As the old marketing theory goes its always harder and more expensive to switch a customer from a competitor than it is to keep a customer. Here is a diagram from the Harvard Business Review on why.
Why your solution must be 9 times better for a product switch to occur. So the seller over rates their widget by a factor of three and the buyers(happy in their own little world) think that what they have is three times better than it is.
The following diagram shows that if you can minimise behaviour change, from a significant product change( switch) then you might well have a great product. If you are looking to switch, make the barriers really low to change, less ‘retraining’ the better eg MS Excel had exact same keystrokes as Lotus 123.
Hence my decision on buying a new Notebook.
“Twitter is dying” prompted me to look at what the issues for Twitter. They are typical of a fast growing company in technology. In particular Twitter is a disruptive technology and it can learn from the success of Facebook on what to do next.
According to comScore the Australian audience of Internet users was 12.3m in June 09. Looking at the use of Social media with these audiences, you find that Facebook is used by 49% of this audience, Twitter by 6.4% and Digg 3.5%.
This is important data when considering what type of people are currently using these tools. Using the diffusion of innovation curve below and looking at the penetration rates - then its clear that Facebook is now entering the Late Majority stage of its adoption curve - where the overwhelming pressure from peers is influencing usage.
Both Digg and Twitter are in the Early Adopter phase. This is usually characterised by opinion formers and ‘role models’ driving adoption. The next phase for both of these companies is to grow into the Early Majority phase - this is one where the pace slackens, users are more deliberate and users are willing to adopt only after peers have adopted. Unfortunately the opinion leaders in the early phases have no influence on this next phase.
This original work by Everett Rogers was then extended by Geoffrey Moore to look specifically at high technology products from start-up. Commonly known as “Crossing the Chasm” , Moore’s book looks at the different stages and how there is a chasm between the Early Adopters and the Early Majority. The key lessons for Twitter and for Digg is that they need to focus on changing their strategies to be successful.
Currently Twitter is targeting the rare breed of people who have the insight to match an emerging technology to a strategic opportunity - prepared to take on a high-visibility, high risk project.
Their successors in Early Majority detest risk, waste of money and time. The quality of the product is key and will tend to communicate more with others from within their own social group of industry - rather than look outside. The way to success in this segment and ultimately for the whole market is to focus on a niche, to dominate that niche and to build a reference base in the pragmatists within that niche. Then to grow the niche and then develop another niche and grow from there.
In a previous entry I discussed why everyone needs to be part of the “marketing” effort. I am happy to exchange marketing for sales here - essentially all business is in the business of selling their products or services - and every member of staff has a role to play.
The rationale simply is that the brand and reputation of a company is built up by each and every transaction between the company, its staff and its customers, suppliers and partners. A bad experience will reduce brand equity and a good experience will increase it. Brand equity makes selling easier.
So HOW can you instill this in staff? I have reduced it to 5 things with the acronym BASIC
- Breakdown ’silos’ between departments
- Allow staff to take ownership of issues and to follow them through to the BITTER end
- Step into the customers shoes and view from their position - and LISTEN
- Inclusion on how their actions increase sales
- Courtesy to all
Came across a great article by David Kent of international brand consultants The Right Group. Basically the message is that if you continue to invest in the brand then the long term rewards are high. Full article link below.
“Here are some simple tips to achieve positive outcomes.
1. Listen to the market, focus on customer needs
- Be sure you understand your customers — their needs, wants and expectations.
- In changing markets, the basic needs of customers do not dissipate. Customer priorities can shift, however, so you need to develop innovative ways to satisfy these needs.
- Unmet customer needs present opportunities for new product development. Rather than pull back on innovation in new products, examine different ways to create and launch new ideas.
2. Manage your brand across all touchpoints
- In challenging times, customers place even more importance on brands they can trust.
- Ensure your brand is clearly defined and is delivered at all times.
- Avoid bait and switch branding; making a promise to customers that cannot be fulfilled.
- Engage all of your people with your brand promise. Staff interactions with your customers need to reflect your brand.
- Align your business practices to reflect your brand. All operating procedures, systems and policies need to reinforce your brand.
3. Communicate clearly
- Ensure your communication (internal and external) is clear. Clear customer communication minimises the potential for clutter, which leads to confusion.
- Also ensure that you reinforce your relationships with customers.
- Review your existing marketing communications programs. Think outside the square to identify alternative mediums and campaigns.
4. Look for ways to deliver superior value to your customers
- Customers are more focused on value; they want to receive more for less.
- Ensure your customer value proposition meets the needs of a value conscious customer. Make sure it can withstand challenges from the competition.
- Invest in customer retention, as acquisition is more difficult.
Marketing is usually seen as an easy cost-cutting option, but think carefully about the long-term impact this will have on your brand and profitability.”
Full Article
This post was prompted by a recent conversation and also by a meeting some months back.
Both conversations were around mobile email being the ‘Killer App‘ for two different companies. One is a smart-phone manufacturer and the other a telco - both saw mobile email as the ‘Killer App’. Both are wrong because of timing.
As the wikipedia link above notes the Killer App is much sought after. But the companies who have built them don’t seem to thrive - eg Visicalc, Lotus 123, Palm. In each case the applications developed promoted and validated a platform that took off, but when competition came in the original companies did not adapt and thrive in the new environments.
In the case on mobile email there are two key reasons(in my mind) why the mobile email is not the Killer App:
- Every device does email (well every smart-phone does email) - some great, others OK but they all do it. So Blackberry started it, Windows Mobile, Symbian does it and iPhone makes it sexy
- Mobile email is promoted by Telcos as a solution at a price-point. In the main the Telcos offer the same handsets, same price points, same speed, same coverage etc ( I know that Telstra will scream!)
The two point clearly that mobile email is now a commodity - that means bad in marketing speak - it means undifferentiated, price based etc yuk! Not to say that there won’t be great growth as people pick up smart-phones as predicted and volume of data increases and the your Telco will make money from their 3G network - but not a Killer App.
By the nature of these industries companies who innovate get great growth as the market grows but will have followers who will develop very similar solutions - probably at a lower price point. So what can an innovator do?
The answer lies in a variety of areas:
- What do customers want? Think about the segments carefully - such as early adopters, teens - what are their pain points and their needs, wants etc( your general market research will not answer this)
- Why did the ‘early adopter’ buy a Blackberry - what was their need and what is their current need eg is email still their #1 app or do they now tweet and its therefore about communications and not email.
- Redefine the original category - continue to push the envelope -prove you are better - better still redefine what you as a company does
- Look at what other apps you can build for your customers. For example there was no real killer app for the Windows platform although Office comes close but that was packaging a bunch of good apps at a price point - saving time/effort etc
- Fight the commodity trap - be different, do different and force people to choose - better to lose a customer because you don’t fit the bill than tonot have a clear position to defend.
So if you once had a killer app that became a commodity and its now a liability - get back to basics and understand innovation and the customers - again!
According to IBIS World there are a number of industries that will not only ride out the current recession, but also benefit from it. Here is a list of the Australian economy’s 10 fastest employment growth industries for 2009 that are looking to expand despite current forecasts:
- Recycling Collectors
- Private School Teachers
- Online Information Providers
- Road Construction Workers
- Cosmetics Retailers
- Cosmetics Manufacturing
- Grain and Livestock Farmers
- Health Providers
- Rail Network Providers
- Internet Service Providers
I attended a seminar with Saul Eslake the chief econmist at ANZ recently. In response to a question on why the Reserve Bank reduced interest rates last month by 100 basis points - his answer was twofold - firstly because it needed to show it was serious and secondly because it could.
It was able to because of the relatively low debt it is carrying and secondly because interest rates were quite high( and so there was room to move downwards - unlike some countries like the US).
Lesson is that this is a market that will be a great target in these tough times
Every cloud has a silver lining. Many companies will be pulling back at this time and many US based companies have already instigated a hiring freeze and many have severely limited travel. The silver lining is for those companies who wish to grow during these times and will invest in marketing and sales to do it.
I think that “marketing-oriented” companies will hold the line and keep marketing spend rather than radically cut it. In the early 90’s Microsoft invested while everyone cut and grew market share - I happened to be an employee at the time and there was budget for great ideas that grew revenue - flaky ideas were cut.
Its just harder work and the mix of where you put effort and money is more critical. At the end of the day you need to generate qualified leads, build the value in your offer and get the pricing right through innovative packaging and offers.
If you think about the AIDA - awareness, interest, desire and action - different companies will have a different focus. Key will be to focus on building sales pipeline and awareness will likely be the one to be cut.
