Thursday, October 23, 2008

Signaling strategies


134633529_7e39771e44 It's impossible to see everyone. You can't handle the input of what every consumer is buying or thinking or looking at. So, we resort to signaling strategies.

A few celebrities wearing Uggs in the middle of the summer sends a signal to fashion wannabees everywhere: these are hot. It doesn't matter too much if they actually are hot, all that matters (to these wannabees and the retailers that serve them) is that in the past, when beautiful people in Santa Monica did something, it was an effective signal to the market.

There are all sorts of signaling strategies consumers look for. Political endorsements, end cap displays at stores, large scale ad campaigns, The New York Times bestseller list--each is seen as a bellwether for what our friends and those we admire are about to do.

Marketers may be selfish, but we're not stupid. Once a signaling strategy is seen to be effective, we seek to game it. 25 years ago, driving cross country to go to my first day of work at Spinnaker Software (I was the 30th employee) I drove through Chicago. And I passed a Spinnaker billboard. Wow! This company was going somewhere if they had billboards all over the country. When I got to work in Boston two days later, I discovered that this was the one and only billboard they had in the country, strategically erected on the road to the big CES trade show. They were signaling the buyers of the big stores.

Various bestseller lists, because of their unwillingness to be transparent, is easily and often gamed by publishers and musicians and websites that focus their efforts on the sort of places that report to the list.

There are three reasons you need to care about the increasing amount of effort spent gaming the signals:
1. As a consumer, don't be fooled. The more important a signal is, the more likely it is that marketers are gaming it.
2. As a signaler, be careful. As you sell out and permit yourself to be gamed, you make it more and more likely that consumers won't be influenced by you.
3. As a marketer, beware. The effort you expend gaming one signal or another is almost never worth the distortion that gaming produces. Instead of spending your time delighting authentic voices, you're corrupting a signal. Which means that you end up being really good at signal corrupting but not so good at winning in your market. For every Uggs, there are 100 companies that spent too much money and time influencing a few, only to discover the market didn't care.