A New Start

FT: Brickfish aiming to use viral adverts to catch the attention

Brickfish aiming to use viral adverts to catch the attention

By Paul Taylor in New York

Published: July 3 2008 03:00 | Last updated: July 3 2008 03:00

When Kodak, the US photo supplies company, decided to re-enter the inkjet printer business with a range of printers that claim to cut the cost of ink in half, the company chose an unconventional way to get the message out.

Kodak teamed up with a San Diego-based start-up called Brickfish that has pioneered a new web-based viral marketing method called social media advertising.

Together they created a campaign dubbed "Pricey Ink Stinks" built around a competition that challenged online visitors to find another use for their old, ink-hungry printer and blog about it, take a photo, draw it or video it for the chance to win one of the new Kodak models.

The campaign was a success, generating 87 entries and more than 173,022 "engagements" which Brian Dunn, Brickfish's chief executive, claims are a much better metric than unique visitors or page views. Engagements, or a campaign's "e-score", measures consumer action defined by entries, votes, reviews and views of branded user-generated content.

Clients use the Brickfish platform to launch online advertising and marketing campaigns designed to capture the attention of consumers - particularly the young, creative and connected - and tap the power and reach of social networking.

Instead of marketing to consumers, the Brickfish advertising platform effectively co-opts consumers who become part of the campaign, generating blogs, images, video and audio content that is shared virally and voted upon. Meanwhile, Brickfish enables its clients to monitor and track the campaign through "viral map" technology that provides detailed analytics about campaign reach, performance and demographics.

"This viral, consumer-driven marketing approach has proven to be five to 10 times more effective than existing online advertising methods such as display ads and search optimisation," claims Mr Dunn.

With online banner ads stuck with their 0.1-0.2 per cent click-through rates, marketers at big-name companies including Samsung, Nike, Qualcomm and Procter & Gamble have begun to listen.

P&G used Brickfish to launch a campaign for its Aussie shampoo brand. Like the Kodak campaign, the Aussie effort was a contest site. The competition attracted 4,017 entries and more than 2m visitors, 80 per cent of whom were viral connections through sites such as MySpace, MyYearBook and SugarFoot. Brian Jochum, P&G's Aussie brand manager, described it as one of P&G's most successful engagement branding efforts so far this year.

"In order to broadly reach consumers across the internet, Brickfish provided us with a highly cost-conscious and effective method to virally spread our brand name to thousands," he said.

Using Brickfish's media platform, P&G was able to track not only the initial message sent but subsequent ones to other social networks.

In total, Brickfish has launched more than 200 campaigns for clients, including about 30 for the fashion and cosmetics industries.

Copyright The Financial Times Limited 2008

FT: Airmiles, Credit Cards

Hot airmiles

Published: July 1 2008 09:30 | Last updated: July 1 2008 19:44

Flying might have lost its glamour in the past few years but the business of marketing loyalty schemes has remained as alluring as the designer handbags on offer in duty-free. Now, however, the International Accounting Standards Board’s new rules on such programmes threaten to wipe hundreds of millions of dollars off airline balance sheets.

Qantas’s review of whether to spin off its frequent flyer division – which has 5m members – and sell up to 40 per cent to outside shareholders could be the first in a series of restructurings and sales to result from the IASB’s new rules, which came into force on Tuesday.

Traditionally, the liability of unused flyer miles was recorded on the airlines’ balance sheet at the (relatively low) marginal cost of a delighted regular customer putting their bum on an otherwise empty seat: a meal, some baggage-handling and a few extra gallons of kerosene.

But the IASB, seeking a more rigorous analysis of the opportunity cost of frequent flyer rewards, now wants the liability to be valued at “the amount for which the award credits could be sold separately”. At its most conservative, that means basing the value on the cost of a full price ticket.

The new regulations have their logic, no doubt. But their timing is awful, given that airlines are struggling for survival amid surging oil prices. When Qantas voluntarily adopted the new standards this year, it took a hit of A$508.4m to its retained earnings.

Spinning off its loyalty programme could raise between A$2bn and A$3.5bn. Keeping control would make strategic sense as the Qantas brand is at stake. And acting quickly might produce a better price than waiting for other airlines to crowd the market and depress demand.

Run well, these can be embarrassingly successful standalone businesses. One danger is that the semi-independent reward programme outshines the parent airline. Air Canada spun off its rewards programme, Aeroplan, in 2002. It is now worth four times more than the airline itself.

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Qantas looks at loyalty spin-off

By Elizabeth Fry in Sydney, Raphael Minder in Bangkok and,Justin Baer in New York

Published: July 2 2008 03:00 | Last updated: July 2 2008 03:00

Qantas is considering the partial float of its frequent flyer business later this year, in a move that could raise between A$2bn (US$1.9bn) and A$3.5bn for Australia's biggest airline.

The Qantas announcement comes as some Asian flagship carriers are also studying whether to spin off their passenger loyalty programmes - including Korean Air and Japan Airlines - at a time when their main airline business is facing soaring fuel costs and stiffer competition from low-cost carriers, according to people close to the airlines.

While the carriers would not comment, such a move could allow them to generate additional funding, as well as highlight the value of a business that is less reliant on aviation as it generates sales by selling air miles to credit card companies, hotels and retailers.

Geoff Dixon, chief executive, said Qantas would decide by August whether to sell a 40 per cent stake in the business, with a partial float among the options. Qantas, one of the world's most profitable airlines, is overhauling its loyalty programme into one where points can be redeemed for any seat, at any time.

Qantas shares rose as much as 9 per cent yesterday, before closing up 6.6 per cent at A$3.24. UBS, Citi and Macquarie have been appointed as joint lead managers to manage the potential IPO. Morgan Stanley will continue to provide financial advice ahead of a possible offering.

US airlines that face a potential cash crunch later this year are starting to sell pools of frequent flyer miles to their credit card partners. The downturn has made many conventional capital-raising options more costly or dilutive, leaving carriers to explore alternatives that leverage assets that will retain value even as market conditions continue to deteriorate.

Airlines' ties to the credit card industry have come under greater scrutiny from investors this year as mounting losses cast doubt on carriers' ability to avoid seeking protection from creditors.

Continental Airlines, one of the six legacy US carriers, raised $413m on June 10 from affinity card partner JPMorgan Chase by selling miles and posting some of its routes and airport slots as a security interest. The figure comprised about 12 per cent of Continental's total cash at the end of the quarter.

In a bid to persuade investors that they will stave off bankruptcy, carriers such as American Airlines and United Airlines have noted that they have billions of dollars in miles and other unencumbered assets that could be exploited to raise cash in the coming months.

Additional reporting by Jonathan Soble in Tokyo

Copyright The Financial Times Limited 2008

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US airlines sell off frequent flyer miles

By Justin Baer in New York

Published: July 2 2008 03:00 | Last updated: July 2 2008 03:00

US airlines that face a po-tential cash crunch later this year are starting to sell pools of frequent flyer miles to their credit card partners.

The brutal industry downturn has made many con-ventional capital-raising options more costly or dilutive, leaving carriers to explore alternatives that leverage assets, including frequent flyer miles, that will retain value even as market conditions continue to deteriorate.

Airlines' ties to the credit card industry - both the issuers that co-brand cards and the electronic payments companies that process ticket purchases - have come under greater scrutiny from investors this year as mounting losses cast doubt on carriers' ability to avoid seeking protection from creditors.

Credit card issuers use airline miles to reward account holders for making purchases.

Continental Airlines, one of the six legacy US carriers, raised $413m on June 10 from affinity card partner JPMorgan Chase by selling miles and posting some of its routes and airport slots as a security interest.

The figure comprised about 12 per cent of Continental's total cash at the end of the quarter.

Others may follow. In a bid to persuade investors that they will stave off bankruptcy, carriers such as American Airlines and United Airlines have noted that they have billions of dollars in miles and other unencumbered assets that could be exploited to raise cash in the coming months.

"The wheels are already in motion," JPMorgan analysts Jamie Baker and Mark Streeter wrote in a research note last week.

"Can a similar deal between American and Citibank [its affinity card partner] be that far off? Not in our opinion."

Because carriers often sell miles to card issuers at a discount to persuade them to acquire large blocks in advance, the transactions can be costly.

Nevertheless, airlines can make a persuasive case. Large issuers such as JPMorgan Chase, Citi and American Express value their marketing agreements.

Frequent flyers tend to earn and spend more money, and exhibit more loyalty toward their co-branded airline card than the typical account holder.

"Issuers are always trying to find a way for cards to not be commodities," said Richard Vague, a former credit card executive who ran stand-alone card issuers that are now part JPMorgan and Barclays.

"Airline programmes have always been one of the most successful in terms of having additional value."

Copyright The Financial Times Limited 2008

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Card companies hold a strong hand

By Justin Baer in New York

Published: July 2 2008 03:00 | Last updated: July 2 2008 03:00

Last autumn, Frontier Airlines selected First Data over its peers as the low-cost carrier's credit card processor. But by April, Frontier held the electronic payments company responsible for its descent into bankruptcy.

Frontier's Chapter 11 filing underscores the crucial role the credit card industry plays in determining which airlines survive the downturn unscathed.

While credit card issuers can be a source of capital for airlines struggling with record fuel costs and slumping demand, card processors like First Data and US Bancorp can have the opposite effect on a carrier's financial flexibility by holding on to some or all of the proceeds from advanced ticket sales.

Processors have the right to "hold back" cash under certain circumstances because they take on the risk that airlines may go out of business before they meet all of their future obligations to passengers.

In short, if a consumer uses his credit card to buy a seat on an August flight to Los Angeles, and the airline fails in July, it is the processor who is left to reimburse the would-be passenger.

"It's really just like an extension of credit, in the sense that you're collecting the cash upon tendering the receipt but not delivering the service until some point in the future," said Ben Hirst, Northwest Airlines' general counsel. "That's typically a credit-based decision and so it varies by carrier, depending upon the relationship of the airline and the processor and the strength of the company."

In some cases, an airline's processor is part of the same financial services conglomerate that owns the company that co-brands credit cards with the same carrier.

Still, the threat of potential processors' hold-backs "may pose an even greater liquidity risk than fuel over the next several months as cash balances come under increasing pressure", JPMorgan analysts Jamie Baker and Mark Streeter wrote in a research note.

"Any material change in hold-back could exact a heavy toll on liquidity."

Concerned that Frontier's financial conditions had wilted materially, First Data put in place a timetable that would have quickly held back 100 per cent of the airline's advanced sales.

In filing for Chapter 11, Frontier was granted a stay on the holdback policy.

"Unfortunately, our principal credit card processor, very recently and unexpectedly informed us that, beginning on April 11, it intended to start withholding significant proceeds received from the sale of Frontier tickets," Sean Menke, the airline's chief executive, said in a statement.

"This change in established practices would have represented a material change in our cash forecasts and business plan."

Brian Mooney, president of First Data's Merchant Services unit, said his company was surprised, too.

"Even they would admit that the high price of oil had caught them in a tough bind," Mr Mooney said. "We had ongoing dialogue with them in the months leading up to the filing. They had not mentioned they were considering bankruptcy."

Under protection from creditors, Frontier reached a processing agreement with First Data that increases the extent of the hold-back more gradually. While troubled by the severity of First Data's actions with Frontier, many US airlines executives see the Denver-based airline's filing as an extreme case. Larger carriers will have more leverage and additional sources of liquidity, they argue.

Copyright The Financial Times Limited 2008

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Australian carrier soars on idea to float customer scheme

By Raphael Minder in Bangkok

Published: July 2 2008 03:00 | Last updated: July 2 2008 03:00

Investors yesterday sent Qantas shares to rally to their biggest one-day gain in a year, after the Australian carrierannounced it could list its loyalty passenger programme.

But beyond investors' euphoria, which resulted in the Qantas share price rising 6.6 per cent to A$3.24, lies a long-debated idea that continues to divide the airline industry.

The benchmark was set in 2001, when Air Canada spun off its Aeroplan frequent-flyer scheme as a separate entity. Aeroplan now trades on a multiple of 18 times 2008 earnings and has a market capitalisation that is four times that of Air Canada.

However, the Canadian success story has not been sufficient to convince European airlines such as Air France to follow suit, while some Asian airlines, including Korean Air, are now showing interest but refuse to disclose their plans.

In fact, even Geoff Dixon, Qantas chief executive, did his best yesterday to damp shareholders' enthusiasm by insisting a partial flotation was only one of the options being considered.

"Under active consideration for the future of the programme is a partial initial public offering, potentially for completion in 2008," he said.

That caution underlines the dilemma faced by airlines that seek to boost the value of their assets without losing control over them. Proponents of the spin-off idea point to Aeroplan as an exemplar of how airlines can extract greater value from a programme by turning it into an independent profit centre, capable of ultimately forging new partnerships with other airlines.

Peter Harbison, executive chairman of the Centre for Asia Pacific Aviation, a Sydney-based consultancy, says that, given Aeroplan's track record, it makes sense that "all airlines who have a well-established frequent-flyer programme are looking at the concept", which amounts to a recognition that the sum of the parts can be worth more than the whole.

"The bad apple is often the airline itself, which tends to contaminate the others," he adds. The worst scenario, however, is an immediate loss of a favourable and secretive contractual arrangement between an airline and its loyalty programme, which could also force the airline to raise its assessment of the liabilities generated by its redemption plan.

In the longer term, there is also the potential for reverse contamination as an independent programme branches out.

"Should the divested unit enter risky ventures and ultimately go bankrupt, the damage to the loyalty that Qantas has built up would be immense," noted Morgan Stanley in a report earlier this year, which forecast that Qantas would therefore settle for a partial sale.

Still, analysts believe that Qantas is among those airlines that have most to gain from floating its programme because, as a flagship carrier, it has built up a long-standing domestic clientele of more than 5m cardholders, a significant attraction for Australian banks and other local partners. That applies even more to Japan Airlines and Korean Air, two carriers that have also been studying a spin-off and which have, respectively, about 20m and 15m programme members.

On the other hand, Cathay Pacific and Singapore Airlines, two of Asia's most profitable air carriers, have successful loyalty programmes but with a relatively small domestic base, which makes an IPO a less attractive option, according to observers.

That they are still determined to extract more value from their programme was, however, demonstrated recently by Cathay, which launched a new venture with American Express after ending a long-standing card deal with Citibank. Listing a loyalty programme also creates additional costs, estimated at A$10m (US$9.5m) a year in the case of Qantas by Morgan Stanley, because of the breakdown in the existing contract between the airline and its programme and the need to hire more staff to set up a fully fledged business operation.

But Qantas, like many other airlines in the region that have committed to an extensive fleet expansion, has already earmarked A$13bn of capital expenditure over five years.

That in itself could be the compelling reason for Qantas and others to seek to raise additional cash from an existing business.

Additional reporting by Elizabeth Fry

Copyright The Financial Times Limited 2008

Why Zappos Pays New Employees to Quit—And You Should Too

http://discussionleader.hbsp.com/taylor/2008/05/wy_zappos_pays_new_employees_t.html

Why Zappos Pays New Employees to Quit—And You Should Too

I spend a lot of time visiting with companies and figuring out what ideas they represent and what lessons we can learn from them. I usually leave these visits underwhelmed. There are plenty of companies with a hot product, a hip style, or a fast-rising stock price that are, essentially, one-trick ponies—they deliver great short-term results, but they don’t stand for anything big or important for the long term.

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ST: Banks that provide good service can reap big gains

Home > Money > Story
June 9, 2008
COMMENTARY Banks that provide good service can reap big gains
They can boost their valuations by offering more personalised approach to clients
By Goh Eng Yeow, Markets Correspondent
LARGE companies such as banks and airlines spend millions of dollars to make sure consumers know about their cutting-edge services - and how they stand out from the crowd. Yet, it has become a grim fact of life for consumers - especially the less wealthy ones - that they are getting no service at all or poor service at best. In fact, even the affluent are complaining. Take the elite staff at banks hired to attend to 'priority and private banking customers'. Many of these well-heeled customers gripe that their relationship managers are poorly trained and behave no differently from commission-based financial advisers and insurance agents. 'Most of them have very poor product knowledge and some even give you wrong advice,' said Straits Times reader Sia Cheong Yew. The instinctive reaction of most consumers when confronted with such woeful service is to shrug their shoulders, suffer in silence, or move their money or business elsewhere. This is a big blow to the organisations that spent considerable amounts of time, effort and resources on trying to capture these potentially lucrative customers in the first place. Seasoned stock analysts say this failure at the all-important final step of marketing explains why some companies are valued highly by investors, while others are neglected, even if they operate in the same industry, serve the same mix of customers and deploy the same type of assets. A friend of mine said this point was driven home forcefully to him when he had to change his flight schedule while he was in Japan. A helpful Singapore Airlines (SIA) representative in Nagoya helped him to switch the departure city for his return flight from Tokyo to Nagoya, even though his travel agent had said the switch was impossible as he was on a budget ticket. My friend was delighted with the prompt attention that he received even though he was a 'cattle-class' passenger. He had enjoyed the now all- too-rare experience of talking to a real person at the other end of the line, rather than getting the usual automated voice message used by many companies to cut costs. Simple gestures such as these earn SIA enormous good will among passengers and investors, he said. In accounting terms, this good will translates into a dollar value that measures a company's intangible assets, such as a strong brand name and good customer relations. SIA's strong good will gives it a lofty valuation, with investors willing to hang on to the carrier's shares and finding it a 'great way to fly', even though soaring jet fuel prices have crippled many airlines. But as many who have tracked SIA's performance over the years would attest, good will takes years - sometimes decades - to build up. And it can be literally destroyed overnight by a company's blind greed as it pursues short-term profit and income. Nowhere is this more evident than in the financial sector. For instance, when was the last time you actually talked to a bank officer over the phone, instead of having to listen to some infuriating automated message giving you 10 different options to choose from? One writer in The Business Times recently lamented that, in recent years, banks and their front-line staff have become focused mainly on personal and corporate profits and targets. One bank even went so far as to blatantly advertise that it needed relationship managers to acquire new clients and quickly convert them into 'profitable, multi-product relationships' in order to enable it to lift its market share. 'I don't know about you...but I would run as fast as I can from institutions that roll out their red carpet with target-hungry, profit-maximising wealth managers,' he said. Just imagine how much good will, which these banks have carefully built up over the years, has been destroyed by their myopic obsession with profits, and the corrosive effect this has on their stocks' value. Sure, such practices will give the banks a boost in earnings in the short term. However, as the sub-prime crisis in the United States has shown, long after the commission-hungry managers have collected their bonuses and left the scene, investors may find themselves staring at considerable losses, as banks struggle to clean up their balance sheets. It is sad to note that despite such painful lessons, some banks may be sowing the seeds of trouble by failing to abandon such practices, alienating their customers in the process. Should wealth managers be encouraged in their obsession with selling products so that they can reach their targets faster? I should think not. As the SIA example shows, the intangible benefits from earning consumers' good will are inestimable, even if they do not raise the bottom line directly by a single cent. They have helped the carrier to scale fresh heights in a cut-throat business - in the face of soaring costs. Banks may even get a boost in their rock-bottom valuations from investors, if they offer a more personalised approach to their customers and give up the product-driven approach that many of them now practise. Getting a few pointers from SIA will certainly help. engyeow@sph.com.sg PRECIOUS YET UNDERRATED COMMODITY Good will takes years - sometimes decades - to build up. And it can be literally destroyed overnight by a company's blind greed as it pursues short-term profit and income. Nowhere is this more evident than in the financial sector.

FT: Restyle in the aisles

Restyle in the aisles

By Elizabeth Rigby

Published: May 27 2008 22:11 | Last updated: May 27 2008 22:11

For many of us, wheeling a trolley up and down supermarket aisles is a routine affair. But for Dina Howell, the minutiae of shoppers’ wanderings on their weekly shop is very interesting indeed.

Ms Howell, who is in charge of all of Procter & Gamble’s in-store marketing worldwide, wants all the details, no matter how small. She wants to know how many people walk down the haircare aisles in a superstore and at what time of the day. She wants to see whether bigger, brighter displays attract more customers. And she wants to use this knowledge to try to understand how P&G can sell more of its goods in superstores.

To this end, P&G and a dozen other consumer goods companies – including Coca-Cola and Kellogg – and 18 US retailers such as Wal-Mart, Walgreens and Target have each spent $250,000 on “project Prism”, an initiative led by AC Nielsen, the media rating agency.

Infrared sensors have been dotted through 166 superstores in the US to monitor the movements of millions of shoppers as they push their trolleys along the aisles.

“It is a big test,” says Ms Howell, her eyes widening as she contemplates the information being gathered, and then extrapolated to apply to thousands of stores.

“We are getting data from the US right now and it is very interesting. Of all the business that happens [for P&G] in the US, we are getting data on 60 per cent of those volumes.”

Prism – “pioneering research for an in-store metric” – uses infrared beams to track shoppers’ movements and then correlate them with sales data. Advocates describe it as the first truly scientific measurement of the effectiveness of in-store sales tools such as shelf location and promotional displays.

The findings are still under wraps, but Ms Howell, who gave a talk about Prism at the annual World Retail Congress this year, says the research could change all manner of aspects of superstores, from how the retailers sketch out their floorplans to the types of products they stock.

“I suspect [that] with Prism we will begin to understand those aisles that you and I enjoy shopping [in] because they are so empty. Retailers will maybe start thinking ‘should I be devoting that level of real estate [to those categories]’,” she says. “I am sure that there are categories being underserved, but that data will reveal it.”

That could mean changes such as cutting back on the homeware section in return for bigger health and beauty aisles. But it could also bring about changes to how stores are set out if retailers and consumer goods companies can work out what type of shoppers go where and why.

In one retail chain, AC Nielsen monitored who was shopping in the haircare and soft drink aisles for a month. During that period, 1.7m shoppers – 1m of whom were women – walked through soft drinks but gave the haircare section a miss.

AC Nielsen estimates that half of those 1m women were between the ages of 24 and 54 and therefore the target audience for makers of shampoos, conditioners, hair dyes and styling mousse. Getting even a fraction of them to walk through the haircare aisle could eventually amount to millions of dollars more in sales.

“If you are not a huge company, you might not be able to get retailers to change around aisles,” says David Sommer, managing partner of in-store media planner MEC Retail, who is also involved in the Prism project.

“But say there is someone who you want to sell breakfast cereal to and you know they don’t walk down that aisle – you could find another place in the store where you could reach them, such as putting a sign in the dairy section to remind them that breakfast cereal is a good way to start the day and point them to aisle two.”

As well as spotting missed opportunities, Prism can help consumer goods companies work out whether in-store campaigns are really converting browsers into buyers.

“[Ahead of a marketing campaign] we monitor the amount of people walking through and we are able to know that 15 per cent of people were converted to buy that category [be it haircare, detergents and so on].

“If we then do a marketing exercise in that aisle, we can measure if the conversion rate is higher, say 20 per cent,” says Ms Howell.

“Then you can take the difference [in sales volumes] times the average dollaring [sales] and know what the size of that prize really was and not what it was projected to be.”

In July, Nielsen will start selling the Prism data to a wider group of companies in the US.

Mr Sommer says: “It is a huge deal. Up to now, in-store [marketing] was handled by the sales guys who worked for Colgate or Campbells or P&G and it was just about stocking them high and letting them fly. Now it is much more analytical, so you are not just trying to sell things, you are trying to understand who you are reaching.”

Ms Howell, a veteran of 18 years at P&G, says that reaching those women who might buy Tide for their laundry or Pantene for their hair is getting trickier in the internet age.

“The way to get shoppers’ attention is so scattered – if you think about daily life, how many things do you do in a day? So it is very important to find ways to get to her.”

Until now P&G has spent $7bn a year talking to “her” through television and print adverts. But that could change as it tries to reach out to the shopper in the aisles instead.

Copyright The Financial Times Limited 2008

FT: A return to the consumer's unconscious

A return to the consumer's unconscious

By Stefan Stern

Published: May 22 2008 03:00 | Last updated: May 22 2008 03:00

Five years ago Gerald Zaltman tried to help business leaders out with a book called simply How Customers Think . His broad theme was that purchasing decisions are not as coolly rational as marketing professionals like to think. Instead, they stem mainly from unconscious and emotional thought processes.

But he clearly feels too few business leaders were listening, because now he has returned to this subject, assisted by his son Lindsay, to explore the specific question of the metaphors we all use to frame and to understand the world around us. Tune in better to customers' metaphors, the Zaltmans say, and you are closer to making a sale.

The authors are able to call on a wealth of academic voices to support their approach. Stephen Pinker, an acknowledged authority on how the brain uses language, provides an epigraph for the book: "Metaphor is so widespread in language that it's hard to find expressions for abstract ideas that are not metaphorical."

The subtitle is: "What deep metaphors reveal about the minds of consumers". The Zaltmans explain that "deep metaphors" are "unconscious viewing lenses", that help us to structure what we think, hear, say and do. "Deep metaphors are enduring ways of perceiving things, making sense of what we encounter, and guiding our subsequent actions . . . they are the product of an ever-evolving partnership between brain, body and society."

So what, you might protest - who cares about metaphors? Business is about selling, not poetry. The authors argue - rightly - that there is a direct line from grasping what your customers are really telling you to building a stronger sales performance.

That understanding is known, in the jargon, as "customer insight". And if they are honest, a lot of business leaders admit they and their colleagues often do not have it.

An anonymous chief executive tells the authors: "We do not have deep consumer insights . . . Just because my managers consume the products and watch the focus groups, they think they understand consumers. They do not. When I push them to explain a customer insight that excites them, they often cannot. They have not thought deeply about it. If it did not upset me so much I might feel sorry for them."

Focus groups let you down because consumers are forced to respond to ideas that are not generated by them. Conscious questions are asked about unconscious processes. The answers that emerge may well lead you astray. "Brand battles are waged and won or lost at the deepest level," the authors argue. That means you have to take much more time to listen carefully to what customers, individually instead of in focus groups, tell you and develop greater sensitivity to the language they use.

Consider the language that surrounds the theme of connection, for example. Budweiser, the brewer, has grasped this well. When young men started yelling the word "Whassup!" to each other in Budweiser commercials, the company was making a profound point about connection and what its product could do to help form it. Connection is one of the most powerful themes a consumer goods manufacturer can tap into.

Or consider the metaphor of a journey. To deploy this skilfully can also bind your customers closer to you - if you understand what sort of journey your customers contemplate.

The Zaltmans compare two slightly different statements: "I am fast approaching my retirement date"; and "My retirement date is fast approaching". The first implies agency; the second is more passive. These two customers are different and should be "segmented" differently. One financial services business did just that and developed two different presentations of the same financial product. Sales went up in both customer categories and were achieved quicker as well.

Other important metaphors - balance, transformation, container, resource and control, with journey and connection - feature in about 70 per cent of customer thinking, the authors say. But you can listen out for other, less obvious metaphors too.

Don't let the ambitious scope of Marketing Metaphoria distract you from its central idea. Customers are harder to pin down than we think and they must be listened to more carefully. For that insight alone, this book should be welcomed.

Copyright The Financial Times Limited 2008

FT: A Sex and the City guide to media

A Sex and the City guide to media

By John Gapper

Published: May 15 2008 03:00 | Last updated: May 15 2008 03:00

It may not take a lot to make the New York Post, Rupert Murdoch's city tabloid, grumpy but the four actresses of Sex and the City , the new film of the television series, certainly provoked it this week.

The Post was dubious about the hat worn to the film's premiere by Sara Jessica Parker, who plays the lead character Carrie Bradshaw in the drama about the lives of four Manhattan women. Even worse than this faux-pas, she wore the hat in London, where the film's world premiere was held.

After London, which the Post dismissed as "the wrong city", the quartet is hitting Berlin tonight before returning to New York for yet another glitzy launch event in two weeks. New Yorkers must make do for now with posters of Carrie and her friends plastered around the city.

Even in its absence, however, Sex and the City is part of the Zeitgeist. Both the drama itself and the way it is being marketed say a lot about the future of film and television. In fact, here is my Sex and the City guide to the entertainment industry.

First, the world is bigger than the US. Carrie, Charlotte, Miranda and Samantha are jetting around Europe for the same reason that the Cannes film festival, which opened yesterday, includes the premiere of the planned summer blockbuster Indiana Jones and the Kingdom of the Crystal Skull. That is where the money is.

US films earned $17bn at the international box office last year, compared with $9.6bn at home. As a result, studios are becoming loath to invest in films that do not travel, such as dramas based on baseball. Because SATC is heavily identified with New York, the producer New Line Cinema hedged its bets with European premieres.

Second, paid-for is bigger than free. That sounds strange in the era of the internet, but entertainment for which consumers rather than advertisers pay is growing more powerful. Americans used to spend many more hours with media such as radio and broadcast television than with DVDs and video games but they are switching.

SATC is a prime example because it was a subscription cable television series made by Time Warner's Home Box Office. Indeed, along with The Sopranos , it was part of the Sunday night line-up of original programmes that turned HBO into one of the most powerful forces in entertainment, with annual revenues of about $4bn.

HBO's formula, which has since been mimicked by pay channels such as Showtime and even free cable channels such as AMC, the maker of Mad Men , was to make expensive and intelligent dramas that viewers could not find on broadcast television. SATC was too raunchy, The Sopranos was too dark and violent, Six Feet Under was too morbid etc.

It did not care about decency, or whether there was a broad enough audience to draw advertisers, because it was funded by 29m subscribers. Meanwhile, broadcasters switched to reality shows that were cheap to make - far cheaper than the $2.5m per hour a top-rank drama can cost - and reached big audiences.

That made sense in the moment but it means that HBO and Showtime, which makes Dexter and Weeds , hold more valuable long-term properties. The deal struck by HBO with Apple this week to charge $2.99 for episodes of The Sopranos and Rome on iTunes (and the standard $1.99 for SATC ) shows its pricing power.

Third, the small screen is bigger than the big screen. Box office receipts of $9.6bn in the US last year were easily outstripped by the $23.4bn of DVD rentals and sales. Digital technology allows studios to exploit new forms of distribution, including iTunes and video-on-demand. Some 20 per cent of HBO's revenues come from reselling its dramas.

Furthermore, the power of pay television is not only biting into broadcast networks but is posing a challenge to Hollywood. Subscription channels used to rely almost wholly on re-running Hollywood films and, even now, 70 per cent of HBO's output consists of studio films. The transfer of SATC from the small to the big screen is a symbol of a shift in the power balance.

A decade ago, actors, directors and scriptwriters far preferred to work in film. Complex and sophisticated dramas were found in cinemas while television was a forum for soap operas and bland drama. The rise of HBO and Hollywood's switch to making blockbusters for the 12-24 year-olds who comprise 41 per cent of frequent film-goers is changing that.

The rise of pay television as an artistic force is matched by a decline in the value of run-of-the-mill films in the secondary market. Three Hollywood studios broke away from a deal with Showtime last month to form their own pay television channel after the latter complained that it was paying too much for films and could make its own dramas.

Fourth, adults are bigger than teenagers. Young people have held sway over Hollywood in recent years because they can be relied upon to go to the cinema. But pay television has tapped an adult audience that has been under-served by film studios and can now watch dramas at home on high-definition televisions.

That is breathing life into dramas made for adult niche audiences rather than big teenage and college-student cohorts. Hollywood studios are responding to this. "Studios are being much more deliberate about choosing demographic targets and developing films for them," says Geoff Sands, a consultant at McKinsey & Company.

As adult targets go, you do not get much better than SATC . It started out as a quintessentially American television series and has ended up as a film seen first by Londoners and Berliners. Romance, promiscuity, fashion and all, it is the very model of a modern media enterprise.

john.gapper@ft.com

Copyright The Financial Times Limited 2008

FT: Truck maker heeds firemen’s call

Truck maker heeds firemen’s call

              By Hal Weitzman

Published: May 12 2008 19:42 | Last updated: May 12 2008 19:42

Anyone who thinks “fire-engine red” is a standard  colour would be surprised  by the paint laboratory at the back of the Pierce factory in Appleton, Wisconsin. On the wall are 125 metal plates, each painted a slightly different reddish hue.

“If you’re going to spend half a million dollars on a fire truck, you’ve got to be able to choose the exact colour you want,” jokes Jim Michal, vice-president of manufacturing for Oshkosh Corporation, the heavy truck maker that acquired Pierce in 1996.

Many western manufacturers have tried to stay competitive in the face of low-cost overseas competition by closely tailoring products to their customers’ needs. Oshkosh takes this approach to the extreme, customising its trucks according to individual buyers’ needs and collaborating with customers on redesigning its vehicles.

Its experience shows how such a strategy can pay off: in the past decade, Pierce has grown at an average rate of more than 11 per cent a year. With revenues last year of $600m – up from $180m when it was bought by Oshkosh – it is now the leading maker of fire trucks in the US with a market share of about one third in North America.

Tim Solobay, chief of the Canonsburg Volunteer Fire Department in Pennsylvania, agrees that Pierce’s customisation strategy helps attract buyers. “We went with Oshkosh because it’s just easy working with the company – you know it won’t become an engineering nightmare.” Pierce trucks are popular with volunteer teams, of which there are about 34,000 in the US and which account for 80 per cent of the company’s sales.

Mr Solobay is beaming at his new fire truck, parked on the factory floor – a slice of classic Americana with rows of gleaming vehicles bearing the emblems of fire departments from Jacinto City, Texas to Downers Grove, Illinois.

Mr Solobay says this is his third point of contact with the company: first, he and his crew met a local salesman to talk about design features, then, last December, they visited the factory to talk in more detail about customising the vehicle. On this return visit – a four-day trip – they check the results and take delivery.

Mr Michal says Pierce’s strategy of working with customers is two-pronged. First, the company tailors each vehicle, from the artwork on its grille to the water-pumping technology. “The customer has an option list for specifications,” he says. “The result is that no two vehicles are exactly the same.”

While that makes Pierce vehicles (such as the one pictured below) among the most expensive on the market, it also wins fierce brand loyalty among purchasers. Mr Solobay says his fire department is paying about $30,000 more than it would for a vehicle from a rival, but adds that for a fire truck that is only replaced about every 20-25 years there are other considerations, such as dependability and the unique features the company offers. “These are top-quality vehicles,” he says. “We know that because our other fire trucks are from Pierce.”

Oshkosh is so confident that its customers will stick with the Pierce brand that in April – while the US industrial sector appeared to be mired in recession – it increased the price of its vehicles, citing rising steel costs.

Charlie Szews, Oshkosh’s president and chief operating officer, says the tailoring strategy has been honed over decades. “We operate in relationship markets. These products last up to 50 years – there are still Pierce fire trucks from the 1950s that operate in the field. We have to think long-term.”

The second part of Pierce’s strategy involves using contacts with customers to aid redesign and spur innovation. Before undertaking a fundamental redesign of its basic fire truck model two years ago, Pierce surveyed its customers to get ideas for improvements. Then the company invited more than 100 firefighters to visit the factory to give them more detailed feedback. It put them in groups and asked them to design their ideal fire truck from scratch.

The company fed ideas from this exercise into the redesign: it removed a pillar from the windscreen and changed the location of wing mirrors to improve visibility; made door handles bigger so they were easier to use for firefighters wearing gloves; and installed side airbags for extra protection.

Oshkosh also used the opportunity to measure firemen – and found out they were, on average, taller and broader than federal guidelines on cab heights and seat widths had led them to expect. As a result, the company widened the standard seats in their trucks.

During a standard sales process, too, the company has a lot of time to get to know its customers. As with the Canonsburg fire department, customers who buy a fire truck infrequently – such as volunteer departments serving rural areas – typically have three meetings with the company over the course of the six months leading up to a sale. Up to 10,000 visitors a year come through the factory to inspect and collect their vehicles, and Pierce uses the opportunity to collect feedback.

“We line them up with a series of lunches and dinners while they’re here so we can hear their ideas,” says Mr Michal. “At every meal we have a staff member from a different department go out with them to chat informally. Then the employees document what’s been said and send it on to the engineering department or the marketing department.”

Bob Bohn, Oshkosh’s chairman and chief executive, says the ability to listen to customers in such an informal setting is an invaluable part of the production process. “It gives them a chance to really tell us what they like and what they don’t like,” he says.

It is only through taking advice on its products from their users that Pierce has been able to claim a progressively larger slice of the fire truck sector, the company says. “These markets only grow at about 1-3 per cent a year,” says Mr Szews. “We need to think differently in order to increase our market share.”

Vehicles built on front-line experience and first-hand feedback

While Pierce’s relations with its customers go deeper than most, Oshkosh adopts a similar approach across other units. Employees in its military arm, for example, spend months living in the field when US forces are testing prototypes and 20 per cent of the division is devoted to parts and servicing. The company has two facilities in Iraq and one in Kuwait dedicated to repairing and refurbishing military vehicles.

Mike Conger, Oshkosh
vice-president and general manager of operations, says his experience of living for three years near government “proving grounds” where vehicles are tested and delivering vehicles to the field is typical of how the company works with the US military. “I could walk around and talk to the staff sergeant or the chief warrant officer and get direct first-hand feedback about how our vehicles were performing,” he says.

As is standard for US military contractors, members of the Defense Contract Management Agency, a unit of the Pentagon, also work on site with Oshkosh. The company brings the dozen-strong DCMA team in to its operations as much as possible, with federal staff sitting in on twice-daily production meetings as well as inspecting quality and processes. Mr Conger says: “We hear the customer’s expectations right on the shop floor, and our employees hear it first-hand.”

Copyright The Financial Times Limited 2008

             

                 

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FT: Penguins offer safer surfing for junior web users

Penguins offer safer surfing for junior web users

By Maija Palmer

Published: May 12 2008 03:00 | Last updated: May 12 2008 03:00

The founders of Club Penguin - Lane Merrifield, Lance Priebe and Dave Krysko - are possibly some of the nicest guys in the internet business. They give millions of dollars a year to children's charities and are fierce advocates of family values.

Mr Merrifield looks more like a kindly primary school teacher than an executive, the kind of man you might trust to look after your children. This is what parents are, in effect ,doing as they let their children join Club Penguin, the virtual online world for six- to 14-year-olds.

What started out as a sideline project in the sleepy holiday town of Kelowna, British Columbia, Canada, is rapidly growing into a global phenomenon.

Club Penguin has 20m users and analysts estimate up to 10 per cent of them have persuaded parents to pay about £4 a month for souped-up access to the site. Stephen Prentice, senior analyst at Gartner, notes: "Kids' virtual worlds are the success story. If you exclude online games, around nine out of 10 virtual world users are probably under 12."

Club Penguin became so successful that last July it was bought by Disney for $700m (£350m). It is now building an international presence with Disney's backing, beginning with the opening of a UK office earlier this month. It is also hiring a marketing executive for the first time since it was founded in October 2005.

There is some irony in the fact that the Club Penguin founders now find themselves owned by a big US company. All three originally moved to Kelowna to escape the corporate rat race. And, they had started the site in order to create an advertisement-free zone for children that also offered entertainment.

The site's popularity - it made a profit within four months - showed the founders they had found a gap in the market.

Safety features were a big selling point from the outset. Mr Merrifield's wife is a clinical psychologist specialising in childhood and helped shape the site; his sister and mother, both teachers, also offered advice.

Virtual Worlds Management, which tracks networking sites and virtual worlds, estimates that there are more than 100 youth-focused virtual worlds either live or in development, with 52 of them aimed at children under seven. Disney alone is understood to be developing up to 10 virtual worlds aimed at children.

The fact that many of these sites are associated with commercial brands such as Barbie, Beanie Babies and Bratz worries parents concerned about their children being exposed to too much advertising online.

Safety is also a problem. A recent survey by Ofcom, the UK communications regulator, found that nearly half of all British children have a profile on a social networking site, including a quarter of all eight- to 11-year-olds with online access. These children are theoretically too young for Facebook, Bebo and MySpace, which have minimum age limits of 13 or 14. However, many find ways round the age restrictions. Given that last summer MySpace alone detected and deleted 29,000 convicted sex offenders on its service, parents concerns are real.

Their search for safer online alternatives - sites that are more closely monitored and where children cannot reveal personal information - plays to Club Penguin's strengths. It employs more than 100 moderators who monitor the site for unsafe behaviour. They are trained to spot bullying, or attempts to share contact details.

Pictures cannot be posted on the site. Instead, children are represented by a colourful penguin. Filtering software prevents phone numbers being published.

Club Penguin's culture of niceness is key to its success. But how well it can continue to walk the fine line between wholesomeness and commercial pressures is unclear. Mr Merrifield says that Disney has been very hands-off with the company and lets it do things its own way.

Mr Merrifield admits the company could create soft toys based on its virtual penguin characters but he pledges this would only be done with careful consideration. "It will be very purposeful. It will be based on what the audience want," he says.

The question is: which audience is he talking about? Eight-year-olds do not mind commercialism - they love toyshops. It is parents who resent it, and Club Penguin will have a tricky balancing act to please both sets of customers.

Copyright The Financial Times Limited 2008

Polish Plumbers

                                                                                     

Last Updated: Tuesday, 21 June 2005, 13:05 GMT 14:05 UK                                                                                                        E-mail this to a friend                     Printable version

                                                                    

'Polish plumber' beckons French

New "Polish plumber": A humorous counter-blast from the east The Polish tourist board has come up with a seductive image of a Polish plumber to counter negative French rhetoric about east European workers. The "Polish plumber" - a symbol of cheap labour - became a catchphrase of the French "No" camp during the referendum on the EU constitution. "I'm staying in Poland - do come over," says the new ad on the Polish tourist board's website for French visitors. The site carries messages from French readers praising the ad's humour. Elzbieta Janik, spokeswoman for the Polish tourist board, said she and her colleagues were "annoyed that a negative image of Poland was being used by politicians... to avoid the real political problems". Image makeover The ad was produced by the tourist board's Warsaw headquarters to "help us create a positive image of Poland," she told the BBC News website. "We have been given a label we don't deserve. After all, France has plenty of Spanish stone masons, Portuguese workers... "This was a humorous response to the political debate - we wanted to tell the French: 'Despite the bad words about Poland you are welcome'," she said. Posters and T-shirts bearing the handsome Polish plumber image might also be produced, she said. "French people have phoned up to congratulate us. They told us: 'We're not dupes, we know Polish plumbers are not to blame'," she added. = = = More Articles in   International > Unlikely Hero in Europe's Spat: The 'Polish Plumber'   By ELAINE SCIOLINO Published: June 26, 2005   Correction Appended PARIS, June 25 - Blond, buffed and blow-dried, a come-hither half-smile on his face, the man in the travel ad grips the tools of his trade as he beckons visitors to Poland. Skip to next paragraph       Enlarge This Image Polish Tourism Bureau A Polish ad features a model as a plumber who assures the French that he is staying in Poland (away from their jobs).      Ed Alcock for The New York Times Wieslaw Zieba, a real Polish plumber and electrician, has worked in France for 25 years and knows his tools.     "I'm staying in Poland," the man says, a set of strategically placed pipes in one hand, a metal-cutter in the other. "Lots of you should come." He is the "Polish plumber," a mythical figure who became a central actor in the debate in France over the European Union constitution, which was roundly rejected by French voters last month. Portrayed as a predator who would move to France and steal jobs by working for less pay, this "plumber" has come to personify French fears about the future. Now the Polish Tourism Bureau is using the character to try to allay French fears and attract visitors at the same time. "With all the bad publicity about the 'Polish plumber,' we thought why not have a sense of humor and make him work for us?" Krzysztof Turowski, the creator of an ad on the bureau's Web site, said in a telephone interview from Warsaw. "We picked someone handsome and clean with a sexy look in his eyes - to get the French to come to our beautiful country." Next week the tourist office will offer Paris a firsthand look at Piotr Adamski, the 21-year-old model, who will also pose at the Eiffel Tower in the same green overalls and Stanley Kowalski T-shirt he wore in the ad. Mr. Adamski has become such an overnight sensation that even Poland's former president, Lech Walesa, the Nobel Peace Prize winner and founder of the Solidarity labor movement, offered him advice for his Paris trip. "I suggest that he ask the French why the heck for so many years they encouraged Poles to build capitalism when as it turns out they are Communists themselves," Mr. Walesa, an electrician by trade, said in an interview published Friday in the Polish daily Gazeta Wyborcza. He added, "Piotr probably won't have the chance to say this, so he should at least publicize Poland well in Paris." The ad campaign blends humor with a more serious message. At a moment when France is suffering from an unemployment rate of more than 10 percent, and Prime Minister Dominique de Villepin is waging what he calls a 100-day battle to combat it, it is an effort to assure the French that Polish workers have no intention of stealing their jobs. Even if they wanted to, they could not. Under the treaty that allowed Poland and nine other countries to join the European Union last year, older members of the union can restrict access to their labor markets for up to seven years. Only Britain, Ireland and Sweden have allowed in workers from the new members. But labor has always been one of Poland's most important exports. In a sense, the "Polish plumber" is much more than that, because in most cases he is also an electrician and sometimes even a mason, carpenter, painter and roofer as well. "It's ridiculous, truly bizarre to say Polish plumbers are dangerous for France," said Wieslaw Zieba, 55, who has worked in France as a plumber and electrician for 25 years. "Some of the things that have been said by political figures border on the xenophobic. This is a country that desperately needs more plumbers. But it's not a noble profession that everyone wants to follow. You have to clean up after flooding and unblock toilets." Indeed, according to the French plumbing union, there is a shortage of 6,000 plumbers, and there are only about 150 Polish plumbers in France. When Mr. Zieba first came to Paris, he said, he had no friends, knew no French and slept in the Metro. He now has dual Polish-French citizenship and runs a thriving business that also does masonry, carpentry, plumbing and electrical work. But the fear of cheap imported labor in France is so profound that it has dominated the discourse about the troubled French economy. The term "Polish plumber" was coined in March by Philippe de Villiers, the head of the right-wing Movement for France party, in response to a European Union proposal known as the Bolkestein directive, which would make it easier for workers to live in other member countries and receive the same salaries and benefits as if they had never left home. The thinking behind the directive was that if goods could move freely across the borders of European Union countries, why not services? The directive "will permit a Polish plumber to come to work in France with a salary and social protection of his country of origin," Mr. de Villiers said. He also expressed worries about the "Latvian mason" and the "Estonian gardener." At a news conference in April, Frits Bolkestein, a former Dutch member of the European Commission, used the term himself, saying he was looking forward to the arrival of "Polish plumbers to do work, because it is difficult to find an electrician or a plumber where I live in the north of France." He said he hoped that "Czech nannies" and "Slovenian accountants" would find work in France as well. The next week, a band of rogue electricians from the state-owned utility EDF cut off the power supply to his country home in the village of Ramousies (population 248). Opponents of the European Union constitution, meanwhile, urged voters to reject the document, arguing falsely that it would facilitate the invasion of the Polish plumber. The issue became so serious that Poland's president, Aleksander Kwasniewski, brought it up during an official visit to France just days before the referendum. "I know that the argument about the Polish plumber is very often used, or exploited, in France, but I must tell you that this is really exaggerated," he said. "It's not true that low-wage workers from the new members of the European Union have flooded the other countries." Meanwhile, Mr. Adamski, the model, is getting used to his newfound fame, boasting that he spent several days installing the hot and cold water faucets in his Warsaw apartment. "I'm very pleased to be the postcard for my country," he said in a telephone interview from Warsaw. But for a real-life Polish plumber like Mr. Zieba, who is 5 feet 4, wears old jeans and hides his belly under a multipocketed work vest, plumbers just do not look like that. Mr. Zieba noted that in the ad, Mr. Adamski is carrying the wrong cutter for the plastic and metal pipes he is holding. "He's too lacquered, too handsome and too clean to be on a work site," Mr. Zieba said of Mr. Adamski. "He looks like something out of an X-rated fantasy film about women who are waiting for the plumber to come." But then, he added, "I wasn't so bad when I was his age." Hélène Fouquet contributed reporting for this article. Correction: July 3, 2005, Sunday: A front-page article last Sunday about Poland's effort to ease French fears about whether workers from new European Union member countries, including an oft-cited hypothetical Polish plumber, might flood into France and take French jobs misidentified a tool held by a Polish model d