Archive for May, 2010

Pepsi-Cola Brands Add Meaningful Mojo

Thursday, May 27th, 2010

In this blog and my book I’ve written often about my goal to drive a fundamental shift in the way that the marketing function is performed—rather than just some small experiments as part of a traditional, interruptive campaign, true change will only occur when major companies change their organizational alignment toward Marketing with Meaning. Well, dear readers, when I look at the pattern of work that is coming from the Pepsi-Cola brands I begin to gain confidence that the shift is indeed happening.

There certainly have been other companies that are farther down the road of turning Marketing with Meaning into their way of doing business. In my book I talk about Pepsi’s Frito-Lay subsidiary, which has shifted remarkably along these lines with brands such as SunChips and Doritos. There’s also some major change going on at Kraft Foods and Procter & Gamble. Until recently Pepsi has been known more for continuing the pattern of big, traditional advertising campaigns. Its “Got G” campaign for Gatorade last year did not reverse a sales decline, and a rebranding effort on Tropicana bombed.

But if you were writing a history of Meaningful Marketing today you would have to call out Sunday, February 7, 2010. It was Super Bowl Sunday, if you remember, and it will be noted in the Museum of Advertising as the day that Pepsi decided not to advertise for the first time in 23 years. Instead, the brand quietly launched The Pepsi Refresh Project weeks earlier, an effort to provide funding to individuals and groups with important causes. Some say that Pepsi won by not wasting dollars on the big game, but I believe we all won because the company showed us how even a huge brand built on traditional, interruptive advertising could shift to Marketing with Meaning with a big idea.

But Pepsi Refresh has been the first of other major steps down this path of a new way of marketing. Another great example is the latest innovations on Gatorade. After years of simply reminding us that Gatorade exists with the assistance of a phalanx of highly paid celebrity endorsers, the brand has gone back to its roots in innovation. It recently launched a line called G Series with different SKUs for Before, During, and After a workout. Here the brand is giving its buyers something that is specifically formulated for each step, and instead of pricey pitchmen, the marketing is direct, informative, and—because the product is unique—interesting. This is the innovative brand that I’ve missed for years, and I look forward to trying this new regimen in my next long run. It is a reminder that Marketing with Meaning starts with a meaningfully different and beneficial product.

Another great example of the shift at Pepsi-Cola is the next chapter in DEWmocracy. I first wrote about this user-driven campaign around new Mountain Dew flavors in my book. It was originally launched in 2007, and I included this case study in my chapter about how you can turn a one-time meaningful idea into an ongoing source of engagement and sales. Even way back then, Frank Cooper, Vice President of Marketing for Mountain Dew, alluded to chance for this to be much more than a one-time win. Back then he said:

“If we get a significant reaction, we think there’s an opportunity to expand this game into a broader online property. We’re seeking feedback from the consumer about what parts of the game they enjoy; is the story resonating? And if it is, we do have plans to expand it.”

Over two years later, the latest “game” of DEWmocracy has launched its third iteration with a very impressive and engaging execution. It’s not the immersive game that was more appropriate for the Web in 2008; instead, the brand has evolved to use even more consumer creativity and direct involvement. Trucks sampled several new flavors with more than 200,000 people across the U.S. And 50 “Dew Labs” fanatics were chosen to narrow down to the final three flavor/color/name candidates. The brand then offered designers and art schools the chance to create the next can. And now Mountain Dew is tapping small agencies, digital content creators, and other small producers to create TV ads for each flavor. Even media companies such as CollegeHumor are campaigning for their ideas to win.

It’s no wonder that Frank Cooper was recently promoted to the role of Chief Consumer Engagement Officer and last week was listed as #6 on the Advertising Age Entertainment A-List.  Advertising Age praised the fact that Mountain Dew retained 80% of the citrus soda market from 2006 to 2008, despite seeing traditional media spending cut in half.

Three big beverage brands, all moving toward Marketing with Meaning, and all doing it in ways that are differentiated based on their brand equity and target consumer. I call it a trend. And I’m excited to announce that we will include executives from Pepsi in our “Burning Question” seminar at the Cannes Advertising Festival this June. We’ll get the chance to learn more about how this company is shifting its marketing approach toward purpose and meaning, and gain insights on how even a giant, traditional advertiser can learn new tricks.

We have a lot more news coming about our Cannes event in the weeks ahead!

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Posted in Organizational Behavior | 1 Comment »

How Companies Follow Process to Failure

Tuesday, May 25th, 2010

When people ask me what it takes to be good marketer I always reply that a key to my success has been the ability to pay attention to how people behave and form models to explain the behavior of individuals and society. Interestingly, this is probably what it takes to be a good comedian, too. Constantly paying attention and analyzing the world is a lot of work, unfortunately, and one of the “models” of behavior I’ve noticed is that companies often resort to rules and processes to guide people’s behavior so that they have to think less. The objective of process is to improve service quality and consistency. Unfortunately by dumbing down behavior, a “good” process can prevent firms from creating a great service. Let me share one example from my experience at the Delta Sky Club last week.

I am a very frequent flyer and for years now have been paying a few hundred dollars to be a part of the Delta Sky Club, which formerly was called the Crown Room. The Sky Club is a great value for someone such as me who spends too much time in airports. It provides a place to relax, free Wi-Fi, plentiful drinks, and helpful staff. But I’ve noticed something odd in my weekly check-ins at these air travel oases. Until a few months ago, the staff at the welcome desk would scan my boarding pass and welcome me in. But recently they have also been asking for my driver’s license or passport when I hand over my boarding pass. But why?

Here’s the thing: Except for maybe one or two airports in the U.S., the Sky Club is located in the main concourse after you go through the increasingly rigorous security check. That means that a trained expert in the front lines of terrorism protection has already double-checked that your ID matches your boarding pass. So why would Delta need to do this again? In fact, the boarding pass is printed with the words “SKY CLUB” and Delta takes the additional step of scanning the boarding pass, which brings up your personal account.

When I went through this extra step last week I asked the Delta representative at the desk about the purpose of this ID check. I made sure to let her know that I was not complaining, just curious. She had no clear idea why she was doing this step hundreds of times per day. That’s always a danger sign, by the way. If the person on the front lines of customer service can’t tell the customer what’s going on you have an issue. She then vaguely recalled something and mentioned that, “We added this process because people can do things with these print-at-home boarding passes.” OK, now I’m getting nervous: The TSA is approving people who might have fake boarding passes! And people are taking the time and risk to fake boarding passes just to get a free beer and Wi-Fi at the Sky Club?!

There might very well be a logical reason for Delta’s double-check of IDs, but I doubt it. Rather, I believe this is a process that someone instituted because there was some small chance at gaming the system. Things such as this happen often in businesses that are used to a lack of competition or service quality. And most airlines fall squarely into this zone. Someone comes up with this idea in a meeting and the group approves it without talking about the fact that it is at best pointless and at worst a signal that Delta does not trust its most frequent flyers. Power corrupts absolutely.

But the other lesson here is that new processes should not be taken on lightly. When employees are told what to do and how to do it even the best of them turn off their brains and go on cruise control. It was true of factory workers at the turn of the 20th century who suffered under Taylorism, and it is true of service providers in multi-billion-dollar companies today.

Posted in Marketing Without Meaning, airlines | 1 Comment »

Takeaways from the Upromise Partner Summit

Thursday, May 20th, 2010

This morning I gave a keynote speech at the 9th annual partner summit for Upromise in Boston. In case you haven’t heard of it by now, Upromise is a meaningful marketing platform that partners with brands to contribute a percentage of their sales to a college savings fund. I first came across Upromise back in 2001 when I worked on the Tide brand at Procter & Gamble and led a test of the service with a handful of other brands at the company. Nearly a decade later I was excited to see that Upromise is as strong as ever, and perfectly delivering on what I’ve been preaching in this blog and my book for two years this month. For this post I wanted to capture my catching up on some of the things that make Upromise a great partner for brands looking to connect with people in a meaningful way.

The Upromise Proposition

Overall, Upromise is a classic win-win-win and one of only a handful of businesses I consider “meaningful marketing platforms.” These platforms happen when you create a business that helps brands offer meaningful marketing to consumers, and you take a piece of revenue based on your ability to help both succeed. Probably the biggest meaningful marketing platform is Google, in which search advertising is clicked if it is helpful to consumers, and Google collects a fee from the advertiser based on whether the consumer chose to click on the ad.

Upromise similarly creates a win-win-win by enrolling a network of brands that will give a percentage of sales to a college savings plan. Consumers get anywhere from 1% to 5% back, businesses gladly hand over the fee to capture these sales, and Upromise collects a small percentage from the marketer based on each sale. To date, more than $44 billion has been spent through Upromise, resulting in more than $500 million in total earnings for consumers who are in the program. This success led Sallie Mae to acquire Upromise about two years ago.

In addition to the general plan, Upromise works hard to add features for both marketers and members. There is personalized offer platform, special promotions, and email, Facebook, and Twitter updates to help savers find out how to earn even more. And because Upromise has access to all of the data about purchase behavior, it offers an unprecedented ability to calculate ROI. No wonder its partners range from Exxon Mobil to McDonald’s to Bank of America.

Partner Example: Liberty Mutual

Liberty Mutual is one of a number of major financial services brands that are involved with Upromise. I have been a fan or Liberty Mutual for some time, and I wrote about their Responsibility Project both in this blog and in my book. In speaking with one of the brand’s representatives at this event, I learned that the Upromise partnership is a perfect fit with its brand purpose of encouraging responsibility.

Liberty Mutual has selected a smart path in embracing the idea of personal responsibility. First, the idea of “responsibility” differentiates the business in a crowded space and in a way that fits with what an insurance company is about (unlike sponsoring baseball games or showing a whale jumping in a commercial).

Second, people who are responsible tend to purchase more insurance AND they tend to be people who have fewer accidents. So by “owning” responsibility, Liberty Mutual increases its revenues and reduces its costs (i.e., paying out claims). Third, by embracing responsibility Liberty Mutual helps to build trust with its customers. After all, the responsibility goes both ways, and people need to trust that their insurance company will pay their claims if and when an accident happens.

The tie with Upromise makes a perfect fit with Liberty Mutual’s responsibility focus because the people who will take actions to save money years ahead of college are very likely to be more responsible than average. So Liberty Mutual further discovers and bonds with the high-revenue, high-profit customers that it desires. What I love is that this is a way of “targeting” people who have a desirable psychographic, and then delivering something that adds value to their lives.

Power of the Partner Summit

What I really love about the event that I attended is that it represents a way for Upromise to market itself in a meaningful way to its business customers. First, the company paid for me to attend in order to give these partners some added-value education about where the marketing world is going. Second, there was plenty of time for the partners to get together and trade tips and learnings amongst each other during meals, breaks, and at tonight’s Red Sox game. And there were additional speakers and breakout sessions in which companies such as Mastercard shared some keys to their success.

But the most original idea was a panel session in which actual Upromise users were flown in from around the country and put on the stage to share their likes and dislikes about the service. This “live focus group” offered some unscripted insights about what is working and what isn’t, but more importantly it reminded the partners of the real impact Upromise is making in terms of people’s purchase habits and success in saving for college. I have never seen a conference do something like this before, and I hope it is the beginning of a trend we see at other training events and corporate offsites.

So kudos to Upromise for continuing to build their customers’ businesses and give millions of parents a way to save for the biggest expense in their families’ futures.

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Posted in Achievement, Presentations | 1 Comment »

How One Private School Welcomes Competition

Tuesday, May 18th, 2010

Only a handful of my friends know that I spend a decent amount of time each month as the President of the Board of Trustees at The New School Montessori in Cincinnati. It is a private Montessori program serving about 150 students from preschool through 6th grade in one of the older, close-in neighborhoods of the city. This is the school where both of my daughters go, so it was an easy decision to get involved with the program. Being on the Board not only allows me to use my knowledge and skills in leading an organization for the betterment of the school—it also provides me with another platform to learn and develop as a business leader. By day I work on billion-dollar brands for Fortune 100 companies. But in my volunteer time with the school I have a chance to work with a small, nonprofit organization. And last week I even learned how organizations such as this can benefit its customers and its business through Marketing with Meaning.

In addition to my role as Board President I head up the Marketing Committee for the school, working with some other parent volunteers and the school administration to maximize annual school enrollment and long-term equity in the community. We recently went through a marketing strategy process and chose to focus on attracting and retaining students by sharing and enrolling them in what truly makes our school special: its unique culture.

The New School Montessori has many benefits for the prospective parent: strong test scores, Montessori accreditation, a diverse student body, a challenging and personalized curriculum, and a unique setting in a historic mansion built in the 1800s. But what people end up loving most, and what other schools find difficult to compete with, is the people who are part of the school community. Parents, teachers, students, and administration are incredibly caring and giving. The leader and Director of The New School Montessori, Eric Dustman, exemplifies what makes the school great. And although he often has to make tough decisions (especially in this economy), Eric and those who work with him continually build upon the culture by doing what is right for students.

All of this is a long-winded way to describe one small example of how Eric chose to do the right thing for students in a way that puts school enrollment at risk, but ends up delivering meaningful marketing.

One of our annual events is something called “Life After The New School.” The event is held each fall, a few weeks after the start of classes. In this event, the class that just left the spring before returns to share their experiences in 7th grade with the new class of 6th graders. Because The New School ends at 6th grade, this event helps students start to learn about which schools they should consider attending the following year. The panel of “graduates” takes questions from students about everything from how much homework they have to the quality of the school lunches. And the answers vary a bit because there are students from about five different private and public schools in attendance. It’s a valuable, fun event for both parents and students of all ages.

In addition to students, Eric gives representatives of the schools themselves a chance to spend a few minutes talking about what makes their institutions unique and successful. This is where it gets interesting, because most of these other schools have programs for children in preschool through 6th grade. In other words, we are inviting our competition into our building to talk about how great their schools are.

Eric and I recently spoke about how this felt. He admitted that it can be a little unnerving to see parents of kindergartners in the audience getting pitched by the competition. But he realized that exposing these parents to other schools does two things: First, it is the right thing to do for parents and students, who eventually do have to choose another school for their child. This is a marketing service that goes back to examples such as Progressive Insurance, which tells you their price, and those of their competitors.

The second benefit is that in hearing about these other schools, parents are reminded of how great The New School Montessori really is. They see that these schools don’t offer anything more than we have, and the returning students all agreed in looking back that The New School Montessori prepared them extremely well—and that there are more than a few things they miss once they have left.

Doing the right thing for your customers, even at the risk of your business, ends up building loyalty and revenue. Interesting to see how even a small, nonprofit school can teach billion-dollar brands a little something.

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Posted in Solution, non-profit, small business | 2 Comments »

A Costco Story That Wasn’t… But Still a Good Idea

Thursday, May 13th, 2010

Way back in September 2009 I was asked to comment on a story about a new program that Costco was testing in a handful of stores as a benefit to its small-business shoppers and general members. Oddly, the story never appeared and I cannot find anything about the program anywhere. I’ve been holding onto my notes about this program since then, and I think it is still a story worth sharing—maybe a free idea for your large or small business to take and run with.

The idea Costco was apparently testing was a coupon book that includes offers for the services of its business customers. For a small fee, these businesses could include coupons and offers in a book that would go to all Costco members. This was an attempt to secure a win-win-win by giving small business customers (the heaviest spenders at Costco) a leg up in a tough economy, provide all customers with an additional benefit of being a member, and allow Costco to retain and add members.

I believe this was a brilliant move by Costco, and one that started because the company saw an opportunity to help its business customers on their higher-level needs. An increasing number of companies such as Costco are starting to look for new ways to add value aside from just stacking stuff high and selling it cheap.

The mission statement of Costco is: “To continually provide our members with quality goods and services at the lowest possible prices.” When I worked at Procter & Gamble in marketing, I had opportunities to meet with buyers from Costco. I quickly learned that everyone at the company is completely focused on bringing value to its members. This has traditionally been through better deals, lower prices, and stable margins. But in this case Costco is wisely delivering value to members in a new way. Here, the company saw an opportunity to “deliver members quality services” by providing a forum for marketing between members. Because of the company’s mission, it came up with this idea first.

There are several benefits to such a program. First, it is a free service for members at a time when a challenging economy is taking a toll. By helping customers through these tough times, Costco will earn loyalty for years. Second, Costco’s success is completely tied to the success of its core small-business owners; if they do well, Costco will experience higher revenues, too. Third, Costco would win a great deal of positive buzz by being the first to embrace this idea. I think this compares well to the Hyundai Assurance Program, in which this small car brand broke through by being the first to buy back vehicles of those who lost their jobs. This program won huge sales during a down market.

But the big question is: Why haven’t we seen Costco launch this program nationally? This is hard to say. Retailers test things all the time, and often have trouble taking programs beyond a handful of stores. Other ideas might have had priority, or organizational politics might have gotten in the way. I imagine that there are a number of real challenges, too. Costco would have to hire people to process the customers’ ads and coupons, and it would have to pay to print and distribute the booklets. It would also take time to drive awareness of this program among its business customers.

Nevertheless, this is clearly an example of Marketing with Meaning, and there might be other businesses that could take this Costco idea and adapt it for success. For example, a major bank has hundreds of business customers that it could bring together to market their products and services to each other. Business-focused law firms and accountants could host networking sessions for their clients to join up. Perhaps the greatest thing about an idea like this is that it is relatively easy to test. And even if you fail to get a critical mass, your best customers will appreciate your desire to help them succeed.

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Posted in Coupons, Retailers, Solution | 4 Comments »

Reflections on My Visit to India

Tuesday, May 11th, 2010

A little more than a week ago I returned from my first visit to India. I went for business—a chance to hook up with some brethren from our parent company, WPP—but I was fortunate enough to have some time away from the work that brought us there to absorb the people and places of this amazing country. Please bear with me going a little bit off-topic today, but I think it’s important once in a while to share something personal that does connect with what is at the heart of “marketing with meaning”: Understanding people, society, and life.

I’ve done a decent amount of travel in my life, and have visited developing nations including Vietnam, Argentina, and China. But none of these experiences is comparable to what I saw in India. Here are a few of the things that stood out from our handful of days in the country in and outside of Delhi:

  • There is humanity everywhere. This is a little difficult to describe, but India is a place where there are many people, and they live out in the open. Drive down the streets and within a block you will see people eating, drinking, buying, sleeping, changing, fighting, cooking, and washing clothes. While it is unusual and quaint to hear dishes clinking when you walk through a Western neighborhood, India is a continuous, rich display of human life in all of its triumphs, tragedies, and chores.
  • Infrastructure is far behind, but people don’t seem bothered. I was amazed to travel down one of the major highways outside of New Delhi and see only two lanes. This is a country of 1.2 billion people, and one of the growth miracles of the modern world, yet the interstate a few miles away from my home in Cincinnati is 10 times more developed and in better condition. I was also surprised that few people speak English even though this is a historic and secondary official language of the country and education is highly prized. Nevertheless, there is little concern or “hurry” to improve. Maybe this is a good thing, as it allows India to grow at a pace that allows it to adapt, rather than upending everything they hold dear.
  • There is poverty everywhere, but the people smile more than we do. I was blown away to see the amount of people living in small quarters in dirty streets strewn with mounds of trash. Cows, dogs, and people sorted through these trash piles. No vehicle looked less than 10 years old. There are many poor people sleeping on the road median at night. Yet there are no riots in the streets and the people seem to find a way to get by. I will never forget taking a camel-driven cart through a small village at the base of a castle-turned-hotel where our meeting was held. Adults and children smiled and used what little English they knew to say, “Hello, mister!” A little boy with no pants defecating in the gutter of the dirt road waved to me.

It was most interesting to me to see the very rich and very poor living side by side in this vast nation. Fancy cars with leather interiors vie for a driving lane along with dilapidated bicycles hauling propane tanks. And we visited a Sikh shrine and joined people of all classes in bathing our feet, washing our hands, and paying our respects.

I look forward to visiting India again and gauging the progress it makes. I just hope that this unique culture persists through the inevitable wave of development and Westernization that is already sweeping through.

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Posted in Leapfrom Media, Life | 2 Comments »

Two Start-ups That Highlight Customer Service

Thursday, May 6th, 2010

Most of our encounters with start-up companies in the digital world have been less than desirable. Because they are new and often overwhelmed by their growth, service often takes a backseat. But that happens less and less today, as the growth of social media means that not only do service gaffes hurt new companies’ prospects, but also that incredible service can itself drive word-of-mouth. Some companies, such as Zappos, have made customer service their main marketing tool. Lately I’ve encountered two newer companies’ customer service efforts–one good, and one poor–that offer tips on the right way to run your own company and another way to deliver Marketing with Meaning.

The Good: Poll Everywhere

This is a relatively new service that we’ve been using to create live SMS-based polls during powerpoint presentations.  Think of Poll Everywhere as a version of those devices that are sometimes handed out in big events and used to get immediately feedback and answers from the audience.  Except that this is much cheaper to create (even free versions are available) and can be done with nothing more than a basic mobile phone.  Within seconds you can create a poll and add a live, updating PowerPoint slide to your presentation. There are a variety of monthly service plans for the tool.

In terms of customer service, what I really loved about Poll Everywhere is that it sends you an email reminder two days before you are charged again for the service.  This worked well for me, as I recently traded up to the more expensive plan in order to use the service for a very large presentation I was giving. But in the month ahead I do not have a similar need. So this warning email allowed me to trade back down at a significant cost savings.

This simple step comes at some cost for Poll Everywhere, of course. I likely would have forgotten about my monthly fee for a month or more, giving the company additional revenue.  Further, I would have blamed myself for being dumb, not the company for continuing to charge me a rate that I chose to accept. By helping me spend my money wisely, Poll Everywhere earned my trust and my positive word-of-mouth.

I wish more companies would earn my trust and loyalty this way. Why doesn’t Netflix proactively offer me the opportunity to trade down to one movie per month when I go a long time between rentals? What if your gym or country club offered to reduce your monthly fee when it notices that you’re not going as often as your plan allows?  “Crazy,” I know, but in reality such moves engender enormous trust, and in most cases help retain customers who would be much more likely to opt out entirely after a few months of overspending.

The Bad: iStockphoto

iStockphoto has actually been around for more than four years, but it is still seems to be a small online start-up to me. It is one of a handful of low-cost stock photography sellers. I first learned about the service from Guy Kawasaki and used it when I began blogging a few years ago.  The price of $1 per image was right for my modest needs, and the company offered discounts when you bought credits in bulk.  It has been a good service that I recommend to others and we use the service from time to time at our agency.

But I was unpleasantly surprised a few months ago to receive an email from iStockphoto, explaining that my 100 credits would be expiring this week.  I was mystified by this message and policy. Maybe somewhere in the fine print the company explained that there was an expiration date for these credits, but this was certainly not obvious, and is completely inconsistent with just about any other service I have come across. As a regular user of iStockphoto, it’s not like I was some lapsed customer with a liability they needed to phase out.  I had about $100 that I was in danger of leaving on the table because the company arbitrarily decided to take these electronic bits away.

Although it was at least smart to warn me months in advance that my credits would expire, the act of stealing my money this way is outrageous. Remember, the company already got my money, and keeping record of my credits costs nothing. I believe this is incredibly shortsighted and bad for business. After all, there are many other places to secure stock photography, and the Internet makes it easier to set this up every day. By screwing over its customers for no real gain, iStockphoto ends up generating continuous waves of negative word-of-mouth. I did a quick Google search for “istockphoto credit expiration” and found several negative reviews. Count me as one person who will never use iStockphoto again, and who will look for ways to use my influence to weaken the company wherever possible.

Customer service is not an afterthought or something to “be managed.”  Rather, in the connected world of social media it is at the front lines of building trust and earning word-of-mouth–it’s Marketing with Meaning.

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Posted in customer service | No Comments »

Why the iAd Model Faces an Uphill Battle

Tuesday, May 4th, 2010

(Kudos to Fast Company for this image)

Steve Jobs has a well-earned reputation for willing Apple to success in markets with innovative products that consumers fall in love with. He’s done it with computers, music players, mobile phones, and tablets. Now he is turning attention to a market that is desperately in need of his genius: advertising. Jobs recently announced that his company is creating a mobile advertising service called iAd, which will arrive with the next operating system upgrade in June. With iAd, app developers will have the chance to embed their games and tools with advertising brokered by Apple and receive 60% of ad revenue. Sounds like a great deal for the millions of entrepreneurs around the world who are dreaming up better games and tools for Apple products. But there are five six reasons that I believe iAd will fail to meet the lofty expectations for a world-changing ad model:

1. The cost per engagement model is not variable.

Apple has been known for simplifying pricing in every market it enters. It chose to set music prices at $.99 for a song, and $9.99 for a movie download. Although the music and movie companies fought for more variable pricing, Apple stuck to its guns because it felt consumers wanted a simplified model. With iAd, the company has announced that it will charge one penny per advertisement exposure, and $2 per person who clicks on (or otherwise chooses to engage with) each ad.

I think marketers will accept the penny-per-exposure pricing.  That translates to a $10 CPM, which is high compared to Web banners but below most TV buys. On the other hand, a $2 per interaction comes with a big problem: It is an arbitrary number that is set with no knowledge of the end value. After more than a decade of Web marketing, brands still have little ability to measure what a website visit or banner click-through is worth. I’m surprised that Apple did not implement a bidding system like Google Adwords, where brands compete for space and pricing ends up rising or falling to what the market will best bear.

2. There is no scale opportunity.

At the end of the day, no matter how much excitement Apple’s products generate, iAd will be just another of the dozens of new and old places where marketers can run advertising. There are 85 million iPhones, iPad Touches, and iPads out there worldwide today, on which users spend 30 minutes a day with apps. But not all of these apps will have advertising. Meanwhile, there are 300 million people in the U.S. alone who watch television an average of 2.8 hours per day. There will be many, many more people who read newspapers, buy magazines, or ride subways than own iAd devices.

The big brands that Apple is targeting desire to create an advertisement once and spray it across as many of these media options as possible. But in its efforts to improve the advertising market by controlling it, Apple is making it a hell of a lot harder for marketers to include it in an ad buy. The service will not allow Flash programming–making most banner ad creative units obsolete–and it will have other rules and processes that are still being sorted out. Apple will also use its own measurement system instead of tying into other services that allow comparisons across media choices.

3. The cost to play is too high.

Reports are trickling out that Apple will only allow advertising by companies that agree to spend up to $10 million on the iAd platform. This compares to similar deals in the $100,000 range for other mobile ad networks, which I would guess is often cast aside anyway. Again, even the big brands that Apple covets and that are used to paying for media in the millions of dollars will be loathe to bet so many bucks on a relatively small, unknown, and untested advertising model.

Big marketers want the chance to test and play with a new medium before going in guns-a-blazing. What they like best in new media is a self-serve advertising model that even allows them to place a few ads with a few thousand dollars to see what happens. Google Adwords and Facebook Ads, for example, both allow brands to learn with limited expense. No matter how cool it might seem to place your brand on the most discussed ad network ever, it takes a big personal risk to move so many dollars so early.

4. Better creativity cannot be forced.

Apple showed off its iAd platform by mocking up what ads for Nike basketball shoes might look like. Of course they look cool–like just about anything Nike does. Jobs has spoken often of how poor the world of banner ads is, and he believes that marketers will do a much better job with the tools that Apple is creating with iAd. But not every brand is Nike….

In fact, most advertising is for stuff that people likely won’t want to click on, no matter how cool the iAd platform can be. Will people want to engage as much with day-to-day companies such as banks and toilet paper? Nope. And while Jobs thinks most banner advertising is crap, that’s not because there aren’t enough tools to spiff them up. Flash and rich media banners allow a great deal of creativity and engagement already. You can play games, request samples, get geo-targeting, and watch cool video from a banner today.  Sorry, Steve, but most banners suck because the companies that buy the space don’t believe that the extra cost of creative development and rich media buys are worth it. Why would these same advertisers Jobs wants suddenly believe that iAd is now the answer?

5. Apple will have a hard time building a sales competency (NEW).

I added this after my original post after reading a great Twitter comment from David Rubinstein. If Apple really wants to get into the ad game, then it needs to play by the rules. And Rule #1 is that you need a sales force that can start wining and dining the clients. This has got to be a pretty foreign concept for Apple. It is the coolest kid on the block, and more used to companies coming to its campus in Cupertino for help and advice versus begging for a 30-minute meeting in Manhattan. But that’s not how it works in the advertising world. While some clients will be enamored enough with the company to write a big check right away, most trust their media planning and buying agencies to do the hard work of deciding where ad dollars go. So the Starcoms and GroupMs of the world are the ones with the power. Apple will have to put the hard sell on these tough negotiators in order to build up an ad business.  They will have to play the game of relationship building and create a true sales organization. This is not easy. Just ask Google, which built its billions on a self-service and self-selling ad platform, and is only now, slowly, getting its arms around selling to big, billion-dollar brands. It’s been tough for the Google engineering-driven culture to figure out how media planners and mass marketers think, despite hiring many folks from the traditional ad-selling side.

6. Apps are more meaningful than ads.

Regular readers knew that this point was coming. I believe Apple does have an opportunity to make a few bucks by creating a slightly better option for interruptive advertising. But Apple has already done so much more for marketers by creating these killer platforms for value-added apps. In fact, I would wager that brands have already spent more on creating apps than they have in buying mobile banners like what iAd will sell. Examples such as the Kraft iFood, the REI Ski Report, and Charmin restroom finder apps all provide value to the consumer and create much more meaningful connections for life. These brands and a growing number of others would rather create apps that directly engage with the consumer, instead of buying ad space on someone else’s irrelevant game or utility. This is where the marketing world is going, and surely where marketers will play most on Apple’s platforms.

Steve Jobs is not afraid of taking on a large, old industry with inefficient practices by bringing the end consumer a better way of living. In music, for example, he created an iPod device and iTunes software that improved the music-listening experience so much that the music industry had to play ball.  With iAd, Jobs is challenging the advertising model built around cheap GRPs, poor creativity, and buggy software. But while this new platform might be marginally better, it is still an interruptive advertising model that is barely a fundamental improvement for the end consumer.

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