Inertia

Is your brand’s current performance the result of consistently delivering a remarkable customer experience and evolving to meet new consumer needs and wants?  Or is it simply inertia?

Many companies deliver decent performance today primarily by reaping the benefits of prior success.  The song they should play at their shareholder’s meeting is “Living in the Past.”

Dissect YOUR sales and profits.  How much comes from products, services or customer relationships that you developed many years ago, rather than in the last few years?  If you are not a business focused on older customers, what would happen if tomorrow you got zero business from anyone over 5o?

Sears–one of my former employers–is not still around today because they meet consumer needs in a differentiated, relevant way.  They have not generated significant numbers of profitable new customer relationships in many years.  Their best customers are aging.  They exist because of inertia.

In reality, of course, plenty of forces are acting on companies like Sears that will lead to their eventual demise unless dramatic action is taken.

When your success is rooted in customer relationships that are broadening and deepening; when new customers come largely through word of mouth from your brand evangelists, that is momentum and that is a good thing indeed.  When your customer metrics are deteriorating and no forces are acting to change the trajectory of your business, it is just a matter of time before you crash to earth.

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What does it cost me to see the next card?

When it comes to innovation, many companies approach it as an all or nothing proposition.   Without a clear road to profitability, they do nothing.   If the cost to develop the new line of business seems particularly daunting, they table further discussion.  When clarity around key assumptions seems challenging, well it’s better to delay (or worse yet, form a Task Force that meets once a week but generates no forward progress).

Innovation rarely comes in a clear glidepath to prosperity.  Rather, it’s a journey where reaching the first hill provides more direction as to how to climb the next.

Once I worked in business development for a company whose CEO was passionate about innovation.  When we brought him a new idea he never asked to see a detailed multi-year project plan with Excel spreadsheets showing ROI under various scenarios.

If the idea fundamentally held promise, he asked one powerful question:  “What does it cost me to see the next card?”

Sometimes it was a bit of consumer research.  Sometimes tumbling some high level numbers.  Sometimes working with R&D to assess basic technical feasibility.  But what the CEO knew was that like certain card games, winning in new business was about a series of antes–multiple lower cost steps that helped decide whether to make the big bet.

So instead of endless speculation (and task force meetings!) about whether there is a market for a new concept, spend a little bit of money on basic consumer research to get some guidance.  Instead of months of study about whether there is ROI in being on Facebook or Twitter, get one of your junior marketing folks to spend a few minutes each day trying stuff to see what happens.

Usually the cost to see the next card is less than you think.

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Weapons of Massive Consumption

“And I am a weapon of massive consumption. It’s not my fault it’s how I’m programmed to function.” – Lily Allen

As a society it does seem that we have been programmed to spend, spend, spend.

Spending is American.

He who dies with the most toys wins.

We MUST have the next big thing, be it the latest iPhone or the newest big screen whatever. We need to keep up with the Jones’, the Kardashians or whomever catches the fancy of People magazine.

Often, it seems, we are what we own.

Now–in what I like to call the “Hangover Market”–many of us are waking up to the consequences of our profligate ways.  For many, it is causing a good hard look not only at our budgets, but our values.   Slowly but surely it seems that consumers are starting to realize they are NOT what they own, that substance can trump superficiality, that tangible value matters.

This change creates opportunity for brands that have a real story, that deliver remarkable value for consumers.  For brands that have been living on inertia (I’m looking at you Sears!) or clever marketing, I’m afraid your days may be numbered.

Which side will you be on?

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Surgical Shopping and the Hangover Market

Last holiday season I coined the term “surgical shopping” to describe the highly precise way many consumers were purchasing.  While the panic of late 2008 and early 2009 subsided, consumers were only gradually opening their wallets, focusing primarily on needs vs. wants and often trading down to brands that gave very clear bang for the buck.  By the time the numbers were in for the 4th quarter, it was clear that business was better, but not particularly good.

As an economic recovery struggles to gain traction, this “surgical shopping” behavior remains rampant, and in my opinion is not likely to change any time soon.

This behavior is evident on the lower end of the market, as private labels (or more accurately “private brands”) gain market share.  And it’s apparent on the higher end, as accessible luxury brands such as Coach, Nordstrom and J. Crew beat their more exclusive and expensive rivals.  Even at the absolute luxury tier, brands like Louis Vuitton, Gucci and Hermes outpace the competition as they emphasize their heritage of investment quality craftsmanship to win over flash in the pan, mostly pure image brands.

This is now the Hangover Market.  Waking from the intoxication of too much marketing and societal hooch, consumers are now shaking off the cobwebs and dry mouth of excessive, superficial spending.   And while it’s always difficult to predict future consumer behavior, many consumers are not going back to their old reckless spending habits.  For some, this will be out of economic necessity.  For others, this will be values based, as they become more discerning about the quantity of what they buy and the price they pay for certain items.

So what does this mean for business leaders and brand stewards?

Tangible, obvious value wins.

Craftsmanship wins.

Authentic wins.

Experience wins.

Connectedness wins.

Being remarkable wins.

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Expensive & Lousy Meets Free & Excellent

I just got back from Chicago where I spoke at the annual Shopper Insights in Action conference.  It was a great trip, but one of the things I will remember the most is a very disappointing experience I had at the host hotel.

At this hotel (which shall go nameless, but it rhymes with lariat), I was charged $14.95 for daily “high-speed” internet access.  Putting aside whether hotels should charge for web access–they shouldn’t–my primary complaint was that the service was far from high-speed.  In fact, it barely worked at all.

After a full day of trying to get my email account to even load properly, I finally relented and called the toll-free help line.   After half an hour on the phone with the support person listening to them spew indecipherable technical jargon and trying various things to increase my connection speed–most of which involved limiting service for other folks in the hotel–we concluded that this was a long-term problem at this location, likely caused by their not having upgraded their infra-structure.

Expensive & Lousy.

Ironically, the next day as part of my conference presentation, I shared the Zappos success story to reinforce the importance of using remarkable customer experiences to win in an intensely competitive market.  As you may know, part of Zappos growing reputation for legendary customer service is that delivery of their product is free–both for the original shipment and for any returns.  Moreover, Zappos will often upgrade the customer to overnight shipping at no charge.

Free & Excellent.

Of course, we cannot just randomly give away high value products and services.  But as brand stewards, minimally, we don’t have to call attention to the things that represent an obviously bad value, nor do we have to reinforce the notion that we are using every opportunity to nickel and dime our clients (I’m looking at you credit card and airline industries!).

Remarkable is a choice, and we get to decide which elements of our business model and brand promise create the wow, the buzz, the purple cow.  It’s not always easy or practical to deliver the Free & Excellent.  But you can certainly stop the Expensive & Lousy.

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Is Your Strategy Swimming Naked?

Warren Buffett once famously said “you only find out who is swimming naked when the tide goes out.”

Well as far as I can see, the tide’s out and the water is rising pretty slowly.

Is your company like those financial institutions that lent money to the person who looked like the Millionaire Next Door, only to discover they were playing the balance transfer game and using their home’s equity like an ATM machine?  Might have been a good idea to have understood those customers’ ability to pay you back.

Are you like some of those luxury brands that appeared to be winning big pre-recession, but were mostly growing through raising prices and now are scrambling to win back customers they let drift to the competition?   Seems like a good idea now to realize that you need both the uber-wealthy and the solidly affluent to help pay the bills.

Or maybe you are that high-flying e-commerce company that touts its incredible rate of customer acquisition and average spend per customer, while failing to notice an alarmingly high rate of customer churn.  Oh, you don’t track retention?

Perhaps you are that brand that crows about its double-digit growth rate, while not even knowing that the category is growing much faster.  Hmm, I guess market share is not important in your business?

When business looks good, it’s so easy to pound our chests.  But there is a big difference between looks good and is good.

Remarkable companies are keenly focused on deep customer insight–in good times and bad.  They have customer segment specific strategies that inform all their tactics, and they identify and act upon weakness before it becomes a crisis.

No one can predict everything that might happen to significantly impact your business.   But a well crafted customer-centric strategy gives you the best chance to not be caught swimming naked, risking being sucked in by the riptide that is your boss, the Board or the marketplace.
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Now go put some pants on.

What Color is Your Growth Strategy? The Curse of the Red Herring.

Blue Ocean.

Black Swan.

Purple Cow.

In the last several years various authors and pundits have literally given us colorful ways to think about how to grow our businesses.   Good stuff.

But what about the Red Herring?

As you probably know, a “red herring” is any diversion that is intended to take attention away from the main issue.

How many folks in your organization employ the Red Herring Strategy to dismiss a potentially insightful line of inquiry or to shoot down a bold new idea?  How many times does your team lose traction and waste energy distracted by a long discussion of things that you simply cannot change.

Sometimes you need to let go of the Red Herring before you can swim in the Blue Ocean or find your Purple Cow.
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