May 11, 2005

The Perils of Commoditization

There's probably no worse fate for a product than to be - or become - a commodity.

Consider the bundlers. To me, they are "bunglers." We all know who they are. They're offering phone, TV, and Internet services all bundled together. And what differentiates them? Nothing, other than price.

But the price keeps changing.

We pitched one of these guys. A really great company. They had a low-price bundle on the market doing well, and we recommended branding and bonding with consumers, rather than being prisoners of the price wars. "No," they said. "We're doing so well with our low-cost offer. We're gonna stick with it."

Not surprisingly, one month later their major competitor came along with a price that was 20% lower. Whoops!

The June issue of PCWorld has a good article on how folks sign up for bundled services thinking they'll cost "x." And then they end up costing more.

Boy oh boy, these providers are really missing the boat. They're going to be spending their lives wondering why their customers churn so fast, when they could and should be building bonds with their customers....bonds that go well beyond price.

What an irony that one of the hottest categories in marketing today is so blind to the basics of branding!

ADVERGAMING - A Hot New Category to Watch

It was inevitable. Advertisements on video games. After all, the video game industry is explosive.

Men now spend more on video games than on all forms of music combined. Annual video game sales top $10 billion, which is about the total amount of annual U.S. box office sales. More than 40% of U.S. households have some kind of system dedicated to game play.

Last year, ad sales on games totalled about $10 million. But the real action is Advergames, in which the game itself is the advertisement. Spending in this category? About $200 million...and expected to top $1 billion in the next five years.

All part of the ever-expanding world of Lifestyle Touchpoints where smart advertisers can intercept consumers. Toto, we're not in Kansas anymore.

The Public/Private Tightrope

Meeting with a public sector client today, I was reminded of how marketing decisions - like all decisions in the public sector - are different than they are in private enterprise. All those candidates and office holders who say, "Government should run more like business" don't get it. Government canNOT be run like business. It's the government...and there are political considerations and consequences that simply do not exist in the private sector. The challenge is to get as close as you can to the best practices of the private sector world while being ever-responsive to the dynamics of the public (political!) environment. It's a fascinating challenge. Has anyone written wisely about this?