Friday, 29 July 2011

Why should you go for Best of Breed?

We were having a meeting the other day with a vastly experienced ex-CPO of many FTSE 250 organisations, whose counsel to us was that we should look at developing a fully integrated eProcurement toolset if we were to have a chance of working with FTSE companies. Given our current direction, it did get us thinking about the whole best of breed versus enterprise solution debate.

The main advantage of best of breed is that is allows customers to select the ‘best’ product for each requirement, rather than going for one tool that can satisfy every requirement in perhaps a sub-standard way. Time and again we have seen certain modules of these enterprise solutions gathering dust within an organisation simply because they are not a best fit yet organisations are paying the software companies for supporting these unused features. In worse cases, best of breed applications are still brought in to do the very same task, only better, leading to the company paying for the same requirement twice over.

It is frequently cited that enterprise solutions have less integration costs. However in many cases it can be far more costly to implement an ERP solution onto the current IT infrastructure and then to bespoke it to fit the specific requirements. Perhaps if there were any true SaaS ERP applications out there at the moment then maybe the implementation costs would be much less. However adopting a best of breed route opens up the choice in the market considerably, which in turn increases your negotiation potential, in the same way that a buyer might devise ‘Lots’ for a tender process. This becomes particularly prevalent when it may come to switching your provider, as the fully integrated solutions will be extremely challenging to dislodge, whereas you can phase out individual best of breed applications gradually.

Furthermore integration costs can be cut drastically, in terms of price, time and complexity, through the use of clever cloud-based integration tools that remotely link SaaS applications. Boomi, Pervasive and Cast Iron are some example solutions for this. Suddenly the potential to integrate best of breed solutions becomes even simpler, and all possible via the web, thereby greatly increasing the flexibility of this approach.

From our side, the first major hurdle we would have to overcome to become an enterprise solution is that we would need to develop the other modules, such as spend analytics, contract management, P2P, SRM, SIM, project management and so on. This would create huge development costs on our side, costs which would of course be transferred over to our clients. It would also mean our maintenance and upgrade schedules would be vastly more complex as our team has to keep an eye on tens of thousands more lines of software code, much of which cannot be refined in isolation but must be looked at as part of the bigger picture. Naturally, as soon as this happens, cracks appear in previously excellent products, functionality starts to suffer and the user experience is greatly diminished due to the increasing number of options that the user is presented with. It is no surprise that best of breed applications are more streamlined than the larger ERP solutions, as they only have to handle 99% of the capability. As soon as attempts are made to plug the final 1%, which can move them further into the ERP domain, the application becomes unwieldy.

Instead we could partner with best of breed vendors in each of the key areas, using cloud integration tools to integrate our respective solutions, and then our team can focus on our key strengths and plans, and our partners can focus on theirs. We could even have multiple partners within the same product type, for example contract management, so that we could present our clients with several possible solutions from the all-singing, all-dancing right down to the very basic.

The partnership between applications can create huge value. Just a casual glance through the Google Apps Marketplace and you can find thousands of best of breed applications, designed specifically for simple integration with Google Apps. Google could have kept all their software behind closed doors and prevented third parties from branching out. However Google recognises the innovation and perfection of solutions that is created by promoting such an open network of best of breed applications. We certainly use a number of these applications, such as Zoho and Oggchat, and thanks to the way that these applications can feed off the functionality of Google, the costs are extremely low and integration was a doddle.

So, the next time you are looking for a suite of solutions to cater for your procurement needs, please do bear in mind the best of breed approach and use it to create your own solution to perfectly fit your needs whilst keeping your options open for the future.

Monday, 11 July 2011

The psychology of what we buy - Part 2

In the previous posting we saw how advertisers began to sell meaning.  In this post we examine how the selling of meaning and symbols was refined so that marketers could target different types of people. Again today this seems an obvious tactic but for a large part of the 20th century this was not the case. This sophistication was not as you would assume, dreamed up by a crack team of marketing ideas people in a mad men style office, but rather came about half by accident out of attempt, ironically, to combat consumerism itself.

HIPPIES ENGINEER MODERN MARKETING

Now we advance to the early 60’s having examined the inception of psychoanalytically-based advertising in the post-war years. The 60’s gave birth to a huge counter-culture which included a radical student left, one of the primary objections of which was the manipulation of the American people by the methods introduced by Bernays.  The groups protested that by appealing to the unconscious desires of consumers firms were not only engaging in deceptive practices but were causing the American people to become docile, homogenized and unexpressive of their individuality.  Their theory was that people had been conditioned unconsciously to desire mass produced products and thus the desires of their true selves were being ignored and eroded.  The militant efforts of these groups were unsuccessful in changing society but from their failure would come a new method of subversion that would ultimately form the basis of the next orientation of the economy.

Having found direct action ineffective, many of these groups turned to the belief that it was possible to dismantle what they saw as consumerist systems of control by expressing their own inner selves in disregard for the desires thrust upon them by firms.  This was the me generation: I am special, I am unique and my individualism cannot be expressed by owning the same type of “[insert generic mass produced good here]”.  The problem with selling these groups meaning was that their values and thus desires were wholly different from the Americans of yesteryear.  This ideal coincided with a snowballing set of beliefs and practices in psychiatry which advocated the realisation of the inner-self amongst individuals.  This movement was incredibly widespread and by the 70’s over 65% of American consumers saw themselves as unique individuals. 

NEW CONSUMERS  

For the first time firms were now confronted with consumers who did not want to have a unanimous set of desires fulfilled by a homogenized range of products.  To understand how these new consumers could be marketed to, firms turned to the leading research company SRI who conducted in-depth questionnaires with the goal of ascertaining the core value of the new consumer group.  Their findings were the groundwork for many types of market segmentation used today.  What they discovered was that within the new ubiquitous individualism of their respondents there were in fact patterns. These patterns were further collated until distinct types of consumers were created, based upon their values and beliefs.  These types were so radically different because they segmented markets on a physiological and lifestyle-based criterion instead of the typical age, gender and social class segmentation.  SRI found many groups completely transcended previous segmentation and could be found in any social class.  This approach was slowly taken up worldwide; groups were discovered like experientialists whose goals were to enrich their inner-selves through experience.  

ALL BUY MY SELF      

The result of this was to provide a new model of consumer to be utilized by business.  This model differed from both the rational economic man and Freud’s easily persuaded irrational beings.  This new perspective allowed for the variability of individualism and would address the needs and desires of a multitude of types.  Previously the problem in addressing these desires would have been that in production it was only profitable to mass produce.  However new technologies in computing now meant that short runs of many varied products could be produced cheaply as was required to fulfill the needs of differentiated free individuals.  This type of production began a second paradigm shift in the way that goods were sold to consumers.  Goods were now sold to consumers as emblems of their own individuality based on the groups that SRI thought they belonged to.

However it is worth noting that these goods, although now tailored to the differentiated individual, were still selling symbols.  But instead of firms mass producing goods and then symbolically linking those goods with the generic subconscious desires of the masses, they now acknowledging individuality.  We see this type of marketing around us all the time.  Have you ever heard “Those Starbucks guys are so pretentious, they think they’re so mature and stylish”, well with all the style and maturity they’ve purchased you would hope so.  The person uttering this statement will then typically go to a less popular coffee chain and purchase a mug of steaming authenticity with a delicious blend of individualism.  We can see in this example how a product so commonplace as coffee can be sold to two entirely different types of people by linking it with their perception of their inner-selves.

This process of selling us ourselves goes on in nearly all markets.   Here is an exercise to demonstrate: go into your room, if you have your own room, or any place that you consider “your part” of where you live, typically where your clothes are.  Now take an inventory of all your possessions but next to each write a statement of what your perception of that product’s personality would be if it were alive.  For example my Macbook is clever, alternative and smug and has excellent personnel hygiene.  When you add all these perceptions up you will find the sum of your buying has its own cogent personality and if you want to find where that personality came from you need only consult with your mirror.  This is because as consumers we now buy to express our individuality.

CORPORATE FISHERMEN

In this set of articles we have chartered the progress of marketing in its utilization of psychology to sell meaning to consumers.  We have seen how the waters of our subconscious were untapped as a selling tool, when firms appealed to the tiny man on the boat for rational decision making.  We have seen those same waters tugged at by Edward Bernays as he took advertising to the moon by linking products with our submerged irrational desires.  Today though it is acknowledged that to sell effectively a firm must not appeal to the sea but to individual fish within it.   

Friday, 1 July 2011

The psychology of what we buy - Part 1


We would like to introduce a guest blog by our highly capable marketing intern Sam Hallett from Bournemouth University.  Sam has been helping us out in a number of areas over the last few months and has made a huge difference to our general approach and line of thinking to both our direct and indirect marketing activities.  Anyhow, enough from us and over to Sam:

In this two part article we are going to be tracking the progress of the idea of selling ‘meaning’, i.e. status and image, to different types of individuals.  We will examine purely how the idea of selling meaning came to be common place amongst advertisers.  In this first part were going to have a look at the root of PR and modern marketing techniques using psychology that surrounds us today. 

These days it is widely acknowledged amongst advertisers that consumers buy symbols, by that I mean the symbolic attachments inherent in goods. We all know for example that while a Gucci bag may be a thousand times the price of a Primark one, it probably won’t fit a thousand phones, purses or a thousand tiny bottles of eyeliner.  So why then is it a thousand times better?  It is the symbolic meaning.  A Gucci bag is thousand times more meaningful in terms of conferring status than a Primark one.  If you don’t believe that then go and live in a world where Gucci are yet to sell a single bag.  This article examines how advertisers began to realise they could sell meaning.

WHEN PRODUCTS WERE PRODUCTS

Before the work of Freud, consumers were thought to be wholly rational beings. The Rational Economic Man (REM) was the model that exemplified the buying behaviors of man as self-interested and considered actions.  The REM would buy only within his means the goods that he required to fulfill specific needs or further his specific conscious goals that drove him through life.  As such this thinking was reflected both in production and in marketing and advertising.  Through the nineteenth century production orientation had characterised the economy under the philosophy that demand would always exceed supply.  The firm with the means to produce the highest volume of goods relative to the cost was king.  In the early years of the twentieth century however the saturation of the market with huge firms caused by the production orientated economy meant that supply was now surplus.  This paradigm shift meant that to profit firms would now have to directly compete.  Hence product orientation was born. Firms began to produce products to address specific needs that were marketed on the basis of their durability and performance, following the pattern of buying behavior theorised by the REM model.

We can imagine how bizarre this approach would look in today’s climate. “Rayban filter out 17% more sunlight than other brands!”.  “Topshop: the top that tops all others, withstanding fire, acid and even attempts at penetration with stabbing implements.”.

However this was more or less the status quo because firms supposed man shared the same basic needs and thus products and trusted the rational man to select the most appropriate and effective product to meet his needs.  The next change in the way that products were to be sold to consumers would not take place in production; it would be the birth of modern marketing and advertising.

EDWARD BERNAYS

Edward Bernays was the nephew of Sigmund Freud and it was he who was the first to apply psychoanalysis, namely Freudian psychoanalysis, to the market place with dramatic results.  Freud theorized that man was not governed by conscious rational decisions but rather a subconscious set of more base animalistic desires and drives.  Freud argued that man was essentially irrational because the subconscious forces at the nexus of man’s psyche were not concerned with modern society.  They were basic constants that could not be cognized or transmuted into rational thought process because they were essentially animal.

Imagine a tiny man on a boat. He is so small that he cannot look over the deck and see the ocean, but he realises the boat is moving.  He believes it is he who governs the direction of the boat.  The man on the boat is our conscious mind.  Unbeknown to him the great primordial ocean of subconscious animal thoughts swirls and swells, flinging his boat where it will.

THE BIRTH OF PR

Long before the theories of Freud were popularized in the USA and the rest of the western world, they were utilized by Edward Bernays to sell products.  Edward Bernays had previously been employed in the Woodrow administration within the committee of public information, which was concerned with distributing the polemic of the American government amongst its peoples and those of the rest of the world.  The essence of this was that America fought, not with reactionary self-interest, but with the aim of bringing democracy around the world.  In one of the most influential moments in the history of modern marketing Bernays saw the effects of his efforts rendered in powerful synecdoche.  As President Wilson walked the streets of France on the day of the Paris peace conference accompanied by Bernays, he was met with the adulation of crowds gathered to celebrate the victory of President Wilson, the man whose nation fought to bring democracy to Europe.  This was the event that for Bernays proved the efficacy of what was soon to be referred to as public relations.

THE RATIONAL PRODUCT GOES UP IN SMOKE

Bernays went on to manage PR campaigns for the government but it was not until he was approached by American Tobacco that he was to utilize his uncle’s work in the aim of selling products.  At this time in America smoking was a social taboo amongst women much to the dismay of American Tobacco who had employed Bernays to effectively double their market.  Bernays consulted a number of eminent psychiatrists to ascertain the subconscious meaning that cigarettes held to American women.  He discovered that cigarettes were a phallic symbol and thus a symbol of man’s masculinity and status. Bernays’ creativity was in implanting this image into the modern zeitgeist concerned with the growing independence of women.  When independent women were seen smoking it signified their owning of a manly member and their independent autonomy, both previously exclusive to men. This was a seminal campaign because it was the first to realise the idea that products could be sold on an irrational basis by appealing to consumers unconscious perceptions.

This was so seminal in fact because what were being sold to women were not cigarettes, but meaning: chiefly independence and social mobility.  From here sprung so many of the advertising campaigns around us to this day.  Half the reasons that consumers buy goods are not for the goods themselves but for their symbolic value.  A good in this sense can be seen as the product itself wrapped in a bundle of subconscious meanings, signifiers and symbols.  In order to sell goods in this way, marketers must be Freudian thinkers because they must understand what symbols will appeal to those unconscious drives. 

Take the Ferrari; it is the object of desire and appeals to many of our unconscious feelings.  It is speed and performance thus it is power.  It is a premium rarity thus it is status.

So the next time you buy something take a second to think how much you are paying for the product and how much extra are you paying for its meaning.