MBS Blog

If you want to peer into the future of marketing and advertising, then this article in the U.S. edition of the Wall Street Journal (www.wsj.com) is the vehicle. Although it could be construed that it only reflects a snapshot from an American perspective, the odds are that these modes will be replicated…or perhaps even improved…in emerging markets.

As internet access-particularly broadband-becomes more widespread in Russia, Ukraine for example, then additional avenues for reaching and informing consumers will increase.

Marketing in the World of the Web

Bemes, clouds and MySpace: Welcome to the brave new world of retail.

By TOM HAYES and MICHAEL S. MALONE

Retailers will eventually recover from the consumption tailspin that threatens this holiday season. But quite apart from the recession, there are other, profound changes underway in the retail sector. As the evidence mounts about the power of social networks to reconfigure individual behavior, the crucial question facing industry is: How to leverage this phenomenon into actual profits?

The second generation of Internet (”Web 2.0″) companies such as MySpace, Facebook, Linked/In and YouTube exploded upon the scene three years ago. Today, MySpace and Facebook together have more users than the entire U.S. population; and the online community concept is already becoming a powerful tool for everything from creating customer loyalty, to assistance in product design, to a sounding board for company strategy.

Corporations from IBM to Toyota and Johnson & Johnson have been rushing to establish their own affiliated social networks and bind their customers ever more closely. There isn’t a smart company today that isn’t implementing some kind of online community, wiki or blog strategy.

But companies with millions of members of online communities are now asking: What next? How do we sell them products and services, or mobilize them into massive de facto R&D, manufacturing and sales departments? We have been studying the challenge and have concluded that very few of the traditional techniques of classical marketing (call them Marketing 1.0), or even of eCommerce (Marketing 2.0) will work in the world of social networks. A very different set of tools, concepts and practices is needed. Call it Marketing 3.0. Here are five:

- From loyalty to attention. Before you can win consumer loyalty, you have to capture and reward consumer attention. Old propositions — network television’s tired offer of 22 minutes of canned sitcoms in exchange for eight minutes of untargeted commercials — won’t cut it. Consumers are demanding a better deal.

Some brands are starting to flirt with better exchange rates: Virgin Mobile gives a minute of free phone time for every minute of advertising a customer accepts. Ryan Air recently announced it would offer $15 coach tickets from the U.S. to Europe, subsidized by passenger attention to advertising and in-flight sales pitches.

Smart marketers will of necessity become obsessed with customer attention in the way they once obsessed over customer loyalty. The shrewd brands will create elaborate attention-rewards programs, and incentives to break through the noise and make that critical initial connection.

- From crowds to clouds. Once you get that attention — once you generate heavy traffic to your site, gather a large league of “friends” on MySpace, or spawn a dedicated following on Twitter — how do you monetize the crowd?

Smart brands are turning their crowds into “clouds”: organic, self-forming and often self-governing communities of interest. Companies such as Hewlett-Packard, Frito-Lay and Harley-Davidson use their clouds as feedback loops to get better faster by obtaining good, timely, often brutally honest customer insights. And the members of clouds can become true believers; they don’t just watch your commercials, they make them.

Right now, few companies are emotionally equipped to wring the best benefits of a cloud, because the most valuable voices out there usually belong to the malcontents. In the old model, customer-service departments aimed to placate or jettison disgruntled customers. In the cloud model, the idea is to cultivate and reward them. That’s not an easy transition.

- From places to spaces. Consumers are increasingly organizing themselves into new communities — not just the big generic social communities, but myriad idiosyncratic slices of narrow, passionate interest (i.e., BlackPlanet, Inpowr and MomsCafe).

These new market spaces, or “meganiches,” may seem small, even strange at first. But when they’re efficiently targeted, they can be highly responsive, lucrative and loyal. Well-established meganiche Web sites include Gamefaq.com for video gamers, Dpreview.com for digital photography aficionados, and Howardchui.com dedicated to mobile phone zealots.

With this shift toward self-organization by consumers, national advertising campaigns as we know them will increasingly become a waste of time and money for many companies. The trick for brands is to cohabit social spaces with these consumers. Social media, and its verb form, “friending,” requires entirely new forms of advertising: bottom up instead of top down, personal rather than public, and subtle rather than full frontal.

- From memes to bemes. In the Age of Broadcast, good advertising could occasionally manufacture memes of tremendous social impact. Think of “Where’s the Beef?” or “I can’t believe I ate the whole thing.” If you can’t recall an irresistible or effective turn of phrase of late, it’s because it is exceedingly difficult to spread a meme in today’s fragmented media environment. Marketing 3.0 is now the science of devising and managing directed business memes: call them bemes. Bemes are sent by members of social communities to each other and typically contain a reward or exclusive offer, which, when redeemed, also results in a reward coupon for the sender. This encourages members of social communities to propagate a “viral” ad. One well-documented beme was “The Subservient Chicken” from Burger King.

Brute force marketing won’t work inside social networks. The best online marketing now takes place among people who know and trust each other. Consider how rumors work. Like a rumor, a beme is a bit of useful information that rewards each person who passes it along. Want to be a sensation? Create a beme that consumers willingly accept and share with others.

- From silos to simultaneity. Too many retailers today persist in believing that online shopping is merely a virtual extension of real world shopping. That is a big mistake.

Rather, online and offline need to coexist, and we need to rethink how they relate. For example, to their surprise, companies like BestBuy (which even encourages customers to shop the aisles but buy online from in-store kiosks) and Macy’s are discovering that physical retailing is a perfect way to move units online. That is, the physical world has become the showroom for the virtual realm.

Retailers now must reimagine a world where consumers experience products in stores but ultimately buy them on the Web: Stores are for experiences, the network is for inventories. And what in turn prepares potential customers for what to look for in stores? Online communities.

All of this suggests that Marketing 3.0 is not only different from its predecessors, but actively undermines them. If your marketing program fails to adapt to this new world, it won’t just become irrelevant — it will actually work against you.

Anton Olff

Technorati Tags: marketing, advertising, Wall Street Journal, American perspective, internet, broadband, Russia, Ukraine, MySpace, retail, consumption, social networks, Facebook, Linked/In, Youtube, IBM, Toyota, Johnson & Johnson, R&D, eCommerce, Virgin Mobile, Ryan Aur, Europe, customer loyalty, rewards programs, Hewlett-Packard, Frito-Lay, Harley-Davidson, commercials, social communities, BlackPlanet, Inpowr, MomsCafe, Gamefaq.com, Dpreview.com, Howardchui.com, friending, Burger King, BestBuy, Macys,

You have to admire the Chinese.  As the article below from “The Shanghai Daily” (www.shanghaidaily.com)  notes: where some see crisis…others see opportunity. The Chinese obviously do. Perhaps it is natural in a 5,000 year old civilization to take the long view? Building skyscrapers during a recession sounds illogical to some-those who must find tenants to occupy the space for example- but it does reflect confidence in the future, as well as inspire it. 

There was a time when Americans had this perspective. During the darkest days of the Great Depression in the 1930s, some of the greatest and tallest structures in America were built, including the Hoover Dam and the iconic Empire State Building. You would think that this spirit would be present in the midst of the current economic situation, but sadly it has not appeared yet.

Interestingly, a few of my Chinese friends told me after September 11^th, 2001 that if America did not re-build the World Trade Center, higher and better than before, then that would portend America’s decline.

Defying the downturn, city builds even higher

WHERE some see crisis, others see opportunity.

Three months after opening the world’s second-tallest skyscraper, Shanghai is about to start construction of an even taller building - in the face of an economic slowdown and falling property prices.

Construction on the 632-meter Shanghai Tower, expected to cost 14.8 billion yuan (US$2.17 billion), will begin in Pudong’s Lujiazui financial district tomorrow, developers said yesterday.

Gu Jianping, general manager of Shanghai Tower Construction and Development Co, said that by starting work in an economic downturn, construction materials would be cheaper. He also predicted that by the time the 121-floor, glass-and-steel tower is opened, China’s economy is likely to be soaring again.

“Launching construction at this time will help boost Shanghai’s confidence in fighting the financial crisis,” he told a news conference.

The tower, which will comprise offices, retail space, a super-five-star hotel and cultural facilities, will be part of a triangle of tall buildings. The recently opened World Financial Center, at 492 meters, is now the world’s second-tallest building. Its neighbor, the Jin Mao Tower, rises 420.5 meters above the Shanghai skyline.

The new skyscraper will surpass the height of the 501-meter-high Taipei 101 in Taiwan, but the world’s-tallest title will go to the Burj Dubai, now under construction in the United Arab Emirates. The Burj is expected to be roughly 800 meters tall, though its exact height has been kept secret.

The Shanghai Tower is scheduled to open partially in 2012 when the top floor is finished and go into full operation two years later. 

The tower’s pinnacle will feature the world’s highest non-enclosed observation deck. And the building’s high-tech office space is expected to help boost Shanghai’s financial industry.

WHERE some see crisis, others see opportunity.

Three months after opening the world’s second-tallest skyscraper, Shanghai is about to start construction of an even taller building - in the face of an economic slowdown and falling property prices.

Construction on the 632-meter Shanghai Tower, expected to cost 14.8 billion yuan (US$2.17 billion), will begin in Pudong’s Lujiazui financial district tomorrow, developers said yesterday.

Gu Jianping, general manager of Shanghai Tower Construction and Development Co, said that by starting work in an economic downturn, construction materials would be cheaper. He also predicted that by the time the 121-floor, glass-and-steel tower is opened, China’s economy is likely to be soaring again.

“Launching construction at this time will help boost Shanghai’s confidence in fighting the financial crisis,” he told a news conference.

The tower, which will comprise offices, retail space, a super-five-star hotel and cultural facilities, will be part of a triangle of tall buildings. The recently opened World Financial Center, at 492 meters, is now the world’s second-tallest building. Its neighbor, the Jin Mao Tower, rises 420.5 meters above the Shanghai skyline.

The new skyscraper will surpass the height of the 501-meter-high Taipei 101 in Taiwan, but the world’s-tallest title will go to the Burj Dubai, now under construction in the United Arab Emirates. The Burj is expected to be roughly 800 meters tall, though its exact height has been kept secret.

The Shanghai Tower is scheduled to open partially in 2012 when the top floor is finished and go into full operation two years later. 

The tower’s pinnacle will feature the world’s highest non-enclosed observation deck. And the building’s high-tech office space is expected to help boost Shanghai’s financial industry.

Anton Olff

Technorati Tags: China, Shanghai, Shanghai Daily, civilization, opportunity, skyscrapers, recession, America, Depression, Hoover Dam, Empire State Building, Dubai, construction, Pudong, confidence

Spoke with a good friend a few days ago whom is a customs broker here in Odessa.  She stated that business overall has declined precipitously over the last several months. She emphasized that container traffic at the busiest port of Ukraine has slowed to a trickle. This is borne out by anecdotes of others we have contacted whom are connected with trade and logistics services. 

Technorati Tags: Odessa, Ukraine, container, www.komersant.com, Russia, trade, logisitics, imports, wine, Customs Warehouses, financial turmoil, alcohol, Moscow, Federal Customs Service, Solntsevo, CIS,

While the perception in “the street” and in boardrooms is for more economic pain, there are some bright spots. Moreover, there is a consensus that Ukraine will continue to grow as well as transition to a brighter future.  The well respected ERSTE Banking Group (www.erstegroup.com) chimes in:

“The steel industry will continue to invest heavily in production efficiency programmes. The local steel industry has great potential for cutting production costs, as Ukraine has one of the world’s biggest layers of iron ore and large layers of coal. The recent introduction of steel price futures on the London Metals Exchange (and plans to introduce them on the New York Mercantile Exchange) will bring new hedging possibilities for steel producers. The banking system will also strengthen after a period of consolidation and an increase in the share of foreign capital. In the future, Ukraine will remain influenced by cyclical downtrends in steel demand, but will be much more resilient to them, than it is now (compared to just several years ago). “GDP growth will return to its potential growth of 5-6% in 2010, while inflation is likely to come down to a single-digit figure,” conclude Erste analysts”

The key for investors, will be reassessment of risk relative to other markets. It is my view,  Ukraine offers attractive returns over the longer term given the momentum of structural reforms that the current economic situtation may in fact, accelerate. The real question is whether Ukraine will be transparent enough for investors to accurately measure this to their advantage. 

Anton Olff

Technorati Tags: GDP, ERSTE Banking Group, inflation, steel industry, Ukraine

Economics has often been called the “dismal science.”  Having known many economists in my past life working as a wage slave in the corporate world, I can say that it was not the “science” that was necessarily dismal, but the practitioners. This is especially true these days. The same economists that were saying “the fundamentals” of the Global Economy were sound 6 months ago, are now in the doom and gloom mode. In  other words, it is not going to just rain…but rain for 40 days and 40 nights!! 

A person of means and resources might want to start building an ark…or maybe just buy gold bullion and store it in a bank vault in Switzerland…but the rest of us will have to learn to swim in some very deep water (or in sewage) if the deluge comes.

The Nostradamuses of our age…Gerald Celente for example, is predicting Depression II, another American Revolution with widespread tax riots in the United States by 2012. Certainly, it is a possibilty given the recent riots in Iceland. However, those of us with a eye for opportunities (entrepreneurs, shameless exploiters and capitalists) know that would be an excellent time to own a factory making Ronald Reagan AND Che Guevara t-shirts. 

….and what is the current forecast? Well…it depends on whom you ask. Most of the data out there suggests that the economies of the developed world will not be growing at all…but NOT the emerging market economies. According to the European Bank of Reconstruction and Development (EBRD), Russia is projected to grow at over 3% versus the 7.3% it had been prior to the Global Meltdown (and declining oil prices).  Indeed, most of Eastern and Central Europe will see positive net growth. Whatever the forecast, there will be a lot of pain…but also a lot of long term opportunities.

Bring an umbrella. However, make sure to turn it upside down on occasion as it could be raining “pennies from heaven”

Anton Olff

Technorati Tags: Central Europe, Che Guevara, Depression, Eastern Europe, EBRD, Economics, European Bank of Reconstruction and Development, forecast, Gerald Celente, Global Economy, gold, Iceland, Ronald Reagan, Russia, Switzerland, United States

An in-depth and insightful look at the mortgage market in emerging economies of Central and Eastern Europe (including Russia & Ukraine),  as well as Central Asia by the European Bank for Reconstruction and Development (EBRD).  

In pdf format..a must read for anyone currently investing in real estate or securities in these markets or considering future investment. 

http://ebrd.com/pubs/legal/mit.htm

NOTE: The MBS referred to in this report are Mortgage Backed Securities and not MBS, Ltd. 

Anton Olff

As I wrote on 24 November 2008, the recession in emerging markets provides opportunities for companies to promote, establish, re-establish, and capture market share. The key is looking beyond the short term-which is painful for almost everyone at this moment- and focus on the long haul.

John Rose writes today in “The Moscow Times:” The looming crisis in Russia will cause many marketers to re-evaluate budgets, strategies and relationships. Although there may be many challenges ahead for companies as they face the prospect of slower growth and pressure on margins, there is a silver lining in that black cloud. During the last financial crisis in Russia, a decade ago, some companies took advantage of falling media costs and slow-to-react competition to capture market share and set the stage for strong future earnings.

There are three main opportunities for marketing during a recession.

Opportunity No. 1: Customers generally re-evaluate their brand loyalties during a recession. It is no longer business as usual. Many people will be looking for greater value as their buying power weakens. A recession breaks down barriers that make consumers otherwise resistant to new brand messages. This creates an opportunity for brands that have otherwise been unable to capture significant market share in a crowded category or one dominated by a larger competitor. If you are the No. 2, 3 or 4 brand in your market category and you have a good story to tell, this could be your best opportunity in years to relate your story and receive a positive reception. Reacting to the last financial crisis, Mobile TeleSystems continued advertising, while its competitor Beeline retreated. As a result, MTS substantially raised its subscriber base and overtook, Beeline, to become the top Russian mobile service provider. And MTS still retains the No. 1 spot today, despite Beeline’s ubiquitous advertising campaign.

Opportunity No. 2: Many companies will take a wait-and-see attitude during a recession. They will freeze or cut marketing budgets until they have a clearer picture of what lies ahead. This will have the effect of reducing media costs. The smart companies will become more aggressive while their competitors have their heads in the sand, and they can get more for their marketing expenditures. Now is the time to be creative and grab some attention for your company and brand. Establish yourself as a leader by staying visible through the media, promotion and public relations. Show the world you have a resilient brand and a plan for a sustainable future. Experience shows that market share gained during a recession will return dividends when the economy rebounds. Wimm-Bill-Dann continued to promote and expand aggressively during the last crisis, filling a vacuum left by international competitors, who were still licking their wounds. Today, they are the leading Russian producer of dairy and beverage products. Saint Springs is another example of a company that continued to expand its marketing programs while the market was still contracting. After becoming the leader in the bottled water segment, it was acquired by Nestle Waters in 2002.

Opportunity No. 3: Customers expect a deal during a recession. People know companies are under pressure and will expect them to react to the recession with superior products, special offers and better service to win their business or get them to buy. You don’t want to disappoint them. But unless you run a volume business where you plan to always be the price leader, you shouldn’t feel obliged to lower your prices to win business during a recession. Sure, discounts will move inventory today, but it may come at a high cost in the future through the loss of brand value. The key is to give your customers more rather than charge them less. Value is most important, not price. Expand product features, extend warranties, provide special financing terms and offer enticing rewards for becoming loyal to your superior brand. Electronics retailer M-Video owes much of its success to creative promotions it began during the last crisis to lure customers and build loyalty, which is a practice they continue to this day. Currently, together with Sony Ericsson, they are giving away a card that provides free cinema tickets for one year when you buy select mobile phones. Their customers will be escaping the Russian recession to Hollywood — at least in their imaginations — and will no doubt reward the company with loyalty and future purchases.

It’s easier, of course, to follow the market and do what the other guys are doing during a crisis — that is, very little. But with a better understanding of the short window of opportunity brought on by a crisis — plus a little chutzpah — your company could use this recession to build a stronger brand and a more profitable business in the near future, when Russia bounces back.

Anton Olff

Technorati Tags: recessionary marketing, emerging markets, market share, brand, Moscow Times, marketing budgets, Russia,

Shopping in Ukraine over the last few years has been a delight. Every day was a revelation, as new varieties of products and brands filled the shelves with the promise of more to come. That has all changed recently. While the array of products-especially food and beverage products-continue to arrive in stores, particularly specialty outlets, the pace has slowed considerably.

Technorati Tags: food, beverage, imports, Ukraine, brands, consumers, WTO, trade, retailers, Furshet, Tavier B, Ukrainian brands, Russian brands, confectionery, Coca-cola, marketing, advertising, contrarian, emerging markets,

Stuart Biddulph, an English teacher from the U.K. living in Ukraine writes:

 And you’re reading blogs to find out what it’s like here? It’s true that Ukraine is a harsh business environment. Corruption is a way of life, not just for official bodies, it’s ingrained in the mentality. But it’s no good complaining about it. There are historical reasons why it is so, it’s just a different system  and you simply have to work within the system. We’re the foreigners here and we can’t impose our ideas on them.

First rule, if you want to do business, find a local person to handle all the difficulties but be prepared to pay to navigate the system. To get anything done, a little incentive will always smooth the path. Accept that. In our society we have rules which on the whole are fair, sensible and consistent. Here the rules change on a whim but at least there is a way to bypass them and get what you want. We can’t do that at home. Ethically it may be unsavoury but that’s the way it is.

 Second rule is don’t assume you or your ideas will be welcomed with open arms. You might think West is Best, but they don’t. And why should they? They have always been told it wasn’t and they have some very good traditions, products and resources of their own. They simply have little concept of western life so you have to sell everything and convince them of the benefits. Don’t assume they understand the concept. Explain every detail and explain why they need to know.

 I’ll give you an example. You may have noticed how poor customer service is here. There are few help lines, few toll-free numbers for example, there’s no free delivery of purchases,  you feel you should be grateful for having the bus or taxi driver allow you to use his transport, they check your bag going in and out of shops and so on, treatment that would make us livid. But what you’ll notice on your first trip is your treatment in the bars and restaurants. Walk into any McDonalds in the world and you’ll find the same happy, attentive service, clean environment, clear menu pricing and rapid delivery.  Everywhere else here, restaurant staff have this amazing way of looking at you but seeing right though you at the same time, you’ll rarely get a smile or acknowledgement. We believe the customer is always right and we know it makes good business sense. They don’t. You can’t argue that you’re paying their wages so they should be more customer-focused. They think the boss pays their wages. They don’t wonder who pays the boss to pay them and that treating you well might actually secure their jobs and wages. They have their own problems to worry about. They think, if you don’t like it, go somewhere else. I’ve even had that response from the boss! So if, for instance, you’re thinking of starting a customer service training company, there’s great potential but you have to sell the idea and gear your courses to their mentality and perceptions, explain why they need it and how by making customer satisfaction a priority from the door through the kitchen and the table and out again will benefit staff, management and directors. You’re actually going to have to work much harder than you did in your home environment where pretty much everyone knows and plays by the same rules.

Third rule, don’t come in all bullish and assume your idea is going to work. Anticipate all the problems you might encounter and plan for them. Don’t ever rest on your laurels. Don’t boast about what you’re going to do. Just say, this is what I’d like to do, what I’m going to try to do but we’ll see. That’s not cynicism, it’s realism and a slice of humility. Otherwise, you’ll have one disappointment after another. Remain positive and focused but take off those rose-tinted glasses please! They can see you coming a mile off and they’re past masters at bullshit. They may seem impressed but they have their own agenda and they’ll exploit your weaknesses. So stay alert. Welcome to the real world!

The activity at gaming tables are a good indicator of the state of the Global Economy. Both Las Vegas and Macau are seeing declining revenues, though traffic to the former Portugese colony is also suffering from recent Chinese restrictions on travel. Here is the take from Gerald Campbell in Las Vegas:

Technorati Tags: Global Economy, Las Vegas, Macau, China, Gerald Campbell, Casino, U.S., Great Depression, hotels, entertainment venues, housing values, unemployment, criminal activity