Archive for the ‘Current Events’ Category

September 12th, 2013

Habit-Score Assessment: Google Chromecast

By Neale Martin

chromecast

 

Throughout the mid-90s to early 2000s, part of my job was to evaluate the market implications of new technologies for major telecommunications clients. It was exciting to think about how broadband Internet would change publishing, banking and retail and how rapidly evolving wireless technology would alter the landscape of communications, music and media. But there was one large issue that I could not resolve to my own satisfaction—where do I want my content?

If I have content on my laptop, it’s available all the time and portable. But my laptop has a finite amount of hard drive space. If I keep content on portable media, like a DVD, then I can play it on my TV or computer, but nowhere else. Cost of content becomes an issue quickly, not to mention the inconvenience of carrying around DVDs.

The alternative was to have the content available on servers and make it accessible over the Internet, a format now referred to by marketers as ‘the cloud’. This always seemed to be the best solution—if the networks were sufficiently fast and reliable. When I originally thought about this problem, they were not. Fast-forward a decade, and those networks are (somewhat) in place and the marketplace is rapidly shifting to this new model. Netflix, Hulu, UltraViolet, Pandora and dozens of other companies have streaming strategies that incorporate different pay models all based around the ability to instantly access thousands of programs and movies from any network connection. Similarly, Smart TVs, TiVo, DVD players, video game consoles, and specialized devices like Roku and Apple TV stream this newly available content. And of course traditional cable companies offer on-demand streaming from both their set-top boxes and online applications.

Consumers are now faced with the same question I had many years ago (where do I want my content?) except it is no longer a hypothetical exercise. With so many options and so many companies working to “own” and “control” the consumer’s access to content, the choice is getting overwhelming. When the conscious mind gets overwhelmed, the mind relies more heavily on the unconscious mind to make decisions. Therefore it is imperative that any company competing in this marketplace offers a habit-forming experience.

Last month, Google entered into this cutthroat competitive market with a remarkable device that could prove far more habit-forming than all the others. Called Chromecast, this streaming device is slightly larger than a wireless car fob, plugs directly into an HDMI slot on flat panel TVs, and streams content from iOS and Android devices, including iPhone, iPad, Samsung Galaxy, Apple computers or anything equipped with a Chrome browser (sorry Blackberry and Windows phones). I recently received my Chromecast device and, using Sublime’s Habit-Score Assessment methodology, I’ll walk you through why I believe it to be one of the most habit-forming streaming devices currently on the market.

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May 22nd, 2013

Shopping on Co-Pilot: The Power of the Deal in Bad Economic Times

By Neale Martin

coupons

Ben Johnson’s past successes as head of Apple’s retail operations made him a prize catch for JCPenney when the retailer lured him away as their new CEO in November 2011. The market’s response to this hire was largely positive: the company’s share price gained 17.5% on the news. Johnson’s vision for the struggling department store chain was to replace its long-standing retail approach of ever-present sales, deals, and discounts with “everyday low pricing,” and to focus on an enhanced customer experience by creating “store-in-store boutiques” and shifting some of its floor space to high-end fashion brands.

This aggressive new strategy, to put it lightly, didn’t work.

Johnson was fired just 17 months after taking the helm. His vision for JCP not only failed to improve, or even stabilize, the company’s sales and profits—it made them significantly worse. While it is easy to point out the myriad ways that JCPenney is not Apple (and business talking heads had a field day exhaustively listing those differences), the biggest flaw in Johnson’s thinking was not understanding the psychological power of the deal during times of economic stress. (more…)

March 19th, 2013

Episodic Disruption

By Kyle Morich

House of Cards - a Netflix Original Series

Note: This post was featured in the March 2013 edition of the Force of Habit Newsletter.

In the first two minutes of the Netflix Original Series House of Cards, Kevin Spacey’s character, House Majority Whip Frank Underwood, strangles a dying dog in the street and delivers a powerful but unsettling monologue about “useless pain.” By the end of that opening scene, I was hooked, shackled to a show both wonderful and morbid. This sensation normally produces a frustrating paradox—the more I enjoy a series and want to see what happens next, the more aggravated I am having to wait a week for the next episode and months for the entire story to unfurl. As Congressman Underwood would say, “Useless pain, indeed.”

Only this show was different, because the next episode had already arrived—in fact, they all had. In a bold move bucking the traditional week-by-week broadcasting model, Netflix made the entire first season available at the same time. Though it was a successful ploy for this viewer (I binge-watched all thirteen chapters in three days), was it really a bold move, or just a belated acknowledgement that our media consumption habits are changing?
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January 3rd, 2013

Duhigg’s Error: Where The Power of Habit Goes Awry

By Neale Martin

Charles Duhigg’s new book, The Power of Habit: Why We Do What We Do in Life and Business, brings renewed interest to the critical role of habits in our lives. Unfortunately, the book is fatally flawed. The author of the New York Times bestseller makes several critical errors regarding habits and their implications. Though professionals familiar with habit-based marketing know better, The Power of Habit is receiving wide readership and its unsound concepts will undoubtedly confuse those new to the subject. I’ve outlined a few of the major problems with the book here for easy reference.
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September 19th, 2011

A ‘Qwikster’ End to an Unconscious Behavior: An Open Letter to Netflix CEO Reed Hastings

By Neale Martin

Sublime Behavior Marketing CEO Neale Martin in an open letter response to Netflix CEO Reed Hastings’ customer letter distributed earlier today.  In Hastings’ letter, he apologizes for Netflix’s bumbling of their latest price hike and discusses plans to split the company into two separate entities: Netflix, which will focus exclusively on delivering streaming video content, and “Qwikster,” a new company solely dedicated to Netflix’s legacy DVDs-by-mail service.  You may find Reed Hastings’ letter here.

Dear Mr. Hastings,

I cannot stress more how wrong I think you are in the strategic direction you are taking the company. After 12 years of brilliant strategic marketing, your recent moves and calamitous messaging are putting the entire enterprise needlessly at risk.

Netflix began as clever concept for using the web and postal service to rent DVDs, and evolved rapidly by moving to a subscription model and abolishing the dreaded late fees. Blockbuster never stood a chance. When Netflix launched video streaming to complement its DVD rental service, the company was, again, far ahead of the industry in understanding the evolving relationship customers were developing with video content across multiple platforms. By adding this service without extra cost, you dramatically increased the perception of value attached to the iconic Netflix brand. By integrating DVD and streaming, you created a nearly unassailable bulwark against competitive incursion. You built a thriving business with more than 23 millions customers and a stock price that any CEO could point to with pride.

And in a scant three months you’ve put all of that success in jeopardy.

For the past decade, I’ve researched customer behavior based on our rapidly improving understanding of how the brain works. It turns out that the vast majority of behavior is the result of unconsciously motivated habits.  Counter-intuitively, the best customers think about you the least, automatically incorporating your goods and services into their lives without a glance.  The price hike announced last month disrupted this habitual behavior and drew the conscious attention of many Netflix customers. Disrupting the habits of your customers is marketing malpractice—as you’ve seen, over a million of your former habitual customers decided that, upon reflection, the value of Netflix was not worth the price paid, despite the nominal increase equating to only a few dollars more per month for most customers.

The good news was that habits are a default state, and your customers would have likely settled back into unconscious use of Netflix in a few months.  Consciousness in the consumer space is a bit like a tuning fork: a single hit will emit a vibration for a short period of time, and then go silent. The mind does not want to consciously consider every purchase decision, and Netflix would have returned to a habitual choice, silently billing credit cards each month while delivering a reinforcing user experience.  Unfortunately, you stepped in too soon. By splitting the company into two parts with separate websites and billing systems, you are again massively disrupting the customer habits it took ten years to build.  The tuning fork is ringing louder, and more customers will begin jumping ship, either for competing services or no substitute at all.

Somehow you’ve gone from marketing genius to anti-marketing villain.  Even if the company survives and returns to previous levels of success, this risk is far too high to justify. Because, right now, nobody knows what the future will be, and the immediate reaction has been catastrophic. I do not know the underlying cost structures that necessitated the rate increase or the particular view of the future that induced you to split the businesses, as an expert in consumer behavior, I can tell you that fundamentally and unilaterally changing the relationships with your customers is very bad management. A post hoc letter rationalizing your decisions demonstrates a disconnect from your customers that should terrify investors. Qwikster? Really?

I tell my clients that the goal of marketing should be to become your customers’ habit, not their choice. In trying to position for the future, you are forcing your customers to make a conscious choice, and I fear many will choose to leave Netflix behind. I became a Netflix customer when I bought my first DVD player. I recommended your service wholeheartedly to hundreds of people since then, a large number of whom went on to become customers. I cannot imagine recommending your service to anyone today.

Best regards,

Neale Martin

June 30th, 2011

Conscious Intent vs. Actual Behavior: On Meth, Cigarettes, and Not Trusting What People Say

By Kyle Morich

The girl, barely 16, studies herself in the bathroom mirror as she confirms plans with her best friend. “Yeah, my parents think I’m sleeping at your house,” she confirms, “Okay, bye.”  She hangs up and gets into the shower.  As she begins to bathe, something catches her eye in the tub below her.  She glances down and a gasp escapes her lips—there’s blood and dirt pooling in the bathtub around her feet.  She looks around in shock, trying to find the source.  Her eyes discover the culprit, a skinny and broken girl her same age, curled into a ball at the end of the tub, face and arms are covered in fresh cuts and bruises, eyes are sunken in, and entire body laboring with each wheezy breath.  The girl’s horror becomes fully realized when she recognizes this spectral creature: it is herself.  She screams in terror.  The ghastly version of herself shakes her head and rasps, “Don’t do it.  Don’t do it.”  The screen goes to black and the slogan appears: Meth.  Not Even Once.

Titles at the end of the Meth Project “Bathtub” ad

Georgia has a meth problem.  The state of Georgia is a national center for the production, sale, and use of methamphetamine, costing the state $1.3 billion annually.  The drug is so powerful that only a fraction of those who use are successfully treated, so the Georgia Meth Project was launched to target those who have never tried meth and keep it that way. The hard-hitting ads, like the 30-second “Bathtub” spot above, are broadcast on television and radio throughout the state. Recently, the non-profit released study results that they believe demonstrate that these scare tactics are working.  Of teens participating in a “Methamphetamine Use & Attitudes” survey, 78% said the ads made them less likely to try or use meth, and 85% said the ads showed them that the drug is more dangerous than they had originally believed.

True, it is a great endeavor to ensure that Georgia teens know about the harmful effects of meth and are decreasing their intentions to use, but are these harrowing ads actually translating those intentions into behavior? Nowhere in the study were references to any changes in actual meth use, so I looked into the 2009 CDC Youth Risk Behavior Surveillance System, a bi-annual monitoring of health-risk behaviors that contribute to the leading causes of death and disability among youth and adults, to see how methamphetamine use has changed.  The YRBS showed no statistical difference in meth usage for Georgia 9th through 12th graders from 2007 (when the Georgia Meth Project began) to 2009.  My first assumption was that perhaps meth use remained flat while usage increased for other illegal drugs, but the YRBS shows statistically unchanged numbers for cocaine, marijuana, inhalants, and heroin over the same time period.

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