We have mentioned the Oracle of Omaha before:

ComMetrics: If it is good enough for Warren Buffett, what about you?
ComMetrics: Warren Buffet – ropes to skip – c-level blogs – FAQ #2

Warren Buffett’s beloved Gillette sells cheap razors that require pricey blades. These days it looks like Apple has found a way to reverse this model.

With the proliferation of low-cost apps for every niche interest, users are increasingly drawn and bound to Apple, prompting them to buy the expensive hardware. In turn, Apple enjoys operating margins of 29 percent, the envy of fellow phone and computer makers.

Nokia’s average smartphone costs €155 (by the way, Nokia’s last smartphone hit was the N95, launched in 2006). However, Apple manages to charge an average price of about €450 for its iPhone.

To see how social media figures into such products, we need to address some important questions:

a) can Gillette’s razor and razor-blade model, or a slightly modified version be applied to any product?
b) can social media help reach more clients and keep them engaged?
c) does Apple’s increasing binds between users and its products and services work for others?

Customer experience: Managing the life-cycle challenge
Whatever the product, every user or client passes through the customer experience life-cycle model below.

1. Realization – Recognition of a potential customer’s problem or need.
2. Awareness – Connection between need and your product (e.g., being referred to our blog by search engine results).
3. Evaluation – Consideration of your (and your competitors’) product benefits and trade-offs as a solution.
4. Transaction – Customer places order or purchases the product/service.
5. Usage – Product is consumed or used (e.g., capital products – computer hardware used at the company).
6. Service – Post-purchase support (e.g., user community, special client events) for your product.

Of course, selling a product online (e.g., books) versus using the web to support offline activities (e.g., the neighborhood bookstore) makes a difference in how the above plays out.

Moreover, selling house facades, doors and castings for high-rises is a different kettle of fish than trying to get people to purchase your overpriced cup of coffee.

The facade manufacturer might first be invited to submit a tender for the building. If the tenderer is chosen, negotiations start between architects, a general contractor and the facade manufacturer. During these negotiations, final details and pricing are worked out before the purchase or transaction can go forward. In fact, it may still end in stillbirth. Sometimes one can win a tender or design competition but the final contract lands with the second or third competitor.

In contrast, if I want to purchase the latest book by a famous author, I may search for the book or go to my favorite online bookstore. Once found, I enter my credit card details and push the button to get the book delivered to my home within a few days. Vastly less complex than the selling of a house facade.

Answer to question A: The Gillette razor and razor-blade model may not apply to those trying to sell power plants, capital goods or professional services. As well, organizations without a respectable advertising budget may not try the razor blade model.

Can social media help improve revenues
Facebook likes to mention Adidas as an example for how much social media can improve your bottom line.

Adidas has about 2.7 million fans on its Adidas Originals page. Each fan is estimated to be worth around $100 a year in footwear, making its fan page a community worth more than $200 million.

Facebook claims that Adidas’ advantage is that, for just the cost of maintaining the page, it can communicate directly with these people all year.

In some instances it is obvious that the chance to get another discount coupon or ticket to a VIP event is all it takes to get some people to follow (e.g., After a sour start in social media, Skittles gets sweet results). The above is nothing more than duplicating the Sunday newspaper’s coupon section. For instance, Gillette offers a $2 coupon off its pricey blades that the consumer can clip out of the Sunday paper and use the next time he goes to his favorite store to buy replacement blades.

Here social media can help increase the brand’s reach by also distributing these coupons to Facebook fans or Twitter followers. And since some of these people might not get a Sunday newspaper… How loyal such fans might be is another question. Plus, having its own community while providing relevant content via a corporate blog may be more effective for Adidas to improve engagement levels.

Answer to question B: Using advertising budgets to increase Facebook fans or Twitter followers does not automatically build brand loyalty or improve engagement.

Convenience
It is obvious given the many devices we have, from computers to smartphones to MP3 players to home stereo, convenience comes into play. For instance, copying your playlist from one device to the next can be a cumbersome experience. iTunes remains a success in part because it allows people to synchronize their music across Apple and Windows devices.

Spotify tries to modify this approach and its 7 million European users suggests it is doing something right by offering access to its library of millions of tracks over the internet. It is now trying to compete with Apple by offering technology that allows absorbing a user’s existing digital music collection within the same interface, and synchronizing it with mobile devices that run its app, such as Apple’s own iPhone. For the first time, the new software will allow Spotify users to dispense completely with iTunes.

For consumer products convenience is a factor, but if you need to decide which house facade might be best on your 30 story building, many different things come into play. For starters, the price paid to install the facade, as well as its carbon footprint. Maintenance costs, including cleaning and upkeep, also play an important role.

Answer to question C: Apple demonstrates that consumers are willing to pay for convenience while being able to increasing bind their customers to its products. However, convenience may play a minor role with capital goods. For the latter, upfront price, including life-time costs or savings, is critical.

Take-aways

1. What works for Apple or Gillette could fail miserably for you, especially if you offer professional services, try to sell capital goods (e.g., build oil platforms) or want to raise money as a charity.

2. Focus on today’s sure thing rather than on the next big thing. Even if Facebook fans offer spectacular revenue potential, no one can predict how much revenue this will generate over the next decade. Having 10,000 subscribers paying €200 every year for web-based software as a service makes more sense than hunting for another 10,000 Facebook fans.

3. If engagement is critical, use social media accordingly. Freebies and discount coupons always attract attention from certain groups of consumers. But to improve engagement with business clients one must consider that industrial buyers look for different things in a Twitter account to follow or reading and commenting on a blog.

More resources

ComMetrics – Ueberzeugungs-Marketing – warum der Kunde bei Procter & Gamble, Gillette nicht immer der Boss ist
ComMetrics – 2010 trends: Data and mobile communication
Warren Buffett – BERKSHIRE HATHAWAY INC. – shareholder letters

What is your take? How do you see these issues? Have you tried to apply any of these approaches for your products? Worked, failed – share, please! Please let us know in the comments!

You can get updates for this blog on Twitter by following @ComMetrics, get a free subscription by RSS, or get new posts via email:

Article source: ComMetrics – Warren Buffett: What works with social media

This blog post is related to our webinar held on 2010-05-05 – Warren Buffett says: Social media can work for you

Attend our webinars by registering for ComMetrics University – we help you improve your social media performance faster

CEO blogs, c-suite blogs or executive blogs that are:being candid,
addressing timely matters,
being controversial from time to time, while
targeting a specific audience

can be a real help for your corporate brand regardless of the size of the company.

This means micro firms may benefit as much as an FT500 corporation if their CEO blog follows the above guidelines. Nevertheless, success does not come easy.

We have tried to outline some of the mistakes to avoid when writing a CEO or c-suite blog below.

Feel free to pass these tips around

Recently we have posted about blogging in corporations using Southwest Airlines, Delta and JetBlue as examples for illustrating our points. We outlined three mistakes that your blogging CEO should definitely avoid:

Mistake 1 – expecting users to install program to get full enjoyment
Mistake 2 – expecting to have control over social media
Mistake 3 – having no clear focus, thereby getting your target audience confused

We explained this here: social media – ropes to skip – c-level blogs – FAQ #1

Today we bring you two more mistakes your blogging CEO wants to avoid from making. Go ahead read on and gain new insights.

d) type of corporate blogs

I tried to list some categories below – have a look.

We talk about the other blogs besides the c-suite or CEO blog at another time.

Today however we address the CEO blog. So if you are in the process of making a C-level blog (Chief Executive Officer – CEO, Chief Finance Officer – CFI, Chief Information Officer – CIO, Chief Operating Officer – COO) you have to make sure that the voice is authentic.

All else considered equal, it is probably easier for the CFI to address issues pertaining to finance and investor relations, instead of talking about R&D.

Mistake 4 – being authentic while forgetting the target audience: You may be funny and witty, interesting and provide value. However, unless your subscribers perceive the content the same way you do they will get bored.

My blog is targeting our current and possible future clients. Hence, whatever I write focuses on matters that are very likely to be of considerable interest to my target audience.

This is, of course, far more difficult if you are blogging for a listed company as Jonathan Schwartz does for Sun Microsystems. Nevertheless, he manages this challenge quite well. Do you agree?

e) blogging does not mean your CEO engages

Having a corporate blog can mark the beginnings of engagement. Nevertheless, it is a constant attempt to carefully balance between what:

- the firm needs to learn about, and

- the opportunity costs for this exercise of learning

Opportunity costs is the risks that the corporation’s brand may be tarnished if it fails to get into the conversation. For instance, going to most search engines and typing

Nestlé corporate blogs

brings up a few sites, all suggesting that one should be boycotting the brand. Do the same for Berkshire Hathaway:

Berkshire Hathaway corporate blogs

and the results are quite different.

Neither one of the above two firms have a CEO blog. Nevertheless, many download Warren Buffett’s annual shareholder letter. In fact, most financial analysts read it as soon as it is available for downloading. Financial analysts may have the newsletter as the main topic when having lunch with their peers:

Berkshire Hathaway shareholder letters

While Warren Buffet may not have a conversation going with all his investors, he seems to have begun listening to them a long time back. At that time, it was surely not en vogue to do this. Today it has become the norm if not the buzz on the web.

Warren’s approach demonstrates that engagement and listening does not require a blog. In fact, his annual newsletter to his shareholders refrains from using color and glossy pictures/graphics. Nonetheless, it explains important issues before others have even read the writing on the wall. For instance, the importance of independence of corporate directors, better risk management and control systems were issues he began talking about in 2003 or earlier when barely anybody else felt these mattered much.

Mistake 5 – believing that if the CEO blogs then the company is engaging and listening: The challenge is to let those people who want to be heard know that they are being listened to. Accordingly, it is as much a matter of perception as it is of actual listening.

Unfortunately, some clients or users may not ‘feel’ listened to. Hence, they just bark louder. Here blogging can help amplifying the voices of customers and facilitating the firms efforts greater transparency. However, do not be fooled. The effort needed to achieve this objective is substantial and time-consuming, while it takes much patience.

Bottom Line

Stop for a minute – identify your target audience. Thereafter, check if the content is serving them appropriately. Finally, make sure that you are engaging and listening to your audience.

Assess if you are reaching your objectives and do this regularly. This is a process of continuous improvement (see Warren Buffett). However, as we will discuss in an upcoming post, a successful CEO-blog requires a long-term commitment and continuous effort for improvement, thereby helping in justifying the opportunity costs.

Stay tuned.

When you sit on a plane, things can pretty scary as this example shows. For 130 passengers, their Lufthansa A320 flight from Munich to Fuhlsbuettel Airport in Hamburg last Saturday could have ended in disaster.

The powerful winter storm system called EMMA caused 90 kilometer-per-hour crosswinds on one of the runway’s at the Hamburg airport. After skidding dramatically across the runway in an aborted landing, the plane’s pilot opted to take off once again.

Cannot see the image get it here: the near disaster – horror landing for these passengers

Of course, some people will ask if the pilot was a hero or a fool. As well, investigators will have to find out if the mistake was the pilots or if the air-traffic controllers should not have shut down the runway earlier. Right after this near crash, the runway was shut down by air-traffic control in Hamburg.

Nonetheless, the video communicates very nicely that while technology did a great job in helping the pilots prevent disaster, it is people that make the final decision – land and crash or else abort and try again. In this case, the pilot decided to try again.

Using a different runway, the flight landed safely about 10 minutes later. Watch the video here:

some experts claim the attempted landing was more dramatic than any incident in German domestic aviation history – watch video HERE

Just imagine having had a window seat and being on that plane – a really scary thought.

But the video also demonstrates that some things can be communicated much better with a visual image than using words.

Tidbit
Monday it was annouced that EADS won over Boeing in the fierce competition to supply inflight refuelling tankers to the US air force – the A330-200. Could hardly be better designed to restore confidence and fortunes of the battered Franco-German group if it had been engineered by President Sarkozy instead of Robert Gates’ team at the Pentagon.60% of the aircraft will be made in America. The contract including maintenance work is worth about US $35bn.

2008-02-29 – Friday – Berkshire’s shares were worth U.S. $140,000 EACH – this is a 30% increase within 12 months!

The Sage calls time on insurance party and points out to shareholders to ‘… be prepared for lower insurance earnings for the next few years.’

Nonetheless, Berkshire’s potential problems seem pale in comparison with the disastrous choices made by others in financial services.

What is interesting is not just how Warren Buffett makes money but, as well, how well he uses new media to get his message across.

HOW DOES BUFFETT USE THE WEB

Buffett’s Berkshire acquired Business Wire in March 2006. This firm pushes press releases to the media and much more. Business Wire President and CEO Cathy Baron Tamraz has argued strongly against firms using their websites for earnings disclosure. In fact, she was one of the fiercest critics of Sun Microsystems last year when the company asked the Securities and Exchange Commission to recognize that posting disclosure documents on company websites can meet the requirements of Regulation FD.

Business Wire’s owner, Berkshire chose not to listen to Business Wire. It published a short earnings release last November (638 words). Investors were referred to the complete report (disclosures) on the company’s website. Get the full story here from the IR Web Report:

Earnings releases ­ the Warren Buffett way

Nevertheless, not only uses Buffett the web for financial disclosure information, his annual shareholder report is also exemplary when it comes to straight talk. It is refreshingly short.

This year’s shareholder report is again without fancy graphics.

On p. 22, the shareholder report concludes with this paragraph:

‘At 84 and 77, Charlie and I remain lucky beyond our dreams. We were born in America; had terrific parents who saw that we got good educations; have enjoyed wonderful families and great health; and came equipped with a “business” gene that allows us to prosper in a manner hugely disproportionate to that experienced by many people who contribute as much or more to our society’s well-being. Moreover, we have long had jobs that we love, in which we are helped in countless ways by talented and cheerful associates. Every day is exciting to us; no wonder we tap-dance to work. But nothing is more fun for us than getting together with our shareholder-partners at Berkshire’s annual meeting. So join us on May 3rd at the Qwest for our annual Woodstock for Capitalists. We’ll see you there.

Download the less than 500 KB pdf file right here. It is a masterpiece of public relations and straight talk, refreshing:

BERKSHIRE HATHAWAY INC. SHAREHOLDER LETTER 2007

The above also illustrates nicely how one can communicate more effectively using the web or social media. Always interesting when older people show the younger folks how to do it better.