Click-Through-Rate (CTR) in Google AdWords or PPC is like opening a Direct Mail piece

Click-Through-Rate (CTR) in Google AdWords and PPC (pay per click) is like
opening a Direct Mail piece, if you
think about it. Here is how:

  • Direct Mail
    involves preparing a mailer that has a letter and some kind of a response
    form along with a reply envelope. This is what we call "junk
    mail" and last year US Post delivered  84 Billion
    pieces of junk mail. By definition, junk mail is something you just throw
    out. Research suggests that 60% of Americans do respond to
    printed offers/appeals.  The trick is in getting the right mailing
    list and framing the right content in the direct mail piece. Here, data
    analysis can play a big role. For example, if a bank wants to send out a
    new credit card offer to its existing customers and decides to mail all of
    its one million customers it might be wasting money. Instead, by identifying
    key characteristics of customers that might predict better response the
    mailing list can be cut down to say 100,000 from 1 Million saving the
    mailer cost for 900,000 mailers. In either case, the mailer reaches the
    customers' home mailbox and may or may not be opened. The open rate of a
    direct mail piece is sort of similar to the CTR i.e. number opened divided
    by number mailed.
  • Click-Through-Rate (CTR) is similar to the open rate of direct mail. CTR is the
    number of times the Ad is clicked (like letter opened) divided by number
    of times the Ad is shown or the impressions (like the number of letters mailed). However, there are important differences between CTR in PPC (Pay Per Click)
    programs like Google AdWords  and Direct Mail:

    • On the Internet, the advertiser pays for only clicks,
      not impressions. In Direct Mail you pay for every letter and postage
      whether or not the letter is opened.
    • On the Internet, a skillfully managed Google AdWords
      campaign shows Ads and content exactly when the Internet searcher is
      searching. The ability to show when someone is looking is probably the
      best thing about search advertising      . In contrast, the best crafted Direct
      Mail campaign is still called "junk" mail.  OK Internet
      banners can be sometimes annoying, but the overall Internet advertising
      has so far avoided  the"junk" label mainly because it is relevant to search.

So will
Direct Mail disappear? Not really, because there will always be room for printed
stuff at the local level like local newspapers for all manner of services like fall cleanup, plumbing
etc. But even local plumbers will want to advertise on the web because they can
show Ads only around a specific geography by geo-targeting. More on
that in a later post. Contact StratoServe.   

Pharmaceutical companies outsource innovation to Biotech firms

Pharmaceutical companies have great strengths in
the marketing of medicines but tend to outsource the uncertain business of
early stage innovation to small Biotech firms. For creativity and radical
innovation is difficult to do in very large organizations. There are just too
many processes, and many of them are not very clear in the first place. On the
other hand, a small Biotech has comparatively few staffers that are highly
qualified and very highly motivated. The motivation comes from the
possibility of inventing a blockbuster drug and the windfall that could arise
upon FDA approval. 

However, here
are some numbers to think about to get a sense of the odds of innovation
success from page
3 of this brochure from innovation.org a Pharmaceutical research and
industry organization: It takes between 9-15 years to come up with one approved
drug starting with five to ten thousand (yes 10,000) compounds. It is not
uncommon to find Pharmaceutical scientists who have spent 20 years in the lab
working on some stage of the process, and having not seen a single product
make it to the market!

At the
marketing end of the pharmaceutical business one keeps hearing of blockbuster
drugs or those drugs that sell over $1 Billion  a year. But it
turns out that there are only 125 of these drugs and these too face the
"patent cliff" when patents expire and cheaper generics take over
much of the market. For example, the blockbuster cholesterol drug  Lipitor
from Pfizer saw a sales decline of 42% in the first month of coming off
from patent.

Another piece
of older research by
Grabowski and Vernon (1990) reports that of  those prescription drugs
that made it to the market 4 out of 5 or 80% made less than $250
million dollar after reckoning the R&D costs for the drug. In other words,
those 125 blockbusters do have a very long tail of low selling drugs that all
went through the travails of the drug innovation process.

Thus, it does
makes sense for big Pharmaceutical companies to outsource early stage
development to biotech companies and have multiple alliances to ensure that
there is a very thick pipeline of products under development. By doing so, the Pharmaceutical
company can focus resources and processes around later parts of innovation like
clinical trials and marketing. These activities can be made into an efficient
routine that delivers results far more easily with a large organization than
the uncertain endeavors of creatively coming up with initial ideas that small
biotech firms can do well. Contact StratoServe.

Sustainable Innovations : the Pressure-State-Response (PSR) approach of OECD

It's hard to wrap your mind around
the concept of sustainable innovation and the Pressure-State-Response (PSR) of the
OECD is a nice way to think about it. 

So what is sustainability? Well, it
is how you use the earth's resources and what you will leave your grand and
great grandchildren! Sounds simple and rhetorical but is pretty powerful  if you think  going by the Did you know section on page 1 of this OECD Document:

  • 2400 liters or 634 gallons of water are used to make
    one hamburger
  • A billion cell phones are sold every year and we change
    cell phones every 18-24 months

Just thinking about the water in all
the hamburgers that we eat and thinking about re-cycling a billion cell phones
every two years at the entire world level is overwhelming and you would feel
that something should be done.  And that feeling of wanting to do
something is the "Response" in the Pressure-State-Response (PSR) of the
OECD .

The "State" is the current
situation of so many cell phones and their rapid replacement by consumers as
better and better phones become cheaper. However, unless there is public
protest, awakening of  Corporate Social Responsibility (CSR) on the part
of cell phone makers you can't expect the "Pressure" to happen.

But if you look around in the US you
find that for auto tires and car batteries the old ones are taken back for
recycling, sometimes with a small fee when you buy new tires or batteries. It
is not entirely clear in the messaging by tire companies and auto battery
makers, whether they are improving the composition of their products via their supply chain  to reduce
environmental damage in disposal.

This improvement of sustainability
of existing products at the organizational level is sustainable innovation
that is the "Response" motivated by the Pressure-State-Response (PSR) framework. Contact StratoServe.

2008 Radio Shack YouTube Video predicted CEO change today

The 2008 Radio Shack YouTube video alongside has an eerie feeling today as the CEO stepped down. It was somewhat sad to see
that  CEO
James Gooch is stepping down after a mere 16 months. The stock price has
declined 80% since May 2011, when Gooch took over. Sadness given that Radio Shack had that nostalgia feeling up to the early 2000's and the stores
were hangouts for all manner of technically oriented customers.

The comments on the YouTube video date back years and it is the most watched Radio
Shack YouTube video. The comments from previous employees and customers
highlight the problems that the chain is facing including its recent focus on
cell phones and the annoying intrusion about your cell phone details if you
walked into the store.

So the question:  How is it that the research and insight folks
involved with Radio Shack not notice the video and the corresponding comments? And
take some action? 

It's difficult to guess because the video and its comments cover most of the
shortcomings and challenges that Radio Shack is facing today. Perhaps research
folks brought this up and successive CEO's didn’t want to hear the bad news. Or
perhaps social media watch did throw up the video but no one really got around to
understanding what people were saying. In any event the Radio Shack YouTube
video seems to be among those YouTube videos that predict stuff 4 years ahead in the voice of
frontline employees and customers.

If you are a CEO, the Radio Shack YouTube video is an eye opener. It may be
easier (and free!) for you to check out how your frontline employees and
customers see your company and brand. Don't be afraid to look- right away.
Contact
StratoServe.

Staples to grow 10 Billion $ online retail and cut 15% retail floor space but needs to re-think business model

One does not realize that Staples
has a $10 billion online retail presence and is considered by some to be
second only to Amazon.com, according to the Wall Street Journal. Now Staples understands that they need to save by
cutting down 15% of the retail floor space that includes 15 stores in the
US, relocate or reduce 30 US stores and shut down 45 European stores. Probably 
Staples needs to re-think its business model and re-define its business.

Similar to Best
Buy customers many folks visit Staples for only the immediate necessities like
printer cartridges, files and folders that can't wait. For all higher valued
items from computers to printers customers are reluctant to actually buy from
Staples before checking online prices. And like Best Buy Staples sales folks
are very knowledgeable and cannot be faulted for changes in consumer behavior.

On the business
buy side, Staples
does have strong B2B relationships and here too business buyers would like
to handle most items through a master contract as apart of the indirect spend.
Businesses would like to order custom printed stuff for some items like
letterheads but for most of the generic stuff businesses like to order online
and pay by P-Card against a negotiated master contract.

The biggest
change that Staples is trying to deal with, is the whole scale digitization of
business. A traveling salesperson is moving away from a bulky presentation
folder with each slide neatly put away into a plastic sleeve. Instead, the iPad
or tablet helps deliver a constantly refined pitch as illustrated in the
Salesforce.com example of the Rossignol
sales rep revving up the sales presentation on the iPad while waiting at
the client's lobby. Naturally if salespeople are moving away from plastic
presentation folders you can imagine that Staples business is down.

So what is the
future for the office supply business? It's exciting and sometimes scary to
think about because technology and globalization is changing the office so
much. Many offices are giving up office space as people either work from home
or work on the move from the cloud. Offices do have meeting spaces and a few
folks to keep up physical appearances. Naturally these physical appearances do
not include files, paper, filing cabinets or staples– if you think
about it. You need paper to staple together and the movement away from paper
does make Staples seem like a dinosaur!

Redefining its
business as helping the 21st century office just as staples and staplers were
helpful in the 20th century office could be the way to go. Instead of offering
to take digital copy for printing and pick-up at the store copy center, Staples
and other office stores might want to offer services that help the modern
digital road warrior. For example, the digital road warrior might provide some excel
data and need a slick digital presentation in 24 hours while on an international
flight. Imagine that Staples is able to deliver the drafts and the finished
presentation through a virtual assistant to the travelling executive. Sounds
like higher value and margins than paper and staples. Contact StratoServe.

 

Unsustainable Food Packaging Innovation: Shrink wrapped peeled bananas

When Billa Supermarkets in Austria
decided to unpeel bananas and shrink wrap them
there was enough consumer outrage against the German owned Billa supermarket to
withdraw the unsustainable food packaging innovation.  It also turns out
the Billa Supermarkets call themselves environmentally conscious and the
unpeeled bananas became a matter for Facebook protest right on the owners' Facebook
page.

Naturally packaged
products are packaged for convenience in the developed markets (think of coconut water in paper cartons  or bananas in this case) and are not
packaged due to affordability reasons in developing markets. Consider the
following:

  • Fruits and vegetables in developed country markets enjoy the cold chain after harvest right
    through distribution. There are some rare reports in the US of careless
    food truck drivers who do not maintain the right temperature but by and
    large maintaining the right temperature across the cold chain is a
    priority in the industry. And majority of consumers are able to afford
    fresh produce while the poorer bottom of the pyramid families have grocery
    store access problems according to the USDA map of access and proximity
    to a grocery store. This access problem leads to unhealthy fast food
    choices and obesity.
  • Fruits and vegetables in developing countries seem to suffer from entirely different challenges.
    Distributers and retailers are unwilling to pay for refrigerated trucks
    and would rather have slightly deteriorated produce sell at a lower price
    that hope to charge a consumer who has problems in affording the
    refrigeration cost. Unpeeling and shrink packaging bananas would be
    unthinkable in the India market, for example. In fact, if you observe the
    fruit and vegetable market visuals from most of Asia and Africa they
    resemble farmer's markets in the US and Canada.  By not processing or
    packaging fruits and vegetables, these markets provide better nutrition
    and are actually more environmentally friendly compared to the shrink
    wrapped peeled bananas tried out in Austria. Contact StratoServe.

The Changing Buying Center: marketing disposable catheters to wheelchair patients

Understanding the changing buying center is a challenge for both B2B marketers and scholars. Spekman and Thomas (2011) page 16, offer the  example of  disposable catheter marketing to wheelchair patients who might have a very large lifetime purchase amount and several thousand dollars worth buy every year. In the past,marketers defined doctors,nurses, the urology department, hospital administrators and the hospital supply/purchasing department as the members of the buying center.

Today there are potentially many more members of the buying center that influence the catheter brand choice and repeat buys. These include:

  • Medical  websites and discussion groups of patients
  • Facebook groups of wheelchair patients
  • Family and care givers who might have strong input
  • Insurance reimbursements might weigh heavily on brand choice
  • Web marketers of disposable catheters could influence the decision

In other words, the old mantra of the auto part replacement marketer trying to convince only the garage mechanic to recommend your replacement auto part, is no longer a sure-fire way of getting ahead in the auto replacement market. You need to consider virtual and social members of the buying center, who might influence not only the after market individual customer, but also B2B buy decisions at garage chains. For example, you will find a whole lot of discussion boards on every auto replacement part where your brand must truly appear to provide value and at least acceptable customer feedback. And all these virtual members of a buying center might be a mix of customers,users, competitors and rating agencies (think Yelp.com  for restaurants). Never before have forces outside the B2B buyer and seller relationship become so dominant in business buy decisions. And this one more way that the Internet is changing business. Contact StratoServe.

“The Social Revolution is a Trust Revolution”- says Marc Benioff of Salesforce.com

Utilizing the Cloud to Study Customers-StratoServe

“The Social Revolution is a Trust Revolution”- says Marc Benioff of Salesforce.com and in the video from the tenth Dreamforce conference, Men’s Wearhouse CEO George Zimmer seems to agree and say… I guarantee it! [Note: This post is from September 19,2012 with a video segment from the Salesforce Dream Conference, 2012 -Updated March 24, 2021]

The Salesforce.com approach, as unveiled today, does a nice job of integrating social media information about a sales prospect to the salesforce.com platform on mobile devices like tablets and smartphones. Salesforce.com has bought the social media monitoring companies Radian6 and Buddy Media and is offering an integrated cloud solution to the sales forces of companies. Benioff does a great illustration of how Rossignol a ski manufacturer uses the cloud to integrate in-company prospect/client information with the information on social media. Particularly interesting is the specifics of a sales call that a sales rep makes and updates information about a new client VP based on what is available on the social web. The specific prep for this sales presentation is being done in the lobby of the client right from the tablet computer using an app.

So why is this relevant? Because as Men’s Wearhouse CEO George Zimmer points out in the video on this post, millenials are about being social while Men’s Wearhouse was more used to spending  1 Billion$ /year on TV advertising for the baby boomers. Today as customers and organizational decision makers from the millennial generation grow up they’ll trust their friends and contacts opinions more than a TV ad. And it has become far more easier to keep track of stuff on social media than ever before. By dovetailing the social media information for every customer to the company’s databases and then allowing cloud access to a global sales and delivery team is a  huge step in sales force automation and CRM. More on the innovation possibilities of this integrated social and CRM technology in a later post.

About StratoServe.

Sustainable innovation in the supply chain: over 2 kilos of trash/person/day

According to the EPA in 2010 each
person in the US put out Municipal Solid Waste (MSW)- popularly known
as  garbage/trash  equal to 4.43 lb or  over 2 kilos per day. If
you look at the number of garbage cans on the weekly trash collection days- you
know that the number has not decreased and the volume of garbage has gone up.
The time is therefore appropriate to look at possibilities of innovation in the
upstream supply chain that leads to these very large quantities of garbage. See the 2010 estimates of the
composition of trash from the EPA and here are some innovation possibilities with respect to each component of Municipal Solid Waste (MSW):

  • Organic content: Includes yard trimmings and food scrap
    that is over 27%. Innovations could include proper disposal of yard
    trimmings like grass and leaves that need to be put out in paper bags.
    Food waste at about 14 % works out to 35 million tons and is really a
    waste given the poverty in the US itself. Awareness and smaller portions
    might be the answer. The disposal of food scrap in bio-degradable bags is
    an innovation whose time has come.
  • Paper and Paper-Board is about 28% and recycling is
    possible if consumers are more alert about segregating these items.
    Reducing outer packaging in the upstream supply chain and dealing with
    plastic coated paper board is an ongoing challenge and avenues for
    innovation.
  • Plastics, Metal and Rubber are about a third and here
    again education is required in disposal by consumers. In the US, San
    Francisco has banned the plastic bag and Delhi, India has banned plastic
    bags and plastics are seen as villians
    in sustainability. Plastics are great – it’s just that the municipal
    systems and individuals they serve do not have clear systems to deal with
    plastics. For example although towns have occasional solid waste
    collection days – most people seem to throw out their metal and glass
    waste in the trash.

In other words, there is a lot of
innovation opportunity both at the municipal garbage disposal and re-cycling
end and reducing waste at the consumer and upstream supply chain. Contact StratoServe.

Supply Chain rationalization means fewer jobs in small businesses

At a recent conference an entrepreneur at the $25 million sales level mentioned that all the bigger organizations preferred to deal with $100 million level firms for purposes of supply chain rationalization. Quite understandable, but this does affect  employment in US small businesses. Let's see how:

  • Supply (procurement) managers buy goods and services that must fit reliably and seamlessly to the process and supply chain of the buying organization. Reliability of the supplier is absolutely important and rises exponentially according to the items risk value position.
    • For big volume leverage items like raw materials or direct materials and services it's difficult for the buying organization to take a risk with a small business.
    • For strategic items and particularly high knowledge content services sometimes a big firm will hire a small business but again large suppliers have an advantage as they come across as less risky.
    • Bottleneck items do not have volume and do require large investments as in making pneumatic valves for food process industries. Here too small businesses are at a  disadvantage.
    • Non-critical items like stationery also favor large suppliers primarily due to the ability of the larger firms to offer on-line ordering and better servicing.
  • The alliance mechanisms for smaller firms to achieve scale in B2B markets are just not well developed. The only option is to merge and become big and in the process rationalize the merged organization that inevitably leads to job losses.
  • Small businesses inevitably collapse to operating nail spas, restaurants and liquor stores that are strictly B2C and offer only low wage US employment.

Given that a large part of alliance and B2B marketing thinking derives from the human marriage model, perhaps it is time to have some kind of easy ways of arranging small business alliances and entities. These alliances and entities should be able to give comfort to big organizational buyers so that small businesses get orders in the value add – high tech- high pay segments of the economy. Or else the US economy and its small businesses will only be creating low paying jobs in nail spas and restaurants. Contact StratoServe.