In this edition of Theopraxis Thinking, I want to put the boot into a modern marking myth: the tipping point theory. We have seen marketing behaviour change in the last few years, driven by the belief that small numbers of socially active individuals can push the acceptance of a product past a magic tipping point, after which sales take off automatically.
To me, this is akin to saying that the wind is caused by the trees waving their branches. Tipping points exist, but there is nothing mystical about them and the socially active individuals have a small role (at best) in bringing them about.
You Can’t Beat the Bell Curve
The rate at which something (an idea, a product, a fashion, a disease) spreads through a population looks like a bell curve.
The idea that adoption rates are normally distributed – and therefore lie on a bell-shaped curve – goes back (as far as I can tell) to Everett Rogers’ 1962 book The Diffusion of Innovations.
To use Rogers’ terminology, about 2.5% of the population are innovators, 13.5% early adopters, 68% mainstream and 16% laggards – the adoption rate looks like the graph on the left. If we assume that it takes 100 days for an idea to spread throughout a population, then the rate at which people take up the idea looks like the picture below. By the end of the first 30 days, you may only have got the message out to 10% of the population. After another 30 days, you’ve converted about two-thirds of the population, 70 days is 90% and after 80 days you’ve got pretty much everyone. When plotted as a cumulative distribution, you get a ‘S’-shaped adoption curve, like the one immediately below that.
Now you can see where the idea of the tipping point comes from – it’s the point where the graph on the right is steepest.
Connectors, Sneezers, Ancient Greeks and Castrated Sheep
One of the best-selling business books of recent years has been Malcolm Gladwell’s ‘The Tipping Point’ from 2002. Gladwell maintains that ”the success of any kind of social epidemic is heavily dependent on the involvement of people with a particular and rare set of social skills”, namely:
- ‘connectors’, individuals who have links to many different worlds and who transfer ideas between them
- ‘mavens’, who have a strong compulsion to help others to make informed decisions, and
- ‘salesmen’, who…well, you can guess what they do.
Seth Godin recapitulates this idea in ‘Unleashing the Ideavirus’ (also 2002), where he says some people, who he calls sneezers, are naturally more inclined to pass on ideas to their friends. People will tend to listen to those they respect and admire, and so the sneezer gains from the transmission of good ideas as well as the sneezee. Similarly, both lose from the transmission of dumb or irrelevant ideas (so those celebrities you see pitching products on TV are trading their credibility for money). If you can build up a core of evangelizers among these sneezers, Godin says, your idea is much more likely to spread.
Gladwell’s and Godin’s ideas are interesting, but not new. Aristotle first raised this concept 2400 years ago in The Art of Rhetoric, where he talks of ethos, which is the combined moral, technical and personal authority of the speaker. Ethos, he tells us, is one of the three pillars of the art of persuasion, along with reason (logos) and appeals to emotion (pathos). The best ideas, as well as being logical and engaging, come from sources you respect.
The idea may be even older than that – for as long as man has been farming, we have known of the existence of ‘connector’ sheep called bellwethers. The idea is that occasionally there are certain rams that the others naturally imitate. If this particular ram wanders over to one side of the pasture, the others follow. If the ram bleats, the others will bleat too. When they notice this, the shepherds and farmers grab the ram, castrate it, and tie a bell around its neck. The shepherd’s life is now a whole lot easier: rather than herding fifty sheep, they just have to herd the one with the bell and the rest will surely follow. It isn’t the castration or the bell that turns a sheep into a connector, it’s just the unfortunate consequence of being a style icon.
The Myth of the Tipping Point
The marketing men took to Gladwell’s and Godin’s ideas aggressively. If you’ve taken part in a market research survey recently, you will have noticed questions like “are you always one of the first people to get the newest mobile phone?” or “do people tend to ask your advice about mobile phones?”. They are looking for Gladwell’s social connectors and mavens, of course, and you should never answer these questions in the affirmative – not only will you never get the buggers off your back, but now that I’ve mentioned bellwethers, answering “yes” to those questions could result in painful surgery.
Tipping points exist – diseases turn into epidemics and products do sell dramatically – but I can’t accept that this is for the reasons that Gladwell and Godin advanced because many highly-promoted fashions never spread. The films of Ken Loach, David Cronenberg and (whisper it) Woody Allen are wonderfully made and receive rave critical reviews, but Joe Public queues up to see Police Academy 38 instead. And the proportion of people who wear designer clothes instead of Marks & Spencer or JC Penney is tiny, not just because designer clothes are stupidly expensive but because they are often just plain stupid.
The Segway and the Apple Newton, despite being amazingly cool, did not take off. But surely if the connector/sneezer theory is right, these products – highly popular with connectors - would dominate their industries?
The reasons they failed can be found in an earlier book on marketing, Geoffery Moore’s 1991 work, Crossing the Chasm. Moore pointed out something that seems obvious, but seems to have been completely overlooked by the marketing profession:
Innovators and early adopters tend to buy things because they like them, regardless of quality or cost, whereas the mainstream are pragmatists who value old-fashioned things like predictability, quality and price.
Despite reports of how easy it is, the mainstream market isn’t going to hack the iPhone to make it work on their network: if it doesn’t already work every time, they don’t buy it. And they certainly aren’t going to spend $1000 on a badly-made pair of jeans because they have a pretty label. There is a chasm between the two groups, and it’s one that many modern products fail to cross because they have been wrongly positioned.
Marketing men often start with innovators and early adopters because it costs too much to take the product straight to the mainstream. But the ‘cool’ memes that will drive those groups to buy are not the same as the ‘effective’ memes that drive mainstream success. Take the Apple II – this was a hobbyist’s machine that sold in modest numbers until Steve Jobs got the idea of marketing the first ‘killer app’ (a spreadsheet called Visicalc) instead of the box it ran on. Visicalc appealed to the mainstream and that’s how Jobs invented the personal computing industry.
An even bigger mistake than failing to change the memes is using the wrong set in the first place, and pushing an unfinished product at a mass audience. Innovators see imperfections in a product as a challenge, pragmatists see them as a showstopper. Jobs followed up the vastly successful Apple II with the awful Apple III while IBM tried to recapture the PC market with the even more awful PS/2. Both of these failed not because they were slow and buggy but because this made them utterly unacceptable to the mainstream market they were aimed at – labelling them as ‘cool’ would have allowed the nerds to identify and kill the bugs, but instead Apple and IBM tried to cross the chasm and fell right in to it.
So while early adopters have their uses – they allow you test ideas and to get the bugs out – they clearly are not driving mainstream adoption. So what does drive sales growth?
Marketing Products and Ideas in a Vacuum
In a previous edition of Theopraxis Thinking, we looked at the spread of gossip and came to the conclusion that it doesn’t matter if people defect from an idea later as long as they spread it now. Similarly, with most products, and particularly most new products, it doesn’t matter to marketing men if the customer throws the product away tomorrow, just so long as they buy it today. One of Godin’s best sayings is “an idea adores a vacuum”. If no similar product exists, then Godin advises you to launch big. He’s absolutely right.
Now the spread of gossip (and sales of a new product in a market) are determined by a simple equation:
Infection Rate =
Probability of the user hearing the message (0-100%) x
Probability of it affecting behaviour (0-100%) x
The number of times the idea is expressed/advertised per unit time (0 to ∞) x
The number of people it reaches each time (0 to ∞)
Consider a meme-driven marketing campaign where people spread an idea (e.g. “plastic shoes are cool”) with a certain probability of success (defined by the infection rate). An infection rate of 1 means that 10 people spread the word to another 10, then all 20 spread the word to another 20 and so on… The graph to the left shows how many people you get wearing plastic shoes after five rounds of transfer. We can see that, even if no-one ever defects from the belief, memes with a success numbers of about 1.5 or less spread very slowly while high infection rates drive stratospheric growth.
If we built in a certain level of defection, then memes with low success numbers would actually die out.
The lines in the graph above are the left-hand portion of our bell curve – the part where the phenomenon of the tipping point occurs. I hope you can see that the ‘tipping point’ is nothing mystical – it’s just a symptom of the infection rate.
One-off sales are governed by the infection rate, not the defection rate. The infection rate defines whether the meme (and thus the product) takes off, flattens out or tanks. There is no mysterious tipping point that will make your product sell – just fast growth or no growth.
But what defines the infection rate? The critical factor is the degree to which the idea is accepted and stored so that it later affects behaviour. The ethos of the spreader – i.e. the presence of a connector - is just one of about a dozen factors that drive meme acceptance. The other factors are… well, you’ll just have to read the book.
Marketing Products and Ideas in a Saturated Market
In the last edition of Theopraxis Thinking, we also looked at the arithmetic of belief in a saturated market. While the example we used was the level of belief in weapons of mass destruction, we saw that the market share of an idea is driven by the ratio of the infection rate to the defection rate. That means that market share of an idea (or a product!) in a saturated market can be hugely affected by a small change in the defection rate.
In a saturated market, a relatively small shift in the proportion of people who change their mind makes a huge difference to the market share of an idea or product.
So I want to leave you with this thought: many markets are saturated and are governed by ‘me too’ products or, at best, incremental innovations. Here I’m talking about markets like telecoms, mobile phones, retail financial services and automobiles where the products are undifferentiated and the switching cost is low. Getting new customers in these markets is vastly expensive, not least because they run large and expensive campaigns that still manage to achieve a low infection rate.
But if the defection rate has such a huge effect on market share, why do so many banks and mobile phone companies spend so much on getting new customers when they can’t be bothered to keep the loyalty of the ones they already have?