market with organic and fair trade products, which are the result of my research into marketing fair trade chocolate for Sustainability and Environmental Marketing courses as part of my MBA at the Sauder School of Business (UBC). The research included secondary research and a survey to MBA students.

1. Positioning
As mentioned in my previous post, there are two promising markets for fair trade and organic products: ethical buyers –who highly value the green quality of products– and those who buy it for selfish qualities which can be related to health, quality or taste, depending on the product. In my research into fair trade chocolate, for example, I realized that though “ethical buyers” in my survey highly valued the environment and sustainable practices, fair trade and organic qualities rated 5 and 6 in a list of 8 qualities that they valued most when shopping for chocolate. Considering that chocolate is a low-risk purchase and involves little time and thought when purchasing, it is likely that even these buyers would prefer a known brand, a preferred variety of chocolate, or better yet, the quality and taste of the chocolate. So even with ethical buyers, green qualities are not enough. The brand must also build the perceptions of high quality, health/indulgence depending on the product (which green buyers also rated highly) and other functional qualities (like different flavors, in the case of chocolate). For indulgers, a promising positioning strategy would be to use the “single source” quality that fair trade products can offer, because they are usually sourced by specific cooperatives and bought directly by the manufacturing company, as opposed to commodity cocoa, which is bought from distributors from all over the world at the cheapest prices possible.

2. Price and Distribution
As I mentioned in my previous entry, though ethical buyers and indulgers are willing to pay a higher price for the green qualities/experience of the products, a promising strategy is to create a line of products that is affordable and accessible to the general population. Divine Chocolate, a successful non-for-profit based in the U.K., has achieved successful growth thanks to a strategy where it places its chocolate products in popular retail chains and sells at affordable prices*. Placing organic and fair trade products in supermarkets and other accessible retail locations (instead of high-end and specialized boutiques only) also helps sales**. Of course, if the strategy is to compete in the fast-growing high end chocolate segment, fair trade is also very promising. In that case, as mentioned above, single-source qualities and percentage of cocoa are important qualities when demanding a premium.

4. Promotion
From my research I came up with many recommendations for promoting and communicating the value of fair trade and organic chocolate. Advertising should be focused on educating people on the benefits of fair trade, which even the ethical buyers I surveyed were not very aware of. This means not only expressing the social benefits of cocoa bought at above-commodity prices from poor farmers in developing countries, but also the environmental and health benefits that it can bring because of the reduced use of chemicals and growing the plants in a forest, rather than in a dedicated cocoa plantation. PR and events are also key. Divine Chocolate Company, for example, has created buzz by using comedians and celebrities to talk about the cause on TV. It even managed to get then Prime Minister Tony Blair to visit the farms where the cocoa was grown in Ghana**. Another promising opportunity, especially for indulgers, are chocolate tastings and wine pairings, which have become more popular in the recent years.

In conclusion, organic and fair trade products –like many green offerings– are not as easy a sell as we wish they could be. The big lesson from this is that green qualities are not enough. Though they are increasingly important to consumers, and a key in any corporate social responsibility program, green products must also have functional qualities that benefit consumers directly. It is important to price them competitively, and assure that distribution and promotion contribute to making them more accessible and creating value in the buyer’s minds.

*Doherty, B., & Tranchell, S. (2005, July). New thinking in international trade? A case study of The Day Chocolate Company. Sustainable Development, 13(3), 166-176.
**Regmi, A. (2001) Changing Structure of Global Food Consumption and Trade. Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture, Agriculture and Trade Report. Retrieved from the USDA Website on March 10, 2009.

Succeeding in the green market I: Consumer Insights

These days it seems that everyone wants to get into the green market. Whether it’s environmentally friendly or ethical products, there is a lot of optimism about the high growth in these categories. But products with “green” labels can be challenging to promote effectively, as I learned during research into marketing fair trade chocolate for Sustainability and Environmental Marketing courses as part of my MBA at the Sauder School of Business (UBC).

During my secondary research and a survey, I learned about the expectations that people have about green products and their willingness to put their money where their mouths are. I also learned about marketing practices that have helped organic and fair trade brands succeed in this difficult market.

Here is my first of two postings: Insights into the market for ethical and green products.

1. Though environmental and altruistic benefits are termed as very important by many green consumers, “selfish benefits” are more effective in achieving adoption. As opposed to organic brands, which consumers perceive to have personal benefits like better taste and health benefits, fair trade products claim mainly altruistic benefits: you pay a premium price for a product that has been bought at fair prices from poor communities in developing countries. Organics have become big not just with the environmentally conscious, but also with people who want healthier, less processed foods. It’s become a “catchy” label, and people are more likely to associate it to “health” or “environmental qualities” than what it actually means: products made with no added chemicals like pesticides and fertilizers (Try this: ask a person in a supermarket with organic produce in her cart what "organic" means... even the MBAs in my survey had a hard time defining it). Fair trade is even harder to understand and the premium price is not always valued by consumers, who make most of their purchasing decisions based on direct benefits to themselves rather than to other people who’s country they may not even be able to point to on a map.

2. There is willingness to pay for ethical products, but competitive pricing is key to market-wide adoption. Though people are used to seeing organic and fair trade products being priced at a premium, research shows that even people who place a high value on ethical qualities of a product are willing to pay a lower premium than what is set by the manufacturers*. Pricing at competitive prices has turned out to be a successful strategy for market and revenue growth for Divine Chocolate Company in the U.K.**

3. Ethical consumers are a key target, but “health buyers” and “indulgers” can also be key. Research shows that consumers who highly value the ethical qualities of a product will pay more for them, especially if their expectation for that product and brand are especially high. However, they will also “punish” unethical companies by demanding a steeper price reduction for their products***. If premium pricing is the strategy, then key demographics are those that value the health or taste/quality of the fair trade product. In the case of fair trade chocolate, women and Generation X consumers –who are accustomed to paying a premium for luxury experiences– are good targets.

In my next entry, I will give discuss some tactics that have led to success in the marketing of fair trade and organic products.

*Didier, T., & Lucie, S. (2008, September). Measuring consumer's willingness to pay for organic and Fair Trade products. International Journal of Consumer Studies, 32(5), 479-490. Retrieved March 12, 2009 from Wiley Interscience Journals webpage

**Divine and Dubble go mainstream :But fair-trade chocolate keeps its integrity. (2008). Strategic Direction, 24(10), 13-15. Retrieved March 12, 2009, from ABI/INFORM Global database.

***Remi Trudel, June Cotte. (2009). Does It Pay to Be Good? MIT Sloan Management Review, 50(2), 61-68. Retrieved March 12, 2009, from ABI/INFORM Global database.

MBAs: Adding value in a time of recession

I'd like to share this blog with you that I originally posted on the Toronto-based Financial Post's Executive Blog: http://network.nationalpost.com/np/blogs/executive/archive/2009/04/30/mbas-adding-value-in-a-time-of-recession.aspx

Tell me what you think!

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This is not a good year for MBAs. On one hand, more people are applying for an MBA than ever, as a way to get out of a bad job market and improve their skills at the same time. On the other, new MBA grads and interns are concerned about being able to demand higher salaries and even to find a job, when so many businesses are struggling to weather the recession.

But I also believe that this is a time of great opportunity for those of us who can be creative, and use those tools we learned in Business School to really impact the bottom line. A lot of businesses are finding that business as always is not effective anymore and may be more open than in times of success to listen to new points of view.

I used my LinkedIn network to ask people from different businesses about what they valued in an MBA. Here are the qualities they said they valued the most:

1. Being able to work independently: with all the current layoffs, this is no time to make managers babysit new employees.

2. Quantitative analysis: Turning projects into measurable results that can be compared and decided on.

3. New ideas: creativity for solutions, bringing in the latest business solutions that are being discussed in the classrooms.

4. Proven business skills: previous experience can be key in making a decision.

5. Ability to work under pressure and in uncertain situations: “We can begin with what the “M” in MBA stands for: Master. The MBA connotes a mastery of business beyond experience alone. I think the foremost thing it means is that the person is prepared to deal with ambiguity and so is comfortable with a lack of certain and definable answers”, says Ron Cenfetelli, Professor of IT Management at the Sauder School of Business (University of British Columbia).

I even had a recommendation about what companies don’t need from MBA’s: a “know-it-all” attitude and substituting quantitative skills for observation and communication.

What do you think?

Marketing software: The challenge of selling an “invisible product”

I'd like to share this blog with you that I originally posted on the Toronto-based Financial Post's Executive Blog: http://network.nationalpost.com/np/blogs/executive/archive/2009/02/17/marketing-software-the-challenge-of-selling-an-invisible-product.aspx

Tell me what you think!

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Have you ever tried selling something people can’t see, or feel or taste? It seems that marketers have made an art of selling the “invisible” qualities of visible products: a perfume commercial, for example, barely mentions the actual scent of the product or its liquid form. Instead, it promises to turn you into an elegant, irresistible man or woman. The same goes for packaged foods that offer vitamins, minerals and antioxidants that you can’t really see… you have to take their word for it. But in both cases, you have a very real product to see and touch. Even services can be perceived clearly by the senses: think customer service at a bank or five-star hotel, for example.

But what happens when it’s the other way around: when the product is invisible and all you have is the experience of using the product? This is the case of most software products, which have a world of advantages, but to the naked eye appear as pages of indecipherable code.

You may think: “But I do see the product! I’m looking at my computer screen right now!” Well, the truth is that you are only seeing the very surface of the product, or the interface. It is the part of the program that lets you interact with it: buttons, scroll bars, pretty icons… they are your experience of the program, but the real value of the product is the programming behind it.

Because of this, it is hard to market many software solutions, especially when they don’t have the Microsoft logo on them. Small companies selling software have to begin by trying to explain to ordinary consumers or non-IT business clients why their solution is really valuable. In some cases, the interface can be similar to a rival product, so the client thinks it is practically the same, and only decides on price. It can be difficult to explain why there is a price premium, especially if the better qualities aren’t easily perceived by the user.

Because of this, creating a polished and user-friendly interface is so important. Trying to explain the technical benefit to the users is often a lost cause. What you can do is show them how it will work for them and making sure that they can easily experience it.

Another challenge about marketing high-tech products is deciding whether to innovate around the client’s needs, or to just let the inventor’s creative flow decide what to create and risk having a marvelous product that does not immediately fit with a particular user.

Last month I attended a speaker event hosted by the British Columbia Technology Industry Association, which included three BC companies that have achieved big success in the past years: MDA, MailChannels and BuildDirect. Their products have been successful because they are real solutions to real problems. But they also raised an interesting topic: sometimes you just have to make something that doesn’t make clear sense at first and then create the need for it. This is the case of some of the most successful inventions of history. For example, no one imagined that electricity could be useful. Candles worked well enough to light homes, and fireplaces brought warmth to the homes. It didn’t follow a “trend” of inventions, like the mp3 player has followed the portable cassette and CD players. Looking back, it seems like we couldn’t live without it. From our kitchen appliances, phones and TV sets, we depend on electricity for almost everything we do. But who could tell someone in the late 1800s that they needed a TV set or a computer? All they could see was a small light bulb that didn’t light much better than their lamps and fires. But it could be turned on with the flip of a button and there was no need to keep buying oil.
The advantage of this creative approach is that this allows the inventor to be openly creative and not restrained by certain needs. If marketing research is not done properly, it can also be misleading and generate as many losses as not having done any research at all. But in many cases, not tailoring products to users can be a huge mistake. This is the cause of many of the thousands of product failures that occur each year. If you are curious to know about them, just Google “product flops”. You’ll be surprised on how many major brand names are behind product flops, many of which are the result of bad marketing research (New Coke is the typical text-book example).

What is the best approach? It depends on the individual product and if the new invention could eventually satisfy a real need, even if it was not catered to one initially. “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole”. This quote by Theodore Levitt is a classic in marketing education. So even if your innovation is completely new and different, if it can open the quarter-inch hole, even if it isn’t a drill, it might still be successful.

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What do you think? I would like to hear your opinion on the topic, especially if you are in the software and high-tech industry.

Bolivarian Dictatorship of Venezuela

In 2000, when Chavez changed Venezuela's Constitution (among other things to allow for reelection and a longer, six-year term - as opposed to the single, 5-year period in the old one), he changed the country's name to The Bolivarian Republic of Venezuela (it used to be called simply the Republic of Venezuela).

Today, as democracy made its last gasps, we walk into a new phase in the country: The Bolivarian Dictatorship of Venezuela.

May the history of a free country, one of the richest and with most progress in South America, and the oldest democracy in that continent, rest in peace...

Democracy or Dictatorship? We'll know on Feb. 15

Understanding Hugo Chavez is no easy task. He is charismatic and colorful in the eyes of many, cruel and a megalomaniac to his enemies. Unlike the traditional image of a president, he is unpredictable. He has his own radio and TV show, which can last over 7 hours, and he loves to interrupt regular programming to speak for hours about his hate for the "Empire" (the US government), surprise measures to control every area of the economy and to nationalize industries, or to remember his childhood days in a rural area in southwest Venezuela.

Today, the government of Venezuela declared a national holiday to commemorate his 10 years in power. It's been a long 10 years. The country has passed from having one of the most prominent oil companies in the world (state-owned PDVSA), to seeing its oil production fall considerably after Chavez fired 20,000 employees from the company because he considered them enemies of the "revolution". He has survived a coup and several national strikes, the longest of which lasted two months and crippled the economy. In these years he and his followers have sucked up the country's resources and he now controls almost all the institutions of the country, including the Supreme Court, the National Assembly, the Attorney General's Office and many regional government posts.

But ten years in power is not enough for him. Since he came into power, he has been announcing longer stays in power. One of his first moves in power was to change the Constitution, which now allows for one reelection and stretched the presidential period to 6 years. But that is not enough for him. He has organized a referendum on Feb. 15, when Venezuelans will vote for indefinite reelection. He has already been hit hard in the last elections for regional posts, where the opposition won the major states and municipalities in the country.

I've been asked many times if Venezuela has a democracy or a dictatorship. It is hard to answer. I usually say a "democracy". A true democracy would imply separation of power and rule of law. Chavez controls almost all the institutions in the country and is known for implementing highly questionable rulings to suddenly nationalize private enterprises, close TV channels and put political prisoners in jail. However, some opposition leaders still campaign publicly against him and some are now in office in state and municipal government.

But my answer could change completely on Feb. 15. If Chavez wins the election, he will stay permanently in power. A lifelong ruler, even if chosen by vote cannot be considered a democratic leader.

I believe that Chavez's rule has taught us much about the country, about the needs of the poor and about taking freedom for granted. Chavez has taught Venezuelans to hate themselves in a way that we had not known since the war of Independence in the early 1800's.

But it's time to see something new. I dream of seeing a day of change in Venezuela. Obama's inauguration made that dream even closer to my heart. Will that day come soon? We'll know on Feb. 15.