value chain

Social Media Is Changing How Supply And Demand Works For Big Brands

Source: http://www.businessinsider.com/social-media-manufacturing-2012-12

Burberry Milan Fashion Week Menswear Fall Winter 2012 2013 Collection Runway

Many companies see social media as just another marketing and communications tool. A particularly effective one maybe, but just another of many.

According to Erich Joachimsthaler, founder and CEO of Vivaldi Partners, they’re missing out on the biggest source of value from these platforms. In a recent report, he outlines how brands can use social media to change their entire business, not just their marketing.

“Where I see the biggest opportunity is to think about your entire business model. There’s so much of this social information that is unstructured information, and consumers make 75 percent of it,” Joachimsthaler says. “If you want to think about your business, if you want to create value and competitive advantage, it’s about thinking about that information and penetrating it at every step of your value chain.”

One of the best examples of this, which Joachimsthaler has studied in depth, is Burberry.

The first thing that’s allowed them to change their business is the sheer size of their social reach. “Burberry has about 15 million — and that’s growing rapidly — Facebook likes. This is an astounding figure,” Joachimsthaler says. “This is astounding because even Nike is not as strong, and Nike is a $15-18 billion dollar company. Burberry is at about $3 billion. So it’s a massive difference, the two companies don’t compare.”

They built that following by offering something useful. People on Facebo! ok can s ee Burberry fashion shows before the celebrities who actually sit in front of the catwalk.

But what’s truly innovative is what they do with those likes.

“What Burberry does is, it has made those videos shoppable. You can click on the particular garment and you can basically make an order on the spot. So Burberry can collate the orders from 15 million people. They haven’t manufactured the product yet in China, but they have taken the orders, they know exactly how many people have ordered what,” Joachimsthaler says. “They already have my money in the bank. 15 million times $200; that’s a lot of money in the bank. When they have the orders, they can then send the order to China, manufacture it, and within two weeks they can either deliver it to your home, or you can have it delivered to a store and you can buy additional garments.”

For a taste-driven and occasionally fickle industry, this saves a tremendous amount of money. “This changes the entire value chain,” Joachimsthaler says. “The fashion business is fraught with forecasting. You forecast what will be bought in the next year, you need to produce them, manufacture them in China, there are inventory problems, there are logistics problems, then you put it in the store, the thing doesn’t sell, if it doesn’t sell you have to send it to the outlet store and mark it down.

Burberry avoids a great deal of that.

There’s huge potential here that’s yet to be realized, and it could be a game-changer for the industry. We’ve only seen the beginning, Joachimsthaler argues. Someday, companies like Burberry could operate with a fraction of their inventory, and never have to mark anything down.

It’s a tremendous innovation in operations, and one that will have a large impact going forward, possibly even beyond the fashion industry.

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Monday, December 10th, 2012 news No Comments

Why Google Is The Grinch Who Stole Your Business

Source: http://www.businessinsider.com/the-grinch-who-stole-your-business-2011-12


Google Sign

It’s that time of year when we all reflect on the past, search our souls and determine what we want for the next year. I’ve been reflecting on what it means to work with a company that controls so much of the market, provides such a broad set of capabilities and delivers such a large percentage of monthly revenues to publishers. Of course, I’m thinking of Google and what their dominance in the ad market means for a publisher’s future and its ability to remain relevant to marketers.

What do we know about Google? They are this great company that gives consumers some of the best digital products available on the Web: search, email, maps, Android, apps and more. This has catapulted Google to the rank of second most valuable brand, behind only Apple, according to Millward Brown. This seems to be great for consumers, but what about the businesses who are now reliant on Google for search and display revenue, advertising technology and various business applications like Google docs, Android OS, Chrome, etc.?

Many of the businesses I meet with hold Google in high regard because of the products they represent and the amount of revenue they provide. However, these businesses are equally concerned about Google’s consumer stranglehold, their influence over the ad ecosystem and their focus on automation, all of which lessens the publishers’ worth in the value chain as a whole. Google’s market dominance stretches well beyond search, which in itself is obviously enormous. This expansive dominance should be alarming for every marketing-related business, including publishers, advertisers and agency and marketing services technologies.  Here are a few stats on Google by category that will likely frighten even the largest of these businesses:

  • 65.38% Share of Search, Oct-11 Hitwise
  • 44.1% Share of Ad revenue, Oct-11 PCMag
  • 43.8% Share for Video, Oct-11 Comsccore
  • 30.03% Share for Travel, Oct-11 Comscore
  • 22.38% Share for Automotive, Oct-11 Comscore
  • 18.69% Share for Shopping, Oct-11 Comscore
  • 16.29% Share for Health, Oct-11 Comscore

If these stats weren’t enough to dampen your holiday spirit, Google now is even prioritizing their own products above the paid search listings on their search engine. This creates a major conflict for the advertisers that have made Google what it is today and may force those clients to pay even more if their advertising is to remain competitive in this new bidding landscape. Google clearly is leveraging its position of power with consumers to launch new products and ensure their own success. The latest example of this is the promotion of their Chrome browser on the Google homepage. As you can see from the chart below, Chrome is rocketing to the position of #1 browser, a rank it is projected to achieve by June 2012.

Google is now a major threat to every business in the publishing and advertising marketplace. In the short term, while they may appear to be a superior partner that provides revenue and marketing innovation, I believe that over the long term they are eroding the value of each and every business in the media sales and publishing value chain. And, worst of all, they are charging heavily for the privilege. I’d estimate that for every dollar spent by an advertiser in the media buying process, Google captures upwards of 25% in tolls (via their various ad services, DFA, Invite, DFP, AdX, Motif, Admeld, etc.), thereby minimizing revenue and profits for publishers and other vendors along the way

So as you reflect on 2011 and consider whom you want to partner with in 2012, give some thought to the short versus the long term. What is your value proposition to clients? And who do you ultimately want to run your business … the Grinch or You?

Have a great holiday and Happy New Year!

The views expressed here reflect the views of the author alone, and do not necessarily reflect the views of 24/7 Real Media, its affiliates, subsidiaries or its parent company, WPP plc

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Tuesday, December 27th, 2011 news No Comments

Dr. Augustine Fou is Digital Consigliere to marketing executives, advising them on digital strategy and Unified Marketing(tm). Dr Fou has over 17 years of in-the-trenches, hands-on experience, which enables him to provide objective, in-depth assessments of their current marketing programs and recommendations for improving business impact and ROI using digital insights.

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