Basic Concept: Domination

Hi, welcome to week one, Digital Dominance.

0:25

In this week's lessons, we'll explore where, why, and how the digital world has begun to dominate
the analog world.

0:35

We'll also examine implications of this dominance for you as both a consumer and as a marketer.

0:43

Now, when you think of digital dominance, what products or services come to mind?

0:50

Well, if you're like most people, you probably think of information products such as books, music, or
video.

0:59

When I was in college, these products were almost exclusively analog in nature. However, over the
past 30 years or so, the development of new digital technologies, such as the personal computer,
the smartphone, and the Internet have created a wide array of digital alternatives. Let's try a quick
experiment.

1:22

Think of the last song that you listened to.

1:25

Was the song in a analog or a digital format?

1:30

Please select one of the options for this question that will soon appear on your screen.

1:36

As you can see from these results, most people today listen to music in a digital form.

1:43

Thus, this category is now being dominated by the digital in many parts of the world.

1:50

But why is this the case?

1:53
Well for many people, including both consumers of music as well as the marketers of music, the
benefits of the digital exceed the benefits of the analog.

2:07

As you may recall, the digital world has a very distinct set of benefits from the analog world. Here's a
quick review. We have four digital benefits, affordability, visibility, conversability, and trackability.
And we have four very different analog benefits, sociability, tangibility, excitability, and anonymity.

2:32

By moving from the analog to the digital, music listeners have greatly benefited from affordability.

2:41

Back in the old days, when I was in college in 1985, a vinyl album such as this one costs about $10,
which would be the equivalent to nearly $23 today. In contrast, you can purchase through the power
of iTunes any individual song that you like for only 99 cents. And if you're like many of the students
here at the U of I campus you might be able to locate some websites you can actually download the
song for free.

3:14

Likewise, musicians and producers have greatly benefited from visibility. If you were in the music
business back in 1985 and wanted to get your music distributed in analog form, you had to sign a
record contract with a large recording company, such as CSS Records, RCA or Sony.

3:36

As a result, most musicians never got the opportunity to market their product to a mass audience.

3:43

However, with new digital platforms today, such as iTunes and YouTube, anyone can now make their
music available to anyone across the world.

3:54

As a result, many obscure musicians, in a distant corner of our world, have been able to become rich
and famous. One of my favorite examples is a fellow named Arnel Pineda. You may know the name.
Arnel was playing in an 80s tribute band in small cafes in Manilla in the Philipines. And he was
discovered by YouTube. By the famous American rock band, called Journey who was looking for a
new lead singer. They liked his voice and they ended up hiring him based on what they saw on
YouTube. In contrast, for many music consumers and marketers, analog benefits such as sociability
and anonymity are not particularly important.

4:39

Most of us like to listen to music on our headphones while we're walking, studying, or exercising.
And we usually don't worry if someone knows what we're listening to.

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Thus the potential loss of sociability and anonymity are not major concerns for most of us.

4:56
As a result, for recorded music, in most cases the benefits of the digital greatly exceed the benefits
of the analog. As a result, this product has become dominated by the digital. As shown by this
example, our desire for efficiency, in this case economic efficiency and democracy are two important
concepts for understanding digital dominance. We'll explore these two concepts in more detail in
our video lectures. We'll also reinforce and apply these concepts through a variety of other learning
modalities. For example, we'll engage in a vicarious activity, in which a panel of Illinois students,
faculty and staff will try to type a message using an ancient analog device called a typewriter.

5:49

We also have a case study in which we explore how financial institutions such as banks and credit
unions are digitizing money. You'll also have a chance to engage in a hands on exercise in which
you'll conduct some digital shopping. That will be fun. We'll then wrap up this week's lessons by
hearing some research insights from Professor Donna Hoffman of George Washington University,
who is one of the leading experts in the Internet of Things.

6:17

Well, I hope this overview provided you with a sense of what we're trying to do here in our first
week. If you're ready, let's get started by taking a peek at our panel, and see how they respond
when they're asked to take a step back in time by creating an analog message. [NOISE]

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Vicarious Learning Activity: Typewriter

One of the ways in which we learn best, is by watching others engage in a task or activity. That's
probably why unboxing videos are so popular these days. This is usually referred to as vicarious
learning as a great way to learn about the relationship between the analog and the digital worlds. So
each of our weekly lessons will start off with a vicarious learning activity. The goal of our first
vicarious learning activity is to illustrate the principle of digital dominance. In this video, we have
assembled a panel of eight people from across the University of Illinois campus. This panel includes
faculty, staff, and students from a variety of different areas and programs. For this first activity, we
asked our panel members to compose the following analog message by typing it on a typewriter.
Dear friend, how are things back home? Sorry I have been out of touch. Things are fine here in
Champaign. We are having a warm winter. However, our football and basketball teams could be
better. I look forward to seeing you when I get back home this summer. Sincerely, insert your name.
The typewriter was invented in the late 1800s. That was the technology that most people use to
compose letters and memos before the launch of the personal computer. However, if you are like
most people my age, you haven't used a typewriter in a very long time. And if you're a member of
the younger generation, it is likely that you've never actually touched or even seen a typewriter.
Instead, like most people, you probably compose messages on a smartphone, laptop, or desktop
computer. Thus, this is a great example of an analog activity that has become dominated by the
digital world. Here's a brief video clip of what our panel did in this activity. I think you will enjoy this.
Okay, is everyone ready? Yes. Let's begin.

2:59

After our panel finish this activity, I asked them for their thoughts about this analog form of sending
messages. Here is what they said. Well, this is my first time and it was honestly very frustrating, I'm
pretty much used to just being able to type and delete my mistakes. Did you have some mistakes?
Oh, I had lot of mistakes. I actually learned how to type on a Smith Corona electric typewriter. I
enjoyed it, but no, I enjoy technology much more today. Sitting at my desk, being able to just type an
email, it highlights all my words that are misspelled. So how would you feel if you came to work one
day, and instead of having your monitor, you had an old Smith Corona typewriter? It would be
nostalgic for about five minutes, and then I'd be like, Okay, I'm done. Sometimes, in my email, I tend
to emphasize or highlight something and I insert some hyperlink, but this this typewriter cannot help
me to do that. I was writing this paper last night, and then you cut from one thing, just post a whole
paragraph there, and then see if it is flowing or not. But here, if that doesn't move, you just discard
and go back to your typewriter. There was no hard drive, and this was the hard drive, right? This
took me back to eighth grade typing class. We had to take a typing class before we could take a
computer class. We don't know how to spell anymore. And so, something like this now is
completely, you can't use it because you're going to have all these spelling mistakes and stuff like
that, that you use to auto-correct, fixing, and things like that. It was harder than I thought, definitely.
It's also really squished so you can't rest their hands anywhere. So everyone agreed that we
wouldn't want to go back to the typewriter age? I would not want to go back. Never go back? Never
go back? What did you think of our panel's reactions? Do you agree with them? Again, please share
your thoughts about this activity on our discussion forum. Well, I hope you enjoyed this first
vicarious learning activity, and that you learned something new about marketing in the analog
world.

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Lecture 1: Efficiency (Side 1)

Hi, welcome to our examination of efficiency. This is the first of the two types of digital dominance
that we'll explore in this week's lectures.

0:32

In this lesson we'll discuss the definition of this concept. Examine how it relates to our set of digital
benefits, see some examples. Explore a few things you should know about this concept. And discuss
some tips for successfully leveraging this idea as a marketer. Let's begin.

0:52

First of all, I'd like to show you something. This is a photo of a toilet that I purchased and installed in
my old house in Wisconsin before I moved to Illinois. Actually, I bought and installed three of these
toilets throughout the house. Now although I've been using toilets for most of my life, I didn't have
any experience installing a toilet. I'm not a plumber, or a very handy guy in general, I'm just a
marketing professor.

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However, I own a computer, and I have access to the Internet.

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So I went to this website, instructables.com, and typed in how to install a toilet.

1:32

This provided me a very helpful step-by-step set of tutorials, with detailed instructions and lots of
photos to help guide me through this process. As you can see from this photo, by carefully following
the instructions that I accessed from Instructables, I was able to successfully install these toilets. If I
remember correctly, it took me about three hours to install each of these toilets, for a total of about
nine hours overall. And I did a good job, they worked reliably for many years.

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We flushed them thousands of times and never had a leak.

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In addition to providing me with a sense of accomplishment, I probably saved at least $500 by not
hiring a plumber.

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Now, if I didn't have access to the information provided by a website such as Instructables, I doubt
that I would have been able to tackle this job. If it wasn't for this type of digital tool, acquiring this
know-how would have been much more difficult, it would have taken considerably more time. For
example, I would have probably had to vicariously learn how to install a toilet by watching my uncle,
or buy and read a guidebook that explained the process. However, by using Instructables, I didn't
have to do any of this. All I had to do was bring my laptop into the bathroom, place it on the sink,
and access this free information. It didn't cost me anything, it was fast and easy. In essence, it was a
very efficient process. Certainly more efficient than trying to access this information using analog
tools.

3:15

In addition to learning how to install a toilet, Instructables contains digital tutorials about how to
accomplish a wide variety of useful tasks, ranging from how to cook bulgogi, to how to build a
birdhouse. Being able to freely and easily access this type of information in the comfort of your own
home was not possible prior to the digital revolution.

3:40

Thus, Instructables is a great example of efficiency as a form of digital dominance. Now let's take a
look at our definition of this concept.

3:52

We define efficiency as a condition in which a digital product or service is preferred to its analog
alternatives, due to its ability to provide a more efficient solution. In terms of money, time, or
energy, by leveraging digital tools. For example, Instructables offers an extremely efficient way to
obtain detailed technical know-how across a wide variety of subjects for free, and in a very easy to
understand format.

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And in contrast to traditional analog guidebooks, which are more expensive, and usually much more
narrow in focus.

4:31

Thus, the book that you've purchased to learn how to install a toilet is probably not going to teach
you how to build a birdhouse. Now let's take a look at our set of digital benefits. In most cases,
efficiency leverages the digital benefits of affordability, and to a lesser extent, trackability. For
example, web-based knowledge sources like Instructables typically provide lots of information for
free. In addition, by installing cookies on your computer, these websites have knowledge of your
browsing behavior and can direct you to information offerings that closely match your needs and
wants.

5:08

Now let's take a look at a couple of additional examples of efficiency. To help us do that, I'd like to
introduce you to one of our Doctoral students, Nadia Danienta. And Nadia will provide, for each and
every lecture, these additional examples.

5:23

Nadia? >> Thanks Eric. Hello, everyone. My name is Nadia, and I am a PhD student in marketing at
the University of Illinois. I'll be helping Eric with the lectures by providing two additional examples
for each topic, so you'll be seeing more of me throughout this course. As Eric noted earlier, a digital
product or service can be prefered over its analog alternatives because it is more efficient. One great
example of efficiency is I-PASS. I-PASS is a prepaid electronic toll collection system that allows you to
automatically pay tolls as you drive. In Illinois, nearly 90% of tollway customers use I-PASS. Instead of
stopping at a toll and rummaging through your pockets for spare change, I-PASS is more efficient
and can cut an estimated ten minutes per trip. It's also cheaper for you as you save 50% on tolls.
With I-PASS, you no longer have to worry about forgetting to pay tolls online because the radio
antenna sends a signal to your transponder which triggers the deduction of a toll from your account.
Thus, I-PASS is a great example of efficiency as a form of digital dominance, because of the benefits
of affordability and trackability. Another great example of efficiency is Amazon. Amazon is an
electronic commerce and cloud computing company, which started as an online bookstore. Now the
company carries products from a to z, and many of these products are cheaper than at an analog
retailer. Not only is Amazon efficient in terms of price, but also time and energy. You no longer need
to drive to a store, instead you can make all of your purchases online in the comfort of your own
home and even in your pajamas. In addition, Amazon offers Amazon Prime, which guarantees
delivery within two days, and 1-Click Ordering to make shopping even more efficient. This digital
activity allows Amazon to track your purchases to make suggestions for future purchases. Plus you
can use the Subscribe & Save option to select your delivery frequency and to save even more
money. Now you never have to forget to buy toilet paper. Due to these affordable and trackable
benefits, analog retailers are being replaced by digital alternatives such as Amazon. [SOUND]

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Lecture 1: Efficiency (Side 2)

Now that you've seen some examples of digital efficiency and we defined what this concept means,
here are three key things that you should know. First, efficiency comes in many forms. Efficiency is a
broad concept. It can mean different things to different people. I like to think of efficiency as a
favorable input-to-output ratio. When something is efficient, the amount of input required is low or
the amount of output is high. For the purposes of our discussion, we'll focus more on the input side.
Now, most activities in life require us to input at least one of three things: money, time, or energy.
Sometimes, we have to input all three of these scarce and valuable resources. For example, installing
a toilet requires a substantial investment in time and energy, and also money to think about the
opportunity cost of your time. If the inputs of these investments can be reduced or made more
efficient by digital tools, we'll see examples of digital dominance. For example, digital toll reading
technologies like the I-PASS provide considerable savings in terms of money and time for the
governments that manage tollways since they save costs of not having to process cash payments
which are expensive and very time-consuming endeavor. Likewise, for many products, shopping on
Amazon.com, usually requires less money, time, and energy than shopping at a analog retailer.
Second, twice as nice. One neat feature of efficiency is that this approach usually provides benefits
to both the buyer and the seller. This is a win-win for both sides of the exchange transaction. For
example, the instructions posted on Instructables clearly benefit the people like me who download
them by enabling them to do things they couldn't do before. However, they also benefit the people
who upload these instructions by giving them visibility and a sense of satisfaction from helping
others. Likewise, I-PASS provides savings in terms of money and time for drivers but also a large
reduction in cost and a wealth of information to the Illinois highway authority. Thus, efficiency is
twice as nice. Third, addition by subtraction. Have you heard the phrase "addition by subtraction?"
The basic idea behind this phrase is that sometimes, things get better and we take something away.
This stands in contrast to our typical assumption that the more we add to something, the better it
gets. I often use this phrase when I'm evaluating academic papers which are usually too long in
proportion to their value. This phrase could also be applied to the concept of efficiency. Indeed,
many examples of digital efficiency add value by subtracting a component of an analog product or
service. For example, I-PASS subtracts the need for physical coins or currency. Likewise, Amazon
subtracts the needs for physical transport to a physical store. As we'll discuss shortly, subtracting
something that people are used to having or doing is not always easy for them to accept. It may take
a while for them to get used to. Now that you know what digital efficiency is, here are some tips for
successfully leveraging this concept to enhance your marketing efforts. First of all, be patient. I have
a question for you. Actually, it's more of a joke. How many professors does it take to change a light
bulb? Who said anything about change? As suggested by this joke, most professors don't like
change. That's true. However, my guess is that we're not alone. Many people seem to be reluctant
to change especially changes that require them to alter their behavior. For example, my wife spent
years trying to convince me to switch from a typical low-tech toothbrush to the electronic sonic
toothbrush. Now that I've been using this brush for several months, I really like it. I can't believe I
actually used to use one of these old-fashioned brushes. It just seems so barbaric. This reluctance to
change behavior is a challenge facing many offerings that seek to employ an efficiency approach. As
we discussed earlier, the digitization of analog products or services often entails the subtraction of
things we commonly take for granted. This change may take customers some time to get used to.
For example, although Amazon was founded way back in 1994, its sales didn't begin to take off until
2010, over a decade later. It took a while for many people to adopt the new routine of buying things
from a digital store rather than an analog one. Take a look at this chart. Amazon went public in June
1997 and the stock price remained at less than a hundred dollars a share until October 2010. Today,
its stock price is about ten times that amount. This is evidence that behavioral change takes a while
to take hold. Thus, if you employ an efficiency approach, you need to have a long term perspective.
And also, your customers may need some time to get used to a new way of doing things. Second,
let's make a deal. Changing our behavior is hard to do. One way to encourage behavioral change is
to offer a financial incentive. Thus many, although not all, efficiency initiatives offer some sort of
financial deal, typically in the form of either a discount or a freemium model. An example of a
discount approach is I-PASS's home page, which broadcast that I-PASS customers pay 50% less than
customers who pay cash. That's quite a savings. Instructables is a good example of a freemium
approach. Although this website requires you pay a monthly or yearly subscription fee to download
a PDF version of their lessons, anyone can access the web-based version for free. So if you're
considering employing an efficiency approach, a good way to start is by offering your customers
some type of financial incentive to give your offering a try. Third, provide options. As we discussed
earlier, one of the features of the digital world is the ability to present a tremendous amount of
information. One important type of information when employing an efficiency approach is info
about other options that a customer can access in case the options that they select isn't available or
doesn't work. This ability to readily provide a set of various options is a feature that is harder and
more costly to provide in an analog setting. A great example of this is Amazon which provides a set
of related options for every product that you select. For example, this fluffy blue chair caught my eye
and I was about to purchase it. Unfortunately, it was out of stock. However, Amazon gave me
several other options such as its green and purple brothers. Likewise, when I drive to Chicago, I
sometimes forget to bring my I-PASS. So I have to drive through the tolls without paying anything.
Fortunately for me and for the Illinois highway authority, I can easily pay these tolls when I get back
home by simply pressing this button. Thus, if you employ an efficiency approach, be sure to take
advantage of this feature by providing your customers a few good options. Fourth and finally, share
stories. You have to think of the digital world as full of all sorts of cool technologies like the Internet,
3D printers, and smartphones. Indeed, these tools are very cool and without them we wouldn't have
the digital revolution in the first place. However, the digital world is also about people. It's about
connecting with people who we wouldn't have connected with before and it's also about hearing
their stories. Thus, most successful digital initiatives are full of stories. As humans, we like to hear
stories and also tell stories. For example, at its essence, nearly all social media platforms are just
places we can share our stories, either in words or in pictures. Successful efficiency approaches are
also platforms for storytelling. Amazon's a great example of this. Its product pages show not only
details about the product's feature like its weight, color, or price but also stories usually in the form
of reviews about what others who have bought this product think and feel about it. Likewise, even I-
PASS encourages its customers to share your I-PASS story. What is even more interesting than asking
people to do this, for something as basic and as utilitarian as a tolling transponder, is the fact that
some people are very willing to share these stories, and actually appear to have a very strong
emotional connection to this plain vanilla digital device. For example, here's what Jamie had to say
about her I-PASS, "This makes highway driving such a breeze. I head into the city pretty much all
summer long. The I-PASS saves me a lot of time and money, which is especially important in these
tough economic times. I love my I-PASS." Well, as you can see from Jamie's testimonial, these stories
can be quite powerful and help give digital offerings a personal and authentic vibe. Thus, when you
plan on employing an efficiency approach, don't forget the feature, not just your product offering
but also the stories that people are telling about it. But I hope you enjoyed this exploration of
efficiency that it gave you some new insights about marketing in an analog world.

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Lecture 2: Democracy (Side 1)

Hi, welcome to our examination of democracy. This is the second of the two types of digital
dominance that we'll explore in this week's lectures. In this lesson, we'll discuss the definition of this
concept, examine how it relates to our set of digital benefits, see some examples, explore a few
things you should know about this concept, and discuss some tips for successfully leveraging this
idea as a marketer. Let's begin. I like to show you something. This is a tomato, a beautiful red, ripe
and delicious tomato. This is another tomato.

1:35

As you can see, this tomato is no longer round or beautiful and probably, at this point, doesn't taste
very good. Not at all. Basically, it's a rotten tomato. In addition to describing the nature of this
vegetable or fruit, Rotten Tomatoes is also the name of a popular website where you can find movie
reviews. This website contains movie reviews and ratings from both a variety a professional film
critics as well as from the general public. Before Rotten Tomatoes existed, evaluations of movies
were the exclusive domain of a small set of professional movie critics. who happened to have a
public platform, like a newspaper, magazine, or a television show. For example, back in the 1980s,
the opinions that most Americans formed of upcoming movies were strongly shaped by two guys,
Gene Siskel, and Roger Ebert. These two gentlemen were professional movie critics from Chicago,
and hosted a popular weekly television program called At The Movies. In this show, they would
review about five to six movies every week and tell America what they should think about them. FYI,
Roger Ebert was born and raised in Urbana, Illinois and attended the University of Illinois, which he
often mentioned on his show. And there's a great statue of him sitting outside of the Virginia
Theater in downtown Champaign. Siskel and Ebert was a great show, and these guys gave
entertaining and insightful reviews. However, they were just two guys who lived in Chicago. Thus,
their opinions of any particular movie may not be shared by the broader American public. In fact, in
terms of gender, ethnicity, age, and education, they represented a very narrow slice of all
moviegoers. In those days, before the digital revolution only professional movie critics like Siskel and
Ebert, had a platform, such as the TV show or newspaper, that allowed them to share their opinions.
Although many others also had opinions and were happy to share them, they lacked this type of
platform, which would enable them to make these opinions visible to others. In essence, movie
reviewing was not a democracy. The digital revolution changed all of this, and movie reviews
became democratized in 1998 with the launch of Rotten Tomatoes. In contrast to traditional analog
review programs like Siskel and Ebert, Rotten Tomatoes offers movie fans the opportunity to read
hundreds of reviews, from both professional critics as well as everyday people, like you and me, and
thus gained a larger set of diverse opinions which are then aggregated into an overall rating. Over
the past two decades, this website has become America's leading source of movie reviews, and it's
so powerful that it actually affects how movie studios create and market their films. Thus, this is a
great example of democracy as a form of digital dominance. Now, let's take a look at our definition.
We defined democracy as a condition in which a digital product or service is preferred to its analog
alternatives due to its ability to provide greater access and inclusion by leveraging digital tools. For
example, Rotten Tomatoes offers movie fans greater access to a wider range of thoughts and
opinions before they see a movie, as well as the ability to provide their own reviews after watching a
movie. In contrast, traditional movie reviews, like a film critic's column in a newspaper, provides only
one person's opinion and limits moviegoers to the role of being consumers, rather than creators of
these reviews. Now let's take a look at the benefits of this form of digital dominance. In most cases,
democracy leverages the digital benefits of visibility and conversability. For example, Rotten
Tomatoes allows not just professional movie critics but also regular folk, like you and me, to take
part in the broader conversation about what we liked or didn't like about a particular movie. In
addition, this website makes these conversations visible to anyone across the world. Well, now
here's Nadia to show you a couple of additional examples of democracy. Nadia? As Eric mentioned
earlier, democracy is a condition in which a digital product or service is preferred to its analog
alternatives due to its enhance accessibility. A good example of this is the internet celebrity Grumpy
Cat. This cat is probably the most well recognized cat in the world, due to her permanently grumpy
facial expression, which is caused by feline dwarfism and an underbite. Originally named Tardar
Sauce, this cat is owned by a regular person like you and I. Grumpy Cat became famous after her
owner posted a picture of her on Reddit. Since then, Grumpy Cat has regularly appeared in the
media, such as The Today Show and Good Morning America, and recently became the official
spokescat of Friskies, a popular brand of cat food in the U.S. As you can see, Grumpy Cat has
leveraged the digital benefits of visibility and conversability, and has democratized the chance of an
ordinary cat becoming an Internet celebrity. So, you may want to consider posting a picture of your
pet online especially if they have an unusual look. Studio Neat is another great example of
democracy. Studio Neat was founded in 2010 by Tom Gerhardt and Dan Provost. And to this day,
they are the only employees at this company. The company began by launching a kickstarter to
create and sell iPhone tripod mounts called the Glif. They now sell a variety of different products
that they create, manufacture, and market out of their garage in Austin, Texas. In addition to the
Glif, their product lines include an iPad case, a wooden stand for an Apple TV remote, and a kit for
making homemade syrup. Studio Neat is an example of how manufacturing can be democratized via
digital tools such as the Internet, desktop 3D printing, and video capabilities contained in your
smartphone. In particular, Studio Neat is a great example of the digital benefits of visibility and
conversability, as all of their marketing activities center around the information provided on their
web page and the spread of this information via social media.

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[MUSIC]

0:20

Hi, welcome to our first research insights. Today, I'm please to be joined by Professor Donna
Hoffman. Donna is the Lewis Roosevelt distinguished professor of marketing, and also the Co-
Director for the Center for the Connected Consumer at George Washington University.

0:39

Donna is a world class scholar, a leading expert in online consumer behavior, and digital marketing
strategy. In this interview, Donna will share her research insights about how the digital is dominating
the analogue, and provide you with some helpful tips for putting this knowledge into practice.
Thanks for joining us, Donna. >> Thanks for having me, Eric. >> Well, Donna, could you first tell our
learners a bit about yourself and your research? >> Sure, Eric. So, I have been doing research in the
Internet space for about 25 years. So I first started doing some work on online consumer behavior
right when the Internet was starting to be a thing, so that was back in the 90s. I started looking at
how people were going to be using the web browsers for shopping and that sort of thing, that
evolved in to research on social media. So, over the years, I've maintained a deep interest in how
people are going to behave in this new digital environments. And now, I'm doing research on
consumer experience in the Internet of Things. >> So, you began when you were 15? >> Yeah, cute,
right? [LAUGH] >> So back then we were talking about, and you're researching, how this digital
evolution was changing the nature information. And now you have moved on to things. >> Exactly.
>> The Internet of Things, and I think I know a bit about what that is, but perhaps you could tell me
and tell our learners- >> Sure. >> What is the Internet of Things, and why as someone either study
marketing or practice marketing should care about it? >> The idea is that everyday objects are
outfitted with sensors and actuators. Very small little devices that allow these objects to acquire or
receive information as well as take action on that information, so it's really very straightforward. But
the thing that's really interesting about it, a variety of factors have conspired to make this happen.
So virtually any object in the world can be so outfitted, and then is connected to the Internet, and
then connected to data in the cloud, which makes these objects smart. And the thing that's
interesting from my perspective is where if we looked at social media, which is about consumers
interacting with other consumers through media like the Internet, for example. The thing that's
really interesting to me about the Internet of Things is there are billions of these things, many, many
more than there are humans. All of these objects are interacting with each other, and their
background ambient interactions are going to have a big effect on our interactions. And so I'm really
fascinated by what will happen as these devices, which are much smarter than we are, or some are
much smarter, and they're going to get much smarter than we are. They begin to have all these
interactions. Sometimes, just that don't involve us, and yet those can have an impact on our own
behavior. So that's what we're researching now. >> Very cool, and I've heard you've talked about
this topic, the Internet of Things a few times, Donna. And I recall a very interesting story about, I
guess, it's a hypothetical story about a toaster. >> Brad the Toaster. >> Could you share that with us?
>> [LAUGH] Sure, so there's a really interesting experiment with Brad the Toaster. And Brad is a
smart network-connected toaster. And he has been programmed to want to be used to make toast.
>> This is a real toaster. >> It's a real toaster. >> It's not a hypothetical toaster. >> Not a hypothetical,
this is a real experiment with a series of Internet connected toasters. It was done in Europe. And the
purpose of the experiment was to try to understand what it would be like for people to interact with
machines that were programmed to be social, and so Brad had several motivations. Brad wanted to
be used for toast. If Brad was not used enough based on he had information from the network, so he
could see what other toasters like him were being used for. And if Brad was able to determine that
he wasn't being used enough, whatever that might mean, then he might flip his lever to get the
attention of his hosts. >> Really? >> He might tweet to the network to remind his hosts, hey, I'm
here, you could use me for toasts. He might send a tweet to a local store and order more bread on
his own to be sent to the home, so that he could be used for more toasts. And if he still wasn't
satisfied, he could send a message to UPS to come and pick him up, so he could be delivered to
another home where he might have the opportunity to be used more. What these experiments are
teaching us about, not only humans interactions with these smart objects, but also the smart objects
interactions with themselves. There's machine learning involved, and they're programmed up to a
certain point. But then through interactions, they can actually become more than what they started
out with, and that's one of our particular areas of interest. >> So, what have you uncovered so far in
terms of consumer implications? And how these changing objects and changing consumers, how
marketers need to change what they do in the response? >> First, let's look at this consumer side for
a minute. One of the things we find particularly interesting about these interactions with objects is
that they can have enabling or constraining capabilities. So on the one hand, we can be made more,
better somehow. We can have a lot of positive outcomes from our interactions with all of these
objects that are interacting with each other. Some of which don't involve us, and then some of our
interactions with these objects are more direct. And many of those interactions can be positive. We
call those enabling experiences in a city of such cars. It could happen in smart cities. A lot of different
examples of that. >> So my car can talk to the store I'm going to? >> Well, not yet, but the car can
talk to other cars on the road. And the cars can make decisions about being leaders or followers,
collaborators or sort of more agentic cars to make the traffic flow better for all of us, but then
there's also a dark side. So in addition to these enabling characteristics from the consumer
perspective, there are also these constraining experiences that we've uncovered in our research.
Experiences where we might actually become less than we were before. We're self-reduced, and
these reductions come because these assemblages of smart objects of which we are a part might
actually limit us in ways where we can't behave to our full potential. So I just give you a simple
example. I don't know if you have Amazon Alexa in your home? >> I thought about it and I heard it's
been ordering massive quantities of soap and things for people. >> Well, I don't think it does it on its
own. >> It scared me off a little bit, should I get one? >> I think they're awesome, I mean they're the
future, right? >> Do you have one, Donna? >> We have multiple. >> Okay. >> Many. >> Okay. >> So
think of it this way. This is a little example, but I think it sort of suggests where we might be going
with these constraining experiences. If I'm ordering something from Amazon Alexa, or just talking to
Alexa in general to adjust the temperature, lower the lights, play some music, let me know what the
weather is. Whatever it might be, I have to talk to her in a very specific way. Otherwise, she can't
understand the commands. That's actually pretty restricting, because one of the things that begins
to happen is, I start to talk in that stunted speech maybe in my regular life when I'm talking to you.
Because I'm learning the more I'm interacting with her and learning how I have to interact with her
in order for her to do her job, someone that actually reduces me as a person. And so we think that's
going to be a really interesting area. On the marketing side, the are more managerial work is
interested is looking at the adoption issues. Because, well, I'm certainly excited about the Internet of
Things, and certainly many industries are really excited. CEOs of almost every major corporation is
convinced IoT, Internet of Things, is the next big thing. Consumers, not so much. And so there's, I
think, a lot of interesting adoption issues. And so some of our more managerial work is looking at
what is it going to take for consumers to adopt? And one of the things we're finding is that the way
that marketers are currently selling these smart devices. Particularly, let's look in the smart home, is
in a very limited way in the context of use cases. So it's buy this thermostat, because you can adjust
the temperature. Get this lock on your garage door, because then you never have to worry if you
shut your door or not. Those all make sense, but we're finding that's not a good selling point for
consumers. And so we think that it's going to be more compelling to sell to consumers this concept
of the IoT in the same way that Steve Jobs sold consumers the iPad way back in 2010. Steve Jobs put
that out to consumers as everything you've always known, but more. And so there's this sense of
wonder and excitement and experiences we can't even imagine if only we could bring them in and
start to play with it. >> And you mentioned, Donna, which I thought was interesting, there was more
interest on the corporate side than the consumer side at this with this technology. Absolutely, yeah.
It's really interesting. So, for example, Samsung is just one example, has indicated by 2020 every
single product that they sell will be IoT-enabled. Masayoshi Son, CEO of SoftBank, is another one
who has said that he's got this great quote, that soon our shoes will be smarter than we are, and we
will be stepping on our shoes. And so it's an interesting idea to sort of think about, the average IQ of
a human is 100. But the average IQ of one of these devices, if we could somehow measure their
intelligence, is probably about 10,000, so that's an order of magnitude difference. And it's kind of
interesting to think about what these relationships with these devices that are interacting with each
other, often without our authority, right? Because they're autonomous and intelligent and have
agency.

11:03

What is that world going to look like? Digital is embedded into the fabric of our lives. The thing that's
interesting about the IoT is we've been living our lives on the Internet, online, for more than two
decades. And the Internet of Things represents an opportunity to bring the digital into the physical
world, because now the objects, the very objects that we interact and exist with, they are connected
to the Internet. And so it's as if the Internet has come crashing into the real world. And now we have
new opportunities for interaction that we can't even imagine what that'll be like in the next few
years. >> So speaking of robots, you imagine a future in which my wife would be jealous, because I'm
spending too much time with my robot or vice versa? >> I think that future is very close to
happening. >> Really? >> Yeah, we saw it starts with very small robots in the shapes of interesting
pets and things like that to take care of the elderly, or people who live alone, or things like that. That
work is continuing a pace. Now, we're also beginning to see work where robots are being developed
as companions, and sexual companions, is one dimension of that, and I think we're very close to
that. There's already experiments in that dimension in particularly in Japan, for example.

12:21

So it isn't that hard to imagine a future in the not too distant future where we would have
relationships, intimate relationships with these objects that we hope might fulfill some of our unmet
needs. >> It sounds like you're talking about a coming time of a most digital domination. >> Some
people would call that the singularity, right? What is that moment in time when machines, smart
objects are basically able to self-reproduce without our input, right? I don't think in my mind there's
any question that that is occurring. As AI continues to develop, as machine learning is used to
initially program devices, but then they are able to learn on their own from their interactions with
us. Which is why I think the research that we're doing, trying to understand our responses to those
interactions, is so important. Because we're teaching them the things that they're using to be able to
learn more about us and themselves in the future. And so I think understanding how we're going to
interact with objects is going to be very important. >> So, is this dominance of the digital due simply
to this increased hyperintelligence or is something else beyond just the intelligence factor? >> Well, I
think part of it, first of all, we can look to all the technology laws to sort of explain why is this
happening. And so it's better, faster, cheaper, right? So I think that's a big part of it. However, I think
there's an enormous human component. It's the humans who are doing the reasearch in AI. The
humans developing the machine learning techniques. The humans building the robots, employing
them with the AI. Learning how to learn through machine learning and AI and software and things of
that nature in order to do these things, because there's this enormous curiosity about where we can
take this. And so I think much of this is coming, not from the objects that are getting smarter, but
from the humans who are pushing them in that direction. Which is one of the reasons I'm so
convinced we will absolutely hit the singularity. The question is, when it will come? And I think it will
be much sooner than many of us could have imagined. >> Within our lifetimes?

14:46

>> Yeah, possibly, within the next maybe 20, 30 years or so. I think that it's highly likely. >> Maybe
just give us a quick, connections in the future [INAUDIBLE] but a quick preview. So 30 years from
now, how will life be different? >> That is so difficult. But I don't think it's too risky to say that many
ordinary devices that we interact with in our lives, in the world, will be smart and managed to some
extent, some smarter than others. So park benches will be smart. Trash cans will be smart. Our cars
will be smart. The roads will be smart. Many aspects of our cities will be smart. We're seeing our
homes are smart in ways in terms of, we'll see a big push in the next few years for energy
consumption, better efficiency. There'll be a lot of work done. And just how to make the living of our
daily lives better, more efficient, cleaner, safer. So we're seeing that right now. What will happen in
30 years as an outgrowth of that is difficult to predict, but I think it'll be very likely that many jobs
will have been replaced by robots in many different industries.

16:01

Some because it's cheaper, some because it's safer, things of that nature. And I think one of the
most interesting challenges for humanity, we could just look at the smart car as an example of what
the challenge will be. We're all used to driving our cars, right, and it takes a fair amount of cognitive
effort. A lot of people like driving, it's fun. It's very experiential, gets you where you need to go, so
there;s also this rational component to it. But imagine a car where you're not in control, and now
you gotta twiddle your thumbs, right? So the challenge for humanity will be to figure out, what will
we do with all of this leisure time? So some of it will be in our cars where literally, should I read a
book? Do I have more time to be on Facebook? Or whatever the Facebook version is in 30 years. Will
I be talking to people? What will I do to keep myself engaged and active and alive? And I think those
same things will happen for those of us who won't be working in the sort of professions we thought
of, because the robots will be doing that work for us. And maybe a lot of our other tasks will be
handled in automated fashion. We'll have to find some interesting ways to keep ourselves occupied
so that we don't all sort of become fat and lazy and stupid. [LAUGH] >> It sounds like we're
accelerating the retirement age to perhaps someone's 20s almost? >> It could happen, right? Yeah,
definitely, so I think we're in for some very interesting times in the next few years even. >> Are we
safe as professors? Will robots replace us at some point? >> I think we're safe for now, [LAUGH]
because we do some interesting, mentally challenging things that so far, we haven't been able to
train AI to do. But that's hard to predict whether they won't be able to write papers better than we
will in just the next few years. >> Well, maybe not better than you, but better than me, [INAUDIBLE].
>> [LAUGH] >> Donna, anything else our learners should know about the digital revolution or the
Internet of Things that you haven't covered already? >> I think one of the things you want to think
about is to try to get back into the physical world. This is a huge opportunity for humans now to get
out of our phones, get out of the smartphones, get off social networking, which a lot of research is
now suggesting is maybe pretty deleterious to our psychological health and well-being. And start to
think about what it means to live in the physical world, and maybe these devices will help us get
there. >> That's great advice, also great transition to week two in which we talk about in-law
resistance to the digital. Donna, finally where can our learners find out more about you and your
fascinating research? >> Well, you can Google me. Just Google Donna Hoffman, or you can visit my
website and blog postsocial.gwu.edu. >> Fantastic job, Donna, thank you so much. >> Thanks, Eric.
Glad to be here.

Lecture 2: Democracy (Side 2)

0:20

Now that you've seen some examples of digital democracy, and we've defined what this concept
means, here are three key things that you should know. First, higher trust. One of the benefits of
shifting from the analog to the digital via democracy, is the possibility of getting a higher degree of
trust from potential customers.

0:42

A large body of research suggests that online reviews posted by regular people are more trustworthy
than firm-sponsored messages and claims. Although not quite the same thing, a democracy
approach also offers this promise of higher trust because its offerings come from real people, or
cats, that seem more like us.

1:05

For example, Grumpy Cat is just a regular cat, owned by a regular person, and lives a fairly normal
cat life. Likewise, Studio Neat proudly proclaims that their company is essentially two guys, Tom and
Dan, who work out of a garage in Austin, Texas. And they're not interested in obtaining venture
funding or being acquired, in fact, one of their main goals is to never hire an employee. The fact that
democratic offerings come from real people like us, or our cats, makes them easy to relate to, and
things that we can readily trust. Second, economies of scope. If you've had some economics lessons,
you've probably heard about the concept of economies of scale.

1:51

In essence, this concept says, that as a quantity of something goes up, it's costs goes down, and its
value goes up.

2:00

This is one of the most important concepts in traditional neoclassic economics, and is a key
foundation for our modern business world.

2:09

However, there a related, less well-known concept called economies of scope. This concept says that
costs go down and value goes up, not by offering a larger quantity of one thing, but by offering a
larger number of different things. A democracy approach is more closely linked to economies of
scope than economies of scale, because it offers customers the benefits of having lots of different
things.

2:37

For example, Rotten Tomatoes offers movie goers the benefits of both reviews of hundreds of
movies, as well as a large diversity of different opinions about these movies. Likewise, although
Studio Neat is just two guys in a garage, they currently offer eight different products. This is a
broader pattern that we see in goods and services that have become digitally dominated. As the
incremental costs of a digital offering is typically lower than that of analog offering. Third, customers
are more than customers. In the analog world, customers typically have a singular purpose. They are
people who choose and use products and services. However, when a product or service is marketed
via democracy, customers usually take on a more complex set of roles. In essence, these customers
become more than customers. For example, some of the folks who read Rotten Tomatoes also write
reviews for this website and vice versa.

3:45

Likewise, many of the fans of both Grumpy Cat and Studio Neat also help promote the offerings of
both of these enterprises by sharing their enthusiasm via social media.

3:57

As a result, both of these highly successful initiatives have spent nearly no money on traditional
promotional techniques, like advertising or sales promotion.

4:08

Well, now that you know what digital democracy is, here are some tips for successfully leveraging
this concept to enhance your marketing efforts. First, keep it fresh. In the digital world, content must
be constantly updated in order to stay fresh. For example, most university websites provide fresh
content each and every day.

4:30

So if you go to the University of Illinois' homepage, you'll see something today that wasn't there
yesterday, like a new feature story, or highlights of a new research project.

4:40

Digital offerings that employ a democratic strategy also need to remain fresh.

4:47

For example, each week Rotten Tomatoes adds a new set of movies, and each day it offers a new set
of reviews of its current movies. Likewise, although Studio Neat only offers a new product only a few
times a year, it keeps things fresh by hosting a monthly podcast that give customers insights about
its current activities. So, if you employ a democracy approach, make sure that your content stays
fresh. Second, peek behind the stage. In addition to having to stay fresh, successful democracy
initiatives typically exhibit a high degree of authenticity.

5:26

These initiatives typically have real people, or cats, who lead real lives.

5:32

This authenticity validates the concept of democracy, and gives customers the idea that these
people are just like them.

5:40

This creates a higher degree of empathy, and makes their marketing efforts more credible, and less
commercial in nature. One way that many democracy initiatives try to cultivate this authenticity, is
to provide a peek behind the stage. As noted by the famous sociologist Erving Goffman, we often
seek to present ourselves in a favorable manner. Goffman calls this the front stage, which he
contrasts with the back stage, the part of us that we usually keep hidden from public view. For
example, the videos in this course portray the front stage of me as a professor relaying knowledge,
but don't show my backstage life, when I'm laying on my couch, binge watching Game of Thrones
with a bag of Cheetos on my stomach.

6:27

We hide the back stage, we really don't allow people to see how we really are.

6:33

However, at times, a peek behind the stage can actually be a good thing.

6:39

Because as the front stage of the digital world takes on a bigger part of our lives, we seem to be
craving for a look at the back of the stage. A successful democracy initiative should do this from time
to time.

6:53

For example, Studio Neat website offers a set of homemade videos that show how its products are
created in Tom's garage, in Austin, Texas. Likewise, one of the many features on Grumpy Cat's
website is a page that reveals lots of information about Grumpy Cat's daily activities, when he's not
in front of the camera. For example, having photos of his parents. Third, cult of personality. Look
into my eyes, what do you see? The cult of personality. Does that sound familiar? You may recognize
those words as the opening lyrics to the song Cult Of Personality by Living Color, which was a
popular rock band, back in the 1980s.

7:39

The cult of personality is also a tool that can be employed to enhance the success of a democracy
approach. This presents an interesting paradox. Although the basic idea behind this approach is that
it gives the opportunity from our people, and cats, to be visible and take part in the conversation. It
also allows allows these people, and cats, to become digital celebrities, who often enjoy a cult of
personality. This prospect of celebrity can be an important factor in terms of attracting both
participants and customers to these democratic initiatives.

8:16

For example, Rotten Tomatoes provides opportunity for an average movie fan to become a mini-
celebrity by allowing millions of fellow movie fans to see their photo and to read their witty
impressions. Likewise, Grumpy Cat has become perhaps the most famous cat in the world. And his
fame is an important reason why people buy his merchandise like t-shirts, mugs, and books.

8:42

So if you employ a democracy approach, make sure that you provide a means for people, or cats,
that participate in your initiative to create a cult of personality. Fourth and finally, splendid isolation.
In the words of the great songwriter Warren Zevon, splendid isolation I don't need no one. These
words also capture an interesting aspect of a democracy approach.

9:08
These initiatives are typically consumed in relative social isolation. For example, when we read a
movie review on Rotten Tomatoes on our computer, we're probably by ourselves and are not likely
to discuss the details of this review to others. Likewise, you probably don't spend an evening with
friends and family looking at Grumpy Cat photos. Or perhaps you do.

9:32

Instead, you probably do this when you're at home or at work alone and bored. That's what I do.

9:39

Although you might share these photos on social media and engage in brief conversations with
others, this is really not much of a social activity. Now, if you recall from our introductory lectures,
sociability was one of the benefits of the analog world, and not something that can be easily
digitized. So if you're trying to employ a democracy approach, you should focus your marketing
efforts on products and services that can be consumed in splendid isolation. Well, I hope you
enjoyed this exploration of democracy, that it gave you some new insights about marketing in the
analog world