Friday, January 04, 2002

Hi everyone, Clay Shirky here. I just got here, though I don't think I'm going to be much of a team member or a gonzophyte. I heard CL give a talk on GM in December (hi Chris), and was left with the sense that it was a one-sided (buy-sided, in particular) analysis. In particular, I think the GM philosophy ignores message costs.

I can buy ad space for "Women 18-35" on TV shows my media buyers tell me chicks dig, the transaction cost of that is low and the CRM costs are low -- one group, one way message, one buy, done.

If, on the other hand, I have to have genuine conversations with my customers, the number of groups goes up, message tailoring costs go way up, and my CRM costs shoot through the roof. Gonzo Marketing, in this view, automatically reduces per-transaction margins, as well as making those margins variable because of my customers' new (and expensive) desire to communicate with me. So if unit margins go down and lifetime value of a customer also goes down because of increased CRM costs, I can only make it up in volume.

This proposition may work for occaisional high-margin purchases (think Gulfstream), but it stinks for the mass market (think Coke).

Group communication costs rise with group size because the only thing that can have a genuine conversation with my customers is a real live human being, which is looking like a $15/hr expense all in, and even if the number of people I am forced to hire is kept to a log scale relative to audience size ( an iffy proposition), GM looks to me like a way of making my customers happy and loyal, while shredding my quarterly numbers. If I run a business, what am I supposed to like about this?


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