Out of the Wharton School we have a nice piece of behavioral research on the effect speed of Adoption has on longer-term commitment. The article, The Long-term Downside of Overnight Success, describes research finding “the adoption velocity has a negative effect on the cumulative number of adopters”.
This research dovetails nicely with a lot of the topics discussed here on the blog lately, so I thought I’d use it (with a nod to Godin’s post on Strategy vs. Tactics today) to provide some fodder for thought.
First, the importance of Psychology in Marketing. So many of the “discoveries” arrived at through brute force testing of Online Advertising are already well known in the greater discipline of Marketing through Psychology. For more on this read “The Other 3P’s” and if you’d like to do something about lack of knowledge in this area, make sure to read this comment on source books.
Second, this research is a great example of isolating the true drivers of behavior. The idea of looking at baby names to isolate the real behavior from “technology and other commercial effects” while including “symbolic meaning about identity” results in a broad, Strategic-level answer to the question, not a Tactical one.
Why is this important? It means the results can be applied across a host of different Marketing situations, rather than only a specific one.
Much of the “research” done on web topics suffers horribly from pointing to rare, specific successes as a model for everyone else to follow. Might be OK for Advertising people, gives them a low risk excuse to play with a Tactic. Useless for Marketing people, who have the Strategic need to describe results before they happen.
For the analysts out there, Strategy is the Hypothesis. Do you just create tests aiming for brute force pass / fail, or do you follow the scientific method and have a Hypothesis before you design the test?
Third, the whole issue of web business models, which always seem to be built on the concept of Quantity versus Quality as the Strategic vision. These models are about the fastest growth rates, total sign-ups, and traffic. The problem with this approach is this: it’s only really meaningful if “Reach” Advertising is the core business model.
That’s where the trouble is: successful Advertising on the web is not about Reach and Audience, it’s about Preference and Individuals. This is the paradox of Display Advertising in Social Media; it’s exactly the wrong approach as defined by everything people say is “Social”.
And, this is why you find that over time, almost every “new” business model that starts as some kind of a mass concept fails until it turns into a vertical concept – the exact opposite of the Quantity / Reach model. By going Vertical, the model moves from Quantity to Quality and then often succeeds – by serving a smaller, select group of people with certain preferences, building Relationships.
Why? Because, as stated in the Wharton piece, “the adoption velocity has a negative effect on the cumulative number of adopters”. Begging the question: Is your product more like a disk drive, that lacks any cultural identity? Or is your product “in a domain where people use it to communicate to others” like Fashion? Auto? Decor? Social Media?
The former begs rapid adoption, the latter, slower adoption. Anything Social, it seems, would benefit from a slower adoption rate. Paradox, again, right? That’s the difference between Strategy and Tactics, the difference between Marketing and Advertising.
I can hear some of the cat-calls now. Jim, we’re all about scale, the VC’s say we have to grow rapidly, it’s the way the business model works. Network effects, you know. Really? Is a larger network always better than a smaller one?
What if you (and they) are wrong? What if the Reach model is the wrong one for the web? After all, it’s an offline, one-way model.
What if rapid growth actually destroys the value of the business, by attracting the “me-to” crowd that abandons the trendy in favor of the new? What if the early adopters provide a false read on what the important business drivers are, and in fact are your worst customers?
How many of those millions of accounts are dormant? How long has it been since the early adopters came back?
What’s your Adoption Strategy?
Very interesting post. We could replace “vertical” by “niche”, and remind ourselves that we were all talking, circa 1996, about how the Internet was the perfect channel for very niched products, freeing many of them from their local markets with too little demand, while going around national distribution systems that demanded volume.
I think we forgot that the Web has always been about the particular (Preference/Individual), and not the mass, even more so in media.
Exactly. The very nature of the web facilitates “personal”, yet everybody wants to focus on “mass”. How can that be? I can’t hold both those ideas in my brain at the same time. Paradox.
Google is extremely large, but Mass is not their business model, Mass is their platform. The model is delivering extremely personalized experiences based on individual behavior.
I guess it’s similar to the “mass customization” idea. It appears first to be paradoxical, because technology goes faster than business models. Maybe it has to do with what has been considered a success in business for a long time (weight of tradition), notably consistent growth, i.e. selling to more and more people (or at least growing the largest share of a market), with the idea that there should be no limit a priori.
In principle, a niche market is limited by definition, which means that it’s unit/revenue forecasts appear quickly reachable. In most people mind, you don’t want to be in business for potentially very limited annual sales; every business wants to become a billion dollar company someday.
With the proliferation of millions of niched markets, I wonder if the best organizational structure to serve them is not actually the SMBs, or even the very small businesses. I guess a lean and mean company could very well service a particular niche, engage for once in *real* listening of their customers (with so few, it’s easily feasible), cultivate the relationship with them and live many years of healthy profits, while keeping relatively the same size throughout its existence. We know now that smaller companies are able to achieve some very interesting economies of scale, which were possible only with being enormous in the mass production world, thanks to the Internet.
At the same time, I can be completely wrong, Google, as you say, being a good example of traditional gigantism, still able to deliver satisfactorily to extremely niched markets…
Many people love niches until they realize the very definition of niche means the size of the business is capped :0
And perhaps this is the very reason why the “direct” folks concentrate so much on Profits rather than Sales; they understand how niches work and that Sales are capped. Hmm. So this is the real reasons we can’t get any Marketers to care about Profit as a metric, because they all believe the upside of their business is unlimited? Wow. That requires thought.
But there are outliers, companies who seem to understand all of this very well, and mix the models with great success, creating giant companies of niches. If you look at these companies, you tend to find Marketing Measurement is highly perfected using controlled testing.
Take Proctor and Gamble. This is a giant, offline company that is really a series of niche businesses. One of the things they do really well is Marketing Measurement. Another thing they do really well is niche creation – think Swiffer. When you run out of niches it’s possible to create more, but it takes a deep understanding of the market. For the Lab Store we did this twice this summer (and it almost killed me). We now sell 2 products that are the only products in their niches – zero competition.
Interesting thing, if you look inside P & G, what you find is (like Google) a platform, their Brand Management discipline. There’s a formula for success and they are very good at repeating it, because they understand the model at a very deep level through measurement and accountability.
So platform, platform. Organizational structure for P & G, right? But for Google? A function of channel; they don’t sell products, they sell access to information, they are a “pipe” (distribution) not a product. Double Hmmm.
Further reflection:
Perhaps distribution is the key to a successful multi-niche, profit-oriented business model. What do a cable company, P & G, and Google have in common? They “own the pipe”, as we used to say in cable.
The Broadcast TV, least common denominator programming model favors Reach / Quantity over Niche / Quality. A cable company delivers niche fare where consumers self-select according to interest; quality of relationship is higher. Cable company owns the pipe, can leverage all kinds of internal Marketing tactics broadcast cannot without incremental distribution expense.
Google doesn’t literally own the pipe, but by dominating in Search it does so through the side door. This platform delivers highly customized services to all customers without incremental expenditure, and like cable, can leverage all kinds of internal Marketing tactics.
P & G, by dominating the shelves with it’s distribution network, also owns the fixed cost distribution pipe, so can take advantage of niches without incurring incremental costs, and also leverage all kinds of internal Marketing tactics.
So owning the pipe might be the key to a multi-niche, profit oriented, Marketing measurement-centric business model? In other words, if you don’t own the pipe, it becomes “too hard” to measure Marketing Profit and Sales is the only metric you can get a grip on?
Great analysis. I guess owning the pipe is the only way to do niches at a mass level. That is why the companies you mention can achieve it. Huge scale/profits would only possible in the Own pipe/Measure/Focus on Profit trinity.
Interestingly, owning distribution puts you closest to customers, and increase your ability to listen (even through market research).
So, this means that Niche/Quality on a mass scale can be achieved by large organizations. I still believe that a company does not have to achieve constant growth, and aim for size, in order to sustain a healthy existence, thanks to how it is easier than ever to service a niche with the Web.
How would you qualify Facebook, based on this?
Crossed up, paradoxical business model.
Niche? Check, if you call social a niche within “Communications” anyway.
Distribution? Check, owns it for social.
Mass Media / Reach-based Business model?
Oops.
One of these doesn’t go with the others…
So, they need to either:
1. Modify Mass / Display delivery so it is super-targeted to individuals, or if they can’t do this, go with Verticals to drive content / context for Display
2. Replace Display with Search (as I suggested a couple years ago)
‘Course the problem with Search may be all the “connectedness” – it’s not as natural for people to Search as it is to simply connect for answers
Paradox, the business model prevents success. You can’t be Social / Personal and Mass at the same time, more on this here.
It’s so hard to find the time find the time to manage twitter/facebook/blog content and then market/syndicate them … …
The best / quick way to get huge result probably is viral marketing.
Just watched a online movie ”The YES Movie ” produced by the Young Entrepreneur Society, they movie documented today’s young entrepreneurs and some famous authors, great promotional tool for their networking site.
http://www.TheYESmovie.comby Louis Lautman
“For the analysts out there, Strategy is the Hypothesis. Do you just create tests aiming for brute force pass / fail, or do you follow the scientific method and have a Hypothesis before you design the test?”
What an elegant way of expressing it all.
Moving from a Low Accountability to a High Accountability Business Model, And is in that good, Think about it…