CMO 2.0 Influencer Conversation with Dan Ariely, author and Professor in Behavioral Economics at Duke University

Written by on May 24, 2009 – 3:51 pm -

Dan_ArielyMy CMO 2.0 Influencer Conversation with behavioral economist Dan Ariely, who is also the author of one of my favorite books, Predictably Irrational, was particularly insightful and instructive.

Dan started the conversation by talking about his past, and how a life changing event – having about 70% of his body burned  by a magnesium bomb that detonated close to him – led him on a path of human experimentation.

We quickly moved to one of my favorite topics – how people make decisions either in a market framework or a social framework, and how mixing the two, which inevitably happens in the world of business, is not a good idea.

People are inherently social creatures, and when we talk about money we create a different set of expectations than the ones we have in our social world.  The social world and the market world have different rules and regulations. What do you think would happen if instead of taking a bottle of wine to a dinner party you were to give the host cash so that she could buy her own bottle? It would no go over so well, would it?

In the business world we have no choice but to mix the two together, as we hire people in return for a salary, but also tap into social drivers that money cannot buy (i.e., an extreme example of that is firefighters putting their own life on the line, which could not be motivated by any amount of money). Too many companies try to put a monetary value on things where they would be better off leaving it in the social realm. They need to understand the trade-off between economic efficiency and social efficiency. Who would be more motivated to work overtime when you need it – the person who got a $1,000 cash reward for doing well or the one that was sent on a trip to the Bahamas worth $1,000? Research shows that it is the person getting the gift. The same is true for healthcare – why put a monetary value on the healthcare services that you provide to your employees? It does not buy you social efficiency which you could otherwise derive from providing them with that service as a social reward.

Next we talked about group dynamics, especially herding, and how that affects people’s buying behavior. People tend to herd – buy the music that got the most downloads, stand in line at the restaurant that has the longest line, etc. We also follow the herd of our own self, meaning that we buy things based on the way we bought before – even if that was based on a random act.

Dan also reviewed recent research that shows how we internalize the social. In an experiment he gave some people shirts with the term generous printed on it and others with the term stingy printed on it. After wearing the shirt in public for awhile people who had the generous shirts were behaving in a more generous way than those that had the stingy shirt. The interesting part of the experiment is that he got the same results when people were wearing shirts with the same terms printed on the inside of the shirt – so in a way that they were the only ones to know.

Another issue near and dear to many marketers is that of free trials. Free trials for products that are known quantities, i.e., Godiva chocolates, will not lead to the depreciation of value of those products in our mind. Free trials for products that we do not know, and do not assign value to, will diminish the value of that product so that when you start charging for it we will refuse to pay for it.

Other things that we talked about include:

  • The dark side of social rewards
  • How the feedback you get from focus groups can be very suspect because people have bad intuitions about their own behavior
  • How ideation works best when other people can build on your ideas
  • The importance of experimentation and business education in business
  • How pricing is not determined by supply and demand and the importance of self-herding
  • Behavioral economics and its impact on the economy and the stock market
  • The honesty mindframe and its influence on cheating

As usual you can listen to the podcast below and soon we will be putting up transcripts of this CMO 2.0 Influencer Conversation.

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CMO 2.0 Conversation with Porter Gale, CMO at Virgin America

Written by on May 15, 2009 – 9:03 pm -

Porter_GaleI was looking forward to interviewing a marketing executive from the airline industry, and speaking with Virgin America’s CMO Porter Gale was no disappointment.

As usual, we started the conversation by setting some context – in this case we are talking about a new airline which started flying just one and a half years ago, has 28 airplanes, and 1,400 employees.

The motivation for Virgin to start a new airline in the US was driven primarily by the opportunity that presented itself to redefine the category in the face of rapidly deteriorating customer expectations. I think that is putting it rather mildly – and would have categorized the state of the industry as one in which the service providers seem determined to make their customers lives’ miserable while they are with them. At any rate, it was a perfect fit for Richard Branson’s philosophy for Virgin companies to be customer champions.

We spent a fair amount of time discussing the essence of the Virgin America brand, and how they are making deliberate efforts to humanize the brand and the service. In order to ensure consistency of this experience throughout all the customer touch-points, and to get buy-in from all the employees, they have a very rigorous hiring and training process. Showing respect and a human face to the customer may seem like common sense, but it is a tough thing to scale – it requires the right culture and zero tolerance for mediocrity. Another important aspect of Virgin America’s success in humanizing their brand is not to brainwash people into telling the corporate story, but rather to empower them to tell their own stories. To support that personal passion they also continuously focus on making sure that they have a product that employees can be proud of – so it is a big closed loop system.

Porter spoke at length about the importance of social media in customer support, branding, innovation, and marketing. From how they monitor everything that is being said about them and deploy customer recovery actions when someone twitters or blogs about a bad experience during flight, to how they empower people to act as they see fit when they see some negative comment online. For some reason they attract a very tech-savvy crowd, which makes it a natural choice for them to social-media-fy their marketing, or to use Porter’s words “to explore the digital space, look at all of the trends that are happening, the social media changes, and find more ways to engage and have deeper relationships with people who love the brand through digital.”

Another interesting aspect of Virgin America’s marketing strategy is that they find themselves to be not just be an airline or travel company, but also a media company (which I think will be increasingly true for companies who are successful in harnessing consumer movements, communities and tribes). In the case of Virgin America, they were basically able to fund the launch of a new city through a paid media partnership with HBO.

Other topics we covered include:

  • How there are totally new career paths in marketing
  • How they are continuously trying to reinvent the category
  • The importance of fairness in how you deal with customer problems
  • How they focus hard on ensuring brand consistency throughout the travel “ribbon” – including the flight experience, the website, check-in, and where they can, even the terminal experience.
  • How Wifi in the airline industry is a true game changer
  • The role of advertising in awareness building when launching new markets and new offerings and  the shift to social media after awareness is created.
  • How they were able to create a movement before they even flew – rallying people around the cause to let Virgin America fly

When you have an airline and passengers write to you to tell you that they wished the flight was longer, or that they rescheduled their honeymoon so they could fly with you – you know you are doing something right. I wish I could interview some other CMO’s from the industry to get their perspective.

As usual, you can listen to the podcast below and we will start posting transcripts next week.

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CMO 2.0 Conversation with Pete Blackshaw, EVP Nielsen Online Strategic Services

Written by on May 8, 2009 – 1:06 pm -

Pete_BlackshawIt was fun to have a CMO 2.0 Conversation with Pete Blackshaw for a variety of reasons. First, it was reminiscent of a great SkypeCast conversation he and I had a few years back (right after Skype launched Skypecasts – we felt like pioneers), but also because he brings three distinct angles to the CMO conversation – that of a CMO, that of a person who markets to marketers, and that of a thought leader and author. Pete is the author of Satisfied Customers Tell Three Friends, Angry Customers Tell 3,000, and also blogs at

We delved straight into one of Pete’s favorite topics, which is what he calls the great “Conversational Divide” that exists between marketing and customer service. Pete believes, and I agree, that is unfortunate that customer service is so frequently considered a non-strategic part of the business, with little integration between what companies know about their customers from their CRM systems, their social media strategies, the promises they make through marketing , and what actually happens in their customer service departments when they talk with customers. Pete’s take is that it is time for CMO’s to step up to the plate and define a unified conversational ecosystem. It makes no sense, he says, to have different rules in the different parts of the organization.

Companies should also start capturing information about their customers’ influence in their CRM system, i.e., do they have a popular blog, do they have a lot of twitter followers, etc. – especially since the people who typically use the customer service back channels are the same people who tend to use megaphones to express their dissatisfaction. If you do it right you could develop a so-called user contribution system, where consumers help one another and become advocates for the brand, reducing not only your customer support cost but also other costs like consumer research.

Pete talked a lot about the importance of credibility in the age of consumer generated media, and described in detail the six drivers of credibility: trust, authenticity, transparency, listening, responsiveness, and affirmation. He is convinced that trust is perhaps one of the most important competitive differentiators that companies can develop.

We also spent a fair amount of time talking about the benefits of building brand communities, and whether companies should all have their own or affiliate with one another to deliver better value to their members. And we discussed the community efforts at Intuit as we both have familiarity with Scott Wilder’s work – and especially highlighted the importance of setting up a cross-functional center for excellence to capture all the potential benefits of communities, as well as the power of a credentialing model to ensure quality control when customers help one another.

Other things that we discussed include:

  • How Dell Hell could have been prevented
  • The importance of emotion and fairness in word of mouth
  • How the new customer service motto might be “this company is being monitored for quality improvements”
  • How there is a real risk that bad marketers will spoil it for the rest of us
  • The symbiotic relation between traditional marketing tools and social media based tools

We wrapped up the conversation by talking about the challenges that Pete is facing as a marketer, and how he measures progress and success. Not surprisingly, his primary way to measure success is by monitoring his client advocacy. Are customer willing to get on a stage with him? Are they willing to recommend his company?

We also talked about the challenges associated with competing in a world with many free offerings – and with Nielsen actually having their own free offerings. Interestingly enough, the way Pete looks at it is the same way you would look at it from a consumer packaged goods manufacturer’s perspective like P&G – which is that “sampling” does lead to purchases.

As usual you can listen to the recorded podcast below, and we will put up a transcript as soon as we can.

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CMO 2.0 Influencer Conversation with Rob Kozinets, Marketing Professor at York University and author

Written by on May 7, 2009 – 9:01 pm -


For my first CMO 2.0 Influencer Conversation, I spoke with Rob Kozinets, a professor of marketing from York University in Toronto, about communities, consumer tribes and word of mouth marketing – not surprising considering that Rob was the editor of Consumer Tribes, a collection of research papers on consumer tribes, recently finished a book on word of mouth, and is one of the few researchers looking at the practice of business through the eyes of an anthropologist/ethnographer (among other things).

We started the conversation by talking about the disconnect between the world of academics and the world of business, especially as it relates to marketing. It is an unfortunate fact that many mistakes could be avoided if marketers were making informed decisions based in part on some of the recent findings in the fields of behavioral economics, anthropology, complexity theory, sociology, and psychology.

One of Rob’s main themes is that consumer learning, opinions and transmission of influence happens in smaller groups – hence the idea of tribes. Today’s tribes have looser affiliations and are more hedonistic in nature than ancient tribes. They are nomadic by  interest, rather than geography, and centered around expertise and commercial culture. Consumer Tribes are also not typically focused on a single brand but rather on a whole group, a whole culture or lifestyle, or a set of activities.  Another challenge for marketers, according to Kozinets, is that consumer tribes don’t typically develop long-lasting relationships. Even some of the stronger tribes, like the Star Trek groups that were so popular in the 90′s, aren’t as active anymore – people move on as they get more options. It would actually be interesting to see if the Harley community is still as strong as it used to be. People move in and out of consumer tribes, and the tribes seem to have a natural life and death cycle – including a revival stage sometimes.

Of course, most marketers don’t think of their customers as tribes yet, or don’t realize the enormous impact that successful customer communities can have, so for many of them this is an non-existent problem.

According to Rob, one of the big problems with communities is that companies are setting them us expecting fixed ROI. In reality the measurement of the the impact of communities is very hard. They are hard to set up, take time to take off, and are challenging to maintain. And, as Rob points out, a lot of the successful community marketers have had their communities formed for them by their customers – much like Harley.
We also talked about the proliferation of special interest communities sponsored by various companies – e.g., small business focused communities, of which there are dozens. Obviously members will not want to belong to multiple small business communities, so what then? Consolidation, with most members gravitating towards the most successful small business community, or further fragmentation, with more user-driven communities aggregating around micro objectives? It’s hard to predict where we will see consolidation vs. fragmentation of communities as we do not quite understand how people move in and out of those spaces.

An interesting concept which Rob brought up was “share of community time,” which, in a way, is a measurement related to John Hagel’s Return on Attention (John has also agreed to conduct a CMO 2.0 Influencer conversation with me – stay tuned for a date). The problem with calculating share of community time is that there is a huge spread in the estimated number of people who participate in communities – between 100M and 1b.

Other things we talked about include:

  • The role of payments and incentives in communities
  • Whether online focus groups are stretching the possibilities of online community environments
  • How to engage with your detractors as well as your champions
  • How, if you are going to open things up, you should have a strategy to deal with criticism that will come
  • The pros and cons of having a neat classification system for communities based on the different needs that they are trying to solve
  • How community organizers need to think about members first and brand second

We also touched on word of mouth and how most marketers expect word of mouth to amplify their message, when in reality most word of mouth will transform your message.

As usual, you can listen to the podcast below, and we will be releasing transcripts soon.

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CMO 2.0 Conversation with Mark Colombo, SVP Digital Access Marketing, FedEx

Written by on May 4, 2009 – 5:58 am -

mark_colombo100I had the pleasure of conducting another CMO 2.0 Conversation with many teachable moments – this one with Mark Colombo, the Senior Vice President of Digital Access Marketing at FedEx. For the sake of full disclosure, I should say that Mark is a client of Beeline Labs, the company I co-founded and where I am a partner.

Mark set the stage by giving an overview of the FedEx business, a $36B company.  Mark described his business as a “network business,” with very similar characteristics as telecom carriers, railroads, and airlines – facing unique challenges in that they can not easily reconfigure their network based on specific market segment requirements.

We talked a fair amount about the changes in marketing caused by shifts in audience expectations. In this case the audience expectation shift has to do with how customers interact with FedEx and with one another. People increasingly want to interact on their own terms. In Asia that may mean through a text based interface on a cell phone, while in the US people expect a richer Web experience. Meeting expectations gets further complicated by generational differences – with some people using technology only when they interact with FedEx, and others expecting the same rich interfaces that they have grown accustomed to in using other online environments and applications. FedEx now handles 13 million digital experiences with their customers every day, making them not just a business services company, but also a software application development company – and one that has to deliver on its brand promise of trust and reliability through all those software applications. Managing the shift from having most of your customer touch-points happening through digital interfaces instead of through humans (the FedEx drivers) is not a trivial challenge.

From a brand perspective marketing has gone through some interesting transitions. In the 50′s and 60′s, brands used to be built on a set of attributes. Now brands are built by customers, one experience at a time, and those experiences are, obviously, more and more online experiences. Fedex has seen additional changes in branding as their offering is increasingly becoming a critical part of their customers’ offerings – thus becoming an “ingredient brand.”

Mark also talked about changes in market research and in measuring marketing effectiveness – with the most important measure of marketing effectiveness at FedEx now being customer loyalty instead of customer satisfaction. It’s not hard to understand when you realize that a 1% increase in loyalty comes with an extra $100M straight into the bottom line. Interestingly enough, loyalty is strongest among people who had a problem that was resolved to their satisfaction, not among those that never had a problem. When discussing market research we also talked about the power of the 2.0 world and how it makes it so much easier to get instant feedback.

Other interesting topics that we touched on include:

  • How Fedex uncovered affinity-based group behavior in their community, and the role of cognitive surplus in brand champions and customer (self-)support
  • How the new “word of mouth” is increasingly coupled with customer support
  • How they set up a listening infrastructure to monitor what is being said about the company and to be able to quickly turn negative word of mouth into positive word of mouth to increase customer loyalty
  • The importance of co-marketing with customers
  • The role of listening in innovation, and how listening is the most important thing you can do as a marketer
  • How fairness plays an important role in customer loyalty. You can fail to solve a person’s problem but still instill loyalty if what you did appeared to be fair in the eyes of the customer.

Mark also touched on the type of marketing people he is looking for – well rounded people with strong technical skills who are good listeners.

You can listen to the recorded call below and soon we will be posting a transcript of the conversation as well.

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