Tapping the Facebook Audience

The Problem:
How can a small, start-up company with a miniscule advertising budget target a limited-edition product to an elusive demographic without breaking its bank?

The Company:
Bonobos, selling trendy athletic-cut pants online since October 2007.

The Technology Solution:
Andy Dunn, the Chief Executive at Bonobos has a Stanford MBA and a jaundiced opinion of advertising. But when his business partner designed a limited edition line of pants for Chicago Cubs baseball fans, Dunn knew he’d have to do some innovative marketing to locate men willing to spend $120 to wear bright blue pants with baseballs decorating the lining material and pocket edges.

Dunn decided the best approach would be to try a new Facebook self-service display ad system that had just been introduced in November 2007. Taking its cue from Google’s economic rise via self-service text ads, Facebook designed its Social Ads to be simple to create and deploy. Dunn figures that it took only a few minutes to create an ad only seen by Chicago-area men whose Facebook profiles stated they were Cubs fans.

The Outcome:
Dunn’s quickly launched ad ended up costing the company a total cost of $63. The ad was seen more than 250,000 times. And Bonobos sold out the entire line of pants.

Still, despite the obvious marketing potential offered by Social Ads, there are many Facebook members who consider them problematic. Because Social Ads are based on Facebook’s Beacon technology, there are recurring concerns about real and imagined privacy violations.

Facebook’s introduction of Beacon instantly met with resistance from its community members because there was no mechanism for its 50-million users to opt out of the system’s activity posts. The result was advertiser-sponsored stories being spread to each community member’s circle of friends in a manner that was generally considered an unacceptable form of spam.

Then in October 2007, retailing giant Target further soured the sponsorship possibilities and scored a widely publicized black eye with its misguided attempt to control the actions of its Facebook group dubbed the Target Rounders. The bad publicity made members even more reluctant to trust Facebook’s monetization efforts. Although Social Ads now allow members to prevent any public Facebook display of their private transactions made on other websites, there still remains no way for them to permanently block Beacon ads.

For now, Bonobos’ success proves that Social Ads can provide a win-win-win situation for small-budget advertisers, social network sites, and their online communities. Tomorrow DataDocsDailyDose.com will examine how one company used e-mail to transform its customers into advocates.

–J.D. Mosley-Matchett, Ph.D.
“The Data Doc“
You have questions? She has answers!

Gather a Passionate Community

The Problem:
With rapidly falling barriers to entry, competition among online businesses is more intense than ever. How does a new company in an established market gain the trust and customer volume needed to succeed?

The Company:
TradeKing, an online discount brokerage site that launched in late 2005.

The Technology Solution:
As a new company entering a seemingly saturated market for online stock trading, founder and CEO Donato A. Montanaro, Jr. launched TradeKing in 2005 with the tag line: “No Minimums, No Catches, No, Seriously.” Taking a low-price approach ($4.95 per trade and 65 cents per option contract) combined with high-tech online tools, TradeKing provides do-it-yourself investors with the power to efficiently and economically “work the Street” with market snapshots, volatility charts, technical analysis based on pattern recognition technology, and research reports on a 24/7 basis.

However, Montanaro didn’t rely on the “if you build it, they will come” philosophy that snares so many budding Internet entrepreneurs. Instead, he used the TradeKing site as a hosting point for multiple blogs, discussion lists, chatrooms, and trading clubs. As he stated in an August 2007 video interview for the Reuters international news service, “Clients who socially network more, trade more.” Montanaro’s premise must be correct, because the site has been dubbed the fastest growing company in its industry.

The Outcome:
For two years in a row, TradeKing has been rated the #1 discount broker by the editors of the Wall Street Journal’s SmartMoney magazine. The Dow Jones magazine Barron’s listed TradeKing among the top five in its March 2007 online broker survey. And if imitation is indeed the sincerest form of flattery, then newcomers such as Zecco.com provide further proof that TradeKing’s community-based business formula is worthy of duplication.

But such mimicry forces TradeKing to embrace continuous technology development to stay one step ahead of its competition. With new product offerings, such as the May 8th, 2008 introduction of Fixed Return Options heralded by Montanaro ringing the opening bell at the New York Stock Exchange, TradeKing appears ready to meet its challengers head on…because resting on one’s laurels is not an option in the age of social networking.

TradeKing is only one company that has tapped into the power of online communities. Tomorrow’s mini-case at DataDocsDailyDose.com will provide you with a look at a very different start-up company that leveraged social networking in a very different way.

–J.D. Mosley-Matchett, Ph.D.
“The Data Doc“
You have questions? She has answers!

Don’t Overlook the Personal Element

The Problem:
Software is not a magic wand. If a company adopts a program that is designed to integrate its various functional areas, the managers must ensure that the company’s people are provided with adequate incentives to take advantage of the anticipated efficiencies. Unless the company’s managers help their staff embrace new technology, the result can become a communication blockade with inefficiencies spanning the organization.

The Company:
Researchers Majed Al-Mashari and Mohamed Zairi at the University of Bradford in the United Kingdom examined the efforts of a major Middle-Eastern manufacturing company that they code-named Manco.

The Technology Solution:
These researchers investigated Manco’s failed efforts to implement SAP, a sophisticated enterprise resource planning (ERP) system. SAP is a computer-based system that unites the information used throughout a company. In that way, diverse departments such as accounting, inventory, sales, and distribution can tap into a single, integrated data model and boost efficiency across the company.

The Outcome:
Although the promise of seamless information sharing throughout a company makes perfect sense on paper, turning the concept into reality may not be a simple effort when the company’s culture isn’t flexible enough to accommodate new and interactive procedures. As the researchers noted, “Unlike many software installations, SAP R/3 installation is a difficult undertaking in that its success necessitates managing adequately a complex context, which involves organizational changes across various key areas related to strategy, technology, culture, management systems, human resources, and structure.” Unfortunately, Manco focused on the technical aspects of the software implementation without adequate attention paid to the other managerial issues.

As a result, instead of using SAP to become a more customer-focused, efficient, and cost-effective competitor in its market, Manco discovered that its responsiveness, reliability, and manufacturing effectiveness plummeted.

The first decision that triggered Manco’s problems occurred when the company Manco tapped for its SAP support recommended a more robust IT infrastructure to facilitate SAP’s complex applications. The company spent $2.8 million to implement SAP, only to achieve a negative return on its investment (ROI).

The key factor underlying the failure stemmed from Manco’s management team underestimating the impact of employee anxiety. When top management first evaluated the expected ROI, much of the savings offered by SAP was based on a resulting reduction in Manco’s labor force. In other words, the people who were expected to help integrate SAP were the very people the software would eventually make redundant. Although there were other issues that further contributed to the failure of Manco’s SAP adoption, it was this initial misstep that represented the fatal flaw.

This was a clear case of how a lack of internal communication can cost a company dearly. The next case study at DataDocsDailyDose.com will show you how communication improvements not only improve employee morale, but also improve the corporate bottom line.

–J.D. Mosley-Matchett, Ph.D.
“The Data Doc“
You have questions? She has answers!

Market Segmentation Lets You KISS Your Customers

I’ve decided to try a different medium/ So, here’s the latest post in a video format:

Thanks for listening to this “Daily Dose” of marketing science!

The Gift that Keeps on Giving

The Problem:
Everyone knows that the fastest way to grow a new business is to generate positive word-of-mouth references.  But, what’s the most efficient way for a start-up online company to do that?

The Company:
YouTube allows people to share their videos online and became the fastest growing website in the history of the Internet.  Its growth was so impressive that it was acquired in 2006 by Google for $1.65 billion in stock.

The Technology Solution:
How does a startup come out of nowhere and in 18 months get purchased for more than any other online company?  It does it by generating more traffic than anyone else.  On an average day, YouTube serves more than 100 million video streams.

Although many success factors assisted the rise of YouTube’s traffic, researchers Deepak Thomas and Vineet Buch concluded in 2007 that the company owed much of its phenomenal growth to the use of widget marketing. On the Internet, a widget is a small software program that is designed to be easily inserted into a webpage to provide some added function. There are widgets that are self-contained games, widgets that display late-breaking news items, and widgets that are simply designed to attract attention. You can even create a widget to display the latest entry from your weblog on another website.

By making it easy (through the use of widgets) for visitors to embed YouTube hosted videos on their personal blogs and websites, the site also made it easy for its users to introduce new people to the joys of online video viewing.

The Outcome:

The buzz generated by the clever videos people hosted on YouTube created an escalating flow of traffic to the site. Even better, the resulting incoming links from widely dispersed YouTube widgets on a multitude of websites further boosted YouTube’s Google page ranking. In the end, that flow of traffic became worth more than a billion dollars in less than two years.

But what can you do if the customers who most need what you sell are stubbornly resisting your marketing efforts? Tomorrow, DataDocsDailyDose.com will show you how the world’s largest car manufacturer has learned to help customers who don’t want to admit they have a problem.

–J.D. Mosley-Matchett, Ph.D.
“The Data Doc“
You have questions? She has answers!

Take a Tip from Mary Kay

The Problem:
Is there a way to eliminate the cost of reaching perfectly targeted customers who have never heard of your company?

The Company:
Scuba.com is an online retailer of scuba diving equipment and accessories, physically located in Irvine, California.

The Technology Solution:
The easiest and least expensive way to generate sales is to get lots of people who know the customers you’re trying to reach. Then get those people to tell all those potential customers how great your company is. After that, you have to convince those people to sell your products for you and only paid them after they’ve made a sale. Of course, the trickiest part is to find such well-connected salespeople who will enthusiastically work under those conditions.

Back in the 1960s, Mary Kay Ash launched a beauty products empire by enabling housewives to sell her cosmetics to their friends and neighbors.  Even though those women weren’t seasoned salespeople (at first), the company found that personal enthusiasm and great corporate sales support can make up for all kinds of individual deficiencies.

Today, scuba.com has adopted the Mary Kay sales concept to boost sales, but added a technological twist to ease the sales process. As an online retailer of scuba diving equipment and supplies, scuba.com sells at higher volumes than most neighborhood dive shops. The higher sales volume allows scuba.com to negotiate better wholesale prices, which translate into lower retail prices.

However, scuba equipment lasts for many years. So to continue expanding sales volume, scuba.com must gain sales from recently trained scuba divers who don’t already own regulators and buoyancy compensators. And the best way to reach the hearts and minds of those new divers is to approach them via their instructors.

The Outcome:
Scuba.com provides instructors with an easy way to introduce their students to the website. The scuba.com website allows diving instructors to build their own webpage complete with the equipment recommendations they want to pass along to their students. That targeted word of mouth by the instructors is rewarded with a 3% store credit based pm the value of each student’s purchase.

As a result, scuba.com gets the referrals and the sales without having to pay salaried salespeople. The constantly increasing number of sales keeps scuba.com’s prices low, so the students receive great value for their money. And the instructors benefit by being rewarded with store credits, providing them with more incentive to lead each new class of students to their scuba.com pages.

This electronic sales tool simplifies the Mary Kay formula and whisks it into the 21st century. Next time, DataDocsDailyDose.com will examine a strangely named technology that helped to create a virtual storm of online traffic.

–J.D. Mosley-Matchett, Ph.D.
“The Data Doc“
You have questions? She has answers!