Category Archives: Business

Free Upgrade for Windows?

Microsoft recently announced Windows 10, with a strong indication that it may be offered as a free upgrade for licensees of Windows 7 and higher for the first year. Contrary to a lot of the analysis so far, I think this is a relatively low-cost move aimed at regaining mind-share and market share for Windows. I’m supportive, but they’ve got a heck of a hill to climb!

(Note: I’ve spent my career in software development and marketing, including Microsoft from 1992-2012. I’m speaking as a marketing professional here, not as a representative of Microsoft.)

First of all, it’s important to recognize that Microsoft makes final pricing decisions just prior to general availability (GA), so there’s still a lot of room for policy changes. I don’t think Microsoft is intending this latest announcement to be a promise for free software, but it does indicate the strategy in play.

One of the hazards of pre-announcing anything in tech is that you could stall sales of the goodies you are currently selling. So by implying that Windows 10 will be a free upgrade, or at least have a defined free period, Microsoft is urging customers to keep buying current devices and not worry about missing out on the shinier thing that’s coming next.

The Wall Street Journal and others speculated that this move could cost Microsoft as much as half a billion dollars of upgrade revenue. But I think that is way off.

Why? In my years in the industry, I’ve observed that customers rarely upgrade the operating systems on their personal computers. The customer investment in terms of money, time and risk that something might go wrong, is just too high for all but the most technical users.

A new version of Windows is designed to do one thing, and one thing only: sell more computers. And this is even more true as the hardware game has morphed and people now buy a variety of lower-cost devices which they keep for shorter periods of time.

So I think the half a billion might be overstated by as much as 10x. I also think that aside from not wanting to stall current sales, Microsoft has a huge hill to climb to gain back the relevance they previously had in the personal computing space.

In the early 2000’s, developer surveys showed that close to 90% of developers were developing for Windows, and two-thirds of those were doing so exclusively for Windows. But that number peaked with Windows XP, and has dropped significantly since then, being replaced by iOS, Java, Android, etc.

Without third-party developer support, Windows will shrivel up and die of irrelevance. So I think there’s a sad irony in the fact that right next to its Windows 10 article, the WSJ featured an ad for WSJ on iPhone/iPad bundled with Evernote. The battle that Satya and Microsoft are fighting is that WSJ and their readers are apparently not very hungry to consume WSJ on a device running Windows and Office.

After I left Microsoft in early 2012 to go to Adobe, I read a report indicating that more US-based college students were purchasing Apple computers than Windows-based computers. This bell-weather change spoke volumes to me as a marketer, and meant that consumer preferences had, and would continue to move away from Microsoft in a significant fashion.

So far I’ve painted a pretty bleak picture. I think the upside is that Microsoft is doing a good job of reducing development complexity across devices, has embraced open standards, and has an amazing treasure trove of technology in Microsoft Research. Satya has shown a strong appetite for change, and is taking some smart risks to try to maintain Microsoft leadership. They are down, but I’m not counting them out.

Artificial Intelligence: I’ll Take Mine with Extra Cheese (Part 2)

I wrote Part 1 of this post with a warning about the potential future danger of a monolithic artificial intelligence, vs. a distributed self-regulating model:

In my view, AI-driven intelligent agents should be experts in narrow fields, can share or sell their expertise in real-time micro transactions, and be subject to the control of human arbiters of right and wrong. My ideal model provides increased sharing of diverse sources of knowledge, with self-regulating biological models, including, and centered-around, human minds.

The movies have done a great job of showing us what doomsday looks like. Conversely, you need look no further than your own body or backyard to see what the bio diversity model looks like – we are all miraculous products of it.

But if you’re a smallish company, what can you do to combat the likes of Google, IBM or Amazon? What are the organizing principles that will let you compete and create a sustainable competitive advantage vs. those behemoths?

(By the way, I’m writing this because I’m a champion for the underdog, a believer in Small is Beautiful, and I want to put my money where my mouth is.)

Here’s how I would compete:

  1. Partner with the big guys. Not just to keep your enemies close, but because they will be players in pretty much any future scenario, and they’re always willing to partner and share technology with innovators. Plus, there’s always the buy-out scenario.
  2. Pick a niche or two and exploit the heck out of it:
    • I think Automotive is great. I wrote about Google’s play in this market. Turns out they’re also doing Android for cars. But the race is far from over. I predict we’ll be spending more and more time in our cars, and more of that time will be connected time.
    • I really like the idea of building expertise (and tools & services) to serve businesses that are creating branded virtual agents. Domino’s Dom and Alaska Airlines’ Jenn are great examples. Even though Siri is a general-purpose assistant, she’s not for everyone. As will attest, his cuff has 4 kilowatts of DAF! Kidding aside, these examples indicate that real companies (and artists) think there are opportunities for creating lasting relationships via these devices/services, and there may well develop an ecosystem of virtual agents, some general purpose and some with the domain expertise of a Dom or a Jenn.

But what about the argument that Google, IBM and the others have deep pockets and can afford to buy customers and wait a long time? How to compete?

Well, Dom and Jenn are already using one potentially successful approach. Getting their software into the marketplace for small up-front fees, and hopefully a revenue share, in exchange for capturing the transaction data.

You have to cover your up-front costs, taking a rev-share is like syndication dollars for an actor (potentially very juicy); but I think the real money – the IP – is in the data. Owning (or sharing) rights to the customer interactions, not for advertising, but for behavioral analysis and making your own systems smarter, is the goldmine here.

If I were the developer of Dom, I would scrutinize every data point about every transaction so I could make Dom the all-knowing, all-seeing virtual G-d of pizza. This is how to increase valuation over time, valuation that will enable you to play with the big fellas.

In my next post, I’m going to address the big craze at CES – wearables – specifically, health and fitness gadgets, and why I’ll be betting heavily on them.

Facebook’s New Data Policy and How to Protect Yourself

I wrote previously about my concerns with the soon-to-be implemented Facebook Data Policy. I had even planned to call this entry, “My New Year’s Resolution: Get Off Facebook.” But I’ve changed my mind as I spent more time researching and thinking about the policies.

My concern began with the broad coverage in November of Facebook’s planned January 30 data policy update. Two topics raised alarm bells: commercial rights to photographs shared on FB, and the use of location data to serve location-specific ads. Since I’m not a commercial photographer – I don’t require exclusive rights to my photos – my main concern is with location data.

My issue with the location data is not that the intent of the collection, which is to provide FB with ad revenue and me with geo-relevant advertising. Since I’m generally ignoring ads, I wouldn’t benefit from ads that know my location anyway.

What I am worried about is my data falling into the wrong hands. In a post-Snowden world, we have to weight the benefits of data shared, against the risk of discovery of our data by unfriendly parties. Do we really want our church-going habits (or lack thereof!) or visits to Vegas scrutinized in some foreign capital?

So why have I decided to keep using Facebook? Well, it’s an important means of communication for me both personally and professionally, and I like the community I’ve built there. Also, my whole family – including my dog! – are there.

Instead of turning it off, I’m going to alter my usage and use FB in a new context. I’ll describe it for you, so you can make a more informed decision about your own usage.

  • I will continue to use Facebook at home
  • I will use Facebook on my mobile devices – but with location-based services TURNED OFF (I will explain this below)
  • I will use WordPress, Twitter, SMS and LinkedIn (plus the old standby, email!) as my primary comms channels, minus location-based services

The big red switch, that individual users still control, is called Location-based Services (LBS). If you haven’t spent some time learning about how it works on your devices, and setting it to reflect your preferences, I urge you to do so now.

LBS is the process by which your phone continuously publishes its location (i.e. your location) to the apps running on your phone, and to your network provider (AT&T, T-Mobile, etc.) On most internet-connected devices, you have three choices for location settings: On, Off, or App-Specific.

LBS On is what FB and other ad-dependent vendors would like you to use. Don’t! This is the most invasive setting, and allows the app vendors to determine whether to collect and how to use your data. In a worst-case scenario, they collect your GPS data whenever your phone moves, store that data with or without your personal information (name, address) and then accidentally share that data with an unfriendly entity.

I recommend LBS Off by default, and turned on for trusted or critical apps only. With this setting, your GPS data will not be shared with your app vendors (e.g. FB), though your network provider (e.g. AT&T) may still collect it.

What will you be giving up? Well, the first thing is that Siri either won’t work, or will have limited functionality. Like when you say, “Siri, where’s the nearest Starbucks?” Siri won’t have a frame of reference to answer the question. If you lose your phone, the Find My iPhone app won’t work. And when you use Bing or Google to get directions, you may have to manually input your starting address.

Most phones allow you to switch LBS ON for some apps only, so your phone finder and mapping apps can work, but other apps will be suppressed. This is the setting I recommend.

A related question for a future entry: While I can limit the sharing of my physical location by turning off LBS on my mobile devices, who is tracking my Internet browsing habits, and can I limit the collection and use of that data?

Artificial Intelligence: I’ll Take Mine with Extra Cheese (Part 1)

I’ve been thinking a lot lately about Artificial Intelligence (AI). I’m excited about the technology’s potential, but I’m concerned about the direction the business could go, and I want you to think about it, too.

I’m excited about AI for a lot of different reasons. Films, such as 2001, Terminator, The Matrix, Her and Transcendence, are thought-provoking and show the range of possibilities. The augmentation of human capabilities, as described by Ramez Naam, in his book, Nexus, is another interesting view on the future. But I think it’s the potential scale of the business – on the order of the PC or Internet – that makes this topic so much fun to think about.

My concern was crystalized in an article I read recently in Wired, The Three Breakthroughs That Have Finally Unleashed AI on the World. As the title suggests, AI is coming soon, but it will be presented to you and me like a utility served up by Amazon, Google or IBM:

Amid all this activity, a picture of our AI future is coming into view, and it is not the HAL 9000—a discrete machine animated by a charismatic (yet potentially homicidal) humanlike consciousness—or a Singularitan rapture of superintelligence. The AI on the horizon looks more like Amazon Web Services—cheap, reliable, industrial-grade digital smartness running behind everything, and almost invisible except when it blinks off. This common utility will serve you as much IQ as you want but no more than you need. Like all utilities, AI will be supremely boring, even as it transforms the Internet, the global economy, and civilization.

I find the view that AI’s power will be centrally-controlled like a utility, very troubling. Kevin Kelly, the Wired author, is implying that one company or a small number of very large companies can be trusted to create and maintain a singular monolithic standard for AI.

I recently came across the new Domino’s Pizza ordering app, “Dom,” and as crazy as it sounds, I much prefer Dom’s view of the world to Wired’s. Watch the Domino’s 30-second spot. In the commercial, the guy is asking his digital assistant for advice on all sorts of topics. The assistant only knows about one topic. When he finally asks for a pizza, Dom quips, “I thought you’d never ask.”

Why shouldn’t we get our AI from our preferred expert in that field? Why should we rely on Google or Amazon to be expert in all fields? Even in pizza, we may prefer thick crust one day, or thin crust another. Aren’t the values of expertise and intelligence really found mainly in the eyes of the beholder, and don’t these values morph and improve over time as we learn and share more information and experiences with each other?

From the business model perspective, wouldn’t you prefer a world of many competing ideas and services, rather than a few mega-providers? While I sometimes like the convenience of Costco or Amazon, I would find life supremely boring if that was the only place I could shop.

Or think about healthcare. If I’m in pain, I might get very different diagnoses from a Western doctor, a Chinese doctor or an Ayurvedic doctor. Will the Wired model give me viewpoints from all of those medical disciplines, or will its algorithms figure out what’s best for me and filter out the other choices?

I keep coming back to the idea of The Matrix, an all-knowing or all-powerful AI that ultimately lays waste to humanity, because it has no diversity of ideas and is separated from human thought.

In my view, AI-driven intelligent agents should be experts in narrow fields, can share or sell their expertise in real-time micro transactions, and will be subject to the control of human arbiters of right and wrong. My ideal model provides increased sharing of diverse sources of knowledge, with the self-regulatory model of biological diversity, including, and centered-around, human minds.

What can you do to help? Shop small and local. Use Dom instead of Siri. Trust your eyes, ears and gut over the smartphone. Meditate. Help ensure intelligence in the future is artificially augmented, but doesn’t become artificial.

In Part 2, I’ll explore ideas for creating a viable alternative to the monolithic model of AI. Happy Holidays!

Why Prices Ending in “.99” Usually Drive More Sales (But Not Always)

I worked a lot on pricing over the past 5 years, and a question that comes up a lot is whether prices ending in “.99” really drive more sales, and if so, why and by how much?

The academic research in this area says that “pretty prices” (those ending in .99) perform 8-29% better than non-pretty prices.

The reason pretty prices perform better is a mixture of basic psychology – $4.99 reads a lot lower to our reptilian brains than $5.00– and the fact that over time we’ve all become conditioned to see prices expressed in this format. If something doesn’t conform to the expected norm, then we question why. And as soon as a question arises in our brain, it can crowd out, delay or block the urge to purchase.

I recently consulted with a client on a pretty pricing opportunity, and the client made the decision NOT to implement a pretty price change. Since it’s the standard, I thought it would be useful to explain this particular case.

In the study, customers in Germany were randomly shown one of two prices, one pretty, the other non-pretty. The prices differed by 2.5%, and the goal was to see if the client could generate a sales uplift of greater than 5%. Meaning, for a reduction in price of 2.5%, they could show a 100% return in increased sales. However, the results were disappointing. The uplift for the pretty price was only very slight.

The client believes the reason for the counter-intuitive result was that the target customers were European. And Europe has thrown a few monkey wrenches into their taxation system, known as Value Added Tax, or VAT.

The key factors that broke the pretty pricing model were 1) In Europe, prices are required to be displayed “inc-VAT”, that is, including tax; 2) European consumer law requires prices to be consistent across countries; and 3) VAT varies by country, for example, Irish VAT is 23% and German VAT is 20%.

The above means that manufacturers of consumer goods (the rules differ for business-to-business) have generally set standard “ex-VAT” prices (not including VAT), and then display the prices customers see, with VAT. This results in non-standard inc-VAT pricing from country to country (it varies by the difference in VAT) and non-pretty pricing, since a pretty price in Germany would likely translate to a non-pretty price in Ireland.

Here’s the point: it seems that, based on this study, European consumers are now conditioned to expect non-pretty prices. They are no longer motivated by .99. In fact, my client believes that when European customers see a pretty price, their reptilian brains get confused and try to figure out if they are looking at an ex-VAT price, and then do the math to add VAT, then compare an artificially-inflated price with their expectations – what a mess!

I believe the underlying science – consumers prefer consistency and stumble on anything that sticks out – is still good.

By the way, as of January 1, the VAT rules are changing in Europe. Consumers will now be billed for VAT according to their country of residence, NOT the country of the source product or service. More on that later!

Permission Marketing and Why I’m Not So Sure About Google and Starbucks

I decided to change my routine this morning and start my day at Starbucks. The double cappuccino was delicious. The new Starbucks/Google free Wi-Fi gave me pause.

The value proposition for the Wi-Fi is quite attractive: As free coffee shop internet connections proliferate, a faster, more reliable internet connection could help Starbucks differentiate its in-store experience, swaying coffee drinkers to switch from Tully’s or Peet’s, and to consume more Starbucks goodies while they surf.

My hesitation arose based on my level of trust for Google and other multinational corporations bent on world domination. That sounds harsh, but I say it to emphasize a point: As a consumer, I believe I have a duty to be vigilant about the personal information I share in exchange for “free” services, like the Wi-Fi at Starbucks. And I’m not saying I won’t ever trust Google or Starbucks, or that they’ve done something to harm me – they just haven’t yet earned my trust.

As a good customer and since I was concerned, I clicked on the links for “Terms of Service” and “Google Privacy Policy” on the login screen. I was able to view both documents on-screen. Since I was busy, I decided to click on the link to download PDF’s of the documents to read later. While I was able to download other PDF’s from the Internet, neither of these two documents would download, even after multiple attempts. It may have been pilot error on my part, or it may have been a glitch on their end. In either case, it put me on alert.

I connected to the service, but started thinking about permission marketing. Why is it that I’m willing to give my name, phone numbers, home address and email address, to REI? Why is it that I was happy when Amazon raised the price of my Prime membership from $79 to $99 a year? Why is it that I’m very concerned with Facebook’s new Terms of Service regarding GPS tracking and photo sharing?

But when Starbucks and Google won’t let me have something I need, to help ease my mind, a lahar warning starts ringing in my head.

As a consumer, my level of trust, and therefore the permission level I assign a company, is a complex mix of intellectual and emotional calculations. Do I feel the company’s price/value relationship is fair? Do they have my best interests at heart? Do they value their growth and profitability over their customers’ health and well-being? Are they transparent about policies that matter to me? And, if they’re asking me to potentially share a lot of information about myself, are they extra-transparent about the exchange?

As marketers, we are responsible for choreographing this dance – especially with regard to permissions – to ensure we make it easy for customers to extend us their trust and deepen their affection for our brand. One small glitch and we could compromise that invaluable and ephemeral asset.