Solve the Right Problem

May 31, 2011 Leave a comment

Solutions generally come pretty easy. It’s finding the right problem to solve that is often the hard part.

From a one man start-up to billion dollar conglomerates, focus is put on finding solutions to the customer’s problems. In this Entrepreneur Thought Leader Lecture at Stanford University (video below), Instagram co-founder Kevin Systrom shares his thoughts on why finding answers for problems is the easy part, whereas the hard part is finding the right problem to solve. In this short clip Systrom tells about how he and his co-founder went about identifying the problem they wanted to solve around mobile photo sharing.

This idea that “answers are easy, finding problems are hard” can radically change your approach to business and marketing. It leads to what Dan Greenberg describes as “marrying the problem, not the solution”.

Let me give you an example of two very similar, yet contrasting companies. One married the solution, the other the problem.

Kodak Failure to ChangeFor nearly a century, Kodak was the leader in photography. In fact, its name is still synonymous with photography – print photography that is. Since 1999 the market value of the Eastman Kodak Company has dropped a staggering 95.5%. This, of course, can be largely attributed to the fact that Kodak was married to the solution (film) and missed the digital photography boat.

Contrast Kodak’s unwillingness to change to another well-established brand, IBM. Like Kodak, IBM was the uncontested leader in their respective industry throughout much of the 20th century. Similar to Kodak, IBM also ran into some significant strategic challenges and shifts in the marketplace. IBM, however, married the problem, not the solution. During the early 90’s “Big Blue” began the evolution from hardware to service and innovation.  As a result, IBM ranks second on Interbrand’s annual Global Brand Rankings, with brand value of nearly $65 billion.

**A big thank you to Neil Perkin over at Only Dead Fish for inspiring this post**

Filed under Brand Development, Category Development, Strategy Tagged with , ,

Here One Day and Gone the Next – is Brand Loyalty Fleeting?

May 17, 2011 Leave a comment

Talk to any business, large or small, and they will tell you how important customer loyalty is to their company. From Main Street to Wall Street, loyalty is the lifeblood of building a successful brand.

This is the goal of many marketers and managers, to earn the loyalty of their customers. They hold the misconception that customer loyalty is lasting; an unbreakable bond – a marriage of sorts. It is not. A person’s loyalty to a brand is fleeting; it is temporary and can be lost at any moment.

People are not loyal to a company, a product, or a service…at the end of the day they are loyal to themselves first.

They act in their self interests and continuously re-evaluate their decisions as a result. It is a mistake for brands to forget this.

Let me give you an example.

Earlier this month I switched from Firefox to Google Chrome. Just typing that just doesn’t feel right, because I was a brand evangelist for Firefox. For the past six years, I used Firefox and loved every minute of it. I was passionate about the brand, and I went out of my way to sing its praises and convince other people to switch.

What happened? Why did I switch internet browsers? Because it was in my best interest, of course.

I recently upgraded to the latest version of the browser, Firefox 4. I was initially excited to see the new features, but it turned out to be an awful decision for myself, and for Firefox.

  • It was slow and repeatedly crashed.
  • The interface and layout was completely different.
  • I had to spend a substantial amount of time learning how to “customize” it in order to give it some semblance of my previous versions of Firefox.

One day, while I was waiting for the crashed Firefox to reboot, I gave into temptation and began trying out the Chrome browser. It did what an internet browser was suppose to do–it was fast and didn’t crash. The interface was a little different from my previous Firefox versions, but hey, I was going to need to learn the new Firefox 4 interface anyways right? They also made it super easy to switch by importing all of my Firefox passwords, history, and bookmarks. I made the switch and the rest is history.

Remember that loyalty is fleeting. Getting the devotion of customers is easy; keeping it is the hard part.

Filed under Branding, Competition, Marketing Tagged with , , , ,

How to Raise Prices — The Smart Way

April 11, 2011 Leave a comment

Prices are going up everywhere you look; the gas pump, the grocery store, and now on main street. At least that’s according to the latest small business owner survey conducted by the National Federation of Independent Business. They found that more than a quarter of small business owners have either increased prices or plan to do so in the near future, which is the highest amount in 28 months.

Despite an improving economy, such price hikes could spell trouble for those who have resorted to discounting during the recession. Why? Because these “discounters” have trained consumers to shop on price. As a result, price has become one of the most influential factors in making a purchase.

According to SymphonyIRI’s latest MarketPulse Survey, 64% of consumers state that price has become a more important consideration than convenience in brand purchases. Another SymphonyIRI report released in late 2010 found that 77% of consumers were making store choices based on which retailer offered the lowest price on needed items.

What if you are one of these “discounters”? How are you going to increase prices without losing all of your customers? Here is how to raise prices the smart way.

1. Be Honest

If you are losing money on every sale, be upfront with your customers. Sure you may lose a few, but the majority of customers understand that the point of a business is indeed to make, and not lose, money. Five Guys Burgers & Fries employs a pricing model where they set their food prices to reflect their costs. “If the mayonnaise guy triples his price, we pay triple for the mayonnaise! And then we’ll increase the price of our product” explains founder Jerry Murrell.

Honesty is key here. If you tell customers that you are increasing prices because your costs are going up, but you have ulterior motives (such as padding your profit margin), then you are certainly going to reap what you sow.

2. Tell Customers

Some may disagree with me on this point, but whenever you increase prices, I think it is always a good idea to communicate the price increase to your current customers. First, no one likes a surprise price hike; if you increase prices overnight with no warning you are likely to piss off a lot of people. You need to make sure you give your loyal customers plenty of advance warning that prices are going to be increasing in the future.

You also need to explain why prices are increasing. I was a loyal State Farm customer for 8 years. I never had any issues with them and was completely satisfied with my auto insurance. But that changed very quickly. Despite never being in a wreck or getting a ticket, my premium gradually got more and more expensive; Over the course of two years, it went from about $400 every six months to over $600 every six months. I asked my agent why and he couldn’t give me a straight answer. No problem, I switched to All State. Please don’t make the same mistake of communicating the why.

3.Add Value

An increase in price should be accompanied by an increase in value whenever possible. Adding additional value to your product or service will help customers justify paying the new, higher price. Some examples of ways to add value are:

  • Free or upgraded shipping
  • Offer educational ‘how-to’ classes and videos
  • Risk-free return policies
  • Complementary service (sell dress shoes? Offer free shoe shines for life)
  • Include a warranty

In each of these examples, you can see that the value to customers is much more than the cost to provide that value. For example, a 30 day no-questions-asked return policy on a piece of software may be worth shelling out an additional $50 to customers, whereas it costs you basically nothing to provide this policy. The great thing about adding value is that it has a halo effect (increased profit margins, product differentiation, word of mouth, etc.)

Summing It All Up

Of course, when it comes to pricing, you will also want to consider competition, customers, costs, and external factors such as the economy. However, over-relying on any one of these would be a mistake. The key to setting your price is understanding—and shaping—the value that your product or service creates in the lives of your customer.

Well executed price increases will not only help you retain your current customer base, but by adding value you will better differentiate your brand and attract more customers in the future.

Filed under Business, Pricing, Strategy Tagged with , , ,

Master the Art of Saying ‘No’ as a Brand Marketer

March 29, 2011 Leave a comment

Warren Buffett - The Oracle of Omaha

Legendary investor Warren Buffet once said, “The difference between successful people and very successful people is that very successful people say ‘no’ to almost everything.”

The same can be said for very successful brands and brand marketers—they have mastered the art of saying no.

Today, more than ever, there is enormous pressure on marketers to grow sales and market share. This means the temptation of new opportunities:

  • Targeting new market segments
  • Adding new products and line extensions
  • Abandoning tried and true methods for the latest ‘flavor of the week’

But wise is the marketer who adheres to the wisdom of the Oracle of Omaha. Sure, saying yes to these new opportunities could increase brand revenue in the short term, but are the long-term consequences really worth it?

What happens when you take a child the grocery store? They always find something they can’t live without. Would it be wise to continuously say yes and give into their every request? It would avoid the kicking and screaming in the short term, but doing so would reap the long term result of a child who is spoiled and undisciplined.

Please don’t misinterpret my post as an excuse to stay where you are, saying no to each and every new opportunity that comes your way. (Just ask Kodak how this worked out)

This is about saying no much, much more often. No to new opportunities. And no current business activities that are futile. Most importantly, it’s about making the right choices for your brand in the long run.

Filed under Branding, Focus Tagged with ,

Doing More with Less: Fewer Product Options Can Be a Valuable Differentiator

March 16, 2011 3 Comments

In my last post Is There Really Such a Thing as Too Many Choices?, I looked at how too many product choices can leave customers frustrated and unhappy. Everyone says they want more product choices, but studies have shown that more choice equates to less sales, sometimes by a factor of 10.

Most brands ignore this simple fact and continue to pump out new variations to give consumers what they ask for – more product choices. Because of this, offering fewer product choices (resulting in an easier purchase decision) is a huge differentiator in this cluttered market.

Here are some examples of doing more with less product choices:

Trader Joe’s

Trader Joe'sMost grocery stores carry around 40,000 different items. Trader Joe’s takes a different approach and stocks about 4,000 items. With all of the different choices, choosing an item at a grocery store can be a stress-filled experience – brand names, price, size options, flavor differences, ingredients. At Trader Joe’s, instead of choosing between fifteen or twenty types of Italian salad dressing, you are given only a few options. This makes for a better shopping experience and shoppers are often much happier with their purchase decision.

Apple

Apple's iMacWhen discussing the topic of simplifying the customer experience, Apple has to enter the conversation. They integrate this approach in all of their touchpoints, including the purchase process. They offer limited varieties of their products to minimize the amount of buyer confusion. Looking to buy a new desktop computer? Apple offers four variations of the iMac. Compare that to other computer manufacturers whose vast number of options can drive customers away; Dell currently offers 119 different types of desktop computers.

In-N-Out Burger

In-N-Out Menu Variety vs McDonald’sThis West coast burger chain offers only four food items on their menu; three burger varieties (hamburger, cheeseburger, and “Double-Double”) and French fries. This minimalist menu is the polar opposite of McDonald’s endless menu choices. (Click here to see a comparison). Limiting product choices has enabled In-N-Out to beat the almighty McDonald’s in average sales per store.

Google

The world’s most popular search engine has always been about simplifying the complexity of search. Their homepage doesn’t distract users and offers them a clear choice. There is power in simple.

Google Homepage vs AOL

These are some examples of brands that make the purchase process easier by limiting choices. There is a difference between listening to what customers want (more options) and truly understanding what it is they want (fewer options). Choose wisely.

Filed under Branding, Customer Experience, Marketing, Strategy Tagged with , , , , , ,

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