Advertisers' originality still manages to impress

It’s the World Cup and the summer movie season, so the advertising companies are bringing out the big guns. There are a couple of adverts out there at the moment that really stand out.

The Vodafone ad with a businessman’s dinner being interrupted by his daughter-in-distress is particularly powerful. I saw this one up on the big screen and it was not obvious at first that it was an advert at all. It builds up a deep feeling of sadness in the audience as we empathise with the recently-dumped woman. And we admire the man for sacrificing what it clearly an important moment without any hesitation.

Mobile-phone companies have long been at the forefront of marketing psychology – they brought minimalist music into the mainstream with their abstract adverts in the 2000s – but this one really stuck with me for the simple reason that it induced a strong emotional response. It doesn’t especially make me want me to buy Vodafone products, but it’s memorable – which is most of the battle.

Another prominent ad campaign at the moment is the iPad posters up around the London underground. In fairly typical Apple style, they are simple images of the product in question. But the screen of the iPad is filled with different things on different posters, and the screens’ contents are a window on the ‘type’ of person who might like one. Predictably, one of the images is of Facebook, so we can assume that our archetypal iPad user is a social networker (who holidays in Biarritz). To illustrate its use as a newspaper device, some posters have shots of The Guardian; as an example of an eBook, the posters show a page from The Picture of Dorian Gray; and as for music videos they have Juliette Lewis; for movies they have “Up” by Disney. These portray the iPad user as liberal, arty and fun, all of which are quite appealing characteristics.

What’s more, walking around London and noticing an iPad poster I haven’t seen before has become one of the summer’s simple pleasures. And recognising the references to popular culture that they contain lets me feel like I am in on the ‘inside joke.’ Another very clever piece of marketing (though, again, I don’t actually own an iPad – yet).

Financial innovation is on the menu at Hotel Chocolat

On the playing-field of UK start-up businesses, one that I particularly admire is Hotel Chocolat. Started in 1993 by Angus Thirlwell and Peter Harris, it has grown to open 44 stores worldwide by providing a product of superb quality and developing a brand that is modern, decadent and personal. Their products are innovative (I particularly like the super-thick shelled Easter Eggs); their marketing is democratic (customers can submit ratings of each chocolate); and thanks to free samples and a friendly team of sales assistants the shopping experience at their stores is always a pleasure.

When it came time to raise finance, then, is was only natural that the Hotel Chocolat entrepreneurs would find a novel way to do it. Conventional options would include selling equity in the company, which would dilute the owners’ stakes, or taking out a long-term bank loan, which could have a high, variable rate of interest. Instead HC gave their customers a chance to invest in the business. In exchange for a lump sum of £2000 or £4000, the customers will receive “interest” paid in regular deliveries of boxes of chocolates.

A £4000 “chocolate bond” yields 13 boxes of chocolate each year, with a retail value of £18 a box, equating to £234 p.a., or 5.83% net interest (7.29% gross). For customers who are already paying cash for the monthly boxes of chocolates, this is a potentially attractive investment opportunity: to swap capital expense for reduced cash outflows in future. For HC they are locking in the value of those future sales as capital – which they can then earn a further return on.

Looking, for a moment, with a critical eye, I expect the transaction costs of this deal are fairly high (although partly offset by free publicity received). And there is no guarantee that the target customers will take up the offer. Furthermore, the investors are putting their capital at risk, as unsecured creditors, and would be left with a big loss if HC went into liquidation. So as with most forms of innovation, it comes with a certain set of hard-to-quantify risks.

Perhaps the most exciting message from the Chocolate Bonds project is that financial innovation is not dead. Financial innovation has taken a beating in recent years due to the mis-selling of complex mortgage instruments and derivatives, which allowed one party to exploit another. This looks like something refreshingly different: a genuine win-win scenario for HC and their customers.

The 80:20 Principle and the Long Tail

I’m a big fan of the “80:20 Principle.” The principle basically suggests that a small proportion of causes are responsible for a large proportion of consequences; e.g. 80% of a company’s profits could be derived from 20% of its customers. In his book, Richard Koch writes about the 80:20 principle in both a business context and a lifestyle context, and encourages people to use the principle to maximise their effectiveness. He suggests that by concentrating on the few things that you are especially good at (where you fall into the top 20%) you can multiply your productivity (collectively the top 20% deliver 80% of the results, putting them a factor of 16 ahead of the rest).

When the topic came up in the book I am presently reading, it caught my attention. In The Long Tail, Chris Anderson writes about the growing importance of very niche forms of media. The Internet, due to sites like iTunes and YouTube, has become a platform for distributing media with zero marginal cost. This allows a much wider selection of books / songs / movies than is possible in conventional retail, so the “Long Tail” of the market demand curve can now be addressed.

As Anderson points out, this suddenly makes the 80% of books / songs / movies that would previously have been ignored by mainstream business channels really rather important. Entire livelihoods and subcultures have grown up around the niche content that can now be profitable. The global sharing of ideas has created new hybrid styles of art and music. Most importantly: the mass transfer of information is not acting as a homogenising force – rather it is allowing an immense level of diversity to flourish.

Digital Voyeurism

This weekend I went to the newly opened exhibition “Exposed” at the Tate Modern. The collection of images explores the invasion of privacy through photography – at what point does artistic licence decay into dangerous voyeurism? Is the viewer of a photograph implicated in the act of taking it?

Most of the exhibition looks at the invasion of privacy in a historical context, but it prompted me to think more deeply about the present (and the very imminent) technological advances that could take voyeurism to a whole new level.

For example, online photo sharing means that most of us are already leaving publicly available records of our movements through time. It is easy to imagine a scenario in which an organisation trawls the web for photographs, downloading them to an archive and running them through face-recognition software. With the time, date and location stored with each photograph they could create a searchable database that could re-produce the historical location, through time, of just about anybody, based on the photos that they appear in. It would not surprise me if national intelligence services already have such a system. Nor would it surprise me if a privately-run commercial system is available soon.

On the subject of digital voyeurism, Google managed to open up a new frontier when they recorded masses of data being passed over unsecured wi-fi networks. I, like millions of others, already entrust Google with my personal data (emails and search histories and such). As such, I think it is probably a good thing they were behind the data collection and not a company that might be tempted to exploit what they found.

But overall the pace of technological advancement seems to be outstripping the pace at which we adjust our behaviour, our laws and our cultural norms. The Tate Modern’s exhibition focuses on the extreme, but in doing so it acts as a useful prompt for us to re-think our concept of privacy for a digitally-connected world.