Manage your core business assumptions and secure your company's long-term success

What have you come to accept about your customers, products and competitors? What assumptions has your company consecrated as gospel? How confident are you in the assumptions you are making about core dimensions of your business, such as:

• The price sensitivity of your customers
• Your partners’ biggest priorities & challenges
• The macro forces - e.g., technology - that are having the greatest influence on your industry

Which of your existing assumptions are most ripe for "busting"?

Let's warm up with a little target practice. In the cross-hairs today: Laundromats
Let's make "assumption busting" a little more concrete by looking at one of my favorite examples of an industry with assumptions ripe for busting, the glamorous world of Laundromats. I currently live across the street from one of the thousands of fluorescent-bathed Laundromats that dot the streets of New York City. I've had the pleasure of living in New York most of my life, and have sampled a myriad of the City's laundry establishments. While they all tend to look a little different - the age of the machines, the color of the walls, the out-of-order sign hanging above the change machine - they all share one thing in common. They are some of the most unpleasant spaces to spend time in, only slightly edging out the Post Office and the DMV.

So what exactly is going on here? Is the aesthetic appeal of Laundromats simply a reflection of the economics of the business model - i.e., fluorescent lighting & lime-colored paint are all that Laundromats can afford given their thin profit margins? Tell Howard Schultz, the founder of Starbucks that and I'm sure it would make him chuckle. Starbucks showed the world, or at least the US, that masses of people were not only willing to spend more than $1 on a cup of coffee, they were willing to spend 5x that amount given the right atmosphere and the proper balance of sugar & caffeine. Starbucks busted the lid (no pun intended) off long-held assumptions regarding the range of possible coffee behaviors of US consumers, and completely redefined the market.

It's not about the bottom line
The bottom line on Laundromats is simple - it's not about the bottom line. Laundromats are unpleasant places not because they cannot afford to look nicer, but because their owners have come to assume, whether explicitly or implicitly, that customers are satisfied with the existing price/value paradigm. And, given the dearth of available alternatives, it’s reasonable to conclude that customers are in fact (relatively) satisfied.

Were Laundromat operators to BUST existing assumptions regarding the role that a Laundromatcould play in people’s lives, and, for example, make Laundromats more hospitable places to spend time, operators could open doors to whole new revenue streams. These new revenue streams could more than cover the cost of Laundromat “beautification”. Much as Starbucks transformed the drinking of coffee into an experience which enticed people to linger around and purchase additional goods (e.g., desserts, CDs, coffee-related "gear"), Laundromats are perfect places to follow such a strategy given that their patrons are captive to their dirty socks for an hour or longer at a time.


How do I locate busting opportunities within my industry?

Let’s set our opportunities within the Laundromat business aside and discuss how you can locate the assumption-busting opportunities within your industry. Busting is a 2-step process, and like many approaches that can uncover large opportunities, it requires your time, your focus and some of your best thinking.

Step 1

In step 1 you want to codify - i.e. put down on paper - all of the critical assumptions under which your company currently operates. By critical, I mean those assumptions that are core drivers of your company’s growth & sustenance .

An easy way to determine whether an assumption is critical to your business is to ask, "If this assumption proved to be wrong, how much would my business suffer?" If you assess the potential impact to be excessive - e.g., you could lose your most important customers, miss out on explosive growth opportunities, be made extremely vulnerable to competitors, or be put out of business altogether - then the assumption is a critical one.

Categories under which critical assumptions typically fall include assumptions regarding products, prospects & customers, competitors, the industry, organizational structure & competencies, partners & suppliers, technology, and the macro environment. (Below I have provided examples of some common types of critical assumptions)

Completing step 1 often serves as a major eye-opener. Businesspeople frequently find it challenging to identify even a few of their most critical assumptions. Often this is because over time a company’s critical assumptions have become so ingrained within the company’s DNA that they have become all but invisible to most employees¹. Organizations that find themselves in such circumstances place themselves at great risk to external "surprises" – or what I like to refer to as things organizations would have seen coming had they actively monitored their critical assumptions!

Step 2

After you have identified your critical assumptions, you’re ready to move onto step 2. The goal of step 2 is to identify assumption-busting opportunities. This is accomplished by analyzing & pressure testing each of your assumptions from step 1; asking simple, yet provocative, questions such as:

• Is this assumption still valid, or is it ripe for busting? How would I find out? Does my business have processes that allow for efficient, low-risk validation of this assumption? (I.e., can we easily test whether this assumption has busting-potential?) If we learn that the assumption is ripe for busting, what does it imply for our business strategy, our products, our marketing, our organizational structure, etc.? What activities or projects should we start/stop/increase/reduce?
• How can I effectively monitor this assumption on an ongoing basis? Does my business have the flexibility to respond quickly & effectively to changes to this assumption?
• If we learn that this assumption is still valid are there any activities or projects that we should start/stop/increase/reduce?
  

Enough reading. It’s BUSTING time!

Busting is best started by practicing the process within your "personal lab". Your first objective is to become comfortable with the two steps of busting and adept at surfacing your critical assumptions. Begin by doing exercises in which you focus upon a single category (e.g., Products) and try to identify a few critical assumptions within it. Take each assumption you've identified through the battery of questions listed in step 2 above. Now imagine a scenario in which you determine that the assumption is invalid, i.e., ripe for busting. What could it imply for your business? What actions might you consider taking? Write down all of your thoughts.

When you’re done, move onto another category (e.g., Technology) and run through the exercise again. Run through this exercise for each category over the course of a week or two, and see what you come up with. As you become more comfortable with this exercise you can start to bring busting-based thinking into your organization, leading the effort to push for the deep, strategic thinking that is in dangerously short supply in our modern corporations.

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1 - This seems to be more common within large organizations and organizations where people change roles on a frequent basis. I believe this is because in such organizations, the designers of the original business strategies have either left or moved into different parts of the company, taking with them the assumptions that underpinned the strategies they developed. What is left behind is a set of activities, processes, and reporting procedures to be carried out by new employees, often with little explanation regarding their rationale.

How your pricing and marketing strategy should be influenced by your customer's reference point

We love to think of ourselves as rational, objective beings. And yet endless scientific studies indicate that we are anything but... context, the framing of information, and cues can have a profound influence upon how we view the world, and the decisions that we make...



Let's start with a fun warm-up exercise!
Real quick - what animal is displayed in the picture to the right?

(make a mental note of what you think and then scroll down for the answer)






















The answer is... drum roll please... there are two answers in fact. The picture is most certainly of a rabbit. But the picture is also of a duck. Can you see both of them?

For the majority of you who are seeing this optical illusion for the first time, I would guess that you saw a rabbit when you looked at the picture. Why? Thumper. The picture of Bambi's pal sitting at the top of this post alongside a carrot acted as a "cue", priming the "rabbit neurons" in your brain, and shaping your perception in the process. (Had I shown you a picture of Daffy Duck instead of Thumper, many of you would have seen a duck, not a rabbit. Sorry, Daffy.)



But what do "rabbit-ducks" have to do with marketing & pricing?
Simple. To be a successful marketer, it is critical that you develop an adeptness for identifying consumer contexts & reference points, as these factors strongly influence consumer perception, behavior, and price sensitivity. Of course, identification alone is not enough - you must use such insights as key inputs into your overall marketing strategy.

So to use a silly, "Thumpereqsue" example, if you know that people are bringing a "bunny-loving" lens to your restaurant because Bambi is playing at the movie theater next door, you might not want to offer wild rabbit as one of your dinner specials.


"Doug, can I interest you in tush warmers?"
Let's bring the concept of consumer context & reference points a little closer to home with an example that many of us can relate to: the old "car-options" strategy utilized successfully by thousands of car salespeople every day... it goes like this: if you're purchasing a big-ticket item (e.g., a new car, an expensive vacation, a new suit, etc.), you're more likely to also purchase lower-priced "options" or 'add-ons' than if you were offered these same items at a later date.

(hypothetical scene of me in a showroom purchasing a new car)
"Doug, how about we add those tush warmers to the car?... only $250 per seat... you know how chilly leather seats can get in New York during the winter..."

"Sounds good, Mr. Salesperson... what's an extra $500 when I'm already spending $XX,XXX on the car?"

Now instead imagine Mr. Salesperson offering me the same "warmers" for my new car 2 weeks after I've driven it off the lot. Even if he could have them installed without my having to lift a finger, I would likely balk at the offer.

"Thanks for the offer, Mr. Salesperson, but I think I'm all set. Love the new car, by the way. Thanks again for all your help"

Same tush warmers. Different context, different reference points, and different willingness to make a purchase.

In the first scenario I was in "open-wallet" mode. In the second scenario I was not. In the first scenario my reference point for the tush warmers was the several thousand dollar new car that I was in the process of buying. In the second scenario my reference point might have been an outrageous electric bill that I had paid only moments before the salesman made his offer.


Jelly belly's popcorn-flavored channel & pricing strategy
Jelly belly, a leader in the jellybean industry, provides us with a good example of a company that leveraged its knowledge of consumer reference points to develop a channel strategy that enabled it to charge premium prices for its jellybeans.

Instead of selling its jellybeans through traditional candy outlets, Jelly Belly made the conscious decision to sell them at specialty and gift stores, where sweets alternatives included higher-priced items such as gourmet chocolates and fruit baskets.

Since the reference points of people shopping at gift stores were these higher-priced sweets and not other jellybeans, Jelly Belly could price its 'beans at a substantial premium to other 'beans and still provide a cheaper sweets alternative for the gift-store shoppers.

Same jellybeans. Different context, different reference points, different price sensitivity.


How do I start applying these concepts?
Leveraging your insights around consumer context & reference points can turbo-charge the performance of your business by providing you with the means to significantly improve your marketing & pricing strategy.

The first step in this powerful process is to generate deep insights around your target customer's context & reference points. Below I have supplied some initial questions to get you started:

insights around customer context
What are the most common contexts in which your target customers [develop a need for | search for & learn about | compare & purchase | install | use & maintain | repurchase] your product or service?

-What do I mean by "context"? Context refers to those attributes that describe the environments of your target customers, such as: where they are - time & place. who they are they with. what they are doing. what is on their minds. their current objectives & goals. their current physiological & emotional states. get the idea?

insights around reference points
What reference points are your consumers using when they [search for & learn about | compare & purchase | use & maintain | repurchase] your service? How do these reference points impact: Their receptivity to your offering? Their openness to the price of your offering? Their experience when using your offering?

-What do I mean by "reference points"? Reference points are the points of comparison or anchors a consumer uses when assessing or experiencing your product. To use an extreme illustration, imagine two people who are given a used 2005 Toyota Corolla for free. One is a first-generation immigrant who earns $17,ooo a year, whose only mode of transport is a beat-up Yamaha motorbike. The other is a multi-millionaire who already owns 4 luxury cars. Given the two people's vastly different reference points for the free Toyota, their responses to the news about the free car will differ dramatically.

After generating insights around your target customers' contexts & reference points, you will want to explore how you can use these insights across critical aspects of your marketing strategy. In some cases how to leverage the insights will be obvious; in other cases you will have to stretch your thinking and percolate your creative juices.

In a future post I will run through some concrete examples so you can see these essential marketing concepts in action, and develop a greater understanding for how to use them in your business.

As always, I welcome your comments, thoughts, and questions. 

Please feel free to email me if you have any questions about pricing and how to effectively use reference points within your business.






Related posts

• How to unleash the power of context and turbo-charge your marketing

• Product-sandwich product & pricing strategy

• Marketing & the 5 W's: why every marketer should take a journalism class

• CoNtEXT is King
  

Great books on pricing strategy

• The Strategy and Tactics of Pricing: A Guide to Growing More Profitably (4th Edition) (Pie)

Marketing warriors, fight for thy customer!

Whenever I need a little marketing pick-me-up, I turn to this guy, The Ultimate Warrior (the nice-looking gentleman pictured to the right). A beacon of strength, courage & determination, Ultimate fought his way to the top of the World Wrestling Federation during my youth, despite the greater popularity of Hulk Hogan. Sure, much of his energy was likely derived from illicit muscle-enhancers pumping through his body, but that's beside the point.

Much the way The Ultimate Warrior fought his way to the top through his courage & determination, I am calling on all marketers to reach into their "inner Warriors" and fight for the single most important long-term success factor of any company, your customers. It's up to you to ensure that your customer remains king within your organization.

To pull a couple of quotes from the modern-day Plato of business, the late Peter Drucker, everything begins & ends with the customer:

"The purpose of a business is to create a customer"

"The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself"

Battling product-centric thinking
While the business world purports to live in the age of customer-centricity, I am convinced that we still live in an era of product-centered thought. There are numerous factors that underlie this, from organizational structure to the science of human cognition & our inability to hold onto abstract concepts such as needs (vs. far more concrete concepts like products or services).

While I find such topics fascinating, this post in not about exploring what cognitive science can tell us about business thinking. It's about making one thing clear to all marketers, and that is that within your organization you are the ultimate champion of the customer. And without your strong voice, your organization's long-term future may be put in jeopardy. It's a heck of a responsibility to have, which makes it all the more rewarding.

What I have attempted to do in previous posts is to introduce concepts to help us become more customer-centric in our thinking, and in our approach to business. Whether it be through the help of tools such as the purchase journal, talking to your mother, or the cultivating of your inner consumer voice, developing fluency in customer-centric thought is key to great marketing as well as successful business outcomes.

In closing, a few wisdoms for us to keep in mind

• We think about about our products 100x more often than our customers ever do. The inverse is likely true with respect to their needs.
  

• Our products are tools used by our customers to satisfy their given needs, problems or desires. Our products are a means to an end for our customers, not ends in themselves.
  

• Deep insights about consumers is the foundation upon which great new products are built. The Field of Dreams approach (i.e., "build it and they will come") generally only works in the movies.

• As humans (& marketers), we're wired in such a way that makes it easier for us to think about the concrete (i.e., our products) than the abstract (i.e., our customers' needs). Given this, we need to continuously work-out our customer-centric "muscles" to battle against our tendency to shift back to thinking about our products.
  

As always, please post your comments, questions or thoughts, or feel free to send me an email. Happy marketing, fellow Warriors.

Innoviation via other worlds: a tool for generating powerful ideas for your business

I'm not quite referring to Mars or Pluto when I say "other worlds". Although, there is no doubt that even a few seconds of stargazing can inspire & fuel your innovation efforts.

By "other worlds" I'm talking a little closer to home than Mars or Pluto. What I am referring to is a great framework for innovation in which we explore other worlds (i.e., people, places or things) that provide the samehigher-order benefits as those provided by our product or service.

The Analogous Worlds Framework consists of three steps:

1. Identifying the higher-order benefit(s) provided by your product/service (e.g., save money, save time, guidance, peace of mind, confidence, social connectedness, pleasure, etc.)
   
2. Making a list of those people, places or things that provide the same higher-order benefit (s)
3. Asking how these "other worlds" that you identified in step 2 go about providing the higher-order benefit. Is there anything about what they do or how they do it which you could incorporate into your product, or use in aspects of your marketing strategy*?

*By marketing strategy, I am referring here specifically to product, price, promotion, distribution, segmentation, positioning, and targeting.

Analogous Worlds Framework - PPT template
click here to download slide (use it, share it!)

The Analogous Worlds Framework: a brief example - BMW
Let's take "the ultimate driving machine" for a test drive through the framework and see what we can come up with...

Step 1: Identify the high-order benefits provided by a BMW:

• Saves time. Transportation inventions such as the automobile have cut down the time it takes to get from point A to point B in dramatic fashion (assuming you don't line in LA).
• Provides feeling of importance; status. This should come as no surprise from the Bimmer.
  
• Provides access; empowerment. BMWs, and cars in general are incredibly empowering tools, enabling people to explore places that otherwise would have been unreachable by foot, horse, bike or train.

Step 2: Make a list of those people, places or things that provide the same higher-order benefit(s):

Analogous Worlds Framework for BMW

Step 3: Ask how these "other worlds" that you identified in step 2 go about providing the higher-order benefit(s). Is there anything about what they do or how they do it which you could incorporate into your product, or use in aspects of your marketing strategy?

Here are a few of many thoughts that come to mind (note that I have bolded those items in the BMW framework above which led to the ideas below):

• The BMW butler. Leverage the butler concept and design an on board, voice-activated, computerized "butler" that can do various tasks for you while you drive - e.g., manage the radio settings, climate control, seat positioning, etc.
  

• The Car Doorman. Leverage the concept of a doorman, and develop a feature that allows drivers to push a button and have the car door open for them, saving them the time & effort of having to open the doors for themselves - an activity which is especially difficult when their hands are full (e.g., when carrying bags of groceries, carrying children).

• In-car Google. Leverage Google's approach to providing access (via pertinent information now!), and develop a voice-activated capability that allows drivers to access information about local traffic, road conditions, local commerce, the "health" of the car, etc.
  

• Your driving anthem. Similar to the Nike+ / iPod "Power Song" feature that allows runners to push a button and listen to their favorite high-adrenaline song, develop a button under the steering wheel which plays your favorite "cruising song" when pushed. This concept leverages the method via which Tony Robbins provides "empowerment".
  

Hopefully the BMW example will give you a taste of the potential power of The Analogous Worlds Framework. It's a framework that effectively "shakes things up" and gets you to think in terms of the higher-order benefit(s) provided by your product, getting you out of the feature-focused, product-centric paralysis that consumes all of us from time to time.

Please feel free to download the framework, pass it along to your friends & colleagues - and more important than anything, use it. Like many tools, the more you use it, the more it will work for you, and help you generate high-impact, game-changing opportunities.

As always, feel free to contact me with any of your thoughts, comments, or questions.

Great books on innovation & creativity

• Thinkertoys: A Handbook of Creative-Thinking Techniques (2nd Edition)

• Serious Creativity: Using the Power of Lateral Thinking to Create New Ideas

• The Innovator's Toolkit: 50+ Techniques for Predictable and Sustainable Organic Growth

Marketing & the 5 W's: a framework for marketing innovation

In my prior post I introduced the wonders of the 5 W's, and how you could benefit from utilizing this foundation of journalism in your efforts to innovate & develop potent marketing strategies. In this post I provide a peak into one of several dozen 5W's frameworks you can use to turbo-charge your marketing efforts.

5 W's Consumer Journey Framework
This framework provides you with a powerful tool for generating a rich inventory of ideas & insights with respect to the customer journey for your product or service.


(click to download as PDF)

Using the tool couldn't be more straightforward:

1. Create a matrix like the one above, comprised of two dimensions - the 5W's dimension and the consumer journey dimension.

2. Take each customer journey dimension (e.g., demand, search, purchase, etc.) through each of the 5W's, one at a time. Note that some of the Ws will be less relevant to some of the journey dimensions. Despite this, always push yourself to generate insights - 9 times out 10 they exist but just require a little extra brain juice. Within each journey/W box, write as many ideas & thoughts that come to mind.

3. Redo the exercise a few days later and see what additional thoughts you are able to generate. Allowing a little incubation time for your thoughts rarely fails to deliver some powerful new ideas.

4. Now, with your fully blown-out matrix in-front of you, ask yourself some of the following questions:

• What new channels might I want to explore for increasing product awareness, improving the product search, selling, & servicing ?
• What new consumer needs are likely generated at various points along the consumer journey and how might I benefit from them?
  
• What complementary products or services might I want to offer or bundle with my product at various stages along the customer journey or to specific customer segments?
• What new partnerships might we want to explore to provide greater total value to our customers at various points along the customer journey?
• What marcom approaches might we want to test or use with certain customer segments, within certain contexts, or at different stages along the consumer journey?
• What new products or features might I want to offer to meet the needs of certain customer segments within certain contexts and during specific stages of the customer journey?
• What ways can I improve & influence the search & decision-making process for customers / specific customer segments?
• What ways can I can improve the {purchase & payment, delivery & installation, usage & maintenance, disposal, repurchase & renewal} experience for customers / specific customer segments?

Use the tool & share your experience
So I'd like to ask each of you to try the tool out on a product or service that you currently sell or manage. After you have run through the tool and the battery of follow-up questions for improving your business, let me know what insights or ideas you were able to generate - I would love to hear about them, and have you share them with the rest of our marketing community.

And of course, please let me know if you have any questions along the way - I am more than happy to answer them.

Have fun, and I'm looking forward to hearing about the innovative ideas & insights you come up with!

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Related posts

• Innovation using analogous people, places & things (powerful tool)

• Using the 5W's for your marketing strategy

• Using the 5W's to reduce customer churn

Marketing & the 5 W's: why every marketer should take a journalism class

Journalism 101. Who, what, when, where, why, how?... these key dimensions that are the foundation of journalism can also be used to design great marketing & segmentation strategies, and to turbo-charge your innovation efforts.

The 5 W's as they have been dubbed, can serve as a powerful tool for gaining deep insight into the contextual nature surrounding the need for and use of your product. I like to think of the 5W's as the marketing equivalent of an industrial-grade power shovel, allowing you to "dig deep" so you can get to those precious consumer gems that lay beneath your feet.

Context is king
Powering the 5W's is the essential notion that everything that we do is embedded in a context, and the better you, the marketer, understand the different contexts in which the need for/use of your product occurs, the better equipped you will be to develop marketing strategies or innovations that truly pop!

How do I use the 5 W's?
The simplest way to begin using the 5W's is to start with the most basic question and loop it through each W:

• {When/Where/Why/How/For whom} might the need for my product arise?

Spend at least 5-10 minutes on each W, making a list along the way. Allow your thoughts to percolate; don't be afraid to make assumptions - you can always validate them in the future. Do the exercise again a day or two later - often the most insightful thoughts will come after a period of incubation.

As you begin to use the 5W's, one thing that will become clear to you is that one or two of the Ws will often be more relevant to your product than others. You'll also notice that the Ws will frequently interact with each other in meaningful ways, and that you'll often want to drill down on a given insight using "follow-up" Ws. Note these interactions and drill-downs and allow them to generate further insight into the contextual nature of demand for your product. Often the deepest insights lay in these pockets.

Gatorade: a brief example of the 5 W's in action
Let's take Gatorade, that cold, refreshing beverage that most of us have purchased at some point in our lives. Reaching into our magic hat of W's, we come up with "Where?", leading us to ask, "Where might the need for Gatorade arise?"

Given that Gatorade is 'the ultimate thirst quencher', I begin to think of places where the need for thirst-quenching is likely to arise. A few examples that come to mind include basketball courts, hot climates (e.g., Phoenix, The Mojave Desert), marathons, and the Dead Sea.

Let's reach into the hat again... this time I pull out "When?", leading us to ask, "When might the need for Gatorade (thirst-quenching) arise?" Some initial thoughts that come to mind include summertime, playing sports, during a long hike, the morning following a night of drinking, a few hours after eating extremely salty food, and last but certainly not least, during a prolonged bout of diarrhea.

Let's now drill down on one of the "When's" - during a prolonged bout of diarrhea - and ask, "Where might such bouts occur?" One thought that comes to mind is certain poor villages around the globe where outbreaks occur regularly. Gatorade could be used in such places to quickly rehydrate people, especially children, who can die from the dehydration caused by the outbreak. Needless to say the potential benefits to Gatorade, the Gatorade brand, and the people of such villages would be numerous.

5 W's Recap
How to use the 5W's for developing marketing strategies & for business innovation likely merits an entire book; perhaps we'll put one together in the near future. Hopefully in this post I've given you a little taste of how one of the bedrocks of journalism can also serve as a potent tool for marketers & innovators alike. Much more to come.




More posts on the 5 W's:

• 5 Ws innovation framework
• Using the 5Ws to reduce customer churn
  

How to target your best prospects and maximize your ROI

In a prior post I discussed customer segmentation, a topic renowned for producing headaches and mild bouts of anxiety among even the sharpest of business people. The makers of Tylenol might want to consider becoming a sponsor for seminars on the topic; of course, providing free samples for those in need throughout.

In that earlier post I promised that I would discuss some of the ways in which segmentation can be used; in this post I'd like to talk about one such way - segmenting customers by profitability, and then using this knowledge to significantly improve your prospect targeting, and hence your ROI.

The concept behind segmenting your customers by profitability makes intuitive sense. Wouldn't you want to know which of your customers are providing you with your profits, and how to find prospects who look just like them?... wouldn't you also want to know which customers say adios to your service mere days after signing up for it - especially after you've spent so much effort & money acquiring them?

The friendship analogy
The analogy that always comes to mind when I think about this topic is that of friendships. Did you ever have a friend who would constantly borrow money from you and never pay you back? And, of course, whenever you needed a favor, he was nowhere to be found. My guess is that such a friend would likely not be the best man at your wedding, if he received an invitation at all.

On the opposite end of the spectrum we have the angelic friend. The friend who would give you the shirt off his back. The friend who carried you miles to the nearest hospital after you twisted your ankle during your annual camping trip.

To ask the obvious follow-up question, which of these two friends did you prefer? And, for future "friend-making", if you could buy a crystal ball that would allow you to discern "the angels" from "the moochers", would you purchase it? I know I would.

Bringing it full circle
Segmenting your customers by profitability, and using the insights to improve your prospect targeting is a lot like picking new friends.

When picking new friends you want to look for people who have the same qualities as those of of your closest, dearest friends (i.e., "the angels"). So too is the case with your prospect targeting - you want to target those prospects who share the same qualities as your most profitable customers (e.g., have similar information profiles in your database). And in addition, you want to limit or stop targeting those prospects who look like your unprofitable customers (i.e., "the moochers").

Plenty more on segmentation to come in future posts. Please feel free to email me if you have any questions or would be interested in discussing the topic in more detail.

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More posts on segmentation:

• Using the 5Ws for segmentation & marketing innovation
• Using segmentation to develop your marketing strategy
• What is customer segmentation?
  

Great books & articles on segmentation:

• Making Segmentation Work (PDF)
• Market Segmentation: How to do it, how to profit from it
• Counterintuitive Marketing: Achieve Great Results Using Uncommon Sense (One of the best general marketing books with an excellent chapter on segmentation)
  

Your product's lemming factor: are you following your competitors off a cliff?

I have seen it happen time & time again... and it always reminds me of the psychology of crowds, and how the individuals within the crowds assume their fellow crowd-members know something they don't know. So the individual continues to follow the crowd, all the while not realizing that the crowd is often an amalgam of equally confused individuals...

The Lemming Effect
Ok, enough of the philo-babble. The "lemming effect" as I call it is no doubt present within many organizations, and all of us at one time or another fall into its trap. Its influence within product management & product development is pervasive, frequently resulting in products that get bulkier & costlier over time. But we would be remiss to equate the proliferation of bells, whistles & "performance enhancers" with greater levels of customer value.

There are many drivers of the phenomenon of "Frankensteining" a product, and the lemming effect is at the top of the list. It all starts when we become more focused on our competitors than on our customers. One day Acme, our arch rival, increases the performance of its product or adds a new feature. "Hmmm", we think to ourselves, "What does Acme know that we don't? Are customers demanding greater levels of performance?" And then, voila, with limited thought or analysis we quickly 'upgrade' our product. Acme no doubts catches wind of our "2.0", and the arms race ensues.

All the while, our customers might not even be looking for the increased performance or the new bell or whistle. Perhaps our target customer looks a little different from Acme's target customer, and have somewhat differing needs. Perhaps Acme's reason for making enhancements to its product were ill-conceived or driven by internal factors that are invisible to us. Regardless of the reason, the one thing we have successfully achieved is increasing the cost of both our product as well as Acme's, who will no doubt follow suite with their "3.0". Whether we're able to "pass along" this incremental cost to our customers in the form of higher prices is something we certainly hope we can do.

Never take your eyes off your customers
The moral of the above faux situation, and of the lemming effect in general is to be wary of the moves that your competitors make. Do not assume the moves they are making are the right ones or that they have generated an insight that has given them the secret to building the perfect service for customers. The remedy to the lemming effect is quite straightforward, yet often ignored. Stay abreast of what your competitors are doing, but keep your eye on the ball - aka, your customers! Stay close to your customers. Develop multiple channels & methods for gaining access to the "voices of your customers". Understand their needs, desires, motivations, decision-making processes, changes in their outlooks or needs, etc. If you do these things right, you will be far less vulnerable to the lemming instinct, and far more confident in product decisions that you choose to make.

How watching Seinfeld can help you become more innovative

"Did you ever wonder why...?"

The above phrase captures the thematic brilliance of Seinfeld, both the show as well as the comedian. In addition to providing a foundation for Seinfeld's comedy, it also serves as a framework for exploring the world with more innovative eyes.

One of the core premises of this famous "Seinfeldian" phrase is the idea that not everything that is necessarily makes sense or should be. Most people, being extremely busy and having grown up in an environment in which "it has always been this way", are less likely to notice "the absurd" in everyday life.

Taking the time out to put on the "Seinfeld glasses" allows you to take a step back and make the types of observations that can lead to major innovations for products, services & processes. As I have written about in prior posts, becoming a more mindful marketer is the name of the game, and Seinfeld's mindfulness is one such variation on the theme.

So the next time your thinking about a product, a service, a process, or what have you, take a 60-second timeout out and ask yourself, "What about this do I find annoying? What irritates me or seems unnecessary, silly, or overly cumbersome?"

After you have discovered these irritants or apparent absurdities, challenge yourself to come up with solutions, knowing that they are waiting to be discovered.

How to spur innovation using Maslow's hierarchy of needs

Abraham Maslow, the psychologist from Brooklyn who is famous for his 'hierarchy of human needs' has contributed more to the discipline of marketing than he ever would have probably imagined. Mind you, Maslow probably spent little if any time contemplating marketing so he likely would have been ambivalent towards his contribution.

Regardless of Maslow's intentions when he devised his famed hierarchy of needs, his pyramid provides us with some extremely powerful innovation exercises for business, particularly with respect to products & marketing.

One such exercise that I run through frequently is to explore how I might inject one or more of Maslow's needs into an existing product or service to help differentiate it. For example, meditating on the esteem need begs the question of how I might make my customers feel extra special, important, and worthwhile.

With respect to the need for self-actualization, which is strongly associated with giving to others, I am led to think about giving a share of profits to charities selected by my customers. As a purely hypothetical example, let's say for every $100 car insurance premium paid by a customer, $2 will be given to a charity of the customer's choice, which she gets to select while paying her premium online.

In using Maslow's hierarchy as a potential playing field for innovation, it is critical to first identify the core benefits provided by the product you're looking to innovate around - whether it be security, guidance, hope, pleasure, saving time or money, etc. Only once you have a clear grasp of the core benefit of your product will certain needs within the hierarchy begin to resonate, and will opportunities for innovation in your marketing or the product itself begin to "pop".

More to come on innovating around Maslow's hierarchy in future posts - I have some neat frameworks & tools for you to use which will beef-up your Maslow-muscle. As always, feel free to contact me with any of your questions, comments or thoughts.

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Other posts on Maslow:

• Injecting some Maslow into your marketing
  

Enhance your innovation by tapping your product's value-creation web

In the continuous search for innovation and creating more value for your customers and shareholders (and hopefully for society too), it's important that you have a good understanding of your product's value-creation web (aka "value web").

A product's value web is simply an assessment of all of those people, services, products, companies and institutions that have the potential to derive value from the sale of your products or services. This assessment should importantly capture additional customer needs that are generated when a customer purchases your product (e.g., the need for plant food that is generated from the purchasing of a plant).

The Value Web in action
To provide a brief example of a product's value web, let's consider the purchase of a pair of tickets for a jazz club in the city by a suburban couple. Several possible beneficiaries ("web nodes") come to mind. First, there are the restaurants near the theater which may benefit from the couple's desire to grab dinner before the show. Second, we have the garages near the theater because the couple will want a convenient & safe place to park their car. Third we have the babysitter who lives down the block from the couple, who will no doubt earn a few dollars looking after the couples' new born while they are in the city. Fourth we have the city government, which will garner tax revenues via the couple's car tolls (to enter the city) and the sales taxes collected from the couples spending (tickets, garage, dinner, etc.)... and the list could go on.

After you have gone through the important exercise of mapping out your service's value web, you then want to ask some key questions, including:

• Can I bundle my service with one or more of the nodes in a way that would be compelling to my customers? (e.g., bundling tickets, dinner & garage into a single offering at a discounted price)
  
• Can I share costs with any of the nodes - marketing costs, operating costs, etc.? (e.g., including a mini-ad for the garage or restaurant within your bigger ad for the concert)
  
• Can I "exchange" the value created by the sale of my product with other nodes in return for something that I value? (e.g., providing a % of ticket sales to the garage in exchange for the garage providing discounts and valet parking to folks attending the concert)
  

Now, of course, as part of doing due diligence for any of the ideas that you generate, you have to understand the economics behind the different ideas, and ensure that the value created for both you and your partner(s) is worth the effort required.

More to come on value innovation & the value web in future posts. As always, feel free to contact me via email.

Improve your marcom by becoming mindful of messages that hit you in the gut!

One of the most powerful pieces of communication I have ever laid my eyes upon was not the brainchild of the hot, new Madison Avenue agency... nor the creative genius of an underground, esoteric Parisian artist. It was the creation of a couple of public school teachers and their students. It sat on display in the entry hall of their school in Harlem.

There in the display case was a can of a Coca Cola and three Chips Ahoy cookies. Right next to the can of coke was a mountain of pure white sugar. The Chips Ahoy cookies were accompanied by a similar-sized mountain of sugar in addition to a large cube of butter.

The sign above the display read, "Ever wonder how much sugar is in that can of coke you're drinking?"

Needless to say, the hills of sugar and the butter represented the exact amounts of sugar and fat in the respective items on display. It was powerful communication. It scored a knockout blow.

The goal behind any communication is quite simple. Get people to notice it. Get people to "give it the time of day". Get people to be moved or motivated by it.

Whenever I come across something or someone that communicates powerfully, I stop and ask myself, "Why? What was it about this that made it past my 'filter' and touched me in some way?" Whatever answers I come up with, I try to boil down to more generalized themes that I can apply in some capacity to my own marketing efforts. As a marketer, this is an important habit to develop, and one that has helped me immeasurably throughout my career.

Going back to the school display in Harlem, the communication was effective with me for two primary reasons, each interrelated:

1. It was unexpected & surprising.
2. It made the abstract concrete.

While I knew a can of coke had 'lots of sugar' in it, the 'lots' remained an abstract concept that was hard for me to interpret - and one that I likely preferred not to think about. Translating this abstract concept into a visually compelling mound of sugar brought it to life, and made it easily comparable. How could I help but notice that the mound of sugar was 1/2 the height of the can of coke! It was a perverse, shocking image, with a powerful, long-lasting impact.

While my example of the coke can highlighted a couple common success drivers of powerful communications - surprise & tangibility - there are several other such drivers that have relative degrees of importance given the context of the communication. While understanding these drivers is helpful, it's even more important to become mindful of those communications that "get to you" - and to ask yourself, "why?" The nuances you will learn through your self reflection about what make communications powerful is where the real insight lies.

Use your customer's language so they can HEAR you

"... all I need is some cigarettes, a little food, and my HBO..."

-Anonymous gentleman on downtown #1 train, NYC

Well you certainly have to respect a guy who knows exactly what he wants. I wish I had his level of clarity...

I heard the above quote on the 2 train this morning during my work commute down to the World Financial Center, and it really slammed home a point that Sam Horn makes in her wonderful book, Pop! The key insight is to use your own customer's language in your marketing communications. Rather than playing around with formal-sounding or hip-sounding terminology, listen to the actual words that come out of your customers' mouths.

What do your customers say or think to themselves when they're in a situation in which they would benefit from your product (or service)? What do they say or think when they're enjoying the benefits of your product? What words do they use to describe the product to their friends?

Why pay an expensive copywriter or worse, try to write the copy yourself when you have thousands or millions of customers doing the writing for you already? And remember, perhaps the easiest way to gain access to the language of your customers is via the web - blogs, discussion boards, etc.

If you want your copy to sound real and resonate with your prospects & customers, what better way to accomplish this than to take the words straight from the horses' mouths?

Wilton Stentz, the Yoda of online marketing...

All marketers know how important successful communication is - whether you're trying to build brand awareness, maintain the loyalty of an existing customer base, or influence key decision makers at work.

The Law of Association
While there are several core 'laws' that underlie successful communications, few are as crucial and as powerful as the law of association.

The law of association is based on the solid yet simple notion that in order to communicate effectively with anyone, you need to work with the material that already exists inside of their heads. Al Ries & Jack Trout underscored this premise in their classic book, Positioning: The Battle for Your Mind.

The law of association is particularly powerful when you are introducing something new to people, especially when it is complex, hard to "size up" or hard to visualize. Through using what is already in people's heads, you can instantly communicate in a manner that is both clear & compelling.

Who the heck is Wilton Stentz?
Let's use the title of this article as an example of the law in action. Now you probably don't know who Wilton Stentz is, but you most certainly know our friend, Yoda. Let's imagine that Mr. Stentz is a wise & experienced online marketing consultant who lives in Zurich. Now I could simply say these very words to you and you would be able to comprehend them; whether you would really hear them & remember them is a different matter. But when I look into your mind to identify something that represents wisdom & experience in a rich & visually compelling way, I come up with an association that immediately brings Mr. Stentz's attributes to life. When Wilton is compared to Yoda - in an instant - you "get it".

"It's the Rolls Royce of..."
To touch upon a few additional examples, you've probably heard the law of association used with respect to a a famous luxury automobile brand. Ever had someone tell you, "It's the Rolls Royce of... so-and-so"? Or, how about the brilliant use of the law by baby toy manufacturer, Baby Einstein? What parents don't want their children to become as brilliant as Albert Einstein?

Looking at current events you can see the law of association playing out in the presidential primaries on the Republican side. Just have a look at what Fred Thompson has tried to do, attempting to associate himself with former President Reagan. Perhaps it was a clever idea; however, one requirement that Fred seems to have overlooked is that the law requires there to be real integrity behind the association that is made. There is no substitute for this requirement, nor will there ever be.

The law of association has a rich and varied set of applications within communications, and I look forward to exploring them in future posts.