Issue: Newspaper and Magazine Publishers have gotten pricing wrong on the Kindle.  They need to get it right for the iPad.
Commentary by: David Vinjamuri

I used to teach a pricing class at NYU whose enrollment was approximately one quarter of the number of students I routinely see in my new media survey courses.  Pricing is one of the most important decisions that a marketer can make, but it’s a chore much less interesting to marketers than advertising or promotions.  At the largest consumer companies, pricing is often set at the highest levels within an organization, and as a result young brand managers may have very little practical experience with the consequences of making bad pricing decisions.  The magazine and newspaper industry is no exception.  In the past few years, these publishers have repeatedly erred when pricing their content for the Kindle.  With the upcoming launch of Apple’s iPad, these folks have another chance.  They’d best not waste it.

As the clock ticks down to first shipment of Apple’s iPad, the company is reportedly in deep talks with magazine and newspaper publishers.  While early deals with book publishers got much of the attention before the iPad launch, robust content deals with print publications may be at least equally important to both the iPad’s success as well as the future of the traditional news media.

As this advertising blog has noted previously, print publications are living on borrowed time.  Rate bases have been shrinking and might have done so even if these organizations not been so quick to post their content freely online in the mistake belief that online advertising revenue would offset the sales loss from cannibalization.  Just as the iTunes store did for the music industry and the Kindle has begun to do for book publishers, the iPad may create a new revenue model for newspapers and magazines.

The cardinal rule of pricing is that it’s easier to lower a price that’s been set than to raise it.  Publishers seem to have learned this a bit two well.  Newspaper pricing on the Amazon Kindle is far too aggressive, ranging up to $14.99 a month for the New York Times.  Many newspapers and magazines routinely offer new or lapsed subscribers significantly cheaper deals for print subscriptions than the fixed price for the Kindle.

Publishers need to remember that the “right price” for a product is the highest price a consumer is willing to pay and feel that a fair value has been received.  “Fair value” is an important concept here.  Photos and graphics reproduce poorly on the Kindle.  There is no sense of holding the newspaper or being able to scan the front page.  What you get is literally the news.  And consumers are aware that the production costs of a printed magazine are entirely absent from the electronic version.  There is no justification for the substantial prices for these publications on the Kindle.

The iPad is a more complex story.  Because of its high resolution color screen and its ability to show video, the iPad will allow publishers and advertisers alike to create a richer, multimedia experience that may far surpass the printed publication.  But refining these efforts will take time, and demand patience from readers.  Therefore, publishers would be wise to price magazines and newspapers at a level that encourages consumption rather than placing a choke-hold on growth.  Penetration pricing, rather than skim pricing is the correct strategy here.  If publishers attempt to overcharge, they’ll have only themselves to blame for losing their last, best chance to find a new revenue model.

Brand: Google
Execution: TV Spot - Super Bowl
Target: Search users
Rating: *****
Reviewer: David Vinjamuri

Description:
This spot, reportedly a last minute buy for Google tells a love story using only the Google search engine.  The search queries show how boy takes a trip, meets girl, gets girl, gets married and has babies.

What Works:
Established agencies have had a difficult few years in the Super Bowl.  In the last two years, the winners of user created ad contests (for Doritos and the NFL) have been among the best entries on the Super Bowl.  This year, the most effective ad in our judgment comes from a surprising place - the in-house creative team at Google.

We love this ad because it is simple,  because the execution is tied directly to the brand (unlike other memorable spots, this one you can’t remember without knowing it was for Google), because it tells a story, and because it is a powerful reminder of how Google has changed our lives.  It is a classic “brand as hero” execution.  Given the production values and extravagance of some of the other spots in the game (more on this from us soon), it is shocking that the spot that does the best job of building the brand was undoubtedly the cheapest to produce.

Finally, we appreciate that Google brought this to the Super Bowl after it had been battle-tested on YouTube, showing popularity and staying power.  It’s another unusual move for advertising on the big game.

What Doesn’t:
The query at the end “how to assemble a crib” with the baby gurgle was a bit over the top.  The tagline “search on” doesn’t seem especially memorable.

Branding Bottom Line:
The marketers at Cars.com should take a close look at this spot after their big game fiasco.

Issue: Toyota has fallen victim to brand hubris, and is feeling the consequences
Commentary by: David Vinjamuri

Toyota’s recall of 2.3 million vehicles, and the unprecedented step of halting production at six of its U.S. plants may seem like the inflection point in its quality crisis.  Although the sudden acceleration claims have been circulating for at least three years, Toyota appears to be taking the problem seriously and responding strongly.  A parallel might be drawn with the 1982 Tylenol recall, where J&J chairman Jim Burke took the unprecedented step extending a local criminal issue into a national recall to avoid a loss of confidence in the brand (or copycat acts) and used the entire J&J workforce to physically remove the product from shelves.  (Ironically, J&J is currently experiencing another crisis with Tylenol.)

Unfortunately, Toyota’s current crisis is headed in a different direction.  Two minor facts in the news give us evidence that Toyota is in for more trouble.  First, The New York Times notes that Transportation Secretary Ray LaHood asserted on a Chicago radio show that the U.S. government requested the work halt - disputing assertions by Toyota North American COO Jim Lentz that the production stoppage was purely Toyota’s initiative.

The second minor news item was the assertion by Apple co-founder Steve Wozniak that he has found a reproducible, software-based error causing unintended acceleration in his 2010 Prius, a car not on the recall list.

Either of these assertions may prove to be incorrect, but the mere fact that they’ve both reached the national news media suggests that Toyota has a bigger problem: brand hubris.

Brand hubris, shortly stated, is the tendency of successful brands to believe that they’re infallible in the areas of their greatest strength.  This puts them at greater risk of a catastrophic error.  A good example from the last decade was Dell, which once had an unassailable reputation for quality and customer service which was brought down by a single blogger (Jeff Jarvis).

In Toyota’s case, their sterling reputation for quality led to a customer service apparatus unable to comprehend the concept that a major error could have made it through their system undiscovered.  This attitude dictated the company’s response to early complaints - rejection and legal squabbling and forced the issue to bubble into a crisis before senior management would acknowledge it.

That same attitude guided the company when it refused to engage with Steve Wozniak, and kept it from getting its story straight with the National Highway Transportation Safety Administration.   Both of those were costly PR mistakes.  For this reason, it seems likely that Toyota’s problems will multiply, not ameliorate.

The lesson for other brands is this: don’t assume that you can’t screw up, even in the areas of your biggest strength.  Reward those who identify problems early.  Realize that some of the most important information on the quality of your products comes from your customers and don’t punish customers who take the time to complain.

Issue: Will the Apple iPad help print media reestablish a revenue model?
Commentary by: David Vinjamuri

Apple has just introduced the iPad - the long awaited tablet computer.  Just as this advertising blog predicted that the iPhone would revolutionize the mobile internet, we believe that Apple has taken an important step towards rescuing the print news media from oblivion.

As you may know by now, the device itself has a 9.7″ touch screen, wi-fi and some versions have 3G from AT&T.  Pricing runs from $499 to $829 (for the 3G version with 64gb of memory) plus $30 a month for unlimited data.

We have long believed that the Kindle will revolutionize publishing, but it is not a realistic device for advertising because it lacks color and a high resolution display.  Even the larger Kindle DX is too expensive ($489 - as much as the base version of the iPad) for a black and white low-res reader. On the Kindle, you can have newspapers delivered to the device daily and then read the text of each article.  The iPad allows you to read the newspaper as a newspaper, or a magazine as a magazine.  In fact, magazines and newspapers can improve on the paper experience by incorporating video, interactive and multimedia content.
This suggests that news organizations and publishers will be able to create a subscription model for iPad content which can be partially advertising-supported.  The advertising will be measurable, just as with online advertising.  Although this has not been discussed, it is reasonable to assume that widgets - or other functional ad units - could be created for this device.

Immediate reaction to the iPad has been somewhat muted because the technical characteristics did not excite tech fans.  Apple’s real genius, however, is understanding how to evolve consumer behavior - a far more difficult and important task.  The so-called “paperless office” has been hyped and discussed for over a generation, but it has not come to pass because paper is portable and easy to read.  Although the iPad and subsequent devices will not outdate paper, they take an important step forward.  Just as the iPod delivered the ability to carry around hundreds of cds worth of music in a tiny device and the Kindle allowed us to carry a thousand books, the iPad will allow average consumers to keep books, movies, pictures, magazines, newspapers and important personal documents on a device that is the right size to view them.  That’s a bigger deal than it may initially seem to be.

Issue: Why does bad behavior hurt some brands more than others?
Commentary by: David Vinjamuri

Accenture announced over the weekend that it would sever its relationship with Tiger Woods, who has fronted a major advertising campaign for the consultancy over the past six years.  Nike, on the other hand has reaffirmed support for Woods after his accident and revelations of marital indiscretions.

This advertising blog has never been a great fan of celebrity endorsement.  As the Tiger Woods example illustrates, even the most stable of celebrities may expose a brand to negative attention.  However, celebrities play different roles for different kinds of brands.   As odd as it may sound, Accenture was right to drop Woods while Nike was equally wise in staying with him.

To understand the distinction between the type of endorsement value Tiger Woods has for these two different brands, we must consider the type of associative brand equity Woods transfers to each brand with his endorsement.

Tiger Woods is a world class athlete.  Indeed, winning the U.S. Open in 2008 with a serious knee injury may have been one of the most outstanding athletic achievements of the past decade.  For Nike, Tiger Woods endorsement is an endorsement of direct expertise.  Nike’s brand equity is based on understanding the needs of serious athletes.  The Nike brand values are about commitment and intensity.  In spite of taking a hiatus from golf, Nike has every reason to believe that Tiger will continue to be a serious athlete and a top competitor.  Nike has often successfully maintained association with athletes who have had some degree of personal notoriety because the brand equity it takes from these athletes is related to their dedication, not the conduct of their personal lives.

The Accenture relationship with Tiger Woods is one of the few sponsorship relationships with Woods outside of Nike that we believe has been effective for both parties, as we’ve argued previously. In this campaign, however, Tiger lends the Accenture brand equity through indirect expertise - in this case his focus and judgment.  Thus, when Woods’ judgment becomes suspect it eliminates his value as a brand spokesperson for the Accenture brand.  The past association may indeed hurt the brand in this case.

What’s the brand lesson here?  If you are looking for a spokesperson, try to pick a celebrity who has direct expertise in the problem your brand solves.   The celebrity should be a core user of the brand and someone who is highly credible with other users.  This doesn’t mean that they have to be aspirational.  In 2005, Alka-Seltzer very effectively used the late Peter Boyle (who played the father in the TV sitcom “Everybody Loves Raymond”) as a direct expert in indigestion.  Most sufferers would have no interest in becoming the character Boyle was known for.  But an older, overweight cranky man who might have eaten an entire turkey was a credible expert for indigestion relief.

Using celebrities to promote brands is a risky business.  Most endorsements are meaningless and hollow.  But even those which are effective contain risks.  By focusing on direct expertise, brands can at least avoid some of the direct pitfalls of bad celebrity behavior.

Issue: How Via instant coffee completes the transformation of Starbucks into a convenience brand
Commentary by: David Vinjamuri

This week, Starbucks announced “Via” - a new instant coffee.  The launch advertising was acceptable and the product has been favorably reviewed for taste.  But what does it mean for the Starbucks brand?

This advertising blog has long argued that a succession of financially successful Starbucks innovations, from blockbuster grocery store products like bottled Frappuccino, Starbucks carts and even drive through windows all dilute the Starbucks brand.  Even small-footprint Starbucks which drew long lines of commuters in the morning changed the “third place” atmosphere that was Howard Schultz’s essential contribution to modern American culture.

Via is not really a diversion from the Starbucks brand strategy.  It is really the culmination of a series of steps that have taken the brand away from its original mission.  Starbucks has now emerged into the full light of day as a convenience brand.  It will continue to compete head to head against Dunkin Donuts and McDonalds to own the morning convenience consumer and now adds Taster’s Choice to the list of packaged goods brands it counts as direct rivals.

It is hard to argue with the financial wisdom of this choice.  Starbucks as Howard Schultz first imagined it would be a much smaller company.  But the Starbucks that is emerging from this brand evolution is a weaker brand, more General Motors than Porsche.  Margins will be smaller going forward although revenue will most likely grow.

This last development is most surprising given Mr. Schultz’s recent return at the helm of the brand.  It may signal desperation, but more likely a sign that the corporation is looking to be acquired.  Don’t be surprised if a food giant gobbles up Starbucks soon, and ends the dream of empire that started in a coffee bar in Italy.

Issue: To gain viewers in a chaotic market, ABC will be omitting the first commercial break on some new shows
Commentary by: David Vinjamuri

The Los Angeles Times reports that ABC is reducing the number of commercials to be aired on the premier of new fall shows:

The network is eliminating the first commercial break — which typically occurs about eight minutes into an episode for comedies — from new prime-time series, including “Cougar Town,” “Modern Family” and “The Middle.”

The strategy has a precedent - FOX last year dramatically reduced commercial interruptions on prime-time series “Fringe” and “Dollhouse” and sold each episode to a single sponsor.  This advertising blog commented on this experiment, which we found promising.  The strategy was discontinued by FOX as the economy faltered and advertisers willing to sponsor an entire hour-long episode vanished.

ABC’s experiment is less dramatic but equally important.  Some shows will run for as long as twenty-minutes uninterrupted - a lifetime by network television standards.  If viewer retention improves, mainstream networks may finally begin to learn one of the most obvious lessons of the Internet era: less is more.

An hour-long network television show averages 18 minutes of commercials, often in 2 minute or longer blocks.  If networks were to move to 6 ninety-second blocks (totaling 9 minutes) and thus cut commercial interruptions in half, they might dramatically increase the viewership of those commercials.  FOX did a good job of advertising the short length of its commercial breaks on Fringe and Dollhouse last year.

In the 1987 movie “Wall Street” Michael Douglas playing Gordon Gekko famously said “Greed is good.  Greed works.”  Unfortunately, it hasn’t worked well for commercial advertising.  Less would be more.

Issue: The current debate over FREE ignores the one thing that is priceless: TIME
Commentary by: David Vinjamuri

The online marketing community is caught in a kerfuffle over Chris Anderson’s new book FREE: The Future of a Radical Price.  Malcolm Gladwell fired a salvo from The New Yorker and Seth Godin jumped in to defend Anderson.  Even John Gapper of the Financial Times has entered the fray, with a spirited interactive book review of FREE.

Anderson, in a straightforward extension of his thinking in The Long Tail, argues that with distribution costs declining radically (and marginal distribution costs on the Internet approaching zero), content wants to be free.  He points out that Free is a powerful concept, much more appealing than ‘cheap’.  As marketers have known for years, an offer of something for ‘Free’ fundamentally alters consumer psychology and decision-making.  He suggests that content should be free, that newspapers, record labels and other content providers should just get over it and find other ways to make money.

Gladwell makes a solid economic argument that content is not free, it’s almost free.  And that the only thing really approaching zero is marginal cost.  An airline might be able to put you in a seat for almost nothing, but someone still has to pay for the plane, just as someone still has to pay for all that bandwidth and infrastructure.

Godin makes the argument that Free is already here and that it’s good because it democratizes marketing and allows everyone to play.

Nobody, however, seems to consider the implication of all of this free stuff.  It is consuming the most precious resource in human history: Time.
For Anderson, Godin and perhaps even Gladwell, the Internet and all of the Free stuff is a goldmine.  As writers, they can spend their time panning the streams until they sift out enough precious dust to sate themselves.

For the rest of us, the new media world is rapidly giving us a headache.

Ask yourself the question, why do brands exist at all?  Because consumers are willing to trade something they make more of (money) for something they can’t (time).  Brands save us from the paralyzing indecision that we’d have every time we stood in front of a hundred kinds of toothpaste, or forty kinds of brown bread.

Yes, that’s right, we’re willing to pay more money for brands we know so we don’t have to spend Time deciding what’s good.

The fundamental problem with this world that we’re finding ourselves in is that consumers and marketers alike find ourselves drowning in free information.  It’s great that it’s free.  But we now spend more time than ever sorting and choosing and less time consuming.

The argument doesn’t matter, of course.  Godin correctly points out that what is happening will happen.  But the thought that newspapers will go away and their place will be taken forever by unpaid bloggers seems unlikely.  All of the good blog models on the Internet rely on people contributing ideas cheaply or for nothing.  Advertising hasn’t paid the freight for anyone.

So when this phase is done, when we no longer feel obligated to sort through 1000 meaningless, self-promotional Tweets on Twitter to get a good idea, what will exist?  Probably some big brands that charge us for stuff we all like and some small brands that charge some of us for stuff a few of us love.  And yes, some free stuff, too.

Of course it’s ironic that the one thing that’s clearly not FREE among all of this noise is Chris Anderson’s book.  That still costs $17.91.  To be fair, Anderson has said that Hyperion is going to let him make the book available for FREE online, but he can’t tell us just how.  We’re guessing that it will take us some time to figure that out.

Issue: What is the Brand Promise of Reality TV?
Commentary by: David Vinjamuri

The current fifth season of the reality show “Jon & Kate Plus 8” is the most popular in the show’s history, with the premier show drawing nearly 10 million viewers.  Part of the reason for the audience growth this season has been the marital troubles of Jon & Kate Gosselin, which came to a head as the couple filed for divorce on June 23rd.

One news item that followed this announcement begs a brand question: Kate claims in her divorce filing to have been separated from John for two years.   Initially the separation appears to have been limited to Jon moving to a room above the garage.  Now the couple has separated completely.  Other sources claim that the separation is “legal mumbo jumbo” and that the physical separation occurred just a week ago.  Whatever the truth, one fact is clear - the couple has had significant marital issues for much longer than they’d acknowledged.

Which brings us to the central brand question here: what is the brand promise of reality TV?  Is it to be real and honest?  Certainly a show on TLC (which was once The Learning Channel) would want to accurately represent the subjects.  And while Jon & Kate Plus 8 undoubtedly focuses on the kids, a primary reason many people watch it is to answer the basic question: how do you hold your marriage together with that many kids?

So the brand promise must be to honestly depict a family, with all of its flaws and foibles.  And by hiding that truth, for weeks or months, Jon & Kate Plus 8 let down its faithful brand advocates.  Which reveals an inherent problem with the reality genre.  Jon & Kate may have been doing the best thing for their family in trying to hide or at least minimize their marital problems.  But it was the wrong thing for the brand.  That is a difficult way to live.

Issue: The Word of Mouth Marketing Association (WOMMA) cozies up to IZEA - the former PayPerPost
Commentary by: David Vinjamuri

David Gelles reports today in The Financial Times that IZEA, the former PayPerPost will be a sponsor of the upcoming Word of Mouth Marketing Association (WOMMA) event WOMM-U in Miami.  WOMMA is an industry association that has created an ethical code that members abide by.

IZEA is the current incarnation of PayPerPost - service that allows companies to pay bloggers to write favorable reviews (paid advertising, essentially) of their products.  Current IZEA customers include K-Mart, Air New Zealand, Universal Music Group and the resort chain Beaches.

The paid blog posts are very similar to advertorials.  The difference is that these blog posts are not labeled as advertising. This violates WOMMA guidelines and is still roundly condemned by influential bloggers.

The surprise here is that WOMMA would accept IZEA as a sponsor.  As Gelles writes: “This is a bit like if McDonald’s were to sponsor a PETA convention.”

The brand question for WOMMA as well as IZEA customers like K-Mart and Universal Music Group is simple: what is the effect of insincere praise on sincere brands?

While consumers may stumble across these sponsored blogs in search (although Google has downgraded their page ranks), and consumers may make purchase decisions based on these reviews, the practice is built on a foundation of sand.  The moment the underlying motive for the recommendation is revealed - money - the negatives for the brand soar.  Advertising if done well can be effective and word-of-mouth marketing is ideal.  Masquerading advertising as word-of-mouth is worse than unethical, however.  It is a fundamental betrayal of the trust that is the primary driver of the relationship between the brand and the consumer.

And not surprisingly, there’s also the chance for brands using these unethical techniques, like K-Mart and Beaches to get negative PR attention by being outed in places like The Financial Times and this advertising blog.

AN AFTERNOTE:

Ted Murphy of IZEA writes the following in the comments on the FT article (addressed to David Gelles):

1. David,
I am the first person to admit that we made some initial mistakes with PayPerPost at launch. When we created the sponsored conversation industry there were no standards. We have had to make adjustments along the way and have since created the standards by which our properties currently operate.

While we have created our own standards I would actually argue that there are still no Internet-wide standards. WOMMA has done a great job creating guidelines and an ethical code, however that code is interpreted very broadly and the member base is relatively small. There is no universal form of disclosure among word of mouth marketers, not to mention online marketers and affiliate marketers.

We have taken it upon ourselves to create what I believe is the highest standard of disclosure and transparency in online marketing. In addition to operating a completely open marketplace we insist that bloggers abide by our REAL Code of Ethics.

http://socialspark.com/code_of_ethics

No other WOMMA member that I am aware of has standardized, machine readable disclosure. Bloggers cannot submit a post for payment without having our standard disclosure badge included in their post.

I do not deny our fumbles of the past, but I feel it is important to recognize our current state of operation. We have come a long way and we continue to innovate. Look for another announcement around the disclosure topic at WOMMAU next week.

Ted Murphy
Founder / CEO of IZEA
Twitter : @tedmurphy

Our response is as follows:

Ted,

Disclosure, even machine-readable disclosure, is not an acceptable substitute for transparency. Blogs are by nature conversations, and the form has grown and been sustained by original, authentic voices. When consumers read blogs they have the reasonable expectation of reading the honest and unbiased opinion of the blogger. By adapting paid endorsement (i.e. advertising) to the blog format, you are using the form to deceive. A disclaimer at the bottom does not remove your responsibility to the consumer.