GODS OF THE MARKET

Dick Pountain/Tue 10 August 2004/1:57 pm/Idealog 121


I was a little disappointed when Sony announced that it was pulling out of the worldwide PDA market just after I'd bought my second Clie, but I can't say I was all that surprised. The symptoms of Terminal Marketing Madness (TMM) had been there for all to see for months in the shape of dozens of whacky new models with funny hinges and seemingly random price tags.Those whom the Market Gods wish to destroy, they make release dozens of models that no-one asked for and that merely cause confusion and anxiety in the consumer.

I first observed this phenomenon in Apple Corp. back in the mid 1990s, when having enthralled the computing  world with its vision of the Macintosh, the firm suddenly started pumping out a new model every six months with no distinguishing features that I could understand. This immediately preceded that sharp decline in Apple's fortunes that was only reversed when Steve Jobs returned and launched the fruit-gum-colored iMacs. On the other hand a more recent Apple product, the iPod, demonstrates the reverse phenomenon, namely a vigorous new product that everyone understands - and more importantly, wants - at first sight. Ominously though, Apple has already begun the process of blurring and obfuscation, spinning off redundant new iPod models so that by the time its serious Far Eastern competitors have their offerings ready for this coming Christmas, the powerful iPod brand will be a vulnerable mess.

I know that it's a cliche for a technically-minded journalist to slag off marketing types as air-headed parasites on the creativity of the design and engineering people. I know that no product can hope to even be launched into today's market, let alone to succeed in it, without the skills of a marketing department. But one synonym for 'cliche' is 'truism', a true statement that has become boring (but no less true) through constant repetition. Marketing people would claim that their discipline is nowadays almost as scientific as the product engineering itself, and that's probably true. However the problem is not any lack of skill on the part of marketeers, but a misapplication of their efforts.

The decision about what products a company should make ought to be taken at the highest level of that company, by person or persons who have a feel for the product and a gift for divining what the public wants (albeit assisted nowadays by the best and most scientific evidence available from surveys, focus groups etc.) But that's not what happens nowadays in the biggest marketing-led corporations: brand marketing has taken on an alarming degree of autonomy, where the brand becomes more important than the material products in which it is incarnated. Models have to be scrapped almost before anyone has had time to buy them, because the brand must be seen to advance. The brand starts to be revered as a kind of living organism with its own evolutionary history and logic - we need to launch this model because it will take the brand in that direction, we need to add this feature so that people will perceive that...  This sort of approach might even work when the product itself is something abstract and intangible like pensions or insurance, but it's ultimately counter-productive when applied to tools and utensils (which is what computers, and cars, still are beneath all the voodoo).

Modern buyers simply have too much information available to them from the consumer press to fall for such beads-for-the-natives approaches. When a product that clearly performs better than the rest emerges they will buy it in droves, but once that product enters its decadence, smothered in bells and whistles, they'll drop it for something cleaner and more useful. There is of course one important exception to this last observation and that's Microsoft Windows, where fortunately for Bill Gates, there is such huge inertia - the expense of creating new operating systems, the investment in old software - that his product could skip the clean phase entirely and thrive on its decadence. And I'm afraid Linux just isn't quite clean enough to wean people away from Windows: it is faster, it is more stable, it is cheaper, but it isn't significantly easier to use, which it would have to be to break free of the inertia trap.

I don't claim that Terminal Marketing Madness is the inevitable destination for every market sector. On the contrary, a glance at other markets shows many of them settled down into a relatively sane and mature state, with clearly demarcated product levels and appropriate prices: say hi-fi equipment, cameras, video equipment and similar consumer electronics. Even the car industry mostly deploys sensibly graduated model rages, with pricing at each level that makes sense to the potential buyer. What's so scary about the full-blown, acute form of TMM is how expensive and unprofitable it must be for the producer: to tool up for a completely new model (with different body mouldings or whatever) only to dump the whole thing six months later must be crippling to the bottom line, even with all the flexibility of modern computerized design/production tools. The areas most prone to TMM - like the PDA and laptop markets - would appear to be those where the products are in some sense discretionary or luxury purchases, catering to gadget freaks with large disposable incomes. Quite possibly there is an underlying strategy, but it's high-risk gambling rather than investment: throw millions of bucks at a dozen bizarre but innovative designs, and hope that just one will be the big winner.

[ ORIGINAL Readers of previous rants in this column may have formed an impression that I'm some kind of partially-reconstructed Marxist who loathes the whole notion of markets and favours Use Value over Exchange Value (as the jargon used to have it). Nothing could actually be further from the truth - I take great pleasure in seeing a great product that improves people's lives succeed in a fair market, and I need no convincing that markets are the most efficient way of distributing the material products of any society, given the wretched failure of most alternatives that have been tried. Where I part company from free market enthusiasts is in that I don't believe that markets offer the best solution in every sphere of life (for example in assistance, affection or information); I don't believe that markets are always rational and perfectly efficient (in fact I know that they're not); and I believe that it's no sin to intervene in a market if a majority of people dislikes the outcomes it produces. It's encouraging to know that I'm far from alone in such opinions: there's a strong and growing body of academic opinion that, while wholly in favour of markets, studies the kinds of distortion and irrationality that can infect them, with a view to devising ways to alleviate them. In next month's column I'll take a closer look at one of these studies, the so-called Winner-Takes-All market. ]