Archive for October, 2011

A Thermostat’s PR Triumph

October 28, 2011

Thermostats are not the most exciting devices. I would put them right up there with water heaters and door hinges in terms of overall interest, things that fall in the category of “items you need but don’t think much about.”

This is why I am so impressed with what Nest pulled off this week.

Nest is a start-up company launching a new thermostat. It is apparently a pretty nifty device; it looks cool and makes a number of adjustments based on who is in the room. But at the core it is, well, a thermostat.

This week Nest was everywhere. I saw it in the New York Time, The Wall Street Journal and The Chicago Tribune. In each publication Nest received a huge article and all of the articles raved about this very cool new innovation. I did a Google search on Nest Thermostat today and got 35.2 million hits. This is pretty impressive. Nest is exceptionally well positioned heading into the holiday season.

How did this happen?

Well, it certainly wasn’t chance.

Nest clearly executed a simply brilliant PR campaign. I suspect the company and its agency crafted the story and pitched it carefully. In a slow news week, media outlets picked it up and ran with it.

The fact that a former Apple executive started Nest certainly helped. And it is an interesting device. But more than anything Nest did some brilliant marketing.

Well done.

Groupon’s Problem

October 18, 2011

Groupon is gearing up for an IPO. My advice to the team planning the offering is quite simple: move quickly.

Andrew Ross Sorkin has as an interesting article on Groupon in today’s New York Times. He notes that Groupon has a number of rather significant issues, including a fairly low cash balance and a working capital deficit.

I think Groupon has perhaps a more fundamental problem: its current model isn’t likely to produce sustainable growth.

Groupon connects customers and companies. Customers come to Groupon looking for deals and companies come to Groupon offering deals. Groupon connects the two groups and pockets a rather large portion of the revenue.

On the surface this seems like a win-win-win situation.

But it isn’t.

The problem is that customers and companies actually want different things. Customers want great deals on brands they love: Whole Foods, Starbucks and the funky new restaurant down the street. Companies want to offer deals on new products and fading brands. Someone with a popular brand doesn’t need to offer a Groupon.

To date, Groupon has grown in part because companies are experimenting, seeing how the Groupon system actually works. I suspect this is why Whole Foods offered a deal on Living Social and why Gap offered a deal on Groupon.

As companies learn how Groupon works they will become more selective.

When Groupon primarily offers deals on new brands people haven’t heard of and brands that are clearly fading, customers will move on to other things.

This trend might already be developing; Groupon only grew revenue by 13 percent in August.

To have any chance of getting a high valuation Groupon should get its IPO done ASAP.

Losing a Brand Builder

October 6, 2011

Yesterday we lost one of the great brand builders of our time. Steve Jobs was a master in terms of design and technology. He was also an exceptionally gifted brand manager.

Jobs did four things incredibly well in terms of branding.

Perhaps most importantly, he believed that branding and marketing mattered. Under his leadership Apple consistently invested in advertising and this focus never wavered.

Jobs focused on the long-term. Apple didn’t do a lot of short-term price promotions, launch a ton of mediocre new products, or cut back on brand building when times were tough. The focus was always on building a brand that would endure.

Jobs also paid attention to details. He cared how things looked and felt, and worked hard to make sure that everything about Apple supported the brand. This focus on execution mattered.

Finally, Jobs believed in great creative, running a series of powerful campaigns over the years, including one of my favorite advertising campaigns of all time.

Did Amazon Get the Price Right?

October 3, 2011

Last week Amazon announced the launch of the Kindle Fire, a tablet device targeting Apple’s very successful iPad.

One of the most debatable parts of the launch is the price: Amazon set the price at $199, significantly below Apple’s cheapest iPad, which sells for $499.

Many people have attacked Amazon for the pricing move, declaring that the $199 price is simply too low. Indeed, some analysts have studied the likely product costs and determined that at a $199 price Amazon is making very little profit, so little that the Fire could be considered a non-profit venture.

So did Amazon pick the right price?

To understand that situation, it is critical to look at the broader picture. Apple is now flying high, scooping up new customers  round the world. The company has an absurd amount of cash, some incredible products and one of the world’s most coveted brands.

How do you compete with Apple?

You don’t stop Apple by building a slightly better device; the Apple brand will overwhelm even a superior product. You don’t stop Apple with a big innovation; Apple is setting the pace these days.

The cleanest way to differentiate from Apple in a way that people care about is to set a much lower price. Indeed, it might be the only option right now.

The other issue is that Apple is an enormous long-term threat to Amazon. If Apple dominates distribution of media including books, films and songs, then Amazon will take a significant hit. Apple could even enter the world of retailing at some point, directly attacking Amazon’s core business. If Amazon wants to survive it has to slow Apple’s momentum.

Will the Fire beat the iPad? I suspect not. But Amazon doesn’t have to beat the iPad. By creating a viable alternative to the iPad, Amazon will put pressure on Apple, and ensure that the entire world doesn’t become Apple’s domain.


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