What possible commonality could a previously unpublished writer now making over $200,000 per month selling e-books on Amazon share with the makers of a head-shaving helmet and an expensive Super Bowl ad spoof for Groupon? Admittedly a motley crew to lump together, they all have benefited or suffered under economics of the new loyalty loop that the Internet has brought to marketing.
In December 2010 Harvard Business Review published an article called Branding in the Digital Age: You’re Spending Your Money in All the Wrong Places. Since reading the article I’ve found myself constantly re-evaluating how consumer decisions are influenced. We have moved from the traditional funnel of consistently narrowing our choices from many to fewer and finally a purchase and are now moving toward the loyalty loop where choices are added and subtracted during an extended consideration and evaluation phase, then once a purchase is made, we openly share, exchange and advocate while fuelling the influence of others online.
Allow me to elaborate with my three unusual examples to illustrate the power of the loyalty loop.
The long tail economics of successful indie writers selling e-books online. Twenty-six-year-old Amada Hocking has self-published eight novels online since April 2010 and currently averages monthly sales of 100,000 e-books through Amazon.
Top Kindle Indie authors typically sell 2,500 to 100,000 books per month, with many in the 10,000 range. At an average of $3 per book, and Amazon taking 30%, the remaining profit looks pretty sweet. Sell books at a low-risk, low price point, to lots of people.
This model is only possible with the loyalty loop marketing model. It’s one thing to write and publish an e-book. It’s another to cultivate a following online to generate those kinds of sales numbers.
Hocking tweets and is well connected in the blogging community, where she sends advanced reading copies to influential book bloggers. Her urban fantasy and romance appeals to youth. Readers and the connected blog community advocate and feed the loyalty loop, which in turn influences more buyers online. Recently her success has garnered TV and magazine stories. She doesn’t pay a cent for marketing.
Groupon’s Super Bowl Tibet ad blunder. Of course, the loyalty loop can work in reverse. Advocacy can turn negative, as it did following Groupon’s attempt at self-inflicted humour.
In case you missed it, Groupon paid over $1 million for a 30-second spot during the Super Bowl.
In it, actor Timothy Hutton appears to make light of the political struggle in Tibet in the name of a great Groupon deal at a Tibetan restaurant. Supposedly the company was making fun of itself by talking about discounts as a noble cause.
Viewers, having seen humour in the parody, would then appreciate the philanthropic donation that Groupon had set up for Tibet.
Too bad the connecting website never appeared in the ad. And too bad the great unwashed tuned into Super Bowl were more receptive to objectification of women in their advertising than obtuse connections.
So how did the new loyalty loop marketing model fail them?
Arguably much of the value of buying a Super Bowl ad goes beyond the high reach of the TV audience.
Chatter before, during and after the event online is where the real value is. In Groupon’s case, it didn’t frame the spot before to build anticipation and understanding. It then failed to respond quickly afterward.
It dropped the ball where the loyalty loop mattered most: online. Talk turned negative and Groupon never really recovered.
Headblade’s crazy shaving-helmet video. So you’re a small company that designs and sells razors to a highly targeted segment: people who shave their heads. How do you let the world know your razor is the best?
You create a hokey looking homemade video demonstrating a helmet that, when worn, will lather and shave your head with motorized razors in about 30 seconds. Sound scary?
Sound unbelievable?
This YouTube viral video marketing campaign was fresh, edgy and, most importantly, sparked conversations about head shaving. It featured one of Headblade’s razors in the helmet and demonstrated how it works. The helmet, later revealed as a hoax, generated countless purchase inquiries for the company.
The online chatter grew exponentially, and flooded over to mainstream media. The company experienced record hits to its website, where it featured the real products it sells.
In the loyalty loop marketing model, it gained positive traction in a rather obscure category.
So the big question to ask is this: is your marketing feeding the marketing funnel or the loyalty loop?