anticipatory marketing

There are two components of Anticipatory Marketing (AM). Consumer choice and consumer experience.

Consumer choice is a consumer's mental image of a product or service. The mental image is what the consumer prefers or desires. Christensen, Olson and Ross refer to it as a consumer's self-referrent image of a product. A choice that emerges from a combination of knowledge, experience and suggestive information. It is most often what a consumer buys. Although not all the time. There are multiple gaps between a consumer's choice and a consumer's decision to buy.

For example, a time gap exists. Benjamin Libet's theory on free will recognizes a time lag between conscious purchase and free will. This time lag affects a consumer's ability to respond in real time. Which explains in part, or which appears to lead to, impulse buying. Shariff and Peterson of University of Toronto explain this perfectly well in their article on anticipatory consciousness. There are other gaps. Resource gap. Convenience gap. Influence gap. Which are all self explanatory. AM fully recognizes the consumer's self referent image and the realities that allow or prevent this image to materialize.

This position is significant in the formulation of an AM agenda. AM understands that consumer choice, to a manageable extent, is predictable. AM contends that by understanding and measuring the conscious choice, both in the context of what is desired and realities of consumption, a marketer may be able to anticipate the actions of a consumer. How?

Consumer experience is the sum total of a consumer's conscious choice and conditions that dominate this choice. This is measured by actual transactions which may be available in documented transactions or defined in statistical surveys. In its absence, actual transaction may be substituted by primary data drawn from a well-designed statistical survey. AM requires an investigation of consumer choice and free will. Results strengthens findings derivable from actual transactions.

The charts below shows an execution framework for AM presented in a hierarchical sequence (chart 1).
 

Chart 1: AM Execution Framework 

    
Is AM anticipation marketing. No, it is not. Although AM looks at anticipation marketing as an important influencer in consumer choice. It may have a greater influence in a consumer's free will. Anticipation marketing, as defined by Baron, Hickey and Merrel,  is identifying, exploring and understanding an interesting consumer response phenomena -- collective irrationality. It is a strategy that drives interest in a product in the absence of above the line and below the line advertising.

How is AM different from predictive analytics? Predictive analytics makes use of transactional data to generate a predictive model. Sometimes exclusively. AM borrows from various disciplines, as shown in the chart below, and formulates a consumer model that combines consumer choice, free will and consumer experience.

               Chart 2: Components of AM      

For comments, email Nick Fontanilla to abfontanilla@yahoo.com or nick.fontanilla@gmail.com. For inquiries on Anticipation Marketing and how a company may be able to make use of this tool, email to info@imetricsasia.com.

Bibliography
1. Glenn L. Christensen, Jerry C. Olson, William T. Ross, "Why Consumption Vision? Understating Consumer Value in Anticipatory Consumption Imaging," Advances in Consumer Research Volume 31, © 2004 (www.acrwebsite.org/volumes/v31/acr_vol31_65.pdf) 
2. Azim F. Shariff and Jordan B. Peterson, "Anticipatory consciousness, Libet’s veto and
a close-enough theory of free will," University of Toronto (http://sharifflab.com/wp-content/uploads/2012/03/Shariff-Peterson-2005.pdf)
3. Ellen Baron, Kristin Hickey and Paul Merrell, "Anticipation Marketing: Understanding buzz for Generation Now, Esomar, 2008.

ANTICIPATORY MARKETING

Learn. Apply. Lead.

A Free Webinar on an Emerging Principle in Marketing.

August 20, 2013

3:00 to 4:00 p.m.

To register, click https://www3.gotomeeting.com/register/266105934

disaggregated pricing (part 2)

When my kumpadre Ed Tiambeng, a seasoned traveler, was penalized for re-booking his flight to Tacloban even if it was one week ahead of the original schedule, he got smoldering mad. From the smoke of madness, he came up with a not-so-bright idea of calling his congressman to propose a bill that will ban penalties for rebooking if the ticket was rebooked at least two days before the flight.

It is a not-so-bright idea because the same rule will apply to all airlines. The airline with the advantage will still keep that advantage no matter how small that is. It is also not certain if government will have the facilities and ability to regulate this option.

Michel Roberts, my favorite strategist, argues that a market leader would always have the advantage if what the competitors did was merely to try to out-compete the market leader. If they exploit the weakness, if there is any, the market leader would have the size and muscle to adjust and overcome the weakness. If they compete head-on focusing on the strength, there is just no way that the market leader would lose. Roberts consider the SWOT approach as irrelevant for this reason.

Herbert Hoover, the 31^st president of the United States servicing from 1929 to 1932, advocated and pushed for efficiency management. That framework suggests that government is inefficient and should be less visible in sectors where the private sector is capable of producing the desired capacity. He favored a strong government and private partnership. For all his failures at the onset of the great depression, Hoover presented a solid governance principle. We should not allow government to spread its tentacles.

Instead of seeking for a legislative initiative, competitors should consider this failing as an opportunity to create its own arena of competition. It is possible that Cebu Pacific’s system was designed to support the disaggregated pricing. No Board would ever support the mothballing of a huge investment based on a speculative notion. My best guess is that the Board will vote to sustain that strategy if it comes to that. On the other hand, other airlines can easily sway to a new system with less complication and with nothing to lose. If they do, they have my attention and my money.

One possibility is for other airlines to create a system that will credit delays in flights to penalties for rebooking. This approach has two benefits. First, it would endear the airline to passengers who have suffered so much from the disaggregated pricing scheme. Second, it puts some credibility in the airline’s mouthful of promises.

A more radical approach is the pizza approach. Pizza not delivered on time becomes free. Passengers pay only if the flight leaves and arrives on time. Passengers pay 50% once the plane departs on time. The balance is payable on arrival according to on-time performance. Hah, that would be one super strategy. Of course, the only way this may be implemented is if the system supports it. If an airline has a working system in place that supports a different approach, like Cebu Pacific, it would take more than a normal effort to calibrate if at all that is possible. If none or a different one exists, that airline is more flexible.

If you have other ideas, email to abfontanilla@yahoo.com.

disaggregated pricing

Not too long ago, air travel, both domestic and overseas, was associated with excellent in flight service. Airlines then served good food, provided newspapers, had user-friendly booking and re-booking services, and maintained a ticketing system that was quite elaborate and service oriented. I recall that in that setup, all costs were paid up front. It was designed to cater to the business travelers who were considered more discriminating and demanding. Calibrating the services to what business travelers expected set the standards for air travel. And that was one super standard.

To keep operations viable, airlines front loaded the airfare to include all these amenities and expected services even if on some occasions these services were actually not utilized. Front loading the airfare, or what I call aggregated pricing, is based on the assumption that air travel needed to be comfortable and compensate for the stress related to air travel. It was also based on the assumption that air travelers were faced with imperfect conditions such as scheduling and carry-on baggage. Because of the front loaded airfare, the cost of air travel appeared somewhat prohibitive to many travelers. Many took to other travel modes such as land and sea travel. Back then, air travel, sea travel and land travel co-existed and were not threats to each other.

Cebu Pacific reinvented air travel in the Philippines. It disaggregated airline services and prices by cutting the air fare to its basic minimum. Cebu Pacific even ventured to sell seats at very attractive promo rates to fill up the capacity during months when travel was expected to be at its lowest. Components of the air fare such as food, newspaper, re-booking, check-in baggage, insurance and other items were disaggregated and charged only on demand of the specific service. I call this disaggregated pricing, the opposite of aggregated pricing. Cebu Pacific compensated for the scaled down services with in flight entertainment courtesy of the flight crew at no additional cost to the airline.

Disaggregated pricing is a form of radical pricing but quite different from the radicalized pricing strategies adopted by successful ventures such as Google, Yahoo and Wikipedia which provide the basic service and earn revenues from volunteered payments and democratized options. The strategy must have been successful for Cebu Pacific. It now claims to be the number one airline in terms of passengers flown and has aggressively added capacity through the years.

The strategy employed by Cebu Pacific also restructured the travel industry. Sea and land travelers saw the economics of disaggregated pricing and started traveling by air. Employees and students who in the past could not afford to travel domestically and overseas found the upfront and downloaded cost low enough to travel. My employees have pre-booked their flights way ahead and have been traveling at least twice a year to local and overseas destinations. Domestic tourism improved. Even travel to overseas destinations covered by the pricing strategy increased.

Disaggregated pricing had many social and market benefits. It was a good strategy. I thought so too until the realities of imperfect information started setting in.

My meetings in Cebu and Catbalogan on October 21 and 22 were cancelled right after I booked my flights online. It was too late to cancel or re-book the flights so I decided to go ahead with the trip by setting other appointments. Since the original flight back to Manila was two days later, I was able rebook that flight from October 23 to October 29. Well, for that rebooking, I paid a penalty of P934. On the way to Tacloban airport on October 23, I realized that I rebooked the flight to October 29 and did not change the flight back to Manila to October 23. Good thing, seats were available. I had to pay an additional P1,500.

For that multiple destination from Manila to Cebu to Tacloban to Manila, I had to pay a total of P9,606.56 or around US$223.41. While the basic fare was only P5,494, I had to pay taxes and fees of P696.76, web administration fee of P106, travel insurance of P720, seat reservation of P224, SMS reminder of P5, security aviation fee of P15, and total penalty of P2,440.80. That was a lot of money for a local trip with only three stops. No newspaper. No food. Only cheap live entertainment from the flight crew.

So, is the disaggregated costing less costly? Not quite. Next time you book, check all the details.

Marketing as Growth Accelerator

(Acceptance speech delivered by Nick Fontanilla, Ph.D. as 2010 president of the Philippine Marketing Association during the induction ceremony on January 27, 2010 at the Manila Polo Club in Makati City)

1. New Drivers

What is the focus of the Philippine Marketing Association in 2010? Let me answer this question by first looking at some significant trends.

There are five new trends that are likely to drive or are driving significant changes in the corporate environment and marketplace. Of course there are more but I would like to focus on these five because they are potentially the important agents for major change. These are the availability of knowledge, open connectivity, the power of the individual, resource networking and emergence of the third place.

1.1. Free Knowledge.

Many companies created tremendous value, both shareholder and customer, by providing their services for free. Yahoo is still available for free. Google created so much value by providing more services for free. You Tube remains a popular site for its free services. All the online social networking sites are joinable for free.

This philosophy of creating value by providing products and services for free is best synthesized in Jimmy Wales' dream that served as the thinking platform for Wikipedia. He said, "Imagine a world in which every person on the planet is given free access to the sum of all human knowledge. That's what we are doing."

How does one create shareholder and customer value by providing services for free? This requires radical thinking. A radical customer-driven thinking. A change in the way that we conceptualize and create value. A change in the way that we interpret our balance sheet.

1.2. Connectivity (pixel)

We are all connected through fewer than six degrees, writes Mitch Joel in his book Six Pixels of Separation. Six pixels mean “that I know someone, who knows someone, who knows someone, who knows someone, who knows someone, who knows someone – who knows you. In other words, you can get to someone within six layers of connection. “That was the past, according to Joel. “In the digital world, there are no degrees of separation between you and your customers. You’re connected to those who are potential customers.

When I registered in Linkedin some years back upon the invitation of a business colleague in Chicago, the site gave an estimate that there were more than 15,000 Linkedin members that were part of my network. And I barely started. My colleague’s network became my connectible network. His networks’ networks also became my connectible network. I have not checked my network now. I would hazard a guess that it is in the millions.

When you think about your Facebook, Myspace, Friendster or Twitter, a personal network of millions is just possible. Imagine the numbers when you have, say, 100 friends within the network, and each of your 100 friends would have their own 100 friends in their respective networks and each pair has only 15 to 20 common friends. That is a problem in Trigonometry. But that should come out to a lot of people within your network.

In other words, when a company thinks hard enough and works smart enough, this company can connect to all its customer, one-to-one, dialogue with the customers, one-to-one, and engage the customers to the extent that the customer becomes a partner and a friend, one-to-one.

1.3. Resource Networking

To be competitive, marketing practitioners must use resources and technologies that are globally up-to-date. To get around the financial constraint attendant to this strategy, successful companies have resorted to resource networking.

Resource networking is a daring strategic platform that businesses use to put together resources and co-create a personalized experience that is purpose driven. This strategic platform was conceptualized by C. K. Prahalad and M.S. Krishnan, both professors at the Ross School of Business in University of Michigan. Labeled N=1; R=G this platform has a business context but had been effectively used in government and politics.

N=1 is a phenomenon where value is co-created by all stakeholders. The focus is on the centrality of the individual. R=G emphasizes that access to resources should be multi-vendor and global. The focus is on access to resources, not ownership of resources which is the traditional method. Using N=1; R=G as the platform, manufacturers access resources that are available from those most capable to deliver them and, in real time, co-create (with one consumer at a time) a personalized experienced.

Krishnan cites Apple as a company approaching the N=1; R=G business model. By accessing appropriate technology wherever it is available at a managed cost, Apple co-creates with every user a selection of favorite songs, one song at a time. The number of products, services and vendors that are involved in this co-creation is amazing. Most of them are not even owned by Apple.

Reflecting forward at what we can do at the local level, N=1; R=G is a strategic model that is ideal for Philippine companies and organizations. The road forward can be less resource hungry, less bumpy. It provides a network for defining and building intelligent models that is socially and financially viable.

1.4. Emergence of the Individual

Hollywood actor Ashton Kutcher has over two million followers in Twitter, an online social media network. Before he worked his way up to this number, he challenged CNN, a global and powerful broadcast network, to a public contest -- to get a million followers in Twitter. Kutcher won. An individual winning over an institution. With what he won, Kutcher donated 10,000 mosquito nets to places that are infested with mosquito.

Individuals, not social institutions, are beginning to have more social, political and economic power. One person who advocated for more community support on an ailment that has never been taken seriously for research and development sent an appeal to an open-ended audience via the world wide web. Millions replied. The government and the private sector moved to provide financial and technical support. The EDSA II revolution happened so fast mainly because individuals, equipped with cell phones, provided the critical mass to engage the government in a solid fight against corruption.

Each person, through the use of technology, can reach millions in an instant and create a response that is equally instant. Everyone has basically the same access to information and knowledge at a socialized cost, and to opportunities that before were reserved to the privileged few.

This is not a social development where individuals escape from the protection and care of communities, but one where the individuals, liberated by freer access to knowledge, purposely become the powerful and effective instruments of communities for positive change.

David Mercer presented a thesis that the primary social force for change and development will be the individual. Individuals have liberated themselves from strictly social beings who depend so much on social institutions to social beings who are less dependent on others to innovate, discover, advocate and earn.

Mercer believes that over the longer term, full flowering of this individualism will represent nothing less than a quantum leap in social organization and that the “philosophy of individual empowerment is likely to be the greatest force for change….”

1.5. Third place

What is your Third Place? Home is my First Place. Office is my Second Place. Church, of course, is above these places. My Third Place is Starbucks. Many others consider the Mall as their third place.

Billy Coburn strikes a complete note on this question in his article Cafés of community: the Starbucks principle.

Home is a good thing. Home for the holidays. But home is not the only thing. In fact, sometimes family closeness gets just a little too close, especially during the holidays. After a few days of togetherness — right about now, three days after Christmas — many of us would probably welcome a little time away from home.

That second place, home being the first place, is usually work. At work we form friendships, socialize and spend a considerable chunk of the week. It’s a place where we practice our vocation and participate in a community of colleagues. But home and work are not enough. Sometimes we need to get away from work.

We need a third place.

No one understands this better than Howard Schultz, founder and CEO of Starbucks. Schultz founded Starbucks on the premise that Americans are missing a third place in their lives — a place that his coffeehouses can fill.

He understood that in America, as well as in Italy, it’s not about coffee, it’s about connection. That’s the Starbucks Principle. And for many, it seems to be working.”

It works for me. Perhaps, it works for many Filipino consumers, too. I remember, during disasters and special events, only one store would be open. Generous use of electricity. Of the space. Of the tables. And services within the Café. That’s the Third Place. This needs radical thinking and understanding of the consumer behavior.

2. THE PMA

2.1. Marketing at the Crossroads

What does this mean for marketing and for corporate development? At the 2003 CMO Summit and from the random notes of Yoram Wind of Wharton School:

“….Marketing should be an engine of growth and profitability for the organization. It should link the insights from the market with the strategies of the firm to drive the creation of value through developing relationships with customers. Marketing should create and build leadership brands that consumers love and it should lead the continued transformation of the company. A McKinsey study presented at the Summit noted three primary opportunities for driving growth: Integrating customer insights more broadly into business functions, integrating business strategies with brand strategies, and Integrating marketing and go-to-market execution. Marketing perspectives can serve as an engine for growth through several approaches: Creating market-driven vision and value proposition, using market insights to drive innovation, leveraging technology and marketing to create convergence, and rethinking customer experience and relationships. Marketing, at the interface between the organization and the environment, can provide new opportunities for value creation and growth. It should be a concern to the entire organization. Marketing provides opportunities by identifying opportunities to serve unmet needs of current customers or new customers for the company’s current and new products and services. A focus on growth requires an integrated approach, cutting across the organizational functions and activities.”

These notes from Yoram Wind support the validity of the five emerging trends which highlight the centrality of the customer in an organization’s corporate culture.

But more than the centrality of the customer, marketing practitioners should create a new form of thinking that does not only look at the needs of the customers. This new thinking considers a marketing approach that positively transforms organizations, consumers and communities. In other words, marketing practitioners must create marketing that is meaningful for the people that it serves.
What is marketing that is meaningful? Bob Gilbreath, Chief Marketing Strategist of Bridge Worldwide, says that marketing has meaning when it adds value to people’s lives, whether or not they immediately buy what you are selling. I attended the national advertising congress organized by the Philippine Junior Marketing Association where more than 2,000 marketing students and teachers attended.

Jos Ortega, past president of Philippine Marketing Association and CEO of J. Walter Thomson presented selected outstanding ads. His own favorites. One of these was D7 from Thailand. D7 is a ready-to-drink coffee in can. The Ad has several versions, each version showing a typical Thai bureaucrat behavior that is negative and regressive.

The Ad shows a D7 can suddenly slapped on the cheeks of the bureaucrat. That reverses the behavior of the public servant and transforms this person into an efficient and dedicated public servant. A message is splashed on the screen saying – WAKE UP THAILAND. The intention is clear. The message simple but meaningful.

This is where marketing and marketing practitioners should be headed. Becoming an engine for corporate growth by creating marketing that is meaningful and value-adding to people’s lives.

2.2. The Philippine Marketing Association

WHAT DOES THIS MEAN FOR THE PHILIPPINE MARKETING ASSOCIATION AND FOR MARKETING PRACTITIONERS?

- WE MUST RECOGNIZE THE ROLE OF MARKETING AS A GROWTH ACCELERATOR, AND IN TRANSFORMING COMMUNITIES AND PEOPLE.

- PHILIPPINE MARKETING ASSOCIATION MUST PROVIDE THE EXPERTISE TO DISCERN WHAT SUCCESSFUL MARKETING STRATEGIES ARE AND HOW THESE CAN SERVE AS GROWTH ACCELERATORS.

- PHILIPPINE MARKETING ASSOCIATION MUST BECOME THE VENUE FOR THIS DISCERNMENT AND FOR SHARING THESE BREAKTHROUGHS TO PHILIPPINE INDUSTRIES AND TO MARKETING PRACTITIONERS IN OTHER COUNTRIES.

3. The 2010 PMA Board

Every Philippine Marketing Association Board of Directors follows the tradition of raising the bar of excellence through innovation. The 2010 Board will not be any different. The new Board commits to continue the tradition of raising the standards of excellence. We hope to do this by using the accomplishments of past Boards as a springboard for creative engagement and by highlighting the significance of marketing as a discipline in an environment that is looking for more effective approaches for sustainability and long term viability.

Our theme for 2010 is Marketing as Growth Accelerator. The theme is suggestive of the role of marketing in accelerating corporate growth, promoting sustainable development, and advancing relevant advocacy. In 2010, we intend to highlight marketing breakthroughs – successful marketing strategies and programs – that provided companies and organizations with the competitive edge and served as an engine for corporate or institutional growth.

We will endeavor to engage all our stakeholders including marketing-related associations, marketing professionals, government, students and faculty, and our members through sharing, dialogue, participation, fellowship and partnership wherever and whenever these are appropriate. Lined up in 2010 are traditional PMA events and programs that will showcase marketing as a driver and growth accelerator.

We invite everyone to participate in this year’s activities and to be part of this community of professionals with the vision of promoting and sharing best practices and excellence in marketing.

I.M. FREE

I like this shirt for what it stands for. Donated by Chikka, I won it in a raffle during the DigitalFilipino Club Christmas party on December 14, 2009. As I normally do, I gave it away to a colleague. Realizing later that it was something I wanted, I got it back by trading a more expensive shirt.



For Chikka, the company that generously gave away this shirt, it symbolizes many things about its services not the least of which is its being available to all users for free.

To male friends who saw it, it symbolizes male emancipation -- the chance to shine again.

To me, the message on the shirt (I.M. FREE) symbolizes radical thinking -- in marketing and management.



Many companies created tremendous value, both shareholder and customer, by providing their services for free. Yahoo is still available for free. Google created so much value by providing more services for free.

This philosophy of creating value by providing products and services for free is best synthesized in Jimmy Wales' dream that served as the thinking platform for Wikipedia. He said, "Imagine a world in which every person on the planet is given free access to the sum of all human knowledge. That's what we are doing."

Free knowledge. Free email services. Free VOIP. On the shirt of a friend says, Sleep with Me, Free Breakfast. Free wi-fi services. Unlimited text.



How does one create shareholder and customer value by providing services for free? This requires radical thinking. A change in the way that we conceptualize and create value. A change in the way that we interpret our balance sheet.

(For comments, email to abfontanilla@yahoo. com or nick.fontanilla@gmail.com)