Archive for the ‘Infographic’ Category

From “The Network Is Your Customer,” by David Rogers (Yale University Press, 2011)

As the adoption of social media, mobile computing and new digital behaviors continues to deepen, businesses today are faced with the challenge of rethinking many of their basic strategic paradigms. In thinking about customers, businesses are facing a shift from a paradigm of individual customers to one of customer networks. At the same time, many models for marketing need to be updated as well.

One of the oldest and most widely adopted marketing models is the “marketing funnel.” This model, based on psychological “hierarchy of effects” theory dating to the early 20th Century, plots marketing as a sequence of psychological states in the mind of a the customer: from Awareness (of the product category) to Consideration (thinking about a purchase), to Preference (for a specific model or brand), to Action (making the actual purchase). More recently, as the importance of customer retention to a company’s value became better understood, a fifth stage has been added: Loyalty. The funnel’s shape arises as each of the five stages is depicted as narrower than the last, indicating a smaller subset of customers (e.g., more people are aware of a product than consider purchasing it).

Businesses are facing a shift from a paradigm of individual customers to one of customer networks.

— David Rogers

For years, marketers have harnessed a traditional set of tools to marshal their target customers through each psychological stage.  These tools were traditionally all broadcast media: TV ads might drive awareness, a direct mail piece stressing product features might drive consideration… all the way to a rewards points card whose regular reminders were sent to instill customer loyalty.

Today, social media and the incredible diversity of digital content have transformed the process of the funnel. While the original five psychological stages still hold true, there are a host of new sources of information influencing the customer at each stage. Instead of broadcast messages dominating the decision-making process, network communications (often from other customers) hold increasing sway. We can see how by looking again at the five stages:

  1. Awareness. The 2011 Edelman Trust Barometer study revealed for the first time that search engines have become the first source of trusted information for today’s customers, ahead of any traditional media brands. Search results, then, including content on non-traditional media like blogs, are now critical in the first stage of the funnel where awareness is created.
  2. Consideration. As customers actively consider a purchase, they increasingly take an active role in researching it online. As they do so, they are often influenced by product reviews posted by other customers on sites like Studies by Nielsen and others have shown that product reviews by strangers are among the most trusted sources of product information.
  3. Preference. Before making a choice of a specific brand, customers often turn to their friends online as well. Brand attachments are increasingly formed, and shared, in social media platforms like YouTube, Facebook and Twitter. Local search (whether via Google, or Yelp or Urbanspoon) is influential too, as customers seek not just what is desirable, but what is nearest by.
  4. Action. When purchase does happen, it may not just be in a store, but done online via PC, smartphone or tablet (as e-tailers rush to create ever more enticing catalog apps for the iPad and others). Purchase may also be driven by social action, thanks to social discount services like Groupon.
  5.  Loyalty. Once a customer is won, social media allows far more options than just loyalty cards for keeping in touch with them and driving repeat purchase.  Today’s customer relationship management (CRM) spans database-driven emails, Facebook fans, Twitter followers, and private online communities for premium customers. Digital media also allow for much more customized interactions, communications, and offers to drive add-on selling and loyalty.

The biggest change to the marketing funnel, however, is in the addition of a new, sixth stage: Advocacy. Today, the most ardent and engaged of your customers not only make repeat purchases (loyalty), they take on the role of brand advocates and spread their own positive messages and testimony about your business online. This advocacy, in turn, feeds back into the customer network effects from the very top down through each stage of the funnel—showing up in search results, product reviews, Facebook “likes,” links, retweets, and social buzz.

The challenge for today’s marketers, then, is not to throw out the old funnel paradigm. (The validity of its psychological model has not changed amidst today’s technology.) Rather, marketers must continue to employ broadcast marketing tools where they are still effective, while learning to deploy, inspire, measure, and nurture the kind of communications and advocacy in customer networks that drive marketing through all six stages of the funnel. That may sound like a daunting challenge, but it’s the only path to strong, valuable customer relationships in our digital age.

The contents or opinions in this feature are independent and do not necessarily represent the views of Cisco. They are offered in an effort to encourage continuing conversations on a broad range of innovative, technology subjects. We welcome your comments and engagement.

Fantastic views from Tim Merel on the video games business

We are entering a world where the games market is fundamentally splitting in two, like the media market of a decade ago. Back then what we now call “old media” scoffed at “new media” upstarts for giving away content, bizarre business practices, and products and services that made no sense to the wise old birds. “They’ll destroy more value than they’ll create,” was the mantra.

Well, welcome back to the future.

Today’s games market is fundamentally splitting into “Value” and “Volume” markets, both by sector and geography. The two-speed market this is creating may have more rapid and profound effects on the games market than it did on the media market, with meteoric rises for some and slow going for others.

Let’s start by defining what we mean by “Value” and “Volume.”


  • Users: thousands to tens of millions
  • ARPU (Average Revenue per User): $-$$$
  • Costs: $ millions to tens of millions
  • Operating profit: negative to 20%+
  • Growth rates: negative to <10%
  • Business model: unit sales, subscriptions, virtual goods


  • Users: thousands to hundreds of millions
  • ARPU: ¢ – $$
  • Costs: $ tens of thousands to millions
  • Operating profit: negative to 60%
  • Growth rates: negative to 20%-100%+
  • Business model: unit sales, free, virtual goods, ads

Please note that these are not hard and fast rules, so there will be exceptions (such as World of Warcraft in Retail MMO when we get to sectors). But as a way of thinking about how the games market is dividing and what it means, they are useful rules of thumb.

In terms of thinking about where each games market sectors fits, here’s a starter:

Value sectors

  • Pure console
  • Retail MMO

Volume sectors

  • Social online
  • Casual online
  • Mobile
  • Social-mobile
  • Browser-based MMO

This categorization may be relatively uncontroversial, but the geographic divide possibly less so. Please note that for geography we are discussing user markets, not necessarily developer markets. Companies from any geographic location can succeed in other geographic markets, such as Zynga (US) and Rovio (Finland) globally.

Value geography

  • North America

Volume geographies

  • China
  • India
  • Brazil

Mixed Value/Volume geographies

  • Europe
  • Japan
  • South Korea

Put all that together, and you get the “Big V.”

The Big V

The eagle eyed will have spotted the small categorizations in brackets under Value (large long-term niche) and Volume (mass market growth) in the Big V chart above. If there is genuine controversy in this world view, it is probably here. So let’s explore.

Our forecasts are that online and mobile games should grow total video games market size to $87B and take 50% revenue share at $44B. The historically strong pure console sector is flat to down.

Our forecasts are that Asia Pacific and Europe should take 90% revenue share for online and mobile games (China 49%, Europe 17%, Japan 14%, South Korea 11% in 2014). North America remains important.

The drivers of this growing and changing world are socio-demographic and cultural, as well as technological. The most concrete statistics are socio-demographic, for which we’ll look at China as an example.

In 2010 China had 29% internet penetration, with around 382M users. So more Chinese internet users than the entire US population. China is forecast to reach 56% internet penetration (754M users) by 2015, or more than twice the US population, with the bulk of Chinese games played in internet cafes and on mobile phones. So while ARPU for gamers in China is much lower than America, the huge volumes enable Chinese online/mobile games companies to use incredibly efficient business models to deliver 50%-60% operating margins. To give a sense of scale, China’s Tencent generates up to 20M peak concurrent users, or roughly the population of Australia playing a Tencent game as you read these words.

China and the various online/mobile games sectors are the poster children for the Volume market, and fit the “mass market growth” description well.

For the Value side of the divide, the US and console markets are good examples.

The US population is stable, so remains a large market. The console market is flat to down, and despite recent and anticipated hardware launches we are unsure that this trend will change. Yet gamer ARPU in the US is much higher than China, and good console titles still sell for high prices at retail (even if increasingly bought online or with digital downloads). So the US and the console markets remain great games markets.

Yet compared to countries like China, the US is no longer the leading games Volume market in terms of gamer population. Even compared to Europe, the US is smaller by volume. When it comes to the console market, volumes, revenues and profits across the industry are generally trending down despite blockbusters like Call of Duty.

So in global terms, these markets look like they may become large long-term niches. Still great places to operate, valuable, capable of producing great games companies and great games, but generally not on the same scale or with the same growth rates and profitability as the Volume markets. Some of these Value markets are trying to transform themselves into Volume markets, and they may succeed in doing so despite the challenges. As before, this is not absolute and there should be many exceptions.

Recent games investment, acquisitions and public company valuations (see the June transaction update of our Global Video Games Investment Review 2011 for the data) indicate that investors may be taking a similar view.

So what does this mean for your games company investment?

Whether you agree with this world view or not (and it’s certainly open to interpretation and discussion), the underlying trends are what they are. They can’t be ignored, so you may as well embrace them.

As a starting point, ask yourself some simple questions. Depending on your answers, you may start thinking differently about how to invest, plan and operate to take advantage of the brave new world.

  1. Users: are your games aiming at thousands, millions or hundreds of millions of users?
  2. ARPU: do you measure ARPU in cents or dollars?
  3. Costs: do you think of game development and user acquisition costs in thousands or millions, and do you have the right cost/revenue model for your markets?
  4. Operating profit: can your business be flexed to deliver super-profits?
  5. Growth rates: could your business deliver 20%-100%+ annual revenue growth?
  6. Business model: what revenue sources are most important for your games — unit sales, subscriptions, virtual goods (currency/items), ads?
  7. Geography: can your games operate across geographies and cultures, or are they domestically specific?
  8. Platforms: are your games platform specific, or can they operate across sectors?
  9. Value to Volume transition: what can you achieve in Value markets as they transform towards Volume, and how does that compare to what you can deliver in existing Volume markets?
  10. Scalability: are you building a genuine business platform with scale advantages, or a series of hits?
  11. Exit: can you become a “must-buy” for one of the major players in either Value or Volume markets, and what does that look like?

There are many more questions you could ask yourself, but deciding whether you are a Value or a Volume player (and keep in mind it is becoming increasingly difficult to be both) may have a profound impact on the future of your games business investment from valuation, investment, strategic and operational perspectives

1) La Base de la Pyramide : la Marque
C’est la façon dont vos clients perçoivent votre entreprise et votre marque  . Cette base est le résultat de l’histoire de votre marque, de la façon dont l’entreprise et la marque se sont construites. C’est le socle sur lequel votre eStratégie va se construire.

2)Le second étage de la pyramide : le Site
On n’est plus dans la réalité des choses mais déjà dans la construction du message qui va être véhiculé. Votre site web est la « vitrine » online de votre entreprise et de votre marque. La construction de votre message dépend à ce niveau :
-du design de votre site (ses couleurs, son érgonomie, ..)
– de sa structure (sitemap, tunnel de conversion, …)
-de son contenu (ligne éditoriale, balises renseignées, code « propre » et lisible, …)
-de son référencement (la façon dont votre site se rend visible sur le web)
Ces quatre éléments peuvent directement affecter la façon dont votre marque est perçue.

3) La troisième couche de la pyramide : Développement de contenu et linking
Ici on parle qualité plus que quantité. On est presque (j’insiste sur le presque) dans le Story Telling de la marque. Si les 2 1eres couches étaient « racines » et « branches » alors à ce niveau on est au « fruit » ou en tout cas à la fleur.
Ici on parle de marketing, de communication, on commence a parler d’écosystème autour de la marque et de l’entreprise.
Un bon SEO manager sait qu’il faut mixer des liens de qualité basse pour un input massif mais que la finalité est de construire un écosystème de liens de qualité

4) Le sommet : Managment de la réputation et du Social Marketing
Le Social Marketing et la gestion de la e-reputation est la partie visible de l’iceberg. A ce niveau, on est dans ce que d’aucun appellent le web2.0, le web participatif où la marque « se donne en pature » aux internautes consommateurs. Pas d’amateurisme à ce niveau, car l’interaction avec l’internaute est porteuse de développement de business fort mais aussi de retours négatifs (bad buzz) qu’il faut gérer.  Une « boulette » en social marketing peut défaire une réputation en quelques post ou clics (Voir Nestlé ou Malabar par exemple)

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