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.