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The Appeal of Social Media

Social Media as an Amplification Tool

“Social Media” has been a hot topic in the field of marketing for a great many years. Often considered a double-edged sword, the concept of social media is particularly enticing to marketers because of the improved reach and engagement over traditional marketing methods. However, a poorly-executed social media campaign can backfire just as quickly as a successful one.

Take JP Morgan, for example. Underestimating the possible backlash from Twitter users, they launched a “Twitter Takeover” campaign with the following question: What career advice would you ask a leading exec at a global firm? Tweet a Q using #AskJPM. JP Morgan then proceeded to deal with 7 hours of vicious tweets from Twitter users, ultimately withdrawing the campaign by tweeting “Tomorrow’s Q&A is cancelled. Bad idea. Back to the drawing board.”

And yet, some companies have found ways to make social media work. “Viral marketing” has essentially become the holy grail of marketing. The rampant virality of a video or photo across social networks is absolutely astounding, and the spread is essentially cost-free. The famous Old Spice advertisement currently has over 47 million views on YouTube, a number greater than the entire population of Canada!

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About a month ago I wrote a blog post that likened Business to a boat, with Marketing steering the wheels. Social media, in this day and age, is akin to giant waves in the ocean; they can either propel your boat forward at great speeds, or send it plundering to the depths of the ocean. A good marketer can navigate those waves.

A good marketer, in my opinion, uses social media not only as a tool for propagation but for communication.

Social Media as a Means of Communication

A brand manager’s role is to ensure that the brand’s message remains strong, consistent and adaptable in the ever-changing market. Social media is an excellent way for a brand (like Old Spice) to invigorate its message, to communicate directly with consumers, or even to show some personality.

Sure, you will have the occasional “troll” or “hater” that threatens to damage your brand’s reputation. But by keeping on top of communication channels, a social marketer can turn consumer comments into great opportunities. A great example is a response post by Bodyform:

Roughly one year ago, a man named Richard Neill poked fun at Bodyform, stating that they had set unrealistic expectations for their products. Left alone, this comment would have received very little attention and would have prompted negative comments, if any.

However, Bodyform replied quickly and creatively.

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The CEO of Bodyform replied with a tongue-in-cheek video that “apologized’ for setting unrealistic expectations while promoting the Bodyform brand. This response garnered much interest and eventually became viral, much like Old Spice.

The flexibility of social media not only allowed Bodyform to respond quickly and in a public manner, but also provided the means for the video to become viral. Over the years, I’ve seen many companies use social media in creative ways.

Great brands require hard work, dedication, and consistently wonderful products. Social media helps the brand promote their product(s) through amplification, but that only goes so far. A truly responsive brand will go out of their way to communicate with the consumer, gather input, and work towards making the entire consumption experience satisfying.

And guess what? Satisfied consumers come back.

Until next time, signing off.

-Chris

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Snapchat, Facebook, and the Hold-Out Strategy

At the time of writing, it has been 4 days since Snapchat formally refused Facebook’s acquisition offer of $3 billion. The main question on everyone’s mind is: Why?

General consensus agrees that Snapchat may have dropped the ball on this opportunity. Pooja, a colleague of mine, reasons in her blog post that Facebook and Snapchat are “miles apart in their positioning” and that Facebook attempted to buy Snapchat in order to “swallow the competition.” I agree with Pooja that this could be a plausible reason, but I offer an alternative perspective.

Before I explain my rationale, let’s step back in time to 2008. This is back when Microsoft attempted to acquire Yahoo! (yes, this actually happened!). At the time, Microsoft saw potential in Yahoo!’s search engine and offered a bulky 62% premium in its offer ($45 billion for a company worth roughly $27 billion). This move was done in order for Microsoft to drive critical mass, increase scale of economics, and access Yahoo!’s engineering talent to accelerate innovation.

And what did Yahoo! do? Yahoo! rejected the offer. Yes, Yahoo! rejected a ridiculously sweet deal with a 62% premium. And what did Microsoft do in response? They offered higher.

Microsoft re-evaluated its offer to Yahoo! and offered an additional $5 billion to its initial offer. Yahoo! ultimately did not accept the offer (which was a terrible decision, in my opinion) but the strategy to wait clearly worked at least once. Yahoo! ultimately pushed its requests too far, which prompted Microsoft to withdraw the offer. Although this strategy was ultimately a failure, it does show the merit of waiting to evaluate a company’s true valuation.

This strategy is called a “hold-out strategy,” at least according to discussions with my Strategic Management professor. The idea behind this strategy lies in the concept of trade, that no-one will offer a deal unless they gain some benefit from the deal. Let me put it this way. Let’s say that you have a really cool action figure, and I offer to buy it for $8. Clearly, since I offered to buy the figure, I value it greater than $8 (perhaps at $10). Your best move is to respond by offering to sell the figure for $9, which is greater than $8 but still less than $10. Assuming that no other kid on the playground has this particular toy, I may actually consider buying it.

This is how I see the Snapchat/Facebook acquisition. I do not think that Snapchat’s services are worth $3 billion, but Facebook clearly does. Relating this back to Pooja’s article, if Snapchat is really seen as a threat worth removing for $3 billion, it may be in Snapchat’s best interests to become that “bigger threat” which will prompt Facebook to consider raising its offer.

I find acquisition strategy (poison pill, white knight, etc) to be similar to a big game of “chicken.” It’s really hard to determine the real winners in such a game, so only time will tell how the course of this interaction will run.

Until next time, signing off.

-Chris

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Sustaining Greatness in Gaming – Part 2

Once a boxer becomes a champion, he must now defend his title. The fight never ends.

In my last blog post I talked about my thoughts on what defined a successful product. In summary, I thought that a great product needed to be appreciated by its target market, and that the product needed the exposure to reach that market.

This post will define the other half of the battle: sustaining your success.

So you have a great product. Your fans are willing to throw money at you to keep making great things. Your product is being mentioned in online circles, promoted through word-of-mouth, and all is going well. There’s only one problem.

The world never sits still.

Whoever currently enjoys your product will eventually get tired. Newer, cooler things will roll out, and new technologies will render your product obsolete. Your fans will eventually become complacent and you’re bound to need to roll out something new-but what?

This is where paying attention to your customer pays off.

In eMarketing, we discussed the concept of the conversation prism. This convoluted diagram essentially lists all the different mediums where an online community can discuss, or observe, your brand.

In my opinion, diagrams are useless unless they help explain something or suggest new methods of working. This diagram does both. First of all, it explains where your product *could* potentially be talked about. This includes places like Facebook, Twitter, or Reddit. By going around the circle, you can identify all the different sources for ideas from your very own customers.

Remember my definition of a “good product” in part 1 of this post? “A great product is anything that is perceived to be attractive by the target market. That is all.” What does this mean? This means that the customer is king.

A lot of business students I talk to say that it’s in a firm’s best interest to “maintain an ongoing relationship with its customers.” When I ask them about it, they reply “so that they can keep making money off of loyal customers.”

I like to look at it a little differently. A firm keeps a lasting relationship with its customers so that it can, or should, pick up ideas. Oddly enough, I talked about this a year ago in my post “Listen to your consumers!” and I’m reiterating the same message now.

This title of this blog post is “Sustaining Greatness in Gaming” because I believe that great game developers listen to the feedback of its players. I keep tabs on popular trading card games and online MMORPGs/MOBAs, and although the problems differ one thing always stays the same: the players want the developers to listen.

Let’s go back to discussing FTL: Faster Than Light. The developers for the game are currently hosting an AMA (Ask-Me-Anything) on Reddit along with some other awesome dame developers. Here, they directly answer the questions of their players and create hype for new products. In particular, they’re getting feedback on what’s cool (or not) in their games. This is essentially free, painless market research.

These are the top posts in the comment thread. If I were the marketing manager for Subset Games, I’d be taking a lot of notes from this thread. We have people voicing their opinions on the product, creating new ideas for future releases, and doing all of this absolutely free.  This is a gold mine of information, and it would be foolish to disregard these comments.

However, what’s very interesting is the response of the developers. “While we have some minor stuff in the works […] it’s unlikely that we’ll be jumping on to a sequel.” What does this mean? To me, this simply means that they’re going to release something new. Something different. Rather than staking all of their success on one given product, they’re going to expand their portfolio to include other games as well. This is a great move as far as strategy goes, and there is only one piece of advice I’d give to the developers:

Make sure you listen to the players.

It’ll be hard to live up to FTL, but if you’re great at inspiring joy in consumers (e.g. PopCap Games, creator of Insaniquarium and Plants vs. Zombies) you’ll likely create another fabulous product. And that will sustain your success.

So what is a successful firm? I’d like to define it as an entity that listens to its audience and creates great products again and again, time after time. If you can do that, I’d classify you as successful.

That’s all on success and sustaining greatness from me. See you all next post!

Signing off,

Chris

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Sustaining Greatness in Gaming – Part 1

Firms exist to create and sustain competitive advantage

Firms exist to create great products and services. Customers will pay for said product/service, and business owners profit so that they can spend their money on great products and services. And that is how the world goes ’round.

But what, exactly, makes a great product?

A great product is anything that is perceived to be attractive by the target market. That is all. If children love your board game, it’s a great board game. If avid knitters love the texture of your knitting thread, you have great thread. If a scientist is able to advance his work through your series of PCR thermal cycler, you have a great…well, thermal cycler.

But what happens when your product isn’t perceived by *all* of your target market to be as awesome as you’d like it to be?

Artists and indie game designers rarely unanimously agree on their thoughts of an “excellent game” or “beautiful work of art.” Each and every one of us have varying opinions, and it’s only natural that these opinions conflict with others. This basis is the source of my ongoing respect for artists and game designers: the less well-known your product is, the more degrees of freedom you’ll have to work with. You don’t have to cater to the masses’ cravings for explosions and violence if you have a beautiful story. You don’t have to use high-definition graphics to convey the emotions of an 8-bit character. And because you don’t have to cater to the masses, you can do whatever you want. You’re limited only to your ideas, and those are endless.

But, if your idea is beautiful, chances are that someone else will agree with you.

And that idea will explode.

We can look at a huge variety of indie games that have made it big. Let’s focus on FTL: Faster Than Light, a RTS game created by Subset Games.

Source: Wikipedia

FTL is a wonderful game with hours upon hours of replay value. Replay value is, in my opinion, very indicative of a game’s success. It means that the gamer is willing to spend more time on your game, and that is (almost) always a good sign. Unless a gamer is constantly frustrated going forward, many hours spent on a game is indicative of a flow state of mind, which is basically that feeling you get when you’re completely immersed in completing a task (cleaning a room, dancing at a party, playing games or writing an interesting blog post(hah!)).

Long story short: FTL is a great product and many people recognize that.

Great products don’t mean anything unless people know about it

Back in the day, when you needed to visit a good restaurant you’d have three options to help choose where you’d dine:

1) Which restaurants are close, and how much do they charge?

2) Which restaurant does my foodie friend Fred recommend?

3) Which restaurant’s advertisements seem appealing?

Essentially, your decision is based on convenience, recommendation, and other appealing factors.

In this day and age, you’d probably look up prospective restaurants using Google and read online reviews. Or you’d tweet #hungry and your foodie friends would tweet back #tryChung’sChineseFood. Or you’d receive a groupon for 50% off at a nearby sushi restaurant. The internet, and social media, is essentially supercharging the exposure of great products/services, and damaging the genuinely bad products/services.

So how do indie games fit in?

FTL: Faster Than Light won many awards when it first came out, due to its grueling difficulty and interesting mechanics. But That would appeal to a gamer’s valuation of the game. But the most important factor for indie games is probably the gaming community itself. A positive recommendation, passed on from one user to another, has the potential to go viral and reach insane levels of exposure. This is the concept of a meme: a piece of cultural data that is passed along from person to person until it has gone “viral.”

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It was only a matter of time before I talked about viral videos.

Okay, so FTL never went “viral.” But it did get very popular, and its release in Humble Bundle 9 only increased its popularity.

So you have the two parts to a successful product: A great product that appeals to its target market, and the exposure it needs to get out there and rock.

But, there is a missing piece.

And I will discuss that critical piece in my next blog post.

Momentarily signing off,

Chris

 

 

 

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Regional Differences in Pricing

I’m a fan of a certain Anime series called Tengen Toppa Gurren Lagann. It’s a motivational roller coaster of emotions and over-the-top action. I love it. Here’s how much an import of it costs online.

At the moment, you might be saying “Holy moly! You mean to tell me that a box of CD’s will cost you almost half a grand?! You must be nuts to even think about buying this thing!” And you’re probably right. Not many people in North America, save for the fanatics or the 1%, would ever dream of buying this glorious box. You’re probably thinking that the marketing managers messed up their pricing strategy. Now, here you’re probably wrong.

Let me introduce a fictional character named Cras.

Cras

 

Cras is your typical North American male. He’s 16 years old, talented but unmotivated, and enjoys playing video games in his spare time. He works part-time as a swimming instructor. There is no way that he will blow over $500 for an anime series he can watch online for free (legally, of course!).

Cras’ friends feel the same way as Cras. They’re pretty interested in explosions and giant robot fights, but they’re not going to spend a lot of money on this hobby when they can be out playing League of Legends or buying cheap games on Steam.

In fact, a large majority of North American males would probably fall under the same category as Cras and Co. They love the series and the concept, but wouldn’t be able to dish out $500-600 to pay for this product.

Now allow me to introduce George.

 

George is an Anime fanatic from Japan. He’s 16 years old, likes to hang out with his friends from school, and tutors Economics part time. His favorite flavor is vanilla, and just so happens to love the series Tengen Toppa Gurren Lagann.

 

George’s friends also love Tengen Toppa Gurren Lagann, and George is willing to save up money from his part-time job to buy the product. He’ll be so cool!

There are obviously some cultural differences between the two pools of people, effectively making them two separate market segments. The North American market is huge, and has an abundance of products to buy (like phones, cars, games, etc). The Japanese market, conversely, is very small. Consumers in this market also has an abundance of products to buy (phones, cars, games, etc), but the amount of Anime fanatics in this market is dramatically higher than those in North America. This is because Anime is made in Japan, and is more well-known there.

Since there are so many substitutes for Anime (as a hobby) in North America, and the amount of fanatics is statistically very small, the price sensitivity of this market is very elastic. This means that a lot more people will buy a product if it is comparatively cheaper, and a lot less people will buy a product if it is much more expensive (see terrible diagram below).

From this diagram, we see that if a product sold for $600 in the North American market, 10 people (only the most fanatical) would buy it. If the product were priced more reasonably, say $100, a lot more people (100 people!) would buy the product. Feel free to tag on a few extra zeroes in the Quantity axis if you want the diagram to be more realistic.

Let’s say the producer wants to make as much money as possible from the North American market. Let’s see the calculations:

$600 x 10 people = $6,000

$100 x 100 people = $10,000

If the producer wants to maximize profit here, he’s sell the product for $100 in North America. He’d make $4,000 more than pricing the product at $600, and making money is cool.

Now let’s look at the Japanese market.

Anime is made in Japan, and so the product gains more publicity and popularity here. The amount of fanatics is statistically greater per area in this region. The price sensitivity of this market is very inelastic (see shoddy diagram below).

This hastily-drawn diagram with incomplete labels implies that the fanatic-dense population is willing to pay *any* price for the product. Think of a rich Star Wars fan bidding to buy the original Darth Vader light-saber used in the movies. $30,000? $40,000? It doesn’t matter, he’s going to buy it anyways! Here we can see that even if the price dropped by $500, only an extra 100 copies of the product will be sold (because the 100 fanatics were planning the buy the first 100 copies, and the next 100 copies were bought by people who were interested but on a budget).

Here, if the producer wants to make the most money, the calculations would look like this:

$600 x 100 people = $60,000

$100 x 200 people = $20,000

Whoa, man! You’d better price that thing as high as possible in Japan! You’d make a lot more money than trying to sell lots of cheap copies, I tell you. And since Japan is the main market for Anime, the product is priced at $600.

“But, Chris!” you may ask. “Why don’t you do both? Sell the product for $600 in Japan and $100 in North America? you’ll make ALL THE MONEY!”

Well, sorry, but I’m afraid it doesn’t really work that way. Jonathan Clements in his talk about Anime mentions a peculiar phenomenon that occurs when you segment the market this way. I’ll try to explain it in as few words as possible.

Remember George? Well, he has internet. And an American credit card. And Ebay exists. You can guess what happens next.

George is pretty furious to see that his North American counterpart is able to buy the same product he is, for half the price (let’s say North America prices the product at $300 instead of $100 to make up for import costs). So he goes on Ebay and buys 100 copies of the product from North America and imports it BACK into Japan. Being the businessman he is, he sells it to his buddies and classmates for $400 each. Eventually, enough of these reverse-imports occurs so that 80% of the Japanese market can now access the product at the reduced price of $400. From a company perspective, these are the calculations that occur:

Sell product for $600:

$600 x 100 (Japan) + $600 x 10 (NA) = $66,000

Sell product for $100:

$100 x 200 (Japan) + $100 x 100 (NA) = $30,000

Sell product for $600 in Japan, $300 in NA, 80% of Japanese market opts to reverse-import the product from North America:

$600 x 20 (20% of Japan) + $100 x 220 (80% of Japan and all of NA) = $12,000+$22,000 = $34,000

“Uhhh,” says the producer of the product, “I think that I’ll make A LOT MORE MONEY if I sold this product for $600 instead of trying to segment the market.” And he would be right.

And this is why we can’t have nice things. (I’m joking).

Interestingly enough, the Anime industry is an interesting industry because although most of the money is made in Japan, a huge audience pool lies in Europe and North America. Some production companies have noted the untapped market in non-Asian areas, and have produced anime to cater to a more western audience (Cowboy Bebop). Others stick to Japanese-oriented humor (Haiyore!, Joshiraku). And some have decided to produce “good Anime” that fit their own tastes and dont’ conform to any particular norm (Neon Genesis Evangelion).

Next week, I’ll be talking about how such companies market their products for different audiences, and how their efforts have stacked up on the rankings.

Until next time, signing off!

-Chris

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Disintermediation and the Anime Industry: Evolution is Critical

Today in our eMarketing class, we discussed the concept of disintermediation and Justin Lew brought up the example of Netflix. The fact that Netflix completely revolutionized the way consumers consumed TV and other forms of digital media is not a new topic; the online model has been adopted by a wide range of industries, from books to groceries and everything in between, since the late 90’s/early 2000’s.

Business students often learn that disintermediation is efficient because it “gets rid of the middleman,” saving costs and streamlining the supply chain. But that middleman can also fight fire with fire and find that an online model can help their own business by offering more choices, bundles, or just general convenience (see:  Expedia.ca). By reinventing themselves through disintermediated online models, existing firms and new entrants around the world continue to challenge the conventional model(s) of doing business.

Disintermediation through adopting an online business model can not only provide a firm with competitive advantage, but can make opportunities out of threats and give birth to a whole new niche to target.

Take the streaming Anime industry, for example.

Five years ago, Japanese animation (Anime) was rather hard to obtain in North America and catered to a niche market. Licensing companies made money primarily on the sale of DVD’s or expensive, new Blu-ray technology. This period of time was also in an era when piracy was at a high; consumers of Anime tended to illegally stream or download series because the pricing for a nice product was either too high or the licensing process took too long after a series was released for a fan to buy the official product. The piracy issue became so bad that Funimation and Bandai, two major licensing companies, issued a statement against Crunchyroll, a website which was, at the time, a source for illegal streams of Anime.

Funimation stated that:

“The battle against unauthorized distribution of anime is a battle that Funimation cannot fight on its own.  Without proactive and effective copyright policing and enforcement by those that control anime content, sites like this will continue to gain a reputation as outlets for free anime”

Bandai supported the action with the statement:

“Bandai Entertainment Inc. will continue to work with other U.S. companies and Japanese licensors to fight against downloading and its negative impact on the US anime industry”

These two licensing giants acted swiftly in response to Crunchyroll as it secured a capital investment of $4.5 million USD from venture capital firm Venrock, publicly denouncing the act of supporting a site that streamed unauthorized anime. And for good reason! As owners of the licenses, Bandai and Funimation had good reason to be upset. The market had essentially become a war between the “expensive, slow, but official licensors” and the “quick to update, free, but illegal streamers.” It was a rough time for licensing companies.

Fast forward to 2012, three years into “the future.”

The rampant piracy of anime has hit Bandai Entertainment hard, and Bandai was forced to cease the distribution of new releases, essentially shutting down its future prospects in the Anime industry. And what of Crunchyroll? Crunchyroll became the only site that offered a unique value proposition: paid, online streaming Anime. Crunchyroll essentially became the Netflix of Anime when it hit 100,000 paid subscribers just over a year ago. Bandai, which relied on physical sales of its Anime, had opted out of the seemingly dead end business prospect. But Crunchyroll continued to support the idea of online Anime streaming by selling premium subscriptions that cost between $5-$12 a month. What irony! Not only did the once-illegal streaming company secure a solid stream of revenue, but it was finally able to do what Bandai and Funimation could not: cater to the needs of the casual Anime watcher.

Before Anime could be streamed legally, the only source of legal Anime was either shown rarely on TV or purchased for huge prices. There was a mismatch between Supply and Demand; physical Anime was much too expensive for the casual consumer and, even today, continues to cater to a niche market for a ridiculous price. With the introduction of online Anime streaming, casual Anime watchers finally have the ability to pay a fair amount ($5-$12 per month) to consume Anime with easy access (streaming). This opened up a completely new market to cater to, and Crunchyroll continues to expand its product offering by selling Anime-related merchandise.

Time and time again we marketers are shown that online business models can completely turn a conventional business model on its head. In this blog post I showed that not only can this result in competitive advantage, but can open up the potential to cater to a completely new market. A point I brought up earlier was regarding the mismatch between the Supply and Demand of a typical Anime viewer; I will probably expand on this point in a later blog post.

But, for now, I thank you for reading this post all the way to the end. I’ll see you next time!

Signing off,

Chris

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COMM 464 – A New Beginning (alt. “Full Circle”)

I started this blog in COMM 101 during my first year at UBC, and here I am as a fourth-year student taking COMM 464. Only a few years ago did I stand in younger shoes, pondering if my decision to enter Business school was the right one. As the years went by and I learned more in my field, I finally feel the confidence to say: “Yes, it was the right choice.”

As a student, I’ve become more analytical and methodological in my work. I’ve grown to appreciate the concoction of forces that make up a Market environment. Not unlike a scientist, I’ve learned to isolate variables, deduce causes for effects, and strike theories for explaining market trends. While others examine the enzymes that denature healthy proteins, I examine the factors that make up a successful brand image. Some statisticians regress lab models; I regress market prices. I find enjoyment in finding insights in a sea of market numbers, much like a scientist would when dissecting the lab data obtained from painstaking hours at a lab.

A poet would write pages about the grace of a river; the flow of water that crashes, flows, and gives life to an ecosystem. Much like I poet, I would draw notice to the power of a Network, where confrontations, friendships, and activities give birth to the virtual community. It doesn’t matter what field you’re studying as long as you stay true to your interests; so long as you can find joy and wonder in what you do, there’s a good chance that you’re in the right place.

Life isn’t a road. It’s a maze. And sometimes you wonder if you’re on the right path. But so long as you’re willing to step forward, you’ll eventually make it out. Sometimes you’ll backtrack or go in circles, but who ever said that the journey would be easy?

So as I end this somewhat nostalgic post, I hope you’ll be willing to follow me as I take on my final year of courses. This post marks the beginning of a series of posts that I will make in COMM 464. I hope you’ll enjoy your stay.

Signing off,

Chris

 

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