Tuesday, October 19, 2010
Monday, October 18, 2010
Social networking sites on the Internet are now regarded as one of the most important tools of communication. People have recognized social networking as the fastest and most trusted means of spreading news and making people aware of the facts and information. People have begun joining networking groups even as a status symbol. Being on a networking site is now considered as one of the best ways to get recognized. Being part of an online social network helps people to stay connected with their friends and families, and also to develop business links.
Viral marketing depends on a high pass-along rate from person to person. If a large percentage of recipients forward something to a large number of friends, the overall multiplier effect would be quite phenomenal and also the message would travel very quickly. This means that each person one reaches, one is also reaching a group of his /her friends as well. Then those friends tell other friends, leading to rapid increase in reaching down the line, which is in some way similar to what happens in many network marketing companies.
In 2007, Cadbury’s dairy milk chocolate launched a viral marketing campaign, which was much popularized on YouTube. During same year, World Wrestling Entertainment promoted the return of wrestler, Chris Jericho, with 15 a viral marketing campaign using 15-second cryptic binary video.
Recently Pepsi astonished the advertising industry by its move to ignore Super Bowl football matches and instead focus on Social Media. Pepsi, in an effort to leverage on social media, opted for the “Pepsi Refresh Project” which was rolled out in January 2010, to fund refreshing ideas that could change the world. Numerous individuals and organization visit the “Refresh Project” website via several social media platforms, and submit ideas for projects that could refresh their community. The next process involves public voting. The amount of money ($20 mn) saved by not advertising through Super Bowl is being diverted to supporting various selected projects every month ranging from $5000 to $250000 per project. Apart from serving as a promotional tool, social networking sites can also provide a platform to conduct product surveys, undertake research, build the brand, manage one’s online reputation, engage employees t know each other better, and recruit potential candidates for the company.
Manpreet Singh Nagi
Manpreet Singh Nagi
FT 2010-2012 Section C
FT 2010-2012 Section C
Saturday, October 9, 2010
A couple of months back, Google announced discontinuation of online sales for Nexus1.
A couple of years ago, DELL did something similar for its laptop, though Dell did not stop online sales of its Laptops, it moved into a kiosk model in which customers could visit a kiosk, have a look and feel of the laptop they are interested in buying and then make the final choice.
Dell with its unique selling and distribution channels, was enjoying the second position in the market for a very long time (first being HP with 18% market share), but after the economic meltdown of 2009, as people started looking for cheaper products, Acer- a company based out of Taiwan had a 30% increase in sales making it the number two player in market with a 13% Market share.
Dell lost its USP (Unique Selling Preposition) of low price for high quality products. As more big players emerged, Dell found it difficult to maintain the unique bargaining power with the suppliers.
A zero inventory for Dell adds pressure to the suppliers as they are not certain of the sales volume. As a supplier, you would have less bargaining power if you have a fixed order than to have serve a customer with a JIT (Just In Time) Inventory system. As a result, Dell lost its competitive advantage.
Very soon, Acer with similar quality as that of Dell (most of the internal components are made by other manufacturer’s, example: Intel for processors, Nvidia for graphics etc) gave stiff price war to Dell.
Secondly, as the buyer is exploited by choice, he does not see sense in waiting for about a week for the product to be shipped. Acer is available at retail outlets and a buyer can always negotiate a deal with the local seller and also ask for ad-on gifts such as back-pack, pen-drive etc.
Let us have a look at Nexus One
Google's decision to discontinue direct sales, which comes less than six months after launching the online store, is fairly striking.
There is nothing wrong with the product (it has received a higher rating than the IPhone and the Motorola Droid by all tech forum and I have myself used the IPhone, Droid and the Nexus1) , there is enough publicity done, the price is very competitive, it has HTC and Google brand associated with it, but still the product isn’t selling.
Now, if we combine (have a nexus) of the issue faced by Dell and Google, we can see that there seems to be a change in which internet markets are going to operate in the future.
It seems, the shift would very soon be from B2C (Business to Consumer) to a more B2B (Business to Business) model.
Today, the consumer wants to have a touch and feel of the product before making a purchase decision. Internet and online sites are mostly used for doing a product research and comparing between different products, but the final purchase decision is made only after the “demo” is done.
As in the Dell case, the kiosks do not sell the laptop (they accept payment, but the order is still placed online), still, the consumer can have a look and feel of what he is buying, this avoids an uncertainty, thus removing the psychic price that the consumer might have to pay.
In the case of Nexus1, the consumer is not sure how the product is going to look and feel, even the most interactive website cannot replicate the look and feel of the product completely.
Internet market for B2C is promising if the companies are ready to re-innovate the business model and provide additional flexibility to the consumer.
For example, www.bigshoebazaar.com is a portal which enables consumers to order two shoes at a time in case the customer is not sure about the size, pay cash on delivery and when the shoe is returned, they reimburse the full amount of the shoe along with the shipping charges incurred by the customer.
Another example could be of companies into online gifting solutions, customers do not require the feel element while purchase from FernsNpetals (www.fnp.com), they would look for prompt delivery and payment security.
In case of B2B markets, since the goods sold are either raw-materials or have an option of being customized as per the buyers requirements, the need for touch and feel for the product is not strong, moreover, in such markets, it is feasible for the seller to send a sample to the buyer as the magnitude of order is generally big enough to cost the free-sample cost to each buyer.
So, we see that B2C channels are not very promising as the customer’s buying decision is based on the look and feel of the product.B2B and C2C (consumer to consumer) seem to be more sustainable business models over the internet.
Companies must remember that no matter how good your product is, you can’t see it unless the consumer wants to buy it.
“The consumer isn’t a moron. She is your wife.” -David Ogilvy.