Thursday, March 15, 2018

Identifying Key Attributes, Features, and Meanings

When it comes to attributes, features, and meanings, there is a staggering array of possibilities.  Rather than taking the “kitchen sink” approach and attempting to be everything to everyone (which is quite often impossible), a maker must identify which of the attributes, features, and meanings is important to a given consumer.   Ideally, the product will be loaded with everything the customer desires, without the added expense of anything that they do not desire, to maximize profit.   But how does one know what qualities are important to the audience?

There is no clear answer, and the sources I've read each seem to have their own take, with very little overlap.   Each of these qualities can be considered in and of itself or in comparison to competitors’ offerings:
  • Functional Goals.   What is the user attempting to do with the product?  What problem are they attempting to solve?  What qualities are necessary to achieving their desired goals?
  • Durability.   How long will the customer expect the product to last?  Do they expect it to be serviceable for a long period of time, or is it something they will use once and throw away?  Are they willing to pay more for a more durable product?
  • Convenience.  How easy is it to use the product to accomplish the goal?   Is the customer willing to undertake much effort, or is it a benefit of the product to make the task effortless?
  • Reliability.   How well does the product perform its intended function?  Is there a chance that it will fail?  Is it something that requires a lot of maintenance and repairs?   Does the product perform well under a variety of environmental conditions?
  • Difficulty.  What will customers need to know/learn in order to use the product properly and effectively?  How much of an inconvenience is it?
  • Performance.  Can the power, speed, or other capabilities be improved to complete the task faster or better?
  • Aesthetics.   Is the product attractive and packaged properly?  Does it convey the appropriate impression?
  • Technology.  Has the technology progressed since the last time the product was updated to provide anything that will improve the product?
  • Value.  Do customers feel the benefit of the product is worth its price?   Can the benefits be increased or the price decreased?
  • Meaning.  Does the product speak to the appropriate emotional desires of the customer?  Do they feel it is appropriate or desirable for the kind of person they wish to be perceived as?
  • Market.  Is there a more profitable market segment to whom the product can be positioned?

It is particularly important to engage customers and prospects in answering the questions – the success or failure of a product does not depend on what insiders think of it, nor even the industry press, but on the way that it is perceived by the customer.

Thursday, March 8, 2018

Locking in Customers

There are various practices that are used to lock-in customers so that they continue to purchase a service or reorder a product rather than switching to a competitor.   Term contracts for services such as cable television and wireless phones are common examples: the customer must repurchase each month and must pay fees to cancel their contract.  This is meant to add to the cost and inconvenience of switching – but more importantly to make the customer feel that they are committed so that they don’t even consider switching or terminating service.

There are also switching costs to products – such as the cost of replacing a library of videotapes with DVDs when changing to a different kind of player, retraining employees when changing to a different software package, and so on.  These costs are often described in terms of the money price, but there is also a psychological effort involved when it comes to consumer products.   It’s simply less pleasant to have to deal with a new product or a new provider, even if the cost and time involved is the same.     The difference between as switching cost and a lock-in is that the latter is intentionally created by a supplier.

Likewise, there are strategic differentiations that a firm uses to entice customers to repurchase: offering a unique product or feature, selling at a lower price, having a long duration, and so on.   It is arguable whether these are lock-in tactics because they give the buyer a reason to prefer their brand, but the buyer doesn’t lose anything by purchasing a different brand.

There’s a specific mention of the social and emotional involvement with a brand.   When a customer feels a social connection to a person who provides them with service, or a social connection to other customers of the brand, this causes them to be reluctant to leave.   However, unless this is set up intentionally, it is not a lock-in.  And in some instances, this works against the brand (when a hairdresser leaves a salon, her customers will often follow her because their attachment to the employee is stronger than their attachment to the brand.)

Customers can also become emotionally attached to the brand itself when it becomes a part of their identity.   A person who feels they are a Cadillac-driver is inclined to purchase the brand even if there is no connection to their salesman or the dealership, even if it is less suitable and more expensive than other brands.   While brands covet this level of commitment and seek to foster it, it is ultimately the choice of the customer to become and remain loyal to a brand.

Thursday, March 1, 2018

Innovation: A Matter of Vision

Depending on how it is done, innovation can have a very brief shelf life.   If your firm depends on novelty to sustain its market, anything “new” quickly loses its flavor.    This is particularly true when competitors notice that a firm has discovered something that excites the market and move quickly to imitate it.  In a very short amount of time, the quality that was unusual and unique to one specific brand becomes ubiquitous and everyone is offering it.

There are, of course, some protections afforded to manufacturers to give them exclusive demesne over a slightly differentiated product – but since business has gone global, these protections have no teeth.   It’s nearly impossible to prevent a manufacturer on the other side of the globe, or even on the other side of a political border, from copying a product.   Even manufacturers in the same nation, subject to the same legal system, are quite adept at finding loopholes that enable them to adopt and imitate any quality that customers find attractive.

In such an environment, innovation gives a company only a short-term advantage: it enjoys consumer preference between the moment it delivers something unique to the market and the moment its competitors take away this advantage by replicating that quality.   Hence, the constant atmosphere of panic at many firms to “innovate or die” is an attempt to constantly stay a step ahead of imitators that are hot on their heels.

But all of this is predicated on certain premises: that the competitors recognize the value of the innovation and wish to imitate it.   Particularly in an atmosphere in which innovation has become rampant, there is much greater value in being able to evaluate innovation than to be nimble in imitating it.    Not all new ideas are good ideas, and quickly imitating a bad idea can be devastating – as such an evaluative step is critical.

And this provides an opportunity for sustainable innovation: an idea whose value is seen by the market, but whose profitability is missed or underestimated by competitors.    It is impossible to conceive of an innovation that cannot be imitated – but rather simple to conceive of one that will not be imitated.

An entrepreneur is defined by his willingness to take risks that others will not, to bring something “new” to the marketplace that customers will find more appealing than existing options.      The difference between the successful entrepreneur and the dilettante whose ideas result in a string of failures is in the ability to preform an accurate assessment and prediction.   And the ability of the entrepreneur to stay ahead of his competition is in seeing the value that they do not.   Their lack of vision is its own impediment.

Thursday, February 22, 2018

The Best-Laid Predictions

Forecasting and future planning, in all their myriad forms forms, represents a struggle against an invariable truth: that the future is unknown.   At best, our most careful research and attentive modeling is based on the assumption that what is true in the recent past will continue to gold true in the future.  The most horrific blunders in history are laid upon that foundational assumption – but then, so have the greatest success.   To fail, to succeed, or to act at all requires some sense of what will happen in the future, particularly in reaction to something that does not exist at all in the present.

This can be difficult to observe in the aggregate: when financial plans fail, they do so with a shrug.  Something went awry “in the market” or “in the international economy” and there is not even the ghost of an attempt to recognize the flaw in the analysis – generally because in spite of the catastrophic failure, there are firm plans to apply the exact same analytical model to the very next decision.   The model was perfect – the world went wrong, and it’s assumed that the world will follow the rules next time and the model will work.

But where predictive models can be observed in a more granular manner, the inherent flaw of the present-future assumption becomes clear.    Ask an individual person what he plans to do in the future, and you can plainly see how he will speculate, confabulate, and make up plausible stories about a hypothetical situation in which he plainly has no clue how he will actually behave.    Even the most sincere respondent, reacting to the most unbiased instrument, doesn’t really know what he is going to do in a real situation that has not yet arisen.

When investigating behavior, you are implicitly making people think about things they do not normally think about – and often hectoring and harassing them until they lie in a manner that suits your preferences.    As a subject why he chooses to purchase a given brand of mustard, and he will shrug and say, perhaps, that “I like it.”   Press upon him, asking the reason he should like this brand over another that is virtually identical in all regards, and he will struggle to respond.   If you don’t like the lie he tells you, press him further until he tells a lie that you like – and then write that down and include it in a study where you declare, with pompous certainty, that you have identified “the real” reason consumers prefer one brand over another.       Use that as a basis of making your strategic decisions … and see what happens.

Consider that the very act of studious observation takes the customer out of the context in which a decision is made, if they ever are in such a context to begin with.   Consumer taste-tests of products rest on the assumption that customers consider the taste of a product to be the critical factor in making a buying decision – and do not consider for a moment that it will be any other factor.   In rare instances in which stores offer samples at the point of purchasing decision so that a customer can compare the flavor of two products they have not yet purchased, this may hold true – but this seldom ever happens.   And this is why Pepsi consistently beats Coke in blindfolded taste-tests, yet consistently sells less across virtually all markets where both are offered.

In one sense, asking the customers for their opinion seems a better course that relying on insider opinions – and it may be a more democratic method of deciding among options, but it is not necessarily accurate.   Customers do not know how they will decide in real-life purchasing situation and are speculating.   Observation studies can be very useful in exploring the present and recent past and, certain enough, the patterns of the past will tend to perpetuate if nothing else is changed – but they do so in a very superficial manner: one can easily observe and measure what is being done, but this does not accurately indicate the reason it is done – and it is the reason and the conditions, more so than the superficial act, that is most useful in the prediction of future behavior.

Thursday, February 15, 2018

Customer Responsibility

In an earlier post, I expressed a rather sour perspective on the level of irresponsibility shown by customers and the manner in which their failures are invariably blamed on the firms that attempt to serve them.   But this begged the question: what is the source of this responsibility.

In researching the concept, the general conclusion seems to be that responsibility is a character trait that encompasses a few different skills and practices.   In general …
  • Goal Selection – Responsible individuals are aware of their goals and has prioritized them appropriately.
  • Activity Selection – Responsible individuals consider whether engagement in an activity will achieve their desired outcomes
  • Self-Discipline – Responsible individuals show dedication and tenacity in the completion of activities that progressively achieve their goals
Returning to the earlier material, the dissatisfaction that results when a person has selected the wrong product to achieve his goals is a dysfunction of the activity-selection task and the dissatisfaction that results when a person fails to use the product in a correct manner is either activity selection (when he does entirely the wrong thing) or self-discipline (when he does the correct thing, but not for long enough to ensure the goal has been achieved).   

But still, I am led to the same conclusion: while proper marketing can inform a potential consumer of the benefit of the product and proper documentation can inform him of the correct way to use it, neither of them does any good if they are ignored by a customer who feels that the tasks of product selection and use are someone else’s responsibility – and not his own.

So while I don’t have the solution to the problem, I do have a little more insight into the nature of the problem.   I wouldn’t go so far as to say that responsibility is not the cause (as it certainly is), but I do believe it is not the root cause.   The root cause is a matter of attentiveness – simply paying attention to what is important.   

Perhaps the roots could be traced further, to the problem of discretion – as one can be very attentive to the wrong things – but this becomes a chicken-or-egg argument: is a person inattentive because they are indiscreet, or indiscreet because they are inattentive?   Anyway, I do not believe discretion to be a problem that firms can address in the market, though they can work on the attentiveness of the consumer.  

Still, I see little prospect for a solution here.   Ignorant people can be quite stubborn in their ignorance, refusing to give attention even when great effort has been undertaken to bring things to their attention.   And so, I’m still stuck of the fatalistic notion that there are “good” customers and “bad” ones, and the firm can only seek those who are made “good” by other means.   So I’m not entirely satisfied yet.