Innovation Reactor

What makes a great brand?

There are five reasons why Apple, Coca Cola, Google, Nike, Cisco, and Mercedes Benz consistently rank amongst the Best Global Brands.

• They anticipate customer requirements and fulfill them 
• They have products that are simple and easy to understand
• They are supportive and treat people fairly, ethically, honestly and have transparent policies and terms 
• They are easily available to people when needed
• They help people achieve their dreams

And yet a poor experience with customer service or bad communications can leave people with negative feelings about a brand. So it's astonishing that many companies haven't figured this out yet.

Great brands have customer service policies to make life easy and provide help for customers when things go wrong. These brands are trustworthy and supportive because they make customers feel good and offer peace of mind after every interaction. Brands like Amazon and Disney know this and have instilled in their people a way of interacting that goes beyond advocacy. By crafting a culture around "helping others" and being "on the customers side" these brands have become synonymous with delivering a great experience.

The problem with marketing is it's all too easy for companies to slip back into blasting out emails and post packs – burning black holes in consumer mailboxes. But great brands develop more meaningful and contextual communications because they listen to customer needs. These communications are relevant, flexible, helpful, and there when customers most need them. Brands like Zappos have created values like “Build Open and Honest Relationships With Communication” to help guide their marketing strategy and ultimately build deeper connections with their customers.

The really good news is that if you focus on providing helpful customer service and meaningful communications your brand can be great too.

 

Online Customer Experience Innovation: Creating Community

Nowadays your customers are more likely to trust a complete stranger’s product review, because they prefer to know what other people think rather than being shown “branded” marketing messages. By developing an online community where customers create the content, share information and interact, your company can deepen customer engagement and influence the purchase decision.

Free: The Future of a Radical Price - UK Book Launch

Free is the new book by The Long Tail author and editor of Wired magazine, Chris Anderson. Having been an enthusiastic proponent of Long Tail theory I was fortunate to attend the UK book launch last week. Here’s a quick run down of the book.

Free is well researched and reviews some companies over the years that have used Free as a business model or a component of their marketing strategy, Jell-O, Village Voice, Google, Gillette, Yahoo, Facebook, Craigslist and US saloons back in the 1800’s that provided a free lunch if you bought a beer.

The book looks at the economics of free by comparing physical markets (Atoms) to the online digital market (Bits). With physical products, marginal costs rarely fall to zero so free is a marketing strategy used to drive sales that are cross-subsidized from another customer segment. You are probably paying sooner or later. Whereas in competitive markets, like the internet, price falls to marginal cost, therefore Moore’s Law (50% increase in performance and subsequent price declines approx every 18 months) can now be applied to technologies like storage, bandwidth and processing to allow business models based on free to thrive.

A central idea of the book is Google's “max strategy” where Free maximizes distribution and customer reach.

“It’s the best way to reach the biggest possible market and achieve mass adoption” says Anderson.

The obvious problem with a Free business model is monetization, i.e. we’ve got a popular product, a good reputation and all these new customers, now how do we make money from our business? However, most businesses would rather have this issue than having a great product with high margins but no customers and or brand recognition.

The book argues that in the digital world the first to Free gets attention and significant market share. Using the Microsoft struggle with piracy and open source software as an example, sooner or later you’ll compete with a company with a "freemium" business model so you need match the price, adapt your product offering to new segments or offer significant differentiation.

Anderson writes “Those who understand the new Free will command tomorrow’s markets and disrupt today’s”.

He offers several ideas for making money from Free such as offering products or services that allow customers to save time, lower risk, increase status and more premium or complimentary products and services to enhance their experience. But this is really nothing new and something we marketers struggle with each day.

There are some real problems with Free. For instance, the behavioural psychology of when products are provided free, customers tend to be less engaged and have lower commitment levels. Also, if free is not managed it can create abundance and waste that has long term effects on the environment. Devon Dudgeon writes another great review of Free in her Below the Line blog.

Chris gave a short introduction and I received a free copy of course. While I enjoyed reading the book and meeting Chris I didn’t enjoy the read as much as The Long Tail, probably because I paid $24.95 for that one!

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Free: The Future of a Radical Price

Revolutionary Road – Online business lessons from LOVEFiLM

LOVEFiLM is the largest online movie rental company in the UK. With over 1.2m active subscribers it generates approximately 50% of all UK DVD rentals. The business has been a remarkable online success story with 94% of subscriber’s recommending the service to friends and LOVEFiLM CEO Simon Calver expects to hit the £100m-turnover mark in 2009.

So how did this small start-up enter the market and beat established players like Blockbuster? This post highlights the most important lessons and best practice from the LOVEFiLM experience.

1. Understand what your customers care about the most then deliver a great value proposition

LOVEFiLM is built on a simple idea that consumers passionate about film want choice, convenience and value-for-money. Your business must create a unique customer-focused value proposition to compete and win.

• Choice: While the average rental store can hold a few thousand titles LOVEFiLM can provide over 65,000 from the latest releases to cinema classics.

• Convenience: Website where you can fine-tune your rental order list and DVD’s are sent by next day delivery service.

• Value for money: Lower cost per rental, free delivery and no late fees.

2. Minimize operations costs and quickly generate cash flow to support brand building and customer acquisition

Lower fixed overheads and rent: Rather than retail stores LOVEFiLM has one centralized distribution centre that services all of the UK, providing lower fixed overheads and rent.

Inventory efficiency: LOVEFiLM can fulfill customer rental orders on the same day to provide a speedy service that delivers on its brand promise.

Generate cash: Importantly many new online start-ups struggle to generate positive earnings because they offer their product for free to early adopters who then resist paying when companies try to monetize their product. From the start LOVEFiLM insisted on a business model with a monthly subscription fee because it provided a positive cash-conversion cycle that enabled growth. This business model is smart since upfront cash can be reinvested quickly in brand advertising and customer acquisition.

Pay-for-performance contracts: Signing performance-based affiliate marketing and channel partnerships for new customer acquisition ensured LOVEFiLM only paid for an active subscriber and not clicks or cold leads.

3. Design your website to make navigation easy, provide relevant content and make the purchase and billing system simple to use

LOVEFiLM is essentially a long-tail business with 80% of DVD rentals coming from the back catalog – movies over 3 months old – so the website is designed to make it easy to search for popular titles or browse films by genre.

Your company website and the customer service experience is such a key driver for building your brand. In the digital world it’s important to understand how your customers search for information and move through the buying process. Therefore use customer research to make your website navigation intuitive, place content where it's easy to find and keep the registration and billing process simple.

4. Allow customer personalization and community to deepen engagement with the brand

The LOVEFiLM website not only lets customers create their own personalized rental lists and watch movie trailers but also encourages them to add to their own film ratings, reviews and recommendations. By creating an online community where customers create the content, share information and interact, LOVEFiLM deepens customer engagement with the brand.

It’s a common misconception that user-generated content is hard to control, requires additional resources and the ROI difficult to measure. Because fast-growth companies like eBay, Amazon, Expedia and now LOVEFiLM are using online user-generated content to give their customers a voice and to differentiate their brands in a crowded online space.

5. Make continuous product and pricing innovations

Product innovation:  By using data to understand unique customer needs LOVEFiLM was able to introduce new product packages such as Unlimited, Capped and Pay-as-you-go monthly rental plans, catering to different segments. LOVEFiLM has recently added video games and is also developing a movie on-demand service to address behaviour shifts in customer entertainment and media.

Flexible pricing: LOVEFiLM started with one standard price but soon after the initial marketing push the customer rate growth slowed. Research indicated they were missing out on different audiences who didn’t want one-size-fits-all pricing so LOVEFiLM now provides different price points. New businesses are often reluctant to discount their core offering then feel surprised when new lower priced competitors steal market share. A good lesson here is to listen to customers, be flexible on pricing models to serve different segments, lower the entry point and don’t be afraid to cannibalize your brand or someone else will.

6. Blend digital and offline channels to monetize your marketing

With growth in new subscribers and increased website traffic LOVEFiLM now has 4.3m unique visits per month to the UK site and has been able to monetize their website and weekly email newsletter via ad sales.

Since DVD’s are sent by first class post, LOVEFiLM generates additional revenue in partnership with film studios and distributors by using envelopes and inserts to advertise the latest upcoming blockbusters and new releases.

New films and Hollywood stars are always in the headlines. LOVEFiLM actively monitors the newswires and engages in proactive PR to connect with news stories drive awareness of the brand and traffic to the site. A quirky LOVEFiLM review of the latest Star Trek movie received national coverage on the BBC and YouTube promoting the back catalog of Star Trek DVD’s.

If your business has a customer database and regular communication channels you can explore ways to monetize and extract value through ad sales, PR and partnerships like LOVEFiLM.