Disrupt or be disrupted. That’s today’s digital mantra.
But how do you disrupt?
Or how do you respond if you are being disrupted?
Here are 10 business models behind digital disruption, as covered by Jo Caudron and Dado Van Peteghem in their book Digital Transformation, and 7 strategies to respond to disruptors if you are getting disrupted, as enumerated by IMD’s Professor Michael Wade, co-director of the IMD Leading Digital Business Transformation course.
10 Hyper-Disruptive Business Models
- The Subscription Model (Netflix, Dollar Shave Club, Apple Music) Disrupts through “lock-in” by taking a product or service that is traditionally purchased on an ad hoc basis, and locking-in repeat custom by charging a subscription fee for continued access to the product/service
- The Freemium Model (Spotify, LinkedIn, Dropbox) Disrupts through digital sampling, where users pay for a basic service or product with their data or ‘eyeballs’, rather than money, and then charging to upgrade to the full offer. Works where marginal cost for extra units and distribution are lower than advertising revenue or the sale of personal data
- The Free Model (Google, Facebook) Disrupts with an ‘if-you’re-not-paying-for-the-product-you-are-the-product’ model that involves selling personal data or ‘advertising eyeballs’ harvested by offering consumers a ‘free’ product or service that captures their data/attention
- The Marketplace Model (eBay, iTunes, App Store, Uber, AirBnB) Disrupts with the provision of a digital marketplace that brings together buyers and sellers directly, in return for a transaction or placement fee or commission
- The Access-over-Ownership Model (Zipcar, Peerbuy, AirBnB) Disrupts by providing temporary access to goods and services traditionally only available through purchase. Includes ‘Sharing Economy’ disruptors, which takes a commission from people monetising their assets (home, car, capital) by lending them to ‘borrowers’
- The Hypermarket Model (Amazon, Apple) Disrupts by ‘brand bombing’ using sheer market power and scale to crush competition, often by selling below cost price
- The Experience Model (Tesla, Apple) Disrupts by providing a superior experience, for which people are prepared to pay
- The Pyramid Model (Amazon, Microsoft, Dropbox) Disrupts by recruiting an army of resellers and affiliates who are often paid on a commission-only model
- The On-Demand Model (Uber, Operator, Taskrabbit) Disrupts by monetising time and selling instant-access at a premium. Includes taking a commission from people with money but no time who pay for goods and services delivered or fulfilled by people with time but no money
- The Ecosystem Model (Apple, Google) Disrupts by selling an interlocking and interdependent suite of products and services that increase in value as more are purchased. Creates consumer dependency.
7 Strategies to Respond to Digital Disruption
- The Block Strategy. Using all means available to inhibit the disruptor. These means can include claiming patent or copyright infringement, erecting regulatory hurdles, and using other legal barriers.
- The Milk Strategy. Extracting the most value possible from vulnerable businesses while preparing for the inevitable disruption
- The Invest in Disruption Model. Actively investing in the disruptive threat, including disruptive technologies, human capabilities, digitized processes, or perhaps acquiring companies with these attributes
- The Disrupt the Current Business Strategy. Launching a new product or service that competes directly with the disruptor, and leveraging inherent strengths such as size, market knowledge, brand, access to capital, and relationships to build the new business
- The Retreat into a Strategic Niche Strategy. Focusing on a profitable niche segment of the core market where disruption is less likely to occur (e.g. travel agents focusing on corporate travel, and complex itineraries, book sellers and publishers focusing on academia niche)
- The Redefine the Core Strategy. Building an entirely new business model, often in an adjacent industry where it is possible to leverage existing knowledge and capabilities (e.g. IBM to consulting, Fujifilm to cosmetics)
- The Exit Strategy. Exiting the business entirely and returning capital to investors, ideally through a sale of the business while value still exists (e.g. MySpace selling itself to Newscorp)
There’s a rather brilliant presentation and transcript for marketers interested in behavioural economics over at Evolving Economics by Jason Collins (Australia’s answer to Rory Sutherland). Jason presented “Please, not another bias! An evolutionary take on behavioural economics” at last week’s Marketing Science Ideas Exchange conference in Sydney, and covered the controversial issue of brand personality and why it matters.
Bottom line, brand personality is the set of human personality traits that are both applicable to and relevant for brands (think ‘open brand’, ‘conscientious brand’, ‘extravert brand’ etc…) and brand personality matters because our evolved emotional systems reward us for signalling our personality traits to potential mates, allies and adversaries through display behaviour. So brands that have ‘display value’ have emotional appeal because they help us signal aspects of personality we wish to project. From this perspective, brands are peacock tails for hire, signalling our desirability to the world. In a world where product quality is increasingly a given and where product characteristics are quickly copied by competitors, it follows that brand personality should be a key psychological locus of brand value (along with brand salience).
But brand personality has been controversial in marketing because it has traditionally been a magnet for bad thinking, bad research and brand nonsense. Think brand onions, keyholes and pyramids. Byron Sharp dealt something of an evidence-based deathblow to the idea of brand personality in How Brands Grow, dismissing brand personality as ‘esoteric quackery’, and likening proponents of brand personality to ‘medieval doctors’. This hasn’t stopped some die-hard proponents from persisting – see this eye-watering example spotted by @neurobollocks last week.
Enter Jason Collins, who attempts to save the concept of brand personality with a theoretically informed framework based on the consumer psychology of Geoffrey Miller. The key insight is that if brand personality is a set of human personality traits that are both applicable to and relevant for brands, then we would do well do look at brand personality through the lens of human personality, specifically the established ‘Big Five’ dimensions of human personality
- Openness to experience: inventive/curious vs. consistent/cautious. Such elements as appreciation for art, emotion, adventure, unusual ideas, intellectual curiosity, imagination and variety of experience.
- Conscientiousness: efficient/organized vs. easy-going/careless. Such traits as a tendency to show self-discipline, act dutifully, orderly, trustworthy, aim for achievement; planned behavior.
- Extraversion: outgoing/energetic vs. solitary/reserved. Such traits as energy, positive emotions, openness to others, sociability, impulsivity.
- Agreeableness: friendly/compassionate vs. cold/unkind. Such traits as kind, compassionate, modest, trust, cooperative.
- Neuroticism: sensitive/nervous vs. secure/confident. Such traits as anxious, unstable, nervous, vulnerable, a tendency to express unpleasant emotions.
Measure a brand on these five ‘OCEAN’ dimensions (along with general intelligence), you get a unique iOCEAN ‘trait tattoo’ that can be useful – and therefore appealing – for signalling. This trait tattoo is a measure of the display value of a brand. Measure your own personality trait tattoo here.
This is a rather different approach to brand personality than the ad hoc jumble of descriptors we use when personifying brands (although Stanford psychologist Jennifer Aaker has developed a BPS (brand personality scale) based on five more or less stable clusters of concepts we use when – Sincerity, Excitement, Competence, Sophistication and Ruggedness). Collins’ insight is that we should carve nature at the joints when we investigate brand personality using the OCEAN dimensions of human personality.
Likewise when we look at the ever-expanding jumbled list of cognitive biases that pepper marketing today; they make better sense when we look at them through the lens of human evolution. With respect to brand personality, Maggie Geuens has made a similar point in her reformulation of Aaker’s BPS along the lines of the five dimensions of human personality, but rebranding the dimensions for industry ease use (what brand would call itself neurotic?); Simplicity (Openness), Responsibility (Conscientiousness), Activity – (Extraversion), Aggressiveness – (Agreeableness), Emotionality – (Neuroticism).
So there may be sense and utility in what may be dismissed as brand personality nonsense if the framework we use is theoretically informed by evolutionary science. Of course, any framework is useful only to the extent that it has both explanatory and predictive power; and more research is needed to see if the trait tattoos of brands can predict brand appeal.
The full transcript of Jason’s presentation, along with the slides, are available online, and well worth a read.
Here’s a speed summary of Matt Watkinson’s new FT book on experience design that’s getting rave reviews – including from Rory Sutherland: The Ten Principles Behind Great Customer Experience.
For digital designers, the 10 Principles put the ‘you’ into UX, by building on the empathic design movement – designing from insights into ‘you’ – the person actually using the service, product, site or app.
Empathic design is people-first, not technology-first, and builds out from human needs, emotions and desires. We expect and demand well designed experiences that work for us, and if they don’t we vote with our wallets and our voices – which is why the popular Net Promoter System for experience design and management has helped drive growth for so many companies.
The 10 Principles seeks to address two big problems in experience design – a pervasive short-term cost-saving/revenue-boosting fixation that destroys experience (and sustainable growth), and a preoccupation with (usually meaningless) quantitative metrics.
Quality of experience eats the quantity of experience for breakfast
The Ten Principles Behind Great Customer Experience
- Great experiences strongly reflect the customer’s identity – Our beliefs and values play a decisive role in our behaviour as customers. Those experiences that reinforce our self-image and resonate with our personal values leave us feeling good about our decisions, while those brands that clearly stand for something engender much stronger loyalty. This is essential to getting the experience right at a brand level.
- Great experiences satisfy our higher objectives – In a movie, what makes each character interesting are the objectives hidden beneath what they say or do. Customers are no different: wants and needs are derivative, it is satisfying the higher objective behind them that is the foundation on which great experiences are built. This is fundamental to getting the experience right at a product or service level.
- Great experiences leave nothing to chance – To create consistent, smooth customer journeys, every interaction needs to be considered, planned and designed. There is no detail that is too small to consider. This is the starting point for getting the experience right at an interaction level.
- Great experiences set and then meet expectations – Existing expectations, learnt behaviours and associations are the criteria that customers use to judge an experience from the beginning. Great customer experiences explicitly consider these factors, and exceed expectations where desirable
- Great experiences are effortless – Interactions that put the onus on the customer, soaking up their time and energy, are quickly put off or replaced with those that are less demanding. Few things generate more goodwill and repeat business than being effortless to deal with.
- Great experiences are stress free – We all instinctively avoid stressful situations. Customer experiences that eliminate confusion, uncertainty and anxiety reap the rewards, generating a competitive advantage, loyalty and a peerless brand image.
- Great experiences indulge the senses – From delicious food to relaxing music or a beautiful painting, we all actively seek sensory pleasure. Customer experiences that delight the senses win our hearts and have us coming back for more.
- Great experiences are socially engaging – The importance of cultivating personal relationships with customers cannot be over-stated: we more readily buy from a friend than a stranger. However, our position within a social group is also a powerful and private motivator. Those experiences that elevate our status are often the most highly valued.
- Great experiences put the customer in control – Control is fundamentally important to us: we want to do things in our own time and in our own way, and we take exception to those encounters that force us to jump through hoops. By contrast, we appreciate experiences that are flexible, accommodating and leave us feeling in control.
- Great experiences consider the emotions – We are all slaves to our emotions, yet most see their customers from a purely rational perspective. Evaluating the emotional aspect of an experience brings often unconsidered issues to the surface and opens up new ways to delight the customer.
With practical, how-to chapters on each of the 10 principles, The Ten Principles Behind Great Customer Experience is easy to understand, quick and efficient to use and offers a flexible and scalable framework for doing ‘experience-first design’. The book itself is well-designed including a series of downloadable worksheets (with completed examples) for great experience design (link to download all worksheets)
There’s little explicit in the way of psychology, but the ten principles are psychologically informed, drawing on Khaneman’s Thinking, Fast and Slow, and McClelland’s Big Three ‘APA’ model of psychological needs – Achievement – need for personal accomplishment, Power – individual’s desire to control environment, and Affiliation need for friendship, acceptance, and belonging.
Digital marketing has a bright future with a sharp increase in effectiveness if we harness sensory metaphors (bright future, sharp increase) in our work.
A new study published in the Journal of Personality and Social Psychology has found that sensory metaphors are more memorable and more successful (in terms of popularity) than non-sensory metaphors (open access draft). The logic is that our five visceral senses (sound, sight, touch, smell and taste), shape our language, our perceptions and our experiences, and so sensorial language cues more mental associations, making the metaphor more immediate, meaningful, and memorable. Like ourselves, it would seem our experiences and language are embodied.
The research ‘Drivers of cultural success: The case of sensory metaphors‘, conducted by Jonah Berger and Ezgi Akpinar looked at data from 5 million books over 200 years and found that sensory metaphors are used more frequently over time than their semantic equivalents (e.g. bright future vs. promising future). Followup experiments with 156 participants found that sensory metaphors are indeed more memorable than non-sensory metaphors, and that they have more associative cues (the metaphor is associated with more things).
What this means is that brands, advertisers and copywriters will enhance the effectiveness of their campaigns and content if we focus on bringing to life the sensorial truth of their communication through sensory metaphor. This latest research confirms another finding that consumers may respond better to taglines that use metaphor (specifically metaphors with figurative and literal meaning) than purely literal language.
With that in mind, ask yourself – or better your customers – which of these sensory metaphors best suit your brand? Use the answer to diagnose how people really feel (sensorially perceive) about your brand, and use that insight to connect with people on a more visceral level using sensorial metaphor.
Which of the following metaphors best describe our brand?
Akpinar, E., & Berger, J. (2015). Drivers of cultural success: The case of sensory metaphors. Journal of personality and social psychology, 109(1), 20.
“I love that brand!”
It’s the holy grail of marketers, but what actually is ‘brand love’?
Brand love is very different to human love finds a new study out this month in Psychology and Marketing warning marketers against using the L word in marketing. At least not that L word. People may like brands, but not love them, and the analogy between the love we experience for people and the feelings we experience for brands may ultimately be misleading and lead to bad marketing decisions.
For example the study, conducted by Tobias Langner and colleagues at Bergische University, found that brand ‘love’ is more rational, transactional and dependant on receiving rational benefits, whereas human love is more altruistic in character.
This follows the philosopher Bertrand Russell’s famous definition of love:
Love is delight in contemplation, benevolence in action (Bertrand Russell)
For marketers, this means we should not overestimate the durability, loyalty and unconditionality of people’s attachment to brands, even for those we say we ‘love’. Our brand ‘love’ is not about what we can do for the ‘brand’ but what the brand can do for us. It’s selfish, and it’s likely to be based on habit, not ‘love’. And as Byron Sharp has shown, there is little of the exclusivity with brands that we can experience with love; instead we flit fickle-like between alternative rival brands based on availability, rather than staying true to our brand ‘love’ (72% of Coke drinkers also buy Pepsi in the UK).
The study, measuring emotions both quantitatively through physiological arousal responses and qualitatively through depth interviews, also found that emotional intensity in human love far exceeds that of ‘brand love’. From a psychological perspective this is important, since cognitive control declines with emotional intensity meaning that love takes on a less rational character and is likely to be qualitatively different.
Moreover, since all human emotions (e.g. love, anger, sadness) may be plotted on a simple two dimensional matrix of intensity (arousal) and direction (positive vs. negative valence), then if brand love differs significantly from human love in intensity, then it becomes a different emotion, much as anger is qualitatively different to annoyance.
So whilst marketers like using the idea of brand love (see Interpersonal Brand Love Scale below) – it allegedly won Saatchi and Saatchi a US$430 million JC Penney contract using their ‘lovemark’ framework (brand love as defined by SIM sensuality, intimacy and mystery), – a trademark is not a person and your emotional attachment to it is unlikely to be love.
Source: Langner, T., Schmidt, J., & Fischer, A. (2015). Is It Really Love? A Comparative Investigation of the Emotional Nature of Brand and Interpersonal Love. Psychology & Marketing, 32(6), 624-634.
Interpersonal Brand Love Scale
- I experience great happiness with this brand.
- I feel emotionally close to this brand.
- When I am with this brand, we are almost always in the same mood.
- I think that this brand and I are quite similar to each other.
- There is something almost ‘magical’ about my relationship with this brand.
- I feel tender toward this brand.
- If I could never be with this brand, I would feel miserable.
- I find myself thinking about this brand frequently during the day.
- Sometimes I feel I can’t control my thoughts; they are obsessively on the brand.
- If I were separated from this brand for a long time, I would feel intensely lonely.
- There is nothing more important to me than my relationship with the brand.
- I would feel deep despair if this brand left me