Q. What is your opinion on the effectiveness of marketing today?

A. Marketing is crucially important to all developed economies. Without marketing, price would be the main differentiator of products and services. The diversity of products and services in today’s economy owes its existence to marketing.

In the current recession, marketing is under extreme pressure, as cost cutting sweeps business. Luckily marketers have plenty of opportunity to improve their effectiveness, since in the boom years they had become very inefficient, and money was routinely wasted on marketing activities that did not deliver, and mistakes were ignored and often repeated.

Q. What remains to be solved?

A. Plenty. Efficiency needs to be the focus for the next few years – here’s a dozen for starters.
1. Making the marketing budget work harder
2. Writing budget approval cases that win every time
3. Maintaining media effectiveness and reducing costs
4. Eliminating production cost-wastage and the causes
5. Making marketing assets and collateral work harder
6. Avoiding surprises in budget commitments
7. Getting Agencies to do a better job in less time
8. Holding Agencies rigorously to account for results
9. Wasting less time on budgetary bureaucracy
10. Penetrating partial and confusing data
11. Faster approvals with fewer errors
12. Forecasting more accurately

Q. What mistakes do companies typically make?

A. Marketing seldom has a meaningful discussion with finance, and vice versa. They ask different questions and speak different languages.

Finance talk about Budgets, Budgets, Budgets. Marketers talk about Brands, Brands, Brands.

Finance and marketing sometimes have disjointed working relationships. They often ask different questions and they answer them in different languages. During training we often use this example: assume sales revenues for the latest period of Company X have been flat, marketing budgets have been flat, and sales volumes are down, then what’s happening to profits? The correct answer is that profits are up, but most people get it wrong because they ‘wing it’.

Questions that finance ask focus too much on budgets and too little on performance; and marketing focus too much on brand awareness and image and too little on sales and profit performance. Everyone retreats into their own technical jargon, each bewildering the other and wasting lots of time pursuing irrelevant questions. Ultimately any attempt at finance-marketing dialogue gets derailed.

Q. Could you elaborate on the Return On Ideas reports and your Infinity model for marketing effectiveness?

A. An important new report “Return on Ideas” was launched on 27 April. The subject? How any organisation that has to market itself can be more efficient, effective and value adding. This is a frustrating business challenge and what we’ve delivered isn’t theoretical or waffle. The report is packed with practical suggestions, checklists and case studies, solidly based on candid research on over 100 organisations, large and small and across industries. When we shared it in draft with a sample of Chartered Institute of Marketing and DMA members they gave it their unanimous thumbs up.

The infinity model is a framework designed to put the marketing-finance dialogue back on the rails. It contains a unique collection of practical self-help exercises and checklists and illustrative case studies, all wrapped round the core model.

IMAGINE – PREDICT – DEMONSTRATE

What we found is the best organisations have a positive creative tension between financial rigour and the marketing imagination. More specifically this involves:
- harnessing the marketing imagination to create value adding ideas (e.g. Heinz created the popular upside down bottle after consumers complained of sauce retention)
- predicting how much financial value these ideas will contribute (i.e. explicitly calculating the financial case for an idea before committing budgets)
- delivering and demonstrating that value really was created (e.g. there are questions over whether the Cadbury’s Gorilla campaign was ultimately a financial success)
- establishing learning that will improve future ideas, predictions and results (i.e. making learning an essential part of every campaign plan)

Q. What can companies do to put the report into practice?

A. A lot of progress can be made in just one day, through holding a workshop with finance and marketing. By discussing the questions listed in the report, participants can find out how they can do a better job of making marketing more efficient, effective and value adding. In the process they will start to speak a common language that focuses on performance as well as conformance.

Having a follow-up session with the managing director, or business unit heads, can be helpful too. The report sets out departmental specific questions to be answered by the key players. A common issue that such discussions can resolve occurs when business units hold the marketing purse strings, and they use the marketing department as an internal service function. All too often such expenditure is squandered on vanity projects, whose sole effect is inflation of managerial egos, without sound commercial justification.

Quick wins from these workshops can be put into practice with immediate benefits. A longer-term programme of change may be identified too, and the report contains a road map to plan out this more strategic approach.

Q. What would be your key recommendations to marketers for measuring and assessing ROI?

A. You need to get better at planning ahead. Often measurement and assessment is an after-thought, and by the time marketers remember they ought to be measuring the effectiveness of a campaign it’s too late. We came across so many examples of companies that spent a fortune on this marketing activity or that, but which hadn’t collected the data before the campaign that would enable them to measure its effectiveness.

An example of good practice is Diageo who introduced a marketing activity evaluator. It was a tool that anyone spending any serious money on marketing activity had to use before proceeding. They had to set out the business case and put aside money to demonstrate the effectiveness of the activity. Diageo used this tool to build up a databank on what did and did not work. This is one of the most elegant cases I’ve come across.

Another example is BT. When Duncan Lewis joined BT as business development director, he discovered around 3000 mini-campaigns running at the time. He decided to shut them all down and insist on getting a proper business case for each. This forced the internal marketers to become much more disciplined and resulted in the emergence of some of the most successful advertising campaigns.

Q. Could you elaborate on this quote (from your paper): “Market research was obtained by almost all the organisations researched. There was a widespread expectation that market research should have a pivotal role in generating ideas, predictions and demonstrations, yet this expectation was seldom met.”

A. At first, the finding came as a surprise to me. I kept meeting marketing directors who grumbled a lot about the “lack of insights” from their research, and it became a recurrent theme. In particular they seemed to be seeking novelties that could be incorporated into their advertising and product development. To me it seemed an odd expectation – there really aren’t going to be enough novelties to go around all the firms in the marketplace. It didn’t seem the job of research to discover novelties, I felt that was the job of the creative agencies.

At the same time, many marketers seemed to be making very limited use of the potential of research as a predictive tool. Several boasted in a macho way about NOT TESTING. It seemed that many had had poor experiences with testing, but when it came to specifics it seemed that their experiences were with poorly designed tests, not with testing in general, but these marketers had drawn general conclusions from their particular experiences.
Agencies too seemed to encourage clients to act in a cavalier way, and are eager to manipulate research findings to suit their own Agency agenda. It often surprises me just how naïve marketing directors can be in allowing Agencies to set the research agenda and effectively trust the Agencies to mark their own homework.

Q. Could you elaborate on this quote (from you): “IT can be a powerful aid to market research, but it also has enormous power to damage customer relations…”

A. Yes. I was talking about the many roles that Information Technology plays in the world of marketing, and whether it is a force for good or bad. On the negative side, IT has been a powerful enabler of cost-cutting, and as we’ve seen with the automation of customer service, what’s good for the cost accountants isn’t always good for customers. Cutbacks in customer service have been rampant in recent years, and I’d predict that the recession will make matters worse for customers. In the world of market research, cost-cutting has also been a driving force, and the migration of research onto the internet has not been wholly satisfactory. The quality of the insights have often degraded as a result of this cost cutting, and too much of the research agenda is dominated by costs rather than quality of insights.

Q. What would be your key recommendations to market researchers for measuring and assessing ROI?

A. Market researchers need to get closer to their counterparts in management accounting if they are to become part of a true ROI measurement. Too many think that awareness and attitude tracking is good enough, but it really isn’t equivalent. ROI is a financial measure, and although market research can be useful to supply EVIDENCE, the PROOF comes about from linking together the evidence, not from the raw data itself. So teamwork and shared understanding are key, and that last point – shared understanding – will distinguish the winners from the losers.

It’s arguably the next big thing in research. Or, perhaps, the next really big thing.

It’s the emergence of what Suresh Vittal, principal analyst at Forrester, calls the ‘listening platform’, something he defines in his recent report as: “A technology and analytics infrastructure that mines a wide variety of traditional, online, and social sources to extract and deliver insights that shape a firm’s marketing strategy.”

In a market dominated by firms that aren’t from the mainstream research community, Vittal anoints Nielsen BuzzMetrics and TNS Cymfony as the leaders in “a pack of strong performers.”

Big opportunity
“It’s not a $25m market opportunity or we wouldn’t be in it, it’s definitely in the billions…in five years,” says Jim Nail, chief strategy & marketing officer, TNS Cymfony.

A couple of years ago TNS bought Cymfony, a company with roots in PR measurement. “PR in the US is a $45bn market and measurement is 5-10% of that,” says Nail to underpin the opportunity.

In trademark ebullient style, Pete Blackshaw, EVP, Nielsen Online declares: “I kind of see this as the new centre of marketing.”

Then again, he would say that. Blackshaw realised the power of consumer-generated and social media years before others and co-founded BuzzMetrics to capitalise on this. BuzzMetrics is now at the epicentre of Nielsen’s listening platform strategy.

Forrester’s Vittal says the market is too nascent to quantify the opportunity. He estimates that 1500-2000 companies have made the decision to use a listening platform and that another 10-15% of Fortune 1000 firms are actively looking into it: “There is a recognition that your customers are talking all around you and if you want to react to their discussion and maintain a listening strategy you have to listen.”

But he believes the opportunity will end up being much larger: “This [market] is very similar to the business intelligence market…practically every company under the sun will need listening tools…it’s a very broad platform: the CEO uses it, the CFO uses it…”

The catalyst for growth has of course been the rapid rise in social media and user-generated content. Vittal says that the pharma, CPG and travel sectors are particularly focused on using these platforms, and it’s a particular boon for pharma who: “…traditionally had limited access to their end consumers because of regulation, business model etc.”

Uses
The range of applications for these listening platforms is as diverse as for research in general.

At first the aim of these tools was simply to understand what was being said about brands online and then summarise through metrics. Metrics, Vittal says, such as the level of buzz or positive/negative sentiment, share of discussion, tone of voice, impressions, share of mentions, etc. While mostly quantitative, sentiment measurement tends to be managed qualitatively because it has proved problematic to automate.

But as the market has developed, so the applications have grown in sophistication: “Some of our best early traction revolved around almost extended notions of a customer satisfaction/loyalty service (e.g. Toyota)…this was almost like an extension of their Six Sigma thinking around quality…it’s almost, boy, I want to re-engineer my whole CRM operation to be much more in sync with a lot of these social media realities,” says Blackshaw.

As a result, he now talks of a shift away from quality strategy Six Sigma, towards what he calls ‘six signals of listening’.

The market does not seem to have evolved any particular killer application yet. Defensive branding was thought to be a candidate, says Nail: “But no one has found a way of predicting which issues will go nuclear on you.” Moreover, when things do go ‘nuclear’, there’s less time between chatter and when it goes nuclear making it difficult if not impossible to intervene fast enough (that said, daily updates can be used to monitor the impact of defensive initiatives).

Performance
Forrester tested a number of listening platforms by asking each vendor to monitor chatter around the ‘Forrester’ brand. Although admittedly not a consumer brand, it was nevertheless one that Vittal could expertly assess.

Both Nielsen BuzzMetrics and TNS Cymfony scored well on the comprehensiveness of their coverage of data sources, i.e. general and trade publications, forums, social networks, etc. If you want to know everything being said about you, comprehensiveness is clearly important. The strong media (measurement) heritage of both firms has clearly benefited them.

Both gather content through so-called online aggregators that, Nail says, have some room for improvement: “We found so far that while there is some overlap, nobody has everything.”

Blackshaw says that Nielsen has an additional data advantage, namely the ability to integrate internal Nielsen data such as purchase data. The data modelling possibilities are mouth-watering.

The next stage in the workflow is natural language processing or text-mining to understand meaning.

Language is one of the big issues here. Cymfony only deals with English content, although Nail states that overcoming this is a priority. And even though BuzzMetrics operates a multi-lingual service, Blackshaw says there is still room for improvement to better understand meaning and context: “I have a hunch that there is something in the airwaves of conversation on some of these strategic groups – such as Spanish - that might be untapped.”

A particular issue with all platforms that Vittal assessed is that of sentiment analysis, namely the ability to establish whether chatter is positive, negative or neutral towards a brand. Vittal found that most systems reported a high level of neutrals (i.e. algorithms failed), requiring manual intervention and thereby compromising scalability.

It is not clear whether an automated solution is possible here. Language is remarkably ambiguous and full of irony, and computers have a hard time dealing with that.

Both systems perform well on analytics. One reason is the availability of an in-house online metrics facility to help weight the data (to correctly represent for each media type). Note, for example, how TNS bought online metrics firm Compete.com soon after the Cymfony acquisition, and the fact that Nielsen Online houses the BuzzMetrics and NetRatings units – there is direct synergy.

A slight bone of contention for Nail is that Vittal rated BuzzMetrics higher for its ability to deliver insights, with Vittal saying they did “a lot of brand association diagrams“ and managed to synthesise everything well.

Nail says he hears the opposite from clients, particularly those who have recently switched from Nielsen: “We’ve taken probably half a dozen Nielsen clients in the past year or so. What we hear from them is that they [Nielsen] give them a hundred slide PowerPoint deck with lots of charts but no insight.”

Nail admits to being “friendly rivals” with Blackshaw, and concedes that Nielsen is slightly ahead in some areas: “We are catching up with them now in terms of creating vertical experts in our analyst teams, ” says Nail. Current verticals include financial services, CPG, consumer technology, enterprise technology, retail and healthcare/pharma.

Nielsen is always looking to improve its insight capability, says Blackshaw. His team distributes a regular collection of analysis and commentary to clients over and above dashboard and PowerPoint deliverables. These include threat trackers, issue briefs and outreach videos: “The way you construct knowledge share within your client is also really important, e.g. how do you convince legal to approve this? We’re starting a program…an advocacy round-table, client-only conversation [to promote effective knowledge share].”

Iteration
Listening platforms are clearly in their infancy. Vittal reckons they are only 20% of what they could become and has a laundry list of suggestions.

One of these is pricing. Current pricing and sales strategy suggests that the leading players are focused on the enterprise market. But Vittal would like value-for-money solutions aimed at small and medium businesses. The same strategy that drove Google’s meteoric rise in revenues. Blackshaw admits to pricing pressure due to competition and the availability of alternative approaches.

Another suggestion is to go beyond online sources of data: “The emphasis seems to be online because of the quantity of conversations happening here…but it’s not purely online,” a reference to, among other things, customer service conversations by phone. “Eventually it will be across all touch points – anywhere where there is a conversation happening,” says Vittal.

Another recommendation, along the lines of what BuzzMetrics is already doing, is to integrate more data such as sales, awareness etc. to help clients make more effective RoI decisions. This should be easier for Cymfony to accomplish now that it is part of the much larger WPP group.

Ultimately, Vittal, Nail and Blackshaw all agree on the aspiration to deliver reporting with a clear ‘call to action’. Much of this will require a more strategic, consultative approach.

Privacy is a hot topic that is only mentioned by Nail. Although not a particular issue now, this is something the vendors need to be mindful of as consumers start to think through the implications of putting their lives and thoughts online, as happened during the recent controversial u-turn from Facebook when adapting its terms and conditions. Pressure for greater privacy and/or more weary users could limit the coverage of listening platforms.

Big elephant
Although two of the largest research companies in the world lead in these systems, that in no way implies that they are universally welcomed by those who focus on traditional modes of research.

Client research and insight teams will, no doubt, be weary of using these systems for core studies such as customer satisfaction and loyalty given the issues around representativity and response bias.

But Cymfony’s Nail says that there is a growing acceptance of their value: “There’s going to be greater acceptance of using social media as a data source to mine for consumer insights…We’re starting to see money come out of focus groups, surveys and other kinds of market research tools, invested with us either as a substitute or increasingly as a part of a market research project.”

My, oh my, how things have unravelled.

Back in September, Research World looked at the impact of the downturn and the focus was on the collapse of financial organisations.

But now the focus has shifted to collapsing retailers, among them household names such as Circuit City in the US and Woolworths in the UK, one of the world’s oldest retailers.

What’s more, “Ten chains ‘face closure’ in 2009” declares a headline from a UK consultancy as a dismal prelude of the carnage to come.

In this Darwinian environment, retailers need to adapt or face the real prospect of death.

Global
It’s no surprise that the downturn has spread and is even hitting the high growth BRIC economies.

But, says Christopher Ruane, head of ?What If!’s retail innovation practice in China says that “The fundamentals in China are nowhere near as bad [as the West].” He says that Mercedes has enjoyed a good year, that Disney has successfully launched a premium-priced language learning centre, and that designer brand Marc Jacobs is opening a new branch “within 3 blocks of another Marc Jacobs store.”

Javier Medrano, VP marketing for Grupo Bimbo, one of the world’s largest bakery firms, concurs for Mexico and Latin America: “For the last two years the [Mexican] government has been campaigning against childhood obesity so a lot of companies are launching new products and lines…[thereby helping to stimulate the economy],” says Medrano.

Masstige
India, though, may be a BRIC exception. While still expected to achieve high single-digit growth, Piyul Mukherjee, director of Proact Research and Consultancy says that the number of stores in malls has mushroomed over the past five years, and that most “…are going to find it tough.”

That, says Mukherjee, is because the middle class have failed to embrace these new stores, many of which feature high-end brands such as Rolex and ‘Mango’. The result? They could well prove to be as much a victim of flawed business models as of the downturn.

Value, value, value
Perhaps predictably, consumers focus on value during harsh times. But what does that mean in practice?

In the West’s most mature economies, the focus seems to be on trading down, often to store or lower-priced brands. Gill Aitchison, president of global shopper & retail research at Ipsos, says that an Ipsos MORI study in late 2008 found that 61% of UK shoppers had started to buy more own label/store brands, while 26% had widened their repertoire of supermarkets to get better value.

Aitchison does, however, warn retailers to maintain their core offerings: “While shoppers are watching their spending, they still expect choice and variety. Therefore, full-service retailers who are limiting their stock and delisting products will see a decrease in shopper satisfaction. Discounters [e.g. Aldi, Lidl], on the other hand, who already have created expectations of reduced SKU options, will not suffer this.” In short, retailers that cater to both price and value seekers are expected to do particularly well in the current climate.

In fast-growing markets such as China, India and Mexico, where the growing middle class has developed an appetite for quality and variety, and where the effects of the downturn are far less severe, value is about more than simply price.

In China for example, foreign retailers Carrefour and Tesco do particularly well: “It’s partly about refinement, partly about quality, and significantly about safety – I can’t over emphasise how important product safety is in China, people are aware that food especially is often not safe here (eg. melamine milk scandal),” says Ruane.

And in Mexico, the search for value has led to a resurgence of local mom and pop stores: “A couple of years ago we really saw a slight decline in new traditional local stores opening. The supermarkets were offering really good value…but recently that’s been changing again because now people are now more conscious of prices, they don’t have enough money to spend for a week’s worth of products, they are buying two or three times a week in smaller quantities in smaller stores,” says Medrano.

Middle-squeezing
Vivek Sharma, group director, marketing strategy & insights at The Coca-Cola Company contends that during a downturn “it’s the middle men that get squeezed.” By which he means that retailers need to occupy a position of good value (e.g. Wal-Mart) or a distinctive niche (e.g. Whole Foods).

It’s the reason, he says, that Nielsen data shows that Wal-Mart and dollar stores are outperforming the likes of mid-market Target.

It’s also why the UK’s Woolworths is closing: “Woolworths sold a wide range of merchandise but never achieved a positioning of being the best at any one thing,” says Aitchison.

Foreign invasion
Western retailers have been making inroads into other countries for a while. And when they do, they need to be careful on the level of local adaptation.

Minimal adaptation can sometimes work. Ruane says that their influx in China has forced domestic retailers to “significantly raise their game, while other domestic retailers have gone to the wall. Price promotions and clean stores are much more common because of the impact of Tesco and Carrefour.” But, he says, Tesco and Carrefour have also adapted by installing wet markets (for selling fish etc.) to accommodate local preferences.

But foreign approaches don’t always work, however logical they may seem.

For example, Indian supermarket chain Big Bazaar has steadfastly eschewed the ‘clean and tidy’ look of Western supermarkets: “Big Bazaar knows that people like a mess inside, they don’t want clear, clinical aisles like in the West,” says Mukherjee. Big Bazaar also refers to the ‘bum-brush factor’ – they say that the moment bums fail to brush each other, sales go down!

GoMe, China’s leading electronics retailer, faced a similar dilemma a couple of years ago when US competitor Best Buy arrived. Best Buy decided to operate traditionally organised stores with clear information displays, in stark contrast to GoMe’s market-style setting devoid of information. GoMe was right, explains Ruane, because: “Shoppers tell us time and again that they don’t believe anything they read or hear in store. If they want an opinion they’ll use the internet and go onto a bulletin board or else seek a personal recommendation, even for a brand they trust.”

Medrano says that foreign retailers have had a mixed experience in Mexico. Wal-Mart successfully operates under four franchises: Walmart (hypermarkets), Bodega Aurrera (high discount), Superama (supermarket with a focus on higher quality and prices), and the members-only Sams´s Club. In contrast, rival Carrefour has exited the market.

And in the UK, German discounters Aldi and Lidl have made significant inroads, so much so that market leader Tesco has ‘copied’ their discount line as a defensive measure.

Winning retailer: Future Group
Mukherjee regards India’s top retailer, Future Group, as a significant success story, one that she expects to continue during the downturn: “…they have a whole bunch of [different] outlets…there’s a whole bunch of consumers out there who will always, whatever you may do, not really want to walk into a large supermarket because they say that’s not my scene.”

Future, she says, have seen off competitors by building a strong national presence under an assortment of value brands. Crucially, while competing brands focused on the middle class, Future targeted the lower middle class through its KB outlets, something malls initially resisted because they didn’t “want that kind of a crowd in the mall.” Malls soon relented once they realised Future’s power to drive footfall.

For now at least, the credit crunch has stymied the ambitions of competing players, both foreign retailers and domestic conglomerates such as Metro, Tata and Birla. The latter, says Mukherjee, “missed the bus on retail at a national rather than a local level,” by starting too late.

Future is now busy building its own portfolio of value brands across all the categories they sell, something they anticipate being very profitable.

Winning brand: Coca-Cola
Coca-Cola has been one of the more successful brands during the downturn. “We once again demonstrated our ability to perform consistently, delivering our eighth consecutive quarter of double-digit comparable earnings growth,” said CEO Muhtar Kent in last October’s trading update.

At the sharp end is Coke’s Sharma. He says that US consumers did not reduce overall grocery spending at first, instead choosing to reduce the number of supermarket trips to counter the sharp rise in fuel prices.

But now that the recession is starting to bite, consumers are trading down to cheaper brands and even eliminating certain categories altogether.

So how does Coca-Cola defend itself against price shopping? Sharma says by focusing on value: “People are starting to look more at value propositions…we look to provide the right price-pack offer and to reinforce our intrinsics.”

Two of those ‘intrinsics’, says Sharma, are the colour red and the distinctive contour-shaped bottles. The latter is now making a comeback in the US because “Whenever you come across Coke, we need to evoke those strong memories people have.”

If you read last month’s piece on ‘Buyology’, you will have seen the success Coke achieved from its sponsorship of TV’s American Idol. Coke’s seamless integration of red and the contour shape into the show was textbook marketing that resulted in very high brand awareness. Sharma modestly proclaims that Coca-Cola is “very happy with the program.”

Online
Despite the growth of online, retailing is largely still an offline story in many categories. In some categories such as financial products and services, electronics, books and digital products, online is significant. Beyond this, the Internet plays an important role in facilitating price comparison for value seekers.

An area of interesting development is China. It now has the world’s largest online population and “Chinese ecommerce has more or less doubled over the past year, albeit from a low base,” says Ruane.

Auctions are particularly popular. TaoBao, China’s answer to eBay, is driven by person-to-person sales of low ticket items. Delivery is extremely low cost due to the low cost of labour and the creative use of city subway systems.

Key barriers to growth include the limited availability of online payment systems, plus “Chinese consumers are much more visual and tactile than western consumers…and there’s a big concern about fake goods, particularly fake consumer goods,” says Ruane.

No Shit, Sherlock!
Shopper research, as distinct from consumer research, is a hot and fast-growing area, according to Ipsos’s Aitchison. This, she says, is because “…it helps retailers to pinpoint actions in store to recognise and counter the economic concerns that shoppers are feeling. And the beauty is, they are generally relatively low cost to implement, compared to advertising or deep price cuts.”

Sharma is testament to its importance within Coca-Cola: “I’ve been doing shopper insights for some years, but it is only relatively recently that we decided to [restructure teams]…my team is… focusing only on what we call commercial and franchise insights, which is all about trying to understand a lot more about the shopper as opposed to the consumer. And I have my colleague who is focusing a lot more on consumer insights. The key is ‘renewed focus’ on the shopper.”

We talk to Martin Lindstrom from his New York City hotel.

Just hours after Barack Obama is elected US President, Lindstrom is getting ready to leave the US for his European book tour, the US tour having generated over 700 articles, including many in the mainstream press and an appearance on the couch of TV’s The Today Show.

It’s his bid to popularise the business book: “I realised that no one reads business books any more…what people, including business people, really read is novels…that’s the style I’ve tried adopting in Buyology.”

And the book is indeed a pleasant, easy read. But that’s one of the criticisms levelled at it by the Bob Barocci, CEO of the Advertising Research Foundation, who apparently dismissed the book in an Advertising Age article by saying that the ARF did not review “pop” books.

Notwithstanding that, the book has received widespread praise and is a bestseller.

So, just what is Buyology all about?

The experiment
“Buyology,” according to Lindstrom’s website, “unveils the results of marketing guru Martin Lindstrom’s pioneering three-year, $7 million dollar study that used the latest in brain scan technology (fMRI and SST) to peer into the minds of over 2,000 people from around the world. The shocking results will reveal why so much of what we thought we knew about why we buy is wrong. Buyology rewrites the rules of marketing and advertising.” Bold claims indeed.

Lindstrom’s inspiration came from a 2004 study by Dr. Read Montague, director of the Human Neuroimaging Lab, who wanted to understand why Coke remained dominant despite Pepsi’s success in taste tests.

These tests were conducted using conventional research and so Montague decided to see if neuromarketing would reveal something different. Sure enough, after examining brain activity, Montague concluded that people weren’t making brand decisions based on taste but on the emotional impact of the brand, and that since Coke was more successful than Pepsi at ‘implanting’ the impression of a quality brand, it had ultimately won peoples’ affections.

Although this conclusion was not universally shared, according to David Penn, MD of Conquest Research, the study did inspire a number of enterprising companies into this space. Penn has taken a close interest in neuromarketing.

One of the inspired was Lindstrom, and he set about designing his own study.

Hypotheses
Aware of the ethics surrounding the use of neuromarketing, and being an unproven technique, Lindstrom was careful to choose a topic for his study that would ruffle as few feathers as possible: “You will always find critical voices no matter how deep you go into things. What I tried to do was to…go into areas where we could be fairly safe about the conclusions we could draw.”

One area that intrigued him was why public policy measures seemed to have little impact on discouraging smoking. He figured neuromarketing could give him the peek into the parts of human behaviour that traditional research couldn’t reach, namely the sub-conscious.

So, armed with an extensive contacts book of wealthy corporates, he began his drive for sponsors. But even he, a globally successful figure in strategic marketing, found it difficult to raise the $7m needed. The issue: corporates were frightened off by the ethical issues around neuromarketing.

But through dogged persistence he managed to convert enough of them. And with eight out of ten product launches failing within three months, you can probably understand why corporates were keen to get involved with something that could improve the odds.

Let’s look at a couple of key things he found.

Tobacco
Lindstrom’s work on smokers confirmed what he believed – that health warnings on tobacco boxes have little impact on smoking behaviour. The results applied whether the warnings were subtle (US) or more brazen (e.g. photos in the UK).

However, he discovered something he hadn’t expected: that rather than deter smoking, warning messages actually encouraged cravings. Completely counter-intuitive, he naturally asked the researchers to re-check the results.

Lindstrom offers an explanation. He believes that as people get used to warnings, they start to perceive them as images rather than text. The ‘image’ then becomes strongly associated with the brand or product. And because the product in question generates positive feelings (cravings), so do any associated images.

It’s the reason why, e.g., the Silk Cut tobacco brand tried to ‘own’ the association with a sheet of purple silk before the advertising ban started; in subsequent tests, 98% correctly attributed purple silk to Silk Cut.

Based on these conclusions, public policy seems to have failed dismally.

Product placement
As the effectiveness of conventional TV advertising deteriorates, product placement is on the rise: “It will be the number one way, I think the concept of the television commercial is dying.”

But based on the study, Lindstrom believes that product placement itself fails much of the time: “We’ve gone from a stage where you feel that just because you’ve put your logo [in the program] you’ve done your job. Well, guess what? You’ve done the opposite job instead.”

He cites the work done with American Idol, the popular TV show. Ford and Coke are two key sponsors. Both pay the same fee and yet Coke achieves far higher brand recall.

Why? Lindstrom reckons it’s because Coke has integrated the brand more deeply and seamlessly into the show. Coke is sipped by the judges. Furniture evokes the shape of its bottles. There are Coke-red walls. And Coke airs commercials during the breaks.

In contrast, Ford chooses to just run conventional ads. during the breaks with no intrusion into the programme itself (except for a logo placed out of context - logos are less important than brand associations such as images, colours, smells, sounds).

The surprising finding is that not only does Ford get much lower recall than Coke, Ford’s recall actually declined as a result of the sponsorship!

Bizarre? Well, Lindstrom says that effective product placement has a “double-barrelled” impact: (a) brand recall goes up, and (b) recall of other brands goes down. It’s as though the brain has limited capacity such that making memory space available for one brand reduces the space available to others.

No doubt these findings will cause some discomfort in the automaker, as well as with advertising agencies charged with product placement.

Efficacy
Lindstrom says that ad. agencies are generally sceptical of Buyology. Notable exceptions include Saatchi’s Kevin Roberts, author of Lovemarks, the book about increasing the emotional quotient of brands.

There are other neuro-sceptics. Among them is Conquest’s Penn (although he remains open-minded).

Penn maintains that the reason neuromarketing failed to advance much since 2004 is a failure to understand that the 2004 Pepsi study showed correlation rather than causation (something the study’s authors were at pains to point out). It did not prove - as some neuromarketers have since claimed - that there is a ‘buy button’ in the brain.

As Professor Lawrence Parsons of Sheffield University puts it: “This is the problem with all neuroscience. We don’t really know what we are seeing when we watch the brain work. Is it the thing itself - the thought, the flash of insight - or just an aspect of it, the bark rather than the dog? We’re just not at the point where we can answer these big interpretive questions.”

While Lindstrom accepts that neuromarketing still has to prove itself, he says that the Pepsi study was generally convincing. He maintains that the main reason neuromarketing failed to advance much was ethics: “After interviewing 300 people on this topic, most felt the main issue was ethical….it was a real struggle to raise the money…no one wanted to be associated with the study, but now sponsors are happy to go public.”

To satisfy any doubts there may be about his study, Lindstrom has offered to open it up to scrutiny: “…under the circumstances that we are working against the same agenda.” He has already shown it to Millward Brown and Ipsos and says they are “…incredibly positive towards the study…and fairly comfortable about it.”

The end of research as we know it?
In 2004, Lindstrom believed neuromarketing would make traditional research techniques redundant. Having completed the study he still holds the view. But being more aware of the shortcomings of neuromarketing and issues around market acceptance, he believes the process will take longer. But dominate, he believes, it will.

This is where neuro-sceptics are bound to have an issue. Penn strongly believes that neuromarketing will never be able to survive without complimentary qualitative (the ‘what’ will always need the ‘why’).

Penn has taken a different developmental route. For example, acknowledging that traditional research lacks sensitivity, he has developed a non-invasive, non-verbal questioning method (Metaphorix) that avoids both conventional pitfalls and the issues with neuromarketing. Lindstrom acknowledges this as a useful contribution but remains a steadfast supporter of neuromarketing nonetheless.

In fact, he has established Buyology Inc., a New York-based neuromarketing company with the intent of maturing the discipline as fast as possible, so as to help bring down costs (from $250,000 to around $60,000 a project) and reduce timings (one part of Lindstrom’s study took two years to develop).

He anticipates that Buyology will have a marked impact over a two-year period, but that more significant change may take at least a decade: “By significant change I mean that one format or another of neuromarketing is going to be implemented or used in almost every major campaign activity for major brands in the world. At least thirteen out of the largest 100 US brands are using neuromarketing in their strategy implementation right now. I know that because I work for these companies.”

The Millward Brown approach
Don’t say we didn’t try.

In the ceaseless search for simplicity, we ask Eileen Campbell, CEO of Millward Brown for a single measure to encapsulate brand health: “We aren’t really advocates of single number measures – the same way you wouldn’t monitor your personal health with a single number.” Sounds reasonable.

Instead, the philosophy behind BrandZ, their brand health tool/framework, is to measure the strength of the consumer bond, says global brand director Peter Walshe: “Consumers have relationships with brands, and the intent is to strengthen those relationships.”

Strength is derived from a couple of (exotic-sounding) metrics: ‘bonding’ and ‘voltage’.

Bonding refers to one of five levels that indicate the strength of the consumer bond. It is based on factors such as: spontaneous awareness, knowledge, relevance, performance, and perceived competitive advantage. For example, the lowest level (weakest bond) typifies a consumer who is simply familiar with a brand and nothing else. The highest level (strongest bond) reflects a consumer who regards the brand as relevant to them and way ahead of the competition.

And voltage? That, says Walshe, reflects how effectively consumers move up the bonding levels. Strong brands tend to have high conversation ratios between the levels.

Interbrand and Landor
Global brand consultancies Interbrand and Landor also run brand health monitors. But they do so for brand valuation purposes as well as for brand/RoI optimisation.

Interbrand launched the first ever brand valuation tool in the 1980s as a way for companies to recognise the intangible value of their brands as tangible assets on balance sheets (a controversial practice at the time but now an accepted financial practice). Our focus here is on the brand strength bits of the valuation tool.

Interbrand’s Rishi Dhir, senior consultant within the brand valuation team, says that seven factors contribute to their strength score. Only three of these are consumer-driven (the rest are judged by Interbrand folks and cover areas such as IP/protection, diversification, etc.). The consumer metrics include: leadership (based on awareness, familiarity and whether the brand ‘acts as a leader’); relevance (how the brand is performing vs. marketplace trends, and the distinctiveness and differentiation vs. the competition); and, stability (loyalty, repeat purchase, level of satisfaction, recommendation, etc.).

“It’s not a particular number that counts, it’s what lies behind that number,” emphasises Interbrand’s UK CEO Rune Gustafson, “It helps clients prioritise touch points and investments.”

WPP’s Landor uses sister company Y&R’s long-standing Brand Asset Valuator (BAV) tool. Landor’s president of Asia-Pacific, Michael Ip, says it uses two ‘pillars’ for strength (differentiation & relevance), and two pillars for stature (esteem & knowledge/understanding).

Efficacy
There are a couple of primary uses for brand health tools, notably identifying a brand’s impact on future sales (i.e. prediction) and measuring/improving RoI (i.e. diagnostics).

Millward Brown’s Campbell says the BrandZ model is “pretty predictable.” Walshe adds that over countless studies, the correlation between the strength ‘score’ and measured sales is at least 65% (r-squared = .65+). In other words, strong brands correlate with significantly higher levels of purchase.

And in terms of diagnostics, Interbrand’s Gustafson says that a study for hotel chain Intercontinental uncovered an unmet need that the chain could potentially ‘own’. They discovered that knowledge was a key loyalty driver: “The [guest’s] disappointment was that they weren’t learning more about the places they were visiting because they were darting between meetings.” This insight led to concierges being brought forward in the decision-making process, and rooms were equipped with ‘5 things you can do’ lists. “Staying relevant and coherent to customers is one of the mainstays of a brand,” says Gustafson.

Issues
All very well, then.

Well, not so quick, says Ian Gee, regional brand planning director, Asia Pacific, at global media agency Initiative. For one thing, he believes that the link between what people say and what they do is ‘vulnerable’, particularly nowadays: “Research is very bad at predicting the future, particularly during an uncertain [economic] period.”

While this is not a direct retort to Millward Brown’s correlation between brand strength and sales (because those sales are not self reported by consumers but based on actual data), it does raise the issue of a lag between attitudes/perceptions and behaviour.

A lag that concerns Gee: “People store attitudes that they may sometime want to use to inform brand/product choice. But when confronted with making a choice, suddenly external circumstances have changed so much that the actual decision they make, there’s no relation to the attitudes they may have stored up until yesterday.”

Another issue is differentiation. John Gerzema, chief insights officer, Young and Rubicam, and author of new book The Brand Bubble, reckons that plain vanilla differentiation has had its day: “Consumers don’t just want a brand to be different; it has to keep being different. We call this energized differentiation, the consumer perception of meaning, motion and direction.“ He sees brands as a direction rather than destination, where velocity rather than distance is the key strength metric.

However radical that sounds, Campbell has similar thoughts: “An important measure is a sense of momentum…if the public has a sense that your brand has a positive trajectory, that’s quite a good indication of share growth.”

Emotions
Robert Passikoff, founder & President of Brand Keys, believes that brand health monitors fail by focusing on the rational: “The decision process in brand adoption, engagement and loyalty is primarily emotional (70%).”

This is made worse by his belief that “the rational bits [of brands] are generally undifferentiated, the emotional bits provide the differentiation.”

And using image attribute statements does not help, he says, because the statements do not represent “the emotional elements that resonate within brands…plus, emotions are difficult to articulate with traditional image statements.”

His solution, developed over the past 24 years, involves the use of psychological questions/scales that measure what people believe. The result is a map of engagement (any marketing or communications activity that results in an increase in brand ‘equity’) vs. attitudinal loyalty.

Passikoff claims that “because it is psychologically-based, we are able to see changes to the configuration of categories…and of levels of expectation, usually 12-18 months ahead of traditional research techniques.”

Growth of online
Gee points to the growth in word-of-mouth/online buzz as a development that brand health monitors need to incorporate: “I can see these growing in the future as more of our lives get committed online…that will become probably a stronger measure of overall brand health than the more formalized questionnaire-based tracking.”

Campbell says they are starting to include this activity: “The other thing we are starting to measure are what conversations they are having about brands…are they talking to other people about brands…how much consumer propagation is happening.”

Music, no doubt, to the ears of Mark Earls, author of Herd: How to Change Mass Behaviour by Harnessing Our True Nature, and winner of best paper at ESOMAR’s 2007 Congress. He contends that we tend to copy others rather than make truly individual choices, and so when faced with reporting why we make certain decisions/our attitudes, we tend to post-rationalise. For him, understanding how we interact is key.

In general though, Earls is not a particular fan of brand trackers: “Monitoring brand health is a distraction. The real game is not with the brand but with people and their interactions - this is what shapes consumer behaviour, not brand perceptions or relationships.”

Winners and losers
Having opined about the tool itself, a few emergent themes then.

Given the economic climate and pressures, Campbell is starting to scrutinise attributes such as ‘brand willing to pay more for’ and ‘brand that is good value for the price’ on some of her clients’ trackers because “Marketers need to protect the sense that they are providing something special.

“We think it’s particularly important for marketers to try and prevent consumers from switching to lower priced or store brands…we found that the perceived gap in quality between a major brand and store brand is greater than the actual gap…then you’ve set an extraordinarily high hurdle for the brand marketer to get over once the recession is over to get them back.”

In other words, price promotions could be a false economy and ultimately damaging. “These are great times,” says Gee, “for challenger brands when old loyalties come into serious question. Like Lexus in the 1980s, an S-class car for an E-class price.”

Interbrand’s Gustafson talks of the chaos in the financial sector, particularly in the US and UK. Here, trust in financial brands has been damaged with the resultant loss of significant brand value among financial services brands, some (Merrill Lynch) more than others (HSBC) (as of June ’08).

Landor’s Ip, based in China, believes that despite the reduction in domestic growth rates, there is still an opportunity for Chinese and Indian companies to build share globally. And while Chinese companies currently lack a depth in global management, he believes that companies such as Lenovo are learning fast: “…they were very clever in appointing a CEO from outside the company, and in moving their chairman to New York.”

Future
Reflecting on the future, Campbell suggests that the research industry may well be on the cusp of a new challenge: “I think we went from ten years ago being very good at explaining why something happened…today we’re pretty good at predicting what will happen…what I think clients are increasingly looking for is to imagine a future and tell them how to get there…beyond a single brand and towards portfolio management.”

“You must have mis-recruited me,” says Chris Forrest of qualitative house The Nursery, “I’m not sure there is lots of innovation in qualitative.”

Moreover, he feels there’s no need for innovation: “Qualitative research is quite evolved… a major tool for us is the good old focus group…it’s just a very good way to get people to interact with each other.”

But far from being a Luddite Forrest is innovating, it just takes him a while to acknowledge this. And that’s not dissimilar from the initial reaction we get from others we spoke to.

So, where’s the innovation?
There are two emerging areas of innovation in qualitative, and both are online: hybrid techniques that capture quantitative and increasingly qualitative information; and, techniques that capitalise on web 2.0 and the increasingly participatory nature of the web.

These reflect some emerging ‘truths’. The fact that emotions play a more significant role in decisions than rational quantitative surveys suggest, hence the use of a hybrid model to infuse the data with emotional feedback. The fact that consumer presence and attention is shifting online, hence the use of online as a data collection method not just for quantitative data. And the extension of ethnographic techniques online where self-expression is abundant.

Qualitative agencies are starting to embrace online. As Sandrine McClure of Reperes (one of the first agencies in Second Life) puts it: “We’ve moved away from the ‘let’s do qual. the way we used to do it and let’s put it on the internet’ to now learning how to do it online properly.”

Hybrid: more than the sum of the parts
So-called hybrid techniques are not a recent innovation. Quantitative practitioners have included qualitative elements in questionnaires for some time to source rich, unprompted data. But here’s the difference: the new hybrid is driven by the qualitative folks.

For Forrest at least, the motive for developing hybrid techniques was defensive as well as progressive: “[we developed hybrid] because nobody is using all the theory we currently have about how the brain works, and we were going to conferences and finding that quanties were raiding the qual. toolbox…to make quant. surveys more interesting – they were taking some of our pie!”

Forrest uses hybrid techniques for brand communications work. They comprise three projective techniques: word association; a proximity/predisposition measure; and a semiotics-based picture sort based on the work of Gerald Zaltman. McClure deploys hybrid studies, which are similarly based on projective techniques, when developing brand platforms for new brands.

Qual 2.0
The humble blog, that bastion of self-expression, has really taken off as a platform for qualitative exploration.

Sven Arn of H,T,P Concept refers to his offering as a ‘focus blog’ and often sees it as a pre-group, a place for consumers to accurately report on product usage and discuss issues ahead of a traditional focus group: “You’re a lot closer to the moment of consumption using this technology…and the great thing about it is it takes place in their own time.” The ability for consumers to upload photos and rich media only adds to its attractiveness.

But why bother with the subsequent focus group at all? Arn says, and others tend to agree, that the humble focus group will be around for a while: “…one thing that we found doesn’t work in a blog…as soon as you start asking lots of questions, it ends up being a question and answer session and people lose their involvement, you don’t get a lot of depth.”

Unlike Arn, McClure often uses her ‘home use’ blogs standalone. Used for qualitative product testing, they are far superior to the paper diary due to their interactivity. In fact she recalls how interactivity transformed the prospects of a breakfast product. During testing most reported that the product was ‘disgusting’. But then one person came up with a preparation method that significantly improved the taste and texture. Needless to say the client was happy with this random act of co-creation!

McClure sees qualitative 2.0 as an enduring phenomenon, and one that is becoming increasingly mainstream among consumers (no longer youth-centric) and agencies.

But let’s balance this unfettered enthusiasm with a clientside perspective. Crispin Beale, recently appointed head of Facts International but hitherto a career client (Royal Mail, BT and a major electronics retailer), puts it succinctly: “online communities have been more successful than I thought they would be.”

Assessing innovation
Innovation is all very good. Clients say they want it. And we know that in competitive markets with a low barrier to entry (i.e. MR), the most innovative players tend to thrive.

Forrest, however, takes issue with the notion that clients always want it: “It’s been a truism in the industry for a number of years that if you want to win a proposal then you recommend lots of interesting methodologies…but the client says they only have budget for the focus groups. You win the project on the sizzle stuff but then they don’t do the sizzle stuff…clients like to feel they are buying something funky.”

Beale takes issue with this: “[As a client] we were always looking for innovation.” And he didn’t buy any of the arguments about innovative techniques being too risky to try: “…it’s very much talking to a network of peers, finding out who’s been using new techniques. Then if something new can give you a competitive advantage, you just try things on a small scale.”

Informed buyers would, Beale says, belong to client networks and discuss the efficacy of new techniques: “…sometimes we’ll say I’ll give it a go and then next time say it’s your turn.” Moreover, “…it’s not just the techniques, it’s the individuals. And if you get individuals that you trust and respect within the industry…then you’re more predisposed.”

McClure provides a balancing view: “Innovating still takes a leap of faith, it takes confidence. [Clients] need to have faith in your agency and confidence in themselves [to be able to sell it internally].” That said, as the number of success stories presented in conferences and publications increases, clients will no longer have to rely on that intuitive sixth sense for internal justification.

Hy Mariampolski of Qualidata, a specialist in ethnography, has more issues with interpretation than techniques: “Most practitioners don’t have the foggiest notion of how to interpret projective techniques…I’m looking for a higher level of interpretation, not a higher level of analysis.” As an example, he cites a shower study where they tried to understand why a person washed their hair five times, something only made clear through observation. The interpretation, that showering was a self-nurturing behaviour, well beyond basic functional need, fundamentally changed the category.

Beale welcomes more actionability: “…sometimes as an industry we get very, very tied up in specific methodologies, whereas what we should be getting tied up in is how we used those insights to make money or save money.”

A few months ago, during a podcast recording, Jem Fawcus of the innovative Firefish was asked about his attitude to risk. I naturally assumed that as an entrepreneur he would be pro risk-taking. After all, he and business partner Allison had taken big personal risks to establish their agency. But Jem surprised me with his anti-risk stance: “agencies are there to minimise client risk”.

It took me a few moments to realise he was right. But, as someone who’s an advocate of experimenting to drive innovation, which invariably involves risk, I believe that I was also right, and that risk-taking and the tolerance of mistakes should be an essential characteristic of the industry.

In the words of Sir Ken Robinson, the inspirational educator and innovator, “If you’re not prepared to be wrong, you’ll never come up with anything original.”

Managing risk
I am essentially calling for researchers to be given a license to innovate and be creative. In effect, for management in research organisations, as well as in client marketing, product and MR teams, to explicitly and sincerely tolerate risk and mistakes. Because until we find the perfect approach to addressing client issues, we should always be looking to improve through trial and error.

But that’s not to advocate risk-taking at all costs. That would be silly. Even the most ardent supporters of innovation would agree to sensible limits. In fact, when I recently emailed a prolific industry innovator a story about how someone at Google managed to lose the company $1m by mistake, something that one of the founders brushed off as a cost of their experimentation culture, my contact remarked that “luckily for them $1m is neither here nor there”.

It comes down to culture
There’s no fast track to creating a culture of innovation. It takes time. It takes persistence. It takes top level support.

“I believe a creative culture comes from combining skills that don’t normally come together and making sure that people don’t become too habitual in their working practices,” Derek Leddie, The Leading Edge

In time, though, the benefits do flow through:

“We were looking for a new way of measuring the equity of our brands. Repères took the risk of researching and developing a completely new approach. They asked for minimal development investment. Today we have undertaken 15 different projects with them and they have a licensed product that is selling well to other clients,” Mark Whiting, Moët Hennessy.

The client factor
Some naysayers among you may point to the power of clients to kill innovation. While that is true, the good news is that an increasing number of brands are picking up on the innovation vibe, including P&G, Tesco, Apple and Google, to name but a very few. Brands that not only like their agencies to exhibit similar traits but in many cases expect them to.

And the interesting thing is that as online brands proliferate and grow in influence and prominence, so does a culture of experimentation as symbolised by the term ‘beta’ (a label designed to warn users that websites/applications are not in final form and may contain errors).

As Mark Jones, managing director of travel and entertainment brand lastminute.com explains:

“One of the things that the lastminute.com brand represents is innovation. We don’t claim that everything put out there works first time…we’re not afraid of innovating and even getting it wrong amongst certainly a closed user group.”

Finance brand egg.com shares a similar culture, as profiled at last year’s Congress.

The pay-off
But can risk-taking and innovation lead to financial prosperity? Well, let’s take a look at an extreme example, Google, only eight years old, but already making around $6bn in annual profits. All driven by a culture built on systemic innovation. A culture that attracts and retains the best engineers, by giving staff 20% time to design and develop their own initiatives (most of their new products originate from this source), and ensuring that ideas are only ever internally shot down on the basis of robust, quantitative, objective data. A culture that embraces risk and mistakes, and sees them as the inconsequential cost of progress, a bit like a child trying to walk despite continually falling down.

But, you say, that’s hardly a relevant reference for the research community. Well, that’s the kicker. Google and the MR industry share the same mission: both are designed to quickly get people to the information they need. The only difference is, MR currently adds meaning.

Remember ‘The Cluetrain Manifesto’? It’s the book co-authored by pre-eminent marketing practitioners including Harvard University’s Doc Searls. It coined the phrase “markets are conversations”.

Well, Mr. Searls is at it again. Not satisfied with inspiring consumers to use the web to redress the balance between marketers and consumers (e.g. via blogs), he wants to move things up a gear. And web strategist Adriana Lukas is along for the ride.

VRM…what?
VRM stands for Vendor Relationship Management. Put simply it’s the opposite of CRM.

Put less simply, says Lukas, the intention is “to equip individuals and vendors with tools to enable mutually beneficial transactions and to readdress the balance between demand and supply. It doesn’t get your pulse racing!”

The impetus for change, she adds, comes from an intuitive sense of what people prefer.

Consider a street market. Commerce here comprises three elements: conversations, relationships and transactions.

By contrast, online commerce tends to be just transactions, without meaningful conversations or relationships. “Online advertising isn’t really about conversations [it’s one-way shouting], and CRM isn’t really a relationship [it’s about hoarding and potentially mis-using data],” says Lukas.

VRM is therefore predicated on the notion that empowering individuals to take charge of their data (i.e. giving them the ability to decide who to share it with, when and how) will foster better relationships between consumers and brands, and ultimately lead to healthier markets.

A new era
The inspiration for ‘Cluetrain…’ apparently came from Searls et al ruminating about the different dynamics and rules in the online world, and the inability of brands to adapt. A well-known example is where Dell gave a high profile blogger poor service. Dell’s reluctance to ‘join the conversation’ when the blogger posted about the experience resulted in a major backlash which, thankfully, Dell seems to have learned a painful lesson from.

Perhaps the tide is turning in favour of VRM given the growing support for somewhat related initiatives such as OpenID (single sign-on) and data portability. The latter is designed to ensure vendors do not lock-in consumer data to unfairly prevent or discourage switching. When Searls speaks to marketers he likens data lock-in to people lock-in (slavery), clearly hoping to elicit an emotional reaction! “We have to think about whether lock-in is necessary to managing relationships,” says Searls.

New types of data are also moving online, and vendors may be wise to consider VRM principles. Take Google, Microsoft and their recently launched health initiatives. These are ultimately aimed at holding medical and health records in one place – very scary. Both stress the security of their systems and the benefits for both health organisations and individuals. But these may not go far enough for VRM proponents.

Own terms
These are early days for the VRM movement. Although Searls is sponsored by his employer, he is open-sourcing development to attract the best and most passionate minds to the cause.

Spearheading progress from her London base is Lukas, member of the Project VRM steering committee: “VRM is a culmination of what I see the web and the social web doing to individual empowerment, taking it further from conversations to transactions.”

Through regular meetings at her VRM Hub, Lukas is developing a web-based protoype to put a practical face to the concept. But further down the road, is there is a risk of VRM stalling if marketers and consumers fail to buy into the concept?

Lukas promotes VRM as win-win. She expects brands to be able to transact far more with those consumers who take charge of their own data. The example she cites is based on her love of wine. If VRM enables her to create a ‘feed’ of information reflecting her wine likes (say drawn from her blog and various websites), and then offer this to a series of wine merchants, she would in effect be providing vendors with both the ability and permission to sell her relevant items. If anyone misbehaves (by spamming, etc.), she could remove them from the feed. The rest would benefit from seeing continually updated needs.

But all this seems a lot of work for the average consumer. Lukas agrees and says that the answer is, once the infrastructure is built, to encourage developers to build compelling VRM applications that individuals want to use.