i [love] marketing.

My Year in Review

I like to think of 2012 as the year of a lot personal and professional insights.

The biggest professional insight of the past year was coming up with the Digital Design approach. It came from my experience of working with people who think of digital strategy only in terms of practices they are familiar with: engagement planning, communications planning, propagation planning, you name it. Nothing can be further from the rich and broad digital reinvention of the ways we do business and live our daily lives. I became convinced that more than a gap in knowledge, there’s a rift in values between those who understand digital and those who merely use it. 

I realized it’s important to emphasize that digital insights need to be the hub of any solution and/or idea. Enter Digital Design. It’s an approach and methodology focused on solving problems in a way that improves human lives. It thinks of digital as a new source of value for both the business and the user. As an approach, Digital Design is behavior-first, collaborative, additive and evolving. It’s driven by making the world a more open, social and sustainable place. It's based on the fact that we've run out of time for solutions that are not sustainable, that hyper-consumption is a waste, and that we need a much more efficient economic activity. As a methodology, Digital Design is human-centered. It’s a set of tools and methods oriented towards creating and capturing economic value through helping people do things in a more playful, human, sensible and efficient way. 

In practice, Digital Design informs strategy. The focus of strategy is on understanding problems, not enforcing a particular solution. Strategy's job is to outline the experience that connects the business and the user. Best strategies help solve problems by generating an idea on how to creatively improve human life. Best experiences are holistic: they grow business and bring value to users.

In theory, Digital Design draws on design thinking, business modeling, organizational analysis, sociology of innovation, systems thinking, complexity studies, experience design, behavioral economics, and cultural studies. Think of Digital Design as Design Thinking 2.0, updated for the dynamics of the digital world. 

To bring Digital Design to life, I drafted a Digital Business Gameplan. It's a tool meant to help businesses identify new market opportunities in the digital space. I also made an overview of digital business in 2012. Coming up next are a Digital Design Curicullum and Digital Business Models. In my everyday work, I want to combine marketing and business ideas, new business modeling and revenue streams, and service design. 

I had a chance to share my take on Digital Design with a lot of curious and interesting people in 2012. I was a panelist at a well-attended SxSW conversation this past March. Shortly afterward, I found myself in a good company of other keynotes at a Croatian advertising festival, IdejaX. And then, in September, I had an opportunity to realize how hard (and great) it is to guest-teach a graduate class at SVA. In December, I was again part of the fun crowd of IAB judges. Throughout the year, I had teamed up with the amazing Ale Lariu to teach Digital Strategy course. In between speaking and teaching and working, I put my thoughts in writing for Fast Company and also went back to contributing to AdAge. I plan to continue to make speaking and writing as part of my monthly routine. I look forward to teaching an online digital marketing course with MediaBistro in March.

I enter 2013 quite content. There's a lot to be done in the next year, but the past 12 months provided a solid ground for me to build off. I look forward to the fun and excitement of 2013. Wishing the same to you.

Avis buys Zipcar. So what?

There's a flurry of reactions around Avis' purchase of Zipcar. The most daring of those proclaim how "sharing economy's entering mainstream." Wait, what? Let's get this straight. Zipcar is an hourly B2C rental car service, not a P2P collaborative consumption platform. There's nothing about it that screams sharing economy. 

Zipcar's true innovation was the car rental model based on the insight that in the age where people buy music by the song, they'd probably want to rent a car by the hour. And they were right. Alas, while they were first, they were not the only one. Hertz On Demand is an hourly car rental platform launched to take advantage of the fact that increasing number of people value access to cars more than their ownership. And get this: Hertz on Demand is the same as Zipcar, but no one calls it sharing economy. 

More important, however, is that Hertz On Demand has, and Zipcar doesn't, a giant fleet of vehicles and already established and profitable operation. That's where the Avis deal comes in for Zipcar. At the time of its acquisition, Zipcar's costs of maintaining its fleet are at about 65% of its total expenses, which is massive. Its operational costs are high. There's a frequent shortage of available vehicles. So, while Zipcar may be known as a leader of the hourly car rental category, in reality it's not. It's hard to compete with Hertz.

It's hard to compete with Hertz for Avis, too. Avis' On Location hourly rental service is tiny, focused on corporate renters and all around lame. It doesn't have convenient pickup locations and a substanital car fleet. So when faced with "build or buy" dilemma, Avis choose "buy" in order to remain competitive. Zipcar's acquisition will solve at least one of Avis' problems.  

The conclusion is that Zipcar has created a market that has been consequently penetrated by more powerful entrants. To stay competitive, Zipcar had to become bigger. And it did.

There's nothing innovative about that, neither in economic nor in social terms. If you want to talk about real sharing economy, look at what Getaround, RelayRides, Whipcar, and Wheelz are doing. But no one's lining up to buy them, lest Steve Case. There's still a long way for P2P innovation to prove its profitability and penetrate mainstream - and for sharing economy to become a norm. When it does, it probably won't happen via acquisition. 

Economics of value-based pricing

"One prominent feature of information goods is that they have large fixed costs of production, and small variable costs of reproduction. Cost-based pricing makes little sense in this context; value-based pricing is much more appropriate. Different consumer may have radically different values for a particular information good, so techniques for differential pricing become very important."*

It's no wonder that traditional marketing and advertising don't work in digital space. Customers' perceptions of value of a product/service and their expectations of the value they'll gain are completely unrelated with the cost of creating that product/service. Companies' value proposition thus needs to be correlated closely with consumers' value perception. This value perception is shaped by Google-led commoditization of products/services, transparency of pricing, and social information - to a greater (much greater) extent than advertising. Key to success? Staying close to customer's perceptions and expectations of value. That's the path to sustainability; everything else has a short shelf life, literally and figuratively.

* From here.