Marketing Magnified CMO Council
August 2012

IN THIS ISSUE

Editor's Cut

Get to Know a CMO - Q&A
Get to Know Vikram Krishna, Head of Group Marketing, Emirates NBD (National Bank of Dubai)

In the Spotlight
Decoding the DNA of a Successful Solutions Marketer
By Steve Hurley, Managing Director, Solutions Insights, Inc.

Feature Article
Price and Service Aren’t Enough: Marketers Need to Connect with Costumers on Their Own Terms
By Helio Fred Garcia, Executive Director, Logos Institute for Crisis Management & Executive Leadership

NEW PROGRAMS

Engage at Every Stage

State of Marketing 2012

The CMO Council’s most valued annual survey is in the field! We ask that you join our 350 advisory board members worldwide in completing this extensive 42-point assessment. All information is kept confidential, and only aggregated findings and select analytics are shared with members worldwide. Survey participants will receive an advance copy of the executive summary.

CLICK HERE TO PARTICIPATE

REPORTS

Advancing Customer Intelligence in APAC

This report explores how companies, specifically those with a presence in Asia-Pacific, can engage with customers in a more valuable way by being more adept at big data analytics. Not surprisingly, marketers report being overwhelmed by growing... Report Details

FEATURED MAGAZINE

PEERSPHERE, THE CMO COUNCIL JOURNAL

Peer SpherePEERSPHERE, THE CMO COUNCIL JOURNAL
PeerSphere is the quarterly journal of the Chief Marketing Officer (CMO) Council, an organization dedicated to high-level knowledge exchange, thought leadership, and personal relationship building among senior corporate marketing leaders and brand decision-makers across a wide range of global industries. The journal is peer-inspired, peer-driven, and peer-influenced and provides insight from global marketing leaders about best practices and strategies in the marketplace.

The journal primarily showcases insights, best practices, and commentary from CMO Council members, experts, and academics, reaching a highly qualified audience of senior client-side marketing executives who have corporate, division, product line, or geographic marketing responsibility.

PeerSphere is available to download for $9.95, or you can download the digital version and receive a printed copy for $17.95. The digital magazine is provided on a complimentary basis to premium CMO Council members thanks to our sponsors, Ricoh, Glatfelter, and Frederic Printing.

If you would like to get involved in PeerSphere as an interview or profile subject, please contact Managing Editor Mary Anne Flowers or Kamilla Nosovitskaya regarding any inquiries.

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SERVICES

CMO Council Speakers Bureau

CMO Council Speaker’s Bureau – Connecting Experts With Events

The CMO Council Speakers Bureau helps CMO Council members and other marketing professionals find top-line events and conferences to increase their visibility within the marketing industry. The Speakers Bureau also helps CMO Council partner associations and organziations locate experienced marketing professionals for keynote industry events and conferences, and assists CMO Council media and publication partners with locating subject matter experts to interview for print, Web, radio, and television.

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READING

The Mobile Wave: How Mobile Intelligence Will Change Everything
By Michael Saylor

The Hidden Wealth of Customers: Realizing the Untapped Value of Your Most Important AssetIn the tradition of international bestsellers, Future Shock and Megatrends, Michael J. Saylor, CEO of MicroStrategy, brings The Mobile Wave, a groundbreaking analysis of the impact of mobile intelligence—the fifth wave of computer technology.  

The Mobile Wave argues that the changes brought by mobile computing are so big and widespread that it’s impossible for us to see it all, even though we are all immersed in it. Saylor explains that the current generation of mobile smart phones and tablet computers has set the stage to become the universal computing platform for the world. In the hands of billions of people and accessible anywhere and anytime, mobile computers are poised to become an appendage of the human being and an essential tool for modern life.

With the perspective of a historian, the precision of a technologist, and the pragmatism of a CEO, Saylor provides a panoramic view of the future mobile world. He describes how:

  • A Harvard education will be available to anyone with the touch of a screen.
  • Cash will become virtual software and crime-proof.  
  • Cars, homes, fruit, animals, and more will be “tagged” so they can tell you about themselves.  
  • Buying an item will be as easy as pointing our mobile device to scan and pay.
  • Land and capital will become more of a liability than an asset.
  • Social mobile media will push all businesses to think and act like software companies.
  • Employment will shift as more service-oriented jobs are automated by mobile software.

Products, businesses, industries, economies, and even society will be altered forever as the mobile wave washes over us and changes the landscape. With so much change, The Mobile Wave is a guidebook for individuals, business leaders, and public figures who must navigate the new terrain as mobile intelligence changes everything.

Purchase From Amazon »

The Social Media Bible: Tactics, Tools, and Strategies for Business Success
By Lon Safko

Engagement Marketing: How Small Business Wins in a Socially Connected WorldThe Social Media Bible is a comprehensive, 700-plus-page social media resource that will teach corporate, small business, and non-profit marketers strategies for using social media to reach their desired audiences with powerful messages and efficiency. This newly revised third edition addresses technology updates to the iPad, apps, Foursquare, and other geo-targeted networks. New case studies and company profiles provide practical examples of how businesses have successfully implemented these strategies using the newest social media marketing tools. The book also features:

  • Updates and changes to Google's search engine algorithms
  • More information on plug-ins, widgets, apps, and integration
  • Updates on Twitter and Yammer and new information on Google+
  • The latest in mobile marketing

Master the latest social media tools and deliver powerful messaging in the most effective way possible with The Social Media Bible.

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High-Tech, High-Touch Customer Service: Inspire Timeless Loyalty in the Demanding New World of Social Commerce
By Micah Solomon

Engagement Marketing: How Small Business Wins in a Socially Connected WorldIn an age of Twitter, smartphones, and self-service kiosks, high-tech but still high-touch customer service is the answer.

Today’s customers are a hard bunch to crack. Time-strapped, screen-addicted, value-savvy, and socially engaged, their expectations are tougher than ever for a business to keep up with. They are empowered like never before and expect businesses to respect that sense of empowerment—lashing out at those that don’t.

But take heart—old-fashioned customer service, fully re-tooled for today’s blistering pace and digitally connected reality, is what you need to build the kind of loyal customer base that allows you to survive—and thrive—and High-Tech, High-Touch Customer Service spells out surefire strategies for success in a clear, entertaining, and practical way. Discover:

  • Six major customer trends and what they mean for your business
  • Eight unbreakable rules for social media customer service
  • How to effectively address online complainers and saboteurs on Yelp, Twitter, TripAdvisor, and other forums for user-generated content
  • The rising power of self-service—and how to design it properly
  • How to build a company culture that breeds stellar customer service

High-Tech, High-Touch Customer Service reveals inside secrets of wildly successful customer service initiatives, from Internet startups to venerable brands, and shows how companies of every stripe can turn casual customers into fervent supporters who will spread the word far and wide—online and off.

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UPCOMING EVENTS

Media Technology Summit 2012
Date: October 11, 2012
Location: Marriott Marquis Times Square - New York, NY

Media Technology Summit 2012 is a premier invitation-only conference for senior executives from across the country to discuss and debate the technology, trends and innovations shaping key sectors such as Social Media, Mobile, Advertising, Big Data, Cloud, Internet, eCommerce, Retail, Payments, Entertainment, and Consumer Engagement. Celebrating its 5th Annual convening, this year’s summit continues the tradition of balancing a world-class roster of featured speakers with significant networking time, providing both unique insights and relationship building opportunities for a unique global network of Fortune 500 executives, venture capitalists, and entrepreneurs.

CMO Council members receive an exclusive partner rate of 20% off. Just use VIP discount code CMO20 when you register here: www.mediatechsummit.com

Event Website»

Location Business Summit USA
Date: October 16-17, 2012
Location: Hyatt Place - San Jose, CA

The 4th Annual Location Business Summit is back and bigger than ever! Bringing together senior executives from across the location and mobile ecosystem, this event is designed specifically to help you pinpoint key LBS business models and highlight services that can generate significant revenue. With the industry demanding to hear from consumer brands, agencies, developers, mobile operators and content providers, The Location Business Summit is the platform to bring together all these key players for two dynamic, fact filled days. With our faculty of expert speakers drawn from LBS leaders that include Caesars Entertainment, Big 5 Sporting Goods, Time Out North America, The Ritz-Carlton, General Motors, BMW, Google and Yelp to name but a few, we’ll focus strongly on the key issues that are going to drive the market forward – from indoor and social location to marketing and consumer engagement. Come and listen to the companies that have taken the location based leap, and are reaping the rewards.

CMO Council members receive an exclusive saving of $400. Just use discount code CMO12LBS upon registration. Find out more here

Event Website»

JOIN THE CONVERSATION

If you would like to submit an article or recommend one, please follow these guidelines:

  • Maximum 1,000 words
  • Microsoft Word format
  • Use Arial typeface
  • Appropriate content for executive level audience
  • Marketing-related content

Send your submission as an email attachment to:
Kamilla Nosovitskaya
CMO Council
mm_content@cmocouncil.org

07.23.12 - ASIA-PACIFIC COMPANIES USING ADVANCED ANALYTICS TO BE MORE CUSTOMER-CENTRIC
CMO Council Dialogues Reveal Top Marketers Are Being Challenged to Filter Vast Volumes of Customer Data in Efforts to Make Their Brands More Knowledgeable, Relevant, and Valued
More »

EDITOR'S CUT

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Unless you live under a rock, you have likely heard a reference to the runaway book phenomenon, Fifty Shades of Grey.

If you are comfy under your boulder, let me fill you in. This book series is what (to the gentlemen) your lives/girlfriends/sisters/
daughters have on their e-readers, or (ladies) what you have on your e-readers but like to think you would be bold enough to mark around with the book itself. It is, as some news outlets have dubbed it, “mommy porn.”

This book started as fan fiction, or user-generated content for those not in the know. It was a tribute to the other publishing success story, Twilight. It started as an e-book that was also available as a print-on-demand title back in 2011. By January 2012, the book was a viral marketing success story. By April 2012, a large publishing house bought the distribution rights and lifted Grey from a book on demand into a book in high demand. By July 2012, Fifty Shades of Grey had sold more than 31 million copies worldwide and had brought in an estimated $145 million in revenue. And it isn’t slowing down. Movie rights have been sold, and hotels looking to latch on to this salacious awakening are replacing the Bible with the S&M tome.

Yet despite this insane pop culture success, what amazes me most is how quickly everyone seemed to forget about the spending power of women, especially when it is urged on by the power and influence of the “Mommy Viral Network.” In fact, many experts have raved about how they couldn’t believe or fathom how the word of women’s mouths could so quickly translate into cold, hard cash.

Women have long been in one of two stereotype camps for business—they are either the purchasing decision makers or the window dressing in a Mad Men-esque ad campaign. But let’s consider a list of women by the numbers:

  • In the U.S. alone, women represent $7 trillion in consumer and business spending and control more than 60 percent of all personal wealth.
  • Women make or influence 85 percent of all purchasing decisions and purchase more than 50 percent of traditional male products.
  • Women surpass men in Internet usage. In fact, women account for 58 percent of all total online spending.

These are just a few of the stats that sum up the “mom-market” (for a great list, check out the article I used to source these facts), and there is no indication that this spending power will diminish. So why do so many experts seem caught off guard by the success of Grey? My assumption is the sheer speed that this phenomenon sparked. Thanks to social media, the mom network exploded with commentary about the racy prose. Add to that the proliferation of the e-reader and its ability to disguise the racy read in a generic e-book cover, and you have a winner.

What Grey should remind marketers is that women, and this digitally connected network of recommenders and influencers, have the ability to take an idle recommendation into a multi-billion-dollar payload. In short, Grey should be a sharp wakeup call for marketers—a shot to remind us how quickly a product can go from obscure to omnipresent thanks to women.

Until next month!

Liz Miller
CMO Council

Please boost my ego and follow me on Twitter: @lizkmiller on Twitter

GET TO KNOW A CMO - Q&A

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Get to Know Vikram Krishna

Head of Group Marketing, Emirates NBD (National Bank of Dubai)

In June 2012 Emirates NBD was named the biggest lender in MENA. How has this designation impacted the company?

Being named the biggest lender was both a significant indication of the way in which Emirates NBD has grown in the last few years and a reiteration of the confidence that people have in the bank. As one of the largest financial providers in the U.A.E., we have a huge variety of products and services that cater to the wide-ranging needs of the people. The title has definitely impacted our brand image positively, but more importantly, it has also put additional pressure on the bank to perform better at all levels in order to meet customer expectations.

The Emirates NBD Warehouse Sale in June ran with the incorporation of social media platforms such as Twitter. What was the strategy behind interconnecting Twitter and live updates to customers at this Warehouse Sale?

This is the age of social media, and people are constantly interacting on social media platforms—often more than they do face to face. Also, social media, particularly Twitter, is a key driver of public opinion among the connected audiences. Tweets are both short and to the point, and therefore prove to be an excellent medium to convey short, crisp messages to people. Through this warehouse sale, we were reaching out to the young and educated potential customer, and Twitter served to considerably enhance that reach.

Please provide some background on the recent campaign Emirates NBD launched to encourage customers to save more. What have been the results so far?

It is well known that there is an absence of a culture of saving in the U.A.E. Emirates NBD launched this campaign to encourage customers to save more through greater focus on specific savings-related products because it is in keeping with the bank’s objective to provide customers with tailored products that address their specific requirements, especially in the context of the current economic conditions. Given the recent economic change and the green shoots being seen, we believe this is the ideal time for customers to start setting aside money for a rainy day and to save for a secure future.

We have also recently launched a public service initiative called “Pay Yourself First,” which urges salaried individuals to take a pledge to set aside money for savings upon receiving their monthly incomes.

What future marketing initiatives and campaigns are Emirates NBD working on to stand out in the banking market?

Emirates NBD is currently working on several new marketing initiatives for various segments and divisions within the group. Customer convenience continues to be the driving force at Emirates NBD, and given the growing significance of alternative banking channels and smart communication technologies, the bank is also focusing on developing new applications for the iPad and mobile banking.

At the group level, we are also working on the upcoming re-launch of our Islamic banking brand, which will integrate our existing Islamic banking arm—Emirates Islamic Bank—with the newly acquired Dubai Bank. The merged entity is undergoing major restructuring and will soon be established as a significant force in the Islamic banking arena.

On the payments platform, we are also working on upgrading our ATM design and will soon be launching our new state-of-the-art payment platform.

What structures do you have in place to build stronger customer service and experiences?

Our market studies have repeatedly shown that customers are on the lookout for easy and quick access to banking products and services, and customer convenience is an important driving force at Emirates NBD.

Emirates NBD Group has the largest branch and ATM network in the U.A.E., which gives customers easy physical access to our services from across the U.A.E. without difficulty. Also, our online banking services have been acknowledged as being among  the best in the region and offer clients secure, safe, and speedy access to financial services.

Service quality is a prime focus for Emirates NBD, and we are constantly working with customer-facing employees across all divisions to ensure that they provide customers with top-quality banking services. In-house training programs, mentoring, and customer feedback are used to constantly upgrade and enhance service quality at the bank.

In terms of assets, the merger for Emirates and NBD made it the largest banking group in the Middle East, with operations in U.A.E., Saudi Arabia, Qatar, Iran, India, and the U.K. How has this evolved and leveraged the company since the merger?

Since the merger, Emirates NBD has drawn from the strengths of both its parent brands to further grow and enhance its service offering. We have also invested in a 360-degree marketing strategy that leverages various techniques to build the Emirates NBD brand.

Much of this has paid off in terms of customer growth. Today, Emirates NBD has significantly increased its customer base to include more than 1.3 million customers across the various segments of retail banking, priority banking, business banking, and private banking. In addition to having one of the widest ranges of products and services, we also have the best-in-class product suite across retail, corporate, and institutional clients. Emirates NBD also continues to invest in new platforms that enable us to keep up to date with the latest technologies and build our alternative banking channels.

All of this has enabled us to enhance our brand value and brand equity. Today, the Emirates NBD brand is valued at more than $1 billion (U.S.) and has earned its rightful place among the most valuable banking brands in the world.

The evidence of all this is that we continue to win a series of regional and international banking awards for product quality, service ethic, and marketing techniques for our various divisions.

What types of digital platforms are you investing in, and how are you justifying these investments?

With more than 1.5 million plus monthly visitors, the Emirates NBD website is emerging as a primary sales and service channel. We work with our digital team to continuously upgrade and enhance the website and make it increasingly user friendly. The business being generated through the website is considerable and often offsets the cost of upgrading.

The population of the U.A.E. is predominantly young and considerably web savvy. Hence, they are well connected in cyberspace through various social media channels. In response to the need of the hour, Emirates NBD is exploring the launch of some social media channels to further drive customer engagement. These are primarily YouTube, Facebook, and LinkedIn. We are also making enhancements to our mobile platform, and new payment services are being added to ensure that we are always ready to meet customer requirements.

Vikram Krishna, Head of Group Marketing, Emirates NBD (National Bank of Dubai)

Vikram Krishna is the Head of Group Marketing at Emirates NBD. In this role, Krishna has the mandate to consolidate and grow the bank’s dominant market position. He has been responsible for the successful re-launch of the Emirates NBD brand through a 360-degree integrated marketing approach, which has won several accolades for the bank, including Asia’s Best Brand at the 2011 CMO Asia Awards for Excellence in Branding and Marketing and the Stevie® Award for Marketing Department of the Year in 2011. Emirates NBD’s “Truth and Reality” brand campaign also received recognition as Distinguished Honoree at the Stevie® Awards in 2011. In addition, Communicate Magazine included Krishna in its Top 50 Power List for 2011 as one of the 50 most powerful people in the regional media, marketing, and advertising industry.

Prior to heading Group Marketing, Krishna was instrumental in the profitable turnaround of the Emirates NBD’s Personal and Auto Loan business. Before joining Emirates NBD, he held the posts of Senior Vice President of Marketing–Retail Assets for HSBC India, and Vice President and Head of Mortgages for North India at CitiFinancial.

Krishna, who began his career with the advertising firm Lowe before moving to the banking industry, has a bachelor’s degree in mathematical studies (Delhi University) and an MBA in marketing from Bharathidasan University in Tiruchirappalli, India.

IN THE SPOTLIGHT

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Decoding the DNA of a Successful Solutions Marketer

By Steve Hurley, Managing Director, Solutions Insights, Inc.

For nearly a decade, we've seen high technology companies struggle to make the transition from primarily selling products to creating and selling solutions-based offerings. As companies have adopted a more customer-centric business model, the role of solutions marketing is rapidly gaining momentum as a critical position within the marketing department of many B2B companies.

We first tracked the emergence of solutions marketing as a critical marketing function in the high-technology sector. The drivers that made solutions so important to technology companies, however, have spread in recent years to a wide range of industries, including health care, manufacturing, pharmaceuticals, chemicals, and many others.   

A First-Ever Survey of Solutions Marketers

In collaboration with ITSMA, a leading marketing association for the technology sector, and with additional support from three universities and industry associations, we recently conducted a web-based survey of professionals with direct solutions marketing experience. We gathered responses from 133 qualified solutions marketers who represented more than 125 companies in over a dozen different industry sectors. These companies were in the B2B market, and 75 percent of them reported revenues exceeding $1 billion.

Our First Insight From the Survey: The Importance of Solutions

Understanding solutions marketing is important simply because solutions offerings are getting a bigger and bigger share of companies’ portfolios. Eighty-five percent of the respondents said that solutions were extremely or very important to the future of their companies.

How is sentiment of importance reflected in their business operations? More than two-thirds of the respondents stated that over 40 percent of their total revenues came from solutions sales. With a growing revenue base generated by solutions, companies are staffing up in response. Well over two-thirds of the respondents indicated that their companies have increased the size of their solutions marketing staff over the past two years, with some of the increase coming from “net-new” hires while others used existing staff in these new roles.

The CMO Dilemma: Who Should You Hire to Manage Your Solutions Marketing Activities?

The problem that we’ve seen at the CMO level is how to staff these new solutions marketing positions.  Our research has shown that there are 17 marketing competencies that are either significantly different or completely new between the roles of product and solutions marketing. Given these differences, staffing has become a real challenge. Some of the questions that our CMO clients have had to answer in identifying the right professionals to put in these roles include:

  • What are the key skills and capabilities they need to have?
  • What prior experience should they bring to the job?
  • Who should they report to?
  • Should they be compensated at the same level as product or services marketers?

Solutions and Solutions Marketing: Understanding the Context

In order to appreciate the recent surge in interest around solutions marketing, it’s important to understand how we define the word “solution” in the context of B2B activities: “a combination of products and/or services with intellectual capital, focused on a particular customer problem, and driving measurable business value for customers.”

The Profile of a Solutions Marketer

The primary objective of this survey was to understand the type of person who was able to successfully market solutions, as well as his or her key challenges. The survey unearthed three characteristics that make solutions marketers stand out from most other marketers:

• Number of years spent as marketers—On average, solutions marketers noted at least 16 years of marketing experience. This indicated that companies were giving solutions marketing responsibility to their more senior, more proven marketing professionals.
• Type of marketing experience—Nearly two-thirds of solutions marketers working for product-based companies reported that they had experience in marketing both products and services. This confirms the need to understand both types of marketing approaches in order to effectively market solutions. Surprisingly, 50 percent of the marketers from the non-product based companies—professional services companies and systems integrators—also indicated that they had experience in both areas.
• Reporting relationships—The overwhelming majority of solutions marketers who took our survey appeared to have direct-line reporting responsibilities up to VPs, SVPs, and C-level executives.

The solutions marketers also responded that they have hard jobs; nearly two-thirds of survey respondents viewed solutions marketing as more challenging than product marketing.

Solutions Marketing Challenges

Since most solutions marketers felt their jobs were harder than product or service marketers, we followed up to find out what made it so challenging. 

 
The survey participants felt their biggest challenges were people related rather than process- or technology-based. They spent a considerable amount of time on internal communications, getting the sales and delivery teams to understand how they need to operate differently, and getting the business units and channel partners to collaborate more. Given that these challenges were chosen as the most difficult and important, it wasn’t surprising that 67 percent of the respondents felt that having strong interpersonal skills was the most important competency for a solutions marketer.

Understanding the Role of a Solutions Marketer

Despite the importance of solutions to the future of the organizations represented in the survey and the significant increase in the numbers of solutions marketers within these companies, the role of a solutions marketer was still not well understood. More than 50 percent felt that only their peers in the marketing department understood and appreciated their role and what they contributed to their company’s success.

While we didn’t have an opportunity to dig very deeply into this issue, one potential factor might be that the role of solutions marketing was, on average, only first introduced to the companies six years ago. This is a relatively new marketing function, and it appears that in many companies there is still a strong need to articulate the role, responsibilities, and core activities of these professionals.

The Keys to Successful Solutions Marketing

Based on our survey, it appears that solutions marketing is a critical but very difficult function within marketing. To be able to successfully create, market, and sell solutions, solutions marketers in the future will be required to:

  • Build up both product and service marketing experience before taking on solutions
  • Be an evangelist; market internally to help others both inside and outside of marketing understand the role of a solutions marketer
  • Learn specialized skills and training in order to take on the unique tasks and responsibilities associated with solutions marketing

Steve Hurley, Managing Director, Solutions Insights, Inc.

Steve Hurley is the Managing Director at Solutions Insights, Inc. Hurley, a leading expert on solutions and solutions marketing, has worked over the past 10–15 years developing and implementing innovative methodologies and tools that have enabled companies to transform their business models to be more solutions-focused. In 2009, he established Solutions Insights, Inc. a consulting and training company that works with companies in a diverse set of industries on solutions sales and marketing issues. You can reach him at shurley@solutionsinsights.com.

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Price and Service Aren’t Enough: Marketers Need to Connect With Costumers on Their Own Terms

By Helio Fred Garcia, Executive Director, Logos Institute for Crisis Management & Executive Leadership

A year ago, Netflix had a sterling reputation and loyal customers. It had become a leader in the home video rental business by leapfrogging rivals such as Blockbuster and offering an easy-to-use service with easy-to-understand pricing. At the time, it offered a flat monthly fee for unlimited television and movie viewing in two different formats. Customers could receive DVDs one at a time by mail and also watch unlimited streaming videos online for a flat monthly fee of $9.99. Customers who wanted only streaming videos could pay only $7.99, although most customers opted for the bundled service.

But on July 12, customers’ in-boxes contained a note from Netflix. The same note also appeared on the company’s blog. It began with the name of someone most customers didn’t know: “Jessie Becker here to share two significant changes at Netflix with you.” Ms. Becker was Netflix’s Vice President of Marketing.

Her note began by announcing the establishment of two new DVD-only plans, a one-at-a-time plan for $7.99 per month, and a two-at-a-time plan for $11.99. She emphasized that these were the lowest prices ever for unlimited DVDs. So far, so good.

The next paragraph, however, left people initially confused: “Second, we are separating unlimited DVDs by mail and unlimited streaming into separate plans to better reflect the costs of each and to give our members a choice: a streaming only plan, a DVD only plan, or the option to subscribe to both. With this change, we will no longer offer a plan that includes both unlimited streaming and DVDs by mail.”

That somewhat dense paragraph wasn’t particularly easy to follow. What did it mean—to no longer offer a plan that includes both unlimited streaming and DVDs by mail? Were they canceling something, or simply not taking new customers? It wasn’t clear. The next paragraph, where one would expect an explanation, was about price.

And it made people angry. “So for instance, our current $9.99 a month membership for unlimited streaming and unlimited DVDs will be split into 2 distinct plans: Plan 1: Unlimited Streaming [no DVDs] for $7.99 a month. Plan 2: Unlimited DVDs, 1 out at-a-time [no streaming], for $7.99 a month.

The price for getting both of these plans will be $15.98 a month [$7.99 + $7.99]. For new members, these changes are effective immediately; for existing members, the new pricing will start for charges on or after September 1, 2011.”

In other words, customers had to choose: give up DVDs, or give up streaming, or pay $15.98 a month for bundled service that previously only cost $9.99—a price increase of 60 percent. But that increase wasn’t made explicit in the email. Customers had to do the math themselves. And it came with an added inconvenience; instead of a single bundled plan, customers would need to maintain two separate plans, without any discount for having both.

But the longest section of the note was the explanation, and it wasn’t satisfying. It spoke about the company’s operations, their concerns about the viability of the DVD business, and an internal reorganization. There was nothing in it about customers or customer desires, behavior, or preferences. It contained nothing about customer convenience, ensuring quality service, or broadening the selection. It was all about the internal operations of Netflix and its view of the viability of the DVD business. Customers reacted angrily, and hundreds of thousands abandoned Netflix.

Two months later, CEO Reed Hastings sent a note apologizing for his insensitivity. And then he said that the DVD business was being renamed Qwickster, with its own website. Unstated in his note was the new burden this would place on customers: they would now need to visit two separate websites, maintain two accounts, pay two separate bills, view separate movie catalogs, and deal with two different order lists—in other words, lots of inconvenience for the customer, all the while costing more. Customers weighing the inconvenience against the stated reason—the new name—didn’t understand how the trade-off benefited them. Hundreds of thousands more abandoned the company.

Several weeks later, the company dropped its Qwickster plan and sent customers a curt note without any apology. By then it had lost nearly 1 million customers, and its stock had fallen from $300 per share on the day of the announcement to $113 three months later. It closed recently around $70 per share—a loss of 75 percent in the last 10 months.

Netflix fell into a trap that many companies and leaders often find hard to avoid—it communicated to its stakeholders, not with them. Its leaders saw the world through the perspective of their own operations and simply conveyed their business decision to stakeholders using their own frame of reference. But that frame of reference almost never succeeds in winning stakeholders’ hearts and minds, especially when there’s a potentially negative impact on them.

Taking Audiences Seriously

If we are to influence audiences, we need to speak with them on terms they value. Netflix spoke to its audience in terms of its own business operations. But customers don’t care about a company’s operations. They don’t have sympathy for the business challenges or logistical issues a company may face. They care only about the impact on them. Customers don’t know—and don’t want or need to know—about a company’s internal operations in order to buy its products and services. To get customers to care, a company and its leaders need to begin with the customers’ concerns and then link those concerns to what the company is doing.

For leaders who live and breathe the company’s operations, this common-sense observation is hard to grasp. Audiences have their own ideas, concerns, and frames of reference. And if we want to maintain their trust and confidence, we need to start by taking them seriously. We can’t move them if we don’t meet them where they are, but that means knowing where they are, how to meet them, and caring enough to do so.

Netflix didn’t meet its customers where they were. Rather, it asked its customers to meet the company where it was. It failed to anticipate the emotional reaction its customers would have, both to the price increase and to the manner in which it was conveyed. And Netflix seemed to be blindsided by the anger.

Taking stakeholders seriously requires respecting the point of view of those whom we would engage. It requires curiosity about what matters to them and what it takes to win them over and keep their trust and confidence. Effective marketers connect with audiences by understanding what matters to them and by speaking in ways that resonate with them.

Helio Fred Garcia, Executive Director, Logos Institute for Crisis Management & Executive Leadership

For more than 30 years Helio Fred Garcia has helped leaders build trust, inspire loyalty, and lead effectively. He is a coach, counselor, teacher, writer, and speaker whose clients include some of the largest and best-known companies and organizations in the world. Garcia is also the author of The Power of Communication: Skill to Build Trust, Inspire Loyalty, and Lead Effectively (FT Press, 2012). He tweets at @garciahf.

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