What should low-margin brick-and-mortar retailers do to compete effectively against nimbler online rivals? Create a unified customer experience that integrates retail and online. At least that’s the gist of the unsolicited advice for struggling book retailer Barnes & Noble in yesterday’s Wall Street Journal.

Most of the authors, retailers and agents cited in the article give Barnes & Noble credit for its ambitious e-book offerings, but suggest it could better leverage its brick-and-mortar presence. One key advantage a physical location offers is ease-of-browsing. As the president of a New York literary agency puts it: “Discovery of new titles still happens primarily though physical bookstores.”

The recommendations to maximize Barnes & Noble’s discovery potential apply to brick-and-mortar retailers generally, not just bookstores. Key recommendations include:

1. Host a variety of destination activities like release parties, author signings and book club meetings.

2. Feature low-risk products, e.g., paperbacks as opposed to more expensive hardbacks.

3. Offer aggressive bundling and discounting, such as free digital copies with the purchase of an author- or genre-based bundle.

4. Reorganize the store—perhaps using new types of displays—to facilitate the discovery of new products.

5. Implement clear, compelling signage and/or other way-finding systems, such as employee recommendation tags, to help match customers to products of interest.

The trick to a successful brick-and-mortar enterprise is enhancing what sets it apart from online competitors. Discovery is definitely one of those distinguishing assets.

An app designed to track your mood throughout the day could yield exciting new commercial research possibilities.

The Emotion Sense app combines data collected via the phone’s built-in sensors with data from periodic mood surveys to generate an ‘emotion map.’ The free Android-only app uses the phone’s GPS, accelerometer and microphone, along with calling and texting patterns, to characterize your environment and behavior. Those data streams are then correlated with the results of brief mood surveys to identify peak emotional states and their associated triggers.

While the University of Cambridge researchers who developed this app intend to use it solely for therapeutic purposes, it’s easy to imagine exciting commercial variants. Here are a couple of key possibilities:

Customer journey tracking. Leveraging the app’s location and communication tracking features, this variant could provide useful data about consumer buying patterns. What types of stimuli trigger a purchase? How often and in what circumstances do consumers compare products online while at retail? These and other moment of truth-style questions could be answered by a modified version of this app.

Satisfaction & loyalty measurement. A variant of this app could be deployed to measure consumer satisfaction under different conditions: before, during and after a purchase; across use-cases; and at various stages of product ownership. The app would be especially useful in this context if mood surveys could be triggered by key events, e.g., stepping into a retail store.

Regardless of any particular commercial use, the Emotion Sense app reinforces the value of integrating automatically-generated behavioral/environmental data and rich, self-reported feedback. With the advent of this and other, similar mobile apps, the ‘holy grail’ of effectively combining quant and qual is fast becoming achievable.

According to Games Industry International and other industry press, the instant verdict on the Xbox One’s unveiling among devoted gamers was largely thumbs down. The presentation was criticized most heavily for its emphasis on the console’s non-gaming features, specifically, its media management capabilities. A voice-controlled interface? Advanced picture-in-picture? Social TV via Skype? A Halo TV show? Most devoted gamers apparently shrugged their shoulders.

Microsoft’s strategy here is, however, perfectly understandable given some essential numbers: hardcore gamers are outnumbered by casual gamers, who are, in turn, outnumbered by consumers of popular media. By breaking virtually every console sales record, Nintendo’s Wii showed the power of appealing to casual gamers. It’s not surprising Microsoft decided to try to go Nintendo one better by targeting an even larger mass audience.

Our consumer research on the connected home over the last twelve years certainly points to media entertainment as the most powerful adoption driver. And the Xbox One addresses the most frequently-voiced need among these potential adopters: control. Most consumers are looking for the type of all-in-one media server the Xbox One purports to be. They’re looking to save time and effort associated with managing their media entertainment.

Whether Xbox One delivers on that promise, of course, has yet to be seen. From Windows Media Services (formerly, Netshow Services) to the ill-fated Zune and recent Xbox Music (its all-in-one music service), the company’s record in this space is pretty spotty. But the concept is undeniably spot-on.

During its earnings call earlier this week, Electronic Arts (EA) CEO John Riccitiello declared the company had reached “the end of an era.” By that, he meant an era dominated by packaged games for consoles and gaming-dedicated handhelds. While the decline in packaged game revenue is no surprise given that current-gen systems are in their seventh year, Riccitiello suggested the industry is settling into a new normal defined by growing digital and mobile opportunities.

EA is well-positioned to capitalize on these trends. It’s grown digital revenue at a steady pace, averaging annual growth of 40%. The publisher is currently tied for first in digital revenue among western gaming companies, due mainly to the success of Battlefield 3 Premium. Its Origin digital distribution service is producing solid numbers as well: 30 million registered users and 4.4 million buyers with average sales of about $64. What’s more, about 13 million are accessing Origin on their mobile devices.

This shift toward mobile games will only accelerate as more consumers adopt 4G LTE services, and EA ramps up simultaneous multi-platform releases of its core titles. The fact that Origin now has 70 independent developers pumping out content for the portal can’t hurt, either.

EA’s public outlook signals a video game market in rapid transition. Packaged and social games are losing steam, while digital and mobile options take up the slack. The question is: Will the latter produce revenues fast enough to make up for losses in more established product niches? The uncertainty around the answer has compelled EA (and many other AAA title publishers) to adopt a conservative title development strategy, emphasizing its most popular franchises. This is a natural, but hopefully, temporary reaction to the current market volatility.

What makes gaming so exciting is the ever-present potential for an original idea to break through the standard industry fodder. It’s an industry built on the next big thing. Let’s hope powerhouse publishers like EA haven’t entirely lost their appetite for discovering it.

We humans are, well, liars.

To put it more delicately, as author Dan Ariely does in his recent book  The (Honest) Truth About Dishonesty, we’re prone to white lies, cheating and exaggeration so that we can “maintain a positive view of ourselves.”

This is definitely a challenge for those of us in the business of asking people to predict their future behaviors. And no one knows this better than our brethren in the world of political polling. Election outcome forecasts hinge precariously on their ability to accurately predict who will show up at the polls—and who will not.

Marketers and researchers aiming to accurately forecast who will buy a particular product can take the same factors about human behavior into account that the pollsters do. Broadly, they fall into two categories: — things that: 1) diminish, and 2) enhance our likelihood of acting as we predict.

Factors that diminish our likelihood of acting as we predict:

The “planning fallacy.” One of the chief ways we rationalize our optimistic forecasts is by underestimating how long actions will take, and overestimating how much time we’ll have in the future to do them.

Environmental factors. Extreme weather is the most obvious such factor to take into account at the moment. Another biggie is economic conditions. (While environmental factors can prevent us from acting, they can also motivate us; see below.)

Factors that enhance our likelihood of acting as we predict:

Norming.  If we see (or assume) that our peers are doing something, noble or otherwise, we’re more prone to do it ourselves. (We’re also more likely to say we’ll do it, and not follow through.)

Past behavior. If we’ve done a behavior in the past, that increases the odds of doing it again. Voters who have been to the polling place before don’t have to go through the bother of finding it again. Even doing something related has an influence; people who have bought some sort of consumer electronics device in the past year or two are more likely to actually buy another one this holiday season.

How to factor these elements into your forecasts is part art, and part science. This excellent 2010 article by NPR uncovers how the political pros do it.

Just because everybody lies doesn’t mean we shouldn’t listen. Self-reported likelihood to act is correlated with actual behavior. It’s just not the whole story.

Nobody said this research business was going to be easy.

As a former English lit major, an editorial in yesterday’s Wall Street Journal caught my attention immediately. “How to Avoid a Bonfire of the Humanities” proclaimed the headline. It’s a rare instance of a business paper touting the practical benefits of the humanities.

Michael S. Malone’s piece details the dwindling popularity and resources of university humanity departments at a time when technology companies are increasingly competing for customers on the basis of storytelling. In many, if not most cases, technology alone isn’t enough to ensure business success. The editorial quotes Steve Jobs on this point saying, “It’s technology married with liberal arts, married with the humanities, that yields us [Apple] the result that makes our heart sing.”

Jobs understood that effective marketing comes down to telling your product’s story in a way that taps into powerful archetypes and emotions. Doing that requires knowledge of universal myths, a wealth of sympathetic imagination, and the ability to present compelling use cases via a wide range of channels, notably, print, radio, video, social media and games. Who better to tell involving product stories than humanities majors?

All too often, though, I see companies mistake product features for story points. Marketing through engineering, I call it. Without pointing fingers at any particular company, a number of recent campaigns around 4G LTE have revolved around purported or transitory technology advantages. The mere mention of faster download speeds doesn’t mean much to me. I need a concrete example, a tantalizing glimpse of the life I could be living if only I had 4G service. Otherwise, I’m content with the 3G experience.

In working with the hard drive manufacturer Quantum years ago, the company came around to the fact that speeds-and-feeds belonged in a box. Literally. Their print ads corralled product features into a so-called ‘geek box’ removed from the main visual. Their ads properly focused on emotional benefits, the personal stories that brought their products to life.

Technology provides the what, marketing provides the why. The most persuasive ‘whys’ are those with an evocative story behind them.

Offering a “compelling user experience” is now the Holy Grail when it comes to making successful digital products and services. Indeed, an endless supply of books, blogs and tweets testifies to its importance from a wide range of perspectives—from ethnography to app development to business ROI.

But what, exactly, is a “compelling experience”? And how do you know if your product or service provides it?

Simply put, compelling user experiences elicit strongly positive emotions. And the best user experiences evoke these emotions during product use or service delivery as well as after the fact. In other words, we have positive feelings about these experiences as both means and ends.

The means.  Products and services succeed when they help users get into a positive state of “flow” and actively engage with the solution. At the risk of going Zen, flow is that feeling of focus and enjoyment where time slips away and you become one with the activity. Video game developers are extremely effective at harnessing this feeling, and the term “gamification” really means leveraging the principles of flow to achieve the same effect.

Not coincidentally, three key conditions necessary for a state of flow are fundamental to the design of a successful game or “gamified” user interface:

1. A clear goal–you know what you can do, and how to do it.

2. Immediate feedback–crucial for for learning and developing confidence.

3. A sense of user control. Things that are simple, intuitive and pleasant to do are easier to remember, contributing to a sense of control. As user skill increases, the level of challenge can increase to further reinforce this sense.

And ends.  A digital product or service can elicit positive emotion by delivering not just the actual objective benefit, but also the subjective feeling associated with the broader benefit—typically after the action is carried out. For example, a security system not only keeps intruders out of your home, but makes you feel confident in the knowledge that you have made your family and belongings secure.

Emotion plays a large factor in all aspects of the consumer experience—from expressing needs, through forming initial impressions and making purchase decisions to using and recommending solutions. This framework offers a helpful reminder to product designers and marketers alike to keep both the means and ends in mind.

After six years and more than $50 million of his own money, former Major League pitcher Curt Schilling’s wildly ambitious dream of building a massively multiplayer online game (MMO) to rival market leader World of Warcraft (WoW) came to a crashing end this summer. His 38 Studios imploded in spectacular fashion, complete with reports of financial mismanagement, public spats with former employees and government officials, lawsuits of various sorts, and a loss of $75 million in taxpayer money. The personalities and interpersonal dramas surrounding the company’s shuttering, however, tend to obscure the fact that its business strategy was inherently flawed. Starting with the notion of taking on WoW head-on.

Here, then, are my top-three lessons for developers drawn from 38 Studios’ tragic example:

1. Have a strong point of differentiation. According to Michael Porter in his seminal Competitive Strategy, there are three generic strategies a company can adopt to be successful: cost leadership, differentiation or focus.  Though Schilling has lately hinted 38 Studios actually intended to go the cost leadership route by launching the MMO as a free-to-play (F2P) offering, his earlier pronouncements suggest he was really going for differentiation, if not in kind, at least in volume. As suggested by online previews, the game appeared to be the MMO equivalent of Walmart, offering up the same experiences as WoW—just a lot more of them. The MMO market is particularly unforgiving when it comes to me-too products. Why would gamers who have invested in characters, online relationships and the like with one title switch to another nearly identical to it?

2. Build to scale. Despite a purported budget of $100 million, 38 Studios’ MMO was too large for its budget. The game was designed to beat WoW on its own terms—world-building, character design, story and game mechanics—features that took Blizzard Entertainment years and years of investment and real-world testing to perfect (or at least, turn to its advantage). Schilling bet on releasing an MMO bigger and better than WoW from the get-go. Any company, regardless of its niche, must scale its projects to fit its talents and resources. Most developers properly move from small beginnings—a mobile game or relatively easy-to-execute packaged title—to increasingly larger and more complicated projects.

3. Know your market. According to a July study by SuperData Research and Newzoo, there are about 50 million MMO players in the U.S. Fewer than half—about 23 million—spend money on F2P or subscription MMOs. While the overall fee-supported MMO market is expected to grow over the next several years, such growth is expected to be incremental. Together, the introduction of new MMOs and the continued dominance of the F2P model have shrunk the average transaction size year-over-year even as gamers are spending somewhat more in aggregate. 38 Studios gave little indication of anticipating this and other transformational trends. The number of MMO titles has nearly doubled since the beginning of 2011 while the pool of MMO gamers has expanded only at the margins. To get WoW-sized subscriber numbers, 38 Studios would have had to convert implausible numbers of newcomers, or just as unlikely, win over millions of subscribers to other AAA games. This issue is intimately related to the company’s lack of differentiation and its insistence on building out of scale.

The upshot of these lessons is this: hone your value proposition. Even if 38 Studios had corralled sufficient resources to launch its MMO, indications are the game would have been a bland also-ran.

Two recent news items about climate change illustrate the need to take consumer psychology into account when designing digital products and services. This principle is especially true for those with abstract and/or long-term benefits.

We’re all climate-change idiots.”

The first item, a New York Times editorial, makes this bold claim in the headline: “We’re All Climate-Change Idiots.” Editorial writer Beth Gardiner argues that people are just not psychologically equipped to deal with such abstract, pervasive danger, no matter how real or grave the threat.  “You almost couldn’t design a problem that is a worse fit with our underlying psychology,” she quotes Anthony Leiserowitz as saying. As the director of the Yale Project on Climate Change, Leiserowitz is in good position to know.

Gardiner lays out some specific psychological underpinnings that prevent us from effectively assessing and addressing climate change. These include our preference for simplicity over complexity, a knack for paying attention to irrelevant information, and a general disdain for delayed gratification. And of course, there’s our habit of valuing information that reinforces our existing beliefs while dismissing competing views. (Sound familiar? If you’re a product developer or a marketer, you take many of these factors into account every day.)

She then offers some suggestions for working with (or around) our psychological quirks, citing our need for things that are easy, immediate, and help us keep up with our peers. Digital solutions mentioned include default double-sided printing, real-time energy monitoring displays, and publishing energy usage norms among one’s neighborhood or network.

How Facebook could change the game for sustainability

The second piece, “How Facebook could change the game for sustainability,” reveals how the social media giant is working to exploit the power of social norms through apps designed to work within Facebook.

In the article, GigaOm writer Katie Fehrenbacher focuses on an interview she conducted with Bill Weihl, Facebook’s manager of energy efficiency and sustainability. Weihl says a sustainability app can be more powerful within a social media context because it’s “much more personal and seems likely to help people pay attention more and make a change.”

Facebook’s first such app, developed by Opower, lets users compare their energy usage to friends and to national averages. Currently in beta with 16 utilities, the Opower app ultimately will let users compete with each other in a game to minimize their energy use.

Will Facebook “crack the code” for behavior change when it comes to promoting sustainability?

Even with a healthy dose of skepticism, I think Facebook is onto something here, especially if it adheres to the principles laid out by Leiserowitz and others in the emerging field of climate psychology. The key of course, is to ensure the app capitalizes on our natural habits rather than requiring us to adopt new ones.

In the end, perhaps the real idiots are the ones who keep fighting an uphill battle with human nature, or worse—do nothing at all.

By now you’re probably aware of last week’s Kickstarter success story, Ouya, the Android-based gaming console. The project racked up the biggest first day ever on the crowdfunding site and a few days into meeting its fundraising goal of $950,000 became only one of eight projects to top a million dollars. At the time of this writing, the project has cleared just over $5 million, with 22 days left to solicit backers. As even the chronically jaded Darth Vader might say, “Impressive. Most impressive.”

Why all the love? Ouya represents everything indie gamers and developers have been pining for since, well, the advent of open-source gaming. It has two main virtues:

It’s relatively inexpensive, a.k.a., cheap. The console promises to be a boon for gamers weary of shelling out several hundred dollars for hardware and accessories, paying $60 a pop for premium titles and getting nickel-and-dimed for online multiplayer action. Ouya is expected to retail for only $99 and many of its titles are likely to be free-to-play (F2P) or at least have a significant F2P component. This could mean F2P gaming in the living room on a grand scale.

It’s developer-friendly. The potential consumer benefits of an open source console are clear: more titles and more unique titles. The relative ease of programming for the Ouya should guarantee a continuous flow of new games and encourage developers to take design risks that would be financially impossible in titles intended for one of the big three consoles. Ouya represents a chance to shift the public spotlight from fancy graphics toward ideas.

Good ideas, though, are only a necessary, not a sufficient condition for success. If a good idea alone was enough, we’d be carrying Apple Newtons instead of iPhones. Solid execution is crucial. Here are the three most important questions the brains behind Ouya have to answer to realize indie gamers’ dreams:

1. Which games will drive console sales at launch? The usual Android shovelware and ports of franchise entries like Angry Birds won’t cut it. The living room experience is fundamentally different than the mobile experience. Consumers turn on their TVs for immersive entertainment. Which titles will offer the equivalent of a AAA cable program or blockbuster movie? Without a winning library of games at launch, the console might as well be a cleverly-designed cardboard box.

2. What’s the distribution strategy? A console based solely on downloadable content doesn’t offer much to brick-and-mortar retailers in the way of ancillary sales. Why would Walmart bother with a $99 product (presumably, with a small profit margin) when it doesn’t have the chance to sell games for it? Absent a strong retail presence then, how does Ouya compete effectively? Even Amazon doesn’t rely entirely on its website to hawk the Kindle. Its retail partnerships have been essential in raising awareness and facilitating impulse buys of the device.

3. What are the compelling social components? Part of what distinguishes console from mobile play is the ease of playing with others. It’s not clear to what extent Ouya will allow for either in-person or online multiplayer action. But the social aspect shouldn’t be underestimated, especially when the console is likely to appeal primarily to hardcore indie gamers, a natural affinity group.

Basically, the makers of Ouya need to figure out how they’re going to convince consumers the console does more than blow up Doodle Jump to TV-sized dimensions. How effectively they do that will determine the course of this crush-worthy experiment.