Innovation Reactor

Go to and communicate where customers live

When I develop integrated marketing communications I frequently dream of a world where millions of customers flock to my site, sign-up for my product, and keep on coming back for more. But then the Silicon Valley Tech Fairy (think Tinkerbell with iPads for wings) slaps me and I wake up. 

In reality the vast majority of customers will not come to your site. Why? Because they discover products when connecting with friends on Facebook, reading a blog, checking their newsfeed, cleaning up their inbox, going to and from work, watching a favorite TV show, viewing a video clip, flipping through a magazine, or doing a product search. But many marketers still place the bulk of their investment and emphasis on their own site. 

If customers are visiting other places already how can you use these to your advantage?

Good integrated marketing communications target major touch points or influence opportunities with customers. In other words you need to go and communicate where your customers are. 

To do this I suggest a multi-pronged approach to your marketing strategy, using three major channels, with each channel having a specific purpose to either (1) scale, (2) expand, or (3) penetrate, the market. 

1. Scale: Choose a high visibility channel that will allow you to scale and attract new customers rapidly from your core target segment.
2. Expand: Find a channel that enables you to reach an adjacent pool of new users.
3. Penetrate: Segment your existing customers and promote features, functionality or special offers to increase product usage.

When developing integrated marketing communications remember to design a plan that is focused on engaging customers at the places where they frequent most.

 

Customer service: the DNA of great brands

Bad customer service makes you feel like Bill Murray in Groundhog Day.

 

You search a website for an elusive 800 number, like a quest for the Holy Grail. You call and get stuck in an automated voice system, press 9 to speak to an agent, only to be redirected to the main menu. You get through to a real person, then spend an eternity on hold as they check with their supervisor. You get transferred to another department. You repeat your story…again. You go round-and-round like Punxsutawney Phil on a treadmill.

 

Supportive customer service is more than a side note. In the BusinessWeek Customer Service Champs 2010 report, consumers frequently mentioned how American Express readily reversed questionable charges without hassle, how easy it was to return shoes to Zappos, that Enterprise Rent-A-Car would pick you up from home, or times when Nordstrom staff provided special attention. At these companies customer service is an inseparable part of the brands DNA.

 

What this research revealed that customer service experiences become etched on peoples' minds, and were big reasons why they kept on coming back.

 

For your customers, when it comes to making a purchase decision, customer service is the safety net – there to catch them if something goes wrong. It doesn’t matter if you have lower prices, are technically better, or provide a wider choice. For many people, if your customer service stinks, it feels like the opposite is true, and that is what they base their next buying decision on.

 

When designing products, customer service is an afterthought for many companies. But from my experience value propositions which include great service have higher sales and engagement levels. Potentially there are some higher costs involved upfront. However, keeping customers happy will ultimately create evangelists over the long run, who promote your product for free and thereby reduce future marketing costs.

 

Rule: Customer service is more than a minor benefit; it’s an integral part of your value proposition.

 

 

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).

 

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

Achieving strategic agility in unpredictable markets

 

Some companies seem to have a knack of embracing new ideas and innovations faster than others. In many industries growth and profitability is determined by speed-to-market with new product development. So what makes these companies better at seizing opportunities?

To answer this question I attended a great lecture on strategic agility by Professor Don Sull, from London Business School. He proposes that organizations start off as nimble and agile, but when they grow large it’s how they transition between agility and absorption that determines success.

• Agility - the capacity to seize opportunities faster
• Absorption - the capacity to sustain change and deliver long-term shareholder return

To use a boxing analogy, Mohammad Ali early on in his career had great agility to “float like a butterfly and sting like a bee” but later on lost some of that speed and had to absorb more punches from his competitors, eventually losing the title. 

My research found Abercrombie & Fitch, the fast-fashion company, a great example of agility. While growing to over 1,035 stores worldwide they have developed processes to seize opportunities faster. Their new in-house Innovation Design Center produces flexible designs for quick approval and production, enabling reduced time to market for the latest fashion trends. While also reducing costs and limiting the competition’s ability to copy its designs. These capabilities has allowed Abercrombie & Fitch to post 16 years of earnings increases and deliver superior Total Shareholder Return over the last 5 years, vis-à-vis Gap their largest competitor.

When companies become larger, growth begins to stall as markets mature. Professor Sull suggests that firms can develop absorptive capabilities allowing them to seize opportunities when the perfect storm arises. Some examples are;

• Diversified cash-flow (General Electric)
• A war-chest of cash (Microsoft)
• Powerful tangible and intangible assets (Procter & Gamble)
• Excess resources and staffing (JPMorganChase)
• Lock-in via exclusive partnerships or integration (Oracle)
• Compete in protected markets (Royal Bank of Canada)
• Strong local market or low cost position (Cemex)

These absorptive capabilities mean companies can outlast others in a war of attrition or scale new innovations quickly. Diversification, strong brands or patents can provide the beachheads to reinforce and attack other customer segments. Strict government regulation and exclusive partnerships can limit new entrants. Finally, a strong local market or low cost position may allow you to absorb price volatility and downturns in international markets.

To increase agility in your business you can outsource or acquire it. Outsourcing requires you find the right partnerships that compliment your core business. Whereas acquiring agility involves you keeping the hardware and rewriting the software by changing organizational structure, key management personnel and culture.