BarnRaisers

Where should money be invested these days?  Advertising or Advocates?

The Harvard Business Review, in this December’s issue, says the internet and social media have changed the way consumers interact with brands.  Although we continue to engage BEFORE we buy, we now also actively engage AFTER we purchase a product.  At this stage, we either publicly promote or assail the brand as well as collaborate on its development.

The “old way of doing business is unsustainable,” says HBR and since these are their words, not mine, here’s how they explain it to answer the question.

THE “CONSUMER DECISION JOURNEY”  (IN STAGES)

We all take a ”Consumer Decision Journey” everytime we buy a brand.  Before, it had three stages.

1. CONSIDER
2. EVALUATE
3. BUY

A car buyer, for example, would examine a consideration set of comparably priced vehicles and methodically pare down the available choices until he arrived at the one that best met his criteria. A dealer would reel him in and make the sale. The buyer’s relationship with both the dealer and the manufacturer would typically dissipate after the purchase.  But now, there’s an additional stage according to HBR.

1. CONSIDER
2. EVALUATE
3. BUY
4. ENJOY, ADVOCATE, BOND

Now, consumers are more promiscuous in their brand relationships. We connect with a myriad of brands—through new media channels beyond the manufacturer’s and the retailer’s control.  After we remain aggressively engaged spreading the word (good or bad) to an ever widening social circle offering either praise or criticisms.  If the manufacturer is listening, we offer ideas on how to make the product and customer experience better.  There is sustainable business value to listening.

THE CONSUMER DECISION JOURNEY (IN PICTURES)

Before, the buying cycle was like a funnel.  It started with a large audience and narrowed down to those who made a purchase.  It had a beginning and an end.

Companies typically spend between 70%-90% of their marketing budgets at the top end of the funnel on advertising and retail promotions; yet HBR concludes “in many categories the single most powerful impetus to buy is someone else’s advocacy.”

Now, it’s like a relay race where the baton is handed off to someone who takes it, runs with it and hands it off to the next person.  The process doesn’t just begin and end.  It builds touching more and more people as it goes.

In time, it is predicted the ENJOY, ADVOCATE, BOND loop will be so strong, it will circumvent the the CONSIDER and EVALUATE stages.

This doesn’t mean you shouldn’t spend money on advertising but it does mean if you’re not listening, engaging and helping spread positive word of mouth (when it happens) online and in social media, you’re not spending in the right places and you’re spending a lot more money on advertising than you have to.

But don’t take my word for it.  Starbucks has a brand community to ENJOY, ADVOCATE AND BOND at mystarbucksidea.com where they listen to customers and ask for their ideas about new coffee drinks.

“We used to launch a new product and it cost millions of dollars. Now, when we launch a new product, we already have millions of fans,” say Chris Bruzzo, Vice President Brand, Content and Online at Starbucks.

Are you spending money in the right places?

For my money, the best wisdom per word on marketing, management and business strategy comes from Peter Drucker.  Born in Vienna in 1909, Peter wrote 39 books by the time he left us in 2005.  He was frequently sought after by the Harvard Business Review, The Economist and the Atlantic Monthly.

Much of Peter’s best remembered advice was written over 40 years ago, but he rarely needed more than 140 characters to make his point.  Hmmm.  Here are a dozen I turn to now for guidance.

1. Efficiency is doing things right; effectiveness is doing the right things.
2. Follow effective action with quiet reflection. From the quiet reflection will come even more effective action.
3. Knowledge has to be improved, challenged, and increased constantly, or it vanishes.
4. Management by objective works – if you know the objectives. Ninety percent of the time you don’t.
5. Objectives are not fate; they are direction. They are not commands; they are commitments. They do not determine the future; they are means to mobilize the resources and energies of the business for the making of the future.
6. Most discussions of decision-making assume that only senior executives make decisions or that only senior executives’ decisions matter. This is a dangerous mistake.
7. People who don’t take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year.
8. Plans are only good intentions unless they immediately degenerate into hard work.
9. The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.
10. The purpose of a business is to create and keep customers.
11. There is nothing so useless as doing efficiently that which should not be done at all.
12. The only thing we know about the future is that it will be different.

Peter’s teachings are alive and well at the Drucker Institute, or Drucker_Quotes on Twitter in 140 characters or less.

The New Music Seminar is rolling across the country this year.  It might not have come up on your radar screen, but it came up on mine.  The seminar’s creator and producer, Tom Silverman, founder of Tommy Boy Records, is a friend from college.

Tom (on the left) made a seminal contribution to hip hop when he discovered Grandmaster Flash and recorded the hip hop classic, Planet Rock; then came Queen Latifah and Naughty by Nature and others.

The purpose of the New Music Seminar, which began in 1981, is to give aspiring artist in all music genres the knowledge and tools they need to succeed in the music business which, according to Tom, is in a period of profound change.  No longer do new artists need to focus their time, attention and energy on getting signed by a record label and the slim chance they will be funded and made into a star.

Today, record labels rarely take chances on new artists.  Instead, digital technology, the internet and social media now make it possible, sometimes even free, for artists to do it themselves.  Wikipedia covers the history of the New Music Seminar in detail at http://en.wikipedia.org/wiki/New_Music_Seminar

More people want to become professional musicians than ever.  In fact, the number of records from new artists has risen from 79,000 in 2007, to over 110,000 in 2008, to an estimated 145,000 in 2009 – almost double in 2 years.  Although competition has increased significantly, online tools are so readily available, if someone has 1000 loyal fans and tours throughout the year, they can now make a living doing what they love.  But the key to doing what you love, according to Tom, is you’ve got to know your fans.

Anyone who owns or manages a business or brand, or is thinking of starting one, can benefit from this lesson in the music business; especially if you thought you needed to focus time and attention blasting the word out to as many people as you can.

How well do you know your 1000 most loyal fans?

The New Music Seminar is rolling into New York City from July 19-21.  For more information, go to: http://www.newmusicseminar.com/blog