Innovation Reactor

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.

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.

Online Customer Experience Innovation: Online Tools

Online tools are a great way for your customers to engage and interact with your brand.

Maki from Dosh Dosh suggests creating a powerful long-term social media marketing strategy by developing services, tools and free complementary services. These are not only a great way to enhance your customer experience online and to drive engagement, but you can get some real customer feedback to optimize your products and communications. Here are some ideas for online services and tools for your website.

Calculators ~ these days customers want more control and to make the most of their money. Calculators allow customers to interact, get more information, visualize savings or calculate shipping costs. They're a great way to connect emotionally and capture more sales.

Personal Online Dashboard ~ let’s customers track their purchase history with you, savings earned, payments made, special offers and to update their product preferences. Include other items like recent news, latest events or new product features, shopping tip of the day, product discounts, daily deals or the hottest items other customers are buying right now.

Customer Wishlist ~ let your customers create a list of products they would like from your store or suggest products that you don’t currently stock. You can include product reviews, video and shopping ideas to provide inspiration.

Customer Lists ~ create simple templates that allow your customers to make a family budget, shopping list or to create travel plans. Make it easy for them to add images, maps and then send, print, store or update.

Customer Alerts ~ allow customers to sign up for email alerts to receive information and the latest news on your products and services

Product or price comparison tools ~ customers want to select and easily compare products and prices so product or price comparison tools are excellent. To enhance sales multi-product landing pages work great and generate a lift in conversion by providing more customer information and product choice.

Related Posts:

Building Complementary Services: A Powerful Long-Term Social Media Marketing Strategy

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!

Affiliate Links:

Free: The Future of a Radical Price

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.

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.

A quick guide to successful strategy execution

Many companies hire expensive consultants, agency planning teams or innovation “gurus” to develop  new strategies but surprisingly many plans fall down due to poor execution.

So here’s a quick guide to help improve your strategy execution using my experience implementing large company-wide marketing strategies, major advertising campaigns and new product launches.

1. Inform people on the rationale for the change and improve the flow of information

Strategy execution is often ineffective in large organizations because a lack of vital information results in poor decision making.  Frequently, information is hoarded by corner-office executives, protected by gatekeepers or never transmitted beyond various business unit silos. The key steps to strengthen the information flow are;

• Communicate and supply information about your new strategy to your employees so they understand the major components of the plan and the projected benefits the strategy will deliver to your company and people
• Provide your employees up-to-date market intelligence on competitors, customers and key driver metrics that measure company performance
• Develop an internal communications plan comprising of management meetings, emails, conference calls, employee newsletters
• Setup informal Q&A forums to improve data visibility and use your company intranet or shared drive to post critical business information, competitor and customer research or important presentations.

2. Build ownership of the strategy at all levels

Strategy execution can fall down when there’s uncertainty around people’s roles and responsibilities, fuzzy accountability or ambiguity about the ownership of decision rights. Clarity around decision-making is important because people need to know who’s accountable and senior management need the ability to track achievement and success.

An important building block is to create ownership of the new strategy by using employee workshops because this makes the planning process inclusive and builds collaboration, teamwork and trust. Moreover, develop a blueprint and roadmap so people understand the strategy, new direction for the business and timelines for implementation. Finally, improve execution efficiency and remove decision making paralysis by documenting people’s roles and responsibilities, assigning accountability for critical projects and communicating these to the wider organization.
 
3. Create a sense of urgency to overcome challenges and maintain momentum

Motivation is a critical factor for effective execution since it can seem like an insurmountable task to suddenly change direction. As people, processes and products that are rooted in the past need to transform quickly, do you have the optimal organizational structure, best talent and a diverse rage of expertise on your team?

An important enabler for effective execution is to create cross-functional teams and assign process owners and project managers to coordinate strategy execution across business lines. Changing the organizational structure is difficult, so a good approach is to search your company for talented managers and functional experts to create your project teams.  Remember to keep employees motivated by using team performance awards and recognise individual achievement or top performers for their great work.

Every plan has its execution challenges but improving the flow of information and sharing best practices throughout the business can help overcome difficult problems, improve efficiency and maintain momentum. It’s a great idea to create a centre of excellence to distribute best practice and improve oversight, strategy delivery and cooperation between business units. Lastly, always be realistic about your organization’s capabilities and capacity for change; tackle small projects first and aim for bite-sized successes.

4. Inspire people to embrace change and lead by example

You cannot execute a strategy with an email, a few employee meetings or pep-talks. But how often have we seen senior management try it – or alternatively we see a big-bang new strategy launch followed by silence after just a few weeks.

To get your people inspired so they can champion the gameplan, leaders must be in tune with the pulse of the business. This starts with setting clear goals and priorities and getting to know your people and business inside-out. A critical element is for leaders to follow through on deliverables, anticipate roadblocks and obtaining timely performance feedback.

I’ve mentioned the importance of communication, improving the flow of information, recruiting the best talent and sharing best practices. With these tools in place, leaders should then support decision-making at lower levels since front-line employees usually have the best knowledge about customers, clients and suppliers. The result is empowerment that delivers faster speed-to-market and execution.

Acknowledgments:

Execution: The Discipline of Getting Things Done (2002), Larry Bossidy, Ram Charan and Charles Burck.

Harvard Business Review (June 2008), “The Secrets to Successful Strategy Execution”, Gary Neilson, Karla Martin and Elizabeth Powers.

The Essentials of Customer Marketing

 

The essentials of customer marketing are basic tools that every marketer today should use when developing integrated marketing communications. I have outlined these 8 essential toolbox items below.

1. Authenticity. Customer marketing must be authentic and direct to the point. Though for many businesses, personalized communications tailored to an individual are cost prohibitive. But marketing can engage segments of 200 customers rather than 200,000 using an authentic voice that is not presumptive and does not ingratiate itself with the audience.

2. Transparency. Customer marketing communications are transparent, straightforward and honest to deliver on promises. They're not disingenuous, with hidden conditions or caveats that are buried in the small print. So avoid complex language, excessive marketing ‘buzz’ words and tech-speak. If your product is technical then put the top 5 points in a call-out box using short bullets and avoid a laundry list of product features.

3. Simplicity. Customer marketing production should be simple and unvarnished rather than slick or glossy. Online, each page loads fast and is functional with informative-engaging content, practical customer information and tools. The website doesn’t need a ‘skip the intro’ button because it’s not flashy or pretentious plus it has an intuitive site-map and page layout designed for - and tested by - actual customers.

4. Insightful. Content reflects real personal or small business issues with an empathetic tone of voice. David Meerman Scott suggests that when you understand your customers’ unique problems you can then create buyer personas and tailor the communication content. This content should be straight-forward, non-complicated and does not over or under inflate the importance of issues. If content is not meaningful, informative, helpful or entertaining, or have genuine value, it’s just forgettable and a waste of your clients or company’s money.

5. Actionable. The communications have actionable content and any offers are relevant and tailored to the needs of the consumer or small business owner. It’s now time to ditch those highly promotional brochures filled with marketing fluff and sales hyperbole.

6. Organic. Any content is realistic and relevant to the customers visiting your website today. Your copy uses actual customer quotes or customer language and not something staged, highly polished and dreamed up by an office copywriter with no knowledge of the customer.

7. Personal. With the choice of channel from direct mail, email, online, radio, press, TV, direct sales and mobile, delivering unique content through the correct channel, at the best time is vital for effective customer marketing. Since the delivery channel is the first contact in the customer experience, personalize it by using registered mail, live stamps, clean outer envelopes, opt-in email addresses and phone numbers. Massed produced, non-personalized mail and promotional outer envelopes are cheap but ultimately drive low response rates, generate a poor brand experience and wasteful. Seth Godin talks about permission marketing and treating people with respect as the best way to earn their attention. If the customer has not ‘opted-in’ then any contact is just spam or cold-calling.

8. Intelligent. Of course selectively use humor in your communications but avoid child-like fun, slapstick comedy and puns. Humor should use an intelligent wit, with deep truths rooted in the customer experience. Try getting your best customers to share their experiences to inform and educate others. Gather relevant industry experts in panels or forums to discuss the latest trends and post relevant topics or white-papers on your website to provide inside information to help your audience.

The Path to Extraordinary Leadership

I recently attended a seminar by Michelle L. Buck, Clinical Professor of Management and Organizations at the Kellogg School of Management at Northwestern University, titled The Path to Extraordinary Leadership.

In times of economic crisis leaders are now in the spotlight and scrutinized more than ever. While the history annuals remain littered with catastrophic leadership failures some leaders rise above the ranks to become highly successful.

Extraordinary leaders seem to generate synergy and infuse collaboration. They have a global perspective with the ability to span cross-cultural and cross-functional boundaries, with the energy and knack to seize opportunities at the right time. Moreover, these great leaders seem to have authentic life stories and core values.

So how can we develop our leadership abilities from good to great? Professor Buck’s research suggests the path to extraordinary leadership can be broken down into four main areas below.

Assessment & Feedback

• By constantly seeking feedback and performance data - to understand their strengths and weaknesses - great leaders develop a balanced and rational perspective of themselves. They then apply this information and knowledge to effectively leverage their strengths and improve performance gaps.

Reflection & Planning

• Extraordinary leaders make time for reflection to review and analyze their actions and decision-making. They assess their individual performance and the perceptions of others then look for areas to optimize and improve. With true inner reflection they can then move forward and create better plans for the future.

Knowledge & Insight

• Great leaders place importance on continuous learning and challenge themselves to understand the detail and inner-workings of their industry. They spend time networking and asking questions to learn from others. Since this learning improves their expertise, knowledge and thought-leadership in their field these leaders can then move ahead of the curve by seeing what’s next. So they can use their insights and to identify new opportunities, challenge the status quo and drive real innovation and change. 

Experience & Action

• While the media emphasises heroic individuals and turns them into celebrities, great leaders embrace the importance of teamwork and cultivate interpersonal relationships. Through these relationships the best leaders make an impact by rallying people to their vision for the future. Then using their experience they implement action plans to drive results, by collaborating and influencing across teams or organizations to accomplish goals.

Some might say that many leaders are extremely lucky in their careers. However one underlying pillar is a disciplined mindset to focus on these four key areas. This enables great leaders to learn from experience, show resilience when faced with challenges, and leverage their core values - with a sense of purpose that remains stable - while their strategies and practices adapt to a changing world.

An Authentic Story

But most importantly is that each extraordinary leader has an authentic story, ethical core-values, and a powerful resonating message. Valeria Maltoni has a great summary of Barack Obama's Social Media Campaign and how his authentic life story was promoted across different media to keep his supporters engaged. While Lorissa Shepstone has written a fantastic article on Anita Roddick who founded The Body Shop and inspired women by never compromising her core-values. Finally Guy Kawasaki promotes mantras that are meaningful and memorable, and great leaders have powerful mantras so their message is instantly recognizable.

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.