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Strategy: 11 ways to purposefully achieve growth

By Mark Di Somma

You can’t build a sustainably purposeful culture it seems to me without having a deliberately purposeful strategy. Part of the problem of course is that, traditionally, strategy and purpose have lived in different parts of the organisation. My suggestion is that they shouldn’t, and that instead of simply allocating purpose to culture and strategy to planning, the business, the strategy and the culture all need to stem from the company’s driving purpose – its absolute reason for being.

That in turn means that the purpose must be much more than a wish list or a broad hypothetical goal. It must be inspiring, engaging, profit-focused and it must work hard to stand the company apart from its competitors.

Here’s how I use purpose and beliefs to drive distinctive business direction.

1. What is our core purpose (rather than just what is our core business)? When people think of our brand, what is their blinkpoint (the first association that snaps into their heads)? Are they aligned?

2. Why do people buy from us? How have we made purchase an endorsement of the belief we all share? (What do they think buying from us achieves for them, and what matters to them, that buying from our competitors doesn’t?)

3. What are the core beliefs that we share with our customers, and why are they different from what our competitors believe? Are they evident in everything we do?

4. Is this purpose worth it? (Are we making a margin we can justify?)

5. Do our customers continue to value our beliefs? (as evidenced by revenue growth, profitability, reputation and sustained repeat business). If so, what can we do to capitalise on that? Should we intensify/radicalise the belief even more? If not, what do we need to change or re-express that brings people back?

6. Are our own people fully onboard with our purpose? If not, what conversations do we need to be having with them?

7. How far, geographically, does our purpose extend (and therefore where does it stop)?

8. What more could we be doing to fulfil our purpose in our current business (via new product lines, upgrades, new experiences)?

9. What should we stop doing (in order to give us the time and the capital to do more of those things that are more important to us)?

10. What are the best ways to reach and motivate people who believe in what we believe in? (What motives, messages and channels have we not fully tapped yet?) What can we offer them that they will truly value, given what we jointly believe?

11. Who else should be more involved in helping us achieve our purpose? Are we as accessible as we need to be in order for that to happen? Who shares a similar worldview that we could partner with?

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Other perspectives

The new role of marketing

By Mark Di Somma

The reason why companies have worked photocopy business plans for so long is because they never thought to work any other way. It just seemed too risky. The rise and rise of producer nations, in the words of Michael Porter, “rivetted attention on implementation”. Watching Japan, then China and India continue to progress, many companies fell further into the action trap. They believed that the only way to outrun their immediate competitors and their looming Asian rivals was to, somehow, out-do them.

But as Michael Porter has commented: “It’s incredibly arrogant for a company to believe that it can deliver the same sort of product that its rivals do and actually do better for very long … It’s extremely dangerous to bet on the incompetence of your competitors” – and that, he says, is what companies are doing when they rely on operational effectiveness for competitive advantage.

My sense is that operational effectiveness and efficiency currently account for about 50 – 70% of perceived competitive advantage, but that percentage is falling. It’s falling, because of course consumer expectations continue to rise – ironically as more and more best of breed thinking is installed – and consumer emotions continue to change – as more channels give consumers unprecedented access to brands and to each other.

As quality becomes ubiquitous, it’s harder and harder to gamble on incompetence.

And it becomes easier and easier for consumers to change brands for no reason whatsoever other than what they feel. Because the actual risk in doing so is getting smaller and smaller thanks to best-of-breed.

All this makes for an irrational economy. And the irrational economy plays by very different rules.

As Avi Dan points out in this article in Forbes, “Customers are now able find out much about the company they wish to engage with: where and how a company makes its products; how it treats its employees, retired workers, and suppliers; how much it pays its top executives; how seriously it takes its environmental responsibilities and the like.”

The criteria is no longer what they get. It’s just as much what they know – and therefore feel.

The role of CMOs in such a world, Dan goes on to say, is “to meld the internal and external faces of the enterprise”.

That’s a quite extraordinary mandate. It ratifies the points made by Tom French, Laura LaBerge and Paul Magill of McKinsey that not only are all organisations marketers now, but that, in an era where “marketing is the company”, marketers themselves must rethink and reassert their influence.

  • CMOs, they say, will increasingly be held accountable for performances beyond their direct report. Any action that involves a customer will become traceable back to marketing. That’s a whole new set of metrics.
  • Marketers will have greater influence over other areas traditionally outside their sphere of influence because of the converging roles these functions now play in helping the organisation connect with customers. While much has been made of the need for the CIO and CMO to work more closely together, the authors also point to relationships with distibutors, digital teams, physical networks and third-party partnerships. Any interaction that makes contact with a customer will include marketing. That’s a much more complex picture to understand.
  • Marketers will have more responsibility for generating rich customer insights, but, the authors say, expect to see a shift in marketing team skills from, say, researching to problem-solving and strategic-marketing designed to inform critical business result elements such as pricing, sales targeting, and product selection and development. Marketing will become an influential voice in strategic goal setting and not just an operational function to achieve what has been set. That’s a very different set of core skills.
  • Whilst I agree with the authors, to a degree, that marketing will become a more data rich and analytically intense activity, my reservations from my last post still stand. There will be more data to play with – but marketers themselves will stand or fall, in my view, on their ability to read the human factors in the numbers rather than just analysing the numbers themselves. Marketers will need to be able to activate consumers at an emotive level not just interpret how they have acted or will act based on patterns. Instinct will count as never before.

Increasingly, this suggests to me that CMOs will be called on to take responsibility for overseeing much more than marketing strategies. The 4Ps marketers have known for so long will give way not just to 5Ps or even 6Ps, but to an idea that supersets all that and more.

Marketers will in time oversee a brand’s entire market presence: to market, in market and beyond market. And their ability to represent and advocate for customer wants internally, market to buyers warmly and distinctly (directly and indirectly), and monitor and engage with prospects, influencers and analysts socially will help decide the brands consumers are drawn to, and who they choose to disregard.

More reading

The great customer vanishing act: what happens when you can’t track them?
The portfolio approach to strategy
The fall of the wall between customers and culture
The power of being purposeful

Other perspectives

Does my brand look big in this?

By Mark Di Somma
Nederlands: Japanese blowfish (fugu)

Japanese blowfish (fugu) (Photo credit: Wikipedia)

As marketers, we’re often encouraged to puff up our brands to look as big as possible so that they appear significant and credible in a global marketplace. There’s a sense that if you’re big, you must be successful and if you’re successful, then there’s a higher than likely chance that you’ll continue to grow.

Size matters. But not always in the senses that we have been led to believe.

My own view is that the size of your business is actually less critical than the scale and/or extent of your thinking.

A big brand on the hoof is a thing of beauty, to be sure. Strong, assured, competitive, resourced and focused on bringing its vision of the future to life. Big brands command presence and respect.

But the biggest companies aren’t always the smartest, they’re not always the pace setters and they’re certainly not infallible even though they might like to think they are. I have only to direct attention to the GFC to remind all of us that neither history nor size counts as an immunity pill. Sometimes the bigger they brand, the harder they fall.

And what if you’re a minnow? What then?

If you’re a small company in a sector dominated by companies that are large, powerful, respected and ebullient, you’ll never beat them at their game. They’ll outgun you quickly, arrogantly, even dismissively. But all is not lost. You could look for ways to lay down a big attitude that draws attention and gets people interested and attached to you. Such an approach may be your key to truly downsizing the cachet of those who otherwise will simply try and lord it over you.

Being a larger than life brand brings with it opportunities to achieve greater presence and respect than your natural mass might suggest. By pushing up your profile and achieving greater front of mind than your competitors might expect or than you would otherwise command, you can “blow-fish” your size in the market by being more cheeky, fun, rewarding and engaging than all the staid big players around you.

Competitive radicalism

All this leaves brands with four options in my view – all oriented around a competitive radicalism that I predict will increasingly see brands exiting the middle ground, in attitude at least.

To stand out, think very big or very small – or be one, and act the other.

1. Be the monster – the brand that the whole world can’t help but notice.

2. Or be the upstart – the brand that someone can’t wait to discover and tell others about.

Better yet:

3. Be a monstrous upstart – a cult brand that is noisier than its size warrants because it wields a big attitude and a loyal community.

4. Or an upstart monster – an established brand that tirelessly challenges its own rules.

Strong brands project. They cast a powerful image of themselves to the world that may or may not correspond to their size. And they can project a future for themselves that is immensely powerful.

Loom large in the minds of those who buy from you and those who compete with you. Or slowly but surely fade away (or get eaten).

Stark choices.

More reading

Market leadership: the –out and the -est
The business of cloning
Always be branding
You can’t lead as a brand if you follow another brand
Great brands unearth
Is your brand ready for the experience war?
Brands at the speed of life

Other perspectives

Market leadership: the -out and the -est

By Mark Di Somma

Two thoughts that I really like, brought together.

The first was one introduced to me by Rob Smith, CEO, Paper Plus back in August 2008. It’s called –est. It goes like this:

There are a very small number of fully competitive positions in a sector and you need to own, and align yourself, to one:

Quickest
Biggest
Cheapest
Coolest
Specialist.

Anything else is the middle ground.

Everyone I raise this with debates the number and raises other possibilities. But you get the idea. It’s superlative and competitive and combative. To me, this is the –est test in brand positioning. Who are you going to be? And are you sure, are you really sure, you want to be that?

Second thought, introduced recently by Seth Godin in this post.  Out-. You win when you:

Outsmart
Outlead
Outcare
Outlisten
Outconnect

He gives others. They’re fabulous of course. To me, they are the market leading opportunities. They signal how you intend to win.

I think this question brings the two together:

Who are you going to out-______ in order to be the ______-est in your sector?

What I really like about this is how scary it is on the one hand.

And how specific it is on the other …

More reading

The business of cloning
Always be branding
You can’t lead as a brand if you follow another brand
Great brands unearth
Is your brand ready for the experience war?
Brands at the speed of life

Other perspectives

Handpicked – the wider opportunity of curation

By Mark Di Somma
A picture of a display in Brooks Brothers

A picture of a display in Brooks Brothers (Photo credit: Wikipedia)

The first time I really thought about the role of an astute retailer was while watching Mary Portas. Her point: any retailer can stock. Smart and profitable retailers, by contrast, handpick items that their shoppers will crave – and that is where they add value. In a great shop, she was saying, you don’t just come to buy, you come to discover things you wouldn’t normally find housed together. Fine point, well made.

These days, curation is all the rage. As Trendwatching so rightly observed in an article aptly titled “Everyone’s a curator now”, what used to pass for selecting, choosing or finding (Didn’t we once call that editing?) has been transformed into the more scholarly-sounding art of curating. That’s hardly surprising, Trendwatching observes, given the massive levels of choice that consumers now face, nor it is actually that new. In fact, the idea morphed out of the art galleries more than a decade ago, and really picked up pace with the arrival of Facebook, iPod playlists and Flickr.

To Steve Rosenbaum, author of Curation Nation, the trend is the next step in the democratisation of information. Twitter, blogs, Google and Facebook have brought a “daily data deluge” to people’s lives, he says in this article in Wired. Humanising that down into what people want to see, read and discover has generated social search, he says. Curation amounts to “a human-filtered web”.

John Doyle agrees. The VP of digital strategy at Cramer-Krasselt/Chicago says, in an article in Mashable, that marketers are excited by the thought of curation as an evolution in online influence. It helps shoppers sift through the huge range of choices available to them and, just as importantly, it does this with a human touch. (That to me is the interesting part.)

Doyle points to the way that Pinterest lets people organise the things they discover and he sees huge potential for retailers to put a new twist on this online. “Shopping curated collections can be a lot like shopping in a real-life boutique … where the goods are selected and stocked to meet the needs of its best customer: you,” he says. “And because these collections are created by real people (in many cases, friends from within the shopper’s own personal social network), the resulting shopping experience is authentic, powerful and hugely influential on purchase behavior.” He has some great ideas in his post as to how brands can take advantage of this.

OK – Google meets the personal shopper. I get that. But what are some of the wider implications of this handpicked phenomenon? It works for retail. Does it carry into B2B? What if you’re a consultancy or a professional services company? What role could curation have for you?

Exactly the same dynamics are at play in this space it seems to me: a plethora of thinking and new developments that client businesses don’t have time to sort through. Sure, some of them are just updates or revisions. But some are more than that. There’s new approaches, either from your field or another, that people deserve to be aware of. If you’re a consultancy, you can’t own others’ ideas of course, but you can add value by bringing your professional perspective to those ideas and to the evaluation of their wider worth.

For example, the other day I had a really interesting discussion with two strategists I was mentoring on when to use a Disruption-type model versus when you might want to use an amalgamative model like Medici. Neither of these models is my idea. But the principles of each are sound, proven, well documented and applicable, to best effect, in different circumstances.

There is some amazing thinking coming from the big names, but some of the most dynamic thinking is coming from bloggers and thinkers who aren’t at the top of Technorati – or at least not yet.

To me, part of the role of thought leadership is championing the leading ideas, whether they are yours or someone else’s. I think things get really interesting when, just as the Pinterest group did with Brooks Brothers, you start aligning the ideas and approaches of a whole range of thinkers. As long as – and here I completely agree with Mark Schaefer – you attribute generously and openly and don’t just colonise someone else’s intellect for your own gain. If you have the good sense to borrow from someone else’s mind, at least have the good manners to acknowledge that you have done so.

It takes huge skill and a massive amount of time to bring ideas to life. Especially big ideas. But, you know what, it takes an equally big-hearted person to evaluate an idea and to draw attention to it.

A facilitator it seems to me gets between an idea and the person it will benefit and tries to make money or gain profile from just being there. A selector just picks from what they know and feel comfortable with – so, essentially, more of the same. A curator finds an idea or a product and brings it to light in ways that will really benefit the community they are part of. Whether you like the term or not, there’s little doubt in my mind that the value any intermediary can add today is curational not just functional or selective.

In the fast moving, multi-channelled, multi-market, competitively converging world that we all work in, true value-add can’t just be about more of what you know. That’s stocking. Increasingly, it’s about having the confidence and the integrity to bring to the table the whole world’s best and latest thinking – yours and theirs – sifted, layered, organised, appraised and consideration-ready.

Incidentally, if you don’t think you have time to do that, what do you think constitutes a better use of your time as far as your clients are concerned? Today, it’s not just what you have that counts, it’s what you’ve found and what you’ve done with it.

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Other perspectives

Not a problem: success pivots on what you solve, not just what you know

By Mark Di Somma

If you’re not a fan yet of the Scattershot blog, then I’d like to suggest you should be. In a post published earlier this week, Rajant discusses the concept of “ground truth”. Ground truth, as its name suggests, is the view on the ground that verifies and informs the satellite view. It’s a great way to separate a problem from a truth.

What’s interesting about this is that the perspective that brands have of situations gained from afar can be very different from the reality closer to home. In fact, those on the ground may not see that they have an issue at all. That’s a significant hurdle when your cue for action is something your audience doesn’t recognise. Rajant gives the telling example of P&G’s launch of Febreze, which initially failed. The reason? You only need an air freshener if you understand that you are surrounded by bad smells. The problem with that: “even the strongest odours fade with continual exposure … And Febreze’s reward (an odourless home) was meaningless to someone who couldn’t smell offensive scents in the first place”. If my house smells fine to me, then my truth as a consumer is that scent is not a problem and therefore there is no reason to take action. There’s literally nothing to fix. That premise isn’t going to fly.

The actual problem for most marketers is seldom the problem we’re presented with or that we think we have. Often what we’re seeing, or thinking we have to solve, is either something we’d like to solve or a trigger action, the last straw that convinced everyone looking on of the need to take action. If you take either of those literally though, you’re breathing in the wrong air.

Selling what you want to sell is wishful thinking. And that’s all it is until you establish need, habit and (probably) scale.

As for trigger actions – falling sales are not a problem, they are a symptom. Same for increased competition, lack of market share, consumer antipathy … Any solution based on addressing that data alone risks the same outcome as Febreze. It solves something that no-one but the brand owners recognises or feels pain over. It’s not an answer. It doesn’t actually address the real underlying need. The one based on the ground truth.

Most brand strategists run a discovery process, at which they seek to uncover the facts and get to grips with the situation they are being asked to solve. They fact find. And of course that’s necessary. But the real purpose of the discovery process is not to gather information. The purpose of the discovery process is to overlay what you’re learning (facts) over what’s happening (symptoms) in order to unearth the real problem or opportunity (driver).

One of my favourite reminders is that it is not the job of a marketer, or anyone else for that matter, to revive sales, close out competitors, lift customer survey results or increase the Klout score. Because those are all things outside of a brand’s control. They are customer decisions. The role of people who work for a brand is to really understand why those things are happening and to address them in ways that delight, surprise, engage, provoke, and/or motivate buyers. The sign that they have done that well is when sales lift, market presence increases, customer survey results climb and the social media metrics increase.

As HL Mencken once remarked, “There is always an easy solution to every problem – neat, plausible, and wrong.” Marketers love to look for simple answers to easily identifiable problems. The ground truth is that consumers aren’t simple people.

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Other perspectives

Affirmation: how to make a brand experience really count

By Mark Di Somma

Everybody wants to feel they got value for money. Sure – but when exactly does something feel like it was “worth it”?

For example, Lady Gaga’s just wound up a three concert stint in Auckland. When does a concert experience feel like it’s worth it? Is it when you finally see the star in person as they step onstage days, weeks, months after you bought the tickets? Is it at the end of the opening number as the crowd erupts? Is it at the end of the show as you fight your way home through the traffic, images of the last couple of hours running through your head? Is it during your favourite song? Or is the value for money moment when you’re telling friends your “I was there” story via Facebook or, days or months later, over dinner?

When does a film feel worth it? How about the experience of buying a dress? When do you think the keynote speaker at a conference has delivered or is delivering value for money?

At what points do the cost, the time, the effort to get there, the crowds etc feel like they were worth it? It matters because each of those moments yields a verdict: affirmation (that you absolutely made the right decision); neutrality (“it was OK”); or dread (at ever having to go through the experience again).

Here’s some more things you should know about how affirmation works. There is probably more than one affirmation required. They happen at different times. They can have different motivations. They are cumulative.

Strangely, most brands don’t think about affirmation too much at all. Marketers figure that once they get the customer “there” – the venue, the bar, the cash register at the shop, the event – the rest will sell itself. They’ll give them an “experience” and let customers make up their own minds.

But on reflection, a great experience is a lot more than a series of actions. Those actions leave each customer with a personal and confirmed sense that whatever it was was indeed worth it. Worth it then. Worth it later. Worth remembering. Worth repeating. Worth talking about. Worth buying the CD or the book or the next release.

So here’s my simple challenge. When are the affirmation points that make your brand feel worth it? And how have you structured them so that they generate an experience that makes the strongest and most enduring impressions?

To help you answer, try watching this presentation by Nancy Duarte on great presentations. In it, she clearly demonstrates that what brings powerful ideas to life is as much the architecture within which they sit as the ideas themselves.

If you’re serious about delivering experiences that really count, value for money is something you structure for, not just something you hope for.

More reading

Human marketing
Great brands unearth
Sense and Seratonin 
The business of cloning
Participation versus differentiation

Other perspectives

How To Move Your Brand From Good Enough To Remarkable

(fastcompany.com)

Retail brands: price always has a context

By Mark Di Somma

Marianne Bickle takes JC Penney’s to task over their pricing strategy in this pithy and thought-provoking post in Forbes. In it, she argues that the retailing icon misread the market in key ways and compromised its value proposition when it replaced its famous coupon and discounts pricing strategy with a policy that stressed continuity, consistency and predictability.

People buy emotionally, argues Bickle, and that emotion extends beyond the shop doors. It reaches all the way to the macro-environment that influences their wallets. It’s critical therefore that brands understand how their consumers feel about the economy. If things feel uncertain – and nearly two-thirds of JC Penney customers were saying they didn’t feel the economy was strong – don’t change what they know. It not only makes a new pricing strategy undesirable, it’s also destabilising. And people are much less prone to buy when things don’t feel as they have.

It’s also vital, Bickle points out, that brands understand how people buy, not just what they buy. In the case of JC Penney, over 60% of consumers buy clothing when it is on sale. In that context, coupons and discounts make sense. They contribute to the sense of bagging a bargain. They are the JC Penney experience for many people. Everyday, predictable pricing doesn’t do that. For a start, it’s a killjoy – where’s the thrill of saving now? Secondly, and I would argue even more importantly, killing off coupons represents a change of habit. No coupons means a different way of shopping than JC Penney customers are used to, and, by extension, no particular reason to choose JC Penney.

On paper I’m sure the decision looked sensible: people will know what they’re getting and we can all stop playing games. The problem is, curiously, that for many shoppers the games are part of the fun. In a 2001 study on The Emotional Side of Price, Regina O’Neill and David Lambert of Suffolk University examined the role that emotion plays in consumers’ reaction to price. Their findings certainly explain some of the reactions that consumers have had to the JC Penney pricing shift. They also suggest a number of important considerations.

Here’s what O’Neill and Lambert found:

a) People who are more engaged and involved with a product have greater feelings of delight, joy, and happiness than those who are less involved. In the case of high end products, that association obviously has to do with the products themselves. In the case of JC Penney, however, coupons and bargains provide a tangible means of involvement that flat pricing does not. They are more than just a mechanism. They actually represent an emotional bond.

b) Enjoyment correlates with price–quality. People who enjoy products more also believe that higher-priced products come with higher levels of quality. In the case of JC Penney, consumers could see the “value” of what they were buying, which gave them reassurance, and they were able to get a discount. Flat pricing, on the other hand, meant they were just getting what they paid for, which is a whole lot less fun.

c) There is a direct relationship between surprise and enjoyment. People come to shops like JC Penney to enjoy being surprised. They may come for the discounts they know about, but it’s the discounts they didn’t know about that impel them to impulsively buy. Predictable pricing takes away all the thrill of the chase and all the surprise of discovering a bargain they hadn’t bargained on finding. When you know what’s round the next corner, there’s no need, beyond need, to go there.

d) People reinforce their behaviours through the emotions that those behaviours generate. For example, O’Neill and Lambert report, people who buy athletic shoes on sale also buy the lowest-priced shoes, rely heavily on price when they buy, and report the most surprise with prices. The same behaviour would logically extend to JC Penney. The more people buy on price, the more they depend on pricing not just as an economic but also as an emotional reward. Predictive pricing flatlines the price, and by extension flatlines the emotion. The self-congratulation factor disappears.

As I said at the start, when you change the shopping experience for people, you change more than what people get. By implication you also change the context within which they shop. I’ve written in detail elsewhere about how I think retailers should use full and part-service models to differentiate full price and discounted stock and retain perceived brand value. Here’s some further thinking to accompany that based on Bickle’s insights and the findings of the Sussex team:

1. Acknowledge how people are feeling – it provides empathy. Aspiration is not the only tool emotionally. Look for other cues beside the obvious ones like season end and retail “occasions”. So many retailers position things on their terms and to their priorities rather than tuning into what’s running through their customers’ heads.

2. If you are going to change a successful experience (and by successful, I mean one your customers feel works for them) build on what they know and trust rather than changing it completely. You may well need to make changes to make the experience work more effectively for your business, but don’t lose sight of the fact that this is how people are used to shopping with you. Unfamiliar experiences are unsettling.

3. Adjust the reward set on your inventory – but make sure it is a reward. So many retailers subconciously position inventory control as ‘we don’t want this anymore, do you?’ In most circumstances, especially for fashion-focused sectors, the value proposition will probably change as the stock dates. The key question to think through in determining reward sets for a customer is “why would they buy this now?” (as opposed to “why are we still stocking this?”). The reward now on day one can be very different from the reward now on day 120.

In most cases, a simple reversal of question will ensure that these considerations are thought through and met effectively.

Don’t ask: What do we want and how do they benefit in return?
Do ask: How do they benefit and what do we want in return?

The more they benefit, the more you should want. Equally, the less they stand to gain, the less you should expect. Have you costed for that? Because that’s the real role of price.

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 Other perspectives

Is the digital economy actually an economy (yet)?

By Mark Di Somma

Some years ago, I wrote a post that took Chris Anderson’s “freemium” model to task. In it I argued that once you had provided services and information freely, the conversion to payment was going to be a lot tougher. Free, I suggested, would become an implicit entitlement.

Last week, in a withering attack in the New York Times, Ross Douthat lashed out at what he called “The Facebook Illusion”. Comparing Web 2.0 to the home ownership bubble, he took particular aim at the world’s biggest social networking site. The relative disappointment of its IPO should be read, he maintains, not as an indication that Facebook doesn’t make money, but rather that “it doesn’t make that much money, and doesn’t have an obvious way to make that much more of it, because … it hasn’t figured out how to effectively monetize its million upon millions of users … This “huge reach, limited profitability” problem is characteristic of the digital economy as a whole.”

It’s probably a little early to call Facebook. Whether the IPO misfired or was misfired seems to depend a lot on who you listen to.

As for the revenue generation part, I wonder whether the digital economy hasn’t worked out how to make money or whether people have continued to apply the expectations of an analogue model to digital developments. The bell curve model I alluded to last week re. brand likeability has strong economic implications. Specifically, with that model, companies become more profitable as products become more likeable and more popular. This makes complete sense when the transaction is physical. Money changes hands for goods. Volume raises the number of transactions.

But that assumption doesn’t transfer to the digital economy because anyone can “like” and indeed engage with anything or anyone for free. And that doesn’t change no matter how many people participate. The argument I constantly see is that with enough awareness and engagement on the part of brands consumers will “tip” past free interaction and they will buy. Therefore all those millions and millions of people who are currently ‘awaring’ and engaging are a relationship, sales and income pipeline. If you evaluate that audience through a traditional likeability model, that’s an enormously valuable resource.

But what if that’s not true? What if the majority of those people are quite happy to just keeping looking and engaging without going any further? What if no amount of volume will change that – in fact, given the dynamics of popularity on technology, what if being served more and more actually causes entitlement to become more and more implicit? Then that would suggest that the more popular Facebook becomes, the more difficult it is going to be to generate proportional money because the more embedded the expectations of not paying will become.

If this is true then the future profitability of Facebook and indeed the digital economy may depend on changing a habit it helped foster. Social media gave us the world for nothing. That, as Douthat points out, was nothing short of a cultural revolution. But, he says, “The “new economy,” in this sense, isn’t always even a commercial economy at all. Instead, as Slate’s Matthew Yglesias has suggested, it’s a kind of hobbyist’s paradise, one that’s subsidized by surpluses from the old economy it was supposed to gradually replace.”

The old economy model, it seemed to me, stressed some metrics that have made their way across the digital divide, but, if Douthat is right, changed meaning in the process. Market presence for example, and top of mind are easier and cheaper to acquire digitally but they are also easier to lose (distractions) and harder to convert.

The key takeout from General Motors’ advertising exodus from Facebook is not that they don’t see Facebook as valuable – they absolutely do – they just don’t see advertising on the site as worth paying for when they can pursue their content strategy for free on Facebook Pages.

That makes digital an excellent information channel but not an economy.

In my post on the changing shape of brand likeability, I said that the evolution from a bell curve to an ellipse “suggests that the role of marketing is to feed the centrifuge by intensifying the motivation for people to feel like, and buy like, part of a community.” And therein lies the challenge. Not just feel like a community but buy like one too.

Right now I think that’s a potential disconnect for Facebook and others – one that could seriously impair its ability to spin profits at the speed that Wall Street will expect. Millions of people talking is not the same as millions of people buying. And if millions of people will talk anyway without being advertised to, and they don’t act on the advertising they do see, what is the value of the advertising and how can it justify the leverage levels of the IPO?

The biggest challenge going forward for those for a “weightless” or digital economy will be to herd those hundreds of millions of digital natives into economically active and measurable tribes.

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Image by Thomas Angermann courtesy of flickr

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