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Eilers, Sabrina: Emotive Networks and Brands - Opportunities and Threats and their
Impact on Strategy
Hamburg: Diplomica GmbH, 2003
Zugl.: Fachhochschule Dortmund, Fachhochschule, Diplomarbeit, 2003
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3
Table of Contents
Table of Figures
6
1 Introduction
7
2 Concept and Significance of Emotive Networks
10
2.1. The Concepts of Emotive Networks
10
2.2. Significance and Appeal of Emotive Networks
11
2.3. Conversational Content as Essential Ingredient
14
2.3.1. Difference between Conversational Content and Traditional Content
16
2.4. Content and Communication Already Unite Naturally
17
2.4.1. Functional communication
17
2.4.2. Social communication
18
2.4.3. Self-expressive communication
20
2.5. Three Driving Forces of Emotive Networks
22
2.5.1. The consumer demands and expects
23
2.5.2. Engaging content
24
2.5.3. Connecting technology advances
25
3 Manifestations and Demographics of Emotive Networks
26
3.1. Manifestations of Emotive Networks
26
3.1.1. Community platforms
26
3.1.2. Chat rooms
26
3.1.3. Mailing lists and newsletters
29
3.1.4. Email
30
3.1.5. Newsgroups and Forums
30
3.1.6. Multichannel and multiplayer games
31
3.1.7. Supplemental Community features
31
3.1.8. Mobile Messaging
32
4
3.2. Demographic Trends
34
3.2.1. Demographics of online consumers
34
3.2.2. What do consumers do on the Internet?
35
3.2.3. Demographics of mobile phone users
35
3.2.4. What should one expect of the next four years?
38
3.2.5. Summary
38
4 Brands Lose Control
40
4.1. Brands lose emotional touch with customers
40
4.2. Negative publicity spreads uncontrollably
43
4.3. Brands do not know their customers
45
4.4. `Intelligent Agents' cause price decrease
47
4.4.1. Product Agent
47
4.4.2. Price Agent
48
4.4.3. Auction Agent
48
4.4.4. Impact of intelligent agents on brands
49
4.5. Brands cannot fight Emotive Networks
49
4.6. Conclusion
50
5 A Three-Level Approach to win in an Emotive Network world
52
5.1. Which brands are suitable for building an Emotive Network?
52
5.1.1. Brand with strong emotional associations
53
5.1.2. Brand is important in social context
53
5.1.3. Brand is able to offer Conversational Content
54
5.2. The brand loyalty brand exposure matrix for Net consumers
54
5.2.1. Increasing brand awareness
56
5.2.2. Increasing brand loyalty
56
5.3. Level 1: Listen and learn
56
5.4. Level 2: Participate in an existing Emotive Network
57
5.5. Level 3: Create an Emotive Network
59
5
6 Viral Marketing
61
6.1. Marketers fight for brand awareness
61
6.2. Viral Emailing
61
6.3. Online Influencers
63
6.3.1. Online Mavens
63
6.3.2. Online Connectors
64
6.3.3. Engage Online Influencers to cross the tipping point
65
7 Building an Online community
67
7.1. Case Study: `Maggi Kochstudio' and `Cook with Friends'
67
8 Wireless Opportunities
69
9 Conclusions
72
10 Annex
73
10.1. List of Abbreviations
73
10.2. Works Cited
74
10.2.1. Books, Articles, Forrester Research Reports and Briefs
74
10.2.2. Anonymous articles on the Web
81
German Summary
84
6
Table of Figures
Figure 1: Content attracts less money than communication... 13
Figure 2: European Conversational Content Forecast: 2002-2007 ... 15
Figure 3: Comparison of Content and Conversational Content services... 16
Figure 4: Communication Needs of Consumers... 17
Figure 5: Components of Emotive Networks ... 22
Figure 6: Different types of mobile messaging ... 33
Figure 7: Segmentation in the Mobile market... 36
Figure 8: "Do you send one or more SMS per day?"... 37
Figure 9: Demographics of all, online and mobile European Consumers, 2002 ... 39
Figure 10: Key Sources of Information for Music Buyer ... 41
Figure 11: The brand loyalty brand exposure matrix for Net consumers... 55
Figure 12: Online Influencers' impact on the tipping point... 65
7
1 Introduction
Brands have existed for several hundreds of years. Farmers used to brand their cattle
by burning a mark into their fur. Others engraved initials into their valuables. The mark
showed who the possession belonged to or where the cattle or goods originated from.
This tradition still lives on in the logos, names, symbols and designs companies give to
their products and services to distinguish their offers from the others the competitors.
From a simple marking of possessions and origin, branding has come a long way.
Nowadays, companies invest a great amount of resources into building, maintaining
and nurturing their brands. In acquisitions, companies pay a huge amount of money for
a brand. Take Nestlé's acquisition of Rowntree, which owns brands like Kit Kat and
Smarties, as an example. Nestlé paid five times the net asset value of Rowntree in
order to acquire stable brands (Riekhof).
Why do companies pay such large sums of money for an invisible asset like a brand?
The answer is simple: consumers do the same. Studies showed that consumers pay a
far higher price for a product or service of a well-known brand they trust than for a
comparable offer from a less well-know brand (Aaker). Brands make up for a big chunk
of a firm's revenues today and make sales predictable (Riekhof).
As Internet and mobile communication grows in terms of users and becomes more
important in their users' lives, brands are unsure of how to handle this new medium in
the digital age, since market dynamics have changed. Competition is more fierce,
rumours spread worldwide in no time and brands lose emotional touch with their target
segment. This change has been facilitated by online and mobile communication of
peers. People have always formed peer networks, but today these networks are much
more powerful and quicker.
Networks of consumers take over and `steal' power from established brands. Shell
witnessed a worldwide protest against its plans of sinking the oil platform Brent Spar
into the North Sea. Consumers avoided Shell stations and supported Greenpeace.
Rumours of sweat shops in Asia run by Nike and Reebok have led to loss of face as a
result of worldwide protests (SweatshopWatch.org). On top of these threats, brands
have to face the fact that they have no chance fighting these networks of consumers.
8
At the same time, peer networks also open up many opportunities like a customized
and personalized approach to every individual.
At the beginning of last century, the owner of a general store knew his customers. He
knew every member of the family, the profession of the head of the family, the house
the family lived in and which products they usually purchased. Based on this
knowledge, the owner of the general store was able to make specific product
suggestions. He was aware of the financial situation and therefore especially
successful in individual pricing for not-everyday products. Purchasing products used to
be an experience combining two-way communication and personalized treatment
(Chiagouris, Wansley).
In the meantime, most general stores have disappeared, less staff is employed for an
increasing number of consumers. Almost no store clerk knows the shoppers' names,
let alone their family constellation or specific needs. Brands communicate their
messages by broadcasting it over the major media, such as the television. Marketers
cannot distinguish between loyal and non-loyal customers, cannot develop insight into
the specific needs and the personality of individuals.
Now, one hundred years later, marketers have the opportunity to make a personalized
connection to consumers (Chiagouris, Wansley) again. In the digital world, brands have
the opportunity to build strong and lasting relationships with customers, based on their
individual needs and wants.
Caroline Riby is vice president-media director at Saatchi & Saatchi Rowland of
Rochester in New York. She says that `[b]randing is redefined online. We are moving
beyond representing a brand to experiencing it.' (Ribey, cited in Jones). Simple banner
advertising is not engaging for the consumer and does not attract attention or lead to
experiencing a brand.
In this paper, I want to analyse the significance of peer networks, the so-called Emotive
Networks, identify threats and opportunities for brands and give advice on how brands
can make use of this new medium to their advantage.
9
I refer to brands originating from the Old Economy, which have established sound
brand equity and are looking for ways to cope with the digital age. A study by Forrester
Research explains my focus. It revealed that while today 50-60 percent of the brands
on the Net are offline brands, in 2005, the amount will grow to over 85 percent
(Pawlowitz). Established brands have an advantage over e-brands as awareness and
loyalty is already existent among consumers. For e-brands this is very hard to copy .
Established brands bring a good foundation for online activity with them. Now, they just
need to realize the threats they are facing and identify which opportunities can create a
sustainable competitive advantage for them. The dynamics have changed and brands
have to act now.
`Brands have got to be about entertainment. These days people don't just sit in
front of the TV watching ads in the way they used to, so we have to find new
ways of reaching them.'
Chris Brown, Communications Manager at Honda
1
.
1
Cited in Jones.
10
2 Concept and Significance of Emotive Networks
2.1. The Concepts of Emotive Networks
Over 18 percent of European online consumers regularly chat with their friends and
family and with people they have met online. Around 45 percent of the UK online
consumers have sent a link to a Web site to family or friends to share. 74 percent of all
European consumers own a mobile phone of which two out of three use text
messaging to interact with their friends.
Consumers have built a network of peers with which they communicate regularly. They
exchange ideas and opinions, discuss current issues or just want to have fun talking
and chatting with each other. Online and mobile communication does not know
boundaries and is constructed around interests and topics rather than geography or
ancestry (Rheingold).
Peers use technology to connect, such as email, the telephone, mobile text messaging
and Instant Messaging. However, it is crucial to understand that these communities are
not structured around the technology, but are facilitated by it.
In this paper, content is defined as professionally created pieces of information, such
as articles, movies, novels, poetry, music and artwork. Communication and connectivity
is the flow of information between a professional, such as a company, and a consumer
or among peers. These groups communicate by using the landline telephone, a mobile
phone, the Internet or by meeting in person. In online and mobile networks, users use
engaging content which can be communicated to others, such as ringtones, consumer
reviews or e-cards.
Rebecca Ulph and her associates from Forrester Research define Emotive Networks
as follows: Emotive Networks are interconnected groups of consumers engaged in
communication and support (Ulph, Favier, Stagia, Wills). Emotive Networks make use
of connecting technology and digital content to communicate with one or more
individuals.
11
Emotive Networks come in various manifestations. Some networks exists online
between friends, some between strangers and others again are based on mobile
communication services. Emotive Networks are built of a combinations of building
blocks described below.
This chapter will also discuss which profiles of consumers are attracted to the online
and the wireless world. This makes it easier for brand owners to define their target
segments online and mobile.
2.2. Significance and Appeal of Emotive Networks
"The secret to our enduring brand lies in delivering an experience rather than just a
collection of products and services."
- Harley-Davidson Annual Report
Telecom operators struggle with saturation on the landline and the mobile market; dial-
up access and broadband are unprofitable and costs increased significantly for mobile
operators due to a collective 280 billion commitment to Third Generation mobile
communication (de Lussanet, Nordan, Hollaway, Ackers: 2). In order to create new
revenue streams, telecom operators flock to content services and invest huge sums of
money in upgraded networks, enhanced client devices and content licenses. In 2000,
the Spanish media conglomerate Telefònica acquired the Dutch distribution and
production company Endemol Entertainment for 5.3 billion Dollar (Reed Information
Services) for its extensive content archive and licenses. As Forrester Research found
out in interviews with executives from the telecom industry, they see their future in
content. The telecom executives do not know, however, where their revenue will be
coming from.
`Customers want content that improves their lives. That's attractive. [...] We're
breaking ground with a number of sponsorship agreements with entertainment
providers.'
Peter Erskine, CEO of mmO2
12
`Now the question that still needs to be answered is who will pay for what?'
As Thomas Holtrop, CEO of T-Online
2
The Japanese telecom operator NTT DoCoMo tried to rewrite the success story of i-
mode which reached one million subscribers in six months. The Japanese telecom
provider launched m-stage and barely made 100,000 users within the first year. Three
out of the five largest music labels founded MusicNet, an alternative to music file-
swapping services such as KaZaA and Napster. Users are able to download audio and
video files against a small fee. According to a study by Forrester Research, 17 million
Web users are willing to make a small contribution for downloading music. Nonetheless
MusicNet was not successful and claims only 40,000 subscribers, which is 0.2 percent
of all prospective customers (De Lussanet, Nordan, Hollaway, Ackers: 5).
If content is the next killer application, why did services like MusicNet and m-stage fail
while i-mode and KaZaA succeeded?
Andrew Odlyzko from AT&T Research Labs did extensive research on this question.
He found out that connectivity matters more than content and that content is not king.
The assumption that content will drive future revenues is not far fetched. Looking at the
total volume of data running through today's telephone lines, content definitely
dominates (Odlyzko: 1). This is partly due to the fact that information is more dense in
professionally created content such as a newspaper than person-to-person
communication like a letter or email (Odlyzko: 9).
Volume however is not the same as value. Considering the U.S. postal system in the
late 19th century as an example, the phenomenon `volume does not equal value' is
explained. At that time, the government regarded newspapers as `the main tool for
keeping the citizenry informed and engaged in building a unified nation' (Odlyzko: 7)
and subsidized their distribution with the profits of letters. `[I]n 1832, newspapers
generated no more than 15 percent of total postal revenues, while making up as much
as 95 percent of the weight' (John: 38). `Thus content was king of the minds of policy
makers, but it was definitely not king in terms of what people were willing to pay for.
That is similar to the current situation. However, this differential in willingness to pay
does not seem to be understood as well today as it was then.' (Odlyzko: 7-8).
2
Both quotes from De Lussanet, Nordan, Hollaway, Ackers: 3.
13
The striking difference of content and communication is how much the consumer is
willing to pay for the service. Plain content is seen as a commodity. Newspapers are
much less expensive per unit of data than a telephone call, although a newspaper
contains a much higher amount of data. In 1999, consumers spent 101 billion on
communication such as the fixed telephone, mobile and letters. In the same time
frame, they spent a much smaller amount of 89 billion on all forms of content
combined (De Lussanet, Nordan, Hollaway, Ackers: 6). It can be concluded that
communication is much more important to the consumer than content as they spend
much more money on communication.
Figure 1: Content attracts less money than communication
3
In addition to attracting less money, content also faces more competition. If you want to
know what the weather will be like the next day, there are many ways you can find out.
You can ask a friend, read the weather forecast in the newspaper, watch the forecast
on TV or visit a number of Web sites. However, if you want to let your friend across
town know about your planned day at the beach, you have only three options: make a
call, send an SMS or type in an Instant Message.
Content also has a very narrow audience. Stockbrokers and financial analysts pay a lot
of attention to the financial news and not to scores of sport events, while a sports fan
nearly memorizes each score of last night's games. Communication is different.
3
De Lussanet, Nordan, Hollaway, Ackers: 6.
14
Everybody who uses the phone, email and fax machine does it in the same way (de
Lussanet, Nordan, Hollaway, Ackers: 6) .
Furthermore, content services show slower growth rates than communication services.
According to Eurostat, consumer spending on communication services had a growth of
12 percent on average while content services only grew by one percent, not even
beating inflation rates between 1996 and 2000 (De Lussanet, Nordan, Hollaway,
Ackers: 7).
All these indications should have led to the prediction of the success of SMS and the
failure of WAP.(Odlyzko: 12). If content is not the killer application telecom providers
hope for to generate new revenue streams, what is?
2.3. Conversational Content as Essential Ingredient
The argumentation of connectivity being of higher value than content is not intended to
lead to the conclusion that content is unimportant or useless. Content services are
likely to act as incentives for an increase in communication (Odlyzko: 23). In fact,
content and connectivity blend already today: individuals are able to reach a large
audience with posting messages in a newsgroup or publishing their personal Web
pages, computers allow distribution of personalized letters and emails to a mass
market, for example, to offer credit cards. Content with its relatively low value and
intense competition melts together with communication, which excels with people's
deeper need and fewer alternatives. The resulting concept is called `conversational
content'. Forrester Research defines Conversational Content as `the union of content
and communication that creates more compelling services than either one alone'. (de
Lussanet, Nordan, Hollaway, Ackers: 7). This means that if brands, telecom operators
and media firms combine content with communication, they tap a much bigger
opportunity than if they concentrated on either one. Figure 1 above shows that
communication services account for 101 billion and content services of 89 billion in
1999. Companies should stop offering their service divided into content or
15
communication as the combination of these services, Conversational Content, can tap
104 billion in new revenue through 2007 as figure 1 describes.
Figure 2: European Conversational Content Forecast: 2002-2007
4
We may now begin to understand what went wrong with m-stage and MusicNet: the
essential part which was missing was communication. Content is not interesting to
consumers if it cannot be shared with friends, family and colleagues. M-stage's
competitor, J-PHONE's sha-mail service (translated: picture-mail), is used by 8 million
Japanese (www.3G.co.uk, figure from January 2003). It enables the consumers to take
pictures with their mobile phones and send them to their peers' mobile phones or email
inboxes. M-stage just offers broadcasting from the content provider to the user; sha-
mail allows interaction with peers (de Lussanet, Nordan, Hollaway, Ackers: 7).
MusicNet made the same mistake. Its service missed the communication component.
KaZaA lets music lovers inspect one another's collection, find like-minded fans with the
same music taste and communicate with each other by Instant Messaging. KaZaA has
20 million users and 900 million files traded per month.
4
De Lussanet, Nordan, Hollaway, Ackers: 16.
16
Figure 3: Comparison of Content and Conversational Content services
MusicNet
KaZaA
m-stage
sha-mail
Users
40,000
20 million
100,000
8 million
Content features
Download music
files from platform
for small fee
Share music files
and interact with
peers
Download audio
and video files for
own needs
Make, send and
receive pictures
with mobile,
Communication
features
One-way
communication
B to C
View each other's
collection, find
like-minded,
interact with
Instant
Messaging
C to C
One-way
communication
B to C
Send each other
MMS and emails.
C to C
Conversational
Content
No
Yes
No
Yes
Lussanet and her associates summarize Conversational Content services success as
`those that blend communication, which consumers are willing to pay for, with content
that they expect to be cheap or free -- can deliver' (Lussanet, Meringer).
2.3.1. Difference between Conversational Content and Traditional Content
While brands and media firms are in charge of traditional content such as movies,
consumers take over with conversational content. Consumers post book reviews on
Amazon's Web site and their assessments of books and other products on product test
Web sites like Ciao.com for everyone to read. Movies are expensive to produce while
reviews impose nearly no costs at all. Traditional content only goes in one direction
broadcasted to the consumer, while conversational content spreads out in multiple
directions in a peer-to-peer network (see figure 3). Traditional content is made for
consumption and after that the process stops, whereas conversational content
encourages communication and grows organically (de Lussanet).
17
2.4. Content and Communication Already Unite Naturally
Conversational Content is not a totally new concept. Content and communication unite
naturally in everyday activities. To understand this relationship, we need to take a look
at the reasons why people communicate.
Figure 4: Communication Needs of Consumers
leisure-
oriented
task-
oriented
self-
expressive
social
functional
2.4.1. Functional communication
People need to communicate in order to organise their lives: a short dialogue at the
cash register of a super market about the amount due and the change in return, a
telephone conversation with your hairdresser to make an appointment, an email to the
newspaper requesting information about a subscription and an SMS sent to your best
friend to meet for a cup of coffee. Supporting devices used are calendars, telephone
books or shopping lists.
A number of companies have successfully exploited this need for communication and
have started providing conversational content. The dating agency Match.com sends
cinema information to a PDA. Exchange&Mart (www.exchangeandmart.co.uk), an
online classified ads service, has the free `send to my mobile' service for its automobile
section. Details on a car are sent to one's mobile, including key data and seller's phone
18
number. Without promoting this service, 30,000 car details were sent to mobile phones
within the first two months after launch (de Lussanet, Nordan, Hollaway, Ackers: 13).
Other functional Conversational content services could be sending train and flight
schedules to PDAs and initiating phone calls by clicking on a mobile Internet link.
The two heavy user groups of functional Conversational Content are professionals and
technology optimists. These two groups account for more than half of Europe's
population. Forrester Research calculated that if one out of four of these prospects
uses a functional service once a week, this would generate two billion new
communication events a year (de Lussanet, Nordan, Hollaway, Ackers: 14).
However, consumers will only use these services if they make conventional actions
more convenient. If it is too complicated finding an address with a PDA, consumers will
just go back to what they were used to: taking a telephone book or calling up a service
number.
The objective for commercial use of functional Conversational Content is to lower
barriers to purchase. A frequent flyer will appreciate the flight schedule on her PDA and
may prefer to book with that airline or travel agency as she already has all the
information at hand. A garden centre sending directions out to mobile phone and PDA
owners makes it easier for new customers to find them.
Forrester Research predicts that Conversational Content with its functional basis will
take off in 2004, especially with retailers and classified ads services being active (de
Lussanet, Nordan, Hollaway, Ackers: 13).
2.4.2. Social communication
People have a constant need for friendship and social contact (de Lussanet, Nordan,
Hollaway, Ackers: 9). When friends and family members meet, they share experiences,
emotions, gossip, opinions and values. People debate about contrary opinions,
sympathize with friends that had a bad experience or are not feeling well, laugh
together, discuss hobbies they have in common and support each other in tough
decisions. People do not only communicate with close friends or relatives on a social
19
basis. They also talk with their hairdresser about their problems with child education or
within their job or they chat with a colleague they seldom see. People want to find other
people and be found (Kolko, Rhinelander, Denton: 8) and communicate socially to
forge and nurture relationships.
Consumers appreciate a venue for social interaction. Meeting points like chat rooms,
discussion boards, venues and services for sending digital photos and playing multi-
player games are examples of content that enriches social interaction (Lussanet). If a
couple gets a baby, the father can either call the new grandparents to tell them of the
big news and how the baby looks or he lets pictures speak and takes a photo of the
newborn and sends it via MMS to the grandparent's mobile phone or email. Friends
chat with each other and intensify the ties between them. Chatting or sending
messages will never substitute personal meetings as some critics feared.
In fact, people meet their friends more often as ties get more intense. Sociologists have
discovered recently that neighbourhood and family ties are only a portion of people's
overall community networks. Cars, planes and phones maintain relationships over long
distances. They realized that relationships do not solely exist between people from one
neighbourhood, the people you meet on the street by coincidence. Instead, more and
more relationships exist between family, friends and colleagues who do not necessarily
live in the same neighbourhood. `The conceptual revolution moved from defining
community in terms of space (neighbourhoods) to defining it in terms of social
networks' (Wellman). And today, the Internet and mobile phones have joined in to
intensify social ties.
Conversational Content services like the Lycos multi-player game Fight Club
5
(http://fightclub.lycos.co.uk) connect friends, but also people you do not know. A player
chooses his offence and defence strategy. The person challenged, friend or community
member, receives an email with the invitation to a fight and also chooses his strategies.
Now the fight can take place and the challenger receives a notification. Both can watch
the fight and see which strategy won. A player gains points if he wins and can
exchange them for special weapons. There are different stages and the top performers
are ranked in the high-score list. The current top performer played over 42,000
matches and won 88 percent of his matches. There is the possibility to check who is
5
The Fight Club is not a brutal game (author's note).
20
online and chat with other players on fight strategies. This simple game (content)
encourages users to interact with each other by sending out emails and inviting
(connectivity/communication) friends, but also personally unknown community
members for a challenging game.
Friends reunited (www.friendsreunited.co.uk) is a Web site, which lists contact details
of individuals. Individuals can query the large database and post messages or meet
other on the message board. Mid 2002, the site counted 4.5 million users and 250
million hits a month (de Lussanet, Nordan, Hollaway, Ackers: 9). The service is free-of-
charge for those who post their details on the site. 15 percent of the users pay 7.50 a
year for the additional service of being able to contact others directly. The basic service
is for free, as a critical mass of participants is needed to make this service a success.
Friends Reunited has a revenue of 3.4 million per year.
Forrester Research says that if the consumers that already use email and SMS used
only one conversational content service a week, this would result in a yearly volume of
24 billion additional messages.
If a brand lets people share their lives by providing a meeting point for interaction, it will
create the content itself (de Lussanet, Nordan, Hollaway, Ackers: 7). Attention and
revenue will be on the brand's side.
2.4.3. Self-expressive communication
Everybody uses a set of tools to express his or her belonging to a group. To be
identified as a member of a certain group, people speak with a posh accent, listen to
techno music, and wear clothes of a particular brand or style. They express themselves
to show how they want to be identified: as being rich, as techno-lovers or to be
associated with the characteristics the brand implies.
The way people dress gives others cues about who they are. A middle-aged man in a
suit driving an expensive-looking Mercedes lets the outside world think that he is a
successful and rich business man. A yellow scarf with black letters identifies a BVB
Borussia Dortmund football fan. Hairstyles also indicate basic values and beliefs: a bun
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- , 2003, Emotive Networks and Brands, Hamburg, Bedey Media GmbH, https://www.diplom.de/document/222453
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