Tag Archives: marketing

How can Twitter be a viable marketing tool?

Is Twitter a viable marketing tool? Some argue in favor of it, and some argue against it.  I think it boils down to whether an interesting conversation can occur as a result of this. Are there interesting anecdotes that can be utilized to explain the brand story? Are businesses simply using social media for the sake of it? Upon further examination, the pluses and minuses of this approach will be discussed.

Some of the advantages of Twitter would be the design of the platform.  It is simple, scalable, and easy to develop APIs for Twitter.  These APIs are modular and can exist cross-platform.  This is also a “cloud” application, where storage of the information is not placed in the users’ computer, but on Twitter’s servers.  Mostly, the advantage is that people are able to organize around topics, events, companies and causes offline and online with real-time conversations surrounding these.  It is human nature to be curious to know what others are doing and thinking.  Twitter is also a viral platform for everyone’s content, and it provides context to people’s conversations.

On the other hand, some challenges for Twitter can include finding content that would be of interest to potential customers.  For example, if one’s client sold table salt, what content can be tweeted?  The target demographic, busy moms, probably do not have the time or the interest to follow a table salt company’s tweets.  It takes much time and energy for twitter campaigns, and in the end is it really worth it?  What meaningful conversations can come from 140 or less characters messages? With so many people tweeting, isn’t burdensome to read all of those tweets?

I think despite some of the challenges, twitter can be useful if the brand has a compelling story to tell.  Reaping rewards of Twitter for more mundane products/services (e.g. table salt or housecleaning) becomes a greater challenge for marketers.  If there is an exciting narrative that surrounds the brand, Twitter becomes an easier tool to utilize.

Using Twitter searchTinker and other search tools are very important to ascertain what people are saying about one’s brand; one’s industry; competitor products/services; brand’s product/services and the topics of conversations of one’s target market.  These could be complaints, compliments, uses of the product or service.  Also joining in the conversation between one’s company and the customer is very important.  A success story from this was when a customer was complaining about their Comcast Internet service.  This customer tweeted their complaint, and instantly, a Comcast customer care representative responded.   This built up relational capital between Comcast, that particular customer, current customers and any potential customers.  This example of quick customer service became viral across the internet.

How has the recession affected brand strategy?

Many advertisers and marketers position their brand message to Maslow’s higher order needs (e.g. the need for belonging, esteem, self-actualization) on the pyramid.   Has the message changed as a result of the recession?

Mr. John Gerzema, author of Brand Bubble argued that because of the recession we need to embrace the lower order needs (e.g. the needs for safety and physiological protection) on Maslow’s hierarchy.  Fear and uncertainty are on the rise.  The marketers that will have a competitive advantage from this recession will replace passion with compassion.  Evidence of this includes Hyundai’s current campaign called Hyundai Assurance, which lets any Hyundai owner walk away from their lease or loan on a new Hyundai vehicle, if they lose their job within 12 months of the purchase.  In the first quarter of this year, the entire automotive industry in the US was down 38.4% between March 2009 YTD versus March 2008 YTD.  While Hyundai’s sales were up 0.7% during that same period.

There are a few businesses that have succeeded in the recession. Evidence is apparent with the Match.com, The Economist Magazine, LoveFilm and MTV.  In these four case studies, all are able to adapt to people’s interests as a result of people cutting back in their budgets.  The most compelling case study is with The Economist.  Its rich content about the recession and the banking crisis certainly appeal to people, but in my opinion,  it is its creativity in leveraging different media such as its podcasting, online content, magazine content and its educational guides on various subjects such as advertising that help differentiate this magazine with others.

Is increasing the marketing budget enough to increase sales?

On an annual basis, firms are confronted with multiple decisions.  One of them is regarding their marketing budgets.  Here are three scenarios:  1) Increase the marketing budget as a percentage of overall sales (Pushers); 2) Keep the marketing budget constant as a percentage of sales (Plodders); 3) Decrease the marketing budget as a percentage of overall sales (Pioneers).  Which scenario is most effective?

Knowledge at Wharton examines a book written by J.C. Larreche, called “The Momentum Effect,” that examines these scenarios.  According to Mr. Larreche, the third scenario is most effective.  It seems counterintuitive doesn’t? 

From the second scenario, where the company keeps its marketing to sales ration constant.  It does not differentiate itself from its competitors with respect to its spending, it is akin to being on cruise control.  This is the least effective method to increase sales for sustaining profits.  In fact, these firms underperformed vis-a-vis the Dow Jones index by 28%.

The first scenario, by increasing its marketing budget, both sales and profitability increase moderately.  Their shareholder value performance mirrored the Dow Jones index. These companies typically cut back on other expenses such as Manufacturing and R&D in order for them to increase their marketing to sales ratio. 

Surprisingly, the third scenario by decreasing its marketing budget as a percentage of overall sales is most effective because the company allocates its resources to other areas of the business that can help contribute to the overall sustainability of profits in areas such as R&D.  Overall, the marketing budget increases in real terms, but decreases as a percentage.  These companies outperformed the Dow Jones index by 80%.  

Companies need to understand that merely increasing the marketing expenditures is not nearly enough for sustainable and profitable growth, it needs to focus on other areas of its business that maintains current customers and eventually attract new ones such as logistics, product/service R&D and after sales.

I think that companies that understand and identify with current and prospective customers needs and wants in their advertising, product/service design, and after sales is prescient on future successes.  Merely focusing on one area (perhaps the business’s core competency) is not enough.

An example of this can be found in the auto industry. After 9/11, GM introduced an incentive called “Keep America Rolling,” this was to generate sales and to clear up built-up inventory.  Ever since that campaign, the Big 3 (GM, Ford and Chrysler) have constantly relied on expensive advertising campaigns, as well deep discounts and incentives.  This was an example of a Pusher.  The Japanese manufacturers were examples of the Pioneer, they relied less on incentives and were able to be more in tune with the customers needs and wants.