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Archive for the ‘eCommerce’ Category

John Schneider at the Shopper Marketing ConferenceI attended the shopper marketing conference at Old Navy Pier in Chicago from October 16 – 18. Shopper Marketing focuses on the shopper’s path to purchase, or said another way, the moment when people are in shopping mode. There is an important distinction between consumer marketing and shopper marketing with respect to focus, since the shopper is not always the same as the consumer of the product.

On face value, one might think shopper marketing theory largely focuses on the in-store shopping experience with marketing tactics such as point of sale displays. It was refreshing to see how much shopper marketing is evolving by embracing the entire shopper ecosystem. With 91% of smartphone owners less than 3 feet away from their phone year round, rich ecommerce experiences can be had instantly. To support the point that offline and online commerce are blurred, I was a bit surprised at the statistic that 54% of Wal-Mart shoppers visit walmart.com before going into the store.

People are seamlessly swimming through channels from consumer to shopper to advocate and back again, giving them all the power. Mobility enables product, pricing, and promotion transparency at an unprecedented level even though 70% of purchase decisions are still made at the shelf. Although in-store POS displays will continue to play a pivotal role in the sales process, they will reinforce the digital message as opposed to following it. This strategy is particularly resonant for the 50% of shoppers who already use the Internet, while physically shopping in-store.

This new connected consumer forces firms to shift from a brand centric strategy to a solution centric approach that is focused on a much broader and deeply connected system of in-store and online brand touch points.

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X.commerce

I’ve had the opportunity to redesign multiple sign-up and checkout experiences over the years. You might think it couldn’t be that hard, but it is never simple from my experience. The sales team may want loads of registration data at sign-up even if it means there is a huge associated bounce rate. Worst case, sales might think, “if they don’t finish the form, then who wants the prospective customer anyway?” On the opposing side, savvy business models such as fermium models may dictate that you capture as many users as possible, even if you don’t know much about them.What is exciting to me is that it looks like we may have a new solution to our registration and checkout woes. Last week, I had the opportunity to attend the X.commerce Innovate conference where they announced PayPal Access. Unlike Facebook Connect’s focus on sharing the social graph with merchants, PayPal Access brings a user’s authentic e-commerce profile to the registration and checkout process. I use the word authentic, because a person using PayPal is a real world individual with a bank account and purchase history. This product allows users to checkout without sharing their private financial information with the company or physically going through registration. On top of that, the retailer doesn’t have to give up valuable social graph data Facebook provides to merchants since they also announced a partnership with X.commerce at the conference. In a nutshell, a person brings both their wallet and their friends to the shopping experience.

I’m not saying that registration will cease to exist. What I am saying is that PayPal Access may reduce friction in the registration and purchase process for the 100m+ and growing PayPal users. For SMBs, this just might level the playing field a bit with larger companies that have much bigger technology budgets. A few lines of code is all you need to create frictionless checkout for many prospective customers.

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Electronic Arts LogoThere is a lot of emerging competition for traditional video game makers. For instance, Zynga’s estimated $10B valuation is larger than EA’s, yet the firm only has a tenth of the revenue in contrast and a possible over-dependency on Facebook. This almost sounds like the dot com era again to me. How will this story end?

This is the question that my class discussed with Peter Moore, President of EA Sports, when he visited my class on May 16, 2011.

Peter opened by saying digital is the growth driver in the gaming industry. The gaming industry is expected to grow an estimated a 5-10%* from the years 2010 to 2014; while digital gaming alone has grown at a 67% pace to $20B in just the last two years of business. It sounds great, but there is a big challenge – growth isn’t coming from a single digital source.

What is inspiring about EA’s approach to digital is that they are taking it on with enthusiasm – no heads are buried in the sand. Everyone knows that they adapt or become irrelevant. The digital transformation for EA means that they must face disruption on multiple fronts. New revenue generating business models include micro-transactions, downloadable console content, game add-ons and advertising; shifting revenue away from traditional physical disc sales. Platform proliferation dictates an expansion strategy that crosses just about anything that enables true ubiquity for the gamer; allowing them to play where and when they want.

With such a wide array of changes and challenges present, Peter doesn’t ignore the business case for making smart digital decisions across ecommerce, merchandising and device platforms. His rigor is demonstrated in the ability to deliver 30% margins as an operating business unit.

Peter Moore in John Schneider's Spring 2011 MGMT 162 Class

Peter Moore's visit to John Schneider's MGMT 162 course

With Peter’s second visit over the past year, one thing becomes evident. EA and the gaming sector are in for a wild ride. It is truly exciting to watch a large firm embrace Schumpeter’s theory of creative destruction; one that encourages the opening of new markets by tearing down traditional business models and placing emphasis on redesigning industry boundaries as new technologies introduce tremendous growth opportunities.

* Source: PwC Global Entertainment & Media Outlook 2010-2014

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Photograph: Susana Bates/Reuters

Analysts are questioning Microsoft’s $8.5 billion purchase of Skype this past week for good reason. Skype isn’t turning a net profit and Microsoft wasn’t truly in a competitive bid. This sets up the question as to what synergies can be created between these two firms that drives such a valuation. We’ve all heard about Skype’s role as a key technology across many Microsoft technologies such as Xbox and Outlook, but I think there is one focal area that takes the lead over all others – mobility.

Microsoft announced Windows Phone  7 Series at Mobile World Congress in February 2010 with the goal of re-invigorating their position in the smart phone space, one they pretty much created but have since lost. In a recent opportunity to meet Robbie Bach, Retired President of MS Entertainment & Devices, he emphasized the point that they learned that MS had made a key mistake in the past by allowing handset manufacturers and carriers to manipulate the user experience on the phones with little to no restrictions (which can be likened to the approach Android is taking today). Now Microsoft is tightening controls and limiting what modifications, if any can be made. With this new strategy and reach into both enterprise and consumer markets on a global scale, what was missing until last week?

Microsoft did not have a unique value proposition. Nothing to disrupt the space. Apple has the tightest user experience and ubiquity across devices. Android is in just about everything now. In order to thread the needle between these two heavyweights, Microsoft needs something that changes the current market trajectory which looks to be building towards a duopoly a few years out.

Let’s look at the dynamics on the buy side of the industry, specifically the carriers, as an example of what could happen next. With AT&T’s recent proposed acquisition of T-mobile, Sprint is concerned with extinction due to its relatively low market share. Until now, no carrier has been a big advocate of changing their lucrative business model by allowing highly integrated VoIP calling that negates the use of their airwaves for voice transmission. Why would Sprint or another carrier consider disrupting the industry with a low cost VoiP solution that uses MS Windows 7 and Skype? The simple reason is that that Microsoft can create cross subsidies with search advertising through Bing. Suddenly, the carrier doesn’t lose financially. The consumer wins as well with lower subscription costs. Thus, the industry is disrupted with a network effect between search advertising and VoiP.

Microsoft captures market share, perhaps just enough to be worth $8.5 billion.

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“5 for 1 Euro,” the vendor remarks, standing under the shade of the Eiffel Tower. Almost immediately, another man follows down the line of people offering “5 for 1 Euro.” Wait, those sought after mini-Eiffel Towers are exactly the same? Why would I have changed my mind just 5 seconds after the last offer? It is almost like an interrogation process, as we wait more than 2 hours to take the elevator to the top of the real Eiffel Tower. Why would I breakdown and buy one now? I’m getting dismayed, but toward the very end of our wait I hear “6 for 1 Euro.” Really? The same quality, but I get 20% more Eiffel Tower for the same price? I’m sold.

What all these vendors had down really well was the operational piece of their business. They stood right at the point where you demanded their product. They were easy to find, their merchandise was easy to browse, each had a clear pricing model, and the purchase process was a cinch. What they all lacked was differentiation. With near flawless operations, their challenge was moving away from pure price competition and favorable shopping environment, to one that had something distinct that would persuade me to choose them. What could that be?

I turned my gaze on two street performers that started to dance to a Michael Jackson song. At first, only one person stopped to watch. Less than 1 minute into the song, they were surrounded by more than 20 people watching. The crowd was into it. An emotional connection had been made. These guys really stood out of the sea of vendors. A brand was built by just copying the King of Pop and coming up with their own unique dance style. After the song ended, another song started up. Those that didn’t like the next song took off; however, one thoughtful person dropped a coin in their hat. I couldn’t see what it was, but I doubt it was more than a Euro at best.

These street dancers did an amazing job creating a brand. Their product was unique, the audience gave them a tremendous amount of unsolicited time, many gained an emotional tie to the moment and would remember the dancers well after their vacation in Paris; yet, they likely made no more money than the commodity-based Eiffel Tower vendors. Why is that?

Creating a brand doesn’t ensure sales, just as brilliantly designed business operations fail to close the deal if there is no brand tied to what is being offered. Having the fortunate experience of working on multiple eCommerce projects in my life, I’ve come to learn that business operations must be choreographed to the unique demands of selling online, while marketing must have an innovative message and clear go-to-market strategy. Without synchronicity between these two components, failure is certain.

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