Innovation Reactor

The Mad Men approach to customer research

In an episode of Mad Men, the Execs at Sterling Cooper Advertising round up a herd of eager secretaries to test out a new line of lipsticks for Belle Jolie, a cosmetics company. 

On the other side of the two-way mirror, the men enjoy the show as the girls apply different shades and answer questions. But the men gawk and joke at how the girls don’t know why they buy what they buy, and that research is a complete waste of time.

What’s surprising today is how many companies still use the same approach as advertising agencies from the 1960’s. Burning time and money on research designed for a different era.

If the Internet and social media have transformed the way that consumers shop, and technology is blurring the lines between online and offline commerce, isn’t it inevitable that our customer research techniques should change too? 

From my observation traditional research is stuck in the past and companies need to adopt new methods. Here's why:

Traditional research

• Focus groups, surveys and structured interviews
• Tries to uncover explicit customer needs
• Uses market segmentation based on demographics
• Takes place in controlled settings with expensive rooms, equipment and moderators
• Analyzes objective data
• Good for improving existing things
• Static and slow – one city or survey at a time

New research techniques

• Focused on individuals
• Uses observation and empathy
• Happens in natural contexts and through attentively viewing people’s behavior in their own environment
• Uses feelings, thoughts, attitudes, imagination and emotion to uncover latent needs
• Promotes dynamic conversations to generate interpretations and deeper meanings
• Fast, rapid, responsive, and low cost
• Inspires new ideas and opportunities 

Madison Ave in the 60’s is a far cry from the world we live in today. Nowadays understanding individual users through observation and empathy is critical to unlock new product ideas or to create effective marketing programs.  

 

High-Velocity Product Testing

Innovators are always planting new product ideas. They start with a seed and try to grow it into a big, tall and beautiful tree. But often, instead of designing a strong trunk and branches first, they immediately start arranging the leaves.

Here’s a product development tip: build the trunk and branches first, then quickly let customers climb all over them.

The idea is to design and test the main parts of your product early-on and observe actual customer behavior, rather than just listening to what customers say or say they will do.

I’m a fan of high-velocity product testing. This means you get a prototype of the product or the experience into beta, get customer usage data on features or functionality, get information on customer experience pain-points, make adjustments, and then get the next version out fast.

Testing an actual product, with real users in their natural environment, is the foundation of developing something consumers will love. Because the real learning does not start in focus groups or through online surveys, but when you begin reviewing your first set of customer behavior data.

It’s amazing how many great ideas fall flat once they're in live testing, and how the unexpected things become winners. 

 

Three Habits of Highly Successful Product Managers

I recently attended a Customer-Focused Product Design workshop by Sara L. Beckman from University of California Berkeley, Haas School of Business. 

She proposed that product managers excel in three areas - Sensing, Seizing and Transforming - if they want to design innovative new products that customers will love.

Sensing: is all about understanding the strategic environment. What are the latest trends? Who is the competition? What are the user needs? 

Seizing: product managers must be great at taking advantage of opportunities in the market. These opportunities are discovered through detailed portfolio analysis and planning to understand how customers are using your product or substitute products today. Pricing and positioning at this stage is critical to help you win customers hearts and minds.

Transforming: successful managers lead cross-functional teams and use strategic business negotiation or influence to get the resources they need. They quickly design value propositions, get them out to market fast, and start learning in real-time from users.

The product managers job is also to link the technical side (writing product design documents and creating business cases) with marketing skills (creating marketing plans, developing promotions, expanding channels).

I regularly hear from product managers who say, “enough with the theoretical stuff, tell me what I have to do to be successful.” I think the ideas of Sensing, Seizing and Transforming should be considered along with a back-to-basics approach of focusing on, and designing for, the customer.

 

What is ideation?

What do Hollywood Director JJ Abrams, singer and songwriter Dave Stewart from the Eurythmics, Twitter CEO Evan Williams, and Melinda Gates – who oversees the worlds largest philanthropic organization – have in common? They all made the Fast Company Magazine, 100 Most Creative People in Business list. 

But what makes them so creative and innovative? What's behind the next Sci-Fi blockbuster, the words for a hit new song, a global social network, or improved heath and education in the developing world? The answer is simple – ideas.

The Most Creative People in Business have an abundant source of good ideas. The great thing is you can develop this capability too. 

If you want to out-innovate the competition you first need to out-think them. Ideation is the process of generating, exploring, and evaluating new ideas that can give your business a competitive advantage.

Just imagine ideation as a funnel. Insights, views, opinions, data, trends, and knowledge, are captured at the top. Then these elements are filtered in the middle to get the good stuff – new ideas – out the other side. 

There are four key steps in the ideation process:

1. Gather customer insights: Review customer research reports, analyze competitors, social trends, lifestyle patterns, and shopping habits. Search blogs, social networks, and customer service records. Conduct a number of contextual interviews (in-home, in-office, in-mall) with your target customers to understand their behavior in an everyday environment.
2. Find opportunity areas: Look for customer pain-points, problems, inefficient processes, or abnormal behavior. Give these areas names since these themes will serve as vehicles for exploring and developing new ideas. 
3. Brainstorm ideas: Create actionable design statements around your opportunity areas like "How might we improve our product delivery times?" or "What can improve our online user experience?" to provide stimulus and guidelines for brainstorming. Start generating lots of ideas, make sure these ideas are grounded by your customer insights and go for quantity.
4. Prioritize ideas: Develop some customer criteria like "Does this idea improve customers lives?"or "Is the idea different from what customers are using today?" and business criteria like "Does this idea build on the strengths of our core business model?" to help evaluate, rank and select the best ideas.

The 100 Most Creative People in Business have the knack of being able to repeat this process again and again to generate fresh ideas. However even the best can get lost and lose focus so here are a few things to watch out for:

• Ideation is not about defining solutions – ideation is about thinking and learning.
• Ideation is not about brilliant strategies – ideation is about exploration and direction setting.
• Ideation is not about creating advertising tag lines or flashy marketing – ideation is about understanding customer experiences.

 

Outliers: on the edge of innovation

With a spiky pink mohawk she stands at 5ft 7". Wearing a short burberry skirt, army boots, and biker jacket; outfitted with the latest GPS system and night-vision lenses, she explores dramatic ruins of power stations, crumbling psychiatric hospitals, abandoned missile silos, and rusted subway systems. She ignores the no trespassing signs in other forbidden places. As an expert in the new extreme sport of urban exploration, she supplies maps and advice to a whole underground community of dedicated adventurers.

 

In the book Outliers, author Malcolm Gladwell writes about people with "expertise outside of the ordinary." While puzzling to the rest of us, he found these humans are not a one-off phenomena. Rather, expertise comes not only from talent, but also from practice, hard work, rehearsal, many hours of experience, and seizing opportunity.

 

Outliers can be thought of as extreme users. People ahead-of-the-curve who define trends, patterns and popular culture. When developing new products, they are vital for customer research, since they have a disproportionate influence on technology, fashion and social behavior.

 

Extreme users are found at opposite ends of the curve. On a bell curve it's the points located farthest from the middle. Here you'll find either lovers or haters of your products, or what the marketing gurus call "early adopters" or "brand rejectors" respectively.

 

But shouldn't we be talking to the mass market since this is where the money is? Well to understand a flock of sheep you want to talk to the shepherd.

 

Extreme users decode the world around them differently. They use technology in new ways and have different perspectives on reality. These people are often fanatical and go to greater lengths in habit, action or opinion, so acquire better knowledge about their areas of interest than most others. These consumers can articulate their needs more vividly, while the masses in the middle, with limited exposure to your products have trouble. By focusing customer research on extreme users you can then extract a richer source of information.

 

So next time you notice a guy with blond dreadlocks and ripped jeans, who's into freestyle motocross, kitesurfing, rock climbing, 2000ft cliff jumps into deep ravines, and body armor before breakfast, look past the painful scars. Because he's probably the perfect candidate for your research on high-definition cameras, outdoor apparel, social networking and emergency healthcare (of course).

 

"Winning" is the new way consumers achieve control

In the movie The Matrix, the computer hacker Neo learns about the true nature of his reality – that he is actually trapped in a complex computer simulation, used by artificial intelligence to control humans and harvest them as an energy source. 

 

But what’s a kung-fu fighting hacker, dressed in black leather, got to do with innovation? Well if you’re going to design a smash-hit product, then you need to understand the current reality surrounding your customers. 

 

Just like The Matrix, many consumers feel there is a system that's unbeatable and uncontrollable. Constantly bombarded each day with job losses, out-of-control healthcare costs, school closures, higher food prices, "innovative" bank fees, and environmental disasters, many people are looking for a sense of control. 

 

One aspect to wrest back control, in a system that makes control difficult for people, is the desire to “win” by making small gains. Deals, rewards, or other positive experiences satisfy these motivations. Look at the explosion of savings sites like Groupon, Dailydeals, Gilt, or RueLaLa. Discount stores like Dollar Tree in the U.S. or Lidl in Europe have experienced a boom in their businesses too. Then there are the multitude of cash-back programs, 2-4-1 coupons, free shipping offers, gift with purchase, or loyalty rewards schemes. 

 

Since it's difficult for many people to win in the overall game of life, they go for wins that are more tangible and understandable – the small everyday “wins.” 

 

For consumers, moments of winning and control are treasures and value propositions that incorporate small "wins" now have greater appeal. So when you design your next product, make sure it helps customers feel like they are keeping up, rather than being kept down. Because if you're not part of the solution, then you're part of the Matrix.

Human centered product design

The CEO puts on a white lab coat and funny glasses, announces "Innovation Week" at your company, then proclaims that "we should all be mad scientists." You sign up for the brainstorm in room B, get a handful of magic markers, a stack of colorful pads, then stare at a white board. 

 

Down the hall, tech geeks lock themselves in a room for a “Skunk Works” session - the innovation process made famous by Lockheed Martin - and after 12 hours of coding and coffee, they produce a couple of prototypes. Despite your best efforts, at the end of the week the intoxicating smell of marker fluid disappears, sticky notes vanish into the waste basket, and the skunk becomes road kill.

 

Some companies still don’t take innovation seriously. They tilt the telescope inward on their business or technology, to try to uncover new ideas and products. While I'm sure there are some very talented employees trying to find the next new-growth business, this internal perspective does not create a very predictable process.

 

Rather, innovation comes from understanding who your customers are and how they live their lives. This process starts by taking a human perspective first, to uncover insights on existing consumer behavior. Harvard Business School Professor Clay Christensen reminds us that people "have jobs that arise regularly and need to get done." By revealing the problems that customers face and the related functional, emotional, and social elements, you can start to create new ideas and build new products. In short, you can provide customers with real-world solutions. 

 

IDEO, the world-famous innovation and design firm, calls this Human-Centered Design. You start with people first - to define opportunity areas, find unique insights and create ideas - before using your organization and technology to bring products to life. With this approach, your CEO can save the costumes for Halloween!

 

How to write a value proposition statement

The record July heat turned Manhattan into one gigantic blast furnace. But The New York Times building provided an oasis on 8th Avenue. Inside, photographs of Presidents and Pulitzer Prize winners line the nerves to the newsroom. The cafeteria buzzes with journalists and editors, as they feast on gourmet salads and sushi. My tour comes with arctic-air…the perfect environment to relaunch the hottest blog on innovation.

 

At the heart of innovation are ideas. Your product and the customer experience explode from these ideas to become your value proposition – the most potent weapon in business.

 

A good value proposition statement is a short story. In 1-2 sentences, it describes how your product solves a problem, offers a better solution, or helps a customer reach their goals. This value proposition is designed to focus your strategy and people, on the right things for your customers.

 

Each New York Times story, big or small, contains a beginning, middle and end. When the stories on war, peace, love, health, the arts, stocks, politics, fashion, and food, are combined together, they form a compelling value proposition and experience for readers. Imagine, an entire company built on stories since 1851.

 

Like a good news editor, when writing your value proposition, avoid being vague, abstract, or too high level. Since this will confuse your employees and customers. Keep it human and stay away from technical jargon. Steer clear of marketing slogans or tag lines.

 

Rule: When writing your value proposition, keep it simple.

Using customers passions to develop highly differentiated products

   

When developing new products or making improvements to existing ones many marketers struggle to determine the amount of customer value. To help you develop highly differentiated products or services I have created a new product development benefits model.

Stage 1: Add everyday benefits that put you on parity with the competition

You identify a target segment of the market, size up the competition and create product benefits based on your customer needs. However many companies offer the same value proposition and just change the packaging, design or branding. Product development limited to stage 1 creates commoditization and price-led competition. Since everyday benefits are easy to visualize and valuate but customers are often reluctant to pay extra for them. To differentiate your products you need to move further along the customer value curve to stage 2.

Stage 2: Develop special benefits centered on your customers' passion areas

Products in stage 2 engage with peoples passions by establishing an emotional connection and deeper relationship. By adding special benefits to your product - focused on a unique passion area that your customers value - you maximize differentiation of your product. Product benefits created around passion areas have powerful effects on the customer buying process because they offer significantly more value. Customers are also more emotional and less price-sensitive when it comes to their passions, so they will to pay more to access to quality benefits that enhance their experiences.

Research is critical to uncover unmet customer needs, deep emotional insights and the idiosyncrasies surrounding the passions in their lives. Any special benefits you develop and add to your products should offer real value and empower your customers to live their passions.

Example passion areas: Theater, Sports, Dining, Home, Garden, Travel, Entertainment, Motoring, Technology.

Stage 3: Create highly differentiated buzz-benefits

Great products end up as dinner party conversations because they have extraordinary benefits that create buzz and excitement. Stage 3 benefits are easy for your customers to visualize while also being difficult to quantify the value. These product benefits must be available to all customers, however are only attainable by a select few so they remain exclusive. Unique buzz-benefits create excitement, emotional appeal and generate viral PR, reducing marketing costs and making it hard for competitors to replicate your product. It’s really important for you to determine if your brand has permission to play in your customers’ passion areas before you start.

Example buzz-benefits: A day on the set with an Academy Award winning film director, automatic first class flight upgrades, cooking classes with a celebrity chef, a free test drive and lesson from a top race driver.

Summary

You need a mix of rational and emotional benefits to achieve true differentiation, so design product benefits that appeal to both sides of your customer psyche. When you move along the customer value curve and develop special benefits - focused on your customers passion areas - you create products that provide customers more value. Adding extraordinary benefits to your product creates buzz and excitement that will send your product viral.

What makes a great product?

Today I was asked an important question that challenges most businesses - What makes a great product?

I propose the answer to this simple but elegant question is the synergy between Consumer Value, Company Value and the Creation Process. Because the right balance of these 3 areas produces a quality product, outstanding value for consumers and excellent financial returns for the company.

Consumer Value

From a consumer perspective the product must have the following elements;

• The most compelling value proposition in its market or segment – great products impel the target audience to buy them because the design, features, functionality and benefits are irresistible, compulsive and seductive so customers cannot resist.

• Make a meaningful difference in customer’s lives – great products solve consumer’s unresolved problems by tapping into relevant desired needs and this creates added value.

• Be easy for the buyer to understand and use – a product with clear, simple and transparent functionality with no complex manuals or terms and conditions.

• Establish an authentic and emotional connection with the user – great products allow you to personalize features to your individual tastes, they are accessible with an easy online interface and they enhance people’s lifestyles. When this happens products will establish emotional connections so users purchase more and recommend the product to their family or friends.

• Have a great customer experience across the life-cycle – the buying process, fulfillment, customer service, website, and ongoing communications are deliberate and compliment the product. Batteries are included!

• The purchase price maximizes consumer utility – great products are priced correctly so that the rational value, emotional benefits and satisfaction derived are greater than the asking price.

Company Value

These are the key elements of a great product from the company perspective;

• The product is number No.1 or No.2 in its market or segment – the GE strategy that being the No.1 or No.2 player generates significant cost, quality and production advantages over the competition.

• Delivers the company above-average profit margins – because this allows the company to reinvest in growth and product improvements.

• Builds on the core assets of the firm – great products utilize the company brand, technology, customer service, and design or production capabilities. This creates a powerful force when aligned with the organizations business model.

• Designed for a clearly defined market segment – the product provides an easy solution for a unique problem experienced by a large number of consumers. This problem cannot be readily solved by another substitute product.

• The ability to expand from the core business – great product can be extended into new customer segments, new geographies or new markets.

• Easy to advertise and communicate - great products sell themselves since celebrities and early opinion formers endorse product. As the product is rapidly adopted the customer experience generates advocacy and an army of supporters create buzz, excitement and free PR via word-of-mouth. The result is lower marketing and advertising costs.

• Complimentary to your product line strategy – the product has to make sense to customers, your employees and sales teams, and it must fit with your brand and the other products you sell. This limits cannibalization of your other products and makes marketing easier.

• A clear product strategy – products that try to be everything to everyone will fail because they confuse the market and potential buyers. Thus products should compete on price, significant differentiation of features and benefits, or serve a niche customer segment.

• The product is designed to drive ongoing usage, engagement and repeat purchase behaviour – the best brands know a product is more than design and packaging but includes the actual customer experience that surrounds it. When the product experience exceeds customer expectations, and surprises and delights, customers will return for more.

Creation Process

The most commercially successful products use a structured creative process with 2 key ingredients. OK - some products like the Post-it Note were accidents but they still need to get to market through; 

• A talented team of diverse experts - Thomas Edison said “success is 10% inspiration and 90% perspiration” but from my experience creating a new product is down to the blood, sweat and tears of individual champions and cross-functional experts in the team.

• A deliberate innovation process for new product development - this creation process starts with a maniacal customer focus to uncover unmet needs, then structured idea generation to harness creativity. Next energy and passion to create a competitive strategy, with a winning product concept and customer experience. Lastly, flawless execution focused on product design, testing, quality and performance.