Few in the record industry would disagree that it's been a tough decade for them. We all pretty much happily stood by and watched as their intellectual property rights were firmly sidestepped by the internet. Streaming services such as Spotify are now providing some digital revenue alongside iTunes but both these revenue streams represent a significant pay cut for the labels compared to their $20 an album heyday.

There are ways piracy could be prevented but not without cost and intrusion to the consumer, and there's very little energy from anybody except record executives to make that happen. Part of the issue is that no-one ever really wanted a record industry in the first place, particularly now that their A&R function is being successfully fulfilled by the internet.

So when you take out the bottle neck on supply and simultaneously marginalize the record industry, what happens next? 

We're only just starting to find out but one part of the answer may be a thriving musicians' middle class.

Take Jonathan Coulton, a guy most of us have never heard of, but who makes a pretty healthy $500,000 a year from music he sells directly from his own site, along with merchandising and event packages he puts together.

Online music giant Pandora has made creating a musicians' middle class their express goal and in many ways they, and their competitors, are well set up to do it. It's relatively easy for these services to track listens and attribute advertising income against them as long as they allow emerging artists to upload their music then they effectively offer an open platform for artists to make a living.

A similar trend is emerging with books and e-readers and who knows perhaps it might even extend as far as film making, despite the higher barriers to entry from a production standpoint.

Back in the sixties the dominant model of how people made decisions was called Learning Theory. It was a typical construct of common sense in that it painted a rational picture of the how human brain functioned. The model stipulated, in simple terms, that people do things that they are rewarded for and avoid things that don’t go so well for them.

On paper this all made a lot of sense, but pretty soon evidence emerged to show that it often didn’t correlate to real human behavior. In particular people seem to stick to opinions and actions long after it has become evident they are patently wrong and not ‘rewarding’.

Based instead on an observation of real behavior, Dissonance Theory began to establish itself. Dissonance Theory effectively recognizes that there are different bits of the brain and that they are each able to hold competing ideas, but that the brain does not feel at all comfortable with this and will try and resolve the conflict wherever possible. Often this is achieved by aggressively asserting one idea at the expense of the others.

If you’ve ever found yourself cornered in an argument, hammering a point more and more aggressively, while simultaneously feeling a creeping sensation of unease that you’re unwilling to acknowledge, then you’ve experienced dissonance. In fact all of us experience it in a multitude of ways, all the time.

An important element of Dissonance Theory is self perception; people like to think of themselves as competent, moral individuals. When someone makes a choice they effectively make a social commitment to that line of thought. When somebody else highlights that in fact they should have bought a different car, gone on a different vacation, or done something else differently, to acknowledge this would be to acknowledge they made a bad choice.

While the rational bit of their brain may entirely agree with the other party’s point, the overriding response by our four lbs of grey matter is often to vanquish this admission and assert a view of self competency.

Another interesting quirk of dissonance is that the more effort we have expounded in arriving at a conclusion or in acting upon it, the less likely we are to abandon it. If you’ve been a VW owner for twenty years you’re pretty unlikely to admit that it’s a crappy car to choose.

All this has implications for marketers. Firstly re-enforcement is an opportunity; If you can get a customer to make a mild commitment to your brand (anything between clicking on an ad through to actual purchase) and then remind them that they have made this choice, then you may increase their loyalty. From the opposite perspective, it also has implications for how you convince people to switch brands. It’s clear that if your advertising points out flaws in their current choice, in a way that makes people feel stupid, then they’re unlikely to believe you.

I’ve written previously about what a fantastic marketing decision I thought it was by Amazon to launch the Kindle. To me it showed an enormous amount of foresight in understanding that e-reader devices would become the new storefronts for digital books, not being a big part of that market would mean getting shoved off the high street.

The design of the device also seemed to show a real understanding of what people wanted from it, they didn’t need the most advanced specs or features but just a simple, cheap and durable device that made reading books very easy. The iPad and Kindle were constantly compared by people but really they were very different devices designed for very different needs.

Despite all this, I can’t help feeling they’ve missed a step in how they’ve positioned the device and its latest iteration, the Kindle Fire.

Firstly, I really think that their launch advertising massively undersold the rational benefits of electronic ink, which is still generally very poorly understood. Ads focused solely on the reduction of screen glare which, based on conversations with other Kindle users, seems like a fairly marginal benefit.

People have a very visceral reaction the first time they see an electronic ink, almost everyone rubs the screen to see if it will come off; it really looks like someone has painted the writing on the screen. The long term benefit of this is that it makes it very easy to read for long periods of time, something that can’t be said of any other type of computer screen and is a god send to the serious book reader.

While initially there was some resistance to the Kindle in the literary community, many have now taken it into their hearts and feel deeply attached to this seemingly perfunctory little gadget. The Kindle is also quietly revolutionizing the whole publishing industry; giving writers a more direct relationship with readers and spurring a dramatic growth in short fiction. Amazon has almost entirely failed to pick up on the bigger, emotional benefit of being the device for book lovers and an organization with a passionate vision for the future of the publishing industry.

This confusion over the Kindle brand seems to me to have been carried across to the Kindle Fire, which doesn’t have electronic ink and is basically a crap iPad. Hero products are incredibly important in the technology sector: consumers like to know what the latest and greatest device from a company is, the Fire confuses Amazon’s stance.

I observed this confusion playing out amongst few friends who were buying Kindles as gifts over the holiday season. The issue that they had was that by buying a Fire, it seemed like they were buying a cheap iPad and by buying the standard Kindle it seemed like they were buying a cheap version of the Fire. One colleague was so contorted by the decision that he ended up calling his wife to see which one she wanted.

My point may seem a bit academic as Kindle devices continue to fly off the shelves and Amazon resultantly makes bags of easy cash through their online store. The tablet market is only going to become more crowded though and a value positioning alone will be volatile for anyone. The opportunity to form deep emotional ties with the legions of people of love books and own this segment of the market would be a much more reliable business strategy in my mind.

At the risk of sounding like a hacky business book, here's a non-exhaustive list of the what I think the traits of a good strategists are:

They get you the process that gets you the answer – strategists aren’t one man black boxes anymore, often their role is to provide the right stimulus and structure to a group of people and correctly divine the best answers from what that group produces

They are super collaborators – strategists connect several different disciplines, hermetic geniuses are not able to perform this role

They are storytellers – good strategists can take dry pieces of data and weave them into a story that inspires others and gives them direction

They are more intelligent than they are intellectual – intellectualism is egotistical, intelligence is invaluable

Although they have specialisms they are able to practice conceptual, creative and technical thinking – conceptual thinking is a given for a strategist but increasingly they need to produce ideas as well as be able to work with data

They believe in the pursuit of the right answer – campaign strategies are always hypotheses, if later evidence contradicts them then they need to change

They are able to simplify complex problems – brands are complex but clients need simple answers

They think and express themselves in consumer-centric values and language – the first step is of course to stop calling people consumers…

Client leads find them useful and want to work with them – good strategists convince others of the value of good process by ensuring they actually produce better work from it

They have an innate curiosity for how the world works – this has probably manifested itself in interesting side projects that may have little direct link to marketing

The above chart comes from a much discussed study from two Stanford University professors challenging the traditional view that people will continue to travel more as they become wealthier. Average distance travelled has increased for most of the last four decades in line with GDP growth; however in several major, industrialized nations growth in both distance travelled and car ownership now appears to have hit a ceiling.

Across the board the stagnation appears to have kicked in around 2003, preceeding the recession and major inflation of oil prices. The authors therefore argue the data is not a reflection of economic factors but rather more longterm trends such as traffic congestion in major cities.

Another very interesting point evident in national travel surveys is that while car ownership and distance travelled may vary, the amount of people time spend travelling has remained remarkably consistent since it began being tracked. We take about a 1,000 journeys a year and travel, on average, 66 minutes a day. 

People's appetite to travel therefore seems incredibly consistent; technological, economic and societal factors will just influence how they travel. A different report with similar conclusions demonstrates that this operates as a limit on urban growth, most cities don't expand beyond the Marchetti Wall (one hour by car in every direction).

Clearly the stagnation in car ownership is a major threat to the Automobile industry as is its percieved decline as an indicator of status (some data suggests that smartphones are now more important to young people).

A report in today's Guardian lays out some interesting ways that car manufacturers are reacting to this threat. Alongside upstart short term car rental services such as Zipcar more established players such as Peugeot are also currently trialling a membership scheme which would allow subscribers to use any one of their models at a given time.

Equally new revenue sources are being coveted, Audi and Toyota are investing in wind energy which they intend to sell to their drivers. BMW just invested $100 million in transport related mobile services as well as gaining a stake in parkatmyhouse.com, a peer to peer service offering unused parking spaces on private property.

Interesting times ahead...

A few months ago Burger King and ad agency CP+B parted ways in the face of several years of declining share, at around the same time Pepsi slipped to third place in the soft drinks market for the first time in a long time.

Most of the trade press made links between these two pieces of news that went beyond the timing. To many Pepsi and BK represented the marketing new school: they tried to appeal to consumers through more emotional means, used more innovative technologies like social media and came up with ad campaigns that aimed to entertain as much as educate.

To many, their recent poor fortunes represented evidence in favor of more conservative marketing principles: focusing on products consumers really want, raising awareness of these innovations through advertising and averting the excesses of "big" communications ideas.

While there is no doubt value in some of the aspects of this argument, it seems to me to have over extended itself.

Brand selection in the soft drinks market, for example, clearly continues to be dominated by the emotional attributes of the brands within it. The peaks and troughs of Pepsi's sales do not tell a story of intelligent/misguided product innovation but rather of their ability to tap into the cultural values of young consumers. Pepsi 'Generations' saw its first wave in the 80's fronted by stars like Michael Jackson, it's second by successfully tapping into Generation X in the 90's and is in its third as it continues to grapple with GenY. 

The lack of success of Pepsi's latest 'Refresh' campaign may however be a blow to proponents of participative platforms, the bold shift from Super Bowl ads to CSR initiative does not currently seem to be paying off. Many, myself included, believe that Pepsi got their audience insight work right and their channel mix wrong. A stronger skew towards more 'push' channels, like TV, may be needed to remedy their situation. That the mix is wrong, is not to say however that there is no role for consumer participation in brand communications.

Equally McDonald's success doesn't seem to neatly fall along the lines of this false dichotomy of marketing principles.

In the face of a rapidly changing fast food market part of McDonald's success was new additions to their menu. However, McDonald's healthy looking forecasts aren't being fuelled by their sodium laden salads but by the revived fortunes of their artery clogging burgers. Offering salads made people feel better about entering the restaurant and buying a burger, as did the cafe style revamp of the restaurants and the 'I'm loving It' and 'make up your own mind' campaigns.

While McDonalds intelligently reacted to these trends, BK opted for tactical gimmicks like subservient chicken. To me they were never good uses of the technology because they never built to a broader, relevant impression of the brand. What exactly is BK's value proposition these days?

The debate for me isn't around whether emotional appeals or big ideas work but rather which ones work and which combination of channels most effectively communicate them. 

Coors Light originally donned the 'silver bullet' moniker as a result of their distinctive silver can, however over time it seems to have taken a life of its own. Take, for example, the image above where a silver train steaming its way through the Rocky Mountains appears to effortlessly combine the beer's adopted nickname with its regional provenance story.

I think this is a brilliant piece of advertising and that there is more at work within in it then the seemingly straightforward combination of elements described above. Above and beyond this it appeals to a common metaphor, with special significance in US culture, that helps to drive home the brand's core value proposition.

In 1964 Leo Marx wrote a famous piece of literary criticism called the Machine in the Garden. In it he documents a recurring literary device within American writing: the disruption of an idyllic, pastoral scene by a technological intrusion from the civilized world.

Examples include an early scene in Sleepy Hollow where the protagonist is relaxing in a forest only to be perturbed by the sound of a train, at least as famous is the image of Huck and Finn casually floating on a raft down the Mississippi only to be nearly capsized by a steamboat in The Adventures of Tom Sawyer.

Classically there are two elements to the machine in the garden metaphor: a feminine, edenic garden of bounty that represents Man's harmony with nature and the intrusion of an unwelcome machine that signifies the stresses of civilized life. Marx argues that the machine in the garden resonates most powerfully with American audiences due to the country's rapid progression from an agrarian culture to an urban society. I previously wrote about my own interpretation of America's internal struggle with its competing pastoral and progressive ideals in a post called astronauts and cowboys.

In the Coors Light version of the machine in the garden the metaphor has been flipped, the 'garden' is not a feminine oasis but rather a masculine wilderness, representing not a harmony with nature but its brute force and threat to our survival. The machine here does not embody a threat to a natural tranquility but rather Man's ability to conquer and master his surroundings.

This effect is further underlined by the fact the machine in this depiction is a train. The railroads have a special role in US culture, they were the technological innovation that signaled the conquest of the western frontier, connected the country with itself, and the first important shift away from a purely agrarian society.

This image therefore isn't simply an mindless attempt to combine Coors' Rocky Mountain heritage with its Silver Bullet nickname but rather a clever play on a well-known American metaphor, positioning Coors Light as a product of Man's mastery of nature.

What a strong association for an American beer brand from the Rockies to own.

Hip Hop has been the Rock and Roll of our time.

In the early to mid 1980's the only black artists that could squeeze their way on to MTV were Michael Jackson, Prince and Lionel Ritchie; by 2003 every single one of the US billboard's top 10 artists were black. Hip Hop, along with it's sister act R'n'B, swept the charts in the last twenty years and defined most of the biggest pop sensations, including memorable stars such as Dr. Dre, Eminen, Kanye West and Beyonce. 

Hip hop's cultural reach has also spread far and wide beyond the music itself. It's been responsible for some of the US's most impressive new clothing labels including Rocawear, Sean John and Baby Phat. These are not 'alternative' offerings but mainstream styles stocked in Bloomingdales and Macy's; Jay-Z and Damian Dash's offering alone grosses $700M per annum.

Alongside a slew of dedicated hardcore hip hop movies like 'Boyz n the Hood', Hip Hop also launched Hollwood's current leading, leading man Will Smith (although we've probably all long since forgotten he started out as a rapper). Arguably more importantly it has overseen a significant increase in the number of Hollywood roles for African American actors and actresses.

Hip Hop's final expression of stature has been to firmly embed itself amongst the common American vernacular: words like 'dis' and 'yo' now effortlessly float from the mouths of almost every American teen.

Adidas were one of the first to capitalize on Hip Hop's increased cultural cache; the opportunity was virtually handed to them on a plate after Run-DMC released the song 'My Adidas". Not all brands were so keen on the urban, black audiences that had adopted them though, Timberland initially refused to provide free samples to Hip Hop bible The Source for fear of damaging their brand.

The first marketers to truly grasp the transcendent appeal of Hip Hop were a young team at Sprite who laid all their eggs firmly in Hip Hop's basket with a series of Hip Hop themed commercials run under the 'Obey Your Thirst' tag line. The commercials were obscure in nature and included cult icons such as Afrika Baambaataa but still went on to double Sprite's market share. In doing so they showed that Hip Hop could be used to sell products to both sides of 8 mile and beyond.

At least as successful was Vitamin Water's 'Just 50' partnership with 50 cent. The ads cleverly tapped into a mellower, paired back side to the rapper that proved synergistic with the brand. The choice of grape as their hero flavor was also a clever nod to the most popular flavor of 'quarter waters' that were ubiquitous in African American communities. The currency pun with 50's name was also unlikely to have been lost on audiences, 50 himself later rapped (referring to a buy out of the brand by Coca Cola Enterprises):

"I took quarter water, sold it in bottles for 2 bucks and Coca-Cola came and bought it for billions, what the fuck?"

In short then, Hip Hop has demonstrated itself to have a robust and extensive appeal to Millennials. Nothing lasts forever though and brands positioning themselves around cultural trends do need to be prepared to shift strategies very quickly, as Pepsi found out to its cost with its association with Generation X.

So how much longer has Hip Hop got at the forefront of Teen culture? Village Voice just published an interesting article documenting the lack of urban crossover hits in the last two years, personally though I'd bet it has at least a decade left in the tank.

I pulled a lot of the data above from Dan Charnas' excellent history of the business of Hip Hop, The Big Payback, which I would highly recommend picking up a copy of.

Amongst the two most preciously held tenants of modern marketing theory are that one must establish a brand's point of difference and that one must intricately understand the differences amongst one's target and segment them into different groups.

Both of these pieces of thinking were driven from the increasingly mature markets of the late 20th century. As dozens of products piled into any given category material product differentiation between brands was virtually eliminated. Large market leaders found their share being eroded on all sides by smaller specialists appealing to a defined niche.

In short being a generalist no longer seemed possible, better instead to identify a specific and profitable segment, understand their specific purchase drivers and build this as your brand's point of difference.

At times this can feel like an incredibly difficult exercise, finding a genuine point of brand differentiation is tough, particularly when all your competitors are using the same insight and ideation processes (referred to as wind tunnel marketing by BBH labs).

Modern human science can help us better understand this quandary. Evolutionary psychologists, neuroscientists and behavioral economists  are all helping to expose some of the fallacies in psychological thinking to date. We've been obsessed with tiny cultural differences between us at the expense of understanding our shared human nature and the amazing amount of human universals. 

In particular it seems that the field of anthropology has been a guilty of a a strong prejudice to find and exaggerate fractional differences between human societies. It is ironic then that it is an anthropologist that has struck one of the mightiest blows for the Universalists: Donald Brown presented an astonishing piece of work documenting a conclusive list of all currently recognized human universals.

The point: let's stop getting caught up with tiny variations in universals like marriage and start contemplating the implications of the fact every human society possesses these common traits.

This research doesn't bear an abstract allegorical lesson for advertising research but a direct and practical one. Take the famous tribes research done by Channel 4 in the UK which breaks teens down into micro groups like 'Indie Scenesters' and 'Teen Rats'. Does anybody remember their experience of school actually looking anything like this?

Clearly teens dress sense and music taste does vary but largely school is a time of intense peer pressure and immense conformity. The cultural cues may be slightly different but the milestones teenagers progress through, and their emotional reactions, are remarkably similar.

The UK's advertising trade body recently put together an excellent report on the practical application of Behavioral Economics, president Rory Sutherland summarizes his position:

"Conventional market research is largely engaged in asking the wrong questions (that obsession with brand differentiation again) and the vast bulk of the money is spent investigating hair-splitting distinctions between brands made by respondents in artificial conditions which have no relation to the context in which people actually make choices. As such, it has little or no predictive value, and generates remarkably few useable insights for all the money it costs."

It is worth noting, however, that rejecting an inordinate focus on consumer segmentation does not necessarily entail a diminished focus on differentiation. Take two great lager brands, Bud Light and Coors Light, who have chosen to focus on different human universals and therefore enjoy a clear emotional distinction from each other.

Bud Light's focus has long been on the universal human need for social connection, hence 'their sure sign of a good time' tagline and the famous whassup commercials. Coors has instead focused on the universally understood deep metaphors of force and nature, hence their focus on 'Rocky Mountain Refreshment".

Clearly there is still a place for segmentation work but let's not blindly walk that path before we've investigated the potential to tap into a powerful emotional trait that we all share.

Information cascades, also known as cultural movements or tipping points, are a long observed, and intriguing cultural phenomenon. These terms all attempt to describe a seemingly inexplicable rapid shift in behavior and/or attitudes amongst a population. This could encapsulate everything from the Punk movement right through to the rise and fall of Tamagotchis.

Physicists and mathematicians have recently moved into this field of study and found significant parallels between the behavior of culture and the behavior of particles. Physicists were already familiar with the principles of threshold effects: where matter appears to be stable in a certain state but when an external factor, such a temperature, reaches a certain threshold the nature of the matter will rapidly change, for example ice melting to water.

They found that the theory of particles can be usefully applied to the theory of people; cultural movement can be understood, to a degree, in mathematical terms. Imagine a network of people understood in the following way (please bear with me here through a light bit of technical language):

• Each person in a network can be understood to be a node and their relationships as connections to other nodes. 
• Most of these nodes hold value X but some hold value Y
• Each also has a threshold level that means if 70% of the nodes it is connected to shift to a different value it will shift too

Over time the following happens:

• Some X nodes happen to be densely connected to Y nodes
• Their 70% threshold levels are therefore exceeded and they switch to Y value
• This in turn leads more X nodes' threshold levels to be exceeded
• At some stage a cumulative mass is reached and a very large amount of X nodes reach their threshold level and convert to Y values at around the same time: an information cascade

If you've followed this far then this description of tipping points has some really exciting applications for marketing, in particular how we think about targeting.

Traditional marketing theory has often been based on the idea that targeting's role is to isolate an attitudinal or demographic segment of the national population. The theory outlined above suggests a different approach of more intensely targeting specific groups of people connected socially or in proximity geographically to existing customers.

It also frames the nature of enquiry into influence: the crucial question we should be asking is what is the average person's threshold level for a given product? ie how many of their friends need to use it before they will? 

This is all far from just pen and paper theory, AT&T have already demonstrated how successful targeting socially connected people can be: increasing their performance by three to five times compared to standard marketing techniques.

There's a large commercial opportunity too, a raft of companies have already started to spring up to try and use online social networks to capitalize on this insight. They too have posted encouraging results.

Agencies are feeling this shift in thinking as well. The term 'movements' is now firmly in vogue and various creative agencies like Strawberry Frog are attempting to position themselves as experts in this field.

There does seem some real legitimacy to what they're doing but I can't help thinking that the most exciting advances in this field are quantitative, rather than qualitative, in nature and principally relevant to targeting. Perhaps therefore it is the media agencies' media scientists that should be leading the charge into this exciting new area?

This was the last post in the Network Market Series, hope you enjoyed it. I'll probably compile into a PowerPoint presentation at some stage so look out for that.