Is There A Formula For “Virality”?

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Ever use a great product or service that inexplicably fails to catch on and is soon discontinued…and you wonder what in the world went wrong?

Welcome to the world of “virality” – where that thing you thought was the best thing since sliced bread falls off the market with barely a whimper. And something that should never have existed sells 25 million copies and its  founder retires to St. Thomas in 6 months. 

So what does make something go “viral”?

Wharton Marketing Professor Jonah Berger has a book out about that called “Contagious”. Since I haven’t read the book yet – and probably won’t for a while – here are some excerpts from an interview with him on Knowledge@Wharton that might serve as a short-term substitute (if you’re going to find yourself in the same boat as me).

1. The science:

Knowledge@Wharton: In the book, you actually outline a framework of six principles for why things catch on, using the STEPPS acronym. Can you describe those for us and discuss how you developed them?

Berger: The books talks about the six key steps to drive people to talk and share. STEPPS is an acronym for:

  • Social currency:, It’s all about people talking about things to make themselves look good, rather than bad
  • Triggers, which is all about the idea of “top of mind, tip of tongue.” We talk about things that are on the top of our heads.
  • Ease for emotion: When we care, we share. The more we care about a piece of information or the more we’re feeling physiologically aroused, the more likely we pass something on.
  • Public: When we can see other people doing something, we’re more likely to imitate it.
  • Practical value: Basically, it’s the idea of news you can use. We share information to help others, to make them better off.
  • Stories, or how we share things that are often wrapped up in stories or narratives.

2. And, here’s an interesting example about everyone’s favorite amazing-product-and-brilliant-marketing company Apple:

Think about Apple’s headphones. It used to be that we all carried portable CD players. It was like carrying a pizza. You had to run like this, to make sure it didn’t skip. Then, they came out with these things called mp3 players. Really great technology, but they were super expensive. Is it worth adopting this new product? How do I know if it’s worth adopting this new product? If you looked around on the subway or the bus, you couldn’t tell [which products people were using] because everyone’s headphones were black. It was impossible to see what device someone was using, as opposed to another device.

But what Apple did really smartly is they used white headphones. Once you start seeing a number of people wearing white headphones, you say, “Wow. A lot of people are using this. It must be really good,” which encourages you to adopt that product as well. It’s just like if you’ve gone to a foreign city and you don’t know where to eat. How you decide? You look for a restaurant that’s full of people. It’s a totally offline example. But you assume if it’s full of people, it must be really good. Thinking about how to make the private public, particularly in an offline environment, is a great way to help your product catch on.

Find the full article here. When you get there, if you have 16 minutes, watch the video – or skip it and scroll down to the transcript. 

Coke To Bet More On Sugar Water With Bubbles

Consider two things (paywall):

1. Global soda sales and coke’s soda sales are steadily declining:

The pace of Coke’s global soda volume growth slowed to 1% last year from 3% in 2012 as concerns about health and obesity spread. Last month the World Health Organization suggested that individuals limit consumption of added sugars in food and drinks to 6 teaspoons a day—less than the 9 teaspoons in a 12-ounce can of Coke.

Soda volume in Mexico, Coke’s second-largest market, have fallen an estimated 5% or more since the country introduced a tax on sugary beverages in January.

The new drag on Coke’s U.S. business is diet soda. Diet Coke volume has been down for eight straight years, accelerating the decline in the past three. Diet Coke sales plunged 6.8%, in volume terms last year, according to Beverage Digest.

2. But instead of focusing only on diversifying into non-soda beverages,

…the Atlanta-based company plans to double down on its namesake brand. The company is boosting advertising, introducing new products, and using singer Taylor Swift as a pitchwoman. Chief Executive Muhtar Kent has said that last year, when Coke’s U.S. soda volume dropped 2%, was an anomaly. Soda can return to healthy growth, even in the U.S., especially if it is a brand name like Coke, he said.

“Coca-Cola remains magical. We need to work even harder to enhance the romance of the brand in every corner of the world,” Mr. Kent told investors in February. He regularly refers to flagship Coke as the company’s “oxygen” and “lifeblood.”

For starters, he plans to increase global advertising by $1 billion over the next three years. The company spent $3.3 billion last year. Much of the increase will be devoted to soda, including the Sprite and Fanta brands.

But with even Warren Buffet saying “I’m 100% in accord with Coca-Cola’s business strategy and regard Muhtar Kent as the ideal CEO for Coca-Cola” it’s probably a safe bet that Mr Kent (and Mr Buffett) can see the future of Coke’s bubbly sugar water in a way no one else can.

Anti-Trust vs Cable Industry Consolidation

Anti-trust regulators in the US typically do a pretty good job (IMO) when it comes to preventing “excessive” industry consolidation and concentration of power – things that would otherwise inhibit “healthy” competition and hurt consumers.

So what then to make of Charter or Comcast’s chances of buying Time Warner Cable?

But David Gelles, at the NYT’s DealBook thinks there are two good reasons why either company might be allowed to proceed with the acquisition:

Antitrust regulators are understandably skeptical about allowing big companies to get bigger. However, there are reasons why Charter, or even Comcast, might be able to prevail in its pursuit of Time Warner Cable.

Cable operators make two arguments in favor of consolidation. The first is that broadcast and cable networks are demanding ever higher fees for their programming. Cable operators are being forced to pay up, and the consumer is getting hit with higher cable bills. A bigger company would potentially have more bargaining power, and cable operators argue that they will be have more leverage with the programmers, allowing them to keep costs down and save consumers money.

Perhaps. But a more compelling argument made by the cable operators is that while there are a few big companies that dominate the market, they have very little overlap when it comes to customers. In most markets, consumers don’t have a choice between Comcast, Time Warner Cable or Charter, or even two of those three. In fact, most big markets have only one of these available, which might compete against other telecommunications firms, like Verizon and AT&T, and the satellite operators DirecTV and Dish Network.

#2 is fine, but as a consumer, it will be really nice if we actually see the beneficial effects of argument #1 post-acquisition. 

Fashion Icons = IPO-Driven Multi-Billion Dollar Brands

Ralph Lauren (market cap = $15.2B), to begin with, and Michael Kors (market cap = $15.3B. note that it’s ~ $100m more than RL), more recently, are inspiring many new eponymous fashion labels to go public and pull in billions of dollars from investors, writes Peter Lattman, on The NYT’s DealBook.

With his red-carpet gowns, lush cashmere sweaters and jet-set shoulder totes, Michael Kors has influenced fellow designers across the globe.

These days, though, Mr. Kors is inspiring the fashion world not only with his “affordable luxury” merchandise, but also with the extraordinary success of his initial public offering nearly two years ago.

On Wednesday, Marc Jacobs announced his departure from Louis Vuitton to focus on an I.P.O. of his own brand. Last year, Diane von Furstenberg set off speculation about a stock offering when she hired a top-level fashion executive in a push to expand her business. And while Tory Burch has denied any near-term interest in an I.P.O, there are persistent whispers of a Wall Street debut.

Call it the Michael Kors effect.

To some extent, that makes sense. For, if, at some level, fashionable clothes are really not that different from each other (fashionistas, you can stop gasping now), and a high profile celebrity fashion designer has both the design chops and cachet to pull in shoppers repeatedly (no one-trip ponies here), then investors and bankers might be OK with eschewing traditional fears of being overly exposed to a non-diversified set of revenue streams.

The only thing I wonder though is about exposure – or too much of it, to be more precise.

Publicly traded companies, fairly or unfairly, have to show strong quarterly and annual growth numbers to Wall St, lest the stock be punished. And in order to do that, they can either wring more out of their existing customers or expand – geographically and/or across categories. But they need to do it in such a way that the increased visibility doesn’t damage perceived exclusivity, cachet and pricing power (in that order).

That, could be a delicate dance though, after a point. 

Turns Out Consumers LOVE Headphones Made By Celebrities

A while ago, I talked about headphones becoming like perfume, with celebrity branding as the only differentiator. 

And what a differentiator it is!

The Economist writes (stuff in bold = my emphasis, below),

Among the first to spot the potential of this market was Dr Dre, an American rapper-cum-tycoon. In 2008 he and Jimmy Iovine, a record producer, launched their Beats range of headphones, to great success. They have all but created a new product category: premium-priced ($100-plus) cans whose sound quality is good enough, but which mainly sell on their brand image.

Beats Electronics and its founders have proved adept at using celebrity endorsements and product placement to plug their headphones. In America the company now has almost half the market for premium-priced cans, compared with 21% for Bose, a longer-established maker. Beats headphones are bassy: that’s what hip-hop fans want, but might not suit opera lovers. Overall, though, they are a lot better than the earbuds that come free with most portable devices.

Very impressive, wouldn’t you say?

Inexpensive Cameras, Like PCs, Are Dying

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In 2013, Fujifilm thinks that humans will take about 1.6 trillion pictures. That’s an amazing increase over the 100 billion we took just 13 years ago. 

But, many (most?) of those are being taken on SmartPhones and such, and that is hurting the camera business badly, writes Daisuke Wakabayashi on The WSJ. 

So what is the industry doing?

For starters, they are paring the number of pointless cameras they make:

“Everyone in this industry recognizes the market is changing,” said Hiroshi Tanaka, corporate vice president at Fujifilm, the No. 5 camera maker. “The question is what we can do about it.”

Fujifilm plans to halve its product line—down from 20 models last year, limiting the number of less expensive devices while introducing more premium cameras. Panasonic said it plans to reduce the number of “entry-level” models with a goal of slashing fixed costs at the camera business by 60% over the next three years.

And then, they are trying to make the surviving ones better:

Mr. Matsudaira (a Canon exec) said his goal is to cooperate—not compete—with the smartphone. The palm-sized PowerShot N, a square point-and-shoot camera that Canon introduced earlier this year, can send photos easily to a smartphone while allowing the user to take “creative shots” that alter the original picture with different filters.

“The job of the camera had been only to take beautiful pictures, but we started seeing people using smartphone cameras to share and interest started drifting that way,” Mr. Matsudaira said “We have no intention of competing with the smartphone.”

But is that going to be enough to save this category? 

I am really not sure.

SmartPhone users that take pictures using their phones value convenience more than anything else, in my opinion (confirmed anecdotally and otherwise). So if SmartPhone cameras continue to get better and better – higher quality, more options, and some day, a working optical zoom lens – in 5 years, why would anyone want to carry a 2nd dedicated photo taking device?

Point-and-shoots, RIP. 

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