marketing | Paul Wallbank - Communications Professional

The Chinese sock fallacy

Simplistic business assumptions often turn out to be more complex than first appears.

“We have an addressable market of four hundred million dollars a year. It’s a huge opportunity and we could win half of it.”

The business manager speaking – who we’ll call John – was talking about the potential market for his company’s small business product that promises to earn around two hundred dollars a year.

How John came to the four hundred million dollar number was simple. He multiplied the two hundred dollars by the two million small businesses in Australia.

John had fallen for the ‘Chinese sock fallacy’ where a simplistic assumption creates the illusion of a huge market. The idea being that there are a billion people in China all of whom will own five pairs of socks so therefore there’s demand for five billion pairs of socks.

The key part of the fallacy is not knowing whether those billion Chinese or two million Aussie small businesses want your socks or cloud computing services.

Other complications include who are the incumbents currently selling to that market, how many pairs of socks do most Chinese people own, how often do they replace them and what do they pay for a new set?

Suddenly things get complex and the assumptions don’t look so promising as we find with John’s projection of his market.

Looking at the figures for Australia’s small business sector with 61 percent of enterprises having no employees, it’s hard not to conclude most are contractors or consultants who mostly don’t need John’s cloud service.

So the Chinese sock fallacy strikes again.

Are brands doomed?

Are brands dying in the face of informed consumers and emerging market indifference?

A few days ago we covered the Great Transition research paper by Colonial First State Funds Management’s James White and Stephen Halmarick and followed up with a piece in Business Spectator looking at the ramifications for the Australian economy.

One of Halmarick and White’s assertions is that brands are dead as consumers in emerging economies don’t care about corporate names and in developed nations people have better information about local businesses.

The former argument seems flawed from the beginning; Apple for example is making huge inroads in China while local manufacturers like Lenovo, Huawei, Great Wall and Haier are all working hard to establish their names in international markets.

In developed markets, White and Halmarick’s views have more basis with brand names not having the cachet they once did now consumers have a global platform to voice complaints and find alternatives.

A good example of brands that are struggling are companies like Microsoft and McDonalds, although in the case of both companies this could be more because of a shift in the marketplace rather than better informed consumers.

However brands are surviving as they lift their game and adapt to changed marketplaces, in fact its possible to argue that today’s consumers are more responsive to brand names than ever in the past.

A good example of this is again Apple which has more fans than ever before. Apple are also a good example of how big corporations can invest huge amounts into new technologies and products to give them an advantage over upstarts.

We should also remember that brands as we currently know them are largely a Twentieth Century phenomenon born out of the development of mass media communications and many of today’s household names came into the culture thanks to television in the 1950s and 60s.

So as creatures of last century’s media it’s not surprising that brands are having to evolve to a changed world, some of them will thrive and grow while others will shrivel away.

It’s safe to say though that the concept of brands isn’t dead, although many of the names we know today may not exist by the end of the decade.

Daily links – Chinese property developers go onto internet

Chinese internet use and smart phone manufacturers dominate today’s links along with Microsoft and Uber’s latest business changes

Today’s links have a distinctly Chinese flavour around them with a look at how the country’s smartphone manufacturers are coming to dominate their market, Tencent’s plans for global domination and how property developers are looking to the internet to save their falling sales.

Uber and Microsoft make their regular appearances to round out the links in their changes to billing and security.

Chinese property developers turn to the web

Faced with declining sales, Chinese property developers embrace – the Internet!

How Chinese smartphone makers are beginning to dominate the market

The rise of China’s smartphone makers: 10 of the top 17 smartphone manufacturers now come from China.

An interview with Tencent

Business Insider has an intriguing interview with one of the VPs of Chinese internet giant Tencent.

In his Q&A, S. Y. Lau discusses how Chinese communities are seeing their incomes rise due to the internet. One of the famous case studies of connectivity are India’s Kerala fishermen who used SMS to arbitrage their market. We may be seeing a similar story with Chinese tea farmers.

Microsoft restrict warning of patches to paying customers

In a short term money grabbing exercise, Microsoft have unveiled a plan to only inform enterprise customers of upcoming security patches. My prediction is this won’t last.

Uber cuts prices

Car hiring service Uber has cut its fares in thirty US cities while guaranteeing drivers their incomes. This is probably a move to keep competitors like Lyft at bay.

Kodak and the smartphone

The Kodak brand makes a comeback on a smartphone

On reading the Verge’s story that UK tough smartphone company Bullitt would realease a Kodak branded phone in the new year my first though was “Aren’t Kodak out of business?”

As it turns out Kodak are still in business having come out of Chapter 11 administration last year with the company focusing on commercial printing, cinematography and the odd bit of revenue from licensing out their name.

Bullitt on the other hand does that licensing with their main product being a range of tough smartphones marketed under the Caterpillar name which doesn’t seem to be a bad niche given the importance of connectivity to farmers, miners and construction workers.

It’s difficult though to see exactly what the Kodak name is going to bring to smartphones; the brand has long fallen out of favour and is irrelevant to today’s digital photographers, the only way conceivable way the Kodak name could be a selling point is if the devices offer something additional in the way of processing digital photographs or offers some advanced camera features.

From the media release that doesn’t seem to the be the case, however in a marketplace increasingly dominated by cheap Android phones having an additional selling point is useful in locking in higher margins.

Both Bullitt and Kodak though will both be happy for the publicity, in one way it’s good to know the brand is still around.

Why websites are important to small business

Having an up to date website makes good business sense and reduces legal risk

Imagine you were overcharged by four dollars for a home delivered Chinese meal. Would you harrass the restaurateur and demand extra payments? The story of Ben Edelman and Boston’s Sichuan Gardens Chinese restaurant illustrates the importance of a business having an up to date website.

Boston.com describes the saga of when Edelman ordered a delivery of $53 worth of Chinese food, on checking the bill he found he had been charged four dollars more than the restaurant’s website indicated.

Edelman, an associate professor at Harvard Business School, didn’t take this injustice lying down; he contacted the restaurant and when the proprietor, Ran Duan, admitted the prices on the website were out of date Edelman demanded twelve dollars — in line with the typical damages awarded against overcharging businesses under Massachusetts state law.

Update: Since posting this, Ben Edelman has apoligised to Ran Duan and Sichuan Gardens.

Keeping things current

While the matter between Edelman and the Sichuan Gardens remains unresolved the dispute illustrates why it is so important for small businesses to keep their website current.

At least Sichuan Gardens has a website as many Australian hospitality establishments don’t bother and, when they do, often neglect the basics like opening hours, location, telephone number and other contact details. It costs business as potential customers can’t find them.

To be fair to Ben Edelman many of us who’d been overcharged four dollars would probably not bother contacting the restaurant, we’d be more likely to order from someone else next time we felt like having Chinese delivered. At least the professor let the establishment know they had a problem.

For those restaurants and cafes who do have a website, often the menus or rates are out of date and are in formats — usually PDF documents — that can’t be indexed by Google, meaning potential customers searching the web for ‘braised fish fillets with and Napa cabbage with roasted chili’ might be missing out. Menus should be on the site as their own web page in HTML format that search engines can read.

Once a menu is published on a website, it’s necessary to keep it up to date. Having out of date prices on menus is just as much a breach of Australian consumer laws as it is in Massachusetts, so there’s legal aspects to having current information on the site as well.

Losing customers

Probably the biggest risk for most restaurants and cafes though is lost business because those potential customers can’t find you. Wasting hours arguing with angry customers like Ben Edelman is also a genuine cost to the business as well.

With most proprietors and managers in the hospitality industry being chronically short of time, it’s essential websites are easy for staff to access and update; the days of complex updating tools or paying your web guy a couple of hundred dollars every time you want to change a page are long gone. Systems like WordPress, Blogger or Wix offer free services which are adequate for getting the basics up on line quickly.

Social media listing are important too, with most customers searching on their smartphones for venues; having a basic Google My Business page and a Facebook listing are the least you can do to help your customers find your establishment.

Ultimately none of us want fights with our customers, so letting them know who you and what you charge is plain good business sense. With so many other businesses not having a basic web presence also gives you the advantage over the competition.

Attacking Apple iPhone 6

Attacking Apple is not the way to beat them in the marketplace

One of the saddest things in life is the company that bleats ‘but we thought of it first’ when overtaken by a smarter or more credible competitor.

Since the release of the iPhone 6, the knives are out for Apple with Samsung, HTC and even Sony poking fun at the new product pointing out the features already in their products.

The problem for Apple’s competitors is the market isn’t listening to the attack ads. In China alone a million iPhones were sold in first hour they went on sale.

For companies competing with Apple they have to find a compelling product, not be sniping at the market leader. For Samsung in particular with its falling revenues it needs to be generating some excitement in the market, not depressing its customers.

Here’s the Samsung ad; while it’s pointing in the wrong direction it’s good in that it holds the critics to account but it makes not a spit of different to the marketplace.

You’re being scanned

Recognition technology is advancing rapidly, creating opportunities for marketers and privacy concerns for consumers.

A cute little story appeared on the BBC website today about the Teatreneu club, a comedy venue in Barcelona using facial recognition technology to charge for laughs.

In a related story, the Wall Street Journal reports on how marketers are scanning online pictures to identify the people engaging with their brands and the context they’re being used.

With the advances in recognition technology and deeper, faster analytics it’s now becoming feasible that anything you do that’s posted online or being monitored by things like CCTV is now quite possibly recognise you, the products your using and the place you’re using them in.

Throw all of the data gathered by these technologies into the stew of information that marketers, companies and governments are already collecting and there a myriad of good and bad applications which could be used.

What both stories show is that technology is moving fast, certainly faster than regulatory agencies and the bulk of the public realise. This is going to present challenges in the near future, not least with privacy issues.

For the Teatreneu club, the experiment should be interesting given rich people tend to laugh less; they may find the folk who laugh the most are the people least able to pay 3o Euro cents a giggle.

Ello, Ello to a frustrated social media market

The rapid rise of upstart social media service Ello is a warning to the industry’s incumbents and the marketers using the platforms

Over the last week new social media service Ello has been in the news as the ‘anti-Facebook’ that doesn’t collect user details or push advertising onto feeds.

Certainly Ello has touched the zeitgeist with reports claiming the service is getting 30,000 new signups every hour. It’s clear social media users aren’t happy with the existing services.

Part of this discontent is due to social media’s growing pains as the platforms search for the business models to justify their massive valuations, with the consequence of users finding their streams being polluted with invasive and often irrelevant advertisements.

Social dilemmas

For Facebook in particular this is a problem as they have to balance the service’s relevance to users against the demands of ever desperate advertisers who want to post as many ads as possible into the feeds.

Adding to the discontent is suspicions on how the existing social media services intend to trade users’ information. While many internet mavens may claim ‘privacy is dead’, most people are concerned at how a history of their likes, friends or conversations could hurt future relationships or job prospects.

Which ties into Ello’s manifesto.

Your social network is owned by advertisers.

Every post you share, every friend you make, and every link you follow is tracked, recorded, and converted into data. Advertisers buy your data so they can show you more ads. You are the product that’s bought and sold.

We believe there is a better way. We believe in audacity. We believe in beauty, simplicity, and transparency. We believe that the people who make things and the people who use them should be in partnership.

We believe a social network can be a tool for empowerment. Not a tool to deceive, coerce, and manipulate — but a place to connect, create, and celebrate life.

You are not a product.

While Ello’s founders are right that Facebook, and to a lesser degree, Twitter are advertising platforms at present it may well be that social media’s days as a marketing tool are numbered as the business models mature.

The evolving social media model

Facebook’s announcement that it is going into the payments field is an indication that the businesses are maturing beyond the broadcast advertising model that worked so well for television and radio while Twitter’s struggles to shoehorn the old marketing tools into its business continue.

The most successful social media platform to date is LinkedIn which makes less than a quarter of its revenues from advertising — down from 30% two years ago — with the company building revenues in its corporate talent finding services, something that makes LinkedIn’s ambitions to be a global content publisher somewhat strange.

So it may well be that Ello aims to solve a problem that may not exist in the near future.

Ello could turn out to be the ‘Facebook killer’ however the odds are stacked against it, what is clear though is the social media marketplace is telling the industry’s leaders that consumers aren’t happy. It’s something the marketers staking their future on social media need to keep in mind.

Employee engagement in small business

Blogging helps small business tell their story and improves staff morale

Earlier this week I was asked what tools small business could use to increase employee engagement.

My reply was a simple one; start a company blog and let staff contribute to it. Letting workers tell stories of why they enjoy their work not only gives them a feeling of being recognised as part of the team but also shows the human face of the business.

That latter part is an important point as too many small businesses try to sound like Exxon-Mobil when they present their company face when in actual fact most customers are after the human touch.

It’s a simple thing, but showing your business’ human face is not only good for staff morale but also good as a marketing tool as well.

Business benefits from blogging

Blogging can be useful tool for a savvy business

This post is the final of a series of four sponsored stories brought to you by Nuffnang.

Boring is the comment often used about business websites, however smart companies are using blogs to spice up their sites and boost marketing, customer retention and employee engagement.

A blog can make a company’s website more dynamic and a destination for visitors, it’s an opportunity for an organisation to demonstrate its depth of expertise and the qualification of its staff.

Best at this are the big global companies like GE, Cisco and IBM that have large pools of experts who can contribute to the company blog. These enterprise blogs are sprawling sites that cover multiple markets and industries which the companies operate across.

More than a marketing tool

For smaller tech companies, particularly Silicon Valley startups, their blogs have become vital marketing platforms where they often describe the company’s journey and new features being added.

Some companies, like Uber and Nest, use the company blog as their press channels with entries acting as media releases. This is particularly useful for smaller businesses without a PR agency or in house communications people.

At a more tactical level, blogs can be used as a weapon in a fight for marketshare. One of the toughest battles on the internet at the moment is going on between accounting software companies MYOB and Xero and their blogs are at the forefront of this fight.

In this battle MYOB are the incumbent with over a million users in the Australian business accounting market and a small army of Certified Consultants to help clients with using the software while Xero is the well funded cloud computing service that grew its Australian customer base by nearly 50% to 147,000 so far this year.

Small business thought leadership

So the battle is intense with both companies using their blogs to show their thought leadership in the small business space. Both of the blogs illustrate each company’s strengths and weaknesses.

MYOB’s blog is the longest standing and is more of a generalist overview of small business and accounting issues while Xero’s focuses on the new features being added to the product, both have fiercely passionate followers which shows in the comments fields of their blogs.

Blogs though need not be about pure marketing or advertising functions, in fact the best small business ones are those that just tell their customers what’s on. These are particularly good for the hospitality and retail industries.

One plus with business blogs is they help employees understand their business better, particularly when staff are invited to contribute.

Blogging isn’t just about lonely geeks or bored mums sitting in their spare rooms. A well thought out business blog can be a great tool for engaging existing customers, motivating staff and building new markets.

Googling your business

Despite Google’s new small business service, the space remains a great opportunity for a disruptive entrepreneur.

Google’s small business services have been a constant irritation of this site, with the view that local listings have been a missed opportunity for the service.

Overnight, the search engine giant has launched their new Google My Business site to bring together the disparate services offered to local enterprises.

At first look it’s a fairly slick way to get new businesses signed up, albeit dependent upon Google+ for the initial login. For businesses with existing Google small business accounts, the site directs you to the revamped Google Places administrator screen.

The immediate observation is that Google+ integration is a weakness as it relies on one ‘real person’ account to administer the listing; this will create problems for business as staff leave and founders retire.

Black Box Verification

Another problem is the black box verification process still remains – it’s hard for businesses to keep their listings fresh and up to date when there’s a risk doing so will see their entries might be suspended for violating some vague rules.

For local businesses it’s essential to have the search engine listing and the Google My Business site makes it easier to get it running, however the problems with Google’s local business strategy remain.

With Google, Facebook and the other online empires neglecting small business, this market is still a great opportunity for a disruptive players.