The importance of branding in a recession (for KT&T VW’s)

How is the global recession going to impact virtual worlds in the kids, tween and teen virtual world sectors? A question in the minds of dozens of management teams of these worlds.

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One early and obvious casualty from these economic times is a reduction in marketing budgets from advertisers. Marketers are being forced to re-examine their proposed expenditure and cut-back in areas typically classified as non-traditional or without demonstrable returns. Not good news for virtual worlds with business models relying on advertising and marketing from third-parties.

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This issue is unfortunately further compounded because these marketers are probably also fearing for their jobs at the same time and more likely to ‘keep their heads down‘ rather than ‘stick their necks out‘ and propose virtual world campaigns.

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On this basis, revenues from users (via premium subscriptions and micro-transactions) becomes paramount to the short and medium term success of these VW’s – and even more so due to the fact that this sector is already highly competitive and leaning towards over-supply. VW’s need to create strategies which improve on the conversion rates between active and paying users. The good news here is that small improvements on this conversion rate can lead to major revenue upsides.

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So really, the key here is to focus on the buying process psychology related to ‘upgrading’ member accounts. And it’s the parents/guardians of members who are the target here as these are the people with the power, or more accurately, the credit card.

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What’s needed here is the re-assurance from the VW’s directly to the parents that rewarding their children with premium services is a good thing – value for money essentially.

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I’ve spoken several times about the challenges facing what I call ‘Pure-Plays’ – virtual worlds created solely for online purposes without a real-world awareness or presence. These companies have several challenges – grow their user bases, grow their user bases and compete against well-known brands with their own worlds and the positioning/establishment of their own brands. It’s this third point which is sometimes overlooked.

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Of course, as the slide shown left identifies, there are several factors presented threats and issues for virtual worlds but in a recession I strongly believe the role of brand is the key to unlocking the value in active user bases.

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The brand needs to get into the real world in order to build awareness and to a high degree credibility with the parents. They’re not going to dish out their valuable disposable income without being convinced of the value and most importantly, trusting the company.

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What does getting into the real world actually mean?

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It means in the first place the acceptance that business models do not solely work on viral customer acquisition. Then, it’s about tactical initiatives to present the brand positively in the minds of parents – letting them see and experience it.

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Some companies already tap into the real-world mentality with their use of pre-paid cards. These payment devices sit on the shelves and communicate the brands extremely well. You can touch them, pick them up (and hopefully buy them). It’s this tangible demonstration of the virtual brand in the real world that is crucially important. And there’s many other ways of ‘making the brand real.

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The role of the existing paying members is also important. Operators need to dig into their databases and identify the power users – the members who can be leveraged as advocates. These children (and their parents) have already crossed the chasm and become premium. We need these people to spread the word and encourage their friends to join (this is where viral customer acquisition is highly valuable).

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In this instance I think there’s no need to re-invent the wheel. Power members should be given tangible rewards (it’s that word tangible gain) for being paying customers. This could take the form of t-shirts, stickers, toys – anything that has a high perceived value ideally at a pretty low unit cost. Give them branded items that they’ll love to receive. Something like this arriving in the post further builds on the brand affinity and there’s a pretty high chance they’ll show it off to their friends. You’re not only creating a channel for viral activity but also strengthening the relationship with these existing customers – think of it as insurance.

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And be clever here as well. Looking at active to paying conversion rates on a country basis could well throw-up some interest data-points. If a set of countries has higher rates than others then these are the ones that should be targeted with such initiatives.

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Going back to the psychology of they buying process and the role of a real-world brand, the brand attitude map (shown right) demonstrates the shift in perception.

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Involvement in the decision-making process is high if the buyer (parent) thinks there’s a degree of risk associated with the purchase and/or it takes time to assess the purchase. This risk can come from not knowing the company and brand in the first place – not seeing it or experiencing it. Also, the increasing number of KT&T virtual worlds can slow down the decision. Having real-world presence will assist in lowering the involvement.

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Creating a feel-good factor and thus leveraging positive motivation can be achieved in several areas. Reward schemes for paying members is an obvious one. But other tactics like the communication and promotion of premium features/elements will also work – focusing on and highlighting what it means to be premium. Delving even deeper into the traits and profiles of the power users (advocate analysis) is vital here to ensure a two-way view on this relationship.

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To be continued.