Business & Marketing

Open Source: The Model Is About Branding

The traditional business model for companies is to create a product and/or provide a service to customers in order to receive payment and hopefully exceed operational costs to generate a profit. However, what happens when you are not creating a product or service, but instead ideas? How do you make a profit? How can you differentiate yourself from the competition when your product is perceived as a commodity? This is a common dilemma for companies that engage in Open Source design, development or distribution. As defined by the Open Source Initiative, open source is "a development method for software that harnesses the power of distributed peer review and transparency of process. The promise of open source is better quality, higher reliability, more flexibility, lower cost, and an end to predatory vendor lock-in." The benefits for open source are compelling and the idea of creating a community of the brightest minds to create something new is inspiring. This idea of sharing your creative wealth to accomplish great things is something the Creative Commons embraces.

The inherent drama of open source is that it's the collaboration of peers orchestrated in transparent manner, so competitors can easily observe all of your ideas and replicate. Most economists would argue that open source is not a sustainable business model; there are no tangible "widgets" or returns.

There are also skeptics within in the open source community that claim the open source business model is broken because value is in the collaboration, not in open source itself. However, the true return comes in an intangible form - your brand.

Case Study: Open Source Hardware

In a Wired article titled "Build It. Share It. Profit. Can Open Source Hardware Work?" Clive Thompson writes about a computer hardware company called Arduino.  All of their schematics, design files and software for the Arduino board are open source, so anyone can download them to use or modify and manufacture their own boards - and even sell if they want. Arduino's open source hardware has been used in everything from DIY MP3 players to mobile phone charges to humidity/temperature monitors for art museums. If Arduino utilizes an open source business model in which they essentially give intellectual property away, how do they make a profit? This is where I find this case study very interesting; it's all about the brand. As Thompson explains, there are two economic models for open source:

1. Do not sell your product (i.e. hardware or software), but instead sell your expertise as the inventor
2. Sell your product, but try to keep ahead of the competition

The Arduino team doesn't receive a profit when they actually develop boards; it's usually rolled back into the next production cycle. However, they do receive a "profit" when they act as consultants to companies using their open source hardware. Since the hardware is open source, the open source community collaborates to improve the hardware, so they essentially have free labor. And because Arduino is the creator of this hardware, they are at the epicenter of the community and learn about advancements before anyone, so they are the first one to the fight every time.

To analyze Arduino from a business model perspective, expertise is the service provided to customers. Further, operational costs are minimal, so a profitable return is likely. However, while their competitive advantages are notable, the differentiating factor is their brand - a value proposition providing dependability as a benefit to customers. This is due to their success and expertise as pioneers and leaders in the open source hardware community.

Case Study: Open Source Desktop Operating Systems

Open source technology is most notable in desktop and mobile operating systems, specifically Linux and Google Android respectively. Linux is a free Unix-type operating system originally created by Linus Torvalds with the assistance of the open source community. Developed under the GNU General Public License, the source code for Linux is freely available to everyone. Around the world, Linux has great brand recognition with developers, however little to none with consumers. This is likely due to the fact that Linux is used primarily in servers and computer hardware, which is not typically consumer facing. Also, historically the use of Linux in desktop and laptop computers has been quite low. Further, due to the lack of a strategic marketing plan, consumers are not aware of the Linux brand. However, due to the recent Ubuntu distribution and emergence and popularity of netbooks, the market share of Linux is growing. Currently, the market share for desktop operating systems is as follows:

• Microsoft Windows: 87.90%
• MAC: 9.73%
• Linux: 1.02%
• Apple iPhone: 0.55%
• Apple iPod Touch: 0.15%
• Java ME: 0.07%
• Other: 0.32%

Ubuntu is leveraging the Linux brand and open source technology to create its own product (operating system) and brand (Ubuntu). This is somewhat similar to the co-branding efforts of Intel with many PC brands, but without the licensing fees. While Linux is gaining brand awareness due to the Ubuntu distribution, it is not actively promoting its own brand. Linux is taking an open source approach to branding itself - allowing other brands to help define its brand identity and image. I'm curious to see how this will affect the brand in the future. I would hypothesize that it will only augment the brand's image and further the popularity of open source. Currently, Linux is not following either of the two economic models presented earlier, however I wouldn't be surprised to see Linux start selling its expertise more as its market share continues to grow.

Case Study: Open Source Mobile Operating Systems

When Google's Android mobile operating system was released, specifically in the T-Mobile G1, many thought that this would be a strong competitive force against the Apple iPhone. However, this is an example of an open source initiative that resulted in negative outcomes and poor branding. According to a ReadWriteWeb article titled "Android Vulnerability So Dangerous, Owners Warned Not to Use Phone's Web Browser," written by Sarah Perez, in February 2009 a security researcher presented a new vulnerability in Google's Android mobile OS that allowed hackers to remotely take control of the phone's web browser and related processes. Hackers could gain access to saved credentials in the browser and browser history. It was recommended that Android users "avoid using the browser until a patch is released. If this is not possible, only visit trusted sites and only over the T-Mobile network (avoid WiFi). This issue with security was the main reason I took the G1 and all smartphones with the Android OS off my consideration list. This infiltration damaged the Google Android brand. This can be a problem with any open source technology because many people have access to the source code. However, this really isn't any different than a hacker can reverse engineering any product to bypass security - it's just that open source makes it more convenient. Either way, security systems must be built in to restrict vulnerability. Then Google experienced a problem with branding. According to a TechCrunch article titled "Should Google Be Paranoid About Losing The Android Name?" written by MG Siegler, a person applied for and was granted a trademark to the Android name back in 2002. Google tried to trademark the name in 2007 after the Android campaign, however it was rejected. Google tried again but was repeatedly denied and its trademark application was suspended. So any equity that Google may have built with the Android brand may be gone because they will need to completely rebrand their open source mobile operating system. Which may work to their advantage, so that they can redefine the brand and move on from all the security problems. Hopefully, Google Android will redeem the brand with the new Samsung Android smartphone out later this year and with the enhancements to the G1.

Case Study: Open Source Web Browsers

Mozilla was the first open source initiative that I ever heard about. The Mozilla Foundation began in 1998 to "create world-class open source software" and they did just that. They supported the open source community by embracing the pillars of open source: Openness, Innovation and Participation. Then in 2002, Mozilla released their first web browser, Mozilla 1.1. However, at this time Microsoft Internet Explorer had over 90% of the market share for internet browsers. Mozilla had their work cut out for them. However, in 2003, Mozilla created Firefox a world-class tool to experience the internet and began to experience tremendous growth.

The tipping point, however, was their grassroots approach to branding. Similar to the manner in which Firefox was created, Mozilla turned the marketing and advertising efforts over to its supporters by launching a campaign called "Spread Firefox." This website became the community hall for the discussion of marketing and advertising strategies. Among many things, supporters were encouraged to place "Get Firefox" buttons on their websites and blogs to help promote Firefox. Each participant would be rewarded referrer points as an incentive to be included among the top 250 referrers, a list that would be featured on the Spread Firefox website. Mozilla's community marketing guide includes categories such as:

• Organizing and Attending Events
• Public Speaking
• Blogging, Tagging and Social Networking
• Advertising Mozilla
• Making T-Shirts and Other Items
• Guerrilla Marketing Activities
• Collecting Testimonials
• Distributing Software
• Promoting the Mozilla Mission
• Collecting Press Clippings
• Speaking to the Press
• Requesting Sponsorship for a Project
• Reporting Disreputable Behavior

The last category is very interesting, not only did Mozilla ask supports to help promote the product, but also police online activity and warn Mozilla of harmful behavior to their reputation. Even while Mozilla embraced the pillars of open source (openness, innovation and participation), they managed to control the message as well. From a branding perspective, this is something Mozilla has been relentless at. The name "Mozilla Firefox" is a registered trademark and along with the official Firefox logo, it may only be used when specific terms and conditions are followed. While the code for the Firefox browser is open source, there are usage restrictions placed on the code. If derivative works from the code are created, the browser must be rebranded - the new browser cannot leverage the brand name or logo. The strategic rationale is that Mozilla wants to guarantee a consistent user experience for anyone using the Mozilla Firefox web browser. This is something every brand hopes for. There has been some controversy over this, however this is also the reason why Mozilla Firefox has been so successful. Currently, Firefox is the #2 web browser on the market, with market share just over 20%. Below is the current market share for web browsers:

• Microsoft Internet Explorer: 66.10%
• Mozilla Firefox: 22.48%
• Apple Safari: 8.21%
• Google Chrome: 1.42%
• Opera: 0.68%
• Other: 1.11%

This isn't bad for a non-profit organization, especially when its competition is Microsoft, Apple and Google. A true branding effort that produced results. Mozilla even holds a Guinness World Record for the most software downloaded in 24 hours.  To analyze Mozilla from a non-profit business model perspective, they are fulfilling their mission statement: To make the internet better for everyone by embracing openness, innovation and opportunity.

Case Study: Open Source Politics

President Barack Obama's election campaign was seamless, engaging and effective. And he now continues this sound strategy during his presidency. At 12:01 p.m. on Tuesday, January 20th, just one minute after Barack Obama became the 44th President of the United States, www.whitehouse.gov was rebranded and the first entry to the White House blog was created: "Change has come to WhiteHouse.gov"

Macon Phillips, the Director of New Media for the White House, explained that like our new government, WhiteHouse.gov and the rest of the Administration's online programs will put citizens first. And that the initial new media efforts would center around three priorities:

1. Communication
2. Transparency
3. Participation

It's interesting to note, that these three priorities reflect the philosophical pillars of open source and Creative Commons. Further, at the time I am writing these words, it's exactly 100 days after President Obama was sworn in. So it seems to be the perfect time to evaluate these priorities.

1. Communication: Constant communication via an array of channels - the Administration has reached out to citizens online, TV, press, etc.
2. Transparency: The activity on WhiteHouse.gov alone showcases the level of transparency. However, an interesting example of transparency is the creation of Recovery.gov, which was built on the Drupal platform - an open source platform with a reputation of innovation, stability and malleability. Further, the use of open source is significant because security is an obvious concern for the government. Lastly, due to the community surrounding this open source platform, as developers improve functionality, everyone will benefit.
   
3. Participation: President Obama engaged with America and asked them to participate in their government with an initiative called "Open For Questions." Obama asked people to participate in the community-moderated online town hall by submitting questions about the economy utilizing similar voting functionality as Digg.com

Obama's brand was clearly defined before he became President, however on the day he entered the oval office not only did he rebrand WhiteHouse.gov, but he also rebranded what it meant to be President of United States of America. President Obama set the precedent for all future presidents: A transparent process that engages American citizens. And once you start the conversation, you cannot leave it. Future Presidents will be expected to work in a similar manner. Lastly, as the Administration integrates more technology (i.e. open source development) the methods and levels of engagement will advance and deepen respectively. Citizens will take an active role in government and expect that their involvement will make a difference. Similar to President Franklin D. Roosevelt and his fireside chats, Obama changed the way the President communicates with Americans. Whether you support Obama or not, the brand Obama has established thus far, is the differentiating factor between him and other presidents - Optimisim, Change, Transperancy and Community. It's also essential that you live up to your brand promises, otherwise your brand image will deteriorate. So, there is still a lot of work to be done. My only issue with the presidency campaign thus far are the multiple number of websites: WhiteHouse.gov, Recovery.gov, HealthCare.gov (previously HealthReform.gov), FinancialStability.gov, etc. Multiple destinations for the User can become confusing.

by Eric Kogelschatz

The Convergence of Cognitive Neuroscience and Marketing

When I moved to Boston over a year ago to work for Modernista! on the Cadillac account, I quickly put an ad on Craigslist to join a band. Throughout high school and college, I had been in a band, but took some time off to focus on my masters program at Michigan State University. To say the least, I was anxious to get back into music. Soon after joining my new band, I found out that all of my band members were neuroscientists at well-renowned universities - Boston College, Harvard and MIT. Frequently while waiting for shows to begin, we would sit together and debate our set list for the evening. The discussion would usually focus on music, but every so often neuroscience would become the topic of discussion. It was interesting to hear their thoughts and ideas on neuroscience, however I couldn't help but think how neuroscience could be applied to advertising.

Brand Image and Loyalty

A few years ago, I read an article in the New York Times that explained the convergence of cognitive neuroscience and marketing. Since then I have been very interested in how advertising and marketing affects culture and more specifically the brain. The NYTimes article that inspired my interest in neuromarketing was "There's a Sucker Born in Every Medial Prefrontal Cortex" by Clive Thompson. It announced the rise of neuroscientists and researchers applying their expertise to marketing. Instead of using the normal marketing research technique of surveys or focus groups to gain insight, they used MRI (magnetic resonance imaging) to analyze brain activity when exposed to different stimuli. The article predicted that marketers would soon have departments dedicated to neurology in order to reveal deeper insight into consumer behavior. Further, brain activity in specific areas of the brain could explain brand engagement. Historically, it was thought that the ventral putamen (the region of the brain that processes feelings of reward) could explain brand preference. However, more precisely, it is the medial prefrontal cortex that explains brand engagement. The medial prefrontal cortex would activate when individuals felt a connection with the brand or if it reflected their self-image. The study featured was the famous Pepsi/Coke Challenge.

Growing up in the '80s, I remember seeing many commercials about the famous Pepsi/Coke Challenge - an illustrative example of product comparison rooted in research. But what was interesting about this experiment was not necessarily the results, but the process. The initial results of the challenge were clear, Pepsi was the winner. Unaided brand preference was stronger for Pepsi than Coke. In fact, brain activity in the ventral putamen for Pepsi drinkers was "five times as active when drinking Pepsi than that of Coke fans when drinking Coke." However, consumers are exposed to an array of brand communications and true rational preference is often affected by one's emotions. To take this into consideration, the experiment was repeated. This time, the participants were informed which samples were Coke. The results were astonishing, almost all of the participants said that they preferred Coke.

"The brain activity of the subjects was now different. There was also activity in the medial prefrontal cortex, an area of the brain that scientists say governs high-level cognitive powers. Apparently, the subjects were meditating in a more sophisticated way on the taste of Coke, allowing memories and other impressions of the drink - in a word, its brand - to shape their preference."

Obviously, for advertising professionals this is very exciting - it provides evidence on the true impact of branding. Further, it's exciting to imagine the future of brand planning in this regard.

Brand Recognition

We are exposed to over 2 million advertising messages during our lifetime. This translates to 8 hours a day, 7 days a week, for 6 years. Consumers leverage selective perception to acknowledge the messages they find meaningful and important. When launching a new product, how do you ensure that your brand is recognized? According to neuroscientists, marketers need to capture consumers' attention at a subconscious level in order for their message to resonate with the consumer. This requires emotional branding that can affect the consumers rational preferences.

A brand that has truly captivated their target audience is Tiffany. That famous little blue box. Just the sight of the white ribbon wrapped around that blue box provokes so many emotions. The Tiffany logo is on the box, but not visible when the ribbon is on the box. The idea that the little blue box provokes so many emotions is best explained in an AdAge article titled "You May Love the Logo, but It's a Dying Breed" by Martin Lindstrom and a segment from the NPR program Talk of the Nation titled "The 'Buyology' Behind The Way We Shop" featuring Lindstrom as well.

In both the article and NPR segment, Lindstrom references Marlboro. Whether you are a smoker or not, you probably recognize the famous Marlboro man. This character created by the advertising agency, Leo Burnett in the '50s has become an iconic image. The same has become true for the brand's sponsorship of a red Ferrari in Europe's Formula One racing. Lindstrom was curious if "cigarette cravings could be triggered by images, such as the red Ferrari, that are tied to a brand of cigarette, but not explicitly linked to smoking?" Lindstrom found the answer to this question by using MRI and fMRI (functional magnetic resonance imaging). The brain scans revealed increased brain activity when exposed to cigarette packs as well as the Western imagery in a small region of the brain called the nucleus accumbens, which controls pleasures and addictions. However, the unbranded images (e.g. cowboy) activated more cravings among smokers than the branded images (e.g. cigarette packs). The same is true for the Coca-Cola bottle. Just the shape of the bottle may activate the nucleus accumbens in some individuals.

Essentially, through branding, these images have come to embody the essence of the brand. The little blue box, Coke bottle and cowboy, activate areas of the brain at a subconscious level, resulting in strong emotions and ultimately a desired behavioral reaction. Critics may call this subliminal advertising, however when a brand logo or symbol become recognizable at an iconic level, it may reach the consumer at an subconscious level, however the intention is not destructive, but a natural development of human psychology.

Brand Engagement

Apple's PC vs. Mac campaign has been very successful, not only at creating a strong point of differentiation between themselves and the competition, but also establishing a strong brand image by engaging the consumer. According to an AdAge article titled "Is the Ad a Success? The Brain Waves Tell All" by Stuart Elliott, after the winners of Cannes and the Effie Awards were announced in 2007, a neuromarketing firm measured the brain activity of participants when viewing the winning commercials. They measured biometrics of the brain waves, galvanic skin response, eye movements and pulse rates. The results found brand engagement as the differentiating factor.

"Fifteen of the 19 Cannes and Effie winners engaged consumers faster than average spots. Typically, a spot engages with viewers in 5 to 7 seconds. The Cannes and Effie ads engaged, whether emotionally or cognitively, in 1.5 seconds.”

This is very interesting considering that both awards recognize excellence in advertising on different attributes: Cannes recognizes creativity, while Effie recognizes effectiveness. Essentially, this tests emotional and cognitive advertising in the same manner and the result is that both methods are effective. But more importantly, it is brand engagement that defines success. For example, the Apple PC vs. Mac "Get a Mac" campaign won the Grand Effie at the 39th annual Effie Awards in 2007 and the Volkswagen "Safe Happens" campaign won the Gold Lion at Cannes in 2007. It's the cognitive reaction to the emotional moment that grabs the consumer.

The success of Apple's iPod branding is pervasive. It's impossible to walk downtown in any city and not see those white earbuds. However, from a holistic perspective, it's interesting to see how the Apple brand stimulates brain activity. In a segment from the NPR program "Weekend Edition," titled "Study: Apple Logo Stimulates the Brain," Duke researcher Gavan Fitzsimons, investigates what responses participants have to the Apple logo. In Fitzsimons' study,  participants were exposed to an Apple or IBM logo prior to completing a creativity test. The results showed that those exposed to the Apple logo scored 20-30% higher than those exposed to the IBM logo. Thus correlating creativity with Apple and competence, organization and professionalism with IBM. Therefore, consumers should surround themselves with brands that reflect their perceived or ideal self-image to help bring these attributes to fruition or even augment existing attributes. For brands, this means niche marketing and reaching those consumers that you want to embody your brand and opinion leaders that will help disseminate the brand image you desire.

Reach and Frequency

The question that has plagued media planners for years: What is the most effective method to communicate with consumers? This is of course dependent on the client and current market environment, however it often results in an integrated media plan and a balance of reach and frequency. However, what if you were able to determine the exact moment when it was best to communicate with your consumer? Or to communicate with your consumer at the exact frequency required to be the first brand in their consideration set? This question can be answered by applying a unique algorithm to each consumer. This is investigated in a Wired article titled "Want to Remember Everything You'll Ever Learn? Surrender to This Algorithm" by Gary Wolf. A man by the name of Piotr Wozniak, created a program called SuperMemo, which is designed around the notion that "there is an ideal moment to practice what you've learned" in order to have it ingrained in your memory.

"Practice too soon and you waste your time. Practice too late and you've forgotten the material and have to relearn it. The right time to practice is just at the moment you're about to forget. Unfortunately, this moment is different for every person and each bit of information. Imagine a pile of thousands of flash cards. Somewhere in this pile are the ones you should be practicing right now. Which are they?"

What if we were able to apply this concept to advertising? What if we communicated to each consumer exactly at the moment we needed to? After reading this article, I wanted to purchase SuperMemo immediately. I wanted a version integrated into my iGoogle so that it could be tailored to my lifestyle and the subjects I want to learn more about. This is when I realized the power of applications and widgets. If you created a widget for your brand with relevant information the consumer would want and applied this method, you could reach them at the exact moment when influence was needed. Of course this is almost impossible because this is the ultimate opt-in communication for consumers, but what if? The key is relevancy. Providing information the consumer truly desires and that in a convenient manner.

Advertising: Art or Science?

Will the convergence of neuroscience and marketing force our industry to become a science? And more importantly, should it? Is advertising an art or a science? My personal belief is that advertising is a balance of art and science. However, I tend to lean more toward the idea of emotional branding and engagement branding. This is best explained in Marc Gobé's book, Emotional Branding:

“The future of branding is listening carefully to people in order to be able to connect powerfully with them by bringing pleasurable, life-enhancing solutions to their world. In the future, traditional companies will not be able to rely on their brand history or dominance in classical distributions stems, they will have to focus on providing brands with a powerful emotional content."

Creating a unique connection with your consumer and fostering that relationship with relevant information and solutions should be the basis for your marketing communications. Then, with the help of art and science, you can augment the brand experience via consumer insight, strategic planning, creativity and continually optimizing the work.

by Eric Kogelschatz