The debut of House of Cards back in 2013 seems like an age ago now, and for Netflix, it was. The service was then in its relative infancy, or perhaps adolescence, emerging from their more traditional role, provider of hard copy movies via post (how quaint that sounds now!). The entity in 2017 is truly global (in more than 130 countries with over 80m subscribers [April 2016]) and has commissioned myriad original content, including the popular Stranger Things.
That new content comes with a $6bn price tag though, and low margins.
Fortunately, there is much more to be done though. Here are 3 quick things that Netflix can do quickly to dramatically improve the Customer Experience.
- Zeitgeist has been wondering for months why Netflix had not been supporting the ability for offline downloading and viewing. Yes, there are piracy concerns such a new approach would bring, but piracy is pretty pervasive anyway. Presumably there are contractual arrangements to be made / re-negotiated with content partners to allow viewing in a different mode. As it is, before we could post, Netflix sagely announced at the end of November that offline viewing would be a thing, though only available on Apple and Android mobile and tablet devices for now. Reassuringly, their public statement for doing so was due to customer demand, not anything regarding retention efforts or value chain management (i.e. shareholder-facing spiel). Titles not currently available for download include, unsurprisingly, content from Disney, which is trying to build its own walled garden with Disney Life.
- Transparency forms a key part of the next two points. Netflix needs to be much more upfront about what content is going to be available when. This is in a studio’s interest too. A filmgoer might want to see a film again after seeing it at the cinema. But why risk buying it as a single copy when Netflix might have it in their library soon thereafter? Why not keep the Netflix subscriber base more informed about films that are being considered, or better yet, allow people to have a say. If I search for a title not in the Netflix library, then let me submit it to be bought. Once a certain number of vote are received, they could, like HM Government, establish a threshold that would then commit them to considering it.
- Lastly, in a more niche way, Zeitgeist, in travelling in 2015 in France, Canada and the Middle East shone a light on the remarkably different stable of content each Netflix library holds. From an internal, local market strategy point of view, each region has different tastes and different priorities. But from a subscriber point of view, the presence of – for example – West Wing in North American libraries but not in European ones seems arbitrary at best. The problem exists even within markets. In one country, you can stream Toy Story 2 and Toy Story 3 but only order the first film through the mail. It borders on Kafka-esque, and Netflix needs to do a better job of explaining why this is the case.
This is an important time for Netflix. Series like The Crown have helped further solidify its reputation as the go-to innovative player in the market, the new HBO. It must tread carefully though. Nomura reported last year that the service’s price hikes could have created a churn of 500,000 customers in the US alone. Netflix must ensure it communicates the value of what people are paying for. Otherwise, the stellar package of content, paid for like you pay a utility bill may risk becoming similarly commoditised.
*Our 2016 trends for the sector can be found here*
Our most popular article this year by far was a piece we wrote on trends in the media and entertainment industry for the coming twelve months. That nothing has been written since January that has proved as popular as that is a little disappointing, but it is a good indication of what users come to this blog for.
It’s been an interesting past month or so in the Technology, Media and Telecoms sector. We’re going to attempt to recap some of the more consequential things here, as well as the impact they may have into next year.
Star Wars – And the blockbuster dilemma
Friday saw the release of the first trailer for Star Wars Episode VII, due for release December 2015. CNBC covered the release at the coda of European Closing Bell, around the point of a segment a story might be done about a cat caught up a tree (“On a lighter note…”). They discussed the trailer and the franchise on a frivolous note at first, mostly joking about the length of time since the original film’s release. One of the anchors then went on to claim that Disney’s purchase of “Lucasfilms” [sic] and the release of this trilogy of films, given the muted reaction to Episodes I-III, constituted a huge bet on Disney’s part. This showed a profound lack of understanding. Collectively, Episodes I-III, disappointing artistically as they may have been, made a cool $1.2bn. And this is just at the box office. Homevideo revenues would probably have been the same again, almost certainly more. Most importantly (whether we like it or not), are revenue streams like toy sales, theme park rides and the like (see below graphic, from StatisticBrain). So we are talking about a product that, despite many not being impressed with, managed to generate several billion dollars for Fox, Lucasfilm, et al. With a more reliable pair of hands at the helm in the form of J.J. Abrams, to say Episodes VII-IX are a huge bet is questionable thinking at best.
It can be easy for pundits to forget those ancillary streams, but in contemporary Hollywood it is such areas that are key, and fundamentally influence what films get made. Kenneth Turan, writing in mid-September for the LA Times, echoed such thinking. As with our Star Wars example; so “with the Harry Potter films, and it is happening again with ‘Frozen’, with Disney announcing just last week that it would construct a ‘Frozen’ attraction at Orlando’s Disney World”. It is why studios have scheduled, as of August this year, some 30 movies based on comicbooks to be released over the coming years. Of course, supply follows demand. Such generic shlock wouldn’t be made again and again (and again) if consumers didn’t exercise their capitalist right to choose it and consume it. We have been given Transformers 4 because the market said it wanted it.
But is this desire driven by a faute de mieux – a lack of anything better – in said market? David Fincher may not have been far off the mark back in September when he mentioned in an interview with Playboy that “studios treat audiences like lemmings, like cattle in a stockyard“. But a shift from such a narrow mindset may prove difficult in a consolidated environment – Variety’s editor-in-chief Peter Bart pointed out recently that “six companies control 90% of the media consumed by Americans, compared with 50 companies some 30 years ago”. Some players of course are trying to change the way the business this works. The most provocative statement of this was in September when Netflix announced a sequel to “Crouching Tiger, Hidden Dragon”, to be released day-and-date across Netflix and in IMAX cinemas. Kudos. It’s the kind of thing this blog has been advocating since its inception. Though not in accordance with a capitalist model, the market is certainly showing a desire for more day-and-date releases. Netflix isn’t a lone outlier as on OTT provider trying to develop exclusive content that goes beyond comicbooks (that in itself should give Netflix pause; about a fifth of its market value has eroded since mid-October). Hulu’s efforts with J.J. Abrams and Stephen King, as well as Amazon’s universally acclaimed Transparent series (full disclosure, a good friend works on the show; Zeitgeist was privileged to take a look around the sets on the Paramount lot while in Los Angeles this summer). And that’s not to say innovative content can’t be developed around blockbuster fare; we really liked 20th Century Fox’s partnership with Vice for ‘Dawn of the Planet of the Apes’, creating short films that filled the gaps between the film and its predecessor. Undoubtedly the model needs to change; unlike last summer, there were no outright bombs this year at the box office, but receipts fell 15% all the same. The first eight months of 2014 were more than $400m behind the same period in 2013. Interviewed in the FT, Robert Fishman, an analyst with MoffettNathanson put it wisely, “It always comes down to the product on the screen. And the product on the screen just hasn’t delivered.” An editorial in The Economist earlier this month praised Hollywood’s business model, suggesting other businesses should emulate it. But beyond some good marketing tactics there seems little that should be copied by others. Indeed, lots more work is needed. Perhaps the first step is merely rising that not all blockbusters need to be released in the summer. Next year, James Bond, Star Wars and The Avengers will all arrive on screens… spread throughout the year. Expect 2015 to feature more innovation on the part of exhibitors too, beyond having their customers be rained on.
Tech wars – Hacking, piracy and monopolies
Sony Pictures faced some embarrassment this week when hackers claimed to have penetrated the company’s systems, getting away with large volumes of data that included detailed information on talent (such as passport details for the likes of Angelina Jolie and Cameron Diaz). The full story is still unfolding. We’ve written a couple of times recently about cybersecurity; it was disappointing but unsurprising to see the spectre of digital warfare raise its head again twice in the past week. The first instance was with Regin, an impressive bit of malware, which seems to be the successor to Stuxnet, a spying program developed by Israeli and American intelligence forces to undermine Iranian efforts to develop nuclear materials. Symantec said Regin had probably taken years to develop, with “a degree of technical competence rarely seen”. Regin was focused on Saudia Arabia, Russia, but also Ireland and India, which muddies the waters of authorship. However, in these post-Snowden days it is well known that friendly countries go to significant lengths to spy on each other, and The Economist posited at least part of the malware was created by those in the UK. Deloitte, ranked number one globally in security consulting by Gartner, is on the case.
The news in other parts of the world is troubling too. In the US, the net neutrality debate rages. It’s too big an issue to be covered here, but the Financial Times and Harvard Business Review cover the topic intelligently, here and here. In China, regulators are cracking down on online TV, a classic case of a long-gestating occurence that at some arbitrary point grows too big to ignore, suddenly becoming problematic. But, if a recent article on the affair in The Economist is anything to go by, such deeds are likely to merely spur piracy. And in the EU this past week it was disconcerting to see what looked like a mix of jealousy, misunderstanding and outright protectionism when the European Parliament voted for Google to be broken up. No one likes or wants a monopoly; monopolies are bad because they can reduce consumer choice. This is one of the key arguments against the Comcast / Time Warner Cable merger. But Google’s share of advertising revenue is being eaten into by Facebook; its mobile platform Android is popular but is being re-skinned by OEMs looking to put their own branding onto the OS. And Google is not reducing choice in the same way as an offline equivalent, with higher barriers to entry, might. The Economist points out this week:
“[A]lthough switching from Google and other online giants is not costless, their products do not lock customers in as Windows, Microsoft’s operating system, did. And although network effects may persist for a while, they do not confer a lasting advantage… its behaviour is not in the same class as Microsoft’s systematic campaign against the Netscape browser in the late 1990s: there are no e-mails talking about “cutting off” competitors’ ‘air supply'”
The power of lock-in, or substitute products, should not be underestimated. For Apple, this has meant the acquisition of Beats, which they are now planning to bundle in to future iPhones. For Jeff Bezos, this means bundling in Washington Post into future Amazon Fire products. For media and entertainment providers, it means getting customers to extend their relationship with the business into triple- and quad-play services. But it has been telling this month to hear from two CEOs who are questioning the pursuit of quad-play. For the most part, research shows that it can increase customer retention, although not without lowering the cost of the overall product. Sky’s CEO Jeremy Darroch said “If I look at the existing quadplays in the market, not just in the UK, but pretty much everywhere, I think they’re very much driven by the providers who want to extend their offering, rather than, I think, any significant demand from customers”. Vodafone’s CEO Vittorio Colao joined in, “If someone starts bidding for content then you [might] have to yourself… Personally I have doubts that in the long run that this [exclusive content] will really create a lot of value for the platform. It tends to create lots of value for the owner”. Sony meanwhile are pursuing just such a tack of converged services in the form of a new ad campaign. But the benefits of convergence are usually around the customer being able to have multiple touchpoints, not the business being able to streamline assets and services in-house. Sony is in the midst of its own tech war, in consoles, where it is firmly ahead of Microsoft, who were seeking a similar path to that of Sky and Vodafone to dominate the living room. But externalities are impeding – mobile gaming revenues will surpass those of the traditional console next year to become the largest gaming segment; no surprise when by 2020, 90% of the world’s population over 6 years old will have a mobile phone, according to Ericsson. So undoubtedly look for more cyberattacks next year, on a wider range of industries, from film, to telco (lots of customer data there), to politics and economics.
Talent wars – Cui bono?
Our last section is the lightest on content, but perhaps the most important. It is the relation between artist and patron. This relationship took a turn for the worse this year. On a larger, corporate side, this issue played itself out as Amazon and publisher Hachette rowed over fees. Hachette, rather than Amazon, appears to have won the battle; it will set he prices on its books, starting from early 2015. It is unlikely to be the last battle between the ecommerce giant and a publisher, and it may well now give the DoJ the go-ahead to examine the company’s alleged anti-competitive misdeeds.
Elsewhere, artist Taylor Swift’s move to exorcise her catalogue from music streaming service Spotify is a shrewd move on her part. Though an extremely popular platform, driving a large share of revenues to the artists, the problem remains that there is little revenue to start with as much of what there is to do on Spotify can be done for free. The Financial Times writes that it is thanks to artists like Swift that “an era of protectionism is dawning” again (think walled gardens and Compuserve) for content. The danger for the music industry is that other artists take note of what Swift has done and follow suit. This would be of benefit to the individual artists but detrimental to the industry itself. And clearly such an issue doesn’t have to be restricted to the music industry. It’s not hard to anticipate a similar issue affecting film in 2015.
There’s a plethora of activity going on in TMT as the year draws to a close – much of it will impact how businesses behave and customers interact with said media next year. The secret will be in drawing a long-term strategic course that can be agile enough to adapt to disruptive technologies. However what we’ve hopefully shown here in this article is that there are matters to attend to in multiple sectors that need immediate attention over any amorphous future trends.
A recent essay for Foreign Affairs, “The State of the State”, criticises Western governments for failing to innovate. The authors make an unfavourable comparison with China, which, though still autocratic in nature, has at least looked abroad for ways to make the state work better (if only in a necessarily limited scope). One doesn’t need to look much farther than France to see what happens when the state fails to innovate. President Hollande has done his very best to inculcate a backward ideology of indolence among its workers, but the negative effects of over-regulation have been present in France for some time. One major step that is in drastic need of undertaking is the simplification of France’s opaque labour laws, the code for which runs to 3,492 pages, according to a recent article in The Economist. A stark and laughable example of the limits of such a code is elaborated on below,
“[The code] impose[s] rules when a firm grows beyond a certain limit: at 50 employees, for example, it must create a works council and a separate health committee, with wide-ranging consultative rights. So France has over twice as many firms with 49 staff as with 50.”
France of course also has a strong sense of state oversight and sponsorship when it comes to the media industry. L’exception culturelle has long dominated discourse about what content is appropriate and designated to be high art. Such safeguarding of domestic product has been a thorn in the side of late of the EU / US trade partnership, threatening to derail negotiations. Some have argued that such promotion of homemade productions serves not to diminish foreign imports – a love of Americana has not subsided in France – but rather only to preserve a niche. Regardless, argues a recent editorial in one of France’s national newspapers, it has left the country’s media sector susceptible to disruption.
Today’s Le Monde newspaper features a front page editorial on the arrival Monday to the country of Netflix. The company announced its plans for European expansion at the beginning of the year. It won’t have everything its own way, though. Netflix will have to adapt to a very different market environment. The Subscription Video On Demand (SVOD) market is well-established, and it will see much competition from incumbents (last year annual revenues for companies based in France providing such services exceeded EUR10m). These incumbents charge little or nothing for their services, relative to the $70-80 a month Americans pay to a cable company to watch television, according to The Economist, which states “Netflix struggled in Brazil, for example, against competition from local broadcasters’ big-budget soaps”. Moreover, current government policy dictates a 36-month long window from cinema release to SVOD. We’ve argued against the arbitrariness of such windows before, for a variety of reasons, but here such policy surely negatively impacts Netflix’s projected revenues. Such projections will be curbed further by stringent taxes and a further dictat that SVOD services based in France with annual earnings of more than EUR10m are required to hand over 15% of their revenues to the European film industry and 12% to domestic filmmakers, according to France24. As well as traditional competition, Netflix also faces threats from OTT rivals, such as FilmoTV. One possible way around such competitor obstacles is the promotion of itself as a complementary service. The New York Times earlier this spring elaborated,
“Analysts say Netflix, which has primarily focused on older content more than on recent releases, could also survive in parallel to European rivals that have invested heavily in new movies and television shows. Netflix in some ways serves as a living archive, with TV shows like “Buffy the Vampire Slayer” from the 1990s or movies like “Back to the Future” from 1985. Such fare has enabled the company in Britain, for example, to partner with the cable television operator Virgin Media, which offers new customers a six-month free subscription to Netflix when they sign up for a cable package.”
Such archive content will come in handy, particularly given that, as Le Monde points out, Netflix had previously sold the rights to its flagship series ‘House of Cards’ to premium broadcaster Canal Plus’ SVOD service Canal Play (which itself is investing in new content). The article hesitates to guess how much of a success the service will be in France – something Citi has no problem in doing, see chart below – instead looking to the music industry for an analogy, where streaming has become a dominant form of engaging with the medium. As in other markets, streaming services have met with increasing success, particularly with younger generations. For Le Monde, the arrival of Netflix will undoubtedly ruffle a few feathers, but the paper also hopes it will blow away the cobwebs of an industry that has become comfortable in its ways; it hopes the company will provide a piqûre de rappel (shot in the arm) for the culture industry. Netflix’s ingredients – by no means impossible to emulate – of tech innovation, easy access and pricing and a rich catalogue, should be a lesson to its peers. The editorial only laments that it took an American company to arrive on French shores for businesses to get the message.
UPDATE (16/9/14): TelecomTV reported this morning that Netflix has partnered with French telco Bouygues. The company will offer service subscriptions “through its Bbox Sensation from November and via its future Android box service. Rival operators are refusing to host Netflix on their products”.
Microsoft has been trying its hand at a bit of innovation of late in an attempt to raise some of its lost brand equity, and stem the larger market decline in PC sales, which has recently started accelerating. (On a side note, Deloitte have a caveat to these figures, saying the true measurement is in usage, not units).
One of the ways this innovation has come about is in the release of its Surface product, which has interested many but earned the ire of erstwhile manufacturing partners as Microsoft has pursued its own path, making the product in-house. Its new operating system, Windows 8, has struggled to gain traction with consumers. The president of Fujitsu, one of Microsoft’s partners, declared interest to be “weak” back in December last year. The most obvious step-change from previous iterations is the slate screen that greets users upon booting up. On proceeding through this, users then come to a more familiar Windows layout.
In yesterday’s Financial Times, Microsoft said it was preparing to “reverse course over key elements of its Windows 8 operating system”. Envisioneering analyst Richard Doherty was quoted as saying it is the biggest marketing fiasco since New Coke. The only difference being, Doherty comments, that Coca-Cola acknowledged their error three months in, whereas Microsoft is pushing eight months now since launch; Coca-Cola conversely paid more attention to what its customers were saying about the product. “The learning curve is definitely real”, said head of marketing and finance for the Windows business, Tami Reller.
Today’s FT featured an editorial entitled “Steve Ballmer was right to gamble on change”. Opening with a quotation by Bill Gates, saying that to “win big you sometimes have to take big risks”, the editorial cites Kodak as a primary example of a company that refused to take risk, and ended up succumbing to creative destruction at the expense of trying to protect legacy revenue streams. We’ve written before about Kodak and creative destruction. The editorial calls for a revival of a “climate of creativity” at the company, and certainly that is what Ballmer is trying to instill, very nobly and with good reason. Zeitgeist’s bone of contention is with the following, seemingly logical statement,
“…disruptive innovations are disruptive precisely because the new technology does not appeal to traditional customers. Instead, it appeals to the customers of the future.”
We would argue that Microsoft’s customer base is made up overwhelmingly of what might be considered “traditional” customers. Users who find familiarity with a long-established incumbent, who have no interest in OS alternatives like Linux, Apple, Android or Mozilla. They are not looking for a revolution. By all means change your product, but it must evolve, not look like a completely different way of computing when you switch it on. This point is confirmed nicely by a recent piece in Harvard Business Review, which details how to get customers to value your product more. The author, Heidi Grant Halvorson, describes the importance of knowing the right emotional fit for your customers’ mindset. The article elaborates,
“motivational focus — whether he tends to view his goals as ideals and opportunities to advance (what researchers call “promotion focus”), or as opportunities to stay safe and keep things running smoothly (“prevention focus”). While everyone has a mix of both to some extent, most of us tend to have a dominant focus.”
We would argue that users that prefer Microsoft Windows OS to other systems would strongly fall into the latter category. Change is perhaps inevitable, but Microsoft are choosing a precarious path with such radical changes aimed at a group little interested in such fundamental alterations to the way they interact with such an integral device.
After an annual loss of $6.4bn in 2011, Sony has since seen a new CEO come to the fore in the form of Kazuo Hirai, who immediately made it clear that major changes were needed, including significant job cuts, and a renewed focus on, among other sectors, videogames.
Last week at Gamescom, the company fared extremely well, “after unveiling wildly inventive new games for the PS3 and PS Vita, and fleshing out the appeal of its Wonderbook”. The Wonderbook – which consumers in London will get to try out this bank holiday weekend – in particular is of interest as it is a wholly separate device that works with your gaming device, and one of the few platforms that has an proprietary deal with author J.K. Rowling.
Mobile is another one of the significant sectors that Sony will be focussing on. The end of the company’s partnership with Ericsson will only help with this focus. The company tried to integrate gaming and mobile before the end of the partnership in the iteration of Xperia Play, with limited success. Beyond creating their own handset with PlayStation capabilities, they are now branching out. In June, Geek ran an article saying HTC has been given the rights to produce a certified PlayStation phone. Secondly, a company called GameKlip now allows you to play games on your Android phone with a PlayStation controller.
The Geek article talks about the initiative being “part of their attempt to broaden the PlayStation brand and increase total market share”. But since when has PlayStation been suffering as a brand? If you look at the social media fan base, PS has far greater affinity than the Sony brand. Is Sony giving away one of its biggest advantages (be it proprietary content, IP) to its biggest competitors in the mobile space, or is the bigger picture about simply extending the PlayStation brand as far and wide as possible?
Why dominance means nothing if you stop delivering.
Zeitgeist reported recently on the number of high street names issuing profits warnings after an icy December kept shoppers away from their tills.
The encroachment from online retailers onto traditional bricks and mortar stores is only going to increase as once dominant names slowly diminish into also rans, punished by their failure to adapt to progress.
While such a destiny is unfortunate for a lumbering organisation with a physical and costly infrastructure to maintain, for what should be a cutting edge technology company it is unforgivable.
A mere ten years ago, Finnish communications company Nokia dominated the mobile phone market. This rather quaint BBC story from from a decade ago reports that ‘Nokia has strengthened its grip on the world’s mobile phone handset market’ and that ‘for the first time, Nokia has a market share more than double that of its nearest competitor’.
The report concludes with a prediction from Forrester who anticipated that ‘five dominant players would control Europe’s networks by 2015’.
While that prediction may come true, it is questionable whether any of the dominant manufacturers from yesteryear will be among them.
This week’s ‘leaked’ memo from Nokia’s CEO Stephen Elop claimed that the company was ‘standing on a burning platform’ and surrounded by a ‘blazing fire’.
This is not a pleasant place to be. As mobile phones became smartphones an ever increasing importance was placed upon a phones operating system, both in terms of functionality and usability.
Just as the old high street stores threw up websites that weren’t quite as good as the dedicated online retailers Nokia produced Symbian, an operating system that failed to impress anywhere near as much as the ones you’d find on an Apple, Blackberry or Android phone.
Elop’s acknowledgement of the problem has opened the door for a radical change in strategy to try and rescue the problem.
Rumours abound of a partnership with an existing platform.
“It could either be a very bad marriage or a marriage of two players that have not been very effective alone.” commented Magnus Rehle of Greenwich Consulting.
The two likely candidates are Android, which would essentially relegate Nokia to a manufacturer in competition with other Android handset makers, or Microsoft who have also struggled to ship as many copies of their Window Phone 7 operating system as had been hoped.
The former would be a rather bitter pill for a once dominant giant.
The latter, and arguably preferable option, would bring together two massive organisations who have struggled to assert their dominance in the category.
An announcement is imminent, though as Hakim Kriout of Grigsby & Associates points out ‘Very few companies regain their leadership once they’ve lost it.’
Whichever route Nokia go down the lesson is there for brands in every category.
It is infinitely preferable to stay top of the pile than to have to climb back up after a fall.
Regardless of your current dominance, if you fail to keep up with what people want and expect from you, someone else will deliver it and take your crown before you’ve admitted there is a problem. Brands must avoid the complacency that dominance can bring.
If brands assumed that they were surrounded by crocodiles and stayed alert to change and ready to react, they’d be much more likely to avoid getting trapped by ‘blazing fires’.
Charles de Gaulle once commented, “China is a big country, inhabited by many Chinese.” As astute as this observation was (and is), it was hoped that a trip that Zeitgeist paid to London’s Victoria and Albert Museum ten days ago, entitled ‘Going Global: Advertising Works UK China 2010’, might provide a little more insight. The Institute of Practitioners in Advertising described the morning as,
A conference in association with UKTI and linked to London Design Festival looking at the value of advertising and how the UK can act as a creative hub to Chinese brands seeking to go global.
Hosted by the IPA, the conference involved talks from a series from numerous luminaries from Ogilvy, BBH, McCann Erickson and JWT. Our emcee for the morning, IPA Director of Marketing Ms Janet Hull, noted that the UK was the fourth largest market in the world for ad expenditure. Ms Hull also talked about the increasing interaction between UK and China advertising; senior BBH and M&C Saatchi people have been on IPA visits throughout China over the past 18 months.
The great Rory Sutherland (whom Zeitgeist has mentioned in previous articles on behavioural economics and neuromarketing) was next up, speaking in an introductory manner to the morning’s proceedings, stressing that “value is subjective”, that it is created at the point of consumption. Added value exists mostly in the mind, he went on, not in the physical atrributes – “the atoms” of your product. He gave luxury brands as an example of this. He also pointed out that China currently has six brands in the top 100 (six years ago they only had one), according to WPP’s BrandZ survey (which Zeitgeist played a small part in helping develop). He foresees many more Chinese brands entering this pantheon in the next few years. One of those brands is China Mobile, and it was the Chief Representative of this company, Henry Ge, who would speak next.
Launched in 1995, China Mobile is now a $53bn brand. A recent survey conducted revealed 74% customer satisfaction with the brand, higher than any landline or mobile provider in the US. Curiously, not only do they have a very high loyalty rate, they also have a very high return rate, suggesting that perhaps of those who do leave, most will come back. Mr. Ge talked next about brand strategy, talking about how the company offered different plans (divided by pricing, services and rewards) in order to exploit customer segementation, while also seeking differentiation from competition and pricing for sustainable growth. Also of interest was to hear the development of the brand’s USP over the last ten years. In 2000, the brand’s selling point was coverage. In 2010, it’s platform, referring to Apple’s iPhone and Google’s Android OS, as well as more specifically mobile shops and apps. The future? Well, according to Mr. Ge, the future is all about experience, putting the consumer in control. Nothing new you might think; it will depend on how China Mobile and others execute this. It gels well with a recent article in the New York Times which stated “spending money for an experience… produces longer-lasting satisfaction than spending money on plain old stuff”. Of course, as a company comprised principally of engineers, Mr. Ge confessed that those at China Mobile would be understandably nervous about such a shift in power.
Orlando Hooper-Greenhill, Director of Global Planning at JWT spoke next on HSBC, aka Hong Kong Shanghai Banking Corporation, set up in 1865. Any regular traveller would be able to tell you of the bank’s perpetual presence on “jet bridges” – the bits linking the airport to the plane – the idea behind which, Orlando stated, was to say goodbye to you as you left one country, and for it to be the first thing that says hello in a new country. HSBC’s proposition rests on the suggestion that even though their offices are spread the world over, they still provide superior service through their local knowledge. This was exemplified when Orlando showed the room two TV ads for HSBC, one from the US and one from China. Zeitgeist has had a terrible time tracking down the Chinese ad, and at the time of publication Orlando hadn’t responded to our request for where we could get our hands on a copy to post here. Needless to say the ads demonstrated an insight into each audience that it was targeting more than simply laying its cards on the table as to what services the bank could provide. He also presented the audience with a fascinating graphic, which Zeitgeist did manage to track down, see below. It puts into context just what a large audience is waiting out there for your advertising messages (albeit an audience with some maturing to do still).
Next up was Li Fangwu, Assistant Secretary General of the China Advertising Association. He began by mentioning that it was in 1978 when the ad industry as we know it (or don’t) today was “restored”, presumably as part of the Beijing Spring, currently with 170,000 agencies and over a million employees, which is quite staggering. However, Mr. Fangwu was forthcoming as he showed that year-on-year advertising turnover had declined since 2005, which made Zeitgeist realise that China is not completely immune to the effects of a recession. Most amazing was the advertising law dating from 1994, currently under revision. The levels of bureaucracy involved in getting advertisements legally processed was stupefying. Hopefully the blurry pictures below of the numerous government bodies needed to rubber-stamp their approval of a campaign gives an impression of the dizzying complexity currently involved. The word ‘byzantine’ comes to mind.
Nick Blunden of Profero was up next, who spent part of the beginning of the conference polishing up his presentation sat on the row in front of Zeitgeist and a colleague. Mr. Blunden was full to the brim with interesting, topical statistics proving the oft-proved power of the Internet etc. One of the more interesting stats was that smartphone handsets will find their way into the hands of 250m pairs of hands this year, quite a figure. Among some of the more innovative and intriguing case studies he mentioned were Pepsi’s superb Refresh campaign, Lufthansa’s MySkyStatus and Diageo’s Windsor campaign in Korea. Last but certainly not least was Chris Macdonald, CEO of McCann Erickson did his best to convince Zeitgeist that he shouldn’t shoot off to the Cote d’Azur when the Olympics (and the unwashed masses in their millions) descend upon London in 2012. An informative talk all round, and surely but a taste of things to come as China’s sphere of influence grows.