Reflections on CES 2016: Finding Signals in the Noise

January 21, 2016

Intel_CES_2016

Whether it’s your first time going or whether it’s just another year at CES, the event never ceases to feel overwhelming. Over half a dozen hotels are involved, the actual ‘trade show’ is filled with so many booths that it is split into multiple venues covering over 2.5 million square feet, and for a full week there is basically non-stop keynote and conference content.

There is a lot of noise at CES, and pulling out different signals within it can sometimes be difficult. Press coverage is rampant – and inevitably a bit snarky at times – and you can get top takeaways from dozens of different outlets. For example:

  • AdAge highlighted things that got buzz
  • Phys.org focused on listing new tech
  • The New York Times explored how experiential even a deal making room can be, and
  • Znet highlighted the weirdest and worst gadgets

It was just my second year at CES and so I’m not expert on a historical perspective of the event, but a few themes clearly emerged from my experience.

Rebranding the event itself

For a time, the latest TV advances seemed to dominate the buzz, both good and bad, at the Consumer Electronic Show. Over the past several years, though, as the world became more interconnected and technical components became cheaper and cheaper, the tone and breadth of the event changed significantly.

Recognizing these changes, in 2015 the producing organizing rebranded itself as the Consumer Technology Association (from Consumer Electronics Association) and dropped the full name of the trade show to just CES. As CTA President Gary Shapiro noted, “Our name change is an evolution. Just as the tech sector itself has evolved and now crosses multiple industry sectors, we’ve broadened our membership to include new technologies and intersecting industries – software, app development, crowdsourcing technology, robotics, content creation, and the personalized health care and services sectors.”

In this case, the name changes follow an already established shift in the mission of the organization and the set-up of its flagship event, so it didn’t draw much attention or create any real impact. Still, it does formalize the fact that CES is now highlighting how technology will drive broad social and business changes, rather than just showing off the latest update to a gadget in your home.

Autonomous vehicles

The auto industry has become a large part of CES over the past few years. Gary Shapiro even joined in at the Volkswagen Keynote that I attended on January 5. Most of the focus was on electric vehicles, physical displays and interconnectivity. CEO Herbert Diess opined, “The car will be the most important device on the Internet.”

What didn’t get nearly as much attention via the microphones was the future of the automated/self-driving car. This was unfortunate, as one moment on the showroom floor showed me that this is what people are most fascinated by when thinking about the future of transportation.

The benefit of attending CES in person is that you can see people’s reaction to the tech in front of them. When walking the automotive area, the Nvidia booth immediately stuck out as an anomaly. Isn’t Nvidia a graphics card company? And why is this booth swarming with people? What’s going on?

Nvidia_CES_2016It turns out that Nvidia has become a strong player in the automotive area by developing Nvidia Drive to create automated systems to “enable cars to see, think, and learn.” Employees at the booth were surrounded by folks interested in understanding the technical set-up for gathering information on the road as well as the neural networks and machine learning that are being develop to create automated driving experiences.

While looking at futuristic car designs draws one’s eye, people’s minds are sharply attuned to how their car may help them drive in the future.

Partnerships rule

Just introducing the new cool gadget isn’t going to cut it anymore. Every keynote and press conference wasn’t complete without other companies, entertainers, or politicians gracing the stage to talk about projects and partnerships that would shape the future of society.

Panasonic_Denver_Smart_City_CES_2016At the Panasonic press conference, I got to see the mayor of Denver, Michael Hancock, take the stage with Panasonic N.A. Chairman and CEO Joe Taylor to talk about their smart city initiative. Ford announced its efforts with Amazon to integrate the Echo system into future smart vehicles. Google appeared on stage at the LG press conference to highlight their partnership to develop more secure smart things. And Samsung had Microsoft’s Bryan Roper demonstrate natural language queries on Windows 10 that will drive their smart devices.

Finally, there was no bigger experience than Intel’s keynote. From knowns like A.R. Rahman, Oakley, X Games, and Lady Gaga, to smaller start-ups like Daqri, there was a constant steam of people demonstrating what can be made possible by Intel’s latest line of chips.

While competition still abounds in the tech sector, the future growth of smart things, augmented/virtual reality, drones, and robots, will be contingent on various kinds of shared systems. The potential of interconnectivity for both commercial growth and societal benefits will only come about if the devices and systems that hold promise in this area can find ways to work together via partnerships, APIs, and universal standards.

Some closing observances

Samsung Gear has been available, but with Oculus Rift taking pre-orders at CES, virtual reality fully put its stake in the marketplace this year. I’ve tried the headset a few times and within minutes gotten “VR sickness.” I await future reports on the return rate of these devices.

There are car manufacturers a plenty now at CES, but sadly they have no idea how to staff the show floor. Turn left or right at any other booth and you can find a staff person to talk to – sometimes even at a leadership level – but from Volvo to Ford to Toyota, it was nearly impossible to find anyone to talk to about their latest efforts.

The smallest things can create the biggest emotional reaction. Panasonic showed off its transparent TV screen in a natural looking living room setting and people crowded around to watch it with expressions of joy and wonder plastered across their face.

And finally, no Las Vegas experience would be complete without an Elvis moment….

Elvis_CES_2016

BY MATTHEW QUINT


KIND Snacks: Starting a healthy conversation

December 23, 2015

Daniel Lubetzky had the lofty goal of starting a company both economically sustainable and socially impactful. In 2004, after ten years as a social entrepreneur, he started KIND Snacks. Now valued at more than 700M USD, the company still follows his vision to build a community, a movement, and ultimately a company with the goal of doing the right thing.

It was early in his career, however, when Daniel Lubetzky learned the hard way that a mission does not sell a product, the product sells the product. Back in the early Nineties when he was starting PeaceWorks, Lubetzky methodically walked the streets of Manhattan selling dried tomato spreads. Peaceworks produced Mediterranean spreads and other goods, but Lubetzky’s pitch focused on the company’s model to try to promote peace in the Middle East by sourcing and partnering with companies from regions in conflict — Israel, Palestine, Egypt, Turkey, Indonesian, and Sri Lanka. He wouldn’t leave a store until they either bought his product or told him what he should do to improve it. Through these interactions with store buyers he realized Middle East peace wasn’t selling the spreads, the spreads were selling the spreads. So, he soon put quality first, even when it was more time consuming and expensive.

daniel-headshot

As Lubetzky himself notes in his book Do the KIND Thing, “Yes, increasingly consumers are focused on ensuring that the companies they buy products or services from are genuine members of their communities, doing their part to make this a better world. But that is not a substitute for delivering on the functional merits. First and foremost, the product must stand on its own.”

After a decade of positive press with KIND snacks, it came as a surprise to Lubetzky when the FDA sent KIND a letter this year indicating that four of its bars were in violation of marketing labeling guidelines for the use of the word healthy and the plus sign.

Like many others would do, KIND responded immediately and adjusted its labels. Unlike others, they took the slap on the wrist as a way to start a conversation on what it means to eat healthy and how the FDA guidelines may be misleading. On December 1, 2015, KIND submitted a citizen petition to the FDA, asking the agency to update their requirements related to food labeling in order to reflect a shift in dietary guidelines that focus on whole foods that help achieve and maintain wellness, rather than on specific nutrient levels.

kind_fda_infographic_instagram_v1a_final-1

This move, which if made by a different snack company could look like just another lobbying effort, has been embraced by KIND’s stakeholders as a way of doing something good for the community: aiming to help people recognize and understand distinctions between whole foods and processed, low-fat “healthy” foods. This permission is given because the snack company has built its brand with the hope of spreading kindness. One example of this is the #kindawesome initiative –part of the company’s KIND movement- that is“a little program we cooked up to celebrate kind acts everywhere, spot a kind act, give a KIND snack. On us!” Anyone can send KIND snacks to recognize an act of kindness via twitter, Facebook, or email to people they’ve spotted doing everyday kind things.

See Daniel Lubetzky at BRITE ’16 (March 7-8, NYC) to learn more about his story and KIND.

BY GABRIELA TORRES PATIÑO


NEW RESEARCH: Insights on the Future of Data Sharing

November 19, 2015

The high pitched fervor over ‘big data’ has died down a bit, but only because companies are more focused on putting their noses to the grind stone to determine how to more effectively collect and analyze data, of all sizes, to improve their business performance.

The Center on Global Brand Leadership, in conjunction with the Aimia Institute, conducted a global study of more than 8,000 consumers to look deeper into the types of data consumers choose to share with companies, and what factors drive their willingness to share this data.

We encourage you to examine our full report, What Is the Future of Data Sharing?, which offers information and insights on consumer attitudes towards data sharing, how those views are affected by industry category and country, and how brand trust positively impacts a willingness to share data.

In this piece, I will highlight three particular areas to help businesses think more strategically about how to better influence their customers to share data, and create more meaningful relationships with them.

1. The Four Data-Sharing Mindsets of Consumers

My co-author, David Rogers, and I wanted to better understand how certain attitudes towards data sharing might help predict which segments of consumers are more willing to share data. Through a factor analysis we were able to effectively split our respondents along two differentiating attitudes:

  • Defensive attitude axis
    This categorized consumers according to whether or not they had: 1) made up personal details to avoid giving away real information, or 2) had taken steps to limit companies from tracking them online.
  • Sharing attitude axis
    This categorized consumers according to their attitude towards sharing personal information to receive relevant offers and discounts.

Within those differentiated attitudes, we further identified four data-sharing mindsets:

  • Defender (43% of survey participants): Consumers who are not happy to share and are guarded against companies asking for their data.
  • Savvy and in control (24% of survey participants): Consumers who are happy to share, while keeping control of how much, when, and with whom.
  • Resigned (23% of survey participants): Consumers who are not guarded, but aren’t happy about sharing, either.
  • Happy go lucky (10% of survey participants): Consumers who are not guarded against sharing their data and are happy to do so.

Data-Sharing-Mindsets

 

[Click here for the full infographic.]

One of the surprising things we found was that 70% of the people who are happy to share their data for relevant value from a company are also taking defensive actions at times to protect the data they share. Being attentive about one’s data and being happy to share it are not mutually exclusive.

Most interestingly, among all four Mindsets these “protective but happy to share” consumers – the Savvy and In Control mindset – are more comfortable with how companies handle their data, more willing to share various data points, and more influenced by brand trust.

While we are wary of making predictions of generational attitudes into the future, we do believe that the impact of growing up in a hyper-connected society will remain as generations grow older. Given this, the much larger percentage of Millennials and Generation X members in the Savvy and In Control mindset should offer companies hope for building stronger consumer relationships over time.

What is the takeaway for companies? In order to build a “win-win” scenario with your customers when it comes to collecting their data, a company must provide transparency about how they are using data and also give consumers a level of control on how they choose to share their data. In addition, companies must demonstrate how customers will get value from sharing non-required data points.

2. People Do See Value in Traditional Loyalty Program Offers

Not surprisingly, consumers show clear interest in traditional loyalty/rewards program offers and benefits.

Offer-Influences

 

[Click here for full infographic.]

Sharing an e-mail address in return for an offer was by far the most common piece of data consumers were willing to share, and this was true across all age demographics. When looking towards the future, however, we found that younger generations – Millennials and Generation X – were up to twice as likely to share other non-required types of data. For example, 23% of Millennials and 16% of Generation X were willing to share their mobile phone data, as averaged across all 10 offers, while only 11% of Boomers and 8% of the Silent Generation were willing to do so.

As the data shows, consumers report greater interest in offers that are more direct and financial in nature – rewards, cash back, coupons – but a majority do also show interest in offers that are less direct and more experiential  – recommendations and tools to help them make decisions. Given this, firms have a real opportunity to seek information from their own customers and develop personalized offers that match the interests of different groups of customers – sometimes at lower costs than promotional efforts with financial incentives.

3. New Kinds of Data-Enabled Benefits Present Future Possibilities

To better understand where the future might lie for companies, we also wanted to examine new kinds of value that are being developed out of personal data sharing efforts. Netflix and Amazon, for example, spurred the use of aggregated customer data to improve individual user experiences through product recommendations. And services such as Mint and Billguard are compiling financial information and providing insights back to consumers in order to help them make better decisions and protect against fraudulent or unauthorized finance charges.

We classified these new efforts as “data-enabled benefits” and asked respondents how likely they were to be interested in exchanging non-required personal data for such offers.

Data-Enabled-Benefits

 

[Click here for the full infographic.]

Given the fact that these new types of benefits entered the marketplace in just the past few years, we were encouraged that many consumers already agree that there is an interesting value exchange to be had by exchanging their data in return for these benefits.

Once again, the Savvy and In Control mindset shows the greatest affinity towards sharing data in exchange for these new kinds of benefits:

Mindsets-Data-Enabled-Benefits

 

As firms constantly aim to innovate and develop creative new experiences for customers, this data points to a clear opportunity for them. Companies can build their brand and strengthen customer relationships by crafting value-added features for customers that are developed by analyzing and sharing insights on the very data that they hope consumers will share with them.

As Prof. Michael Schrage from MIT has nicely phrased it, “Making customers better makes better customers…. Customers need to learn from you almost as much as you need to learn from customers. Serious customer experience design debates in organizations should focus almost as much on customer learning as customer delight.”

BY MATTHEW QUINT


DOES UNLIMITED STREAMING MUSIC HAVE A MODEL THAT WILL LAST?

September 22, 2015

This post first appeared on the AIMIA Institute blog.

This is the second part of a two-part series. Click here to view part one.

Over the past decade, literally hundreds of start-up companies and established tech leaders have built free streaming and subscription services for music. With good reason, since in 2015 alone over one trillion songs have been streamed. Google and Amazon joined the fray a few years ago, but the big mainstream splash occurred this summer with the launch of Apple Music. Even casual music fans are now aware they have options to sign up not just for free internet radio, but also for paid subscription music services.

Although it almost seems silly to wonder whether today’s streaming music business models will last, I felt for years that their financial stability was not necessarily secure. So, I feel the question is worth asking.

First of all, it is not a good sign that musicians are aggravated about how they are being compensated. Artists have been making headlines by rebuffing the tiny royalty payments they receive from such services. The biggest news was Taylor Swift pulling out of Spotify, and a range of star-studded performers, led by Jay-Z, are re-launching their own subscription platform, Tidal, with the promise that a greater share of revenue would go to recording companies and artists.

Subscription streaming in France

There is a need to take a deeper look at the financials behind these services. Let us say that the word “obtuse” is a generous way of defining the transparency of these deals. When I sent a musician friend of mine this Ernst & Young analysis of how Spotify in France splits its revenue, he remarked, “Meet the new boss, same as the old boss.” The music labels, as before, take in the majority of post-tax revenue.

Where is the money in music?

Most artists receive fractions of a penny on every track played, but almost none of the streaming music services are yet making any profit. Plus, there are lawsuits and regulatory changes (here and here) that could make the financials even more challenging. The deals Apple Music made with the labels are actually under investigation, because of the possibility that some provisions could be anti competitive.

Despite all of this, a big-picture look at U.S. music revenues (2014 RIAA Music Industry Shipment and Revenue Statistics) makes it clear why this model is here to stay. The growth rate of streaming services has been extremely rapid, nearly tripling between 2011 and 2014. Next year, streaming services will likely provide a larger percentage of music revenue than physical music sales. If these “disruptive” services are now the second-largest source of revenue for the music industry, they are not likely to disappear anytime soon.

As streaming use has grown, physical and digital download sales have shrunk, and the overall revenue for the music industry has plummeted. This decline has less to do with these new forms of legally purchasing, or listening to music, than with the opportunities to easily “share” music via the Internet. Not to mention numerous years of an economic downturn and the simultaneous growth of other forms of digital entertainment that grab people’s eyes, ears, and cash.

Since 1973, the peak of the industry in the United States occurred during 1994 through 2000, with the average American spending $60 to $70 per year on music. At present, that number is down to close to $20.

RIAA-BI-music-industry-revenue-trend

Consumers adopt paid entertainment services

In the midst of this, I believe that the subscription model actually offers hope for the industry. Marketers seeking to understand the potential future behavior of the music audience can see signs of the future in other entertainment media.

A majority of the U.S. public is now accustomed to paying for cable TV, Internet service, and mobile phone service, with streaming video services about to hit mass market adoption as well. Subscription service competition is rampant, so there is a real possibility that a majority of households in the country will set up a subscription streaming music service as part of their annual entertainment spend.

To grow users, the services will need to add pricing tiers at the lower and higher ends. This could start, for example, at $4.99/month with some restrictions (and/or some ads). Higher prices could be charged for added services (e.g., Tidal offers a $19.99/mo. option for lossless quality audio).

The ad-supported streaming music model of the future may not look quite like it does today, depending on regulatory decisions, lawsuits, and future licensing negotiations, but with Pandora now generating $1 billion in annual revenue and building a loyal brand following, it is hard to believe that the model will disappear either.

After years of thinking that this unlimited access to music was too good to last, I’m now wiping my brow and smiling. But I have knocked on wood, as well, just to be safe.

What can marketers outside the music world glean from this industry and apply to their own? The music streaming sector has evolved greatly over the last decade, and industry leaders now offer an increasingly personalized experience. Spotify offers their subscribers “Discover Weekly” which is an ultimate personalized playlist based on recommendations from analyzing listening history. With such advanced capabilities for marketers to collect data about their customers, they are able to offer truly personalized and customized experiences like never before.

Examine your business to see if you can encourage customers to move past the ownership model to a “renting” or subscribing one. The rise of the sharing economy shows us that this model has become more prominent. How might a similar disruptive innovation change your industry?

BY MATTHEW QUINT


COULD STREAMING MUSIC PREVENT AN INDUSTRY SWAN SONG?

September 22, 2015

This post first appeared on the AIMIA Institute blog.music_streaming_logos_back

Back in 2005, I discovered Rhapsody, a first-of-a-kind subscription-based music streaming service, and my jaw dropped. What? For the same money I spent buying just one album every month, I can listen to every new album that came out that month, as well as a catalog of almost every album ever released.

So, for the past decade, I have easily perused music of all kinds, checking out knowns and unknowns.

Right now, for example, I am taking a quick listen to some of the latest album releases, from Tame Impala’s Currents — I appreciate that the song craft is not predictable, but it is too produced for me — to Future’s DS2 — good grooves, but I am turned off by misogynistic lyrics — to Wilco’s Star Wars — a favorite band of mine and a nice new album.

With the launch of Apple Music in July, this kind of offering fully hit the mainstream, but the evolution of streaming music to this point provides a fascinating look at the psychology of consumers, brand building, and how this business model is affecting music industry.

I am Not Buying It

I am a big fan of music and established many friendships, both offline and online, through this shared passion. Once I discovered Rhapsody in 2005, I was thrilled to spread the word to all of these friends. To my surprise, however, they did not buy into my excitement.

“So, do you own the albums?” my friends would ask.

“Well, no,” I would reply. “But as long as you pay your monthly fee, you continue to have access to everything, and there is rarely an album I can’t find on Rhapsody.”

Their typical response: “Hmmm. Sounds interesting, but I am not sure I need it.”

Mind you, this was coming from people that likely spent over $100 a year purchasing music, whether CDs or mp3s. There was psychological resistance to paying for access to an album without getting ownership. People were comfortable relinquishing ownership for other types of long-form media, whether borrowing books from a library or renting movies from Blockbuster, but they could not buy into this idea for music.

Unlike most books and movies, songs and albums are listened to over and over again, so the value of ownership is driven by both emotional and functional benefits. I believe people also were skeptical that a service like Rhapsody would even last. So, they preferred the idea of buying one new album each month that they could listen to forever (if they liked it), rather than paying each month for unlimited access to millions of albums because of the perceived potential of losing that access at any time.

In 2006, though, one brand changed the model for streaming music, Pandora. Because it mimicked the radio model, Pandora fit an existing expectation of “temporary” music access. Pandora took the radio listening experience to a new level with personalization. Once you picked a single song, album, or artist, Pandora produced a stream of music matching that style. Like radio, all you had to do was suffer through a few ads.

Pandora is not designed for users to select and immediately listen to any particular song or album, but without any fee (and no DJ chatter), people were happy to have a cool, new passive listening experience using the web.

Brand Building Changes the Game

Is it better to be a first mover or a fast follower? The streaming music model offers an interesting case study on this oft-debated question.

Rhapsody_App_badge_loRhapsody was developed and launched independently in 2001, but it was acquired in 2003 by RealNetworks, a pioneer in developing the capability to steam audio and video content over the internet. Despite creating an innovative model for listening to music, with licenses from all the major record labels, Rhapsody could not escape the shadow of iTunes, which launched that same year.

By October 2003, Apple’s iTunes, originally developed for the iPod, was also compatible with the Windows operating system and everyone with a computer could own digital music with a few clicks. By combining an easy way to purchase music “by the drink” through iTunes with the iPod, the portable music device of choice, Apple usurped any earned attention that might have come to Rhapsody, even though Rhapsody offered users the ability to purchase and own most of its licensed songs and albums, as well its subscription model. Without an investment in marketing and PR dollars to truly compete with iTunes, Rhapsody continued to trudge along in relative obscurity, gradually growing a small user base.

spotify-update-app-iconOther entrepreneurs were spurred by the possibilities of streaming music. Spotify, launched in Sweden in October 2008, smartly combined the ad-based and subscription models. This allowed it to grow large numbers of casual users who were willing to submit to ads and some service limitations, while also gaining more dedicated music fans willing to pay for full capabilities and no ads.

By 2011, Spotify was available throughout most of Europe and the United States. It not only surpassed Rhapsody in its number of subscription users, but also boasted another three to four times as many registered users who picked a free option.

Rhapsody was run by an older Web 1.0 team, who had likely become risk averse after the dotcom bubble burst. Rhapsody management focused on a stable, buyer-only business model with modest growth expectations. Spotify was developed by experienced entrepreneurs whose business model and growth plan were driven by VC funding and the goal of a high valuation based on rapid user growth and buzz. The Spotify team employed Web 2.0 principles: a freemium model, active social media integration, an open programming interface (API), and a budget for marketing, PR, and advertising.

Rhapsody was a first-mover, but it did not do much to build a brand, while Spotify—although it came later—proudly waved its flag as a disruptive agent that would transform the way music was consumed. That message got the tech startup community and its growing user base to spread the word along with Spotify. Today, Rhapsody has around 2.5 million paid users while Spotify has around 20 million paid subscribers and an additional 55 million active users of its ad-supported service.

Score one for the fast follower.

And in part two of this two-part series, I will discuss whether or not all of this will last.

BY MATTHEW QUINT


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