BELIEVE IT OR NOT, THERE WAS A TIME LEGO LOST SIGHT OF THEIR CUSTOMER
There aren’t a lot of toy manufacturers that can claim global brand recognition like LEGO. Think about it – there have been close to four generations of kids that have been able to build cars, space ships, and ancient civilizations, all using fun little plastic bricks! However, this article is about how the brand’s profits had declined significantly in the early to mid 2000’s, even despite having world-wide awareness.
In the early 2000’s, LEGO began over-developing its core product line. At the time, management allowed free reign to product development teams to design different kinds of creations for children to build. This new artistic freedom was happily embraced, but the result was the production of complex designs. Remember LEGO Bionicle?
They incorporated tons of new components that weren’t interchangeable with other products within the line, and as a result, their parts inventory exploded and supply costs ballooned. Making matters worse, most of the new designs didn’t appeal to many kids, leading to a significant decline in sales.
Ironically, reducing the creative freedom of their design team was the solution to reversing supply chain and profitability problems. As a result, team workflow was reorganized to include: marketing managers who understand the customer’s tastes, preferences, and purchasing behavior; manufacturing managers who can control operational costs, and market researchers who conduct prototype testing. As a result, profits grew over 430% between 2009 and 2017. (1)
Although innovative product design has always been a strength for LEGO, history has shown that developing products, services, and a marketing strategy is done most effectively when working with guide rails. This means that initiatives are planned with a complete understanding of the customer taken into consideration: meaning a solution that appeals to the customer. This goes to show that consumers will seek out what they ultimately want – and if what you’re offering doesn’t stack up, they will go somewhere else.
Despite being one of the world’s largest producers of electronics devices, you may be surprised to find out that Samsung electronics started out primarily as a low-tier manufacturing brand with cheap consumer perception. In this analysis, find out how Samsung executed strategic marketing to literally transform into the global electronics powerhouse seen today.
A BRIEF HISTORY ABOUT SAMSUNG
Back in 1970, Samsung’s electronics unit started out making cheap TV sets for the Sanyo label, but over time, it transformed into an innovative company and has turned out to be a pioneer in developing large flat-screen displays, plasma TVs, and cutting-edge smartphones. But until the mid-1990s, they competed mainly by developing technical components and low-cost manufactured products for bigger brands, such as Dell, Hewlett Packard, and GE. They were also selling other low-cost consumer products – like TVs and microwave ovens under the Samsung brand through discount chains like Walmart.
Until the 1997 Asian market crash, the low cost-driven competitive strategy worked well for them. At the time, the market for memory chips and other components Samsung supplied to electronics producers saw increased competition, leading to excess capacity, while sales of the Samsung branded products were falling as well. Despite these facts, the company’s CEO Yun Jong-yong voiced that Samsung could produce products that were as good as Sony’s, but because of the brand’s downmarket image, their TV’s would sit at the back of the stores.
WHAT IS SAMSUNG’S MARKETING STRATEGY?
Samsung’s marketing strategy focuses on developing new innovative products that are supported by strong branding and promotional campaigns. Mr. Yun initiated a new competitive strategy with the goal of developing and marketing superior products while also building an image of Samsung as a stylish, high-quality brand worthy of a premium price. The objective was to establish a unique position using technical innovation while designing more appeal to a younger generation, as well as upscale customers around the world. Yun argued that to continue to compete on price would eventually be their downfall.
R&D INTO INNOVATIVE TECH
Samsung chose to invest heavily in technical innovation and R&D. In order to have a competitive advantage driven by innovation, Samsung had to become a pioneer in developing new technology. During the 90’s, Sony had an advantage in consumer-electronics, but it was rooted in analog technology. The digital world required new products and consequently, the firm shifted substantial resources into developing large-area LCDs, chipsets, and cellphones. Fastfoward to the economic crisis of 2008-2009, Samsung spent over 7 Billion dollars for nearly 6% of the unit’s revenue into research and development, and at the time more than 25% of the company’s workforce engaged in R&D.
PRODUCT DEVELOPMENT & DESIGN
Understanding that cutting-edge technology does not always guarantee market success, Samsung also focused on product development and design. Their goal was to create products that deliver benefits that at least some segment of consumers will consider to be worth the price. Since many product benefits may be subjective – attractive styling, say, or a cool image, or maybe the quality of camera – new product development at Samsung usually involves a team of designers who collaborate closely with the firm’s engineers, manufacturing teams, and marketers.
BRAND BUILDING CAMPAIGNS
Last and certainly not least, Samsung’s marketing strategy focused on creating a promotional campaign to build Samsung’s brand image. Revamping their marketing efforts was just as critical to the success of a new competitive strategy because even the most technically sophisticated and well design products are likely to fail unless customers know they exist, can acquire them easily, and think they’re worth the money.
Eric Kim was brought in to head a global marketing effort. One of his first moves was to re-organize the firm’s distribution channels to be consistent with the strategic objective of establishing Samsung as a high-quality brand. To start, many of the company’s products were pulled out of the low price discount chains and shifted distribution through big-box electronics stores like Best Buy and online shopping through Amazon.
To ensure consistent marketing communications across all markets, they also consolidated their roster of advertising agencies from 55 down to one global advertising group (WPP), who launched the organization’s first brand-building campaign. Using fashion-forward TV commercials, they created a contemporary sense of style while also promoting the technical sophistication of their products. WPP also made use of promotional tools such as product placements, sponsorships, and online advertising to strengthen the brand.
WHAT WERE THE RESULTS OF SAMSUNG’S STRATEGIC MARKETING DECISIONS?
The revamped competitive strategy and marketing programs that Samsung designed and implemented have been a huge success. The global value of Samsung’s brand increased by more than 200% from 2003 to 2008, and it took over Sony as the most valuable consumer-electronics brand.
As a result, the unit sales grew to $119 billion by 2009, and with the advent of the Samsung Galaxy, revenue has grown into a staggering $218 billion as of 2018. According to the vision statement on its website, Samsung seeks to achieve $400 billion in sales while placing Samsung Electronics’ overall brand value among the global top 5 by the end of 2020. Additionally, it seems they continue to lean into their strengths, as Samsung continues its commitment to furthering innovations in technology and products. For instance, the release of the Galaxy Z Flip and the Galaxy Fold are two of the latest examples of leading innovation coming out of Samsung.
The Corporate And Business Implications of IBM’s Marketing Strategy Over The Years
For many years, IBM put the majority of its efforts into the hardware side of the computer industry. Founded in 1911, IBM initially developed electric tabulating machines. Later on, they focused on developing large mainframe computers in the 1950s and eventually PCs, servers, and related equipment by the mid-1990s as the internet began to take off. Although their product mix has evolved their competitive strategy has remained mostly consistent. Rather than being positioned as the lowest-cost provider in the market, IBM has continuously pursued a high-quality differentiation strategy by offering advanced products and excellent technical service at a premium price.
To execute this strategy, the company has committed to a steady pipeline of cutting-edge technology by allocating huge amounts of resources into R&D and product development.
WHAT IS IBM’S MARKETING STRATEGY?
IBM’s marketing strategy involves substantial investments into both traditional and online advertising, as well as promotional budgets to inform potential customers about the always evolving product lines and to reinforce brand awareness. Equally as important, is their history of spending millions on recruiting, developing, and compensating one of the largest and technically competent salesforces.
A SHIFT IN STRATEGY: TECHNOLOGY CHANGES AND COMPETITOR ACTIONS
Beginning in the mid-1990s, IBM’s traditional lines of business started to face trouble, with the company’s worldwide PC market share declining to 8% by 1999. Similarly, while IBM’s sales of UNIX-based computer servers grew rapidly in the mid-to-late nineties, they were only able to capture a small share of the market. Even its esteemed mainframe business (which had been a high-profit/low-growth market throughout the ’80s and early ’90s) suffered losses due to falling prices and declining demand.
Many of these performance problems can be linked to a number of factors that softened the impact of the company’s proven corporate, competitive, and marketing strategies. For instance, vast changes in technology – such as the rapid increase in PCs & Desktops, the emergence of the internet, and the adoption of computer networks – greatly contributed to the reduced demand for large mainframe computers and centralized data processing systems.
IBM’s differentiation strategy became less effective as some of its product’s life cycles began to mature and customer’s purchasing criteria began to change. As the PC industry matured the performance differences between competing brands became less pronounced, leading customers to be more price-conscious, less technically sophisticated, and more interested in buying easy-to-use devices. As a result, IBM’s premium price position was put at a disadvantage in attracting such customers.
Additionally, IBM’s focus on B2B customers contributed to the organization’s problem of competing in newly emerging markets for server equipment and software. Because of the firm’s hesitation to pursue small start-ups during the dot-com boom, IBM left an open playing field for Sun, Cisco, and other competitors in the market.
IMPLEMENTATION OF A NEW CORPORATE STRATEGY
In the wake of lackluster performance and a changing environment, IBM’s executive team began to adjust the corporate mission by de-emphasizing the development and manufacture of high-tech hardware while focusing on providing customers with business consulting, advanced software, and outsourcing services. In 2005, IBM sold its personal computer and x86 based server divisions to China based Lenovo Group Ltd.
To gain leverage on the firm’s existing capabilities and its long-term relationships with traditional customers, new services were concentrated on helping large enterprise organizations hook old corporate databases (often on mainframes) into new online phone systems (such as DSL) and eventually cloud-based platforms.
This new extensive strategy involved the development of “enterprise solutions on demand,” which were packages of networked and modularized technology, software, and consulting services that were aimed at helping companies in numerous sectors rethink, redesign, and manage large portions of their operations. This included everything from accounting and customer services to human resources and procurement. For example, the Bank of Russia was able to reduce its transaction processing costs by 95% using an IBM based system and software.
CREATING NEW BUSINESS AND MARKETING STRATEGIES FOR THE INFORMATION AGE
The new emphasis on business services and software as the primary path toward future growth also forced some changes in IBM’s marketing strategy. Although the firm continues to differentiate itself from competitors by producing superior quality products at premium prices, IBM’s new service business relied on several different factors such as the knowledge, experience, and expertise of its consultants. This required IBM to reorganize and allocate internal resources toward developing a superior salesforce that could provide executive-level business consulting in addition to traditional technology consulting.
Over the past decade, IBM has pivoted primarily toward the development and acquisition of software services (such as The Weather Company and Red Hat, for instance), artificial intelligence, and cloud-computing technology. In 2009, more than 70% of the 4,900 U.S. patents granted to IBM were for software and services and in 2011, IBM gained new attention worldwide for its AI program “Watson”, which was exhibited on Jeopardy!
In late 2020, IBM announced that it is splitting itself into two separate public companies, with the IBM brand pursuing high-margin cloud computing and artificial intelligence, built on the foundation of the 2019 Red Hat acquisition, while the new company (dubbed “NewCo”) will continue to focus on the organization’s existing global technology services.
Every so often, Apple releases a new iOS update and developers, marketers, and business owners have to figure out how it will fit into their digital strategies. It is no secret that Apple and Facebook have been feuding over privacy issues and the iOS 14.5 update is the latest step in the game. For businesses who use the Facebook Pixel to manage event tracking, this latest change could present a challenge.
HOW FACEBOOK TRACKING HAS TRADITIONALLY WORKED
Marketers and developers have been tracking user actions for a long time. This has helped to serve a more personalized (and more persuasive) selection of ads to users. Many marketers take advantage of the Facebook targeting tools to serve customers with more relevant ads.
Conventionally, Facebook and other online advertising platforms have gathered data about users’ behaviors using the Facebook Pixel (for web tracking) and Facebook SDK (for mobile tracking). These two client-side systems send information about user actions back to Facebook directly from the user’s browser. Such actions, or “events,” can include viewing certain content, adding products to shopping carts, making purchases, and a variety of other commercial activities.
That data is then used by Facebook and marketers on the platform to better target consumers with relevant ads. Often, it is used to retarget ads for products that users have previously viewed. If you’ve ever looked at a product page then suddenly received lots of ads about that product, you are familiar with this system.
Similarly, the data can be used to measure the efficacy of ads. By associating later actions with ad views, marketers can determine if they have effectively caused the desired behavior. Without this individual tracking data, marketers would largely be in the dark about whether their campaigns are effective except at the highest level and simplest metrics.
Modern advertising and a lot of commerce are fueled by the data collected by Facebook. Nearly all marketers using the Facebook Ads Manager are benefitting from these data collection methods. So, any changes to how that data can be collected can have big impacts.
HOW THE APPLE IOS 14.5 UPDATE IMPACTS TRACKING
iOS 14 has brought about a variety of new features and changes. However, the most impactful for marketers are the changes to Facebook’s tracking. Most specifically, Apple iOS 14.5 tracking now requires users to approve app access to their advertising IDs, the feature used to power the Facebook SDK on iOS devices.
The previous major version of iOS, version 13, brought similar changes to location tracking. These prompts reduced opt-in rates for location tracking by half on average. The Apple iOS 14.5 tracking changes are likely to bring about a similar drop in advertising ID access.
Using the conventional system for tracking mobile user activity, Facebook marketers would be blind to the efficacy of their campaigns on about half of their iPhone and iPad audience. That is a really serious drop in data access.
It is also important to note that mobile traffic accounts for a large portion of all online activity today. Many consumers are using their mobile devices as their primary screens. So, it is important for marketers to have a way to effectively access usage data for iPhones and iPads.
HOW THE FACEBOOK CONVERSIONS API CAN HELP
The good news is that Facebook already has a solution, although it may require some changes to your website and app. The Facebook Conversions API is an updated version of a tool that has been around for a while, the Facebook Server-Side API.
This API changes the model for how users are tracked for Facebook Ads. Rather than collecting data via a client-side tracker (i.e. on the browser), the API does everything on your server. Therefore, you can track various user events without having to rely on the iOS advertising ID. So, even if users deny access at the app level, you can still gather useful analytics.
There are limitations to what can be tracked client-side. However, the Facebook Conversion API is more advanced than many similar systems and is an increasing point of focus for the social media giant. These are some of the events that you can track and associate with ad views:
The API does more than just overcome Apple iOS 14.5 tracking limitations. It can also help with tracking failures due to bad connections, long page load times and ad-blocking software.
Furthermore, the Facebook Conversions API approach can be used outside of your website and app. It can be integrated with other business systems so that you can track events such as in-person purchases, and inbound phone calls.
WHAT MARKETERS NEED TO CONSIDER MOVING FORWARD
Currently, marketers can still get useful information from the Facebook Pixel in browsers and the Facebook SDK on mobile devices. However, it is likely that opt-in rates on iOS devices will fall significantly with this update. Therefore, it is almost essential to implement the Facebook Conversions API alongside the client-side tracking methods to ensure a fairly comprehensive data set. It is important to ensure that you are not double-tracking activities; however, Facebook designed the systems to work together.
Moving forward, it is almost certain that Apple will continue to crack down on how its users can be tracked. For marketers, it is important to stay abreast of all the latest changes and to adjust strategies accordingly.
If you want to ensure that your brand is always positioned for digital marketing success, start working with the Proecho Solutions team. We provide full-service digital marketing services that will help supercharge your business’s growth. Contact us today to learn more.
Thanks to decades of dystopian fiction and sci-fi movies, most people have a distorted image of artificial intelligence. The fact is, AI is quickly transforming the corporate world as it uses complex algorithms and predictive analytics to convert information about consumer behavior into valuable business intelligence. Marketing with AI is yielding tremendous benefits to companies both large and small around the globe, as powerful software programs streamline marketing functions, optimize campaigns, and improve personalized customer experiences.
The use of artificial intelligence in marketing leverages technology to improve customer experiences from the first point of contact through the sale and beyond. The return on investment of marketing campaigns also benefits from AI technology as machine learning, analytics for big data, and additional processes help to optimize business strategies geared toward target consumers. Tedious, repetitive processes that once sucked up huge numbers of human capital hours are now performed by machines; generation of content, PPC ads, and web design are all possible functions of AI software.
In digital marketing, AI can optimize marketing campaigns, streamlining them in the process and taking away the risk of human error. While human ingenuity is still a requirement for the effective completion of most tasks, AI digital marketing programs can be used to generate reports strictly based on data.
To date, machines cannot copy the human attributes of empathy, compassion, or storytelling. However, AI is also not subject to the limitations of human beings. If Moore’s Law of exponential computer growth continues to hold true, AI’s future capabilities will be truly astounding.
In the marketing world, content creation is the act of developing topics that appeal to target consumers, creating written or visual content around those ideas, and making that information available to the audience through blogs, videos, infographics or other formats. This has become a global industry on its own; it is both extremely effective and extremely dependent on human capital. However, AI has the capability to curate and generate content. In addition, it can determine the right consumers for the content and the best channels for its delivery. While the technology is still in the early stages, AI could eventually be used to generate topics or even write first drafts based on given data or parameters.
The digital advertising strategies of today rely on AI even at the most basic levels. Electronic billboards can be run on AI-based systems. These systems, known as “programmatic advertising,” utilize complex algorithms and big data to determine the best ads for a target market.
While ad development has historically been a creative endeavor accomplished by teams of professionals, businesses of today need to reach beyond the creative message to find the right message, timing, audience, and delivery method for the best results. Consumers have learned to blow through the overwhelming number of ads assaulting them every day with little to no attention paid to the actual messages, causing advertisers to lose money. AI allows businesses to optimize their advertising budget by placing personalized ads in front of relevant audiences. As this technology continues to evolve, it will become even more critical to business success.
AUTOMATED CUSTOMER SERVICE
The AI technology often viewed as the biggest game-changer is chatbots. Consumers are becoming more accustomed to chatbots through interactions with automated assistants such as Siri, Alexa, and Google Assistant. This technology is being utilized on numerous corporate websites to address frequently asked customer questions.
The best part of chatbot technology is the effect it can have on the consumer experience. By automating the more basic functions of customer service, chatbots provide a cost-effective means of streamlining operations and saving the human agents for more complex customer issues requiring personal attention. Some businesses don’t have the human resources to address customer questions in a timely manner; chatbots allow for customer assistance regardless of the hour of the day. AI also doesn’t have bad days; chatbots are always polite and engaging, eliminating customer complaints related to poor human interactions.
Businesses must realize that AI technology has limitations when it comes to the use of chatbots; there should always be a level of escalation that results in human interaction. However, in the future, smart chatbots may take a more active role in communication with humans using originally generated responses in real-time, useful in sales prospecting, lead generating, and customer service.
As technology allows the collection of more complex data, companies are responding by hiring data scientists and programmers to work on their marketing campaigns. The huge number of data sets regarding consumer behavior and market trends can be overwhelming, but AI makes it accessible using machine learning and big data analysis. This technology allows for prediction of future customer behavior, which can be used to personalize advertisements, set prices, and launch campaigns based on the knowledge of what individual customers have historically done and are likely to do.
AI is not the evil force often depicted in movies. As the technology continues to evolve, businesses are finding more ways to harness its benefits to improve the effectiveness of digital marketing. For more information, contact Proecho Solutions.
6 Ways AI Is Transforming The Marketing Industry
Artificial intelligence is rapidly transforming the marketing industry. This technology can optimize a variety of marketing tasks to improve customer experiences. If you are a part of the enterprise marketing field, you probably already use some type of AI solution, but many marketing professionals still don’t have a good grasp of the benefits. Check out six advantages of using AI for digital marketing.
Today’s consumers have become used to personalized marketing messages populating their social media and electronic mailboxes, in place of the more traditional direct mail and media advertising that once dominated the field. A 2017 report by Accenture found that 43% of consumers are more likely to purchase from companies with personalized customer experiences.
AI personalizes marketing efforts as it tracks consumer behavior in areas such as browsing and purchase history, using this information to predict future brand interactions and allowing tailored recommendations about products and services to populate ads. Amazon has used an AI framework called DSSTNE to revolutionize the online consumer experience. AI technology powers algorithms that optimize advertising based on conversions and interactions, allowing effective marketing decisions to be made based on realtime information about consumer history, trends, preferences, and predicted behavior.
AI technology can also utilize natural language processing to determine mood and intention from emails and phone calls, automate real-time recommendations to improve shopping experiences, scan browsing history to present different options to consumers, and provide a retail store clerk with real-time information on a tablet or phone to help an in-store customer.
2. SEARCH ENGINES
Search algorithms are constantly improving. Integrating AI into search engine technology allows past shopping behavior to be considered in browsing, and misspellings in search terms to be identified with alternatives suggested. This software is becoming very sophisticated in determining searcher intent. AI language technology can interpret complex speech patterns and recognize spoken queries, helping voice search technology to continue to increase in both popularity and efficiency.
3. DYNAMIC PRICING
Pricing is a well-known marketing strategy, and discounts have traditionally been used to accelerate sales. However, traditional price-setting procedures cannot match the complex algorithms employed by AI to factor in demand, availability, consumer profiles, and additional factors such as season and popular trends to set prices. Dynamic pricing can be sensitive to minute-by-minute purchasing trends, with prices adjusted accordingly. Many people have experienced this technology at work when searching for a flight and finding the price has increased by hundreds of dollars in a matter of days.
4. ENHANCED USER EXPERIENCE
Online customer experiences are constantly being improved with user-friendly websites and apps. When customers have a better experience with front-facing technology, they are more likely to pursue further interaction with the brand. AI systems can adapt user experiences based on interactions in real time, creating a more user-friendly and personalized experience than traditional testing and optimization cycles could manage.
AI language-processing algorithms have become extremely advanced, allowing machines to replace humans in customer service and sales roles. This is more cost-effective and frequently more efficient. Customer service is further improved because machines are always polite and refrain from engaging in negative conversations with the consumer.
5. WHAT, WHEN, WHERE, HOW
Content marketing offers a great return on investment but requires significant human capital. The use of machine-generated content is not new, but only recently has the quality of the automatically generated articles reached a passable level. AI can be used to auto-generate blog posts and clickbait headlines based on formulas. Several global brands, including Forbes, now publish content that is partially AI-generated. AI can also use algorithms to select appropriate content for a specific audience, allowing for automation of the content curation process.
Enterprise content marketers can utilize AI to simplify the task of selecting the appropriate marketing channel from the large and still-growing list of current options. AI-powered software can target the channels with the highest chance of success for each particular marketing campaign, targeting specific leads based on brand interaction. It can also calculate the best times for launching promotions on each marketing channel.
The “how” of marketing is also being changed by automation, as AI-powered email can copy and paste content into big batches of emails, changing the name and content as needed. AI can efficiently perform repetitive tasks, freeing up marketing staff for strategic planning and other “human” tasks.
6. DATA ANALYSIS
Most businesses collect a large amount of information regarding their customers and industry but do not use the data effectively. AI can effectively process large data sets and identify trends and patterns. This allows for the creation of statistical models to predict future consumer behavior and create business intelligence models to capitalize on that information. In an increasingly competitive business environment, AI can provide critical insights for companies to constantly improve and excel.
While the technical aspects of advanced artificial intelligence may seem overwhelming, marketing software utilizing AI technology is surprisingly user-friendly. If your business has not already explored the benefits of AI-powered marketing, contact Proecho Solutions for assistance!