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!

My Twitter Feed

I've been trying to keep a stream of my Twitter updates running alongside my blogposts. I'm very active on Twitter, and find it to be a great tool to share news and links about Marketing, sustainability and technology.

I've had some trouble lately with the Twitter app for Blogger, which means the feed will be hidden until it's repaired (I'm getting someone else's updates on it).

In the meantime if you want to follow me and see news regarding eMarketing, social media, mobile marketing and more (as well as receiving updates on my blogposts) you can follow me on Twitter.

Unlike many people on Twitter, I'm not trying to hoard followers. I really just want to share information about using online and mobile tools, as well as offline strategies to make brands more relevant. According to some, the more followers you have, the less effective your strategy may be. Here's an interesting article by AdAge: "Chalk Up Twitter's Decline to Ghost Followers" (it's already on my Twitter feed: @alicemchacon).

Emarketing for SMBs: The myth of free

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:

1. There is no physical ownership of the book and no bookcases to show off
2. There is no “touch and feel” of the book, which is especially important for hardcovers
3. Consumers fear that reading on screen will be tiring
4. Very high prices for e-readers, added to additional spending on 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 (similar to the one in the picture). 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.

Internet Marketing: United's lesson on how to get WOM terribly wrong

United Airlines has a lesson to teach us: How to turn a case of bad customer service into a snowballing negative PR case. After being the star of a musical rant by an angry customer whose guitar was destroyed by personnel, they made headlines again by losing his luggage and... get this: just when he was arriving at a conference about customer service, where he was going to tell his story.

Dave Carroll was on a United Airlines plane last year when he said he saw baggage handlers carelessly throw his $9,000 guitar around the airport. He later found that it was damaged and demanded compensation from United. After a year of calls and dead-ends he gave up and wrote a song about it. The video, uploaded on Youtube has had almost 6 million viewers and the song, "United breaks guitars" is available on iTunes. Last week, Carroll was traveling to a conference on social networking and customer service, where he was going to play the song and tell his story. He says that the audience laughed when they heard what had happened.

Though the internet has been around for over 15 years, companies are still struggling to get internet marketing right. Some have hired GenYers or a PR company to set up a Twitter account. Others have gone on Facebook and are sending their executives to conferences on Social Media marketing. Others are limiting themselves to ignoring Social media altogether, and are just sticking to a webpage.

But when companies think of internet marketing they think Marcoms: ads, getting fans on Facebook, etc. and forget some of the basics. Internet changes the way that people interact with your company, or the touchpoints. United ignored this customer and channeled him through their usual, highly bureaucratic, painful, telephone customer service center. The reason that the song has become such a hit is that so many people feel the same way (I had a wheel taken off a suitcase in a recent trip to China by another airline). Maybe overhauling baggage handling will be hard an expensive... but this case makes you think: did United really need to take a whole year to face this?

The internet can give customers a sense of empowerment, especially when cases like this become so famous. But many companies want to play the game the way they've always been playing it. Unfortunately, no mobile apps, Facebook ads or email newsletters can compensate a strategy that doesn't attack the heart of the problem: improving your product and the customer's experience of it.

I'll write more about this in an upcomming book review: "What Would Google Do?"

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 (see 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”

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.

Welcome to my blog

For those of you who know me, you know that I am passionate about learning about new ideas and trends in the world, and even more so about being able to discuss and debate them with others.

In this blog, I want to start discussions about different areas of business, including marketing, sustainability and how business can help develop poor communities.

I especially welcome those who want to make comments about these subjects or publish links.

Enjoy!