Image source: MilkYourMoney.com

WalMart threw a wrench into the system…

My father runs a plant nursery up in Oregon, and for years he enjoyed a steady business with few disruptions beyond the weather. Then one day WalMart lumbered into town, and like a scene from a Godzilla flick, it began crushing everything. Mom-and-pop shops that had served the community for decades were flattened.

Some store owners heard that the best way to beat the low-price leader was through customer service – after all, that’s what every business guru was saying:

“It’s all about relationships.”
“Customer service is the new marketing.”
“Don’t be product-centric, be customer-centric.”

Of course, none of that worked. As my father observed at his nursery, people would come in for his expert advice, which he would patiently and generously dole out. He would walk them around the nursery and point out the perfect plants for their yards. The people would listen and take notes and thank him profusely — then drive to WalMart and buy the same product for a lower retail price than what he could buy it for wholesale.

Sure, customers want great service, but some like low prices even more.

My father’s solution was to stop selling anything WalMart carried. He redid his entire inventory to focus on obscure plants and niche products that were too localized and specific for a mass-market chain. Yes, he went product-centric, and his sales aren’t what they used to be, but he’s still in business today.

Well, the big boxes like WalMart are getting a taste of their own medicine from a more formidable behemoth: Amazon.

Target, for example, stopped selling the Kindle because it no longer considers Amazon a complement or collaborator, but a fearsome no-holds-barred competitor. They’re right.

And then there’s Best Buy.

For years Best Buy enjoyed a steady business with few disruptions, and its big-box buying power enabled it to crush small retailers as well. Then came Amazon, which was able to sell electronics for even lower prices because, as an online-only retailer, Amazon didn’t have the expensive retail spaces, sales clerks, and (at least for a while) the sales tax burdens that Best Buy incurred.

So Best Buy looked for a solution, and it heard what the business gurus were saying:

“It’s all about relationships.”
“Customer service is the new marketing.”
“Don’t be product-centric, be customer centric.”

Indeed, Best Buy’s CMO Barry Judge fancied himself a guru in his own right, blogging about the new marketing and its focus on customer “dreams.” He even made a video about it:

Overnight, Best Buy was hailed as a social media pioneer. Self-proclaimed social media gurus, visionaries, thought leaders, and other snake-oil peddlers cited Best Buy as a “best practice” and a “case study” in how to do marketing. Best Buy employees were encouraged to tweet and Facebook and have conversations with customers, to learn about their dreams, and to foster relationships.

Well, you can already predict what happened next, right? That’s right: all those customers would listen and take notes and thank Best Buy profusely — then use their mobile phones not to get Best Buy deals (as seen in the video), but to check prices on Amazon, where they ultimately made their purchase.

Cue Queen, “Another One Bites The Dust.”

Today Best Buy is downsizing, going to smaller stores with limited stock, and shutting down other stores altogether. The smaller stores will serve more as showcases than retail outlets. And Barry Judge? Oh, he resigned today. His blog, where he used to write about social media and the marketing of the future, now looks like this:

BarryJudge.com? Learn all about the power of social media here.

We’ll also see how long that video lasts on YouTube. (If it disappears, let me know.)

Now, I’m not picking on Barry. I like a lot of what he said in his video. Those are some nice tactics that could actually work — in the right market for the right company and the right customer. Like, say, in elective surgery, where the combo of a customized solution and total transparency and close customer relationships does have value, and where price isn’t all that matters.

But those social tools and tactics don’t work all that well in big box retail. Why? Because we all know why we go shopping at a big box. It’s not for help or insights or relationships. It’s not to have a minimum-wage clerk or commission-based sales rep actualize our “dreams.” We go shopping at a big box because we want massive selection and we want it at the lowest possible price and we want it now. That’s the only reason we tolerate these massive blots on the landscape. Yo, Box, yeah we’ll let you drop a freakin’ warehouse in the middle of our parkland and neighborhoods, but you better give us variety and mega-discounts — or else why bother?

We don’t have feelings for big boxes. We don’t have loyalty to them — hell, if we were willing to let mom-and-pop fend for themselves, why should we care about a mega-corporation?

“Social” is not a strategy; it’s a tool.

If your fundamental business model doesn’t match your market, then no amount of tweeting and Facebooking, blogging and pinning, will help. Indeed, going social could hurt you if you’re wasting your time and money mucking around in it instead of investing in what might actually work — like creating products that are completely different from what your competitor carries or would even want to carry. (And, yes, that means paying attention to your competitors, not just your customers.)

So please do learn about social media. But also learn about other marketing options. And by all means learn about your customers AND your competitors AND your community AND your own company strengths and weaknesses. Then select tools because they’re right for the situation, not because some YouTube video tells you they’re the future.

After all, many of those people who were predicting the future are now history.

Update 5/16/12: Apparently, Best Buy wasn’t very good at this “transparency” thing either.

Ads that appeared on my Facebook page. Why do I feel like these ads are related, and that clicking any of them will get me into trouble?

In part one of this series, I talked about the aesthetic MySpacification of Facebook: how the popular social network’s design went from clean to pure cornea gumbo.

Now let’s talk advertising on Facebook.

I used to buy Facebook ads because I was enamored by the targeting capabilities. For example, when promoting a local theatrical production, I could easily target the zip code and even a surrounding area, the right age group, actors and directors and other theatre types, fans of the playwright, and people who might like the play’s subject matter. In addition, I could easily test ads and make changes, and switch payment from cost-per-thousand views (CPM) to cost-per-click (CPC) at the touch of a virtual button. The tracking data showed me what was working and what was not. This seemed like the perfect ad platform.

Then I noticed that “not” was becoming more common than “working.”
And I’m not alone in this discovery…

The Great Disappearing Clicks of Facebook

Click-through-rates on Facebook have plummeted to 0.01%–0.05%. For those who don’t like percentages, 0.01% means that you get 1 click for every 10,000 views. And according to researcher Dr. Augustine Fou, that 0.01% may just be rounding, since Facebook doesn’t go beyond two decimal points in reporting rates. In other words, the actual number may be 0. As in zip, nada, the big empty.

But what about those 10,000 views? Those have to be worth something, right? That’s branding and awareness! At least, that’s what Facebook’s own sales reps are now saying. (Something I ridiculed in a previous post.) But like most advertising, “views” are more theoretical than actual. Yes, the ads appear on a user’s page, but with all the clutter and distracting content, we web users have developed ad blindness. The ads are there — we just tune them out.

That’s nothing new: long ago it happened to banner ads on other sites, such as MySpace. Indeed, we consumers became so blind to ads that, in order to get our attention, ads became annoying: flashing, jumping, telling you that you had won a free iPod. Marketing stupidity in full effect. Facebook’s ads haven’t made that suicidal leap to annoying… yet. But wait till that IPO goes through, and the shareholder demand for quarterly growth kicks in.

Also — and this is key to remember — unlike a magazine ad, those 10,000 views on Facebook do not mean 10,000 people. I complained to Facebook when I saw that my ads were being shown to the same people 17 times. While some ad repetition is necessary to register with consumers, anything more than 3 usually crosses the line from “Alright, I see you” to “WTF is your problem?! I hate you and will never buy your product again!”

Facebook wouldn’t let me limit the frequency of exposures. Why? Because when you’re buying an ad, Facebook entices you with a large number that counts all the people in your target market. But that number reflects registered users, not active users. The actual number of active users is much smaller, so in order to charge you for thousands of views within the timeframe of your ad campaign, Facebook jacks up the frequency of exposures to a single active user.

And that number of active users on Facebook? Oh, they’re declining, too.
(Did I mention that Facebook is becoming MySpace?)

While the number of registered Facebook users is quickly approaching 1 billion, they’re like visitors to the Grand Canyon: some stay and hike around; others get out of the car and say, “OK. I see it,” then get back into the car and drive away.

According to Dr. Fou, more people on Facebook are driving away:

“From Compete data, we can see that pageviews are down 54 percent at 48 billion, from a high of 100 billion pageviews in August 2010. Average stay is down 35 percent at 17 minutes from a high of 26 minutes in January 2011. Visits per person is down 34 percent at 20 per month from a high of 29 per month in January 2011. And pages per visit is off 60 percent at 15 pages from a high of 35 in February 2010. These declines have been in nearly a straight line and have been consistent over many months, not a temporary glitch.” (from “Facebook’s Achilles’ Heel” on DigiDay.com)

Abandon ship! Or at least shop around…

source of infinite wisdom unknown

In my earlier post, I mentioned that we Facebook users are the product, not the customers, so we have to just take whatever Facebook imposes upon us. Of course, we do have a choice, and that’s to stop using Facebook. And many are making the choice.

We may not outright delete our accounts — it took a long time to accumulate all those friends and post all those photos, and we don’t want to completely drop out of the world’s largest social network — but we are exploring options.

Many have found Twitter’s simplicity more appealing (though Twitter is regularly adding more Facebook-like features). Others, primarily women, have flocked to Pinterest because of its more authentic and aesthetically pleasing experience (though marketers have already begun their invasion by bribing top Pinterest users into becoming their tools). Yes, MySpacification is happening to those platforms as well.

But regardless of the merits of competing social options, the writing is on the Facebook wall: it’s no longer the promised land for either consumers or advertisers. With Facebook’s IPO around the corner, Zuckerberg blew $1 billion on Instagram, which has no revenue. (How Web 1.0.) He saw the writing, too, and needs to show activity and growth and vision before unloading Facebook to suckers investors.

The impending Facebook IPO is being seen as the mother of all Web 2.0 IPO’s. It’s anticipated to be valued at over $100 billion. Certainly nothing to sneeze at. And even after the IPO, I suspect that Facebook will keep going for years, perhaps decades to come…

Just like AOL.

In fact, maybe my comparison to MySpace is wrong: rather, Facebook is becoming AOL. At one point, AOL was valued at $226 billion and seemed unstoppable from both a consumer and advertiser perspective. AOL keywords for brands were just as common as branded Facebook pages are now. And unlike Facebook, millions of consumers willingly paid about $20/month to use it; some still even have an AOL email address.

But by trying to be all things to all people, by trying to replicate the Web instead of complementing it, by focusing on quantity of features instead of quality of features, AOL rapidly became just another platform. And the competitors kept coming. Sound familiar?

AOL. MySpace. Facebook. Web 2.0 looks at lot like Web 1.0 – call it a comedy of eras.

Update 5/16/12: Apparently GM also finds Facebook ads to be worthless.

***

Read the first part of this series: MySpace, Part Deux (And Yes, I’m Talking About Facebook)

***

Dr. Augustine Fou’s “Facebook Ad Scam”

[Thanks to Jon Burk, Marketing Brand Manager at JBM Los Angeles, for inspiring this rant.]

Easy on the eyes, yes? Signature gumbo from Bozo's Seafood Restaurant in Metairie, Louisiana. Photo by Jason Perlow via Wikimedia Commons.

There’s a great term in the book Jargon Watch, a small dictionary published by Wired magazine back in the Pleistocene Era (circa 1997): Cornea Gumbo. It refers to “a visually noisy, overdesigned PhotoShopped mess,” as in, “Gawd, we’ve got to redesign that page, it’s become total cornea gumbo.”

Cornea gumbo aptly described the hot visual messes that constituted many websites in the mid-90s. In a pique of nostalgic democratization, MySpace launched in 2003 and enabled everyone to capture those halcyon days of web design. Where web development once required an overpriced HTML-jockey who had taught himself PhotoShop, MySpace provided the tools to stew up your own gumbo, spiced up with social features borrowed from Friendster which had borrowed them from AOL. (Anyone who thinks social media is a modern phenomenon obviously skipped WWW history class.) Using MySpace on a heavy basis (as I frequently did) required frequent scraping of one’s retinal cones and rods to remove all the accreted and burned-on images.

Then came Facebook…

I joined Mark Zuckerberg’s ant farm in 2007 — wow, I just realized I’ve spent 5 years Facebooking — and back then Facebook looked clean, simple, easy to use. It was relatively ad-free, spam-free and creep-free. In other words, the anti-MySpace. We users rejoiced. We indulged. We had no idea what was coming next.

That’s a lie — of course we knew what was coming next: greed-driven bloat. It happens to every mass-market website. We just hoped that Facebook wouldn’t follow in the footsteps of Excite and AOL and Yahoo and MySpace, which all took their simple, appealing platforms and grew them and grew them and grew them to offer more features and more content in hopes of generating more appeal to more types of consumers. Remember when Yahoo was just a directory of websites? And when MySpace was mostly a place to check out bands and new music with your friends?

Facebook turned out to be no exception to feature creep. First, Zuckerberg opened the gates to everyone, which seemed like the fair thing to do. Then he started adding features from every competitor and even indirect competitor that came along:

• Twitter has a real-time scrolling wall? Well then, so must Facebook!
• Foursquare allows check-ins, which annoy everyone but the user’s closest friends? Well then, so must Facebook!
• Games? Check.
• Chat? Check.
• Music listen buttons? Check.

The result? Yes, cornea gumbo.

Ad Gumbo: Facebook is starting to look like a NASCAR vehicle

Facebook grew from a couple of clean columns to the multi-column sprawl that it is today, evoking the aesthetic pleasures of suburban minimalls and L.A. freeway interchanges. As if that wasn’t eye-jarring enough, Zuckerberg then forcibly imposed the useless, unnecessary, unappealing “timeline” format on everyone. We users griped (as we do with every Facebook change), but since we’re the product being sold to the true customers (the advertisers), we just had to groan and accept Facebook’s changes as usual… Well, maybe (more on this in my next post).

Oddly, even Facebook’s true customers, brands and businesses, were forced to adopt the timeline, even if a chronology didn’t fit a brand’s marketing strategy, and even if the brand’s customers couldn’t care less about their histories.

Like many businesses, I ignored the invitation to go back and flesh out my page’s timeline, but some feel compelled to invest in the fruitless labor. That makes the brands more committed to Facebook, but what does it do for the customer? Given that the “engagement” rate of Facebook pages is already abysmally low, how many consumers will take the time to read through those laboriously constructed timelines, from the company’s founding to the present? (And I’m not talking to those of you who develop Facebook pages for a living.)

Of course, something has to pay for this massive frothing feature-filled sprawl, and that’s advertising, advertising and more advertising. Facebook once had 3 ads cleanly positioned on the right; now you’ll find as many as 10 (yes, TEN!) ads along with sponsored stories and branded apps on your wall, all competing for attention with the ticker, the event announcements, the birthdays, the menus, and the links to your Facebook settings. Oh, and the posts from your friends. Almost forgot those.

In aesthetic terms, the MySpacification of Facebook is now complete.

But wait, there’s more…

Click here for part two of this series: Ad Nauseam: The MySpacification of Facebook (Continued)

I confess: I clicked an ad on Facebook today. Really. Now, you know that Facebook ad clickthrough rates are so dismal (about 1 out of every 2000 views), that even Facebook execs are talking more about “branding” and “awareness.” But I couldn’t help myself. I love me some gadgets and marketing, and this ad for the iTwin featured both…

Mmmm: toys… marketing toys… so I clicked, and this is what I got…

Uh, iTwin, didn’t we just meet? Shouldn’t you at least flirt with me first before asking me to like you? I see from your ad that 15,686 people have already liked you, but what can I say, I play hard to get. And at the least, shouldn’t you have used this page to show me how your product works, as your ad promised?

But Wait, There’s More…

Were it any other product or company, I might have just bailed at this point, but I sensed a teachable case study here, so I went exploring. I Googled the iTwin website, which was much more informative. Apparently, the $99 device enables a user to remotely connect any two computers. Cool — but I’m not sure how I’d use it, nor do I see how that relates to public relations. It’s apparently selling well — the green one featured in the ads is already sold out — unless that’s just a marketing ploy to make the item look popular. (Hint to startups: your first batch of anything should always “sell out.”)

And that was the extent of my shopping trip.

Now, some marketers would call everything I did some hardcore “engagement”: I interacted with the brand at multiple touchpoints. I’ve also provided all this free publicity and an SEO-enhancing backlink. But I just can’t help but think: this relationship could have been so much more, no?

And so the marketer got the toothsome fate he deserved...

Forget the 10-foot-tall 6-limbed marauding Martians – the biggest challenge facing John Carter is his name.

Or more exactly, the fact that Disney used his name as the title to his movie.

Creating the second-worst sci-fi movie title of all time, Disney named this $250-million epic about red planet warfare “John Carter.” Yes, really, “John Carter.” Think about it. I mean, how can you not feel your blood racing at the sound of it? How does it not simply evoke a flaming pageantry of exotic images?

Or are you thinking, “Isn’t that the brother of Jimmy Carter?”

Blame It On the Usual Suspects

How did this travesty occur? According to director Andrew Stanton in the L.A. Times:

“I was in the middle of reshoots, and marketing came to me and said, ‘Look we’ve done all these focus groups and not a single woman is gonna come see a movie called ‘John Carter of Mars’ … I was a little bummed about that (but) … I changed the “Princess of Mars” to “John Carter of Mars” because I thought no boy would go to the film. So I’m victim of the same exact thing.”

Let me translate a portion of that for you non-Los Angelenos. When someone in Hollywood says they’re “a little bummed” by a studio decision, them’s fighting words. Stanton’s really saying that he was pissed out of his mind and probably lost sleep for a week thinking about the one-kiloton dud of a name draped around his film’s neck.

Feel his pain: these so-called “marketing” guys – knowing Disney, a bunch of spreadsheet jockeys with MBAs – overrode the director and made a major creative decision based on focus groups (the worst source of insight ever) to avoid alienating a segment (women) who wouldn’t pay to see this movie even it was called “The Help Wears Prada while Having Sex in the City: New Moon.”

Yo, suits without balls: It’s a movie about a guy with a sword fighting giant green men on Mars. Get with the program. Young men are the target here. Make the boys come see it, love it, spread the word, then convince the girls to join them. Omitting “Princess” from the name made sense, but omitting “Mars”?

Let me guess: these faux marketers probably would have renamed “Star Wars” something like “Star Dysfunctions,” and “The Terminator” would be called “Daddy’s Back, and Look Who He Brought With Him!”

It Could Be Worse

“John Carter” should have been called “The Warlord of Mars.” But unfortunately, I wasn’t part of this almighty focus group.

But what’s done is done, and – surprise, surprise – Disney is encountering less than wild enthusiasm from the masses, despite $250 million in special effects, a classic sci-fi brand, and participation from Pixar wizards. Having a bad name – whether it’s for a movie or a Web 2.0 startup – just means you have to invest much more in marketing to get to square one. Good luck also selling the videogame called “John Carter.” Putting that “Disney” name (which just says “adult action movie,” no?) above the title should help…

If there’s any consolation, at least the film wasn’t called “Serenity” (the worst sci-fi movie title of all time). Yes, kids, once upon a time in a galaxy just around the corner, someone decided to make a brilliant sci-fi thriller sound like a tea house or feminine hygiene product.

And yes, it failed, but it wasn’t the aliens that shot it down in flames.

P.S. Finally saw the movie and found it thoroughly enjoyable. Yeah, the beginning was a mess, and the nonsense about the godlike Therns should have been killed on conception, but this was far better than any of the “Transformers” tripe. And other viewers, from my friends to reviewers on IMDB, enjoyed it, too. Apparently, the “word of mouth” on the film was not about its quality, but that it was a bomb, which only fueled mass avoidance. So given the inane title and the inability of Disney to control the message, I nominate “John Carter” for the worst marketing campaign of the year.

• Related article: “Like Tears In the Rain: How Sci-Fi Series Go All to Hell”

They had me at “meow.”
They lost me at “sign up.”

I was flipping through Facebook, unmarking most of the “Top Story” posts (seriously, Zuckerberg, get your algorithm right already). And that’s when it caught my eye — an ad featuring a cat lounging in some Jetsons-age contraption:

Since I’m addicted to furry creatures with pointy ears and tuna breath,  I was hooked. Since I also dig on futuristic design, particularly anything with the word “pod” in it, I clicked…

And that click constituted an act of extreme rarity.

The click-through rates on Facebook ads have plummeted to such abysmal lows, Facebook’s own head of measurement and insights is publicly disavowing them. Instead, he’s hyping the value of “awareness” and other metrics used by old-school media and previously ridiculed by new-media zealots. (For more on the new media flip-flop on metrics, see my post, “And The Standards Go Out The Browser Window: Banner Ad-Nauseum”).

So call CNN and issue a tweet: here was a Facebook user tearing himself away from his friends’ posts to actually click on an ad.

And just as quickly, I clicked away, pausing only long enough to capture the landing page so I could share it here:

The ad took me to some site I’d never heard before, Fab.com, and there was the Cat Pod that had been promised. The problem? I couldn’t learn anything more about the Pod, or the website selling it, since the site is “by invitation only.” Really? They ran an ad on Facebook to take me to a members-only site?

Ah, but I could gain access: I just had to provide my email address first.

Podded Cat Meets Old Dog

Now, when it comes to these here Internets, I’m an old dog who knows some old tricks. Way back when most of us “information-superhighway” travelers had accounts on Prodigy, Earthlink and AOL, I learned that if you give some stranger your email address, you’ll likely get back stuff you don’t really want. So these days, I give out my email address begrudgingly, even if it involves brands I know well. And I still get annoyed. I recently gave my email address to Groupon, and they responded by bombarding me with discounts on tanning sessions, teeth whitening and other offers I usually leave in my spam folder. At least I could trust Groupon to go away once I unsubscribed (which they did).

But who the hell is Fab.com? Would they be sharing my email address with Nigerian princes or the hucksters behind the “congratulations you’ve won an iPod” talking banner ads? Isn’t it customary to get to know someone, or enable them to know you, before asking for their email address?

So I bailed. I figured my cats could live without $79 pods. I’ll console them with some extra turkey and giblets instead.

And that is a classic example of “friction” in e-commerce.

No, not the turkey and giblets. Friction is anything that makes shopping more difficult for customers. That could be a long registration form, a dysfunctional search engine, or simply too many clicks to get to the products they want. In the bricks-and-mortar world, customers have to put up with some friction, such as essentials stashed in the back of the store, or mathematically illiterate cart stuffers in the “12 items or less” line. But on the Internet, friction lets prospective customers slip away. (Get it — “friction” and “slip away”?) Who needs hassle when there are hundreds of other sites that will happily take our money just a click away?

Now I understand any brand wanting to create an exclusive shopping experience. Stringing up that velvet rope, real or virtual, can make a business more enticing, since it keeps out the “riff-raff” and makes those admitted feel “special.” But before it can do that, the business must make sure people want it in the first place. You don’t want to put up a velvet rope and have no one but the bouncer waiting beside it. And creating that desire requires marketing: you must let people know you exist and that you pack a whole lot of awesome before you ask them to jump through hoops.

Fab.com did neither of those things. Now, as far as I know, Fab.com could be an amazing company run by kitten-rescuing Buddhist nuns with immaculate manicures and masters degrees in legal ethics. But prior to spotting this Facebook ad, I had never heard of them before, and since I couldn’t peek inside their site, I had no idea what else they offered beyond the $79 Cat Pods. They just wanted my email address up front for something unknown that’s by invitation only.

Now, that measurement-and-insights dude at Facebook can talk all he wants about how his ads are best used to create impressions. Ironically, the Fab.com Facebook ad was successful in generating a click-through. It was the impression that was far less than impressive.

What were they smoking?

You’ll find lots of articles and editorials skewering Netflix and its CEO Reed Hastings today, including this one in the L.A. Times, “Once High-Flying Netflix Is Now Stumbling,” which describes all the following events of the past few weeks:

• Netflix’s 60% price increase
• the ensuing defection of hundreds-of-thousands of paying customers
• its subscriber-aggravating loss of the Starz distribution deal
• the impending future of higher content-licensing costs
• the entry of other major competitors, such as Amazon
• Hasting’s mea culpa to subscribers via email
• his decision to make the DVD business a separate service called Qwikster
• and the company’s crashing stock price

The key strategic flaw? Not the 60% price increase — Netflix does need to cover its content-licensing costs. The lethal mistake was grossly underpricing its unlimited streaming service in the first place…

Netflix must have known that Hollywood would demand a bigger slice of the pie. Nobody can offer infinite Hollywood content and expect Hollywood to not pull out the forks and knives. The only outsider who has ever successfully negotiated with Hollywood is Steve Jobs, but he’s capable of walking on water. Everyone else, from Starbucks to Vivendi, Matsushita to Coca-Cola, has found that swimming with sharks is exhausting and can eventually cost an arm and a leg.

So why did Netflix underprice?

Companies often do so to penetrate a market and steal market share. That certainly worked for Netflix, as it acquired millions of subscribers and drove Blockbuster and other brick-and-mortar competitors mostly out of business. Once the competition is destroyed, the victor raises its prices. That’s predatory pricing in action.

But as Netflix discovered, if you grossly underprice to land a customer, you’ll find it extremely difficult to significantly jack up prices on them later. Customers will react angrily and vent their fumes on that social media thing. To avoid this, Netflix should have clearly stated that the low-priced unlimited streaming was just a limited-time introductory offer, while also clearly stating the actual price, which is still an awesome deal (all the videos you can watch ad-free for $8.95/month, which won’t buy you a popcorn and a Coke in most movie theaters).

One finance expert commented that Netflix successfully achieved a 60% price increase at a cost of only 2.4% of its customers — the net result being a bottom line gain. But that’s too limited a consideration. The customer attrition hasn’t stopped, yet, and Netflix’s customer acquisition costs are likely to increase now that the service is priced realistically and the company is perceived as having “ripped off” its past customers. Plus, even at just 2.4%, that’s still too many paying customers (and cash flow) to send to your competitors. I’m sure there are a lot of smiles over at Amazon and Hulu today.

What could be worse?

Hastings had also projected subscriber growth to investors, and Netflix’s stock was priced in anticipation of that growth. Where’s the stock price now? The last time I checked, Netflix was trading at $130/share — quite a drop from its 52-week high of $304 just a few months ago. That’s a market cap loss off about $9 billion. Trust me, Netflix will be hearing a lot more from its investors, who are now seeing red (and I’m not referring to the envelopes).

Above all, the previously gleaming Netflix brand has taken a beating. Once celebrated on magazine covers as the unstoppable startup that revolutionized movie rentals, Netflix is now being depicted as the bumbling opportunist that took its customers for granted, miscalculated the cost of Hollywood content, and issued faulty projections to its investors.

That formerly spotless brand wasn’t helped by Hasting’s hasty launch of a new brand, Qwikster. (Note: see update below.) Social mediaphiles quickly identified Qwikster as the Twitter handle of some stoner (see his original Elmo image above). Again, Hastings looks like someone who jumps without looking.

Going forward, Netflix may stabilize its membership base. It may sell off Qwikster to someone who doesn’t mind all the shipping-and-handling hassles of DVD rentals (hello, Amazon, got a sec?). It may negotiate some exclusive deals for prized content and produce its own content to differentiate from a stampede of competitors. Netflix will certainly no longer be the sensation it once was, but it will exist in some form or another. Kind of like that other once high-flying Internet startup that had millions of paying subscribers, fooled around with Hollywood, and miscalculated the future before tanking on its investors. What’s it called? Oh yeah, AOL.

Hello, Netflix, you’ve got fail.

Update 10.10.11: Admitting that the Qwikster move was a mistake (let me guess — they could find no prospective buyers for it), Hastings has dropped the Qwikster name and plans to keep the DVD and streaming services together under the Netflix name. Perhaps the only person bummed about this latest move is the guy who owned the name on Twitter. On that note, here’s a free streaming video for you:

Model behavior at Anthropologie?

Now that I’ve taken a stab at Banana Republic’s Mad Men promotion, time to look at what’s happening in fashion retail for women.

Surprisingly, it ain’t pretty…

My wife LOVES Anthropologie (I should invest in the parent company just to get some cash back), and she follows it with a religious fervor. Her devotion entails keeping tabs on Anthropologie in social media, and from what she tells me, Anthropologie sure knows how to work it.

Sort of.

Enter the Queen B’s (i.e., Bloggers)

Part of Anthropologie’s social media strategy involves bloggers — more like acolytes whose fanaticism makes Apple fanboys look apathetic. The top bloggers include Roxy of Effortless Anthropologie and Tara B of Little Girl Big Closet.

Anthropologie itself doesn’t blog. Why bother, when these third-party die-hards hang on the brand’s every word and whisper, review every product release, and work their networks until EVERYONE knows what’s happening at their favorite cult, er, store.

These bloggers also constitute a continuous focus group of informed and influential top customers. They point out what fits right, what lacks in quality, and most importantly, what’s straying from the brand. Since they don’t have jobs at Anthropologie at stake, these independent bloggers serve as more objective brand watchdogs than Anthropolgie’s internal employees, and their constructive criticism helps the company shape its practices and product lines. According to my wife, this feedback apparently influenced Anthopologie’s coming fall collection.

Other brands can only dream of such social support: despite hiring gurus and drinking Kool-Aid with the Word of Mouth Marketing Association, they’re lucky if anyone gives a tweet.

Photo of Roxy by Roxy of Endless Anthropologie

Fully aware of the value of these faithful fashionistas, Anthropologie hasn’t let their dedication go unrewarded. Indeed, the company recently held a special blogger-only event in NYC dubbed Color + Print. There the bloggers got a first look at Anthropologie’s fall line, met royalty (the design team), and best of all, tried on the clothes. Roxy of Effortless Anthropologie described it in her post:

“… oh yeah, this wasn’t a buyer event, it was a blogger event. Anthropologie rolled out the abstract red print carpet for us. There was clothing and accessories. There were personal stylists on-hand to help us create a look. There were hair artisans and makeup artists to give us a boost. And then there was a photo booth where we could get our picture taken. Those photos will be up on Anthropologie’s Facebook page today…”

You could say that such an “appreciation event” skirts FTC rules about bribing bloggers, but Corporate America has been feting pseudo-journalists for years (see “The Hollywood Foreign Press Association” behind the Golden Globe Awards), so this is just business as usual with a 2.0 twist. It’s a clever way to tap the power of influencers.

So what’s the problem? Well, you know that bit about Facebook up there?

Imagine what happens when a fashion brand favors one group of customers over everyone else in a social medium…

Yes, the claws came out.

While most of the comments on Anthropologie’s Facebook page referred to the fashions, others savaged the bloggers — not about their opinions or privileges, but about the way they looked. Really. As in digs about their weight and facial features. While, sadly, this total lack of civility is almost expected these days in America, what particularly galled my wife and others was that Anthropologie did nothing about it. While the company answered questions about the clothing and its availability, they left the ad hominem insults untouched.

Tara B of Little Girl Big Closet

In an eloquent riposte to Anthropologie, Tara B of Little Girl Big Closet vented her disgust at this cyberbullying — and Anthropolopie’s lack of action:

“I scrolled through the comments and saw some of the most vile, hateful, hurtful words I’ve ever had the misfortune of encountering in all my time as a style blogger. The vast majority of the negative comments were gratuitously malicious, and could in no way be interpreted as constructive criticism. As I kept reading, it felt like someone had just punched me in the gut. People were not only bashing Anthro clothing in general, but tearing down real women who had come out to support your business. It was just disgusting. I can’t begin to understand why you would put all these wonderful women out there and indiscriminately invite the world to comment on them, and not exercise an ounce of moderation. Why didn’t you protect these young women who were kind enough to model your wares for you? Why didn’t you protect the feelings of patrons such as myself who actually happen to like your ‘gross’ ‘grandma clothes’? Why didn’t you delete the comments that were especially vindictive and hateful, with a warning to the authors of those comments (I saw several repeat offenders)? If all you wanted was to run a contest wherein people would vote for their favorites, why didn’t you simply allow Likes, and disallow comments? There are so many different ways in which this could have been handled. I am all for freedom of speech, and think that people who absolutely hate Anthro should have just as loud a voice as those who love it. But free speech mustn’t be confused with abusive rhetoric whose sole discernible purpose is to denigrate.”

She’s completely right.

Censorship and Social Media

There’s this naïve belief pushed by social media gurus that all posts are sacrosanct — that “in the spirit of social media,” censorship is what’s evil, and that neither corporations nor individuals should touch or delete any comment or post, with the exception of spam.

I’ve always responded to this notion with a “B” and a mighty big “S.”

Your social media platform, whether it’s a blog, Facebook page or YouTube video wall, is not democracy square; it’s your island dictatorship. (Or, more exactly, your walled garden within Mark Zuckerberg’s island dictatorship.)

More importantly, it’s part of your brand, and what you allow others to say alongside your brand reflects on it. Would you give your enemies, random trolls, ex-employees and current competitors an open microphone in your physical space? Just as a restaurant owner wouldn’t tolerate a ranting, raving patron for very long, neither should you feel obligated to allow someone on your social turf to rant and rave.

Indeed, as Anthropologie discovered, allowing abusive rhetoric can be far more damaging than blocking it. Allowing cyberbullies to attack your most devoted and influential customers is bad business on many levels — it could even lead to a lawsuit from the victimized.

Although late to this realization, Anthropologie to its credit eventually deleted the offensive comments and issued the following statement on their Facebook page:

“Thanks to those who kindly voted…notice we said ‘kindly.’ We’re disheartened some chose to make unkind comments about the participating bloggers. To not like our fashion is one thing but to be rude to fellow women is uncalled for. (We hold you to higher standards!) One last note: to the 23 gals who gracefully accepted our styling challenge, we say ‘brava!’ Nothing can take away the fun we had, nor inhibit your fearless style!”

The statement worked, eliciting over 420 “likes” and 60 positive comments from devotees (including my wife, who kept me posted on every post). That’s at least 420 customers who were upset by the transgressions.

In sum, social media can effectively and even enjoyably promote a brand, but like any public medium, it must be monitored and moderated. While we marketers love to create edgy, provocative campaigns that “push the envelope,” the presence of malice is never fashionable.

Update 9/15/2011: And the hits just keep a’coming… There’s more tumult in Anthropologie blogger land, as Kim of the once-popular blog Anthroholic has been accused of taking the money of her followers to do “personal shopping” and not fulfilling her end of the deal. Tara B of Little Girl Big Closet describes the incident (and the dark side of shopping addiction) in an article entitled “Breaking the Silence.”  And here’s a related (and useful) article by Roxy of Effortless Anthropologie that’s already generated over 600 comments: “Alert! Protecting yourself from online transaction scams.”

Wishful thinking.

Don Draper would not be pleased.

Don’t get me wrong — basing a fashion line on the TV series Mad Men is brilliant (albeit, about three years overdue). Since I dig the show and midcentury-modern design, I particularly looked forward to this Mad Men line, and a free cocktail launch party sounded like savvy marketing. Draper would have approved, but…

The execution. Oh, the execution…

L.A. Times ad

This past Thursday, fashion retailer Banana Republic ran an ad announcing a “Mad Style” Cocktail Party. So I decided to check out the event, expecting Mad Men décor, swinging sounds, the BR staff decked out in the outfits with period hairdos, and a tux-clad bartender shaking up ice-cold martinis. Maybe I’d add to my skinny-tie collection while I was there.

Not quite.

I was greeted at the door by two BR employees wearing their usual garb. One held a tray of three drinks, including non-alcoholic apple cider, and the other proffered a plate of roasted potatoes in cream sauce. No, really. Not sure what part of the 1960s inspired roasted potatoes in cream sauce, or why Banana Republic would want people eating roasted potatoes in cream sauce as they wandered aisles of new clothing, but I wasn’t tempted, and neither employee seemed enthused about this new wrinkle in their job requirement.

I entered the store, and the interior looked and sounded like Banana Republic as usual: very very quiet. Nothing distinctly 1960s about the place. I walked around seeking a dedicated room or section devoted to Mad Men, but found instead a small island with only a few articles of clothing and copies of the book “The Fashion File” by Mad Men costume designer Jamie Bryant, who also designed the BR line.

That was it. Woohoo, party.

As for the clothes themselves, they looked nice, but the collection over-emphasized sweaters. Sweaters? Maybe there are sweaters in the TV series (perhaps on old man Cooper), but I was anticipating slick suits and cool blazers, particularly anything from the wardrobe of character Pete Campbell (Don Draper’s the man, but Campbell sports the snazzier duds). One standard suit looked like something Draper would wear, but the entire display left me feeling uninspired and, oddly, a bit embarrassed.

And, apparently, so felt the handful of customers in the store, who didn’t exactly mob the display.

Now this was Century City, an intensely-corporate copse of highrises in the middle of L.A.’s Westside, filled to the sky with thousands of lawyers and Hollywood agents. You’d think they’d turn out for the Mad Men collection — or at least a free drink. I guess they didn’t get the memo.

Don Draper would be fuming.

Now, I’ll cut Banana Republic some slack. I did show up “fashionably late” (7 pm instead of the announced 6 pm). And because the Mad Men line is also “fashionably late” (2011 instead of 2008, when Mad Men-inspired fashions were gracing the pages of Esquire and GQ), perhaps BR didn’t want to overdo it. Maybe they spent all their money on just licensing the brand from Lion’s Gate, so they could only afford roasted potatoes with cream sauce. And maybe the other stores (such as the one near Lion’s Gate HQ) boasted more action.

Then again, this is a brand new clothing line supposedly inspired by an ad agency. And this is Banana Republic, which has a lot of money — and even greater needs.

Banana Republic has struggled to find a position (i.e., market niche) since they ditched safari wear decades ago for more mainstream attire. The brand is ostensibly for graduates of their sister store, The Gap, who want more quality and sophistication. But too many BR clothes bear “Made In China” tags, which tend to say the opposite, and the styles look just like what’s hanging in a Macy’s — or even The Gap.

The Mad Men line could reposition the entire BR brand as one that’s Hollywood hip yet New York sophisticated, appealing to young professionals who realize there’s more to work wear than jeans and a graphic T. But if a company goes to all that trouble and expense to license and launch a new line based on a TV series, it needs to go all the way. Or, as “Eating The Big Fish” author Adam Morgan would say, it needs to over commit.

BR needed to blow the the cocktail party up into a movie premiere style event, with the show’s cast making in-store cameos (at least here in L.A.). BR needed to crank the music, bring out the cocktail shakers, put the entire store and crew into character. Sure, all that would cost money, but so does surviving in a highly crowded and competitive fashion marketplace. Done right, it would have generated significantly more coverage than a few photos in a local Patch article.

Instead, the Mad Men effort felt halfhearted, less Madison Avenue and more midtown mall. And as any true Mad Man could tell you, a diluted cocktail won’t generate much buzz.

P.S. I didn’t buy anything in the store, but when I got home and started conducting research for this article, I found a 25% off deal on the BR site. So I scored the Mad Men mac jacket for a discount the same day it was launched. I was happy, but somewhere, Don Draper is shaking his head and pouring another drink.

In 2008, I blogged about upstart electronics brand Skullcandy, which I had encountered at a Vegas convention. Three years later, that article continues to do its deed, turning up Wednesday when reporter Jeff Horwich of public radio’s Marketplace went searching…

Skullcandy went full IPO that day, so Horwich called to get my latest take on the brand. Hence, I scored my 15 seconds of spotlight (if radio has a spotlight). You can read the full Marketplace transcript on Skullcandy here — I’ll just share my bit:

“Today’s IPO values the company at more than $500 million. Freddy Nager talks about Skullcandy with his marketing students at UCLA. Nager says Skullcandy has done a masterful job dressing up decent Chinese headphones. Unfortunately, other people can do that, too.

Freddy Nager: So now any celebrity who considers himself or herself a brand can call up a Chinese factory and say, ‘hey I want my name on a product.’ It really does pose a huge burden on Skullcandy to always be even edgier-than-thou.

Nager says he’s got a new assignment for his class: design a pair of headphones that’s cooler than Skullcandy.”

Sure, that was fun. It also perfectly coincided with my lecture on blogging that night at UCLA Extension. By blogging about an uncommon topic (Skullcandy instead of, say, Apple), I came up on the Google radar. That’s what Wired editor Chris Anderson would describe as a “Long Tail” effect: thanks to the Internet, niche products like Skullcandy articles can get discovered and deliver value for years.

The incident also supported my lessons about the Long Tail, for which I made my students read the comic-book adaptation of Anderson’s work (see excerpt below).

Yes, it’s a multimedia world we live in, where a blog about a convention exhibit leads to a public radio interview that supports an in-class lecture on a comic book by a Wired editor. And just for kicks, I’ll be tweeting this article, too.

Yes, I love what I do.

Excerpt from "The Long Tail," written by Chris Anderson, published by Smarter Comics, and illustrated by my friend Shane Clester.