Archive for the ‘Marketing’ Category

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

February 25th, 2011

Conquering the Subconscious: An Interview with the Hindu Business Line

By Sublime Behavior

Sublime Behavior Marketing Logo

Neale Martin was recently in Mumbai, India teaching our Level 3 Certification training class to consumer products employees at Godrej.  While he was there, Business Line (part of the Hindu news publication) engaged him in an in-depth interview on unconscious consumer behavior and habit-based marketing.  They’ve recently published part one of the discussion.

You mention that 85 per cent of new products fail, and consumer satisfaction does not equal loyalty. Is consumer satisfaction a necessary layer upon which loyalty can be built? Please explain.

There is very little correlation between customer satisfaction and repurchase or loyalty. When we focus on behaviour, we see that loyal customers are sometimes highly brand-loyal, but sometimes they are brand-indifferent. In both cases, satisfaction is not a good indicator of behaviour. In many studies of brand switching, switchers reported high satisfaction with a brand or store just before defecting. When behaviour becomes habitual, it is no longer tied to goals or intentions, so satisfaction measures become essentially meaningless.

However, customer dissatisfaction is different. If a customer perceives she is dissatisfied, this makes her consciously aware and can disrupt even the most habitual repurchase behaviour.

The statistics around new product failures are truly humbling — estimates are that 80 to 90 per cent of new products fail. Even products that receive great reviews in testing, flop once introduced. The primary problem is that new products are often overlooked in the store because shoppers are on autopilot at point of purchase, completely overlooking the new product. Many companies have sophisticated methods to create, screen and launch new products. But even if potential customers report they will probably or definitely buy a new product, they often fail to purchase when the product is released (one of my clients stated that they have a 90 per cent threshold for definitely or probably would buy, only 3 per cent actually purchased).

- excerpted from Gokul Krishnamurthy’s “Conquering the Subconscious” on February 25, 2011 in the Hindu Business Line.

Here’s the link to the full article: Conquering the Subconscious.  Part Two should be posted in the next week or so.

February 10th, 2011

Tasteless

By Kyle Morich

This past Sunday, I hosted my annual Super Bowl party for my family and friends. The ambient noise drowned out much of the game and many of the famously expensive commercials, which for the most part is a good thing (I’m looking at you GoDaddy).  However, one ad I did actually watch this year, for Bud Light, caught my attention.  It reminded me of popcorn.

In a study currently under peer review, a team of researchers led by David Neal1 set out to discover if goals and preferences truly control human behavior.  Neal’s team brought in a large group of moviegoers, gave them a bag of popcorn and a bottle of water, and asked them to review movie trailers.  However, the study wasn’t about the movie trailers, it was about the popcorn.

The researchers divided the moviegoers into two groups.  One group got fresh popcorn, made that day.  The other group got a warmed-up bag of stale popcorn that had been made seven days prior to the experiment.  Upon leaving the theater, the bags of popcorn were collected and weighed to assess how much of the 60-gram bag each moviegoer had eaten.  These moviegoers were then given a version of the Self-Report Habit Index to assess how habitually they ate popcorn whenever they went to the movies.

For non-habitual popcorn eaters, the results are unsurprising.  They ate most of the bag of fresh popcorn and barely touched the stale bags.  For the habitual popcorn eaters, however, the amount eaten was high regardless of the popcorn’s freshness.  They chowed down.  Neal’s team then asked the moviegoers to rate the taste of the popcorn.  Amazingly, the habitual popcorn eaters who received the stale popcorn knew the popcorn tasted bad. But they ate it anyway.  Their behavior was completely controlled by the movie theater context, not their taste.

Just to confirm the role of context in habitual behavior, Neal performed the same experiment again, but in a well-lit laboratory using a small-screen television.  This time, the habitual popcorn eaters wanted nothing to do with the stale popcorn.  Only in a darkened theater, surrounded by the sights, smells, and other stimuli their brains had associated with the context, was the habit cued.

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October 27th, 2010

Cooking with Cream Cheese: Kraft Plays With Context

By Kyle Morich

There was a time that baking soda was just a crystalline substance that was used in baking to release carbon dioxide and help dough rise.  And then Arm & Hammer got very creative and suggested keeping an open box in your refrigerator to eliminate odors.  And now the uber-substance is used everywhere, from toothpaste to antacids.  We don’t give this a second thought, yet consider this: the same substance you put in your mouth you also sprinkle in your cat’s litter box. That’s marketing, ladies and gentlemen.

We always talk about how Context is a key component to habit formation.  If a behavior isn’t associated with a particular context, that behavior can never become habitual.  But flipped another way, Context can be used to identify tremendous growth opportunities.  By marketing baking soda in the context of odor elimination (or stain-lifting, or whatever), Arm & Hammer expanded the pie and moved their brand out of the Cooking context.  Kraft Foods and their Philadelphia Cream Cheese brand are doing the same thing with their launch of “Cooking Creme.”  This extra creamy version of cream cheese can be added to pastas or other foods to add richness and texture.  Some experienced bakers have known about this versatility for years, but creating a new context for the average consumer has Kraft anticipating a huge uptick in revenue.

Brand managers often think their brand exist in isolation, rising atop a hill awash in the golden glow of the rising sun as their consumers run toward it, extolling their love and joy for the brand and how critical it is to their daily existence.  But the truth is that the consumer world is messy.  Odds are you interact with between 50 to 70 brands before you even leave for work in the morning.  Can you name all of them?  Most of the time, consumers would rather a brand just solve their problems.  We often ask our clients, “Are you the meal, a course, or the ingredient?”  The point is to think about what role a product plays in behavior.  Everyone wants to be the center of attention, but there is big business in being a behind-the-scenes part of a behavior.

Kraft saw a huge opportunity for consumers to start using cream cheese as an ingredient in their recipes, not just as a spread to put on the morning bagel.  Now they still have a tough path ahead of them to make the behaviors in this alternate context habitual.  Consumers will need to repeatedly use the cream cheese product in their recipes, notice the difference, find the difference appealing, and continue to buy the product.  But for recognizing the current Cream Cheese context was saturated and for seeking different contexts for growth, Kraft is at least moving in the right direction.

October 15th, 2010

I Know You Are, But What Am I?

By Kyle Morich

Priming occurs when exposure to some stimulus affects the way you respond to another stimulus.  A classic study of priming by John Bargh (1) examined how exposing an individual to traits and stereotypes from another group affected that individual’s behavior.  Bargh took 30 NYU psych students and had them complete a scrambled sentence test.  Unbeknownst to half of the students, their tests contained words associated with elderly stereotypes (e.g., Florida, old, grey, wise, bingo, retired, etc.).  None of the students had any idea they had been primed with the sentence tests.  What Bargh did next was brilliant, and provided some of the first evidence that what our brains perceive has a tangible impact on our subsequent behavior.  After each student completed his or her test, he timed how long it took for the student to walk down the hall to the elevator.  Bargh discovered that those students primed with the elderly stereotype walked slower to the elevator.

But the curiosities of priming on social behavior don’t stop here.  Bargh’s experiment showed that an individual tends to assimilate the behavior traits of a different group when exposed to stereotypes of that group.  We actually see the opposite effect when an individual is exposed to the traits of another individual.  In a recreation of the Bargh experiment by Dijksterhuis (2), individuals primed with a specific example of an elderly individual (in this case, the Dutch Queen Mother) walked faster than the control group.  This behavioral contrast occurs because our brains implicitly compare its traits with that of the primed example.  We tend to naturally contrast ourselves against individuals we see as different than us. (more…)

October 13th, 2010

Habit Roundup – 10.13.10

By Kyle Morich

A new series of short takes on interesting articles.

Gap’s Logo Misfire (AdAge)

In the least surprising news of the week, Gap, Inc. switched back to its classic logo four days after announcing a new, “evolved” logo to reflect the “changing” nature of the store.  Gap’s sales problems were not caused by consumer confusion about what the logo meant.  Gap never successfully retargeted its brand beyond the “Everybody in Khakis” spots from the mid to late 90s.  I applaud them for undertaking the difficult task of revitalizing their brand image to their target market, especially in the midst of a recession, but they clearly misaligned their priorities.

Changing the image of their clothes, stores, and reputation takes time, and consumers need enough experience with Gap to reset how they view the Brand.  Changing the logo before this process occurs almost feels like cheating, or repainting a rusty car without fixing the damage first.  By changing the logo and announcing to the world “look how much we’ve changed,” the subtle approach was lost.  Gap made consumers consciously consider whether the company had changed, and they responded with a resounding “nope.”

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