What gives with this sudden transition to e-books? What are the implications of this e-reading trend for marketing professionals?

The Economist article “Great Digital Expectations” highlights the rapid rise of e-books. And “rapid” is exactly the right word, as it was just in 2006 that e-reader sales were a measly 100,000, whereas 25 million units are expected to be sold in 2011. The article also mentions some startling ramifications of this trend towards electronic reading and publishing (paraphrased):

• E-books have higher profit margins.
• Romance e-books are selling like hotcakes.
• Digital piracy is a threat.
• Pricing is all over the map.

As more people switch to e-readers and the tablet craze really takes off, there are certainly some implications for marketing professionals.

1. The Long Tail

The long tail will be much more of a selling force. In the past, publishers would rely on big box stores, such as Borders or the like, to prominently display their wares. In addition, publishers would expect discount stores and warehouse firms, such as Costco, to move book volumes. With digital publishing, it’s conceivable that more players will have a “fair shot” at publishing success as clustering algorithms on Amazon, BarnesandNoble.com and the like suggest books based on our browsing history and past purchases. For sure, blockbuster titles will continue to have a conspicuous display on Kindle and Nook homepage screens, but readers will discover more book options as expert recommendation engines suggest likely interests that can be purchased in seconds.

2. Pricing

Pricing will take on added importance. Today, print publishers wrestle with initial price setting as they must deliver books to stores that will sell and also create profits. Pricing must be decided before printing because each book has a printed list price on the back cover.

However, with digital publishing, there is essentially no need to establish a “set in stone” price. In a virtual world, publishers (and online retailers) can experiment with pricing every day, perhaps setting different rates by country, discounting “on the fly” based on daily e-book sales, or offering deals to Amazon Kindle customers through its Special Offers. Amazon shoppers know it’s not uncommon to view a book, say “Harry Potter and the Deathly Hallows” one day at $21.24, and then come back to the site tomorrow and see it listed for $22.09. Pricing experimentation will happen instantaneously based on near real time data analysis—without the need to change store signage and update retail POS systems.

These are just two implications for rising e-reader ownership and there are certainly dozens more.

• Can you think of other marketing implications for the rise of e-books?
• How will social media change the way we find and buy e-books?
• What changes, if any, will this e-book trend have on B2B marketing tactics?

I’d love to hear from you!

And while the inner workings of this former investment bank are arguably much different from your own company, there are important lessons that can be applied to modern day marketing decisions. Let’s start with the first.

Perform intense analysis or someone else will

The world’s largest financial institutions have a critical advantage not usually available to most companies; armies of research staff. In order to discern whether they should accumulate a “position” on particular company, research staff deep dive into income, free-cash flow and balance sheet statements.

However, this analysis is periphery, and in fact there’s something much deeper going on. In addition to potential interviews of senior management and/or possibly sending teams on site to delve into operations, some analyst firms also review quantitative measures they believe will correlate and/or predict future performance. And this deep analysis often leads to some pretty confident decisions.

In his book, McDonald tells the story of one particular analyst at Lehman Brothers responsible for research on a major US airline. McDonald takes pains to note the decision to purchase the debt (bonds) of this airline was based on a level of analysis that most companies don’t bother to attempt. “Jane can tell you what (this airline) is serving for lunch on their flight from JFK to Berlin and what it cost them,” he says. “There is nothing she doesn’t know about that company.”

And this fanatical level of analysis pays off in spades as Lehman buys bonds of this particular airline from frenzied sellers for sixteen to eighteen cents on the dollar. Meanwhile, “Jane knew exactly what the bonds were worth; .52 cents on the dollar,” McDonald writes. And while Lehman traders had to hold this airline’s debt for an entire year waiting for the right opportunity, Lehman was able to eventually sell the bonds and make a $250 million profit in one day!

Bringing this back to the marketing discipline, it seems that competitive and market analysis is often an after thought for many companies. And it shouldn’t be.

Deep competitive intelligence is getting to the heart of the matter. It’s synthesizing all the learnings found in the annual reports, 10-K’s and other information sources and coming to solid and verifiable conclusions about your where your competition is strong and where/if they have a weak underbelly.

Going a step further, deep intelligence gathering is also about using the assembled information to get such a compelling picture of the competition that one can predict competitive intent with a high degree of confidence.

Extreme analysis was important in many of Lehman’s decision making processes. Are you investing enough in competitive and market analysis? Is your marketing team providing this “insight” into senior management decision making?

Listen to your best people and seek contrarian opinions

Employees from the top to the bottom of the corporate ladder often bring unique perspectives and experience to the table—if only someone would bother listening.

McDonald cites an example of one senior manager at Lehman Brothers—Mike Gelband—going against the grain and warning about the potential of a housing bubble. And while there is nothing intrinsically wrong with riding an asset bubble, one needs a solid exit strategy to get out before the bubble implodes.

Mike Gelband saw the writing on the wall and warned Lehman Brothers CEO Dick Fuld, and COO Joe Gregory to get out of the housing market while there was still an opportunity.

However, Lehman senior management didn’t listen. In fact, McDonald writes, “The general drift upstairs was that Mike Gelband had developed some kind of attitude problem and it needed to be changed real fast.”

Some contrarian views rub us the wrong way. We know what we know, and we like our positions. And sometimes we think that anyone who sees differently is a trouble maker with an attitude problem.

Do you have a “Mike Gelband” in your company right now? On your marketing team? Does he or she have a reasoned position on a competitor, market trend, or even a critique of your marketing campaign? Is his/her opinion worth another look—just as a sanity check?

Questions:
• Should competitive and/or market analysis be a larger portion of the marketing budget? Why/why not?
• Voicing a contrarian opinion can sometimes punch a ticket for the unemployment line. If you have an alternate view to a commonly held belief in your company, how should it be expressed?

The other day, I had the privilege of interviewing some marketing candidates. In my interviews I always like to leave my questions open ended and ambiguous so that I can see the thought processes of a candidate. I’m not looking for a “right answer” per se, I’m simply more interested in how a candidate thinks–out loud–and how they come to a conclusion.

In that spirit I asked a candidate, “What is the future of marketing?”

Granted, this isn’t the type of question that one can be prepared for, but the candidate gathered himself and presented a cogent answer. I believe, as marketers, we should all be able to answer this question.

CIO Magazine has attempted–through editorial and articles from various writers to answer that question–for CIOs. Labeling 2008 the “The CIO’s Time to Shine”, CIO Magazine argues the future role of the CIO will change from “technology manager” to “business strategist” and agent of strategic change enabled by technology.

Forrester also has weighed in on the topic and coined the phrase: “Business Technology” (BT) where the 21st century CIO will be a driver of process transformation, innovation, and competitive advantage through the alignment of technology to business challenges.

The role of the CIO is changing from “aligning” to “synchronizing” with the business. Are there any parallels between the transformation of the CIO’s role and changes that should occur in the “marketing” function? Ann Handley was kind enough to give me a forum on the MarketingProfs site to discuss my take on this topic, “Preparing for the Future: How the CIO and CMO Must Collaborate to Win” and now I’d love to hear from you.

* If the CIO role is indeed changing–do you see parallels between where the CIO is going and where the CMO needs to be?
* Are we destined to simply manage and execute the tactical marketing plan and be “king or queen of tradeshows”–or will marketing of the future be so much more?
* Where is the marketing function now, and where do we need to be in the future or stated another way, what is the future of marketing?

A recent article in Fast Company titled, “Going for the Gut,” details how even though we like our “heroes to crunch the numbers, we (also) like them to play their hunches.” Author Rob Walker laments that books like Malcolm Gladwell’s Blink, Jack Welch’s Straight from the Gut and others, give gut decision making first billing over a “careful, rational, empirical” approach.

Walker asks, “Are the narratives of popular culture dominated by super rational heroes triumphing over seat of the pants, gut-trusting bad guys? Actually, it’s the opposite: from Captain Kirk to Indiana Jones to Rambo to Tony Soprano–we’re drawn to the character who follows the hunch and wins.”

And business press and mainstream media largely agree. After all, wouldn’t you rather read about the business executive who had the right hunch and made millions, as opposed to the quant-jock who crunched the numbers and came up with the winning combination?

Gut decision making is “in” and for lack of a better word–cool.

Some senior executives have alluded there’s a mystique to gut decision making–those who have it have it, and those who don’t will never ascend the ivory tower of business success.

Case in point, Ralph Larsen, former CEO of a large consumer product goods company, states in a Harvard Business Review article, “When to Trust Your Gut,” that “very often people will do a brilliant job up through the middle of management levels, where it’s very heavy quantitative in terms of decision making. But then they reach senior management, where the problems get more complex and ambiguous, and we discover that their judgment or intuition is not what it should be.”

I do agree with Mr. Larsen that data driven decision making works best when there is in fact “data” to analyze. Sometimes, senior level decisions can be challenging because situations might be in uncharted territory–and there’s no past data, or too small a data set for analysis or prediction. That said, I’m not convinced that good judgment and intuition is the sole purview of senior management.

There is hope, however, that a data-driven approach can work just as good as gut thinking, and in most instances–compliment it.

Recent books, “Super Crunchers” by Ian Ayres and “Smart Enough Systems” by Neil Raden and James Taylor show case study after case study where companies and government entities of all sizes are using data analysis, experimentation and analytical applications to make smarter and faster decisions.

And the business press also seems to be noticing. In the same Fast Company issue (November 2007) executive Matt Carey cites how he’s attempting to create a “culture of analytics” at eBay, where experimentation, data and testing rule. “I want to eliminate feelings,” he says, “and get down to true math.”

If 2007 was “The Year of the Gut”, perhaps 2008 will be the “The Rise of The Quant Jock.”

Well, “quant jock” might not be the best terminology, and “analytics” might not be the sexiest noun, however running the company and making decisions based on the hard facts and numbers is something that I believe will never go out of style.

* Have you seen other examples of the “glorification of the gut”?
* How is decision making approached in your company (and in your marketing department)–by the numbers or by the gut? Do you see a trend one way or another?

Recently on the MPDailyFix, Jennifer Jones posted that she’s seeing a trend of marketing executives choosing a more tactical approach to budgeting and market planning. Jennifer’s post caused me to chew on a fundamental question, “should marketing be more strategically or tactically focused?” Sure it can and should be both, but which category should dominate a marketer’s agenda?

Don’t be too quick to answer this question. Simply take a look at how most companies manage their marketing resources. I think you would be hard pressed to find many “progressive” companies with marketing managed as a strategic function.

I recently encountered a company that seems to be using a hybrid approach. This company approaches marketing on a one-year, calendar basis. They have a marketing plan (mapped back to business goals), but really don’t plan past one calendar year.

In fact, most of the marketing spend at this company rallies around their big user conference every October. For this firm, marketing activities are focused on securing speakers, building content, planning customer activities, and entertaining customers at a single event.

There are other activities throughout the year but the lion’s share of the budget goes to planning the user conference. Once the calendar year ends, all marketing activities begin again with a single focus toward generating attention and awareness regarding next year’s large “user” conference.

I really don’t have enough data points to firmly criticize this approach, although on paper it doesn’t sound too wise. It’s almost akin to organizing a wedding each year; finding the right site, culling the guest list, sending out invitations, finding the right musical band etc.

Which leads me to my next thought; in my experience, marketing is most effective when it is treated more like a marriage than a wedding. Conceptually, here are a few things that make a marriage work:

* Committed to the long haul (hopefully)!
* Focused on planning for the future (allocating resources to fund different priorities)
* Allows for conflict and cooperation (give and take–working towards a win/win situation)
* Constant communication is the norm
Driving the analogy home, it has been my experience that marketing is more effective when, like a marriage, it is focused on:
* Building stronger, and long term relationships (with our customers, internal customers, partners, sales teams etc–)
* Constant communication (with the parties above)
* Driving a deeper understanding (in this case, of customers and competitors)
* Seeking to influence the “bigger picture”–not boxed into the “day-to-day” minutiae
* A continual process–a journey of improvement, as opposed to marching towards various destinations

I had a wedding and it was fun, but anyone who is married knows–the hard work begins after the wedding. Does the same thing hold true for strategic marketing?

Are some marketers avoiding the “hard work”–the process, the long term focus, the constant communication, the deeper understanding, the bigger picture etc because it’s easier and more fun just to open up an excel spreadsheet and move dollar amounts around to the different columns?

When presented with a budget of say, $500K, I’ve seen many marketers quickly approach it this way: A dash of industry associations, a pinch of direct marketing, maybe a tradeshow or two? How about a couple of display ads in the national IT publication?

Where’s the groundwork? The plan to meet business goals? The multi-year plan to expand to new markets? The portfolio review? And how much investment is it going to take to get there?

I propose that marketing should be run more like a marriage than a series of weddings. Not to say execution of events and marketing deliverables isn’t important, but marketing should seek to influence the direction of the business, not just plan for the latest display advertising campaign.

Is marketing in your organization, more like a marriage or a series of one-off weddings? Should marketing be treated more like a marriage? I’d love to hear your opinions–