Revolutionary Measures

Going direct – and the impact on marketing

The rise of the internet was meant to usher in a new, more direct way of communicating, including the removal of middlemen. We’d buy goods and services directly from their producers, rather than having to go through shops or brokers, cutting costs for consumers and opening up new opportunities for companies. It would be the end of the package holiday, the supermarket and the insurance broker, amongst other business types.

It is fair to say that things haven’t worked like that. While small companies can sell direct on the internet, the majority of goods and services are still bought from middlemen who bring products together, allowing consumers to compare them in a single place and then make their choice. Think of Amazon, ebay or insurance comparison sites, which are essentially old-style brokers with an updated business model.

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Why has this happened? Partly because people find it difficult to cope with too much choice – there is always the worry that you’ve made the wrong decision and also because these companies have ensured it is as easy as possible to buy from them. Amazon has one-click ordering, buttons to press that automatically send new stocks of household essentials, and voice ordering via Alexa.

However, this model is changing, at least in part, due to the rise of Direct to Consumer (D2C) brands. Companies like Dollar Shave Club, Harry’s and a plethora of mattress start-ups are all selling via the internet without any middlemen involved. They often use a subscription model – i.e. you get a delivery of shaving products, beer or food kits on a regular basis, backed up by generous introductory discounts and strong guarantees of quality (if you don’t like the mattress we’ll come and collect it and give you a full refund). They may be relatively small in the UK at present, but they tend to target younger, more affluent consumers and are therefore likely to continue to grow and spread.

These brands are also having an impact on marketing, particularly as many are start-ups that need to establish themselves before similar rivals appear.

1.Name recognition is all
It could just be that I’m their target demographic, but I see adverts for D2C shaving brands such as Harry’s everywhere I go online, in the podcasts I listen to and offline in the press. You need to create and sustain strong name recognition if you are to succeed – given the number of challengers in particular markets it is a question of first mover advantage. This impacts traditional brands, whether that is the likes of Gillette, Tesco or Amazon – they need to respond if they are to keep customers loyal.

2. Marketing is constant
Subscriptions do give some security when it consumer retention, particularly as there is an inertia effect when people don’t get round to cancelling them – look at the number of people who failed to cancel their free Amazon Prime trial before it started charging them. However, consumers, particularly of D2C brands, are savvy and are likely to be constantly checking that they are getting a good deal. So customer marketing has to be tailored, personalised and constant if you are to stay front of mind and engage with your existing consumers.

3. You need a story
You can’t create a D2C brand by just moving your product online or to a subscription model. Not only would that be likely to cannibalise existing revenues, but it wouldn’t generate the appeal of an exciting, new, internet-first brand. People want to get more than a product – they want the story behind it. That means highlighting your credentials, why you are different and what sets you apart. This could be that you buy the finest Japanese steel for your razor blades or donate mattresses to charity – whatever it is, it needs to be clear, differentiated and appealing to your target audience.

4. You need to build a tribe
Business guru Seth Godin pointed out the opportunities that the internet provides to build your own tribe – a group of people that follow your brand, understand what makes you different, act as ambassadors and ultimately buy from you. The most successful Kickstarter campaigns are those where someone with an existing following launches a product. Podcasts that spawn books or tours are another example. Essentially your tribe feels a personal connection to you, believes in your ethos and will both sign up for your new offering and spread the word to others. Building a tribe takes time, but creates a lasting customer base for your brand and all of its products.

None of these marketing tactics are new – and importantly none of them are out of the reach of traditional brands. If you want to protect your products against the rise of the D2C brand you need to look at how they are operating, what you can learn from them and how you can improve your marketing and engagement with customers and prospects.

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March 7, 2018 Posted by | Creative, Marketing, PR | , , , , , , , , , , , , , | Leave a comment

Does Apple Pay spell the end for banks?

There aren’t many people that actively like their bank. In the wake of the credit crunch and subsequent bail-out, bankers became the focus of people’s anger, being accused of recklessness at best, and outright fraud at worst.English: ATM Bank Albilad, Riyadh Saudi Arabia...

At the same time the rise of technology has eroded the central position retail banks have in people’s lives. The majority of us do most of our banking online, with the main physical interaction happening through the screen of an ATM. We don’t know who our bank manager is – and they probably don’t have any leeway to get us a better deal on our mortgage.

So, it is unsurprising that new entrants have been looking at the sector. PayPal has grown to be the de facto way of paying for goods on eBay, and has now spread to lots of other sites. Its smartphone app now makes it easy for people to pay for goods on the high street as well. Bitcoin goes further, not just marginalising banks but the entire idea of a national currency.

However the real threat to banks is from brands coming into the market and pushing them into the background. The launch of Apple Pay in the US this week is a prime example of what might happen. By using your iPhone 6 (or Apple Watch) and Near Field Communications (NFC) you can simply pay by waving your device close to the payment reader. The built-in fingerprint sensor in the iPhone provides security (unlike traditional contactless cards), and the money is automatically debited from your bank account.

Of course, the money paying for the things you buy still comes from your traditional bank account. But in an era of low interest rates, essentially it turns the bank into a safety deposit box which stores your money, with the front-end, customer facing activity controlled and branded by Apple. That is partially down to the stringent regulations you need to meet to become a bank, and also down to where the highest margins are within the transaction.

So what can banks do to out-innovate the likes of Apple? And can they change a culture still built on retail, branch-based banking to reflect a modern, mobile-first lifestyle? Barclays has launched a service called Pingit which lets you send money to friends or family and pay bills, even if you are not a customer of the bank. Since launch in 2012 the Pingit app has been downloaded 2.5 million times and £350m has been sent through the service. But this is small change in the overall scheme of things.

Apple’s biggest competition may well come from Zapp, a service run by payments processor VocaLink that uses your existing mobile phone banking app and account for payments. Scheduled for launch in 2015 it has two big advantages over Apple and Pingit – it runs on all smartphones (unlike Apple Pay) and is seen as independent from an individual bank, although it is not yet supported by all of them.

The battle to control payments and the front end to banking promises to be fascinating. Will Apple’s brand triumph, despite (or even because of) its exclusivity or will Zapp’s wider approach succeed? How can both companies market themselves to overcome security fears and gain traction with a wider market beyond early adopters. Add to this that Google is rumoured to be buying PayPal to give it a foothold in the market, as well as other innovations yet to launch, and 2015 promises to be a busy year in the battle to replace your wallet.

 

October 15, 2014 Posted by | Creative, Marketing, Startup | , , , , , , , , , , , | 2 Comments

What’s the right size for a tech company?

The news that HP is splitting itself in two (ironically a few years after a previous CEO lost his job for proposing the same idea) made me think about the size and structure of tech companies. Some companies invest in growing rapidly and aim to be biggest in their field, others focus on niches, while a third group aim to be a jack of multiple trades, spanning diverse sectors.

HP was previously in the jack of all trades camp, with its fingers in lots of different pies, from enterprise software and services, through servers and networking equipment, to consumer PCs and printers. It will now become two companies, one focused on the enterprise and the other on PCs and printers. Sadly, it haEnglish: This sign welcomes visitors to the he...s missed the chance to name one H and the other P, going instead for the more prosaic Hewlett Packard Enterprise and HP Inc.

While the two companies will be smaller, they will still each have over $50bn in revenues, and are likely to be hard to disentangle. At the same time eBay has announced it will divest its PayPal subsidiary, following pressure from shareholders and the entrance of Apple into the payments market. I must admit to being cynical about efforts by many tech titans to refocus themselves – it can look suspiciously like a random throw of the dice that keeps investors happy but has no real long term strategy behind it. After all, the world’s most valuable tech company, Apple provides software, hardware (mobile and desktop) and music and video content, alongside payments, maps and health data. And no-one has yet pressured it to split.

However there are definitely optimum size and types of company, depending on the maturity of the market they are in. Emerging sectors, such as the Internet of Things, change fast, so a company needs to be flexible and focused, with the ability to pivot quickly and respond to market conditions. It stands to reason that smaller players will be able to do this faster than legacy behemoths.

Mature markets run less on innovation, with much tighter margins. You are selling a replacement piece of software/hardware and any new features are likely to be incremental not transformative. Consequently the bigger you are the greater the economies of scale when dealing with suppliers and customers. The car industry is a perfect example outside the tech industry, where you need to be big to have a chance of profitability.

The tech industry is going through a rapid wave of change, driven by the move to the cloud and the rise of mobile devices. Previous shifts (such as from the mainframe to the minicomputer and then the server) have led to market leaders falling by the wayside – does anyone remember the likes of Data General for example? In fact HP has done well to survive so long, with a heritage that dates back to 1939. What will be interesting to see is if can make it to its 80th birthday in 2019, or whether it will be carved into even smaller chunks before then………..

 

October 8, 2014 Posted by | Cambridge, Marketing, Startup | , , , , , , , , , | Leave a comment

Having your Pi and eating it

Raspberry Pi: è davvero una rivoluzione?

Image by paz.ca via Flickr

I grew up with a ZX Spectrum, and while my programming efforts may never have been up to much (a flickering horse racing game where you could bet and a pretty much mythical hotel booking system for a Duke of Edinburgh’s Award project) it got me interested in IT, and probably has a lot to do with my becoming a technology PR person. More successful programmers went on to essentially create the billion pound UK games industry and provide a generation of tech-savvy workers for the sector.

Now I’ve got kids of my own I can see the same curiosity about technology but the opportunities for casual programming seem so much more limited. They happily use computers but don’t necessarily know how they work or even that you can program them and make them do what you want.

So I’ve been following with interest the progress of Raspberry Pi, the Cambridge-based project that aims to create a cheap ($25/£15) stripped down computer that is affordable for all and aims to develop a new generation of programmers. Based around an ARM processor and Linux, what I like most about it is the deliberate focus on keeping it simple. The idea is to create an ecosystem of partners around the computer itself, adding additional hardware or software to fit specific needs. Add together the cheapness of the computer and its openness and the potential uses are pretty much endless – from education to embedded projects. In a stroke of marketing genius the first 10 beta boards are being auctioned on eBay, to raise funds for the charitable Raspberry Pi Foundation – and they are selling for thousands of pounds.

Both OFSTED and the likes of Eric Schmidt of Google have complained recently about how ICT and programming is taught in UK schools. The advent of Raspberry Pi provides the start point to address these issues – providing the tools to interest and teach a whole new generation of kids. Obviously making it central to the ICT curriculum will take work (and a case), but given the government’s oft-repeated desire to provide young people with the skills a 21st century economy needs, it’s time for David Cameron to put some investment into putting them into every school before we fall further behind.

 

 


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January 9, 2012 Posted by | Cambridge, Creative, Startup | , , , , , , , , , , | 3 Comments