ChasNote

19 July 2004

Sam Palmisano = Phil Knight?

It doesn’t take a rocket scientist to recognize that measurability is changing the game. As the Internet and other digital media delivery platforms dramatically improve our ability to engage with customers at every stage of the buying process, much of the conventional wisdom around B2B marketing goes out the window.

Part of my job is to understand these seismic changes by tracking the new tools, the success stories and the flaming disasters in online B2B marketing. I talk to analysts and experts (including all of you), pore over data from our own research tools, and scan a dozen or so sites and publications. I regularly share my findings with my colleagues at CNET Networks to make sure we head down the right path as we evolve our products and improve on our marketing programs. Given the conversations we’ve had recently about these same issues, I want to share my discoveries and learnings with you more regularly by email. I apologize in advance for the low-res graphics and the lack of copy-editing; ChasNote is a bootstrap operation. Now on to installment #1….

Utility Computing Report Card (and some perspective from Nike)

In late 2002 IBM’s Sam Palmisano announced a $500-million-per-year marketing budget to re-position IBM around “On-Demand Business.” Since then HP, CA, Sun and others have thrown hundreds of millions of ad dollars at the same cause. Utility computing, adaptive enterprise, on-demand computing – call it what you will. According to Competitive Media Research, BizAdvisor and AdRelevance data, these vendors spent a collective $1.37 billion in media over the last 18 months alone to hit the marketplace with a tremendous onslaught of gross impressions.

Industry journalists, if News.com and ZDNet News are any indication, are on board. CNET Networks business tech journalists have written over 350 news stories in the past year, covering the topic and specific solutions from those vendors – that’s 1.3% of total news coverage by CNET Networks. Readers have requested to read those stories 570,000 times: a large raw number perhaps but only 0.7% of total story requests. The delta between the percentage of coverage and the percentage of readership requests is a decent proxy for interest by those readers – by the 6MM monthly visitors to CNET’s business technology brands.

350 utility computing stories written = 1.3% of total stories written
570,000 requests to read those stories = 0.7% of total stories requested
Delta = 46% in a negative direction

You would expect no delta: visitors to our news sites should read utility computing stories, in percentage terms, as much as they read stories on cyber-security or wireless networking. In the case of utility computing, however, the delta is negative. Interest in utility computing, despite more than a billion dollars in awareness advertising in the last year and half, is below average.

In other words, until business and technology decision makers gain a better understanding of the business benefits of utility or on-demand computing, they continue to research the more mundane (if practical) solutions like servers, voice over IP, and operating systems. Awareness around on-demand computing – if you tally the gross impressions served up for $1.37 billion – is strong. But interest by prospective corporate technology buyers remains below average.

Is this surprising, or in fact an expected and satisfactory report-card 2 years into an ambitious, marketing-driven shift in the IT paradigm? We’ll have to stay tuned to see how this one plays out. But we miss an opportunity if we charge forward blind, advertising guns a-blazing, waiting for IDC’s marketshare report for 2007. Digital media delivery (eg, the Internet) gives us visibility into the process – transition points that take prospects from awareness to interest to consideration to preference – not just the final outcome measured in signed service agreements.

Nike in the 1980s

Flipping through Brand Leadership gave me some perspective on the utility computing question. David Aaker and Erich Joachimsthaler tell the story of Phil Knight’s brilliant use of advertising to turn around Nike’s withering marketshare and brand erosion, starting with his endorsement deal with Michael Jordon in 1984. Twenty years ago, Knight couldn’t track the effectiveness of his strategy along the way. He had awareness research and (after the fact) pairs of sneakers sold versus Reebok. So Nike’s story is to a large degree a story of gut instinct and patient conviction.

“Nike’s first major advertising effort to consumers was $20 million spent before the Los Angeles Olympics in 1984. That year, Nike’s US sales decreased by 12 percent and profits dropped by 30 percent. Between 1985 and 1987, Nike’s problem worsened. Its share in the US market dropped from 27.2 to 16 percent – mostly due to the advantage of Reebok, which grew from nothing to more than 32 percent of the market. Nike was undeterred, however, and aggressively increased its annual advertising spending to $45 million by 1989 and $150 million by 1992.”

Five years of increasing investment in a strategy that didn’t seem work?? Of course, we all know how the story ends (Nike’s dominant brand and marketshare). But without Phil Knight coaching our squad, with his unwavering confidence in the initial gameplan, we’re going to need some powerful tools to help us spot-check our progress along the way (and maintain backing from our own CEOs).

CNET’s BT Trax is one tool that we’re confident will help, and I’m on the hunt for others that can help us all plot and measure success against our long-term strategies. More to come.

7 Comments:

  • I couldn't agree more with your premise of the need for change in measuring the success of marketing campaigns re: branding and driving new "brands" such as utility computing. One way to look at it is from the "overall market" end of the telescope. Another is from the individual customer side -- where is an individual customer on the route from awareness to consideration to active selection to purchase? Tracking which specific stories (i.e., an initial introduction to a technology vs. a detailed "what to look for" story would also help us find the leading adopters in any market segment. I have my own "bootstrap" blog exploring these issues http://rscheier.typepad.com/
    and would be curious to hear your thoughts.

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