(We have already cover summary in part-1. Part-2 is dedicated to critical analysis)
Let’s dissect Permission Marketing!
Ch-3: Evolution of mass advertising
Author paints a picture that distribution of goods to far places is a 20th century phenomenon. World trade is not a century old phenomenon. Organizations like East India companies (British/Dutch/French) were established for this reason only (though they were more interested in crimes like loot/genocide/ rape/human trafficking than actual trade). Indians & Chinese have a glorious history of world trade (yeah, the real trade) both maritime & in-land of thousands of years. Even today, Odias (People of Odisha) celebrate Kartik Purnima by releasing miniature boats made from paper/ banana stems to remember Sadhabas (marine traders community) leaving for south-east Asia to carry out trade. On the same day, a grand festival, which was originally a trade fair, can be witnessed in the city of Cuttack called Bali Jatra which literally means voyage to Bali. The difference in world trade is that earlier the place of origin of product mattered more, but now who is selling (retailer & brand but not the real manufacturer) matters more.
Ch 5: How frequency builds trust and permission facilitates frequency
Author advises to keep in mind that all awareness can’t be converted to trust. That might be true but awareness can generate profit even when it fails to generate trust because there is no such thing as negative publicity. There has been many instances of this & it’s highly common in entertainment industry: The Kardashians, Beetlejuice, Dhinchak Pooja, the Friday song, Rakhi Sawant, KRK etc did manage to earn way more than their talent (or lack of it) would have earned them. Even talented artists like Sasha Baron Cohen, Ozzy Osbourne and Kanye West use it.
Author say, “Frequency and trust outweigh reach and its glamour.” In reality, it’s the trust that outweigh everything else in the long term. Frequent ad/message can only induce a trial. No matter how much ad you show, no one going to buy a car just because of an ad. They might be ready to take a test-drive but not to purchase it. Frequency can lead to purchase only in case of low ticket item, may be even apparel or cosmetics but not any costlier or more complex item.
Author links frequency-awareness-familiarity-trust-profit. It happens but not always and it definitely isn’t a one-way traffic. Author believes people trust brands as they are “inundated with frequent messages about their quality and reliability”. But by whom? No matter how much marketers talk about their quality and reliability, they can’t earn trust. These message needs to come from a unbiased party or friends & family. The biggest name in the world for quality and reliability is Honda. It’s not because they are running ads for decades about this. People trust them because they have delivered this quality & reliability across product categories for decades. So if bombardment of same message doesn’t build trust, then why do we trust? It is primarily for 3 reasons: Personal experience (trial), recommendation from friends/ family and herd mentality (The brand has survived so long. So many people are buying it. Then it must be good). Honda became synonymous with “Trust”, “Reliability”, “Quality” primarily because of the first two reason (though the 3rd factor must have helped the cause).
Author says big brands don’t advertise aggressively. If he is talking about aggressive in terms of budget then it is a contradiction of his earlier statement “The top one hundred advertisers account for more than 87 percent of all advertising expenditures in this country.” If he means aggressive in terms of frequency of updation then it is a contradiction of his earlier opinion that we don’t need to update it frequently. There he says instead of getting carried away by the fun and fame of new ads, we should check if the old one is still effective or not. He suggests best person to do that is the accountant as he can tell when the ads stop bringing new business. Ads of some of the biggest brands may not be innovative, but they are always aggressive. Take any example: Apple, Samsung, Amazon, MS, Coke, Pepsi, Google. If you know of a big brand whose ad/promotion is neither innovative nor aggressive, please let me know.
Ch 6: The five levels of permission
Author is right when he says intravenous permission can help minimize opportunity loss. But it also creates new operational issues: Won’t it hamper Walmart’s planning? When to order? How much to order? How does the savings from opportunity cost & less storage space required stack against extra cost from more frequent and lower order size. Will it still get the cost savings of bulk ordering? May be Walmart can do this due to its size, but what about smaller chains or local shops? How will it influence the management of working capital, warehouse, shop floor? There are so many nuances to this which author could have discussed.
Author felt betrayed when he was punished for his loyalty at the framing store & was charged more than new customer. But that is the objective of marketing: to extract highest value from each customer. The issue here was that it was done overtly. It is always the price conscious customer who gets the better deal. Loyal customers seek & buy from one brand & one store. Obviously, they will be penalized for this indifference to information & less effort on deciding what to buy. There is a common misconception that per unit cost is less in family pack than trial pack for all FMCG product. Person buying family pack is making a bigger commitment for which they should be rewarded, yet many times they are penalized for not comparing prices. Even author discuss this couple of pages later but doesn’t link it. When it was about him he writes fear of losing the customer had led framer to give discounts. When it was about others he writes, “Because different people have different attention thresholds, cash discounts are a crude form of points. Frequently the discount is given to someone who could have lived happily without it. Other times the discount is insufficient to get an ideal prospect to buy from you the first time.”
Author should know better. He asked 2 questions in a conference: “How many have enough money to pay for own vacation?" & “How many aggressively track frequent flier miles?”. These are leading questions (for a group of executives in a conference). It is a very common tactics. He would have gotten very different response had he asked these 2 question: How many would be ready to spend amount x for vacation over a great investment opportunity? How many use at least 90% of their frequent flier miles or credit card rewards. Sir Humphrey Appleby explains it best in Yes, Prime Minister(S01E02 clip). Swapan Das Gupta tackles the trap of leading question very well in a debate on post-truth. The fact is almost 40% of people don’t claim frequent flier miles, almost a third of credit card users never redeem their rewards.
Author forgets to mention when the personal relation level works best: when it is legal but not lawful. In simple words a bribe which are not considered bribe. Best instance of this is how pharma companies send doctors to resorts and five-star hotels for “symposium” & “conference” which are actually vacation. Another instance is how political parties support “journalists”, “historian” for their "unbiased research/reporting".
Author feels brand trust is dramatically overrated. I don’t agree one bit. Look at the most profitable companies, they all have great brands (and/or they are part of cartel or monopoly). There are many people who don't have a favourite brand but brand matters to them. Many people don’t care whether it is P&G or HUL, Nestle or Kelloggs, but it must have a positive brand image. They would choose these any day over some xyz brand. Its effect is minimized when a lesser known brand offers an opportunity to save enough to trigger a trial. Look at the irrational trust of Apple fans, if you look at facts Apple isn’t any more trustworthy than Android.
The quality of the book is sharply degraded from chapter 8. And it’s the worst in chapter 10 (Case studies) which had a great opportunity to prove how good & useful permission marketing can be.
Ch 8: Everything you know about marketing on the web is wrong!
He talks about vested interest and ulterior motive in web, how Intel funds start-ups to develop advanced content which requires updated hardware. But this is not ulterior motive, this is how innovation & development works and it should work like this. It’s not only in PC, the same thing happens in automobile, video game and even in finance industry. It is only fair if you want more features & better experience, you need to spend more just like if you want better quality road with less traffic, no speed breakers and save your time you need to spend more & pay toll. You want your video game to look more real than the reality itself. You can’t expect that to run on a 10-year-old device. If you have a yearly pass to travel to the nearest towns in your local train & somewhere along the way a new bullet train service is started, you can’t expect to use your old pass to ride the bullet train. Then why the double standard for tech products? You made a commitment for a certain level of feature for a certain time duration. If you want more, you must pay more.
Author lists 12 popular myths about marketing on the web. First thing first. Myth doesn’t mean lie. There is a difference between myth & lie, truth & fact, fiction & fantasy. But we won’t dwell on that as we aren’t here to discuss philosophy. He tries to prove that these are lies, false or fallacies. But many of them are not.
Take the 2nd myth for example: If you build great content, people will return over and over. Now, it’s true that only great content may not draw crowd. But great content is the safest place to start. Music, movies, sports, video game, talk shows or a simple blog - all need great content. The artist who produces one after another good song, eventually gets its due. He says great content doesn’t ignite repeat visit, which is again wrong. People don’t listen to a song or watch a movie only once. Plus, they search for other content by same set of artists, if they find it & like it they come back again & again. People still watch old movies which are almost a century old. Heck! I still play NFS MW & Counter-strike 1.6 (sometimes).
Better content doesn’t necessarily mean more commercial success just like the most talented singers/actors aren’t the highest paid ones. But, that is due to the audience they are targeting, purchasing power & influencing capabilities of that target audience. E.g. you’ll always find most beauty/life style products targeting 20-35 years old women. This group have better disposable income & higher inclination to spend more on these products and they influence both the teenagers & middle-aged as opinion leaders. Many times good content doesn't get commercial success because they target a group which isn't commercially viable.
When you create great content on a consistent basis, you create a great brand. Your fans know exactly where to look for new content & what to expect from it. Generating cool & fresh content can be expensive, but then this is a capital expenditure not operational expenditure like most marketers & accountants believe it to be.
4th myth: “The search engines are the key to traffic to your site.”
I agree with author that it’s important to create a process to scale traffic than focusing all effort on random visits via the search engines. But still we have to focus on SEO/ SEM if we want to be successful. SEO/SEM is for attracting new customer. Frequent & regular good content is for old customers. Whatever we do, there will be attrition, may be for internal reasons (our quality or how we serve our customer) or external (change in taste/income level of customer, change in macro-economic factors or death). So if we don’t put any effort on SEO, then all our customer will leave us one day and we won’t have anyone to replace them. A 15-year-old girl who loves the Hello kitty purse won’t come again & again to buy the latest hello kitty purse till she is 50. At some time, you need to replace her with a new 15-year-old. SEO might not be perfect, still it works better than most other tools to find your next customer.
6th myth: The web is like TV.
Author believes it’s a poor substitute for TV. NO, IT’S NOT! Not long after author wrote this book, YouTube was started. It busted this myth single-handedly. Today, web is a better alternative to cable TV. Anything & everything you could do with cable TV can be done with Internet.
Author got it totally wrong when he says internet won’t be a million channel media. He gives many examples of how people tried and succeeded to change every medium to a TV but not with internet. Actually it started before TV. When TV came around, they moulded it into a modified radio.
For any medium to be commercially successful it needs 2 factors: first creating a need for non-customer or acquiring users from other mediums to kick start network effects & second creating means to monetize a medium. Truth is if you can’t modify a medium into multiple channels it is very hard to monetize. A big dump of information is hard for users to find & process & harder still for creators to monetize. Internet can be divided into different sections E-commerce, Social media (YouTube, FB, Instagram), OTA providers (Netflix, Amazon, Hotstar), News channel/aggregators, miscellaneous etc. If you look into different section of internet they are further divided into multiple channel based on genre, topic, industry, age group etc. (Note: Acquiring 'users' from outside & monetizing it is called conversion. Its not a 20th century phenomenon, it has been going on for millennia. Though monetizing 'non-users' is only a couple century old phenomenon.)
He is also wrong about TV networks being artificially limited to charge premiums. Truth is that supply is way more than the demand. Let’s say you want only sci-fi content of English language, or Japanse anime or British drama. In each category there are more content of good quality than any single human can realistically consume. He also paints a picture that it has always been a money making industry which is also not true. Yes, today even the weather channels make money, even Ozzyman is interested in weather of Mexico ( I've said too much). But the 1st news program to actually make money in the world is 60 minutes which came in late 60s.
10th myth: “Anonymity is good for the Net”
Again it’s true anonymity can lead to spam, but so does fake profile. Instead of FinStatic Beacon, I can be “Angel Priya”, “Daddy’s lil princess” or “Luvly Sarah”. If a profile isn’t verified through bank details or govt. issued ID, there is no way to tell which is genuine or not. (Even that doesn’t work many times.) Author says it didn’t start this way, which is again wrong. Web started as platform for dissemination of information and inciting collaboration. Today, Web is this big only because of this anonymity. The sites which actually create most value for us are forum/community: Mozilla, Github, LinkedIn, Xbhp, Xda developers, Quora etc. Earlier, there was no “anonymous” account because there was no need of one. Most had a unique handle or digital avatar, no one knew where the person posting lives, what he does, where he work. Now that sites motivate you share all this personal information there is a need of anonymity.
The analogy to ski mask robbery is out of proportion. Anonymity is not same as going inside the store with ski mask. If you wear ski mask & enter a store, you will be shot. Going anonymous (or unverified profiles) doesn’t warrant any negative consequences, not unless you abuse that power through spam or abusive/pornographic content. Sites like Quora or Glassdoor provide protection for telling the truth, if you use that to spread hate/misinformation/terrorism, they will block you and you’ll be reported to authority. They wouldn’t be successful without anonymity because there are many genuine people who want to share unpopular but correct information, but they don’t want to risk being exposed to the society or their employer.
12th myth: Activity Is good.
It’s not a myth, it’s hundred percent true. If people don’t hear you or watch you for some time, they will forget you ever existed. That doesn’t mean that you be active for activity sake. You have to use your brain. Let’s say you are an actor, who gives full attention to one project at a time. The current project might take more than a year. If you stay underground for that long, it can be a real problem. So, in the mean time you might go to an award show, host a TV show, do some social work, appear in a music video or share on social media about what is going on in your life. People seek some individuals out, but after some failed attempts they learn to move on. Look at any celebrity: actor, singer, athlete, politician, they all follow this religiously. When was the last time cosmetics company did a real innovation? Even some big auto makers didn’t innovate for multiple decades but all of them were always active & interacted with its customers. When activity is important in analogue world then why not in digital world? Both have the same people.
Ch 10 Case study
This chapter does more damage than good for the cause of permission marketing. Look at the 1st case: Kosher caterer is without doubt burning money by shouting look at me in a big crowd where others are shouting much louder. But that doesn’t mean the ad/message is only relevant to Jews. Let’s take a similar example: During the month of Ramzan devout Muslims fast during the day & eat only after sun is down. If your city has a sizeable Muslim population chances are, many restaurants make special dishes/snacks in the evening. Though it is targeted to Muslims, a big section of people who come aren’t Muslim. They are there just for the food. Now, If you ignore this section, then you are losing a big business. It’s like saying all the Thai restaurants in NYC is relevant only for Thai people.
The biggest contradiction comes up in the Amex case. Throughout the book, he advises against selling or renting permission, “once a permission is sold or rented means it is not a permission anymore”. Yet in the end he gives example of how AMEX “sells information” (his own words) successfully & project it as an example of permission marketing. That’s just wrong. Wrong!
The example on automobile industry is worst section of book. It's full of bad prediction, analysis & some really bad advice. Being an automobile enthusiast myself, I can tell you that if someone employ his advice it won’t be a pretty outcome. It says, “All car advertising looks the same.” It’s like saying all Asian looks the same, all African looks the same, all Caucasian looks the same. It just isn’t true. The ads may be similar in theme but not in terms of content, at least not to the target audience. They do notice the difference. He says there is no reason to respond or call to action. Explicitly: no. But the implicit call to action is come to show room, take a test drive, book a vehicle.
Then comes the bad prediction: within 10 years manufacturers will fire entire dealership. Number of dealership has actually increased due to introduction of new brands everywhere in the world. Dealership (sales, distribution & service network) is a requirement for many industries. Author is not the first to realize that the middle men decrease our margin. But they also decrease our risk & working capital requirement and increase our reach. See, if you are a new player either to the product category or the geography, then you won’t have the resources to build up a new wholly owned dealership network. It requires a lot of capital and has a lot of risk as you don’t know the market very well. Even if you have the capital & ready to take the higher risk, you need people who have been in that industry (both product & location wise), so they can guide you how to target, sell and service the customers. Only one brand follows his suggestion: Tesla, but then again it’s a small company, who sells to a small demographic, sells very less units. (No matter how much I like & admire Elon Musk, it doesn’t change the fact that Tesla is small & overvalued, which is visible when you compare their fundamentals with Ford/GM/VW/Suzuki/Honda. The current valuation assumes they can and will defend their competitive advantage. You see the names mentioned above? They all lost their competitive advantage to someone else. I don’t see any reason why Tesla would be any different. If you are thinking about visionary leader, they had that also.) They also faced major backlash (even outright ban) for this decision.
There is again inconsistency in his logic. He says, “The average American visits only 1.5 car dealers before making a purchase, so staffing these showrooms with non-commissioned, highly trained consultants is a smart plan indeed.” There is no way people visit only 1.5 dealers, it should be at least double or triple. 1.5 dealer visit means the customers have already made up their minds. This might be true for for old models of iconic brands (gas guzzlers) for which you need to go to used car lot or an auction but not for new cars. For a moment, Let’s agree that they visit only 1.5 dealers which means most of them have made up their minds for a specific model (or at least a specific brand). Okay then, if the product is selling itself, what is the need of highly trained consultants or even an untrained salesman?
He says subscription model eliminates carmaker’s risk. In reality, it increases risk & decreases their profit. Let’s say someone rents the car and have an accident. Chances are instead of getting money from him for repair, the car company would get sued. It will adversely effect not just the car makers but all their partners: dealership, service network, mechanics, insurance provider. Govt. will lose tax. In the end, all of them will retaliate.
In subscription model, author believes, the company knows the preference of its subscribers, so research cost decrease. But to be successful we can’t stop there. We need to know the preference of non-subscriber & act on it. It will lead to hyper-customization meaning more marketing research, R&D cost. Number of component will increase, more risk of compatibility issue. There are many car leasing and car renting companies. How many of them are multi-million dollar companies? Even if you include cab aggregators like Uber, Ola, Lyft, you need just need to check how much profit/loss they have made from the beginning? You need to ask yourself do they have any chance of making profit in long term?
A considerable portion of profit comes from selling more than their customers actually need and through service/maintenance. If they follow author’s advice and don’t upsell, they will make much less profit. Just ask your friends & family members how many of them have bought car worth more than their initial budget ? Profit margin in spare parts can be as high as 6 times the margin in new car sales, it is even higher for maintenance. It also has lower working capital & storage cost. Author would like them to surrender this profit by selling the exact car customer wants to buy. It’s the same in printer/photocopy/shaving razor etc. Initial profit is low, sometime these are sold at a loss to make profit later with higher margin components like the chemicals used in printer/photocopy or razor blade.
Conclusion
It’s a good book, a book which I have recommended to many. It makes a sound argument for replacing interruption marketing with Permission marketing. But it has some logical inconsistency, improper analysis, direct contradiction, bad prediction and a very horrible advice on car industry. I like the author, he tries to come up with something new, he knows how to get the attention of reader but he is too excited to discuss his ideas with you. Therefore, we need to have a clear & rational mind and assess the concept of permission marketing in a on its merits.
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