Assessing the Impact of a Sexual Harassment Lawsuit at a Metropolitan Restuarant

A popular metropolitan restaurant recently suffered the negative publicity of a sexual harassment lawsuit. The courts settled the suit in favor of the restaurant, but an interesting question is how would we measure the damage to the restaurants brand equity. Since I had our mandatory Fair Employment Practices training this week, it's an apropos topic.

Exploratory Research

Harris and Smith (2002, p. C1) define a crisis as any newsworthy event that has happened or will happen in the near future that has the potential for adverse publicity. The sexual harassment event associated with the Restaurant X satisfies their definition of a crisis. In his section on public relations, Duncan (2005, p. 563) says that this type of incident should be treated as a crisis because of the extreme impact it poses to Restaurant X’s “reputation and brand relationships.”

Lichtenstein, et al (2004, p. 29) reinforce Duncan’s premise by noting that corporate social responsibility strengthens brand equity and say its impact goes beyond sales. This means that a consumer perception of Restaurant X as an environment that condones sexual harassment will have a negative effect not only on sales. A reduction of brand equity will also result and with it there will be a consequent loss of owner equity. It is vitally important for Restaurant X to verify through marketing research the attitudes its publics harbor about the incident.

What type of survey research should be initiated

Management should already understand that negative publicity in general affects customer retention. They will want to know if their specific sexual harassment publicity is reducing their customer retention and sales. The goal of this marketing research should be to “shed light on [this specific] association or relationship,” which is how McDaniel and Gates (2008, p. 49) characterize a descriptive research design.

The basic method of research should be survey. McDaniel and Gates (p. 50) inform us that experiments are typically used only for causal research designs. Observation would be an inefficient approach to determine opinions and attitudes on the restaurant’s sexual harassment case because there is no direct interaction with the customer. Surveys are “an orderly and structured approach” to understand “opinions and attitudes.”

This research should be quantitative. Qualitative research is “not necessarily representative of the population of interest,” (see McDaniel and Gates, 2008, p. 110). Surveys are a good tool to find out what factors influence consumers (p. 142); in this case, did the publicity influence customer retention and sales. Of the various types of surveys, I recommend Computer-Assisted Telephone Interviews (CATI).

Why CATI?

In this situation there is a tradeoff between turnaround speed, measurement error, and cost. CATI is the optimal strategy, with Internet Panels a close second. Johnson (2009, p. 2) notes that non-response bias is a significant source of measurement error. He also informs us that both telephone and mail surveys are subject to increasing non-response rates.

Thee (2007, p. 1) reports another problem with telephone surveys for the restaurant: because of the substantial use of cell phones, telephone sampling frames are no longer geographically based. On the other hand, the restaurant public is geographically bound. Thee goes on to say that households with only a cell phone numbered 16% in 2007 (p. 1) and this could grow to 25% by the end of 2008.

CATI can help here. McDaniel and Gates (p. 152) inform us that the computer can customize each questionnaire according to how the respondent answers previous questions. We could ask if they are currently in the metro area. If not and they have no intention of visiting the metro area, then we could close the interview.

McDaniel and Gates (p. 365) also report on a method for determining the extent of nonresponse bias. They cite two studies that suggest nonrespondents are not a clearly distinct subgroup from the general population. To find out for certain in this case, only a very small follow-up survey using nonrespondents as the sampling frame need be conducted.

Johnson (2009, p. 1) informs us that restaurants make frequent use of self-administered surveys. The reason they are not the best solution in this case, is that customers already lost to Restaurant X because of the lawsuit won’t be patronizing the restaurant anymore. In addition, a self-administered survey approach will not have the same quick turnaround as online techniques (see Johnson, 2009, p. 2).

Interviews such as door-to-door and executive would have little traction with the immediate needs of the restaurant. Mall intercept interviews would be too expensive, and in addition, McDaniel and Gates (2008, p. 172) say to avoid such an approach when the incidence rate is low because it will be too expensive. The number of patrons of Restaurant X is low compared to the total population in the metropolitan area.

Internet Panels have been used in other crisis management situations. Duncan (2005, p. 564) reports that McDonald’s setup a panel to protect its reputation from the fallout over a fraud perpetrated in its promotional games. McDaniel and Gates (p. 156) also discuss the advantages of panels. Johnson (p. 2) informs us that “companies like Survey Sampling” provide consulting expertise to “construct a sample to match the target population” and then rent a panel from their large database. Still, as Johnson (p. 2) observes “The internet population is not representative of the population as a whole,” and “Internet users are concerned with privacy and, thus, may refuse the survey.”

What topics should the survey cover?

First up is demographics such as gender, age, and race. The next topic would investigate level of awareness. It would be used to discover the news sources that informed the respondent about the lawsuit, as well as their knowledge about the particulars of the case, and knowledge about Restaurant X policies and training to prevent sexual harassment.

The third topic would be to determine their opinion about how Restaurant X handled the sexual harassment accusation. Duncan (2005, p. 563) says that for such a crisis it is a good idea to survey opinion about the company’s level of honesty, helpfulness, speed of response, clarity, and consistency of message.

The fourth topic would be to find out from patrons about their experience with the restaurant. Have they ever witnessed sexually harassing behavior at the restaurant? Has the staff been professional and courteous? The fifth topic would be to establish the factors that influence Restaurant X patron decisions to frequent a restaurant. An important aspect here is how did the sexual harassment lawsuit affect their opinion about Restaurant X and their willingness to be a customer? The sixth topic would be open-ended questions to find out their opinions about what further steps Restaurant X should take.

The survey population

The population is the existing, lost and potential customers of Restaurant X in the metropolitan area. With no further information from the restuarant advertising or news stories, I will assume that the entire metropolitan area should be viewed as potential customers. To focus only on existing customers would not discover the opinions of lost customers. Additionally it would exclude the only source of growth, new customers.

The sampling units and sampling frame

The sampling unit would be households because people tend to go to restaurants as a family or as a couple and not alone. The sampling frame should not be the telephone directory for the metropolitan area. McDaniel and Gates (pp 333-4) list the problems with the telephone directory including problems with unlisted numbers and their prevalence among non-whites and younger people. Instead random-digit dialing from phone exchanges in the metropolitan area will form our sampling frame.

Simple random sampling will be used to create our random-digit dialing frame. Johnson (2009, p. 3) notes that probability sampling, like simple random, gives the researcher a representative sample of the population. Specifically for simple random sampling, a computer can randomly select the sample and this is consistent with the CATI approach I recommend.

The sample size

The main difference between qualitative and quantitative research is sample size (see McDaniel and Gates, 2009, p.108). Managers are more “comfortable with marketing research based on large samples and high levels of statistical significance” (p. 109). Another factor that will affect our sample size is the required confidence level. Wilson and Ogden (2004, p. 56) say that

"Survey research requires at least a 95% confidence level and a margin of error of less than 5% to be actionable.”

Do we need to know the exact population size for the metropolitan area? Using a sample size calculator it quickly becomes apparent that after a certain point increasing population size by an order of magnitude does not increase sample size requirements by more than a single person or two. Creative Research Systems (2009, p. 1) provides a Sample Size Online Calculator that I used to calculate the following sample sizes:

(The calculator is at Creative Research Systems).

Given the gravity of sexual harassment allegations and the damage to brand equity, owner equity and ongoing sales, I recommend a sample size of 384.

References
Creative Research Systems (2009). Sample Size Calculator. Retrieved on June 17, 2009 from http://www.surveysystem.com/sscalc.htm

Duncan, Tom (2005). Principles of Advertising and IMC. New York: McGraw-Hill Irwin.

Harris and Smith Public Affairs (July 3, 2002). Public Relations Handbook. Retrieved on June 10, 2009 from http://www.awphd.org/PRhandbook/PRhandbook.pdf.

Johnson, E. (2009). Quantitative Research: Surveys & Sampling. Retrieved on June 11, 2009 from http://www.imc.wvu.edu/.

Lichtenstein, Donald R., Drumwright, Minette E. & Bridgette M. Braig (October 2004). The Effect of Corporate Social Responsibility on Customer Donations to Corporate-Supported Nonprofits. Retrieved on June 9, 2009 from http://www.imc.wvu.edu/.

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Thee, Megan (December 7, 2007). Cellphones Challenge Poll Sampling. NY Times. Retrieved on June 10, 2009 from www.imc.wvu.edu.

Wilson, Laurie and Ogden, Joseph (2004). Strategic Communications Planning, 4th Ed. Kendall/Hunt Publishing Company.

Measuring Attention and Packaging Design

A national cereal company has developed a new, healthy cereal for teens. Currently, the company is considering two package designs and would like to assess the effectiveness of each package design in getting the attention of teenagers.

Independent and dependent variables, treatment groups, the design and control for extraneous factors.
Percy (2008, p. 256) notes that mothers are key decision makers for family health and eating habits. Teenager awareness and acceptance, and mother acceptance will jointly determine the purchase decision. Our task is to test the effectiveness of two alternative package designs in getting teenager attention. The dependent variable is teenager attention. The independent variable is package design.

Wilson and Ogden (2004, p. 36) define an influential as an opinion leader, and observe “that people follow the advice of someone they trust and has knowledge on the subject.” We want teenagers who eat cereal but who are also influentials. They will be our subjects. This is a new product and the most important group to reach in this introductory phase is the influentials.

McDaniel and Gates (p. 114) also recommend “Influentials.” They say these people are two to five years ahead of the curve and have significant influence among their peers. They say, “Recruiting influentials is particularly useful when a marketer is trying to determine to launch a new product….” Brooks (2006, pp 31-2) agrees and further says, “A growing body of consumer research suggests the 60-second conversation is dethroning the 30-second ad.”

We will have two experimental groups and one control group. Experimental group one will view package design one. Physiological Measurements will be made to monitor their response to the package design. These measurements can show interest and arousal levels (see McDaniel and Gates, 2008, p 192). The treatment is to show them the design. Likewise for experimental group two but for package design two instead. The control group won't be shown either proposed design.

There are problems with measuring attention because it may change during the testing process and also the subjects know they are being tested for it (see Boyd and Westfall, 1964, pp 105, 111). A control group can help compensate for this. The control group will share the exact same experience as the two treatment groups, except they will not be exposed to a package design.

They will, however, be read the same statement about the new product and package designs and that they will be measured. McDaniel and Gates (p. 219) note that the control group is not subject to treatment, in this case exposure to one of the package designs. Their participation can be used to dampen extraneous factors, like the anticipation of knowing they will be measured.

Experimental design and conduct of the experiment.
The steps are

1. Three groups of influentials will be randomly selected


2. Physiological Measurements will be made of each group


3. Each group will be read each the same statement about the new product


4. For the control group, the post measurement will be taken


5. For the two treatment groups, show each their respective packaging designs only and take measurements

The research design is a True Experiment Design (see McDaniel and Gates, 2008, p 219), the Before-and-After with control design (p. 219). The test subjects should be assigned to each group randomly to control extraneous effects. The experiment should be held in a lab for high internal validity (p. 211).

References
Boyd, Harper and Ralph Westfall (1964). Marketing Research Text and Cases. Richard Irwin.

Brooks, Steve (November 2006). How to Build Buzz. Restaurant Business. Retrieved on June 19, 2009 from EBSCOHOST.

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Percy, Larry (2008). Strategic Integrated Marketing Communications. Butterworth-Heinemann.

Wilson, Laurie and Ogden, Joseph (2004). Strategic Communications Planning, 4th Ed. Kendall/Hunt Publishing Company.

A New Logo for Wendy's?

Background
Wendy’s is an international fast food chain that ranks third in hamburger joints behind McDonald’s and Burger King (Hoover’s, 2009, p 1). It has over 6,500 locations in the United States and more than 20 countries worldwide. Management is considering changing the Wendy logo and brand character to keep it current. There is a concern that changing the well-known logo could have adverse repercussions. To study consumer opinion a series of personal interviews will be conducted.


According to Keller (pp 156-159), logos and brand characters are an easily recognizable way to identify a company and product. They are central to advertising campaigns and packaging. He says they can “create perceptions of the brand as fund and interesting.” However, (p. 158) he also notes they must be changed from time to time. Betty Crocker spent over $1M to update its tired brand character (pp 164-5). This $1M price tag is also the case for updating a logo (p. 157).

Sampling Method
The background information shows the importance of correctly updating a brand character, and that an appropriate budget must be allocated to this important task. Having an accurate cross-section that is representative of Wendy’s customers outweighs cost. We do not want to draw incorrect conclusions by using a sampling method known to be inaccurate.

The life-cycle of a sampling plan is to define the population, choose a data-collection method, identify a sampling frame, select a sampling method, determine sample size, develop operational procedures, execute the plan (see McDaniel and Gates, 2008, p330). This specific assignment is to select and justify a sampling method. Our first decision is between probability samples and non-probability samples. McDaniel and Gates (p. 334) note that probability samples are better for obtaining a representative cross section of our population. Given the importance of the logo or brand character, we need to have the best representation we can get. The trade-off is cost but we should have a budget commensurate with the task.

Next, we must decide among the several probability sampling methods. I like the stratified sample because it has a smaller sampling error than the other methods (see McDaniel and Gates, 2008, p. 341). It is more efficient because it eliminates one of more sources of variation through the stratification process. The researcher is making the “sample be more representative by making sure that important dimensions of the population are represented in their true population proportion.”

Wendy's should stratify on country. According to Hawkins, et al (2007, p 40) cultural factors that like language, demographics, values and nonverbal communications can impact marketing communications. A cultural faux pas with a brand character or logo can make Wendy’s appear like confused Martians. Using country to stratify, I can also avoid the main drawback on stratified sampling – we usually don’t know in advance the proportions of the strata (see McDaniel and Gates, 2008, p. 342). However, Wendy's consolidated financial statements do have that information.

Finally, should the method be proportional allocation or disproportional allocation? In this case, the method should be proportional because it is easy to calculate the relative number of locations in each country to the total number of locations (p 342). Within each country (strata), do simple random sampling with a sample size proportional to the relative percentage for the country.

To collect the data, the store intercept survey type can be used (see McDaniel and Gates, 2008, p. 150). As a style of mall-intercept survey, it would share many of the same advantages and disadvantages. The interviewer can show proposed Wendy’s logos, explain and probe (p. 171). On the other hand, the respondent may be distracted, or in a hurry. Further, there is a greater opportunity for interviewers to select the people to interview in a non-probabilistic manner. Strict operational procedures should be defined.


References
Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

Hoovers (2009). Hoover's Profile: Wendy's International, Inc. Retrieved on June 7, 2009 from http://www.answers.com/topic/wendy-s-international

Johnson, E. (2009). Quantitative Research: Surveys & Sampling. Retrieved on June 7, 2009 from http://www.imc.wvu.edu/.

Keller, K (2008), Strategic Brand Management. Pearson/Prentice-Hall.

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Ruger at a Crossroads

Strategic Opportunity for Sturm Ruger Firearms
Ruger is the apex predator in the revolver market in the United States but has little presence overseas. Moreover, its domestic market share is under fire from semi-automatic handguns. It has an opportunity to expand its sales internationally through revolver sales to Europe. In Europe, countries such as Finland, Norway, Sweden, Switzerland, Serbia and the Czech Republic have gun control laws similar to the United States (see Dodds, 2007, pp 1-2 or MacInnis, 2007, pp 1-2 or Wikipedia, 2009, pp 1-5). As an example, the U.S. has 90 guns per 100 citizens and Finland has 56. In Germany, a valid firearms license is required for each firearm that is owned. Nevertheless, even Germany represents a sales opportunity.

In its 10-K Report, Sturm Ruger & Co. states (see SEC, 2008, p 4) 94% of its firearms sales are to the domestic market. Their units shipped reported in the 10-K (p. 23) are

According to Motley Fool (2007, p 1) in its analysis of Sturm Ruger and Company, the competition in the U.S. firearms industry is fierce and comes from both domestic and foreign competition. They go on to say that the handgun market has constant growth but that Ruger lags the growth. Aggressive competitors like Smith & Wesson are taking market share from Ruger. They conclude that Ruger has no “strategic initiatives that could fuel the growth prospects.”

I have used the Google Trends service (www.google.com/trends) to analyze search engine requests for the word “Ruger.” What I found was fascinating. There is a significant overseas search interest in Ruger. I contend that search interest will translate into purchase intent. This is a largely untapped market for Ruger. I then compared Ruger with Glock. Here are the results.


It is similar with the other competitors and shows a surprising interest in Ruger overseas.

In-depth Interviews
Glock, Beretta and Walther are powerful international competitors to Sturm Ruger & Co. They do not have an appealing lineup of revolvers but instead have focused their attention on the semi-automatic pistol. I need to use in-depth interviews to find out the attitudes, beliefs and feelings of European consumers about revolvers versus semi-automatic handguns. Additionally, I need to define the parameters of Ruger’s relationship with the various European gun retailers, who may be competitors with each other.

Given the prevailing preference for European semi-automatics in Europe, I believe an in-depth interview is more appropriate than a focus group to find out attitudes towards revolvers. McDaniel and Gates (p. 127) say that such interviews allow the researcher to devote more time, to more deeply delve into an area, and “ to reveal feelings and motivations that underlie statements.” We need to know if handgun consumers in Europe would consider revolvers and why. The “if” will let us know if such a campaign is feasible, and the “why” will help set marketing strategic direction.

McDaniel and Gates go on to say that in-depth interviews allow research to explore “casual and tangential remarks,” and obtain insight into the main issue. Also, new directions of inquiry can be quickly and dynamically charted. The traditional discussion guide (p.117) of the focus group limits such flexibility.

Furthermore, one segment we will be interviewing is gun retailing. Here the members are competitors to each other and McDaniel and Gates (p. 128) note that in such a circumstance interviews are a better approach. We will need to discuss inventory, advertising and distribution strategies with them that they may not want to reveal in front of competitors.

I believe qualitative research is the best first step. According to Johnson (2009, p. 1), “It [qualitative research] obtains in-depth information on motivations, feelings and behaviors.” Wilkerson (2003, p. 26) says that qualitative research such as interviews allows for “broad and open-ended questions in hopes that the author would be able to capture any significant information” not in our preconceived notion of the issue. Johnson (2009, p. 3) goes on to say that in-depth interviews can reveal detailed aspects of consumer behavior. This makes qulaitative research the best first step in a campaign to introduce modern Ruger revolvers to Europe.


References
Dodds, Paisley (April 17, 2007). U.S. Gun Laws Draw Heat After Massacre. AP. Retrieved on June 7, 2009 from http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2007/04/17/international/i143553D58.DTL

Johnson, E. (2009). Focus Groups & Other Qualitative Methodologies. Retrieved on June 7, 2009 from http://www.imc.wvu.edu/.

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

MacInnis, Laurin (August 28, 2007). U.S. most armed country with 90 guns per 100 people. Reuters. Retrieved on June 7, 2009 from http://www.reuters.com/article/topNews/idUSL2834893820070828

SEC (2008). Sturm, Ruger Annual 10-K Report. Retrieved on June 7, from http://www.sec.gov/Archives/edgar/data/95029/000119380509000482/e605095_10k-sturmruger.txt

Wikipedia (2009). Gun Politics. Retrieved on June 7, 2009 from http://en.wikipedia.org/wiki/Gun_politics

Wilkerson, Kristen Courtney (2003). Cyber-Campaigning for Congress: A Cultural Analysis of House Candidate Web Sites. UT Austin Dissertation.

A Site for Statrats

The Census Bureau is an external provider of secondary data. Their hefty Web site is a handy source of demographic data from the largest producer of statistics; it's high quality too. According to McDaniel and Gates (2008, p 72), secondary data is existing data that may have relevance to your research. They go on to say that “sources of secondary data include innumerable government agencies,” including, of course, the venerable Bureau of the Census.

A B2B Report: The Census Bureau ICT
Summary
The Census Bureau has a survey report on its Web site known as the Information and Communication Technology Survey (ICT). Its purpose is to make “available data on e-business infrastructure investment by nonfarm businesses.” It is a supplement to the Annual Capital Expenditures Survey. Microsoft makes significant sales to businesses and these are aggregated in the ICT supplement. Here is a press report on the ICT:

Press Release

and here is the actual report:

Full Report

It lets me see sales data and trends in the information technology B2B sector of the economy with separate segments for computer and communications. The most current data, published in February 2009, is for 2007. No one accused the Census Bureau of being speedy. The report is a series of hyperlinks that let me dig as deep as I want, and it even provides me with Excel worksheets of data so I can graph and chart according to my specific interests.
I hope Microsoft is making use of this survey Web report! Dell too.

Marketing Research Utility
I worry for Microsoft. It is in a Gambler’s Ruin competition with Open Source software, which strikes at the heart of Microsoft – its value add to the economy. Open Source offers for free the software that Microsoft sells and that is the basis for its enormous revenue stream. Gambler’s Ruin is a rivalry between two parties, one with a large, well-established position and the other with a small position but able to compete effectively on individual transactions. Of course, Microsoft is the house. Prudence would dictate they worry about the growth of Open Source.

They should worry too, according to the results of the Census 2007 ICT survey. This table from the bureau gives the raw data 2007 ICT Table 1a.

I have graphed it to show the growing problem.

The graph visually shows that computer hardware sales are growing faster than software sales. I used only computer hardware sales data, no communications gear. The difference may be the use of free Open Source software that does not have a sales transaction. The table below shows more precisely the problem:

I derived these from the Census data. As a side note, Linux (Open Source) demolished Sun Microsystems in business server rooms, and Sun is now defunct. Microsoft is fighting hard to maintain its share in the server room, and almost succeeding.

Microsoft has something else to worry over: the growth in software sales is declining year over year. I wonder what is going on in 2008 and today. Kuchinskas (2003, p. 2) reports that in 2000 Dell experienced declining growth in the educational market because of tightening education budgets. They responded with a database-marketing program to the education sector. The Census data above suggests that worse comes. The entire market may be tightening budgets.

Like Dell, Microsoft does monitor market trends using secondary sources like Census, but they also glean information from data mining. In this sense they are the exception to Krol’s observation (2006, p. 1) that technology companies were late to use data to drive sales. One of the selling points we highlighted in MS SQL Server was its data mining capability and how we used it at Microsoft. We could even link to document collections from places like Census.

Unfortunately, my free Census secondary data leaves me short. 2007 data was published in February 2009. Additionally, secondary data may be insufficient. It may not have the granularity I need for a certain conclusion. To get a better sense on my impending demise, I would need primary market research. However, it is worth noting that secondary data, like Census data, may alert the "researcher to potential problems and/or difficulties" (see McDaniel and Gates, 2008, p. 73).

A B2C Report: the Census Bureau E-Stats
Summary
The Census Web site has useful business to consumer information such as the E-Stats Report, (see Ebusiness 614). This report is the result of a commitment by the Census Bureau to measure the electronic economy. It has sales data on e-commerce activities by sector. The sectors are: manufacturing and merchant wholesaling ecommerce sales (considered to B2B) and retail and select service ecommerce (B2C) sales. The data of this report is available at 2006 Final Report.

The report gives more detailed breakdowns in its appendices that are located at Census 2006 Tables. One of interest is the select services (see Census 2006 Table 4). It shows the revenue vs E-revenue in select industry groups (identified by a NAICS code). The Federal Reserve Board uses this report to track the diffusion of the electronic economy (see Dinlersoz and Murillo, 2005).

Marketing Research Utility
Businesses that deal directly with the customer can use this report to track trends by NAICS industry group to see how fast ecommerce to consumers is growing in its industry. For example, one of the industry groups currently in select services is Arts, Entertainment, and Recreation Services and e-commerce revenue is growing 21.9% per year (latest eStats data is for 2006). A company like Domino’s Pizza can use such a trend to partner with a company in the growth sector to expand pizza delivery to the consumer.

In fact, they did, partnering with TiVo and NetFlix who are in the Entertainment ecommerce trend. Consumers who stream movies can order a pizza at the same time through technology in TiVo. Secondary data from Census Reports can tell Domino’s about growth opportunities. Behavioral targeting from TiVo can help Domino’s and other companies to grow their online business to consumers.

TiVo (2009, p 2) claims to have the most advanced capacity in the television industry to track behavior. Delany and Steel (2007, p. 1) note that Microsoft engages in behavioral targeting, and according to Jopling (2006, p 3-5), Microsoft has taken a commanding lead in IPTV technology. Microsoft is always looking for new industry segments to exploit, but the question for marketing research is which ones. The Census E-Stats report has useful data to tell us which NAICS codes have strong electronic diffusion. Also, as IPTV grows, Microsoft may eventually want to partner with TiVo and its advanced technology, to provide service to the Arts, Entertainment, and Recreation industry.

References
Delany, Kevin and Emily Steel (October 2007). Firm Mines Offline Data To Target Online Ads. Wall Street Journal.

Dinlersoz, EM and Hernández-Murillo, R (January-February 2005). The Diffusion of Electronic Business in the United States. FEDERAL RESERVE BANK OF ST. LOUIS REVIEW. Retrieved on May 30, 2009 from EBSCOHOST.

Jopling, Elroy (4 January 2006). Microsoft's Global Consumer Play Begins to Unfold. Gartner, id number G00136841

Krol, Carol (June 12, 2006). Connecting the data dots. Pro Quest.

Kuchinskas, Susan (Sep 2003). Data-based Dell. Adweek Magazines' Technology Marketing.
McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Tivo (November 2008). Q3 2009 TIVO INC Earnings Conference Call - Final. Fair Disclosure Wire (Quarterly Earnings Reports). Retrieved on May 30, 2009 from EBSCOHOST.

Cheskin Research

My former employer, Microsoft, made extensive use of research to understand how to market to each information technology segment. The intent of such research was to help Microsoft establish more powerful social capital than its competitors. Social capital is existing, defined relationships that make transactions easy to accomplish (see Buchanan, 2002, 201-204). Cheskin Research was one of the companies that Microsoft used (see the Cheskin Web site).

Expertise and Methods
Cheskin is what McDaniel and Gates (2008, p 8) would call an applied research firm, one that helps companies better understand the market. Their specialty is multicultural markets in the US, which have grown faster than any other US consumer market. Cheskin applies a proven research process to help firms gain the insight they need into this area of explosive growth.

Cheskin also notes that the "general market" is showing increasing signs of reaching a tipping point on diversity - having powerful ethnic characteristics that will soon invalidate "general market" strategies. McDaniel and Gates (p. 9) observe that companies use firms like Cheskin to do programmatic research to understand “market segmentation, opportunity analysis, or consumer attitude and product usage studies” (see Cheskin on Opportunity).

Their clearly defined research process is very similar to the marketing research process described in the McDaniel and Gates text.

• The first step is to envision or frame the objectives of the research (see Envision)
  
• Next, explore to understand consumer needs, segment characteristics, and trends for both competition and the market (see Explore)


• Third, create or evaluate the concepts born from the exploration. (see Create) This means that they additionally do Selective research (see McDaniel and Gates, 2008, p 9)


• An important next step is to craft a well-told story. (see Inspire) McDaniel and Gates (p. 52) say that “this is a key step” because research “must convince management the results are credible.…”


• Finally comes the solid innovation and differentiation for Cheskin, - for a fee they will also act as consumer advocates after the research phase has completed to assure consistency of management action with market need. They call this the Express service (see Express).

Adequacy of Web site
As you can see by the material at the end of the above links, the Cheskin Web site does a good job describing and promoting their services. Furthermore, their site has blogs and podcasts (see Cheskin Blog) and various articles of interest (for example their article on the ROI of Diversity). I also appreciate that their search function has both a directory as well as free text search (see Search). I can go to a topic area and look at only the subject of interest, avoiding the usual irrelevance of many returned results from free text.

How to Improve Web Site
That said, I don’t think they have the perfect site. It is incomplete. As an example, I searched their directory to find if Cheskin used panels and how they handled panel effects. I clicked on Methods and Techniques and the following was presented:


I used their free test search with no better result. Using Yahoo, I was able to find that Cheskin does conduct panels (see Living Room Panel). Dennis (2001, p 1) reports that research firms may create professional panelists who respond differently than the rest of us, the panel effect.

Another issue with the Web site is that it does not organize around customer profiles, but rather it is organized around Cheskin and its functions. In contrast stands the WVU Web site (see WVU Web) that does have customer profiles as well as functions. Each profile tab has content organized according to the interest and comfort level of the profile. University of Maryland is the same (see UM Web). Among others, Lisa Sanders (2007, p 1) advises Website designers to use the concept of “personas” when creating a site. Personas are ”archetypical characters [who] represent specific consumer segments.”

References

Buchanan, Mark (2002). Nexus: Small Worlds and the Groundbreaking Theory of Networks. Norton.

Dennis, J Michael (2001). Are Internet panels creating professional respondents? Marketing Research.

McDaniels, C and R Gates (2008). Marketing Research Essentials. John Wiley.

Sanders, Lisa (4/9/2007). Major marketers get wise to the power of assigning personas. Advertising Age, 00018899 Vol. 78, Issue 15. Retrieved from EBSCOHOST on May 23, 2009

Everybody Got a Chevy

This Impala ad is taken from Source magazine. The company, Chevy and the model, Impala were the original lowriders so there is a cultural history in the brand. True, the cars today are different than they were 40 years ago but still history does provide that cultural connection. You can still see the old Impala low riders on the streets today. By employing Hip Hop artists, Chevy reestablishes and reinforces that old connection; this is a ride for the hip.

The artists, Cadillac Don & J-Money did a series of videos on Chevy models. Here’s an example in a Chevy lowrider:

Peanut Butter and Jelly

The "Everybody Got a Chevy" series of videos features a different model in each. It ties in beautifully with print ads commissioned by Chevy employing the Hip Hop artists. The fact that the videos are not traditional video ads only reinforces the leverage in the print ads, since the music videos are now associated with the cars and they appear less mediated. I think we will see more and more non-traditional work federated with traditional.

Evaluation of The Black Swan

Audience
The book is a rich resource for people who must make decisions in the face of uncertainty and incomplete information. It is written at an intuitive level so it does not require sophisticated training in mathematics or philosophy to understand. On the other hand, the subject matter is thoroughly presented. For practioners, its risk management implications cross-cut many business disciplines. For consumer behavior operators and academics, it has profound implications about the misuse of mathematical models.

The Black Swan by Nassim Taleb

Strengths
It is easy to misuse survey statistics and, according to Taleb, quite often done. He provides high-level guidelines that indicate if a statistical approach is questionable (see Implications section of this post). He also gives many aphorisms for how to think clearly and avoid common decision making mistakes. Here is a short sampling:

• Focus on anti-knowledge, what we know as false instead of what we know. What we know is captive to the unknown, but if we disprove the justification for an effort we can save ourselves time and money (p. xxi).


• The future will be less predictable but we still must predict (p. 203).


• To escape the narrative fallacy, make testable predictions. (p. 72).


• Favor experiments over history and theories (p. 83-4, 120).


• Don’t focus. Uncertainty can come from any direction (p. 133).


• Understand scalable and non-scalable variability


• If we can predict people’s actions then they are automatons. Is this a valid (p. 183)?


• Rank assumptions not by likelihood but by harm they can cause (p. 203).


• Invest in preparedness, not in prediction (p. 208).


• Seize asymmetric opportunities: low cost, high payoff activities even if the payoff has a low probability (p. 205).


• Look to be broadly right rather than precisely wrong (p. 284).

Weaknesses
It would be easy to misinterpret this work as advocating a carelessness of futurity (for example, see EO, 2007, p3 in his review of the book on Amazon). Such is not the case. It is the realization that Rationalism is dead, Positivism is dead. What do we do now? Taleb is actually giving guidance on the most responsible approach for considering the future. This should be expressly stated: this is not giving up on our dealings with the future but a start on how to properly deal with it.

Information Sources
His could not be stronger. He has personally worked with Benoit Mandelbrot the leading fractal mathematician in the world. He makes extensive use of the work by Nobel Laureate Daniel Kahneman in the Psychology of Uncertainty. It’s the same for network theory, citing the seminal works of mathematicians Watts and Strogatz. Additionally, he brings his own hard earned experience in the trenches of international finance.

Implications for Consumer Research
Foremost, do question surveys and the validity of their statistical assumptions. Taleb notes that physical quantities such as height and weight are subject to some sort of Gaussian distribution (p. 33). Measures dealing with social matters are not usually Gaussian and if not, we have two choices: 1.) the use of Fractal mathematics if the problem is tractable; 2.) run experiments and analyze evidence if intractable.

How do we decide if the population measure is fractal-able? If the measure follows a power rule, in mathematical terms is self-similar, then fractal mathematics applies. A simple power law is the Pareto 80/20 rule, as discussed in last weeks post. If there is a power rule that applies then the distribution is fractal.

How has consumer research faired by universally applying a Gaussian distribution to social matters? As noted in last week's post, there are mixed results and one of the failures may be instructive. Consider New Coke.

Wilson and Ogden (2004, pp 30-1, 52-3) report that Coca Cola used both statistical survey methods as well as work with focus groups to decide if the New Coke campaign should be launched. They ran into a problem, the recommendations from each approach conflicted.

The conclusion drawn from the statistical surveys was to change the formula. The result from the focus groups was the opposite; change would be a big mistake. Coca Cola decided to discount the soft evidence from focus groups and go with hard data from proven mathematical statistics.

The measures were not physical attributes but opinions and beliefs. Based on Taleb’s work, we should question the applicability of Gaussian distribution assumptions to such measures. They may be valid, but maybe not. Wilson and Ogden conclude (p. 52) “survey research is becoming less credible as an accurate representation of publics….” Contrary to the hard data predictions, New Coke did not fair well.

A second and more positive implication is the explosive power of Internet marketing. Internet connections are fractal – a popular Web page is linked to by other pages, these pages in turn linked to by their interested parties, and soon you get a fractal like spider web of connections. This is the basis for viral marketing, which is fractal. Internet marketing can give us asymmetric leverage, where the Black Swan that occurs is positive for us. A classic example of the fractal explosiveness in viral marketing is Smirnoff’s Tea Partay (see Johnson, 2009, p. 26).

Hawkins, et al (2007, p. 249) note that viral marketing is an online strategy to generate buzz and word of mouth (WOM). Buzz is an idea contagion that “[creates] an exponential expansion of word of mouth.” It is low cost but they go on to say (p. 248) that such strategies must be used with care so no miscommunications diminish the brand.

Taleb (2007, p. 220) would say idea contagions are fractal as well as exponential. Fractal worlds are winner take all. They follow a scalable power rule, something like 10% of the videos capture 90% of the traffic, and 10% of that top 10% capture 90% of that 90%. In such a world the top 1% owns a lot, 81% in this example. For WOM marketing online, this means you front $600K to produce a video but most times it doesn’t hit, but when it does it can hit big.

Taleb advises us (p. 205) that living today requires a lot more imagination because it is a world dominated by extremes and the unknown. He goes on to say that consumer behaviorists should seize asymmetric opportunities where you make a series of small bets that you will lose for the occasional big payoff. This is the most effective strategy in the world we are rapidly becoming.

References
Cacioppo, John and Richard Petty (1986.) The Elaboration Likelihood Model of Persuasion. Retrieved on April 13, 2009 from the EBSCOHost database.

EO (April 25, 2007).Many important ideas, many flaws that detract from the message. Retrieved on April 14, 2009 from http://www.amazon.com/Black-Swan-Impact-Highly-Improbable/dp/1400063515/ref=sr_1_1?ie=UTF8&s=books&qid=1239724317&sr=8-1

Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

Johnson, Celia (March 6, 2009). 10 of the Best. BANDT-COM.AU. Retrieved on April 18, 2009 from EBSCOHOST.

Ortega y Gasset, Jose (1994). The Revolt of the Masses. W. W. Norton & Company.

Simon, H.A. (1960). Administrative Behavior: A Study of Decision-Making Processes in Administrative Organization. Macmillan.

Taleb, Nassim Nickolas (2007). The Black Swan. Random House.


Wallace, AFC (1963). Culture and Personality. Random House.

Wilson, L. and Ogden, J. (2004). Strategic Communications Planning For Effective Public Relations and Marketing, 4th Ed. Kendall/Hunt Publishing

Review of The Black Swan by Nassim Taleb

Introduction
The Black Swan by Nassim Taleb is a skeptical view of the Rationalism employed in modern behavioral sciences. It is written with eloquence so that complex ideas and mathematics are made intuitively clear. It is particularly relevant for consumer and marketing research, which have continuously experienced embarrassing and costly failures such as New Coke, Life Savers Soda, Colgate Kitchen Entrees, Pond’s toothpaste, Clairol’s ‘Touch of Yogurt’ shampoo, Frito-Lay Lemonade, Pepsi AM, and Heinz’s All Natural Cleaning Vinegar.

Experienced industry professionals in leading companies did these projects. It is not just consumer research either, as American financial models have recently gone bust in a highly visible manner with the rest of the planet watching in total horror. Why the mixed results from research based on the Rationalist models?

Taleb gives a roadmap that not only explains the misuse of mathematics in such predictive attempts but also explains the fallacies of reasoning possible with Rationalism that lead to a false confidence in our undertakings and an understatement of the risk from random but material future events. The Black Swan is his metaphor for a risk from unknown events with consequential effects.

My review starts with Taleb’s recounting the numerous points of failure in Rationalist reasoning such as domain specificity, post hoc rationalization, the narrative fallacy, and silent evidence. It then explains the abuse of mathematics cited by Taleb starting with the circularity of statistics, and the pervasive but often invalid assumption that our distribution of attributes is non-scalable.

Examination
Nassim Taleb gives us a practioner’s guide to the pitfalls in Rationalist reasoning. He starts with the all too human tendency to wrongly translate an absence of proof into proof of absence concerning risk. His delightful example is a thought experiment with a turkey that is well fed and cared for by his human host. Using the inductive methods of Rationalism with day after day supporting proof, the turkey concludes that his human benefactors have his best interests at heart. There is a sudden “revision of belief” (p. 40) on the Wednesday just before Thanksgiving. Of human malice, the turkey had confused absence of proof with proof of absence regarding the risk he faced.

In the first section of his book, Taleb explains the common fallacies of Rationalism. These fallacies include (p. 50) the confirmation error, the narrative fallacy, and the distortion of silent evidence.

Confirmation Error
Taleb observes that the context of the information presented to us influences our thinking about that information (p. 53). The information does not stand on its own merit but that of its presentation context as well. Taleb calls this Domain Specificity, and Hawkins, et al (pp 299-300) call it contextual cues, and explain its impact on consumer behavior.

Another confirmation error is naïve empiricism (p. 55). This is the human inclination to look for support of our vision and to orient research with this positive frame of mind. It only takes past instances that confirm current proposals.

Narrative Fallacy
This is a predilection for simple explanations in place of complex truths. Taleb’s exposition uses a cognition model similar to the Elaboration Likelihood Model used in consumer behavior (see Hawkins, 2007, p 409-10). Taleb describes (p. 81) the cognitive model devised by the eminent psychologist Kahneman. This model organizes cognition into System 1 thinking and System 2 thinking. System 1 is intuitive and quick, relying on heuristic short cuts. It gives easy and obvious narratives but overemphasizes the emotional and the sensational.

System 2 is what we would characterize as central route processing. It is a derived sequence of thought. It is easy to retrace reasoning to rethink our strategy based on feedback. On the other hand, System 1 thinking is prone to narrative fallacies.

Narrative fallacies take several forms. One is Post Hoc Rationalization. This fallacy provides an artificial explanation of an event after the fact rather than establishing causal relationships during the event. Taleb gives the classic example (p. 65) of a group of consumers who each selected a pair of nylons from a set of twelve. A while later they were asked why they made their particular choice. The answers ranged from better color to better texture. The twelve pairs were in fact identical. Hawkins, et al (2007, p 326) report on a similar happening with Disney and Bugs Bunny.

Finally, the more randomness in information the harder it is to remember (p. 69). We therefore seek to summarize random information and impose our own order on it. We fold meanings into convenient dimensions of existing knowledge. This reduces the dimensionality making it less complex and so easier to store and retrieve. This makes the world look less random, and therefore less risky. This is why we tend to underestimate risk, especially risk that does not fit into our existing knowledge dimensions.

Distortion of Silent Evidence
History is a graveyard of Silent Evidence, as Taleb calls it. The simplification biases discussed above reduce complex evidence into convenient summaries. The omissions add to the silent evidence we ignore, which distorts our view of reality. The manifestation of silent evidence is a false sense of stability (p. 117).

The Scandal of Prediction
In the later sections of the book (pp 136-211), Taleb makes an intuitive case for why our predictive models fail. One critical aspect of a system being modeled is its scalability. In the behavioral sciences most ranges are assumed to be non-scalable. In other words, as you leave the mean, not only is the count less, but that it is increasingly less. This is a convenient assumption because it permits the use of statistical mathematics based on the Bell curve (a.k.a. Gaussian distribution) or a derivation of it.

This assumption about a Bell curve for our populations, as Taleb (2007, pp 229-247) argues, is “that great intellectual fraud.” This is not a true attribute of all the populations where behavioral scientists are applying statistical surveys in a wooden and perfunctory manner. He notes that while it is true for physical characteristics such as height and weight, it is usually not true for social measures. Ranges become scalable so the non-scalable assumption of the Bell Curve is invalid. Scalable system behavior leads to non-uniform concentrations rather than smooth distributions, they are thus Fractal. The rich get richer.


Fractal worlds follow a scalable power rule. As a simple illustration, Pareto found that 20% of the Italian population owned 80% of the land (p. 235), and the 20% of that top 20% owned 80% of that 80%. In such a world the top 1% owns a lot, 64% in Pareto’s case. Taleb also uses book sales as an example (p. 264). It does not follow a Bell Curve. It is fractal and follows a complex power rule. Because it is a fractal world it has winner take all, lop-sided distributions.

He uses height and wealth as examples of applying Bell Curve models in each world (non-scalable and scalable). For height, if you pick 100 people randomly, you will derive a meaningful understanding about the height of the population. Adding another person, the 101st, won’t measurably change the average or deviation, even if it is a tall person, say seven feet. This is the standard Gaussian system.

The social measure of wealth is different. If the 101st person you add is Bill Gates, the average and deviation is changed, appreciably. This is an extreme example to make a point, but Taleb discusses his days on Wall Street where non-scalable assumptions were made for scalable systems, which led to misunderstandings of risk and incorrect investment strategies. He shows how scalable systems are described by fractal mathematics.

Traditional mathematical modeling in social sciences, including behavioral sciences, is flawed. The process of employing mathematics starts with the Circularity of Statistics flaw (p. 269). We need data to know if the population is Gaussian or Fractal. But, we need to know if the population is Gaussian or Fractal to know how much data to collect to decide if it is Gaussian or Fractal.

Let’s say we can get by this problem. Then we encounter another problem for Gaussian distributions (p. 251). Gaussian models in pure mathematics are based on the assumption that each event is mutually exclusive. This is true of flipping a coin but not true in most social actions, where there is usually some cumulative advantage effect like learning. In other words, there should be improvement in the probability of a certain outcome over time because of the cumulative advantage effect of learning.

For the other case, if the model turns out to be Fractal rather than Gaussian, we still have problems (p. 272). Fractal mathematics for randomness does not yield precise answers. The Gaussian does and that is why scientists like to make Gaussian assumptions.

The next post will apply Taleb to consumer research.

References
Cacioppo, John and Richard Petty (1986.) The Elaboration Likelihood Model of Persuasion. Retrieved on April 13, 2009 from the EBSCOHost database.

EO (April 25, 2007).Many important ideas, many flaws that detract from the message. Retrieved on April 14, 2009 from http://www.amazon.com/Black-Swan-Impact-Highly-Improbable/dp/1400063515/ref=sr_1_1?ie=UTF8&s=books&qid=1239724317&sr=8-1

Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

Johnson, Celia (March 6, 2009). 10 of the Best. BANDT-COM.AU. Retrieved on April 18, 2009 from EBSCOHOST.

Ortega y Gasset, Jose (1994). The Revolt of the Masses. W. W. Norton & Company.

Simon, H.A. (1960). Administrative Behavior: A Study of Decision-Making Processes in Administrative Organization. Macmillan.

Taleb, Nassim Nickolas (2007). The Black Swan. Random House.


Wallace, AFC (1963). Culture and Personality. Random House.

Wilson, L. and Ogden, J. (2004). Strategic Communications Planning For Effective Public Relations and Marketing, 4th Ed. Kendall/Hunt Publishing

Marketing Blunder or Urban Myth?

The cultural factors that can impact consumer behavior include language, demographics, values and nonverbal communications (see Hawkins, et al, 2007, p 40). A cultural faux pas can be an embarrassing experience for professional marketers. The best intentions can be rendered fallacious and instead of a positive projection of its brand, a company can appear like confused Martians.

Many gaffes are humorous and because of this there is also a set of urban myths that have been fabricated. To help avoid these, a literary search of myth busters should be done when reporting on marketing blunders. Here are three that are not urban myths you might find amusing.

Eat Elegancita
Hershey’s Elegancita candy bar is filled with caramel cream, cajeta in Mexican, and covered with chocolate. A popular ad campaign in Mexico was extended to other Latin American countries that spoke Spanish with unfortunate result. Cajeta in Argentina and Uruguay, who speak Castilian Spanish, is a slang term for a women’s vagina.

The singer Thalia tells all that she loves cajeta. (see Hoag, 2005, p 1). Hoag goes on to say “Such linguistic pitfalls, where a common word may be understood in a different way in different countries, happen with some frequency in Spanish.” A contributing factor: there are sixteen different dialects of Spanish (see Spanish Dialects and Varieties) .

This story withstands the scrutiny of an urban myth buster (see About Spanish). This guy does torpedo many other urban myths about marketing gaffes, including allegedly misusing the Spanish language. Nova Myth and Other Urban Myths.

Cultural Confusion at IKEA
Money Magazine (see Bad Translations) reports on IKEA, as does Brand Strategy (2003, p 1). The IKEA bunk bed for children is named Gutvik.

This is a homonym in German for Good Fxxx. Muy Bueno! Just the right name for a children’s product. The Urban Myth busters say that to be fair, the German words are Gut Fick, and the phonetics are slightly different. (see TV Tropes) However, they do cite IKEA for another misstep, marketing the Viren Toilet Brush (see IKEA Catalog) in Finland. The legendary runner Lasse Viren hails from Finland.



Hakkaa päälle, Pohjan poika!

I Could Not Love You More If I Loved Pepsodent Less
Dr. Monica Bolesta at the University of Maryland (2008, p 2) discusses how Pepsodent failed to launch its toothpaste in Southeast Asia because it emphasized the whitening aspects.
Pepsodent wrongly assumed the American cultural preference for white teeth was universal. In Southeast Asia, darkened teeth are considered more attractive and the locals even chew betel nuts to stain their teeth. The betel nut itself is considered a sign of love and longevity (see Betel Nut Smile).

The Culitvated Drink for Apes
Pavane is an upscale bitters distilled and marketed by Bacardi. According to both CNN Money (CNN Bad Translations) and Zouhali-Worrall (2008, p 1) in a Fortune Small Business article, product marketing became a cultural blunder in Germany. The German homonym Pavian means baboon.

References
Bolesta , Monica (August 22, 2008). Cross-Cultural Awareness: Avoiding Global Marketplace Missteps. Retrieved on April 3, 2009 from http://www.umuc.edu/departments/podcasts/podcasts_bep/content/shows/sh2008/transcript/Transcript_Diversity_Cultural_Awareness.pdf

Brand Strategy (May 2003). Global village idiot. Source:Brand Strategy; May2003 Issue 171, p39, 1/9p. Retrieved on EBSCOHOST.

Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

Hoag , Christina (03/08/2005). The Miami Herald. Retrieved on April 3, 2009 from EBSCOHOST.

Zouhali-Worrall, Malika (Jul/Aug2008). Watch Your Language! Fortune Small Business. Retrieved on April 3, 2009 from EBSCOHOST.

Smirnoff: Asymmetric Marketing with Buzz

This week finds me in a gangsta kinda mood. So it was with Smirnoff when they commissioned this video gone viral: Smirnoff Tea Partay

Johnson (2009, p. 26) reports that Bartle Bogle Hegarty produced and released this made-for-YouTube video in August 2006. She has it ranked 6th in viral videos with 4.8M hits. She quotes Mel Peters, creative director at Citrus, about Smirnoff’s viral marketing:

“This is a great example of how the advocacy of followers can lead to an ongoing presence for a brand in this crowded space. That it continues to engage with the YouTube community is a testament to its success! “

Hawkins, et al (2007, p. 249) note that viral marketing is an online strategy to generate buzz and word of mouth (WOM). Buzz is an idea contagion that “[creates] an exponential expansion of word of mouth.” It is low cost but they go on to say (p. 248) that such strategies must be used with care so no miscommunications diminish the brand. Taleb (2007, p. 220) would say idea contagions are fractal as well as exponential.



Fractal worlds are winner take all. They follow a scalable power rule, something like 10% of the videos capture 90% of the traffic, and 10% of that top 10% capture 90% of that 90%. In such a world the top 1% owns a lot, 81% in my example. For WOM marketing online, this means you front $600K to produce a video but most times it doesn’t hit.

Chandler (2007, pp 27-9) also says viral marketing is fractal but he is more optimistic. With the advent of social media “the potential for viral, word-of-mouth marketing becomes enormous.” Not everyone is so optimistic.

Freedman (2006, p 81) quotes Dr. Patti Williams at Wharton that “the evidence you can go from online talk about a product to sales is really limited.” An example used is the movie Snakes on a Plane that had a lot of buzz online but a lot of fizz at the box office. To be fair, movies are one of the few categories where traditional advertising is more effective than word of mouth anyway, according to Hawkins, et al (p. 242).

Although not an optimist, Taleb says that living today requires a lot more imagination because it is a world dominated by extremes and the unknown. He advises us to seize asymmetric opportunities like this where you make a series of small bets that you will lose for the occasional big payoff. This is the most effective strategy in the world we are rapidly becoming.

Hawkins, et al (p. 246) say that other driving forces for word of mouth strategies are fragmenting markets and consumer skepticism. With all this said, I think buzz is no baseless fad. Unprecedented uncertainty invites unprecedented imagination. If you try to create buzz and keep persisting, every once in a while you become a playa like Smirnoff. In the meantime, you need to manage expectations.

References
Chandler, Doug (May 2007) Web 2.0: Buzzword or Bonanza. Electrical Wholesaling. Retrieved on April 17, 2009 from EBSCOHOST

Freedman, David H. (Dec2006). Everyone is chasing Internet buzz. But be careful. Online hype doesn't always deliver. Inc. Retrieved on April 17, 2009 from EBSCOHOST.
Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

Johnson, Celia (March 6, 2009). 10 of the Best. BANDT-COM.AU. Retrieved on April 18, 2009 from EBSCOHOST.

Taleb, Nassim Nickolas (2007). The Black Swan. Random House.

Analysis of Rolex and Movado Watch Ads

Watches often do more than tell time. They can help a consumer define and project an image: sometimes for status and power, sometimes to convey style and cultivation.

High-end brands have such extraordinary demand these days; the wait list can be as long as two years to get a Jaeger-LeCoultre. Socha reports that Patek Philippe sold 28,000 watches and Jaeger-LeCoultre sold 50,000 in the Prestige category, while Rolex in the Luxury category sold 900,000 (Socha, 2007, 2008, p 1).

It is no longer rare for Prestige watches to sell in the high six figures. Business is booming and all Prestige manufacturers sell every watch they produce. Even the lower-tier Rolex line is benefiting from this trend. Murphy (2008, p 1) notes that sales were even better into 2008, and quotes that "A diamond watch doesn't sit in our shop more than a week."

The Prestige makers have established "heirloom quality."

Keller (2008, p 137) notes their mantra, "You never actually own a Patek Philippe. You merely take care of it for the next generation." So it is with Jaeger-LeCoultre. Here is their watch Queen Elizabeth received at her coronation. Not so with Rolex. Timex? A different kettle of fish altogether.

Rolex

Rolex watches have a divine heaviness. You would just not expect them to release a plastic Rolex. They reinforce this image of eminence with advertising and celebrity endorsements. Green (2004, p1) reports that Arnold Palmer was interviewed on playing his 50th Masters and, of course, endorsed Rolex. What’s more, Rolex is the 7th largest magazine advertiser in the world. Keller (p 137) notes that "Rolex watches retain their value better than almost any other type of good." However, they have not been able to establish the "heirloom quality" of the top brands.

Keller (pp 133-7) finds that Rolex is among the most "recognized luxury brands in the world." However, Rolex is positioned between the Prestige producers and the next-tier producers and so they have established the lower-priced Tudor line as a "fighter-brand" to keep Tag-Hauer, Movado and Citizen from encroaching into their niche.

I present for your consideration the following ad in the November 2008 issue of Vogue (see Illustration One). First attribute: it’s a two page ad for 30 words of text. This makes a statement; Rolex is an eminent player, worthy of your attention. The alluring model with classic features is the 77-year-old Carmen Dell'Orefice (see Rumbold, 2008 for a two page biography), according to Kathy (2008, p 1). Her ageless beauty underscores the timeless value of the Rolex she is wearing. The redundant headline reads, “Class is Forever”, but we have already gotten the message. Rolex wants to break into the heirloom niche so it can obtain high figures like the Prestige brands.

The body copy has important words – royal, diamond adorned, Stingray leather, and Black Sapphire. If there was reservation before, it is now dispelled: this is a watch like no other, made for royalty from only the rarest materials. It uniquely enhances your image. This professional ad will certainly appeal to the following VALS Segments: Innovators, Achievers and Strivers.

To Innovators, the beauty and class of Rolex is a valuable extension of their self. It reflects (see Hawkins, 2007, p 447), “a cultivated taste for the finer things in life.” To Achievers, the imminence of the Rolex brand appeals to their needs for (see Hawkins, p 448) “established, prestige products and services that demonstrate success to their peers.” Finally, Strivers can emulate the wealthy with a Rolex but they may end up with a Tudor model, the fighter-brand – cheap enough to compete with Citizens.

Illustration One (left page): Rolex, “Classic is Forever” Ad

Illustration One (right page): Rolex “Class is Forever” Ad

Movado and African Americans

Hawkins, et al (2007, p 167) say that “not all messages targeted at African Americans need to differ significantly from those targeted at other groups.” They qualify this rule with the caveat that incorporating black actors, models or spokespersons in the ad is important. A key segment in this audience is what Hawkins, et al call (p 164) “market leaders.” This group sees brands as communicating their unique self-image.

The Movado ad is also two pages, presenting prestige through this eminent use of space and disregard for cost. The two pages permit a flattering photograph of the attractive black actress Kerry Washington and the Movado watch as well. The body copy tells us about the acclaimed actress, and that the watch is available at fine jewelry stores. The impression is this watch is not a mass production pop-out that anyone can own. Noteworthy in the photo of the watch is the diamond studding, the gold accessorizing and the header “The Art of Design.”

The ad does not offer extensive body copy. Jérôme Lambert the CEO of Jaeger-LeCoultre sums up the advantage for this minimalism towards high-end audiences (see Lechevalier, 2009, p 1):

“The products are the real brand ambassadors; that’s our basic message. They have so much to say, and communication is a tool that loses so much of its efficiency when you overlay too many messages.”

The audience here, I think, is the VALS: Innovator segment. Image is important to them (see Hawkins, p 446-7). Brands act as an extension of self, and an expression of cultivated taste, and independence.

Many Innovators are emerging leaders. Kerry Washington is a good choice for the ad because she is an emerging film star (see Wikipedia, 2009, p1) with performances of note in Last King of Scotland and Ray Charles.

Zinkum and Hong (1991, p 352) conclude that advertising which fits with a person’s ideal self obtains a more favorable attitude toward the brand than if the had been more consistent with their actual self-concept. The Movado ad targets African-American women who are VALS Innovators and have affinity with Kerry Washington's attractive and successful image. One thing to help them establish their ideal is the Movado Esperanza watch, one that becomes an “extension of their personality” (see Hawkins, 2007, p 447).

Illustration Two (left page): Movado and African Americans

Illustration Two (right page): Movado and African Americans

References
Green, Barbara (6/16/2004). Rolex loyalist Arnold Palmer plays 50th Masters Tournament. National Jeweler;Vol. 98 Issue 12. Retrieved on March 30, 2009 from EBSCOHOST.

Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

Kathy (November 11, 2008).Rolex "Class is Forever" attention-grabbing ad. Retrieved on March 30, 2009 from http://boomermarketingnews.blogspot.com/2008/11/rolex-class-is-forever-ad-mixed-reviews.html

Keller, K (2008), Strategic Brand Management. Pearson/Prentice-Hall.

Lechevalier, Brice (2009). GMT. Retrieved on April 1, 2009 from http://www.gmtmag.com/en/11_int_lambert_lecoultre.php

Murphy, Robert (4/14/2008) FAST TIMES IN WATCHES: FIRMS SEE BOOM FOR UBER-LUXURY STYLES. Women's Wear Daily. Retrieved on March 30, 2009 from EBSCOHOST.

Rumbold, Judy (3:54PM GMT 11 Jan 2008) Carmen Dell'Orefice: eternal grace. The Telegraph. Retrieved on April 1, 2009 from http://www.telegraph.co.uk/fashion/fashionpicturegalleries/3364006/Carmen-DellOrefice-eternal-grace.html

Socha, Miles, (7/30/2007). Demand Soars for Six-Figure Watches. Women's Wear Daily. Retrieved on March 30, 2009 from EBSCOHOST.

Univ. of S. Miss (Fall 2007). The VALS Segment Profiles. Retrieved on March 30, 2009 from http://ocean.otr.usm.edu/~w481504/kfj/mcj231vals.html

Wikipedia (2009). Kerry Washington. Retrieved on April 1, 2009 from http://en.wikipedia.org/wiki/Kerry_Washington

Zinkhan, George M. and Jae W. Hong (1991). Self Concept and Advertising Effectiveness: A Conceptual Mode! of Congruency,Conspicuousness, and Response Mode. Advances in Consumer Research. Retrieved on April 1, 2009 from WVU IMC 612 Week 3 readings.

Applying Kracauer to Consumer Behavior

Literature and art are modes of communication that provide a framework for understanding marketing communications and its influence on consumer behavior. Siegfried Kracauer was a cultural analyst and member of the applied social sciences group at Columbia University. His work laid the foundation for modern film criticism and he is the author of several works including Theory of Film: The Redemption of Physical Reality.

One of his foundation essays was on photography. First published in October 1927 in the Frankfurter Zeitung, Kracauer considered Photography to be one of his more important works. As editor, he also published the works of Adorno, Horkheimer, Bloch and Benjamin, the architects of what became known as the Frankfurter School. The University of Chicago republished the Thomas Levin translation of Photography in 1993 in its journal Critical Inquiry.

A summary of his article Photography can be found in this earlier posting. Photography is an analysis by one of the most powerful minds of 20th century sociology and film criticism. Most of the precepts it presents are now part of consumer behavior as well as modern film. Moreover, it is part of his larger body of work that is a framework for understanding groups and cultures and tools for discovering their nature.

Kracauer had a PhD in Architecture with significant training in sociology. To supplement his penetrating fusion of the two, he references classical figures such as Aristotle and Goethe among others. The work has been peer reviewed by three generations and has stood the test of time. It is still considered relevant enough to be published in a recent University of Chicago journal.

Several seminal points are made in the article. Visual communication is an art that requires care to eliminate clutter, and establish meaningful associations between the elements that survive the purge. This cannot be done mechanically.

A second point is that photographs do not represent reality. Neither does memory for that matter, because it is the association of what is in activated consciousness. This in turn permits irreality to be created in a subject or consumer. For example, Hawkins, et al (2007, p 326) report on a study that showed subjects presented with imagery were able to recall a childhood event of being at Disneyland and seeing Walt shake hands with Bugs Bunny, which is an impossibility.

A third point is that the meaning conveyed by a photograph is generally incomplete and may be inadequate depending on the skill of the artist. These points are incorporated into consumer behavior already and form the basis for work with conditioning, consumer inferences, memory interference, and memory’s role in learning.

Two final points are not widely applied to consumer behavior but should be. The fourth point is observing the quotidian aspects of the group or culture is the best way to understand the motives and attitudes of its members. The fifth point is that timeless work does not attempt to be contemporary.

How Kracauer Enriches our Understanding of Consumer Behavior
On photographs, Hawkins, et al (2007, p 305) tell us that the impact of visual images on consumers and their inferences from communications with visual images is becoming increasingly important. Page (2006, p 94) makes the more bold assertion that the concept of an image, and the connection of the elements in that image to each other and to the concept is the “fundamental action within an advertisement.” This being so, we should expect Kracauer’s insights into photography to have a reflection in current consumer behavior body of knowledge. They do.

First, photographs do not represent reality, and for that matter neither does memory, as Kracauer observed. Trachenberg (2008, p 113) demolishes the notion that photography represents reality. He says

“Today that simple idea of a light-based transparent nexus between photograph and a determinate past is undergoing radical reappraisal. The digital revolution, as probably everybody on earth now realizes, has eroded the old confidence in that transparency.”

Hawkins, et al say (p 305) that “Until recently, pictures in ads were thought to convey reality.” This has changed and now instead “They supply meaning.” Hawkins, et al (2007, p 282) provide support for the debility of memory as well. They argue that consumer awareness and attention are highly selective, and their interpretation is a highly subjective process. They offer this conclusion: “Thus reality and consumer perceptions of reality are quite often different.” They go on to say (p 328) that memory links fade over time.

Has there been a re-discovery of Aristotle’s Law of Contiguity, the idea of proximity begetting association? Hawkins, et al (p 301) assert that stimuli positioned close together are perceived as belonging to the same category. Page (2006, p 95) makes the next connection. She cites research on Pavlovian conditioning (a.k.a. Classical) that there is also a transfer of meaning with such associations.

Kracauer argues that a series of different photographs can influence the perception of each other through the overall context they create. The modern consumer behaviorists, Hawkins, et al (pp 299-300) explain the nature of such contextual cues. This can be other pictures on the same page in a magazine or the programming surrounding a commercial on TV.

As we might expect, the artistic assignment of meaning is widely recognized and applied. Its fallibility well discussed. Kracauer noted that composition according to a theme is what separates photographic art from mechanical and meaningless photography. Hawkins, et al (p 300) comment on the need to organize stimuli to help consumers react to and interpret our communications with them.

They go on (p 292) to insist that all good advertising must have a clear visual point of reference. They affirm the artistic focus recommended by Kracauer and declare it fundamental to advertising communications (p 290): “Any factor that draws attention to itself and away from the brand and its selling points has to be used with caution.”

Page (p 95) recommends a process she calls framing. Her frames constitute “principles of selection, emphasis, and presentation that organize the social construction of reality.” This is the elimination of non-message elements through emphasizing a meaning to organize our communication.

Analytical Trade-off in Kracauer's Approach
The great social psychologist, Karl Weick evaluated behavioral research according to “three inevitable tradeoffs:” the simplicity, accuracy and generality of the results (1979, pp 35-40). The first tradeoff is typical of activities mimicking the natural sciences, the attempt to be general and accurate while sacrificing simplicity. The second tradeoff, the case study approach, is accurate and simple but sacrifices generality. Finally there is the approach used by Kracauer, thought experiments (considered a valid form of inquiry: see Weick, 1979, p 38) as well as aphorisms from his observations and analysis. These are general and simple at the expense of accuracy. The trade-off Kracuaer chose should be kept in mind in reading any of his works.

Implications for Consumer Behavior of Kracauer’s Work
First, the behavioral sciences are at risk with their overreliance on statistical research methodology. Subject pretense is activated through participation in such research. Neumeier (2006, pp 110-11) cautions that such research is susceptible to the Hawthorne effect. He describes this as the penchant for people to act differently when they know they are under observation or being measured. Kracauer asserted that the everyday social activities of a group or its unembellished enactments like its literature and art reveal its nature without mediation and are better evidence for understanding its essence than its own pronouncements or the application of formal research techniques.

Wilson and Ogden (2004, pp 52-60 ) report on case studies of catastrophic failure in marketing campaigns based on statistical surveys, including New Coke. They present the following summary opinion with several supporting citations (p 30):
"Industry and academic opinion is that opinion surveys that measure behavior and predict behavior in isolation from the group are inherently flawed. Unless the measuring device is carefully designed and implemented, it may not measure the most salient opinion and the results may be misleading, causing costly strategic errors."

Taleb (2007, pp 229-247) provides further explanation and criticism (p 229 and following): “The Bell Curve, that great intellectual fraud.” Statistical distributions such as the Bell Curve are based on the assumption that the underlying population is non-scalable. In other words, as you leave the mean, not only is the count less, but that it is increasingly less. This is not a true attribute of all the populations where behavioral scientists are applying statistical surveys in a wooden and perfunctory manner.

A second and related implication is that the consumer research reaction to issues with mathematical surveys is to introduce “visual ethnography.” Brace-Govan (2007, p 735) says “visual ethnography offers marketers opportunities to gather appealing and pertinent data.” In view of Kracauer’s reservations, and his preeminence in the field of the visual arts, another and critical look must be made into the use of visual ethnography and interpretations based on it. Photographs do not represent reality.

A third implication is a view in the Humanities that the emotions and attitudes of a people can be found in their literature, music and art well before it is obvious to journalists or social scientists (see Kaplan, 2001, p 158). This is because the future lies in the uncomfortable and sensitive feelings of the present that cannot be expressed in a presentable narrative because it would contradict conventional wisdom. However, they can be expressed as a work of fiction or art whose popularity is an indicator of these transforming undercurrents. Review of art and literature is the approach recommended by Kracauer. This is also the viewpoint of the anthropologist, Wallace (1963, pp 101-3)

This can aid the discovery of latent motives in a culture or group. Such unstated motives are often driving forces in a culture but unlike manifest motives, are not directly presented (see Hawkins, 2007, p 375). Instead, indirect appeals through artwork are made. Latent motives according to Hawkins can be cracked with sophisticated analytical techniques, but an implication from the review of the Kracauer article is they can be discovered through a literature review also.



References
Brace-Goban, Jan (August 4, 2007). Participant photography in visual ethnography. International Journal of Market Research. Retrieved on March 26, 2009 from EBSCOHOST.

Hawkins, Del, David Mothersbaugh and Roger Best (2007). Consumer Behavior. McGraw-Hill/Irwin.

Holbrook, Morris (June 1987). What Is Consumer Research?. Journal of Consumer Research. Retrieved from WVU IMC 612 Week 2 Readings on March 21, 2009.

Kaplan, Robert (2001). The Coming Anarchy. Vintage.

Kracauer, S and T Levin (1993). Photography. Critical Inquiry, Vol. 19, No. 3 (Spring, 1993), pp. 421-436. The University of Chicago Press. Retrieved from JSTOR at
http://www.jstor.org/stable/1343959 on March 2009. (If you do not have a JSTOR account, I can email you the article).

Lewis, Charles (1998). Advertising Photography. History of the Mass Media in the United States: An Encyclopedia. Retrieved on March 23, 2009 from EBSCOHOST.

Neumeier, Marty (2006). The Brand Gap. New Riders.

Page, Janis (Spring 2006). Myth & Photography in Advertising. Visual Communications Quarterly. Retrieved on March 23, 2009 from EBSCOHOST.

Taleb, Nassim Nickolas (2007). The Black Swan. Random House.

Trachenberg, Alan (Spring 2008). Through a Glass Darkly. Social Research. Retrieved on March 23, 2009 from EBSCOHOST.

Wallace, AFC (1963). Culture and Personality. Random House.
Wilson, L. and Ogden, J. (2004). Strategic Communications Planning For Effective Public Relations and Marketing, 4th Ed. Kendall/Hunt Publishing