Like miniature freight trains, netbooks are making deep inroads into the PC market, in turn forcing enterprises to lend these mobile marvels serious consideration. Although netbooks have certainly found favor with consumers—even wireless providers are now selling them along with mobile phones—their viability in business settings remains questionable.
According to DisplaySearch, more than 27 million netbooks will ship in 2009, reflecting a 66% increase over the previous year. Standard-sized notebooks, on the other hand, are estimated to see only a 3% sales increase, or 133 million units shipped. However, DisplaySearch attributes this current surge partly to the lagging economy and expects that buyers will return to purchasing more full-featured and higher-priced notebooks after the economic crisis.
Just as cost-effective netbooks are enjoying greater sales due to the economy, they’re also filling needs in enterprise settings—but only for certain segments. In a recent study by Chadwick Martin Bailey, a majority of IT decision makers indicated that netbooks could find a home in their organizations with employees who travel or require mobility services. On the other hand, only a small number of respondents said they would deploy netbooks on a wide scale.
Making The Grade
While the enterprise setting appears to be a mixed bag for the netbook, the education market could be a prime fit. At the Seattle Academy of Arts and Sciences, incoming ninth-graders buy a specific notebook/netbook model from the school and carry it through the 12th grade. In the academy’s middle grades (six through eight), the school owns the laptops and keeps them in carts within specific classrooms. Each year, the academy must make purchasing decisions for both the ninth-grade and middle-grade machines.
“There are four big issues in making a decision about whether to try netbooks on a larger scale,” explains Douglas Ambach, the academy’s assistant CFO and director of operations. “First, we need to know if our students and students’ parents want netbooks or laptops. Second, we need to determine whether netbooks are too small. Third, we need to choose a producer likely to keep producing and supporting the netbooks over a four- to five-year period. Fourth, we wonder if netbooks will prove as reliable as the laptops we have been buying [for] a four- to five-year life.”
Ambach says that the success of netbooks in schools will depend on the size of the screen and keyboard, adding that his academy is more likely to purchase laptops with larger screens and keyboards if they come down in price. Students at the academy receive plenty of school content through their notebooks, but small screens can make reading that content difficult. In particular, reading spreadsheets and data can be challenging on a small screen, and Ambach says that netbooks would be a harder sell for the academy’s math and science classes.
However, Ambach points to what he considers the clearest benefit of netbooks: lower cost to purchase and replace if the devices are broken or lost. “The retail prices for netbooks are so much lower than laptops that we could even forgo purchasing the additional repair warranties we regularly purchase with laptops. Also, the size and weight make them better for students to carry around in backpacks,” he says.
On the enterprise side as a whole, Paul Moore, senior director of mobile product management for Fujitsu America (www.fujitsu.com/us), says he feels the netbook’s prospects for adoption aren’t particularly good. The devices are designed to perform relatively simple tasks, run Windows XP Home, have limited to no expansion, and have small screens and keyboards, he says. But not everyone agrees that the outlook is dim.
“It is still early in the market development of netbooks, but we believe that the prospects in the enterprise environment are strong,” says Rob Cheng, CEO and co-founder, PC Pitstop (www.pcpitstop.com). “Our research shows that netbook adoption in business [settings] is significantly behind that of the consumer market. However, the factors driving netbook adoption [in the consumer space] will be the same ones that drive the corporate acceptance. Netbooks are the perfect combination of great price and portability. It is not the solution for all corporate needs, but ultimately, netbooks will establish a strong position in companies that use laptops for travel and communication purposes.”
One of the roadblocks currently preventing netbooks from obtaining a greater enterprise presence is their lack of performance, says Don Ryan, vice president of technology and media for TNS North America. He notes that for the next two years, the enterprise opportunity may be limited because of the netbook’s lower processing capabilities and also because some of them run Linux instead of the enterprise-standard Windows operating system.
“A more important reason is supply-side considerations,” Ryan says. “The major vendors such as HP are positioning these solutions as consumer devices and at this point do not want to confuse the market by positioning them as business and consumer systems. APAC [Asia Pacific] companies that will produce these systems, such as Acer, do not have a strong presence in the enterprise. Until HP and Dell decide that a netbook fits into an enterprise environment, the market will be slow to take off in this segment.”
Finding A Niche
Research indicates that business adoption of netbooks will center primarily on mobile workers, but experts envision specific industries that could take unique advantage of the devices. For example, Cheng says that military units could find value in the smaller form factor, as could police forces, whose squad cars are usually equipped with laptops. But, as Cheng points out, laptops “seem overly heavy for the task at hand, which is often checking driver information from a central computer.”
Fujitsu’s Moore adds that field force automation settings, where tasks are repetitive and planned, could utilize netbooks. “Planograming, inventory, and small businesses like insurance, remodeling, and landscaping are some examples,” Moore says.
This interview with Josh Mendelsohn, Vice President of Marketing at Chadwick Martin Bailey, is the first in a series of interviews with market research professionals in the Greater Boston area. Chadwick Martin Bailey (CMB) is a global custom market research and consulting firm. In his role at CMB, Josh helps grow CMB’s business by applying his expertise in new research technologies and approaches to the measurement of marketing effectiveness. Josh is also a former president of the Boston chapter of the American Marketing Association.
What do you consider to be the greatest challenges in measuring marketing effectiveness today?
The challenges fall into three primary areas. 1) Organizational buy-in. Without it, companies are not able to truly understand the impact of marketing across the business. Marketing generally cuts across business units and mediums yet measurement is often silo’d. It takes strong leadership to integrate and act on measurement. 2) Adapting to changing marketing mediums. In one way or another, new media needs to be integrated into measurement. Whether that is as simple as embedding questions in a tracker or you undertake a new research initiative altogether, it can’t be ignored. 3) Integrating data sources. For marketing effectiveness or performance to truly be understood companies need to be able to connect to other studies and other data sources to see causality and identify areas for improvement.
Have market research measurement tools been able to keep pace with the rapidly changing media landscape?
To a large extent, I don’t think they have. At least not enough. This is primarily because measurement needs to stay somewhat consistent to see changes over time and with pressure to shorten questionnaires it is hard to work in questions about new media. Another issue is that most companies have not really determined what “success” means in new media, making it hard to quantify and harder to measure the intermediate steps leading to success. Finally, creating measurement tools that are designed for new media takes development time and most firms don’t have the ability (or desire) to move as quickly as media companies.
That is one reason it’s so important to use a mix of techniques to measure effectiveness and identify areas for improvement. For example, when we explore the impact or opportunities that social media presents we will use secondary, qualitative, and quantitative methods within the same engagement.
How will market research continue to evolve?
I believe the use of technology will drive major changes in the industry in two areas. First is efficiency. Automating certain tasks within the research process will enable researchers to focus on drawing out insights and recommendations rather than just creating tables. With pressure to deliver faster results, technology will allow us to provide clients with better, more useful qualitative and quantitative insights in the timeline that they require it.
Technology will also enable us to reach people at varying points in the research process and where appropriate, respond. With the rapid growth of mobile devices and networks people will be able to provide instantaneous feedback, especially about events and interactions. This has positives and negatives in terms of representativeness of sample groups, reliability of results, and understanding the actual impact of interactions.
How can marketers get the most value from marketing effectiveness research? For example, can tracking study research also guide decisions related to media mix?
The biggest influence on whether marketing effectiveness research is useful (and research in general) is whether or not there are specific decisions in mind when the research is designed. You need to know your goals and measure the extent to which messages and mediums are helping you achieve those goals.
The two primary problems with big, traditional trackers is that they are too broad to give you more than directional data on specific decisions and they are too long to incorporate topical issues as markets evolve. The latter is especially problematic now that strategies and market dynamics change so rapidly.
Here at CMB, we almost always conduct waves of research instead of ongoing trackers and embed a flexible module or two in the questionnaire to help clients identify and react to market changes.
There are conflicting research findings as to the effectiveness of online advertising. What is your opinion about the validity of findings based on asking consumers directly about media influence?
10 years ago I would have said it was not very valid. Today, however, consumers are much savvier about media and online interactions. This is in part due to the growth of user generated content and true interactions with brands, not simply reading or watching an advertisement. The best way to measure online effectiveness is a combination of methods – behavioral data and click tracking, brand perceptions, and people’s public postings of positive and negative feedback.
What advice would you give marketers considering marketing effectiveness research?
There are really two key elements to success no matter what kind of research you are going to conduct. The first is knowing what decisions you are going to make once the research is complete. Otherwise you are simply gathering data that may or may not be useful.
The second is getting buy-in from the information users, not just the research department. Understanding what information they need and incorporating it into the project makes it harder for them to reject bad news and easier to leverage good news.
A study by Boston research firm Chadwick Martin Bailey (CMB), in conjunction with Arnold Worldwide, shows that treating the Boomer generation as only or two groups is a mistake that over simplifies their robust differences. “For years, companies have been marketing their products to the Baby Boomer generation as if it were a homogenous group,” says Mark Doherty, vice president of Chadwick Martin Bailey.
“Our research shows that marketers can identify more substantive, actionable and strategic differences by segmenting the groups into five subgroups based on common attitudes, behaviors, and demographics.” CMB and Arnold Worldwide have identified the following five distinct Boomer subgroups:
• Status Seekers: The largest segment identified, Status Seekers make up 26 percent of Boomers. The group is characterized as materialistic and feels money is the best measure of success. They enjoy the finer things in life and are willing to pay more for brand names. Thirty-one percent of Status Seekers drive a vehicle they feel makes a statement about their personality and style.
• Traditionalists: This group accounts for 23 percent of Boomers. Traditionalists are defined by their conservative political, economic, and social views. They have traditional attitudes and belief systems, are known for following the rules, and are smart consumers (interested in value, trust and variety). Forty-five percent of Traditionalists report that they’ll go out of their way to buy American-made products.
• Blue Collar Skeptics: 18 percent of Boomers fall into this group. The Blue Collar Skeptics are just that - skeptics. They are hesitant to trust big business and are concerned about the amount of information online. As they fall on the low end of the Boomer income bracket, this group is more stressed about time and money than the rest of the generation: 68 percent of Blue Collar Skeptics fear that they haven’t saved enough for retirement.
• Activists: The most politically and socially active segment, 17 percent of Boomers are Activists. They are generally liberal and also donate a significant amount of time and money to charity. Activists are concerned about the environment, are brand loyal and are financially smart. Thirty-seven percent of Activists describe themselves as green consumers ) i.e., buying hybrid cars, recycling, etc).
• Achievers: The minority of Boomers, just 16 percent, fall into the Achiever category. This group adopts technology early and are heavily involved in social activities. Twenty-four percent of Achievers claim to be the first among their friends to have new gadgets and devices. In addition to the segments identified above, the CMB study exposed these common misperceptions of the
Baby Boomer generation:
• More than 70% of Boomers were never actually politically active in the 60’s and 70’s. For example, only 6% claim to have been active participants in historic movements such as civil rights, anti-war and women’s rights; and only 15% claim to have participated in demonstrations or protests.
• While only one in five Boomers consider themselves a ‘knowledgeable source of information for new technologies,’ certain portions of Boomer population are much more tech-adept than previously believed. Achievers, for example, own significantly more technology devices than their counterparts, and they consistently rely on technology.
For the purposes of this study, CMB surveyed over 1000 Baby Boomers born between 1946 and 1964. For more information contact CMB at firstname.lastname@example.org.
Hey, big spenders: Luxury retailers are going to new lengths to secure your loyalty.
This week, Nordstrom Inc. rolled out a “tiered” rewards program, giving shoppers a chance to earn perks such as free shipping, specially packaged trips to places like San Francisco and Miami, and access to “red carpet” events and store openings, if they spend enough on their Nordstrom card at the store. In the past, Nordstrom rewarded them only with points toward less-glamorous spending credits, known as Nordstrom Notes.
Rivals are ramping up their loyalty programs, too. Last fall, Saks Inc.’s Saks Fifth Avenue introduced a Saks World Elite MasterCard, which lets shoppers earn points on dollars spent outside the store toward benefits such as free fur storage and dinner at the captain’s table on a luxury cruise line. Neiman Marcus Group Inc.’s Neiman Marcus this year is offering its InCircle rewards participants the chance to buy a limited-edition Lexus car with five million points. It’s also testing a credit card that lets shoppers earn points on dollars spent outside Neiman stores. Both stores aim to broaden the appeal of their programs: For shoppers, it’s easier to rack up points on a card that can be used anywhere than on a traditional store card.
The offers reflect a growing emphasis by luxury retailers on getting a “greater share of wallet” from their 100,000 or 200,000 top spenders, rather than trying to attract new customers. With department stores overall losing market share, their goal is to increase the profits generated by their best customers. At Neiman Marcus, for instance, the top 100,000 customers each spend more than $12,000 a year at the store, while other shoppers spend an average of about $600 a year there, according to Customer Growth Partners, a consulting firm.
Despite the glamorous perks, these programs carry some downsides for shoppers. In many programs, including those of Nordstrom and Barneys New York, a shopper’s level of rewards is based on spending in a calendar year, meaning you have to re-qualify all over again in January. Also, some loyalty programs let you redeem points only once a year.
Generally, the stores automatically convert points into gift cards or spending certificates and send them to customers at the end of the year, although a few will send them more often than that, if requested. Bloomingdale’s issues them monthly, as earned.
The new rewards programs up the ante for such customers, particularly at the highest spending levels. Nordstrom, for instance, has long used a single formula to dole out points for everyone: Shoppers got one point for every dollar spent outside of Nordstrom on one of the retailer’s cards (which include Visa cards), and two points for each dollar spent at a Nordstrom store. While it still offers points toward Nordstrom Notes, the retailer hopes shoppers will see the extra rewards offered at higher tiers as an incentive to spend more.
In Neiman’s InCircle program, which has 20 different tiers and a top tier of five million points, shoppers usually get one point for each dollar they spend, but at the highest tiers, the point-earning formulas are more generous. Neiman tweaks the rewards -- which include trips, cars and designer clothing -- every year to keep them fresh. The “Rewards Issue” of the program’s glossy Entrée magazine recently featured a model in a Russian red fox stole from fur designer Pologeorgis on its cover -- described as a $1,500 value, free to those who earn and redeem 50,000 InCircle points.
At the end of each year, Neiman sends reminders that spending more can help shoppers qualify for better benefits. Last year, Neiman, which has long taken only its own card and American Express cards at its stores, expanded its loyalty program to include spending at sister store Bergdorf Goodman.
The programs can pay off for retailers. At Neiman Marcus, the more than 100,000 shoppers in its In Circle loyalty program spent $1.3 billion last year, accounting for almost half of its business. “The firepower of these customers is incredible,” says Neiman CEO Burt Tansky. Both membership and average spending per participant are growing, Neiman says.
Membership in the top two of Bloomingdale’s three rewards tiers has grown by 20% in the past 18 months, says Frank Berman, vice president of marketing. The store’s strategy is “take care of your best people; they are worth more than acquiring twenty new ones,” he says.
Robin Hopkins, of Alexandria, Ala., acknowledges spending a little more to move up to a higher tier in rewards programs. The 42-year-old mother of two, who works part-time, participates in a number of rewards programs, including InCircle from Neiman Marcus. But, she says, “I am not a $10,000 spender. If I really wanted to get something in particular, I would just buy it,” rather than trying to earn it through a retailer’s reward program.
To get started at most retailers, you have to apply for one of the store’s credit cards, which often have interest rates of 18% or more -- an awful deal if you’re not paying off the balance in full. (Nordstrom is an exception in that it offers points for spending on Nordstrom debit and check cards, as well.) Other things to keep in mind: In some instances, the so called rewards aren’t free, but rather discounts on travel packages or other offers. For instance, Bloomingdale’s offers a three-day spa trip to its Insiders -- at a cost of $1,560 per person, which it describes as a 20% discount off the trip’s regular price.
Nordstrom restructured its program following six months of focus-group study and surveys. Its conclusion: People are less interested in discounts and more interested in perks, such as attending Nordstrom grand opening celebrations, being pampered during private shopping parties, concierge services and free alterations and shipping.
Still, Neiman, Saks and other retailers say gift cards remain the most popular reward redeemed. Barneys New York, a unit of Jones Apparel Group Inc., shuns trips, merchandise and other fancy rewards, and simply sends out gift cards based on point levels.
For retailers, the programs can be costly to operate. Milton Pedraza, chief executive of the Luxury Institute, a consulting firm, questions whether, in the long run, they make more sense for the stores than the traditional perks such as personalized service for the best customers. Even so, he says, his wife participates in the Neiman’s InCircle program, and notes that it “definitely makes her more loyal to Neiman for online purchasing in particular.”