Interview

INTERVIEW : Nicholas Lovell - Author of "The Curve"

This is the first of many interviews with people HERE/FORTH think are interesting, worthy of your attention and who have impacted our thinking recently.  Get in touch if there's someone you think we should be considering.

Nicholas Lovell (@nicholaslovell) helps creators and brands to make money in a digital world. For the past ten years, he has focused on the video games sector, helping companies such as Rovio, Square Enix and dozens more to be highly profitable while giving their games away for free. He is the author of The Curve (Portfolio Penguin) which shows how all creators and brands can make money from free.

THE BOOK:

Explain "The Curve" in a way you've never previously done.

The Curve comes in three parts: find an audience, probably using free; earn the right to talk to that audience again, probably using technology; and enable superfans, by letting those who love what you do spend lots of money on things they really value.

State by State is a project to create travel guides across 50 states of America. They are building a network of creative people, including designers, artists, curators, craftspeople, restaurateurs, and mixologists. They are going to ask for their recommendations for the places they live, work, grew up, or just plain love. The recommendations will be turned into travel guides, both online and in limited edition print-runs.

The company is currently running a Kickstarter, which is a great place to look at thousands of experiments that creative people are running to see what superfans might value. State by State offers limited edition physical travel guides for one of the states for $25. For $125, you will get the book and a gift box from a state, containing a range of products made by local artists and designers. For $1,000 you get to choose which state is curated next, and a range of other rewards. So State by State is harnessing a desire to connect with artisan creators and designers, to support small businesses, to do something cool and to be part of the process or creating a new type of travel guide.

At the other extreme, Nestlé’s Nespresso coffee division is a Curve business.  The entry price is not free, because you have to purchase the coffee machine. But once you have done that, Nestle has cut out the retailer from the equation. Customers order their coffee online, building a direct one-to-one relationship between coffee-drinker and brand. A coffee drinker who is buying the cheapest coffee and only using one pod a day is spending over £200 a year with Nespresso, and many customers will drink a lot more than that.

What made you write the book?

I wrote the Curve because the digital transition makes me scared. I am scared that the artists and creators and brands I love will fail to adapt. The rules of the twentieth century were about the mass market: mass manufacturing, mass distribution, mass marketing and mass media. The twenty-first century will be about direct connections between producers and end consumers, whether that creator is a struggling author or a global multinational making coffee, chocolate or beer. The opportunity is enormous for those who realize that there are new opportunities in these direct connections, and less room for those who are competing to solve difficult logistics problems which are no longer so difficult.

Is “The Curve” a movement, a model or simply a call to action to stop being lazy and non-complacent?

The Curve is a model. It is a new way of seeing the world that builds on the ideas of dozens of people such as Chris Anderson, author of Free and The Long Tail, Seth Godin, who writes about the importance of being remarkable and Geoffrey Miller, an anthropologist who focuses on what people value.

Many creators and brands are already implementing many aspects of the Curve. My job is to help connect all of these disparate initiatives into a valuable, profitable, successful whole.

How should agencies and brands use ‘The Curve’ - differently?

Agencies and brands should use the Curve to create a coherent strategy that involves content marketing, direct response techniques, data analysis and good old fashioned brand building. A concrete way would be this. If we build a piece of content marketing, how will we know if it is successful? My response would be if it earned you the right to speak to someone again. Through email, through Twitter, through Facebook, through Pinterest, through Snapchat, through wherever. Traditional brand campaigns are still incredibly valuable, but they can be amplified via social media and harnessed via a direct relationship with those people who care enough to engage, and have a higher likelihood of going on to become superfans.

What are three things people should take away from ‘The Curve” that have become apparent since publishing it?

1.     The Curve applies to Business-to-business settings. The key lies in what you should give away for free. As a rule of thumb, I recommend against giving away your core business for free. The stuff you give away should take advantage of the cheap distribution of the web. It might be expensive to make once, but it should make little difference in cost to you whether it is used once or used a million times.

2.     Lots more people are already embracing the Curve than I realised. The Curve is ubiquitous, but without it being conscious, many people are not getting the benefit. Many organisations know that they need to give stuff away and they realise the value of a variable pricing strategy. The Curve shows how to connect both ends of the variable pricing curve.

3.     The Curve is not just about money. It can be about time, or status, or commitment. As a former investment banker, I tend to think of things through a financial lens but, for example, charities and political parties can harness many of the ideas from the Curve, but there superfans might pay as much with their time as with their money.  

Will ‘The Curve” change?  What could cause it to?

Of course it will change. I am a big fan of the Lean Startup which focuses on the idea of validated learning. It argues that the primary objective of any organization operating under conditions of extreme uncertainty should be to learn faster than it runs out of money or internal political capital. I think the Curve is the clearest model I have identified to enable creators and brands to take advantage of cheap distribution and easy one-to-one communications. I expect to keep learning how to improve it forever.

THE BUSINESS:

Free is often seen as a bad thing, you turn that on your head with ‘The Curve’, how have you seen companies sell-in that thinking internally?

The core issue is that it is not about giving your core business away for free. I do believe that if your product can be digitized, it will eventually be free, because your competitors will figure out how to give the digital product away for free and make money elsewhere. That’s happened in music, it’s happening in games and it will come to many other industries. It hasn’t come to ebooks yet, but I think that may just be a matter of time.

The trick is not to say “we must go free”. It is to say “There is a risk our competitors will figure out how to use free to make more money than we are making from paid. Let’s start the experiments now so that if they do go free, we will be in a position to respond.” So, for example, my ebooks are not generally free (although 10 Ways to Make Money in a Free World is free and Design Rules for Free-to-Play Games is under £2.) But if the market determines that the price of an ebook is zero, I have a superfan strategy in place.  

Content and Content Marketing are huge areas people are making money right now, The Curve suggests time and money might be better spent on creating communities but this is a time heavy activity and often long-term plays…who is getting it right (and wrong) and how should people decide what to be focused on?

I would suggest that you do both, but the starting point is to use content marketing to earn the right to talk to people again. Building community starts once you understand what your audience values, and I think that is more easily tested with content marketing than by attempting to build a community from scratch.  

Value is heavily referenced throughout the book but it remains a misunderstood, pretty subjective space where research surrounding it is often is bogged down by individual biases and flawed schema.  In today' and future society what do and will people value more than ever?  Do you see this changing? 

Yes, it is changing. Two decades ago, the idea of virtual goods was laughable. People asked why you would buy something that didn’t exist.

I would argue that this is no different to laughing at someone for buying a Prada handbag when they could have bought a cheaper one in a department store or a Hilfiger T-shirt when you could have gone to Primark in the Western world, where we are, broadly, able to feed and clothe ourselves, what we choose to spend our money on is about status, and self-expression, and a sense of who we are, both to ourselves and to our friends.

But our friendships no longer purely exist in a physical space. A billion people log on to Facebook every month. They have an average of 150 Facebook friends. These are friendships and relationships that are built and cemented in a virtual space. The two spaces have intertwined. What people value is stuff and experiences that say something about them to themselves and to others. That is not going to change. What will change is whether that stuff and those experiences take place in the physical world, the digital world or someone interwoven combination.

Why aren’t businesses focusing on “value”?

Because businesses are built more around “here is a product, how do I sell it?” than around “here is a customer, how do I let her give me lots of money for things she really values”. When we start seeing businesses whose key performance indicators are ARPU (average revenue per user) rather than units sold x ASP (average sales price) is when we start being customer-led, rather than production led.  

3D printing is clearly a large revolution but it still has yet to take hold and go mainstream apart from America.  How long do you think until there’s one in every home and will that spell more doom or opportunity for brands, agencies and businesses?

Bill Gates said that we tend to over-estimate the impact of technology in the short-term and underestimate it in the long term. That is where we are with 3D printing. I think we have a couple of decades before it is a reality. But if you think about all the things that were scoffed at when the Internet was new - that we would buy our groceries on the Internet, that we would buy clothes on the Internet, that we would build friendships on the Internet with people we had never met (Hello, Twitter) – I think 3D printing will be transformational.

It is another technology that changes organisations from being product-led (Let us mass-produce a million rubber ducks and work out how to sell them) to being consumer-led (let us work out what a million customers want, and figure out how to give it them in a way that makes us a great operating margin while keeping them very happy).