Focus On: Peter S. Fader

Can RIM Reinvent Itself?

Posted on February 4, 2013

logo_blackberry_boldThroughout 2012, many analysts were predicting that RIM’s days were numbered. And in one way, that turned out to be true.

Last week, the Canadian firm announced that it would no longer be known as RIM – or Research in Motion – and instead was rechristening itself BlackBerry, after its iconic smartphone. Along with the change, the company introduced a new line of devices based on its latest operating system – BlackBerry 10. Combined, these actions have been widely regarded as a last-ditch effort on the part of the firm to remain a viable player in a market dominated by Apple’s iPhone and devices that run on Google’s Android operating system, such as Samsung’s Galaxy. (In the last quarter of 2012, BlackBerry’s U.S. market share dropped to 1.1%.)

Although many analysts were impressed by the latest BlackBerry devices — one of which incorporates a sleek, touch-screen interface, a “smart camera” and other features — some were disappointed that the firm’s newest offerings wouldn’t be available in the U.S. until March. Already, BlackBerry had delayed the launch of its new operating system for more than a year, and the additional delay sent a negative signal to BlackBerry investors. Following the launch, the company’s stock fell by 12%.

“This looks like a huge uphill battle for BlackBerry,” says Wharton emeritus management professor Lawrence G. Hrebiniak. “If market share equates with power, BlackBerry is close to powerless.” The company offers far fewer apps than its competitors, he notes, and its enterprise user base is continually eroding as companies move to allow employees to rely on their own devices for office email. In addition, “other smartphones are more powerful than the latest BlackBerry offering.”

BlackBerry “needed a bold, ‘swing for the fences’ move, and all we got is a so-so clone of other recent phones,” says Wharton marketing professor Peter S. Fader. “The image of the company revolves around a no-nonsense phone for busy people who don’t have time or patience to type on a virtual keyboard or to monkey around with apps. Many of the people who have clung to a BlackBerry — despite the social pressure to leave it — have done so because of the real keyboard it had traditionally featured, and the many conveniences that come along with it…. The new BlackBerry should have boldly featured a real keyboard and lots of keyboard-based conveniences that iPhones — and their myriad clones — can’t offer.” He adds that although BlackBerry announced it would offer a new phone that incorporates a traditional keyboard, “most people are totally unaware of it. Instead, all the hype is around marginal features that don’t offer any meaningful or long-lasting differentiation.”

“They had an incredible hold on the very large market segment that loved their keyboard,” notes Wharton marketing professor Jerry Wind. “They made huge mistakes by not keeping the keyboard and building around it the necessary software and quality services” to compete with Apple, Samsung and others.

In addition, the company’s decision to reform its brand around its well-known namesake smartphone seems like a step backward to some observers. “The rebranding strikes me as having a certain irony,” says Wharton management professor Daniel A. Levinthal. ”Now that the BlackBerry as a device is becoming associated in people’s minds with a somewhat dated piece of hardware, [BlackBerry is] defining the company’s identity in terms of this particular artifact.

“Adding to the irony,” Levinthal continues, “is that the alternate business strategy for RIM would have been to embrace their secure data network as the core asset and decouple that from a propriety piece of hardware. The ‘M’ in Research in Motion — connoting ‘mobile’ — is arguably more a contemporary statement than ‘BlackBerry.’ They have doubled-down on the propriety hardware in all ways … and, I think, have lost the last opportunity to reinvent themselves as a software/service company. They have an installed user base and can certainly generate some revenue from that, but the longer-run competitive dynamics look bleak.”

According to Hrebiniak, however, there’s still hope for the company. “Mobile carriers like BlackBerry’s operating system,” he points out. ”There’s no guarantee that this applause will generate sales, but it could help.” And if enterprise customers become more security conscious again, they could gravitate back to BlackBerry, he suggests. “But, in my opinion, the biggest hope for BlackBerry revolves around competition. A third or fourth player increases competition and keeps [company] leaders on their toes. This sparks innovation and lower prices. Apple has shown some weakness of late, which could help BlackBerry.

“Finally, people sometimes root for and help the underdog, and BlackBerry certainly fits this category,” he adds. “Super Bowl Sunday has probably affected my thinking, but I think that BlackBerry can make it, despite the very long odds…. The underdog occasionally pulls off the upset.”

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Advice for Apple: Strategizing a Lower-end iPhone

Posted on January 14, 2013

cheapiPhoneA lower-end iPhone could prove to be a smart move for Apple, Wharton experts say, but the company has to proceed carefully.

Following reports that Apple is at work on a lower-priced iPhone expected to be in stores by the end of the year, Wharton operations and information management professor Eric Clemons notes that versioning is nothing new for tech products: Adobe Photoshop has a lower-end “kid sister” in Photoshop Elements, for example, and many database software programs offer scaled-down applications intended for student use.

“Luxury goods manufacturers often need to protect their image: A cheap Bentley or a cheap Mercedes would be a bad idea — the original G20 Infiniti sedan was an awful idea,” for example, Clemons says. “But, if done properly, a lower-end version can work well — the new Infiniti G37 is a wonderful car. So Apple needs to make sure that a starter iPhone increases sales, does not cannibalize sales excessively from the full iPhone and does not damage the exclusive image of the iPhone.”

While Apple is known for developing cutting-edge devices, “sometimes it also makes sense to fill the lower end of the product line as well,” according to Wharton marketing professor Peter Fader. Although some critics suggest that news of a lower-priced iPhone indicates that the company is no longer focusing on product innovation as it once did, Fader takes an opposing view. “Developing a low-end device doesn’t necessarily prevent or distract them from simultaneously pushing ahead at the high end,” Fader notes. “Furthermore, there are a lot of valuable commercial opportunities to be gained at the low end.”

Apple has long been known to stick to its guns about charging a premium price for its products and, for the most part, a critical mass of customers has been more than willing to pay it. Kendall Whitehouse, Knowledge@Wharton’s technology and media editor, recalls that back in the 1970s, the company’s Apple II personal computer was competing for market share with products from Atari and Commodore. While the latter two became embroiled in a price war that dropped their respective systems’ price to a fraction of the Apple II, “Apple remained above the fray, held onto its high price — and large margin — and did very well,” Whitehouse notes. “In the next decade, Apple continued to charge a premium for their Macintosh systems when confronted with competition from lower-priced PC clones, even if it hurt their market share.”

After launching the iPod in 2001, however, Apple gradually introduced a line of lower-priced models. “But this was driven largely by the falling prices of flash memory and Apple’s desire to drive revenue through iTunes,” says Whitehouse, noting that while Amazon.com has based its strategy for the Kindle around selling the device at cost — or even at a loss — and making its primary revenue through content for the tablets and e-readers, Apple has done the opposite.

“While songs and apps sold through iTunes generate a strong revenue stream, iTunes’ main function is to drive sales of Apple hardware: iPods, iPhones and Macs,” Whitehouse points out. “Of course, getting iPhones and iPods into people’s hands produces a halo effect for their laptop and desktop computers, so [a lower-end iPhone] may make sense if they see greater revenue through these upselling opportunities.”

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The Pope on Twitter: 140-character Sermons?

Posted on December 4, 2012

As probably the whole word knows by now, Pope Benedict XVI plans next week to start tweeting in eight languages. His Twitter handle is @Pontifex, and he has already generated several hundred thousand followers even before his first official tweet, scheduled for December 12.

The pope’s decision to open a Twitter account raises a number of questions, including: Is this a good marketing strategy? Will it help the Catholic Church reach out to younger generations, and will those younger generations tweet back? What kinds of messages should the pope tweet? Finally, does the pope seem a little late to the game, since, as FastCompany.com noted today, he joins “an impressive, highly retweeted group of religious leaders,” including such names as the Dalai Lama, Joel Osteen, Rick Warren, the Rev. Jesse Jackson, Sr. and Rabbi Shmuley Boteach.

Wharton marketing professor Jonah Berger suggests that the pope’s new communication strategy is a good marketing decision for the Vatican. “As technology advances, religion often gets less attention. This raises the church’s profile and reminds people it is relevant to [our] day and age.” As to whether this strategy will help the church reach the coveted younger generation, Berger predicts that most of this age group won’t respond, “but some will. Churches have a target market just like Pepsi does. And this is another channel to reach that market.”

What kinds of messages should the pope tweet — and what kinds should he avoid? Berger’s advice: “Be authentic. A formal ministry in Japan started tweeting using slang, but people found it incongruous. No one wants to hear the pope talking about YOLO [you only live once] or using phrases like OMG. Tweeting useful information about faith or inspiring stories will spread their ideas while staying true to the [church’s] core message.”

Wharton marketing professor Peter Fader says the pope’s foray into Twitter “seems entirely sensible and natural to me. Twitter is nothing more than a personalized broadcasting channel. No one would think twice if the pope had his own radio station or cable channel. Perhaps he already does.” It makes sense for him, “and any other highly visible person/organization, to have a way to share information, perspectives and other relevant content with followers.”

In that respect, Fader sees Twitter as “very different from Facebook. I actively use the former, multiple times a day, but very rarely use the latter. I find it very valuable to be able to offer one-way broadcasting about my work, and find it equally valuable to read the broadcasts from other people/organizations that interest me. I’m not interested in having conversations.”

Fader laments what he describes as Twitter’s “cutesy name. If it were just called ‘micro-blogging,’ no one would think twice or raise eyebrows that the pope is doing it.”

According to an article in The Wall Street Journal, the Vatican already uses other social media tools such as Facebook and YouTube. In addition, the pope’s “first tweets will be in response to questions put to [him] via Twitter about faith; the pope isn’t likely answer queries unrelated to religion.” The Vatican’s media advisor adds that the pope “won’t physically write each tweet, [but] will be personally involved in what it says,” the Journal reports.

Given that other religious leaders are already tweeting, does Pope Benedict XVI seem a little late to the game? “So maybe he’s a little late, but better late than never.” Fader says. “And as long as [Twitter] is used in an appropriate manner – and I’m sure that will be the case – then I don’t see any downsides to it at all.”

Adds Berger: “No one is counting. Or expecting the pope to be on technology’s bleeding edge.”

 

 

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Navigating the Multi-channel World of Modern Marketing

Posted on November 21, 2012

Technology has altered consumer product marketing from a top-down, somewhat paternalistic enterprise to an immediate experience that has more in common with a door-to-door salesman. Within the last decade, hordes of middlemen or third-party distributors have been obliterated from corporate flow charts. Instead, major manufacturers are hearing their products praised and castigated directly from consumers. And many of those consumers have a potentially powerful and infinite network of “friends.”

Measuring and managing that constant flow of feedback is the greatest challenge facing modern marketing managers, according to Peter Fader, a Wharton marketing professor and co-director of the school’s Customer Analytics Initiative. Fader moderated a panel discussion on the topic at the recent Wharton Marketing Conference.

Within the 90-minute discussion, six experts from leading consumer products companies described technology in general and social media in particular in a variety of ways, ranging from gift to burden. They toyed with words like “enabler,” “channel, partner,” “buzz meter,” “tsunami of data” and “problem generator.” One panelist hailed digital technology as a teaching moment because companies that monitor the web may uncover misinformation about their products and respond.

“There’s way more data now, and it’s a lot more work. Those days of meeting once a year to launch a single marketing campaign are over,” said Ryu Yokoi, senior brand manager for Unilever, a multinational company with headquarters in Rotterdam and London. “On the other hand, the feedback is very tangible and a lot more fun.”

A self-described “pop culture junkie,” Yokoi begins his day scanning the digital landscape for innovative promotions from Amazon to Living Social, and for online chatter about Lipton Tea, his major responsibility for the company. Other Unilever brands include Hellmann’s, Dove, Breyers, Ben & Jerry’s, Skippy and Vaseline. “The one place I don’t want to see our name is the “Condescending Corporate Brand” page on Facebook, [which] rips companies for posting what they consider dumb and insulting content on their Facebook pages.”

Frequently characterized as the word-of-mouth platform, Facebook is a critical tool, but not the only tool for getting out a marketing message on social media, noted Janis Fratamico, director of client experience for IBM Global Client Centers. “The truth is a lot of these Facebook pages have no value. It’s easy to be overwhelmed by the quantity and we recognize that we are not effectively using all the social media that is out there already.”

According to Amy Saunders, director of Johnson & Johnson’s digital center of excellence, the New Brunswick, N.J.-based company uses everything from old-style marketing, such as putting promotions on hospital maternity ward TV networks, to new media-influenced strategies, like analyzing skin problems based emailed photos from consumers.

As online buying continues to grow, so does showrooming, a trend in which consumers shop around at retail stores to examine products and pick the brains of sales clerks before actually buying from an online source offering cheaper prices. “It is a concern because we don’t want to be competition for our retailers,” noted Saunders, who has crafted multi-channel marketing strategies for J&J brands including Neutrogena, Aveeno, Listerine, Visine and Zyrtec.

Her concerns were echoed by Jeremiah Marble, a product manager for Microsoft. ”People want to touch a new phone and experience it in a tangible way,” he said. “Striking that balance between virtual and real customer contact is a challenge.”

Jeff Bedard, marketing director for Chase Sapphire, shared an anecdote that revealed the potential hazards for marketers from an annoyed customer with time to burn and a smartphone in his or her hand. Chase Sapphire is the credit card division of New York-based JPMorgan Chase.

A customer, he recalled, was annoyed with the long line ahead of her at a Chase bank branch. She grabbed her phone and began trashing the bank’s service in a tweet. A Chase social media monitor responded immediately to the tweet and asked if he could help her transact her business online instead of waiting for a teller.

While Chase Sapphire strives to be cutting edge in a competitive business, Bedard calls new technology “a gift to marketers,” but inevitably problematic. “The challenge is to uncover those problems and solve them before they get out of hand,” he said.

Technology can introduce moral dilemmas as well, noted Avi Mannis, vice president of marketing for Hawaiian Airlines. To illustrate, he proposed a common scenario in his business: lost luggage. “Do we go out of our way to help the customer with thousands of Twitter followers or the person who has none?” he asked. “Sometimes, technology can be a burden.”

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Can Energy-consumption Data Change Consumer Behavior?

Posted on November 14, 2012

Do you know how much energy you consume every hour? Most would say that’s a hard — if not impossible — question to answer, but San Francisco-based utility provider Pacific Gas and Electric (PG&E) now has access to that information for millions of its residential customers, thanks to its “SmartMeter” program. PG&E’s SmartMeters are its prime vehicle to fulfill its mandate from the state of California to get people to use less energy.

Since 2006, PG&E has used SmartMeters to collect consumer energy-use data in Northern California. The devices measure residential customers’ electricity and gas usage at hourly and daily intervals. The goal of the program, according to PG&E, is to help customers better understand their energy usage and find ways to save on their energy bills. According to the PG&E website, customers who participate in the program have the ability to be notified by email, text message or phone when their utility use “is moving toward a higher-cost tier.”

The energy consumption data will supplement existing information on customers’ demographics, billings and payments, call center reports and utility pricing, among other variables. The company states that by studying all of this information, it hopes to gain insights into how its SmartMeter platform might be used “to engage customers, reduce energy consumption and offer customers appealing alternative pricing schemes.”

But with so much data to sort through, that’s a tall order. PG&E has partnered with the Wharton Customer Analytics Initiative (WCAI) to lead the effort, which will help identify academic research groups across the world to study the data. Peter Fader, Wharton marketing professor and WCAI co-director, notes that the PG&E project has wider implications for businesses that increasingly use data analytics to extract business intelligence, by offering a model on how to determine the volume and quality of information they need to track in order “to change behavior in meaningful ways.”

“This is a unique data set, and we don’t know of any other that has this level of granular data,” noted WCAI research director Ben Adams during a webinar announcing the research project earlier this month. In addition to energy usage data, researchers will get information about PG&E’s energy efficiency rebates, demand response programs and special rate plans that were available to the customers covered in the data. PG&E will safeguard customer privacy and sign nondisclosure agreements with researchers, company executives said at the webinar.

Studying data collected by the meters will help the company figure out “which message to send to which household at which time in order to get them to conserve energy,” says Fader. “Our job is to find the right academics out there who will help them answer [these] questions.” Those who are selected will receive PG&E’s data sets, and are expected to spend a year studying them before they file their findings and recommendations.

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NBC’s Olympic Tape Delays: #Failing All the Way to the Top?

Posted on August 3, 2012

Yesterday, American gymnast Gabby Douglas won a gold medal around 1:30 in the afternoon in the Eastern time zone.

She won the women’s all-around title again about eight hours later.

Or so it seemed, thanks to one of the most talked — and tweeted — about topics of the London Games: NBC’s decision, due to the time difference between the U.S. and the U.K., to tape-delay many of the biggest-name events so they can air in prime time.

NBC has taken a lot of flack for making that call, along with other aspects of its coverage. The outcry has spawned the Twitter hashtag #nbcfail, which viewers have been appending to their complaints. The network has countered, however, with huge ratings for the prime-time broadcasts. Those ratings — more than the 2008 Beijing Games — seemingly support in-house research that those who have indulged in spoilers before the events are shown on television are actually more likely to watch them.

So, who’s right? The network or Twitter Nation? And how should it affect the future of Olympics coverage?

“New media platforms, from cable TV to the Internet and now mobile and online video, have made media planning much more challenging for media providers,” says Elea McDonnell Feit, a Wharton lecturer and executive director of the Wharton Customer Analytics Initiative (WCAI). “Media companies like NBC are now faced with the challenging problem of figuring out what content to put where and when. The best solution really depends on how viewers want to use media.”

Feit suggests that most prime time television viewers “have a fairly low level of involvement with the Olympics and just want to turn on the tube and be entertained by a few of the most interesting events from the day. They probably don’t even notice the tape delay, unless NBC really messes up and throws in a spoiler.”

In 2010, Feit, Wharton marketing professors Eric Bradlow and Peter Fader, and doctoral student Pengyuan Wang worked on a project looking at how users combined multiple media channels and platforms to follow the FIFA World Cup. Among their findings was that on days when there were several games scheduled, fans preferred to use a website because they could quickly scan game stats and watch short clips.

They also found no negative correlation between the different platforms that sports network ESPN used to cover the tournament, which was “consistent with ESPN’s belief that new platforms do not compete with the old, but allow users to consume media at times that they previously could not,” the researchers write.

Yet Wharton marketing professor Jehoshua Eliashberg calls NBC’s decision to tape delay many events a “big mistake,” noting that “NBC made many consumers angry. The financial advantage of airing programs on prime time is that consumers have more free time to watch TV, and that generates more revenues from advertisers.” He adds, however, that the logic doesn’t hold “for events such as the Olympics where in showing it live, the audience can experience the emotional intensity.”

A more creative approach to the prime time broadcasts, Eliashberg suggests, would have been to go beyond simply showing pre-taped footage of the events intercut with prepackaged features. “For example, [you could have] a live showing, along with a tape delay that provides additional analysis or insightful information — similar to showing movies in theaters and then showing them on DVD along with the director’s cut,” he notes.

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Let Them Eat Apps?

Posted on October 19, 2011

Today, Research in Motion offered its customers the first in a series of free premium apps meant to quell users’ anger over a three-day outage in the company’s BlackBerry email service in Europe, Africa, the Middle East, India and parts of Latin America. The app — normally priced at $19.99 — reads emails and text messages aloud in addition to taking voice prompts so that consumers can use their BlackBerrys while driving.

But in this case, talk — or a talking app — may be too cheap. According to Wharton marketing professor Peter Fader, RIM’s offer of free apps to disgruntled customers “will be seen as a shallow token gesture, which could be worse than not doing anything at all.”

The company’s BlackBerry phone became a household name because it was the first smartphone to include a secure corporate email application, maintaining an addictive hold over users who wanted to stay in touch with the office while on the road or at home. But following the launch of Apple’s iPhone and Google’s Android devices, the company has lost significant ground.

During RIM’s server blackout — its largest ever — last week, millions of mobile subscribers were unable to access their email accounts beginning on Monday. Service was not fully restored until Thursday.

The problem with RIM’s solution, as Fader sees it, is that the intended compensation to consumers — up to $100 in free apps, which will be released over the coming weeks — “isn’t tied to the nature of the problem that existed in the first place…. If [RIM] had had an app-related problem, then maybe some free apps would make sense.  But in this case, they should do something more closely related to each customer’s data charge — maybe offer a rebate/credit on a portion of those fees, or perhaps a free week of international data usage, or something like that.”

Although Wharton management professor David Hsu agrees that free apps are unlikely to make up for consumers’ inconvenience during the blackout, “RIM’s offer seems to make sense in [terms of] driving users to try more applications on their devices. The cost to RIM of giving away $100 worth of applications in-kind is very likely less than refunding the equivalent in actual money, and has the added benefit of trying to create some measure of stickiness to the BlackBerry platform.”

Hsu adds an important caveat, however: “RIM managers should also clearly communicate what steps they are taking to ensure such outages do not happen again in the future.” Fader agrees. In fact, he says, the company could simply do nothing more than “work harder to avoid similar problems in the future. As a Blackberry customer, I would much prefer some meaningful assurance in that regard, as opposed to an offer for free apps which I will never take advantage of.”

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