Sunday, July 25, 2010

Consumer Behavior & the Internet

For more and more aspects of our lives, the Internet is the "everyday answer." For travel, almost everyone uses the Internet over a travel agent or calling an airline directly. Surprisingly, financial services have overcome privacy and security concerns and now most people bank online. This follows the acceptance of the ATM in lieu of branch visits, so perhaps is not too surprising. We see that people are managing their careers online, whether with job search (careerbuilder) or resume management (linkedin). Even finding love (match.com) or other relationships (craigslist or hookup.com) is more and more the mainstream. We read that most people buy goods in stores, but Amazaon and other shopping sites are generally accepted. Most people do not use Skype to call, but more people adopt it for one-on-one connections with distant friends and family.

The power has certainly shifted over the past decade. Comfort with the Internet has grown dramatically, as fear has subsided. Usage is growing steadily, but that usage is not uniforms. Most people do not blog, but people increasingly "post" their status. Indeed, for those under 18, over 33% receive their "news" from blogs and message boards. Even journalists promote blogs as they seek an audience and freedom from the newspaper owners they generally despise. Blogs are no longer the online equivalent of "public access cable."

The other major change in the past decade is that we no longer "surf the web" we "search the web." Unlike TV where people will turn on and browse about for something to watch, going to the web is less and less an experience without a specific purpose or destination. Just like in our own lives, we generally do not "watch a show, we watch TV," this also occurs when people peruse Facebook or Twitter just to see what people are doing and talking about.

Think about how we increasingly investigate what ails us. There is so much information, both pedestrian and highly technical, about medicine and our health. More and more people use the Internet to try and self-diagnose. What does this say about our confidence in our General Practitioner? I hear more and more Doctors complain that their patients don't tell them their symptoms but rather tell them the various things they think they have and why...

I am very confident that the practical aspects of the Internet will insure continued growth -- gathering information and transacting. My word of caution for all this is over the very nature of consumers. We are comparative (good for the web), compulsive (good for the next cool thing) but also satiable (bad for doing the same thing over and over forever). Basically we like choice. If we don't have something, we want it. But once we have it, we don't want it anymore. Where this becomes problematic is for social networks like Facebook. So long as the community can sustain itself with interesting things, then it may work, but like so many others...when it is no longer "cool" because "everyone is doing it" (especially for the next young generation), then a new "exclusive and cool" network will emerge. Remember, great consumer marketing ALWAYS seeks to segment the audience to improve sales and margin. The social network "market" will do as all markets do...consolidate and fragment. It is in the very nature of capitalism as Schumpeter taught us in his theory of creative destruction.

My final thought is on how we consume entertainment. Initially, when we accessed the Internet with dial-up, media usage was limited. Today, with broadband "always on" and with high speed service, we see that media consumption is rapidly changing. There are several interesting trends. First, young people are watching TV and movies on PCs and laptops (legally with Netflix and illegally with Surf the Channel). This is a natural evolution from the "time shifting" of DVRs. We expect to watch what we want when we want thanks to TIVO. Second, more and more people are watching television with a PC or laptop in the same room or literally by their side. Call it multi-tasking, but for more and more people, the Internet can enhance the TV experience (answer questions, communicate with other fans, etc). Third, the future of TV is that TV will become more like the Internet. Next up will be tCommerce, where we will be able to purchase directly from our remote control. All the cable and satellite companies are working on this. Fourth, there is no good news for news. All demographics are getting information from the Internet and their mobile phones. Newspapers will need to drop "papers" from their name soon enough. Radio is ok because of the car, but that's about it. Internet radio is even better at discovery, the key to radio's success. Magazines may be ok for a while, but as soon as iPads and Tablet PCs can give us the big photos and big ads (interactive), then they too are going to exit the "cutting down trees and printing with ink" business.

In summary, people are increasingly living their lives on and through the Internet. My advice to publishers and businesses is to think of the Internet no differently than any market. Focus is better. Keep it simple and effective. Understand that every consumer is unique, that segmentation is required, and that choice is good. Next, we should all expect our experiences on the web to move to mobile phones and larger hand-held devices. Finally, two words of caution. The most technically advanced are already beginning to push back against 1) too much tech and 2) too much intrusion into their lives. People are becoming reflective about being tethered to devices 24/7. Many are saying "enough already." Also, advertisers must be careful to establish when and where they will be so people can understand and accept. Control must remain with the individual.

The Internet has always promised to empower and to be "free." When people can no longer escape; when people feel addicted or dependent; when freedom is curtailed, then even this wonder will begin to fade.

Thursday, July 15, 2010

American Polity and Politics

My facebook page has been the home of some wonderful debates about our nation and our President. I would like to offer some thoughts about some fundamental "truisms" that seem to be at the core of the challenges we face today.

My overall point is that the majority of Americans oppose big and growing government. They oppose high taxes to support big government. Why? Because we value freedom and competition.

1. America is a capitalist and consumerist society. People make choices everyday in a very competitive marketplace for the products and services they want and need. In my lifetime, competition has exploded in every industry -- transportation, food, technolgy, financial services. As consumers and capitalists, the majority of Americans do not believe the federal government provides good value for money. To be very clear, the majority of Americans do not believe that the taxes they pay are effectively nor efficiently spent to provide services they need and want. Indeed, if I were to write a full paper on this subject, I would create a "hierarchy of needs for government services" which would clearly show that citizens appreciate "direct" services like the police, fire department, roads, water/sewage, trash collection. They tolerate military expenditures because they are effective, but not efficient. Hence we run out of patience for the cost of wars like Iraq and Afghanistan...not because we are losing, but because they are expensive. When we move towards "indirect" services, meaning Energy, Eduction, Health and Human Services...we begin to see that Americans don't believe they are well run nor worth the money being spent vis-a-vis taxes. When we move farther afield towards Medicaid, Medicare, Social Security, Welfare, most citizens understand what they are but don't think this is an ideal system. It is bloated, wasteful and uncompetitive.

2. The United States federal, state and local governments are large and have a self-interest in maintaining and growing their place in our society. I have yet to meet a politician or career civil servant who does not know that my first point is true. But they are not going to voluntarily quit their jobs. It is only under duress that governments furlough (notice I did not say fire) workers. Indeed, we should all be thankful for the AMERICAN voters resolve to pass balanced budget laws in 48 states. These force governors to cut spending, or as is the case in Washington State, raise taxes, which will most likely lead to voters ousting the party in power this fall. If we had a balanced budget amendment for the federal government, which INCLUDED entitlements, then we would see the type of appropriate cuts that have been forced upon Greece, Spain and Ireland.

3. What all Americans demand of the President of the United States, as the highest ranking, most powerful and completely responsible CHIEF EXECUTIVE of the nation is outstanding GOVERNANCE. The Executive branch of the USA EXECUTES. It does not LEGISLATE and it does not ADJUDICATE. Those tasks are for the other two branches of government. We demand that the President be the world's best CEO. He has to tell us where we are going, and how we will get there. Then he has to perform as an Executive. The most successful US Presidents have well understood that they must enforce the balance of power against the other two branches. The Executive Branch is the only one which can government my 2nd point, and respond to my first point. The Executive Branch must cut waste over the departments it runs. It must improve the services it provides. Look at the Internal Revenue Service; it has completely remade itself into an effective and quite frankly friendly and useful part of our federal government. The US President must govern the passions which are inherent both from the Legislature and from the Civil Service. That is her/his job.

4. So why do a majority of Americans not support President Obama today? Well, the answer is simple -- we don't like where he is telling us we are going, and he has not proven to be an outstanding Chief Executive. To be clear, he has succeeded in his LEGISLATIVE agenda. He has passed health care, financial reform, and economic stimulus. He will LEGISLATE changes in Education and Energy. He will continue the policy of withdrawal from Iraq and upscaling our efforts in Afghanistan. So why don't we support him? BECAUSE HE IS NO LONGER A LEGISLATOR, and what we all see is that he believes in big government and higher taxes. We don't want that. We know it is not efficient nor effective. That is not where we want to go. The majority of Americans are aware that our spending is out of control. We see that the because citizens refuse to pay for more government spending with taxes, the government borrows money to pay for what they provide. This is not market competitive and is not sustainable. This is where Obama has lost us. On the second point, we fear that he is not the world's best CEO. We are becoming concerned that he is no more capable than George W. Bush.

This is not about communism nor socialism. This is about the majority of Americans NOT believing in big government nor higher taxes. This is about the majority of Ameicans demanding great leaders and executives in the White House.