There are a lot of things that annoy me about Web 2.0 - the lack of sound business models, the buzz-driven approach to investment, the return of pastel colors, but I don’t think anything bothers me more than the cutesy culture that pervades this entire quadrant of the IT sector.

Yahoo and Google started the trend of using cutesy names for multi-billion dollar corporations, a trend which has become so commonplace that it would almost seem out of place for a Web 2.0 company to name itself using words found in Merriam-Webster’s English Dictionary. Google also introduced funny Easter Eggs, like the results when you search for “How Goes Google Work?“

As a result of Google’s success, many shiny new Web 2.0 company has sought to recreate itself in Google’s image, sassiness and cuteness included. While I think cuteness is fine for all of the general service-to-consumer interactions between Web 2.0 services and their users, I think this cuteness comes back to bite those services in the ass when it comes to getting businesses to adopt Web 2.0 services as part of their outbound marketing platform.

Let me share you a quick anecdote:

Over at Working Smarter, the blog I manage for work, we use a number of screencasts that we host with Vimeo, a YouTube competitor. We went with Vimeo because its Adobe Flash player had less compatibility issues than our in-house one and YouTube’s. Well, today we experienced a brief service outage and we were presented with the following error message:

SUCKER

Vimeo drank your milkshake!

This is what greeted all of our customers and potential customers when they came to visit the homepage of our corporate blog; isn’t that wonderful? Even if the majority of our customers have seen There Will Be Blood I don’t think most of them are going to understand right off the bat that this is an error message. It’s bad enough that our customers can’t see our screencasts, but having to show them this silly error message makes me regret giving this Web 2.0 company a chance to begin with. Why? It makes us look just as cartoonish and cutesy as Vimeo, an image which rests in stark contrast to the one that we’ve been trying to build.

So after being the butt of a few jokes by our CIO for my decision to use a third-party service to resolve some of our compatibility issues, I’ve decided that the cost of having this stupid error message rear its head to our customers isn’t worth the benefits of using Vimeo. We’re planning on scaling up our video usage considerably and we drive thousands upon thousands of eyes to our videos each week, which was essentially free exposure for Vimeo. Sucks for those guys.

A bit of downtime I could tolerate - that’s expected from any service, even YouTube, but the fact that we have to broadcast a bunch of cutesy garbage that clashes with our image to our customers whenever something breaks is unacceptable. The bigger lesson I am trying to draw here is that the cutesy stuff might be something that end-consumers appreciate, but a lot of businesses who try to integrate social media platforms into their outreach marketing efforts don’t.

Business Idea: Develop a YouTube, Vimeo counterpart that specializes in hosting corporate videos specifically, like training videos and so forth. Screencast.com is probably the best example of a “closed garden” in this regard.

The first, and arguably most outrageous, cardinal sin of marketing is to sacrifice long-term objectives in order to achieve higher than usual short-term profits.

A good example of this sin would be the recent mortgage meltdown in the financial sector; to quote the Harvard Business Review for a moment:

Arkadi Kuhlmann, ING Direct’s founder and CEO, is one of the most creative business leaders I’ve ever met. But he was able to distinguish between get-rich-quick industry fads and real innovation. “Every person who tries to do real innovation is going to be tempted by money, greed, acceptance, being in the middle of the action,” Kuhlmann says. “But at the core there is one fundamental difference: I know why I’m here. I want to make a difference. If I was into this just for making money, being a big accepted banker, I would have been tempted. But that’s not why I’m here. I am trying to build something that changes the business, that allows me to stay on the right side of the discussion.”

In HBR’s “Why the Mortgage Meltdown Hasn’t Burned These ‘Square’ Lenders” Mr. Taylor enumerates a list of lenders and major financial institutions who were not tempted with the promise of a quick buck, Mr. Kuhlmann of ING Direct being one example.

These “square” lenders are not getting burned by the current mortgage meltdown because they didn’t deviate from their core mission and stuck with their long-term objectives. Sure, these institutions may not have enjoyed the record profits of 2005-2007 like Bear Stearns and Lehman Brothers did, but foregoing those three years of great profits followed by the most infamous spree of financial bankruptcy since the savings and loans crisis seems like a good idea in hindsight, doesn’t it?

The Two Consequences of the First Cardinal Sin

There are two things that can happen to a business when it commits this first cardinal sin of marketing:

1. A company that commits this sin can permanently damage the trust between itself and its customers by deviating from its promises. This makes it increasingly more difficult to acquire new customers and retain old ones.
2. A company that commits this sin can find itself jumping with both feet into a market environment that it doesn’t completely understand. This can ultimately lead a company into a situation where costs begin to overrun expectations and in some instances, revenue.

The second of these two consequences has afflicted the financial sector first. Major financial institutions, like Lehman Brothers, jumped feet first into the sub-prime mortgage market and made a risky gamble based on a flimsy assumption: that the average retail value of homes in the United States would remain above $250,000. The assumption held up for three years and Lehman Brothers had great financial postings during that span of time, but as soon as the housing bubble burst and the average price of housing fell below the assumed level these institutions became insolvent.

As a result of this failure, these same financial institutions subsequently incurred the other consequence of this cardinal sin: the customers no longer trust the firm. Do you think that high-net worth individuals who had millions stashed away in financial instruments owned by the Lehman Brothers are going to reinvest back into that organization even if Lehman restructures following its bankruptcy filing? Hell no.

So let this be a lesson to all marketers out there, regardless of industry: never sacrifice your long-term objectives in favor of short-term profits. It’s not worth it.

Preface: This is a post about marketing, not about politics. Should you be inclined to submit comments, please bear this in mind. Political comments aren’t going to get published.

What do Dell, Microsoft, and Governor Palin all have in common? They let their competition succeed at defining them. This is a major marketing problem; short of major PR disasters, like the Jack in the Box E. coli outbreak in the early 1990s, I can’t think of many kinds of marketing/PR problems that are worse than this kind.

First, I think the McCain campaign could have avoided all of this by putting Governor Palin on the entire press circuit and all the talk shows immediately following the Vice Presidential announcement on Friday. Governor Palin was, and to a large extent still is, an unknown quantity to a lot of Americans; this means both significant opportunities and risks for the McCain campaign. Had the McCain campaign gotten Palin to define herself first on all of the talk shows and the traditional press circuit then they could have probably nipped a large amount of the media speculation firmly in the bud. But that’s not what happened.

Instead, the campaign did little to get Palin’s story out through the mainstream media the way they wanted to tell it. So McCain’s opposition stepped up to the plate instead. They labeled Governor Palin as a country yokel; a delicate, fragile woman incapable of standing up to tough questions and scrutiny; a careless mother; and someone who was devoid of any sort of achievement or record. These are the labels that hung in the air prior to Governor Palin’s speech on Wednesday night. It doesn’t matter of they were fair or unfair. So what did she do?

Simply, she capitalized on those low expectations set by the opposition and used the spotlight of the Republican National Convention to surpass them by an order of magnitude that was not to be believed had you taken everything written about her as the gospel truth. That’s all she had to do: demonstrate in a public and prominent fashion that the expectations set by competitors were well below reality.  To quote the National Review Online for a moment:

I would like to thank the US media for doing such a grand job this last week of lowering expectations by portraying Governor Palin - whoops, I mean Hick-Burg Mayor Palin - as a hillbilly know-nothing permapregnant ditz, half of whose 27 kids are the spawn of a stump-toothed uncle who hasn’t worked since he was an extra in Deliverance.

How’s that narrative holding up, geniuses? Almost as good as your “devoted husband John Edwards” routine?

Palin’s nomination acceptance speech last night was a fantastic start for the McCain campaign’s public relations battle in defense of their Vice Presidential selection, but it’s only a start. I expect we’ll see a lot more of Palin on the campaign trail and on the press circuit.

The Parallel to Microsoft and Dell

I see a lot of parallels with this story and the story of Microsoft, Dell, and Apple. A quick passage from Fast Company should serve as a good introduction:

“Nobody messes with anyone in the tech industry the way Apple has messed with Microsoft,” says Enderle. “It’s the first time I’ve ever seen a major national campaign that disparages a competitor, and the competitor just sits back and takes it. If somebody tried to do that to Oracle, you wouldn’t be able to find the body.”

Dell is just as affected by Apple’s marketing as Microsoft is; Microsoft provides the “lame, crappy” operating system and Dell provides the “lame, unreliable, broken hardware.” Apple has, with the help of Microsoft’s own missteps during the initial release of Windows Vista, lowered the consumer expectations for Microsoft products below the level of reality.

Don’t believe me? Watch even one video from Microsoft’s Mojave Experiment - the entire point of that campaign is that the perceptions of Vista fall well below reality and the campaign does a very effective job in challenging and even changing those perceptions.

As the poster in “Eight Years of Wrongness” points out, all of these companies have simply taken attack after attack after attack without offering a substantive rebuttal. The Mojave Experiment is a great start, but that’s all it is: a start. Dell, Microsoft, and other PC vendors should follow Lenovo’s lead and start developing much more direct counter-advertising, like this ad:

So what do I recommend that Dell and Microsoft do? Simply this - take every opportunity to seize the spotlight and directly rebut the expectations set by Apple. Apple’s products are far from perfect and Dell/Microsoft’s aren’t the complete and utter disaster that they’re portrayed to be. Don’t try to set any new expectations or new messages - challenge and correct the dominant ones set by the competition first.

Unless you’ve spent the past week living in a cave you’ve no doubt heard about the 3G iPhone announcement from Apple’s Worldwide Developer Conference (WWDC) last week. I’m not going to get into all of the new features introduced to the next version of the iPhone because they’re insignificant compared to the new iPhone pricing structure.

Apple’s Time-Tested Market Skimming Strategy

Market skimming is a pretty basic pricing strategy:

• Release a new, exciting product at a high premium and skim the greatest possible margin from the customers with the greatest demand;
• Once the sales volume begins to decrease at the original price, incrementally lower the price to increase sales again;
• Repeat this exercise until a stable price with an acceptable margin is determined.

Apple has done this for all of their products historically; most notably was the original $599 iPhone. Remember all of the whining that occurred when Steve Jobs lowered the price to $299? Job’s mistake with the original price drop was doing it too soon - after all, his customers were willing to pay $599 just to be one of the cool kids with a shiny new iPhone a few months prior to the price drop.

I think Bill Maher’s explanation of iPhone market skimming is probably one of the better ones:

However, the announcement of the new 3G iPhone brings with it an entirely different strategy than the original iPhone announcement.

Apple’s New Groove: Market Penetration

Market penetration is yet another basic pricing strategy:

• Set an initial lower price on a new product release in order to achieve large market share acquisition;
• This strategy is only effective in markets that are price-elastic (price-sensitive;)
• This strategy is used best when the producer is a new market entrant or has relatively small market share.

Currently Apple does not have much in the way of Smart Phone market share compared to product lines offered by RIM (BlackBerry) and Palm (Treo.) The results of recent ChangeWave surveys indicate this:

The new 3G iPhone, which includes important business features such as access to Microsoft Exchange, is going to roll out on July 11, 2008 with a price tag of $199. This means that the iPhone’s price will be roughly equal to that of any new Treo or BlackBerry unit; in some instances the iPhone is actually cheaper than the alternatives.

The new, low price and the addition of key enterprise features means two major things for Apple:

• The 3G iPhone’s first target is the business user; there are a lot of technical and infrastructural issues that might prevent businesses from adopting the iPhone en-masse immediately, but the iPhone’s features and price all fall within the same range as competing products offered by Palm and RIM. Apple is gunning for the business user.
• The 3G iPhone’s price will drop from $199 to $99 at some point in the future, this much I can guarantee. When the iPhone’s price does drop the phone will be adopted en-masse by the general consumer market. Every ratty 12 year old with a $5/week allowance will be running around with an iPhone.

This time Apple is setting its price low and its volume high, gunning for the common man instead of the zombie fan.