[MUD-Dev] R&D

Brian Bilek brian at darkalley.net
Thu Jun 6 00:28:24 New Zealand Standard Time 2002


Dave Rickey wrote:

> Classic business school example: Take a look at the toothpaste
> aisle in a supermarket.  99.9% of the products you see there would
> need analysis in a fairly good lab to show differences in their
> category (Gels, pastes, hybrids and anaesthetics).  Toothpaste is
> a pretty simple product, and everybody in the business knows how
> to make a product that will clean your teeth.

> Everything you think you know about what makes one toothpaste
> better than another is the result of clever marketing campaigns.
> Toothpaste company executives are not in the toothpaste business,
> they are in the brand management business.  They can move from a
> toothpaste company to a candy company and then to a tobacco
> company, and they are *still* in the brand management business.

> With certain narrow exceptions (sports games, mostly), games don't
> work that way (at least not yet).  You cannot take a generic
> product, 99% similar to everything else in the category, throw
> lots of money into marketing, and guarantee a profit.  This drives
> your typical business exec absolutely *nuts*.  It hasn't even
> matured enough to be handled like music and movies.  With only a
> handful of exceptions (Sid Meier, Will Wright, John Carmack, Peter
> Molynieux, and that's just about the list) you cannot even bank on
> particular people to consistently deliver profitable products.
> "Past earnings are no guide to future performance."

I am quoting the above as a whole because I think you're making a
great point.  Branding is a wonderful way, and with the case of a
good like toothpaste (commonly available, many substitutes, little
feature or quality variation), one of the very few ways to
differentiate your product.  You can even be too good at branding.
Another classic business school example: "Band-Aids," or "Q-Tips."
When your brand name has become the generic term for a class of
products, including your competitors', your marketing dollars are
now helping the competition.

However, I would suggest that branding is not the only way to
differentiate a product.  At least, not branding in the context
you're using it (that is, brand "image").  With a more complex
product than toothpaste, you can spend some of your development
dollars on changing the feature set of the product, and improving
its quality; not just spending dollars to change the -perception- of
benefit and quality in the minds of the consumer.  A product or
brand might also be differentiated based on cost.  This strategy is
more difficult in a market such as the one for toothpaste, since
competition is so fierce.

I agree that computer games do not fall into this category, nor
under the 'entertainment' category where you would find music and
movies.  Computer games are a hybrid, and rather than expecting them
to mature into a more commoditized marketplace, or even one that
looks like the music business, I envision it as a category unto
itself.  I'll call it "Interactive entertainment," and while it
certainly isn't a mature market, I see it as continuing to differ
from pure entertainment, and I never see it becoming commoditized
due to the nature of the products.  The platforms - I think it will
be more difficult to differentiate them as we see more of a
convergence of computing, console, and Internet technologies.  I see
product success depending on the innovation and creativity of
developers.  In the interactive entertainment business, I see
businesses pulling processes and best practices from a range of
other industries, but often defining many on their own.

It is an exciting industry!

> In the brand management business, R&D is an expense you undertake
> in order to safeguard your current brands.  Sometimes it creates
> new brands, but that's usually an accident, or an act of
> desperation.  3M was a company built on sandpaper, the MicrosSoft
> success story of its day, sandpaper was an incredibly useful
> product, and 3M held the patent.  Desperate to find new ways to
> sell sandpaper (because of overvalued stock creating expectations
> of increased earnings), one executive went so far as to develop a
> technique for *shaving* with the stuff.  Finally, they got
> desperate enough to remember some geek in the labs who had the
> idea of *not putting sand* on the paper, but selling the sandless
> paper with adhesive on one side as a packaging tool.

> Did I mention that they had already fired the employee in
> question, because he spent too much time thinking of wierd stuff
> rather than finding cheaper ways to make sandpaper?

I agree with the statement you make above, but I would point to the
fact that brand image is not the only way, nor necessarily the best
way, to differentiate the products, especially when dealing with an
industry where buyer knowledge is high (as it is in the case of
gamers).  I can spend all the marketing dollars I want to hype a
buggy game, but in the end it is still a buggy game, and buyers will
catch on to this quickly in this market.  Specifically with regards
to the online games, though this also holds true for single player.

My view is that in the 'interactive entertainment' industry, perhaps
R&D dollars are better spent elsewhere.  I see two different areas
of interest - product engineering (3d models, game engines, new
media, etc.), and more traditional brand research, such as
researching the mind of the consumer.  But the dollars spent here
don't necessarily need to go into brand image - imagine if focus
group research tells you that gamers want a bug-free game above all
else.  That would affect where and why you spend money on
development, and how heavily you spend on QA.  Not brand image - In
this industry, isn't it somewhat hard to build a brand image based
on perception?

While traditional, popular business school examples such as the
toothpaste market, 3M, Harley Davidson, Porsche, and so on are
useful, I don't think they are an accurate gauge of the interactive
entertainment space.  MMORPG's, and other related games, are in many
ways breaking new ground.  Even Microsoft is a stretch - their
business model became wildly successful, in part, because they built
their business relationships to take advantage of the very high
industry switching costs.  Computing platforms were prohibitively
expensive, and so Microsoft went to the hardware manufacturers &
application developers and built strong partnerships, offering a
competitively priced platform with attractive (though not
necessarily the best) OS features and supported by application
launches that met a wide variety of business needs.  The initial
heavy expense paid off because switching costs practically -forced-
businesses to be brand loyal.  In computer gaming, brand loyalty is
almost nonexistant.

Also, in a more traditional business model, marketing is often
broken into two different areas: Brand marketing and product
marketing.  While marketing principles are similar across both
functional areas, the way dollars are spent is very different.
Brand marketing is more focused on brand image, and dollars are
spent on advertising and other tools to change the awareness and
perception of the consumer.  Product marketing is where,
traditionally, more R&D dollars are spent.  This is the market
research into the needs and values of the marketplace, and research
into new and improved products.  In the computer games industry,
this will probably look very different than a traditional business.
In addition to dollars spent on developing better products, I would
say that even something like a company-sponsored community message
board could be considered R&D.  When developers interact with the
consumers on a daily basis, getting new ideas and collaborating on
new products, I would call that R&D (and maybe the government would,
too :).

In short, I would agree with what you are saying about brand image,
but I disagree in how you are presenting it - as the only way in
which marketing dollars are spent.  Or, if what you are telling me
is that brand management is the only way that the gaming industry
sees marketing today, I think perhaps a move towards a more
traditional product/brand marketing model might be of benefit to
some companies.

This, of course, is conjecture by someone outside the industry.  I
certainly don't have access to the primary market research that
gaming companies have no doubt spent a great deal of money on.

-Brian

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