Microsoft's Selective Partner Resale Strategy For Surface: Short-term Benefits, Longer-term Challenges

Microsoft (MSFT) recently announced plans to sell Surface tablets to enterprise customers, including educational institutions, through a two-tier partner program called Microsoft Devices Program (MDP). The program authorizes distributors to sell Surface to a newly designated group of device-authorized large account resellers (LARs). Per the announcement, in the US, Surface will be resold through three authorized distributors (Ingram Micro Inc., SYNNEX Corporation, and Tech Data Corporation) and 10 high volume LARs. MDP is likely to be expanded to select partners in 28 other countries by the end of September 2013. As part of the initial go-to-market model, Microsoft is not including its solution providers in the program.  

Based on recent media reports, Microsoft’s US partners -- solution providers in particular -- have expressed dissatisfaction with Microsoft’s selective approach towards partnering for Surface. Solution providers feel Microsoft is ignoring the opportunity to deliver “wrap-around services” around Surface, which they could have delivered.

I believe that in the near term, Microsoft is correct in limiting access; but, in the longer term, it will need to open up to other partners, including solution providers that can help Microsoft deliver Surface-based solutions as a means to ensure differentiation in the tablet market and drive margins. Microsoft needs to follow some key guidelines as part of Surface’s go-to-market strategy if it wants to stand above the crowd:

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COOL JOB ALERT! FORRESTER RESEARCH IS HIRING A HEALTHCARE EBUSINESS AND CHANNEL STRATEGY ANALYST

In the face of the biggest industry disruption in memory, health plans are gearing up for big changes in their business models. From the implementation of healthcare reform teams, public and private exchange initiatives, dramatically different underwriting, and new user experiences modeled after Apple and Amazon, health care payers — and providers — are looking for answers and a view into the future of healthcare. So Forrester is looking for a Senior Analyst to help us expand our coverage of this incredibly dynamic area. 

Here’s the important stuff in the job description:

The successful candidate will write for, present to, and advise eBusiness & Channel Strategy Professionals in the healthcare industry (including payers and providers) to help guide their direct-to-consumer strategies, through innovative research and advice delivered through written reports, consulting, client inquiries, and speeches.  The ideal candidate possesses a strong understanding of the business and technology issues facing both healthcare and online and mobile commerce markets, plus an appetite for conducting and writing research to help clients stay abreast of the issues.

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Avoid The Visual Clutter And Go For In-Stream Audio Advertising

David Bowie photographIn 2002, the zeitgeist orchestrator David Bowie  opined, “Music itself is going to become like running water or electricity.” A few years later, in 2005, the futurists Gerd Leonhard and Dave Kusek proposed “music as water” in their industry-shaking book, The Future of Music (A Manifesto for the Digital Music Revolution).

The metaphor was simple — music would flow on demand, like a utility, to people's home hi-fis and portable music players. Subscription access to "all" music was the approach that ultimately ended up with no more ownership of physical or even digital copies; CDs, mp3s, and the other ground-bound trinkets would no longer be necessary. Even in my own behavior, I see this change — where once I’d spend time ripping my CDs and loading up my 160GB iPod, now I simply curate music, like my Boxing playlist, in the cloud via Spotify.

Eleven years later, Bowie’s prediction is coming true and streaming is progressing at speed. In metropolitan Argentina 1 in 3 consumers are listening to streaming music - evenly split between mobile and computers (desktop, laptop, tablet). In France 15% of those we surveyed streamed on a computer but a whopping 27% used mobile. In fact this trend to streaming via mobile is likely to be one that will continue worldwide and today in metropolitan regions of Hong Kong and Mexico, as well as South Korea mobile has already considerably overtaken computers as the preferred listening method.

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Three Rules When Exploring New Markets

I consider myself incredibly fortunate to have the job I do: Every year, I get to explore new markets around the globe and meet people who are equally passionate about building eCommerce businesses.

It's sometimes challenging to try and balance the fact that at Forrester, we are often brought to new places specifically to share our expertise — at the same time, our goal is to learn as much as possible while we're there. Many professionals looking to launch new offerings or pursue new partnerships outside of their own country face similar issues: They aim to both provide insights based on their experiences as well as to absorb knowledge that will help inform corporate strategies.

Having had some great meetings over the years and others where I’ve regretted my approach, I now try to adhere to three rules whenever I start a conversation with executives in a new market:

1. Come with a hypothesis, but prepare for it to evolve. Conversations flow much more easily if you have a framework or hypothesis for what trends you're likely to see in a market — just be ready for holes to be poked in different parts of your theory. In a recent conversation with the CEO of an online retailer in Russia, for example, I indicated that online travel sales often paved the way for retail eCommerce to take off, and asked if the situation was similar there. The CEO explained that in Russia, consumers' reliance on package tours — which are not generally sold online — meant that online travel hadn't flourished to the same degree as it had elsewhere in the world. Finding these exceptions is essential to understanding the nuances of each market. 

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Are You Doing Enough Customer Research? Yes, But . . .

Peter O'Neill here: I attended a meeting of our FLB Sales Enablement Council earlier this month in San Francisco. The Council meeting included sales operations and content marketing executives from B2B companies Avaya, Cisco Systems, Haworth, HP, IBM, and Polycom. While the meeting is a facilitated discussion among peers, as per our standard FLB model, it is also more than that. It actively helps us analysts create new IP for our clients — we get their point of view and we test our own hypothesis before publishing reports. This meeting focused on the very important topic of defining the audience for our message (i.e., content and conversations) and messenger (i.e., the content channels, including sales). In an introductory exercise, the attendees listed all the groups and initiatives that they know are doing research with their customers. If you look at this photo, I think you’ll agree with what the Council attendees said after this exercise: “It’s absolutely frightening and quite chaotic!”  This photo shows the list of people or departments - the list next to it is by "initiative" and it is just as long.

I am reporting this because Forrester has just published my latest report for B2B marketers on content marketing, Establish Your Content Marketing Life Cycle; in it, I discuss some critical success factors around content marketing. One of the most important is doing enough of the right research about your buyers in the first place. However, the research I describe in the report isn’t even on these lists!

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The Publicis-Omnicom Merger Is About Marketing's Technology Evolution

The penned merger of equals between Publicis and Omnicom takes two large networks of agencies and folds them into one behemoth holding company significantly larger than WPP, which would fall into second place. To gain strength in building a future, Publicis has been aggregating large digital shops to complement its traditional creative agencies; at the same time, Omnicom has been amassing a large contingent of small shops that grew quickly under its Diversified Agency Services (DAS) umbrella of digital firms in the race to lead the "new" thing.  

Why merge now?  The ad agency world and the technology world are on a collision course, centered on how well companies manage their business or consumer customer. I first mentioned this in a post about change management in my Forbes blog almost exactly one year ago. As agencies find themselves up against tech services giants like IBM, Accenture, Sapient and Deloitte, they are being asked to deliver:

  • Marketing and business strategy based on deep data.  No marketing strategy is competitive today without the strength of managing and interpreting data. Both firms have invested in disparate platforms to build insight into the planning process. Agencies like Rosetta and RAPP use data to inform the strategy to build customer engagement, getting ad efforts closer to Moneyball-like results.
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Friday Flashback: My Favorite Forrester Groundswell Award Winner From 2011

In anticipation of our upcoming 2013 Forrester Groundswell awards, I have been reminiscing about our past winners. One of the great benefits of participating in Forrester's Groundswell Awards is that analysts often use the winners' (and finalists') submissions as examples of best practices. Personally, I have included our Groundswell Awards winners and finalists in event presentations, client advisories, and consulting projects. These winners have inspired many marketers who continuously seek innovative ways to incorporate social media in their marketing strategies.

One winner that I have referred to frequently — and is a personal favorite of mine — is L'Oreal.  L'Oreal won a B2B Groundswell Award in 2011 for its National Salon Facebook program. Using the Buddy Media social relationship platform, L'Oreal provided its ecosystem of thousands of salon partners with tools that helped them easily enhance their business Facebook pages with branded content, how-to-videos, and appointment-scheduling applications. I have many reasons for favoriting L'Oreal's program, but my top three are:

  • L'Oreal's campaign reflects an "outside-in" perspective.This was a true B2B2C campaign that proves how important it is to address the needs of the customer. The campaign provided content and applications to end-consumers, helped partners with shrinking marketing budgets promote their services, and helped L'Oreal get its brand in front of a wide audience of consumers. It was a win/win/win!
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Forrester Needs You - We're Hiring For An eCommerce Technology Analyst

Our clients continue to realize sustained online revenue growth which means many eBusiness leaders have both the funds and backing to continue to invest heavily in commerce technology. Across the board, retailers, consumer brands, and industrial suppliers alike are significantly bolstering their capital investment programs to ensure they stay at the forefront of digital innovation while ensuring that their online, fulfillment, and back-office systems are ready to scale for anticipated growth over the next five years. Subsequently Forrester is hiring for a Principal/Senior Analyst to help us expand our coverage of this incredibly dynamic area. 

Here’s a quick snapshot from the job description:
 

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Despite Impressive Growth, Facebook Is Facing Mobile Ad Challenges

Facebook now has 819 million mobile monthly active users. That’s a huge audience. That’s actually 71% of total active users.

Yesterday, Facebook reported they generated 41% of total ad revenues via mobile. That’s pretty impressive considering they generated nearly 0% end 2011 when they had already 432 million mobile monthly users. Since the launch of mobile ads in 2012, Facebook steadily increased the share of mobile in total ad revenues: it was 23% end 2012 and 30% in Q1 2013.

There is still a monetization gap in comparison to the share of their mobile audience, but that’s definitely impressive for a new product.

There are a couple of reasons for this sharp increase.  Time spent on Facebook is meaningful. Facebook’s mobile ads integrate well in the natural flow of Facebook’s news feeds. They are quite visible and are increasingly successful at driving mobile app installs. According to our European Technographics Consumer Technology Online Survey, Q4 2012, 16% of online adult smartphone owners (ages 16-plus) who use apps report that they first learned about an app via social networking websites such as Facebook. No wonder why the likes of Fiksu and other app boosters spent a lot of money on Facebook mobile ads.  Cost per click increased despite a lot more clicks and ads shown.

For this approach to be successful in the longer term, there are a couple of key questions to be answered:

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Canadian Online Retail Shifts up a Gear, eh?

This week Forrester published our inaugural online retail forecast for Canada. While still lagging behind the US market, online sales in Canada show encouraging signs of growth over the next 5 years. In fact, online sales in Canada have grown from C$15.3 billion in 2010 to C$20.6 billion in 2013 and are expected to reach C$33.8 billion by 2018. A few highlights of note from the forecast:
 
  • Online sales now account for 7% of total retail spend. Forrester forecasts a compound annual growth rate (CAGR) of 10% over the next five years for online sales, however retail total growth (online & offline) in Canada will linger at only 2.8% over the same period. Consequently online sales will account for 10% of total retail spend by 2018, up from 7% today. 
  • Just five categories account for half of the dollars spent online in Canada. Apparel and accessories alone are a C$3.5b plus sector, followed closely by PC;s, consumer electronics, event tickets and groceries. Perhaps this should come as no surprise given these same categories that are also some of the most commonly researched online in Canada. 
  • Average online spend is set to increase 37% by 2018. Today the average Canadian spends C$1,130 a year online which is considerably less than our neighbors in the US (who spend US$1,481), but on the bright side, Forrester forecasts that Canadian online spending will hit $1,552 by 2018. The majority of this growth in online spend will be driven by broader access to products and services that today are only available directly at brick-and-mortar stores or via cross-border delivery from US domiciled retailers.
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