Wednesday 24 October 2012

The future of TV is not quite as rosy for consumers as it appears

I’ve been reading lately about the future of TV. There are no shortage of interesting material on the topic like these short quotes from industry leaders compiled by CNBC, the great post by Brian Solis “The future of TV is more than social it’s a multi-screen experience that needs design” and this must listen podcast by Mitch Joel “The future of TV is social”.

I don’t dispute any of the conclusions in the content  above. The lines of argument are that TV is the next big battle ground. One that has remained relatively unchanged for 25 years but one that looks set to see significant disruption over the next few years through the convergence of social media and digital technologies with television, through dual-screen media consumption and through a wave of technology innovations from motion control, voice control, ultrahigh definition, 3D, to greatly enhanced search and streaming etc. This post is not about the potential technology innovation in the future of TV, it’s about some of the practical barriers that consumers may face over the coming years as the TV industry goes through its transformation.

The first challenge I see is that in an industry dominated by mega-players content will be distributed amongst multiple providers via a rights bidding war. If I just take the UK market as an example, competition to define the future of TV is fierce. We have the traditional terrestrial TV providers like the BBC and ITV who are investing heavily in digital and streaming content. We have the dominant Satellite TV provider BSkyB, whose monopoly has been eroded somewhat over the last few years by BT, Virgin Media and others. In addition, we have Apple TV, Netflix, Google TV, Tesco (via their blinkbox acquisition), Amazon (via their LoveFilm acquisition) and a host of other players inclusing potentially some of the content providers streaming their content direct to consumers. In other words the TV industry has some of the largest companies on the planet with some of the deepest pockets, all competing for eyeballs. In order for any of those players to remain relevant in the market they have to have content rights. A potential scenario for the next few years is that we may see a battle of the giants for content rights which will not only push up prices but also ensure that content is scattered across multiple providers. Take for example the recent announcement that the 2013-14 to 2015-16 premier league football rights have been sold to BT and BSkyB for £3bn – this represents a staggering increase of £1.25bn on the current rights package and splits content between 2 competitors. As rights for other premium content follow suit the result for consumers may be that consumers will need to go to multiple providers for content and that these providers may change at every rights renewal.

A secondary impact of the rights war will be that providers, keen to claw back their investments, will hang on to their existing business models. Those with lucrative subscription models will cling on to them as long as they can and those with exclusive rights (e.g. premier League football, Heineken Cup Rugby etc), will maintain either high prices or increasingly sophisticated (or relentless!) forms of advertising – some of the terrestrial providers in the UK now seem to have more forced adverts on their streamed content than they do on free / live television! The result for consumers? We may well have to consider multiple subscriptions, multiple contracts, multiple hardware devices and more adverts forced into our content. In addition, it’s likely that we may see more providers heading the way of Setanta sports to bankruptcy as over-prices rights become a poisoned chalice for some providers.

A third challenge I see is viewing quality. Over the last few years picture quality within the DVD / Cinema and Cable TV segments has improved radically – we’ve seen a mass roll out of HD, some muted take up of 3D and the potential launch of ultra-high definition. In the streaming world, when picture quality increases so to does the strain on the broadband network. This phenomenon is of course exacerbated as more and more people start to stream more and more content. At the end of last year Netflix accounted for 33% of peak time internet traffic in the US. As more players enter the streaming video market, more consumers stream content and the resolution of that content increases, broadband networks will likely struggle to keep pace.  In reality this means one thing for consumers in the short to medium term – buffering!

A final challenge that consumers may have to contend with will be shortening product lifecycle times and continual hardware / software compatibility issues. To illustrate what I mean here, let me use a personal example. I bought a smart TV less than 18 months ago. The software is already out of date and cannot be upgraded – in effect my “smart” TV is now just a dumb monitor. Now, I understand that many hardware manufacturers moving into software have a pretty steep learning curve to produce brilliant, upgradable software (with the exception of Apple it’s simply not in their DNA). In addition, I understand that rapid technology innovation is resulting in shorter product lifecycles. But most consumers, used to purchasing a TV that lasts many years, may not be so accepting. In addition, TV manufacturers will likely battle against an array of players for dominance of the living room. If you’ve invested millions in developing “smart” TV’s, the last thing you want is for your device to be kept as a dumb monitor, while consumers plug in IP boxes and TiVos and “flick” content from their smart phones onto the TV. Whilst consumers will undoubtedly see huge innovation, it is highly unlikely that the various hardware / software providers will work in harmony, again leaving consumers facing potential frustration, confusion and expense.

Bill Gates once said: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten”. There are some incredibly exciting innovations in the future of television, but mass adoption may be held back, unless some of the barriers above are addressed.

Wednesday 17 October 2012

The 360 degree customer view is dead

I've never been entirely comfortable with the phrase "360 degree customer view". I remember hearing it for the first time in a Siebel sales pitch. The sales guy put up a slide with a customer on one side and a series of connectors - like spokes of an umbrella - connecting to all of the different silos of customer data - the call centre, the field sales force, the finance department and so on. The assertion that followed was the Siebel would connect all the silos of customer data allowing anyone who interacted with the customer to have a complete history of the customer. It was argued that greater customer insight, in turn, could be used to build stronger, more profitable customer relationships.

Thinking back to my early days as a CRM practitioner, I also remember the first CRM training course I attended, run by Francis Buttle. One module of the course described the inability of many organisations to understand their customers and think from their customer's perspective. The training course gave a case study of a Swiss bank who had launched a new savings product designed for pensioners. Now two caveats... firstly, I have no idea if the case study was a true story and secondly, I'll probably do it an injustice as I’m sure I don’t remember all the details. But if I remember correctly the jist of the story was that the Swiss bank had completed a market research exercise that suggested that pensioners in rural locations represented a large untapped market for savings products. They designed a new product, specifically designed for pensioners and they employed a marketing agency to come up with a tailored campaign to target pensioners. To ensure that bank staff would execute on the anticipated success of the campaign, the bank initiated a training program to teach their staff how to interact effectively with pensioners. They built booths in some of their branches and put on coffee and biscuits for their potential new clients. The new product launch was an unmitigated disaster. Despite the research that showed that Swiss pensioners had savings funds stashed under their mattresses and despite the large investments, the bank barely signed up any new customers. In desperation they undertook a research program to try and find out what went wrong. They travelled to villages in Switzerland and ran focus groups with pensioners. When they asked them why they were reluctant to take out the new savings products of the bank one theme emerged above all others - the pensioners were scared of getting mugged on the way to the city banks. With that insight the bank overhauled it's branch model and used large mobile banking vans to visit the local villages to interact with their potential clients on their terms. Knowing that security was an issue they also introduced an insurance policy to offer unlimited protection on savings funds stored with the bank. Again, I have no idea whether that story is true, I suspect some of it was embellished to make a key point of thinking outside-in from the customer’s perspective, but the story stuck with me.

So back to the "360 degree customer view", my unease with the term comes from that fact that although it may be possible to build a transactional view of all of a customer's interactions, orders, complaints etc with your company, those transactions only represent a tiny fraction of a true "360 customer view". A consolidated list of transactions with one company tells us nothing about how a customer is thinking or feeling at any given point in time (this changes constantly based on a whole range of factors that are entirely outside of our control). For example, a transaction that tells me that a customer had broadband installed, probably doesn't tell me that the engineer was late, rude and left a mess in the customer's living room. An inside-out list of transactions tells us nothing about a customer's dealings with competitors, their pain points, their value drivers and more importantly how these change, chameleon-like, according to the situation the customer is in.

Now before you ask, social media is not the panacea. Social media is not the missing link in the 360 degree view. Yes, of course you can supplement CRM data with social data and yes, this can sometimes give you more of an indication as to who the customer really is and what they really think. But, one of the dangers I see with adding social data to CRM is that it can make marketers act like kids in a candy store and it can perpetuate inside-out thinking. With so much data to slice and dice, it becomes even easier to perform a segmentation and blast more and more inside-out offers at customers (people aged 21-25, living in NYC, who wrote a product review of an MP3 player in the last month, who clicked on an add must surely want a targeted email offer for a pair of headphones so let’s keep spamming them???).

A harder position to take, but in my view, one that can yield better results (in the form of long terms profitable, win-win relationships) is one that seeks first to understand the things customers value, the journeys they go through and the critical moments of truth within those journeys. Second, to acknowledge that you can't control how a customer thinks, feels, buys, complains but you can give customers tools to help them create value for themselves and you can sense, respond and fix things when they go wrong. When I first heard the story of the Swiss bank all those years ago the simplicity of listening to customers, rather then making assumptions about them stuck with me. Today, we are awash with data, the challenge is in how we use it.

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