Tara Johnson’s recent blog talks about Google’s new approach to virtual reality advertisements. Although still not a fully developed product, this technology could be foreseen to lead advertisers into a whole new era of advertising, where potential consumers not only see the picture/video on flat surface, but instead encounter a more intimate experience with 3D visualization.

A screen shot of one existing experimental VR ad from http://www.cpcstrategy.com/blog/2017/07/virtual-reality-advertising/

I think this technology offers a very innovative advertising technique that could really solve the bottleneck that advertisement has stepped into—where consumers become indifferent to the bombarding of information and advertisement everywhere in their life and thus the companies’ inputs into advertisements, although sometimes very costly, receive less and less payoffs.

This diminishing effectiveness of advertisements also corresponds to the change in the consumer decision journey from a one way, marketer TO consumer conversation, to a two way, active consumer AND marketer interaction. VR advertisements targets exactly this active evaluation phase of the new consumer decision journey; not only is it more interesting, attracting more potential customers to even view the advertisements, it’s also more direct and intimate, giving customers more accurate information that help them to make decisions.

VR ads could be less suitable for smaller companies since they are more costly; however, for larger companies that are able to spend time and money into developing the technology, the VR advertisement may bring back some very positive results.

For example, recently I read that Ikea plans to experiment with selling furniture on third-party online platforms like Amazon to raise sales. From 2012, Ikea has witnessed an increase to visits to its own website by over 20%, yet online sales still only accounts for 4% of its total revenue. I think this is because many people simply like to see the furniture through their own eyes

Ikea’s visualizing tool

in store before they decide to purchase. Although Ikea has a software that helps shoppers to “see” the furniture displayed, the visualization is essentially still a picture. A VR application can actually help customers to ‘experience’ displaying the furniture in their rooms in 3D and potentially raise Ikea’s sales on ecommerce. Selling through third-way parties means a sharing of Ikea’s profit margin, and in that case it could be an alternative to spend that portion into developing VR technologies to achieve more profit in the long term.

After all, according to Tara, the VR advertisement still has to follow the most important rule—not making the ads forced or intrusive that they stimulate negative response from users. However, if companies handle the technology carefully and let users feel that they are in control, VR advertisement could indeed become an innovative advertising tool that provides convenience and accuracy for consumers and meanwhile raise sales and revenues for companies.

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Recently, I read an article on Dyson regarding its decision to launch an electric car model by 2020.Truly surprised by this bold decision, I wondered whether such decision could lead to profitability, especially given the lack of experience Dyson—a home appliance brand—has in car industry and also the monopoly Tesla holds in the electric car market.

A screenshot of Dyson’s pricey vacuum cleaners from dysoncanada.ca

How was Tesla able to generate its success? Well, several external factors provided Tesla a good environment to grow: Most evidently, technology and ideas in energy conservation is developing faster than ever, allowing Tesla to make breakthrough in electric car models. Politically, US supports resource conservation and allows Tesla to secure a $465 million loan from the U.S. Department of Energy. Most importantly, with the economic growth in the Western countries, people are willing to spend more on vehicles; meanwhile, they are more aware of the environmental compacts and move towards a direction of healthier life style. Tesla targets this specific customer segment and offers focused and differentiated products—high-end electric sports cars—which no other company offered, forming a niche that allowed Tesla to expand so quickly.

I suspect that Dyson will be able to obtain a similar success in the electric car industry.

Dyson has been successful on developing the solid-state battery technology, which will sure make its entry barrier to the electric car industry lower; however, Dyson is not the only company that realizes the profitability of electric cars—Porsche, Audi, and BMW are all developing electric car models that will hit the market around 2020. Those companies have an even smaller entry barrier since this new products still share similar technology, customer segments, distribution channels, and suppliers in production. Although the electric car industry has a fast growing demand, the large number of new entries will make the market extremely competitive; therefore, although the entry barrier is lower, the barrier to success will be quite high.

Furthermore, being a brand famous for vacuum cleaners, Dyson will have to spend more time in trying to attract customers. Unless Dyson’s value proposition is very unique and offers attractive POD, it will not have any more advantage in attracting customers than other companies like Porche, Audi, and BMW who already built a customer base in the industry.

Of course, another direction Dyson could choose to go is cost leadership, but Dyson already warned customers that this will be an expensive model, eliminating that possibility. After all, why would customers choose Dyson over BMW or Porche though, if the products are similar and are at similar price? That, will be up to the value proposition and marketing strategy that Dyson decides to take.

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References:

7 Reasons Why Tesla Has Been So Successful. (2017, September 30). Retrieved October 28, 2017, from The Economist website: https://www.economist.com/news/britain/21729726-apple-abandoned-electric-vehicles-too-complicated-can-vacuum-cleaner-king-do

Steinbuch, M. (2015, January 22). 7 Reasons Why Tesla Has Been So Successful [Blog post]. Retrieved from Blog Page of Maarten Steinbuch website: https://steinbuch.wordpress.com/2015/01/22/7-reasons-why-tesla-has-been-so-successful/

Vincent, J. (2017, September 26). Vacuum company Dyson is building an electric car. Retrieved October 28, 2017, from The Verge website: https://www.theverge.com/2017/9/26/16368196/dyson-electric-car-vehicle-announcement

Images:

Dyson’s pricey vacuum cleaners [Photograph]. (n.d.). Retrieved from http://www.dysoncanada.ca/en-CA/shop/vacuum-cleaners.aspx

PEST Analysis Diagram [Map]. (n.d.). Retrieved from https://www.strategicmanagementinsight.com/tools/pest-pestel-analysis.html

Last week, I read the blog “HEYTEA’s success: a new marketing strategy” by ChenShi and was inspired by the revolutionizing marketing strategies used by the business that leads to their breakthrough in the market. Chen Shi interpreted Heytea’s success from four key approaches (which I highly agree): the emphasis put on refined customer experience, the appropriate brand positioning and specifically targeted consumer sector, the precise choice of store locations, and efficient advertisement through digital medias.

Screen shot of #heytea on Instagram

From my experience, Heytea is a typical example of China’s “Wang Hong stores”—a phenomenon arisen in recent years in which stores become popular on the Internet and thus attract an unusually large flow of customers. (Wang Hong store stands for “web star stores”). Those stores utilize essentially the same marketing strategies; they specifically target young poeple who fully immerse themselves in the power of social media and who pursue brands more so than the actual commodities purchased. Those customers who visit the store take pictures and post on social media, thus promoting the brand to even more people—forming a positive feedback loop. Those pictures increase viewers’ curiosity and eager to try the products—even if the cost is a two-hour lineup.

Despite initial success, I believe that there are certain defects with such marketing strategy. Using Heytea as an example, the post purchase experience is nearly ignored by the stores. After the initial visit, the long wait time and extra effort put into purchasing the product becomes disproportionate to the result obtained. The marginal benefit for purchasing one of these “Web Star Product” substantially lowers, and it’s no longer worthwhile to lineup for two hours to purchase one of these products. Thus, the percentage of returning customers is comparatively low, and consumer loyalty is harder to achieve.

Further, the long line-ups in front of stores make customers perceive the products as more attractive and worthwhile to line-up for. However, as most people finish making their first purchase, the size of the line-ups shrinks, further decreasing the perceived attractiveness of products. Long term wise, sales will shrink. As less customers visit the stores, the effect of secondary online advertisements also decreases, potentially creating a negative feedback loop. As a result, Wang Hong stores lose their popularity quickly. (just like what happened to Simmer Huang—a Web Star restaurant in Burnaby—which used to have very long line-ups but now gradually lost its appeal.)

Picture of a dish in Simmer Huang from https://www.vandiary.com/2016/11/05/simmer-huang-kingsway/

Although Web Star stores gain quick popularity through their marketing strategies, the strategies could be unsustainable, and stores like Heytea has to continuously revise their strategies—possibly introducing new product lines or new advertisement methods—to ensure their position on top of the supply chain.

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Reference:

Chen, S. (2017, September 26). HEYTEA’s success: a new marketing strategy [Blog post]. Retrieved from Sylvia Forman’s Blog: https://blogs.ubc.ca/chenshi/

Ma, J. J. (n.d.). Secrets of wanghong stores. Global Times. Retrieved from http://www.globaltimes.cn/content/1065835.shtml

Simmer Huang in Vancouver [Photograph]. (n.d.). Retrieved from https://www.vandiary.com/2016/11/05/simmer-huang-kingsway/