Analysts have a huge challenge in explaining technology markets, and in particular why it is that the customer isn’t always right, because high tech markets don’t work in common sense ways. That’s the conclusion I had today, after a super-sharp presenter from BBC television news interviewed me about the marketing and forecasting flop of Nintendo’s Wii U.
I’ve always had a huge interest in the strategy of consumer technology businesses, and how big businesses often get the customer experience wrong. As an analyst working on marketing-driven topics from e-CRM to mobile messaging and ecommerce at Ovum, I spoke to the media about the way that customers suffered from technologies used by firms, from Microsoft to the Royal Mail. The market for games hardware as well as in-game items such as d2 items has especially interested me and, partly because I’m commented on it to BBC TV several times over the last dozen years, I’ve benefitted from great insight into the market from key people all along the value chain. I’m a hobby analyst, and it’s been easy to sure that I don’t comment on clients since my work is typically with enterprise solution providers rather than consumer brands.
One of the major challenges that analysts face is that the big story isn’t the only story. Nintendo’s had three hard years; now sales of the Wii U system are less than one-third of what the company expected. After a year when other big consumer brands like Nokia and RIM’s handset businesses faced declines, it’s easy to assume that Nintendo’s going to crumble. But there are a whole mess of reasons why that’s not going to happen and some, like Nintendo’s cash mountain, are easy to explain but others, like its time orientation, are hard to get into soundbites.
Another is that the customer isn’t always right. When we say that the customer is always right, we mean that the way the customer wants it is how things should be. That is, I am sure you’ll agree, a great rule of thumb. In Nintendo’s case that means that many smart folk often don’t understand why Nintendo keeps its games to itself and won’t let them onto the Apple or Android platforms, let alone onto the Playstation or Xbox. Many customers love those games, and some want to play them on devices they already have. But that doesn’t work for Nintendo, and even cut-down teasers on smartphones are a wrench for it. And that’s primarily because of smart strategy, even if it looks like they are just leaving money on the table.
That’s a great example of how markets don’t work like common sense. Nintendo is bleeding money. You don’t have to use your Dr Evil voice to make a quarterly loss of eight billion yen sound like a lot of cash. But it’s just working slowly and strategically (and, of course, somewhat complacently and clumsily) towards its strategic goal and it’s not being led astray by the market too much.
None of those things make sense to most people who first look at any market, and the analyst’s tough job isn’t just to understand them but to be able to make businesspeople understand them and see what it means strategically. For some analysts, a customer inquiry call is like a media interview in slow motion. They need to see how the questions illuminate the common sense that the other person is resting their thinking on. Influencer relations professionals need to learn from that, and in particular understand that while many corporate marketing messages rest on rather generic common sense, analysts and other top market influencers are much more open to hearing about niches, contradictions, curiosities and other exceptions to those rules of thumb.