User-Generated Content: Engaging Customers, Enhancing Brand Authenticity

Leading edge companies leverage user-generated content to bring their brands alive, engage some of their biggest fans, and emphasize the authenticity of their brand.  They don't just solicit customer reviews, collect likes on Facebook, or ask customers to vote on items that they should sell.  They actually encourage customers to help them tell their brand story.  Paige Beaumont, Assistant Editor of the Post Advertising blog, writes about the impact of user-generated content:  

Great user-generated content (UGC) should not exist in a vacuum—it should be reused, when and where appropriate, to bring color and authenticity to a brand’s marketing.  As brands expand their social-media footprints, many have also (smartly) placed more emphasis on engaging with their fans. As a result, they’ve begun proudly featuring selected consumer contributions in print, TV and online advertising. Dedicated fans often create a gold mine of content that’s just waiting to be explored, and in due course, brands have begun to dip into this resource. It’s the easiest and most direct way to build relationships with customers, because their passion for their favorite brands makes them happy to respond and share their stories—messages that are infinitely more compelling than what the brand might say.

Paige offers some terrific examples in this blog post.   For instance, she highlights an advertisement by Target that features real home videos of high school students opening their college acceptance letters.  The ad clearly evokes an emotional reaction, and Target appropriately makes a connection to their own efforts to donate a portion of revenues to schools throughout the country.  

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Cheaters vs. Cheating: Words Matter When It Comes to Crossing The Ethical Line

Christopher Bryan and Gabrielle Adams have conducted a neat new study regarding ethical transgressions.  They examined whether wording mattered when it came to the rate of unethical behavior in which people might engage.  Specifically, they examined whether people might cheat to win $5. They asked subjects to think of number between one and ten; they could win $5 if their number was even.  Much prior research suggests that people are much more likely to think of an odd number.  Therefore, a high rate of even numbers would indicate that quite a few folks were likely to be cheating.  Now, here's the interesting twist.  They broke the subjects into two experimental conditions.  One group was told that they were playing a game that "tests how common 'cheating' is on college campuses."  The other group did not use the word 'cheating' - instead, it used the word 'cheaters' to describe the purpose of the research. In addition, subjects were being told that it would impossible for the researchers to know if subjects were "cheating" vs. were a "cheater." 

What did Bryan and Adams find?  Approximately 20% of the subjects in the "cheater" group reported an even number.  That's what we would expect if people are being honest (given the tendency of most folks to pick an odd number in prior studies).  Roughly one-half of the folks in the "cheating" group reported an even number!   Therefore, the slight alteration of wording seemed to matter a great deal.   No one wants to be called a cheater!  People worry very much about how they think of themselves, not just how others think of them.  The word "cheater" moves people to honesty! 

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One Step Toward Attacking The College Tuition Bubble

Source: Business Week

As a college professor, I understand that we are part of the problem when it comes to the college tuition bubble.   At far too many universities, particularly large research institutions, a significant number of faculty members don't teach enough or teach well enough.  Moreover, tuition dollars support research agendas that aren't always relevant to practitioners.   However, I think a significant share of the blame for the tuition bubble also must rest at the feet of administrators.  Take a look at this excerpt from a current Business Week column by John Hechinger:

At universities nationwide, employment of administrators jumped 60 percent from 1993 to 2009, 10 times the growth rate for tenured faculty. “Administrative bloat is clearly contributing to the overall cost of higher education,” says Jay Greene, an education professor at the University of Arkansas. In a 2010 study, Greene found that from 1993 to 2007, spending on administration rose almost twice as fast as funding for research and teaching at 198 leading U.S. universities.

How can students and parents tolerate these types of statistics?  How can faculty members tolerate it?   I think that several factors contribute to the administrative bloat.  If we don't address these factors, then we will have a hard time reducing the administrator-faculty ratio. 

• First, accreditation agencies serve a useful function, but they have placed increasing burdens on universities.  Efforts to achieve and/or preserve accreditation soak up enormous amounts of time, and they require a lot of administrative work.   I don't think the return on investment is justified in many cases. Could we streamline accreditation processes?  Absolutely.  Will we?  Well, these accreditation bodies are big businesses. They aren't likely to streamline unless enormous collective pressure is put upon them.  
• Second, we do a terrible of preparing people for senior academic administration jobs.  We name professors to senior administrative posts with virtually no leadership development efforts to enable them to succeed.  We all know that a great teacher or researcher may not have the skills required to lead an organization.  Companies spend significant amounts of time and effort on leadership development; universities throw people into the ocean and expect them to swim.  When they start drowning, we appoint a few more associates or assistants to help them stay afloat!  
• Third, many universities offer a wide variety of additional services to students today as compared to several decades ago.  Those services cost money, and they require administrators to oversee these efforts.  There is no free lunch.  If we want to reduce administrative bloat, we have to take a close look at the services we are demanding from our universities. 
• Fourth, universities have faced an increasing regulatory burden, particularly when it comes to federal regulations that affect large research institutions.  Satisfying the regulatory requirements has taken increasing amounts of administrative work.  
• Fifth, too many universities operate in a very top-down fashion.  Faculty and staff members do not feel empowered to make many decisions.   That centralized organizational structure is a remnant of the past.  Many companies have changed in recent years, adopting leaner and flatter structures.  Universities continue to operate in a much more command-and-control environment in many instances, despite the talk about being faculty-led, consensus-oriented, and the like. 

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Retailers, Black Friday, & A Prisoner's Dilemma

We've certainly heard a great deal over the past few days about the controversy surrounding the decision by many retailers to open on Thanksgiving evening.   Regardless of where you stand on that issue, you should ask yourself:  Are these retailers actually generating incremental sales and profits by opening at 8pm on Thanksgiving or at midnight, as opposed to early on the morning of Black Friday?   Perhaps they are, but I suspect that they are simply shifting sales which otherwise would have occurred on Black Friday or thereafter.   People aren't buying more items overall this Christmas; they are simply buying them a bit sooner as a result of the Thanksgiving day openings. 

Why are firms pursuing these policies if they are unlikely to drive incremental sales and profit?  I think it's because the retailers are caught in a prisoner's dilemma.  If they all chose to wait and open on Black Friday at 6:00am, they would be better off as a whole.  However, each retailer is worried that it will lose out if it remains closed while rivals open on Thanksgiving night.  Therefore, each retailer opens up earlier and earlier, for fear of ceding sales to rivals. 

How can firms extricate themselves from this losing proposition?  Well, the retailers cannot legally collude to shift openings back to Black Friday morning.  However, they can try to achieve some form of tacit collusion, or they can try to influence and signal to one another in a way that leads to cooperative behavior for the greater good.  Typically, such cooperation emerges if you have a strong market leader who can influence the behavior of smaller rivals.  Could Wal-Mart serve that function?   It seems unlikely, because even though they are enormous, rivals would probably jump at the opportunity to steal sales from them.  That's why we probably will see this trend of early openings continue, though it may not be enlarging retailer profits by much at all. 

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Peer Comparisons & Compensation: Law of Unintended Consequences

Claudine Gartenberg and Julie Wulf have written a paper on executive compensation that you may find interesting.  They examined the effects of the 1992 SEC Proxy Disclosure Rule, which increased the transparency of executive compensation at publicly traded firms.  While transparency is generally a good thing, they found a somewhat unfortunate unintended consequence.   After the ruling, executives became more aware of the compensation received by their peers, and they engaged in more comparison to those peers.  Those comparisons resulted in a convergence and ratcheting up of executive compensation.  The effects proved to most pronounced among geographically dispersed firms.  The scholars argue that those executives had a harder time knowing the pay of their peers before the SEC disclosure ruling.  Executives in firms of close geographic proximity already could compare compensation to one another through other means besides the company proxies. 

This study only confirms what I have felt for a long time, namely that compensation isn't just about the absolute level of pay.  It's about how you stack up against your peers. That is true within firms, as well as across firms.  You might recall Michael Lewis describing how traders compared their bonuses in his book, Liar's Poker.  A giant bonus could still be disappointing if surpassed by one's colleagues.  It may sound insane, but it's human nature. 

The real problem, though, lies with boards of directors.  It's one thing for executives to want to "win the compensation game" against their peers.  It's quite another for boards to escalate this competition.   Boards need to recognize the market dynamics, but they must guard against a "compare and ratchet up" phenomenon that has taken hold in many boardrooms. 

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Johnnie Walker: The Man Who Walked Around The World

My good friend, John Crosby, sent me a link to this video this morning.  The brilliant and creative short film features Scottish actor Robert Carlyle telling us the history of the iconic whiskey brand Johnnie Walker.   The short film offers some fun facts about the company's history, such as the rationale for the square bottle and the slanted label.   Moreover, the constant walking, use of props, and beautiful scenery truly are captivating.

To me, the short film demonstrates the creative way in which companies can use lengthier web videos, on platforms such as YouTube, to do things that you cannot do in a brief 60 second television advertisement.  Sharing the history of a brand in a creative manner can be a wonderful way to reinforce its authenticity.

The genius of this "Keep Walking" brand campaign by Johnnie Walker is that it is wrapping the brand in history and nostalgia while simultaneously offering a message of progress and hope for the future.  That can prove to be a tricky proposition.  No brand wants to be "your father's Oldsmobile" when it comes to categories such as whiskey.  Yet, the history and the roots of the brand are a key part of the image and positioning that make it iconic.   This short film threads the needle beautifully, bringing together past, present, and future in an authentic way.

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Retailers, Showrooming, and Mobile Apps

Keith Anderson of RetailNet, a leading retail market research firm, tweeted an interesting story today about Wal-Mart's mobile app.   We all know that brick-and-mortar retailers have been fighting a growing "showrooming" trend - the notion that consumers visit stores to see, touch, and interact with a product, but then purchase on-line from an e-commerce company such as Amazon.   Retailers have been working hard on strategies to counter that threat.  Wal-Mart recently updated its app to improve the "Store Mode" element.   That aspect of the mobile app tries to help consumers navigate the store to find what they desire.  The "Store Mode" includes the local advertising circular, a shopping list function, maps of the store layout, and a QR code scanner.   What is interesting about the results to date for this updated app?  According to this article, Wal-Mart reports  that, "12% of its m-commerce sales occur while customers are in stores, showing that consumers are using their smartphones to buy from Wal-Mart what Wal-Mart does not have in stock, or perhaps purchase an item they don’t feel like carrying home, like a big-screen TV."   In sum, a strong mobile app may help protect against the tendency for consumers to drift toward Amazon or another online player for their purchases.

We all know that many retailer apps left a great deal to be desired over the past few years.  However, they have been improving.  Retailers have added functionality that does help consumers navigate the stores more easily and much, much more.  For instance, take this initiative at Nieman Marcus, described in this article on springwise.com:

The US luxury retail store is now trialling its NM Service app, which provides sales associates with consumer data they can act upon in real time. Developed by Signature Labs Inc, the app can be downloaded for free from the App Store. Customers can then select to “opt-in” to participate in the service, and a sensor at a Neiman Marcus store will detect when they walk through the door and launch the app. NM Service will provide information on new products and future events taking place at the outlet, as well as listing the sales staff currently instore. Those sales assistants can also have a version of the app tailored to them, alerting them when a participating customer enters the store. Sales assistants will also be presented with information on the customer’s previous purchases at Neiman Marcus outlets and their online shopping history, and the app will display an image from the customer’s Facebook page so that they can be easily identified. Both customers and sales associates are able to send messages to each other.

These two examples stand at opposite ends of the spectrum: Wal-mart is the classic low-cost player, while Nieman Marcus is a highly differentiated luxury retailer.  However, these examples demonstrate that mobile strategies can be used not only to protect against the disruptive threat of online commerce, but also to enhance the in-store shopping experience.  People still enjoy visiting brick-and-mortar stores to see, feel, and try on items.  If retailers can enhance that visit and provide customers the information they want when they want it, they can compete more effectively not only against online players, but also against their direct brick and mortar rivals. 

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