January 30, 2005
the death of the premium
Many of us make our living simply because other people are willing to pay a premium for something.
INFORMATION: Too busy to find out about the latest movies. That’s OK, I’ll gladly pay a premium to hear what the jounalist in The New Yorker thinks.
FOOD: Too busy to figure out an interesting place for my date. That’s OK, I’ll pay a premium and take her to a really expensive restuarant. Even if she doesn’t like the food, she’ll be so impressed by the decor it won’t matter.
RENT: Too busy to find out where the hot real estate deals are. That’s OK, I’ll just pay a premium and move into an already-gentrified neighborhood.
CLOTHING: Too busy to find out what goes into the making of a really nice suit. That’s OK, I’ll just buy a well-known label whose schtick I’m in tune with. Good enough for the guys at GQ, good enough for me etc.
But of course, the more information somebody has, the more they know about what’s really going on, the less willing they are to pay a premium.
The less willing you are to pay a premium for a cab, the more willing you are to walk.
The less willing you are to pay an extra $600 just for the label on the jacket, the more likely you’ll buy something from the Chinese guy on Mott Street who nobody has heard of.
The less willing you are to spend $300 impressing her with a fancy restaurant. The more willing you are to take her to the weird Indian place in Brooklyn.
The less willing you’ll spend $6 on a magazine just to find out if the movie’s good or not. The more willing you’ll e-mail some Bulagrian film geek whose opinion matters far more to you.
The less willing you are to fork over your $10 million dollars to the ad agency, just because the Creative Director really wants to make this certain commercial. The more willing you are to try out new technology the Creative Director has never even heard of.
The smarter the market, the harder it is to charge a premium.
Whenever I hear traditional media and marketing people get snippy about blogs, Cluetrain, the advent of “Citizen’s Media” etc, I know the reason. It has nothing to do with intellectual honesty.
It has everything to do with the erosion of the high premium their jobs command.
We live in interesting times.
No reward without risk, then.
Hence, ad-bitrage, the business of identifying and securing undervalued ad inventory, and later selling it for a profit, or (when the requisite market forms evolve) shorting overvalued ad inventory and buying as the price declines…
Will be hugely fun to see a whole community of analysts develop would-be predictive models of what makes content appealing…
Relevant precedents:
http://www.guardian.co.uk/arts/features/story/0,11710,1391951,00.html
http://paul.kedrosky.com/archives/000832.html
Actually, I only get snippy when the “Amazing New Thing” is over-hyped.
I want smarter and better conversations as much as anyone, but I don’t see such things replacing me. Quite the contrary. As a writer, I see my value increasing as the need for branded storytelling takes off.
The smarter the market, the more results will matter over hype, marketing spin and oh-aren’t-we-clever trendiness.
For ‘bullshit merchants’ that is bad news. They depend on customer inertia, ignorance and value-insensitivity. They’ll have to raise their game or lose their unearned premium.
The super-competent, just-ahead-of-the-curve firms will be fine. Their clients will start to appreciate the extra value they have always provided.
Clients will continue to pay a premium for reliable and rapid delivery of the outcomes they seek. If smarter markets show that many firms can’t deliver the goods, it just means less competition for the competent firms with track records of success.
Forget blogs / wikis / internet for a second. Customers get smarter through experience, through trial and error. And they demand their suppliers incorporate the lessons they have learnt the hard way. Either the supplier is forced to agree to the clients demands, or the client moves that bit of business to an alternative supplier who’ll happily comply.
The marketing, PR and IT budgets aren’t likely to decrease. Instead they’re reallocated to where they provide the most value. So the premium lost in this reallocation is made up by cross-selling or upselling services with the same premium. Only if you’re stupid enough not to have anything to cross-sell or up-sell do you get hurt.
Premium blend
Hugh Macleod:Many of us make our living simply because other people are willing to pay a premium for something.INFORMATION: Too busy to find out about the latest movies. That’s OK, I’ll gladly pay a premium to hear what the jounalist
David,
Re: branded storytelling, 100% agreed.
Enter startup comedies, like the one I’m developing, Land of OpportuniTV…
(Which will showcase, among other folks, the ad-bitrageurs I wrote about above…)
Right you are. And as someone who has become good at sussing out the real info in a market, I’m a bit put out that the rest of the world will now find it easier.
And they will.
Then creatively combining the information, chuzpah and risk, will increasingly pay off.
But as these layers unfold, by the numbers marketing will be left in the dust.
>The smarter the market, the harder it is to charge a premium.
Then no need to worry, because people and companies are infinitely stupid.
“We are educating our predators”. Heh. I love that thought =)
You want to educate you predators. You want to make them less dependent on you, that’s the point. Marketing in the future is going to be based on moving emotions forward, not triggering past feelings. Marketing in the future is going to be about transitioning consumers to emotional states. Agencies, like parents, who teach and let loose will be the ones who prosper. Companies will come back for more. Everyone pays a premium for quality work. Every one pays for “the best.” It’s just right now we all feel pressured into this dependency role [we’re dependent on brands to, they need to be conduits to emotions]and marketing is not working… so let’s change it!
You’d have a field day … without a doubt ! … if you knew what hocum-pocum went into setting up org charts and the attendant salary ranges for each level of the organization … and how the big premiums are justified (at least the attempts … it’s an inside joke and you gotta be an insider).
And you’re spot-on .… this whole Pro-Am revolution, as Jay Rosen notes on PressThink that some important journalist has called all this blog blather .. stands a good chance of changing significantly over time the whole notion of remuneration for information, knowledge, service and contribution.
Or at the least showing the expensive premiums for what they are … expensive ! Will shareholders call the executive remuneration committee into question, when it becomes clearer and clearer that with a bit of googling or yahooing, and the adroit manipulation of RSS feeds and tags, a significant %age of the information people need to do their work is available at their fingertips, rather than lodged somewhere in the rafters or walls of the organization ?