May 22, 2013, 9:56 pm
In a crowded 4 star NYC hotel market, Kimpton's 70 Park becomes one-of-a-kind through delightful customer experience
US Airways and Kimpton Hotels both compete in very crowded market spaces where price can make the difference in a consumer’s final selection. But one of them knows how to move beyond price to compete on experience and the other doesn’t.
On a recent trip to NYC, I flew on US Air because it contributes to my United frequent flyer status, and stayed at Kimpton’s 70 Park Hotel, because I belong to the loyalty program for this chain of boutique hotels. But with Delta miles and Hilton points, I could easily have made other choices or decided that loyalty points were not worth paying a price premium.
Arriving very late at Kimpton’s 70 Park Hotel, the night staff greeted me the way a hostess would greet a dinner guest she was excited to entertain. Hungry after my too-small airplane meal, I discovered a $15 free mini-bar credit for Loyalty Members, which almost covered the cost of a large bag of almonds and a DosEquis beer. But the beer in the mini-bar fridge was warm. A call to the front desk resulted in a cold beer (with a lime wedge no less) arriving within 5 minutes – free of charge. When I awoke to a rainy NYC day, I discovered a golf umbrella in the closet… plus a NYT at my door, wonderful coffee in the lobby, and an invitation for my daughter and me to join other guests for wine at 4 PM.
In other words, at every touch point Kimpton delighted me as its guest, a delight I will remember.
The night before my flight home I connected (free of charge – thanks again, Kimpton) to the US Air website. The seat map showed rows of open seats at the front of the plane, but I was further back, in a middle seat with passengers on either side. I called US Air asking if my Premium status on United would enable me to have an aisle seat in the front as I had a lot of work to do on the plane. “That will be $45.” Arriving at the airport I discovered flight delays and asked if I could get onto an earlier flight which had a lot of empty seats. “That will be $75.” Again, my “status” card offered no value.
At every touch point, US Air angered. And it angered in ways I will remember, especially next time I fly. If its employees had had access to a database, they would have realized that I am the kind of flyer they should try to delight: I fly a lot and pick planes based mostly on schedule and loyalty club (for me, price is only a factor where options differ by more than $50).
With my next visit to Kimpton 70 Park, they will easily recover the cost of the beer, umbrella, paper, etc. I’ve vowed to avoid US Air because it failed to delight, even in ways that would have cost them nothing, since seats that would have delighted me were available.
Leaders design business models but the outcome depends upon employees. Whether employees delight or anger customers depends upon the stated value promise of the business model, its communication to employees, and the culture that leaders create.
Kimpton’s 70 Park is priced to compete in a crowded NYC 3 Star hotel market. It’s value promise is “a delightful NYC hotel experience” and their culture gives staff the freedom (and likely the working environment) to deliver on this promise at every turn. Kimpton is an authentic brand in my mind as it delivered on its website’s promise.
US Air is also priced to compete on cost. Frankly, I don’t know what its value promise is – or if they even have one. But I am sure its employees would tell me that short-term profit is all that matters and that the culture is one in which employees abide by the rules or are fired.
What customer experience is your company creating?
April 19, 2013, 4:54 pm
Business leaders, whatever their industry, become so mired in day-to-day demands of managing their business that they often fail to see opportunities not just outside their industry boundaries but inside as well. Revenue and profits suffer as a result.
The gun industry is a case in point. The percent of US households owning a gun is has been declining for decades with ownership among younger demographics falling the most. Purchases by existing gun owners, which accelerated post Obama’s election, drive gun manufacturers’ revenue growth.
This demand pattern is not sustainable as a revenue engine. Ownership will likely continue to decline owing to demographics as fewer young people hunt today than in the past. And at some point, the marginal benefit from an additional gun purchase drops below the cost of purchasing yet another gun.
On the surface, therefore, it makes sense that the gun industry would invest huge sums to fight off any attempt to control guns and hurt whatever revenue growth potential remains. Herein rests the industry’s strategic mistake.
Imagine instead if gun manufacturers adopted the following changes to the industry business model:
- Acquire and develop new-to-market safety features such as bio-metric identification and child-proof safety features, making safety technology a new basis of competition. When competition migrates from mature to new-to-market features, industry returns typically increase.
- Lobby for legislation that makes ownership of any newly purchased gun lacking safety features illegal
- Sell safety upgrade kits for recently manufactured guns
- Offer gun owners highly attractive “trade-in” opportunities for guns that cannot be upgraded with safety retrofits
- Continue to innovate safety features
In the 1980s the anesthesia industry had a “gun to its head.” A widely viewed TV show on death from anesthesia created a public outrage that accelerated product liability cases against anesthesia manufacturers. One manufacturer, which had the longest tail of older models in use, went out of business due to liability costs.
Like guns, there is nothing inherently unsafe about an anesthesia machine in the right hands and used the right way. The machines can be dangerous however as they deliver drugs and gasses – the ones that keep you from feeling the pain of surgery – which, if not titrated correctly, cause morbidity and mortality. The older machines lacked basic safety features of newer machines such as hose connections that prevented attaching any gas but oxygen to the part of the machine that delivers oxygen to the surgical patient.
There was industry pressure to fight the public outrage – to argue that doctors needed to be more observant and that anesthesia machines were safe when checked before use. Instead major monitoring companies introduced machine and patient monitoring safety solutions and innovative start-up companies like Nellcor (later acquired by Covidien) created new-to-market monitoring capabilities such as pulse oximetry which measures oxygen content in the blood. Enlightened leadership of the anesthesia machine companies saw the new monitoring as an opportunity. They integrated monitoring into their equipment and passed standards that required this integration.
The introduction of safer systems on the market dramatically lowered the replacement life of anesthesia machines and increased their average selling price. An educational campaign that my team at Ohmeda (now owned by GE Health) developed encouraged hospitals to replace older machines lacking new safety features.
The net result? Safety increased, lives were saved and anesthesia equipment manufacturers had record years of financial performance from dramatic reduction in liability risks and growth in market size and average selling prices.
Of course the comparison is not exact. Doctors, hospitals and manufacturers faced liability costs that gun manufacturers do not (yet?) face. But the revenue uplift possibility exists nevertheless for gun manufacturers.
My advice to gun manufacturers – change your paradigm to improve future performance. Your status quo income statements will be covered in red ink.
What opportunities are you missing in your business?
March 27, 2013, 10:21 pm
Smaller banks will be healthier banks.
What to do about US banks that are too big to fail, to regulate, to understand, to manage or, given their importance in national income growth, to compromise their ability to grow? Two solutions are on the table: one high in regulation and the other high in disruption. Both aim to remedy the US taxpayer subsidized risk-taking that led (in part but not in isolation) to the 2008 financial crisis.
The Dodd-Frank bill (also known as The Volker Bill) tries to separate banking and investment banking activities of the large bank holding companies, as they were pre-Clinton. The regulation is so weighed down in complexity — running about 850 pages and driving 9,000-some pages of regulations — it will require over 24 million hours by federal regulators to enforce it.
Even IF the bill works, Dodd-Frank keeps in place a business model that at its core creates unacceptable risks for taxpayers. This becomes clear if you understand the culture of a publicly traded company from the inside, a window we peeked into reading about how JPMorgan Chase – the bank with the best risk management system in its industry – dealt with the derivative trade that went some $6B into the red. The US Senate’s investigation of the JPMorgan Chase concluded (in a nutshell) that JPMorgan Chase bankers acted in ways that made their numbers look good until they couldn’t hide the truth anymore.
Why would executives act this way? Because shareholders expect publicly traded companies to deliver earnings growth. And when this growth is threatened, they penalize stock prices, which hurts bankers’ bonuses and, far worse, the value of their stock options.
With Dodd-Frank, bankers will supposedly lose significant access to investment banking as a driver of earnings growth. So how can bankers ensure they make their growth rate targets and therefore retain their bonuses and the value of their stock options?
It won’t be easy. The bigger the bank, the bigger the growth target in absolute terms and the more challenging the growth task.
I suspect the too-big-to-fail bankers will do two things. First, we’ll see the final rounds of industry consolidation, as new regulations will be too costly for smaller banks and they’ll be forced to sell. But this only worsens the size problem for the big acquiring banks.
So watch bankers promote riskier loans that pay higher rates. That’s the only way to grow return in an economy that is growing less rapidly than shareholders demand for earnings growth. We know where this leads — e.g., to secure higher-returns some too-big-to-fail bank commercial lenders became complicit in the Enron fiasco, leading to record penalties for their banks.
The net outcome therefore of Dodd-Frank is undue risk in an unsustainable banking business model. Bigger size, more need for earnings growth, more risk to bank capital and US taxpayers.
There is another option. Richard Fisher, who heads the Federal Reserve Bank of Dallas, smartly recommends something far simpler but more dramatic:
- Limit federal deposit insurance and access to the Fed’s discount window (for reserves) to only commercial banking operations that intermediate short-term deposits into longer-term loans (i.e., that do traditional banking). Any other depositor, lender or investor would sign a disclosure acknowledging and accepting there are no government guarantees.
- Restructure the largest financial holding companies into distinct entities, each with a speedy bankruptcy process.
- Re-size the banking entity(-ies) with access to the Federal Reserve reserve window and deposit guarantees within the financial holding company so that they are too small to save. This would essentially break up the likes of Wells Fargo, Citibank, JPMorgan Chase, etc. into smaller banks the way AT&T was broken up into the Baby Bells. The downsized banks, in Fisher’s words, “would then be just like the other 99.8 percent, failing with finality when necessary.”
Fisher has a lower-cost solution for government that is better for our nation’s banking system. Today, money is a commodity and, like energy, the businesses that store it and lend it should act more like utilities — publicly regulated, safety conscious institutions that deliver predictable dividends to shareholders.
Fisher’s proposal brings back the boring banking business model of years past. Bring it on.
March 13, 2013, 10:33 pm
Do you have the skills to take your business to a better place?
I wonder if the editors of the January-February, 2013 issue of Harvard Business Review connected the dots among their articles. As a reader I did.
“The 100 Best CEOs in the World” is the cover story for an issue that also includes the article “Strategic Leadership: The Essential Skills.” Too many CEOs and their C-Suite teams invest too much of their time in operational management. They fail in the role only they can perform: designing a winning portfolio of business models and the hard-to-copy company capabilities, processes, culture, and ecosystems that they leverage. Strategic leadership is all about this work.
I am not saying that operational work is unimportant. Indeed, it is vital. No customer will pay your business for inefficiency or quality issues, and competitors will likely use them to seize advantage. But the leadership team’s role is to establish the measurements, set hiring standards, allocate resources, and design operating mechanisms to advance efficiency, effectiveness, and financial performance — not to be the day-to-day doers of this work.
What then are the essential strategic leadership skills? Based on their research involving 20,000 executives, authors Paul Schoemaker, Steve Krupp and Samantha Howland (Wharton School of Business at the University of Pennsylvania) define it as a collection of six abilities:
- To anticipate
- To challenge
- To interpret
- To decide
- To align
- To learn
As the world becomes more uncertain and volatile, the ability to anticipate — to see past one’s paradigms to understand the potential implications of external trends — rightfully belongs at the top of the list. External changes give new entrants and laggards their only shot at stealing share from a competent leader.
Great leaders challenge the status quo, their own assumptions and those of others — stated or hidden. They make sure any problem is looked at from multiple angles. My recommendation to leaders is to always appoint a devil’s advocate in any discussion to avoid group-think.
Interpretation demands conceptual thinking skills, pulling strategic insight from a collection of observations. One of the roles of the Chief Strategy Officer from my perspective is to bring stellar skills in this area. As marketing becomes increasingly technical and focused on demand management, the need for a Chief Strategy Officer has never been higher.
Decision and alignment come together in my mind. Great leaders make disciplined decisions that ensure actions are aligned with the underlying business model strategy. The authors include in alignment being able to pull people together around a shared vision, using skills of communication, trust-building and frequent engagement.
The ability to learn was spotlighted in the early work of Peter Senge. But it is amazing how many cultures are focused on finding fault rather than learning. According to Schoemaker et al., one CEO built a learning organization by publicizing stories of projects that initially failed and using them to create successes. He encouraged cross-functional teams to engage in novel experiments and report results whatever the outcome, and initiated an internal innovation tournament. He also admitted his own failures and what he learned.
Other articles in the HBR issue pointed to two other traits I would add to the list of strategic leadership skills. In “The Kind of Capitalist You Want To Be,” Whole Foods founder and CEO John Mackey argues that great leaders are conscious capitalists, building businesses that are good for the world, not just shareholders. Mackey’s business success gives him the authority to make this claim.
What is a business after all but an efficient solution to meeting a need or solving a problem? The world’s greatest problems are in the social and environmental world. If leadership teams took off the blinkers that divide the world between for-profit and non-profit, they’d see rich opportunities to grow their business and enrich all their stakeholders.
Finally, Christine Porath and Christine Pearson, in “The Price of Incivility,” make a great case about how a lack of civility costs more than the legal cases that end up in the court. The culture of a company starts in leadership and the norms of behavior that leaders demonstrate: who is promoted, how people are treated, and what values actually drive decisions. When the culture does not respect the individual, employees contribute less than 100%. Lost work time, lost productivity, voluntary exits, lost commitment, and taking frustration out on customers are among the costs of civility documented by the authors. (Also see Steve Paskoff’s brilliant work at ELI for more on this subject.)
Apple CEO Steve Jobs failed on the civility front according to his recent biography. One can’t help but wonder if this hole in his legacy will be like a virus that keeps Apple from succeeding now that teams versus one individual must make the right calls in his absence.
If your business model is failing, might your culture or your strategic leadership skills be a root cause?
February 6, 2013, 9:30 pm
Microsoft's WINDOWS business model has hit a wall. Investing in Dell is not the answer.
It came as no surprise to many analysts that Microsoft has had a disappointing few months, with very slow holiday sales of its Surface tablet and continuing tepid-at-best reviews of Windows 8. PCs and Windows software are in trouble – so much so that Microsoft is investing billions to prop up one of its channels to the market – Dell, and some predict a Kodak-like demise of Microsoft.
It also comes as no surprise to anyone who, like me, turns on a Lenovo Think Pad (or any other PC) and resumes Microsoft Windows. Depending on how I exited my computer, I may have to wait as long as 5 minutes before it is usable. A similar delay occurs throughout the day when my computer falls asleep.
Consider that my employer (IBM) has 400,000+ workers across the globe experiencing these delays every day, every week, season after season, and year after year. Now think about all the other corporate giants with PCs.
Now think more broadly about how many IT Help Desk people are needed at most PC-using companies because user issues with Microsoft Windows and PCs are not easily self-addressed.
So Microsoft, how about propping up PCs and the Windows experience to deliver a better end-user experience? Companies might finally upgrade their Windows software and PCs.
The time frame for Microsoft to change its broken business model is short. Apple – offering a faster and less frustrating computing experience – is making corporate inroads, with Samsung in hot pursuit. Google’s acquisition of Motorola Mobility creates the potential for a mobility juggernaut.
Personally, I wished Microsoft avoided the easy route of investing in Dell and instead bought HP. “Microsoft with HP” could build a more compelling brand and offer faster, lighter, easier to learn and trouble shoot products that provide end-to-end computing solutions for the many workers who work at stationary desks or need something more than a tablet for their work while traveling.
Add in Microsoft phones, SKYPE, great collaboration software, rationalized HP-Microsoft enterprise servers, cloud solutions, and new Microsoft tablets and you’d having a winning suite of enterprise technology for IT leaders who would love to regain control over data security in the “bring your own device to work” world.
A lot of big companies acquire other big companies to keep profits growing – consolidating an industry while not delivering any additional value to customers. Management wakes up the next quarter to face an even higher growth hurdle with no additional fuel for generating growth. This fiasco is what happened in banking and pharmaceuticals, with break-ups recommended by some analysts for more than regulatory reasons.
In the case of Microsoft and HP, the consolidation would in fact create the opportunity for better customer value, not just shareholder value. Together the companies would have more growth prospects. Apple proved decades ago that aligned software and hardware dramatically improves customer experience, which is where brand value rests. Combining software and hardware can also improve IT leaders’ experience.
Here’s another reason why HP is better partner for Microsoft’s partner than Dell: HP is one of the few brands with strong consumer and business brand attributes. From 2001 to 2012, it’s remained in the #15 slot on Interbrand’s rating of brand equity, despite all the public airing of HP dirty laundry and some product failures. Dell over the same period fell from 32nd to the 49th position.
Yes, HP’s market cap is about 50% higher than Dell’s. But Dell never built end-user brand loyalty. Its only differentiation when it entered the market was its direct-to-enterprise channel business model. And of course that matters less now that customizing computers has lost its cachet and competitors are smarter about channels and supply chains. Plus, Dell lacks any strong franchise compared to HP’s printer business.
Every company must face the music of category maturity. Listen up, Microsoft … do what leaders of other mature categories do. They leap across industry boundaries to create solutions that work better for customers. As a lifetime Apple user before joining IBM and the PC world, I sure hope you’re listening. Do this work – if not with HP, then with Dell.
January 21, 2013, 10:41 pm
The fun and easy-to-use XIAMETER® website builds authenticity by advancing and reflecting the brand's value promise.
Brand trust is harder to earn in today’s economy? The pressure to cut costs makes delivering day after day on promised benefits more challenging. Social media creates messages that listeners deem more reliable than your own. And retaining meaningful and hard-to-copy differentiation has become more challenging in our copycat global economy.
Silicon leader Dow Corning is one company that has managed to build authentic brand trust by clearly communicating its value promise, aligning people, adapting its business models, and letting its culture evolve to support its two brands, Dow Corning® and XIAMETER®.
Dow Corning created the XIAMETER brand in 2002 to preserve market share as specialty silicon products commoditized, a savvy example of business model innovation that I wrote about in late 2011. The fully automated (from ordering to fulfillment) business model enables the brand to maintain profitability at the lower price points that commodity products face. That has allowed it to preserve the overall order volume the company needs to remain cost competitive in the specialty silicon business as well. I wrote about the brand a year ago as a terrific example of business model strategy.
To follow the brand’s evolution, I spoke again with Stacy Coughlin, Global Communication Manager for the XIAMETER brand. She’s a critical leader in keeping it distinct from the Dow Corning® brand while still allowing XIAMETER to share Dow Corning’s quality and reliability halo. The halo builds trust in XIAMETER’s compelling value promise: market-based pricing and an easy buying process, without the risk of production interruptions due to supplier quality issues.
A new website — which is where and how customers primarily experience the brand — makes the customer journey even simpler and far more fun, a key element of the brand’s personality. (Watch this tour of how the XIAMETER website operates for a stellar example of communicating a value promise digitally.)
Another example of the XIAMETER team’s innovation around simplicity is a soon-to-be-released tool that will enable customers to pick their order date, like consumers select airline seats. This will eliminate the frustration of entering dates for desired volumes and dealing with “not available” messaging.
But simplicity must reside in more than ordering. Identifying what to order must also be simplified, as there can be 100 some options for any one silicon product line, depending on formulation needs. So Coughlin’s team is changing collateral and where it is positioned on the website. “Our vision is to have Amazon’s ease of finding what you want effortlessly. Customers must find information at exactly the same time they are looking for it or it’s a lost opportunity for us,” Coughlin notes.
Distributors are vital to XIAMETER’s success and the brand is designed to improve their operational efficiency and selling effectiveness. The brand’s truckload shipping option, for example, has led distributors to reconfigure their supply chain to a lower-cost hub-and-spoke system. The website enables a distributor’s sales force to present the XIAMETER brand effectively to end-user customers. And Dow Corning as a whole is looking at social media platforms to unite European distributors to offer even simpler and faster routes to needed answers for both brands.
I knew XIAMETER was building an authentic brand when Coughlin commented on how its culture is distinct from that of Dow Corning brand teams. XIAMETER’s culture is faster paced and more transparent. “Whereas Dow Corning’s peering into the more distant future to decide on fresh areas for its innovations, XIAMETER is focused on what’s happening today and how do we maximize opportunities today,” Coughlin said.
But the divergence in culture doesn’t mitigate the fact that XIAMETER remains essential to the Dow Corning branded products. “Customers of our specialty products want increased and faster innovation. So as more products mature in the industry and move to the XIAMETER brand , we can free the Dow Corning staff for innovation, as we take on the supply chain and quality management work for the product category,” Coughlin shared. XIAMETER’s lower-cost structure also helped Dow Corning better meet the challenges of the 2012 market, including the Euro crisis and a slowing of the Chinese economy as Dow Corning opened their Chinese basic plant in 2011.
On the list of planned innovations is reducing the time to open an account, mobile access to information, more real-time messaging to customers and continuing to improve ease-of-use. “We want to balance how much information we ‘push’ vs. fast response when customers ‘pull,’ as having both communication methods available exactly when customers need them is critical to optimizing marketing programs,” Coughlin adds.
Coughlin and her team will undoubtedly close other gaps because she wisely understands that a value promise is an aim that drives your brand forward, not merely a communications concept. If only HP and Dell had her wisdom!
What are you doing to advance and differentiate your brand’s value promise?
January 9, 2013, 11:06 pm
The profit motive creates dangerous temptations. Financial and political reform can keep us in the garden.
As a budding economist, I was initially awed by the market mechanism: the invisible hand that encourages innovation and leads companies to efficiency levels that grow our nation’s wealth. Observing underlying economic principles at work never ceased to amaze me as a college or graduate student. My learning journey in economics was not unlike that of a science student seeing beauty in the laws of nature.
What I have learned in decades of practice and observation however is that outcomes are only as positive as the underlying motives of decision makers in the private and public sectors. And in this regard, “Houston, we have a problem.”
Over the holidays I read a Wall Street Journal article, “Counterfeit Cancer Medicines Multiply.” As the price of cancer drugs rose, they moved to being 8th among the top 10 drugs targeted by counterfeiters, according to the Pharmaceutical Security Institute. Many of the fake or diluted drugs originate in China and have caused deaths directly or indirectly (by not performing as doctors expect).
To what end are US and European pharmaceutical company decision makers willing to risk some patients’ health and impose a worry on all patients that drugs about to be injected in their bodies are tainted? To gain incremental profits from production in a lower-cost country— lower cost in large measure because the nation lacks strong regulatory controls.
It’s not just cancer drugs that are affected by the profit motive. We’ve recently seen fungus-filled compounded pharmaceuticals from a supply chain that earned reduced FDA monitoring likely through heavy lobbying, and US sales reps illegally promoting off-label use of drugs to generate higher commissions. Yes, selling off label generates multi-hundred-million-dollar penalties for their companies, so many that I’ve concluded that some companies make a cost-benefit calculation that the risk of a penalty is worth the incremental profit gained from selling more of the drug.
Banking, credit assessment, and oil drilling are among other industries in which we’ve seen leaders make profit-motivated decisions that later imposed huge expense on our nation. AIG even threatened to sue the US Government- a move thankfully off the table in the face protests.
I view these instances as the early waves forewarning a coming storm. Economists are predicting a period of slower long-term growth in the developing world, making profit-generation that much harder in these markets. Financial services, pharmaceuticals and energy have already consolidated, removing acquisitions as a route to driving financial performance. What will their leaders do next to generate predictable earnings growth?
We can’t regulate our way out of this mess. Sending C-Suite leaders of companies engaged in egregious actions to jail might dissuade others if personal penalties shape individual behavior, but there are many legal protections granted corporations. Hence low-level BP officials are in court, rather than the C-Suite that created the culture in which lower level talent made what they likely thought were the right business decisions.
So the only answer is a transformation of financial markets and governance, moving corporate leaders from a focus on short-term profits to a focus on long-term value creation. Taxing short-term capital gains as ordinary income, restricting use of machine-driven trading, separating board membership from management positions and encouraging large institutional investors to become more active in governance are but a few of the policy changes we could adopt.
Ask mid-level leaders of publicly traded company how much time is spent “managing” quarterly numbers and how often decisions are made for short-term profit that hurt long-term value. You’ll get a sense of the kick-start our nation might gain from moving financial markets to focus on longer-term performance.
I was not surprised that GE’s Jack Welch claimed “foul” when election eve unemployment levels came in low, helping Obama. How, after all, did Jack manage to meet his quarterly estimates year-after-year-after-year in a company as complex as GE?
I’d add breaking up the too-big-to-fail banks to the list as well. They are too big to understand (according to a recent exposé in The Atlantic) as well as to manage, and our nation would be better served by our pre-Clinton banking system. It kept banks from using government funds and guarantees to make bets in which the banks win on the upside but impose the loss on taxpayers on the downside. No wonder talent flocks to the financial markets – who wouldn’t want to play the post-Clinton game?
How do we create needed change? Term limits and non-political redistricting – which would end the influence of today’s unlimited money in our political system. We’d get legislatures voting for policies that advance a better set of incentives for business leaders.
January 3, 2013, 10:12 pm
Just as we tuned out to TV ads, we are turning away from digital ads.
I feel overwhelmed by the volume of digital messages coming at me from all corners of my life. And I am not alone. My 2013 prediction is that value is about to rapidly migrate once again in technology markets.
Over the holidays I met a young woman in her 30s — a former boutique owner who now works at a leading retailer — who told me that she stopped using Facebook when she realized the postings kept growing in number and falling in sincerity. Also, she’s “unsubscribed” from retailers she buys from, finding that their recommendations based on past purchases more often insult rather than reflect her taste. She is tuning out to digital messaging much as I ignore the ads in newspapers to make my newspaper reading more efficient.
Perhaps my message overload problem was not age-related, I thought leaving our conversation. Later that day, my 23-year old daughter Lauren confirmed that this young woman is not alone. In fact, Lauren is starting her marketing career in experiential marketing — live events that bring attention to brands — because she feels her generation increasingly elects to ignore uninvited digital messaging. And a recent HBR blog author asked the world to stop sending her so many e-mails as we are all becoming reactionary rather than responsive.
Pivot points — dramatic changes in a market — arise when trends work in opposition, creating an unsustainable situation. Digital marketing is approaching a pivot point.
One of the opposing trends, of course, is the proliferation of customized digital messages. Digital technology has dramatically lowered the cost of marketing. I remember how careful I had to be as a Chief Marketing Officer in the 1980s with direct mail because it was so costly. Today’s version of direct mail — digital messages delivered to e-mail addresses and Facebook/Twitter accounts — are like cloud-based software, each incremental unit essentially costless. And personalization of these messages has increased marketing ROI. Is it any wonder we are inundated with messages?
The opposing trend? The young woman’s story I just told is an increasingly common example: as messages grow in number they drop in value, and we tune out, just as we turned to recorded TV shows as TV ads increasingly crowded out true content. So while digital marketing may continue to be cheap, it will be increasingly value-less. And what company can afford to spend any resources on something that provides reduced value to it while frustrating its customers?
The pivot point I anticipate will be a dramatic migration of value from digital outreach to insightful responsiveness. Value regularly migrates in markets from the commoditized elements to differentiated elements that address unmet needs. In consumer electronics, value migrated from hardware to software that creates the user experience. In the years ahead, value will migrate from companies who keep shouting at us to ones that listen, that stand ready and able to answer our questions.
Case in point. I don’t want clothing retailers’ ads in my digital in-box or catalogues in my mailbox any more. I want a retailer to be my personal stylist, available when I have a question, am seeking a specific item, or inform them that I am ready to update my wardrobe. I want the company to respond to me, rather than me responding to their initiation. Whoever gets there first — Nordstrom’s, Saks. Macy’s, Neimen Marcus or local boutiques — will win my clothing business.
Many articles were written at the end of the 2012 about competition between Amazon, Apple, Google and Facebook as their markets increasingly overlap. My bet is that Google will remain a dominant tech leader as customers seek platforms that provide the most useful information to questions they pose because “answering” has always been Google’s core business. Were I Google’s strategist, I would take a lesson from Amazon and become the front end for other companies, helping them answer their customers’ questions, much as Amazon has helped other companies sell and ship their products.
The challenge for companies will be creating and retaining awareness and relevancy so people know and remember to seek out your organization for answers. Content marketing and experiential marketing will be key, as will having the right answers when customers inquire. Great experiences will beget yet more.
As you enter 2013, what can you do as an organization to be a resource and never a nuisance for your customers and prospects?
December 5, 2012, 9:26 pm
The most powerful brands offer more than a unique, hard-to-copy and relevant value promise embracing both tangible and emotional benefits. They are also about more than the brand’s personality, although I will admit to loving beer brand Dos Equis “most interesting man in the world” personality. The best brands appeal to a shared aspiration that speaks to our deep hopes and dreams. When the organization’s actions authentically reflect this aspiration, you have a magical brand, like John Deere.
B2B agency gyro is giving John Deere customers a lot to smile about.
Yes, the John Deere. The heavy off-highway equipment company serving the construction, farming and other earth-moving markets. Its award-winning communications campaign, You’re On, teaches many brand and business model strategy lessons.
Start with Deere’s construction industry homepage, where you’ll see the message “Who says man cannot move a mountain?” as a Deere machine moves earth on a landscape surrounded by mountains. What a welcomed contrast to the daily visual and auditory bombardment —especially prevalent this time of year—from companies whose only message seems to be “buy more.” Increasingly, advertisers messages celebrate wealth and luxury, as the Saturday Wall Street Journal magazine next to my computer as I write reminds me. Deere brings us back to what matters in such a refreshing way.
Deere’s campaign celebrates their hard-working customers, who are the opposite of the images filling most media these days. The contrast in Deere’s messaging is so startling that its campaign is creating a movement to honor blue-collar work, so that more people will consider these important roles in our society for careers.
Of course, the media campaign never would have come about had Deere not continued its tradition of asking customers to work alongside its engineers in product design. The company put its 2012 new product line totally in customers’ hands, moving to an open-innovation business model. As part of its effort, Deere’s agency, gyro, asked construction workers to “sound off” about their needs using a “chatterbox” it delivered to construction sites. This box is not unlike those of the mobile offices found on work site landscapes, but in this case painted a bright yellow like Deere’s earth-moving equipment. Inside, a sound system and video camera captured the voices of construction workers and managers. “Isn’t it time for a little thinking inside the box?” the company asked its users.
The gyro communications campaign around Deere’s product development strategy was creatively and strategically inspired to honor and celebrate the customers who helped Deere create its 2012 product line. The campaign also gave other construction workers a chance to speak out about their work. Listen to this clip (called “Where’s your blue collar swagger?”) to experience the power of the campaign.
Deere’s new products and the related media campaign were rolled out at ConExpo, the annual construction convention. Aligned with the event announcements and happenings, Gyro launched advertising, digital marketing and media strategies that represented integrated marketing communications at its best. The agency created very few of its own words: the auditory and visual messages are all those of Deere customers because “We couldn’t say it better that our customers.”
The results – beyond the creative awards – were impressive. More than 5,000 people attended the kickoff at ConExpo, 30,000 visited the booth and 100,000 watched live on a webcast. “At the same exact moment those customers began appearing in ads and websites, they were also appearing live on stage, applauded by thousands. Additionally, social media tools were not only appearing online, but the entire booth was transformed into a social platform,” according to B2B Marketing, which short-listed the campaign as one of the best in 2012.
There are so many reasons to applaud the gyro B2B Integrated Marketing Communications campaign. First, it communicates that Deere truly cares about its customers – so much that it is giving them an important voice internally and externally. Second, by using the voice of its customers across this site, Deere’s brand personality aligns with its customers – smart, real, down to earth and doing valuable work. What construction company would not want to buy from Deere? Third, the campaign demonstrates that customers designed and love the new products, which will increase leads and speed Deere’s selling cycle, offering high return on its marketing spend.
Finally, Deere is giving its customers the opportunity to more deeply experience and communicate the pride they feel in their work. I can imagine a construction worker taking his son or daughter to this site. What a great way to build brand loyalty.
All this raises a great year-end question. What are you doing for your customers?
November 27, 2012, 8:41 pm
The WSJ has great news, but needs a customer service redesign. (Speaking of design - love that red Impala!)
All I wanted to do was change my Wall Street Journal digital Monday to Friday subscription back to a daily print subscription. Why? Because I found I was not reading enough of the business news as I had when the paper was physically delivered. I also wanted to retain my Saturday delivery subscription. Sounds easy to accomplish, yes?
Four or five (can’t remember which) conversations later, I have effected the change. Why so many? Because the WSJ customer service functions are designed from the inside out to serve internal needs rather than from the outside in to serve customer needs.
To make the change I needed to deal with three customer service groups:
- Saturday only
- Daily print
As I look at this list, I can envision the WSJ’s organizational structure and financial reports.
Because of this business structure, I would have needed to make at least three calls to accomplish the switch (cancel Saturday only, cancel digital, then sign up for daily delivery). And things didn’t go perfectly. My initial call was routed to the wrong group. Then the Saturday-only woman I talked with did not understand when I asked to renew my Saturday subscription but also make it a daily subscription that I was doing more than renewing just Saturday. And why should she? All she thinks about day in and day out is Saturday only. She could not “hear” my request for daily delivery. When the paper did not appear all week, I went into a second round of phone calls.
I am one customer and a very loyal one if you look at my overall buying record. But that record was not visible to each siloed group. And the daily group (where I held a subscription for at least a decade) did not even know that I still existed after my switch to Monday-Friday digital. This gap resulted in the demand that I share my credit card information multiple times.
One very sweet customer service rep – hearing my voice rise when I was going to be switched to yet another contact – got permission from her boss to solve my problem once and for all on the spot. During the four or five minutes I was on hold waiting for the rep, I almost hung up, and was considering switching to the New York Times as I’d gotten that mad. Had the NYT’s content for business news been close to comparable or if the WSJ rep had an attitude problem as bad as mine, the switch would have been a no-brainer.
The WSJ is the only US newspaper making good money because it is a B2B business and business people will pay for content versus search-for-free. While it is smartly trying to be more consumer-oriented with its Saturday offering, readers (or their companies) pay for the paper because they use it for business. But, like other B2B businesses, the WSJ had better wake up to the fact that whether we are buying for our personal consumption or for our business use, customer expectations for service have grown. B2B businesses had best step up to the plate and deliver. When I contacted the WSJ, I expected Amazon- or Expedia-like efficiency and effectiveness. Instead, I ran into a byzantine business structure that may simplify internal accounting and management but makes the customer experience a nightmare.
The challenge facing every company – be it B2C or B2B – is to understand the customer as an individual, design an experience that will delight them, and make sure the promises made about the brand are delivered. That requires outside-in thinking where every process is designed from the customer’s point of view.
In most B2B markets, offerings are becoming more rather than less comparable. This tells me that delighting B2B customers has a huge bottom line impact in today’s copycat economy. It also tells me that B2C brands – like Apple and Samsung – have incredible B2B opportunities as business customers expect more from products and services.
As a B2B business, remember that you are serving real people with real needs, not solely “businesses.” B2B customers make buying decisions on two levels: will it benefit my company and will it benefit me as an individual? This dual-level decision has fascinating implications for branding and value promises. Ignore the individual-level decision at your peril.