More Growth - consumer insight, brand positioning, growth strategy

Are you solving customer problems or just getting emotional

It is amazing just how different the business environment feels just two months later and yet how similar are the big issues that we are facing and need to deal with in order to get more growth.

I have been struck on several occasions this week by how often marketers explanations of a brands success or failure does not discuss whether the business is really helping to solve customer problems and does not consider the real motivations that cause people to want to buy products and then how they go on to choose your brand.

Instead debate shifts to other subjects like how well the brand engages emotionally with their customers or consumers. For example Google success is analysed by Mark Ritson in Marketing this week (10th Sept page 21)and he makes many good points about how they have been successful, but never goes on to discuss how Google's dominance could be driven by the functional experience delivered to customers.   

Google have always delivered on the Power Attribute of "help me find what I am looking for". Their search engine strives to do a better job for customers than the others. They apply this principle not just to search results but also to the display of paid for advertising. If you have tried using their pay per click advertising, you will know that you cannot buy your way to the top of their list. They do not allow advertisers to be at the top of the page just by paying more money for the ad. The pay for click ads at the top of the list are the best available ads that deliver the best answers to search queries. In contrast Yahoo, Microsoft and Overture all have allowed advertisers to buy their way to the top of the list. Advertisers and search engine optimisers often appear on the press and on web forums debating the fairness or wisdom of Google's policies for advertisers and for producing search results. Their analysis often assumes Google wish to maximise short term revenues rather than enhance the user experience. But really advertisers wish to manipulate the system to their advantage. Despite the fact that advertisers are the paying client, Google resist this.  What Google seem to keep remembering is that consumers of the search engine are who they must please the most.

Mark Ritson also mentions that Marketing students in the 80's learned their brand management from Coke, whereas Apple taught the key branding lessons in the 90's and Google provides the best branding lesson of the noughties. At Differentiate we would agree with this but with a different analysis

• Coke taught us about Availability, Acceptability and Affordability
• Apple taught us about design led product innovation
• What Google are teaching us is about the value of being a truly customer led business that never loses sight of its mission to deliver the best customer experience.

So in amongst the doom and gloom that is being talked about, have your priorities changed? I am sure they have, but when your advisers tell you that you need to do more emotional engagement, check on the basics first. Remember if you are not solving your customers problems better than your competitors, your experience of the economic downturn will be much worse than that of our competitors. Find out if you are delivering on the Power Attributes, if you do this you will have an easier ride.

Start with the insight that people only buy things when the product or service helps them solve a problem that they have. The product most likely to be chosen is the one that does this the best. Emotional engagement or appeal may well draw customers to choose one brand over another when there is little difference between the choices, but it cannot persuade people to repeatedly buy things that do not offer good solutions to the issue. Emotional engagement tends to be stronger with brands and products that do the best job. It is hard to have a strong emotional engagement with someone who does not help you in some way.

How are consumers reacting to the downturn?

We know that "things are going to be tough" this year and maybe "even tougher" next year.  What should we do about it?  Opinions seem to range from predictions of doom to a rather cosy feeling that maybe we will see it through and it will not be so bad.

In this post we try to apply the principles of the Growth Game to analyse the situation.  Analysis "Growth Game" style adheres to three principles.

Stop worrying about the future, but do beware of the Black Swan (see blog entry).  Avoid expert predictions of what will happen and instead concentrate on strengthening your ability to compete and the withstand future unexpected shocks.

Actively seek and acquire empirical evidence to understand what is actually happening.  Again try and avoid the expert opinions.  They tend to offer qualitative observations and are tempted to make predictions.  Instead concentrate on evidence of things that are actually changing.  In particular look to gain insights about things that directly affect your business.   

Avoid "interesting" and focus on "actionable" insights.  That means start with the decisions you need to take and then go after the insights that will help you make them. 

We have been reviewing some evidence, observations and opinion about how consumers and customers will react to higher prices and lower disposable incomes.  I have grouped them into expert opinions, hard empirical evidence, insights and conclusions.

Example predictions/observations from experts

• The cumulative effect of numerous cost increases has now reached a tipping point.  Consumers are really starting to feel more vulnerable and this has become more pronounced in the past 6 weeks.
• With pressure on personal finances people will be less willing to pay a premium for "nice to have" things like more local food and food provenance; sustainable foods, organic and fair trade.
• There will be a back to basics trend, grow your own food, more family cooking, use basic ingredients rather than ready meals and less willingness to pay for convenience.
• Under financial and moral pressure consumers will find ways to reduce food waste (30% of food bought currently ends up thrown away).
• People will switch more of their shopping to discount outlets and local shops reducing both prices and transport costs.
• People will eat out less and consumers will switch to more take outs
• Concern over climate change will affect what people buy.

A lot of these statements make sense and some may well happen, but remember they are either subjective or a prediction.  Remember that experts may well understand what is going on but their predictions are usually unreliable.  Take a look at our Black Swan blog post to see the potential pitfalls of listening to expert predictions.  We recommend you look at the empirical evidence and come to your own view about how this will affect your business.

Empirical evidence of what is actually happening now (data to May 2008)

• The polarisation of markets continues whereby the strongest growth is happening at the top and bottom of markets.  The highest growth rates are in premium added value and low price segments whilst the middle gets squeezed.
• In Grocery the strongest growth % rates are in discounter stores (Lidl, Netto) and internet grocery deliveries.  The biggest absolute cash growth is happening in megastores situated out of town.  However, this is not a feature of the downturn.  These trends are long term and have not yet changed in 2008.
• What has changed in the downturn is lower sales in eating out, clothing, household appliances and furniture.  Other sectors including holidays remain resilient.
• OL share of total grocery has not increased for 5 years and as yet there is no sustained trend for own label to increase its share.
• The % of volume that is offered on promotion has gone up sharply and this is more about multi-buys than price reductions except in Tesco who focus more on price reductions
• In 2008 consumers are making fewer big shopping trips, shoppers spend per basket is down and there is less promiscuity between retailers.
• Consumers are claiming to be influenced more by a number of ethical issues, CSR, environment, fair trade, food provenance etc.  Anecdotal evidence of sales growth in products with these claims suggests this is true.

What insights can we translate from this (whilst avoiding predictions)

• Consumers are under financial pressure and are adjusting spending behaviour, but they are choosing carefully where to make the changes.  Indulgences and treats remain important, but consumers selecting which ones matter most (quality food and holidays seem to be doing well).
• The fundamentals of what consumers want (the power drivers of choice) remain the same in slowdown or boom.  The mega trends of health, convenience, naturalness/food provenance and ethical concerns remain in force and continue to be the main sources of growth in markets.
• There is no sign of a flight from quality.  There is some smart shopping to get and be able to afford the quality (promotions, discounters, local sourcing).

Translating insights into action

Reducing waste is an insight that could offer opportunities.  We know consumers are making more frequent shopping trips.  This could correlate with reducing wasted food.   The other area of waste that is an environmental issue is packaging.  May be helping consumers reduce waste could offer opportunities for innovation.

Nielsen recently quoted a survey stating that the top 20 innovations have all been about packaging, format and convenience.  As marketers are we smart enough to come up with packaging formats that reduce waste and have less environmental impact whilst still delivering the merchandising impact and consumer convenience?  It must be worth a try.

The Growth Game takes these guiding principles of getting and translating insights into the practical steps for growth. The process rests on empirical observations and measurement and is all about engaging the business team to create practical and credible ideas.  To find out more take a look here

How do you know what is important to customers?

Why is it that once we walk through the door of the business each day we are programmed to want customers to believe that what we are doing is the answer to their problems and that the features and benefits of our products will be important and useful to them.  Suddenly the world seems to be centred around the products and brands that we sell.

Somehow the corporate mission or our own ambition can blind us to insights we acquire every day.   As we spend our home and shopping lives being customers and making choices between products we can develop a good understanding of what it means to be a customer.  We can understand what is important and how trivial or important different decisions are to us.

I have been reading Nassim Nicholas Taleb's book, The Black Swan,

The Black Swan: The Impact of the Highly Improbable

See our discussion  click here   

He has been reminding me how easily we can get persuaded by the "narrative" explanations that exist within the business.  How easily we tend to seek confirmation of what we would like to believe in the anecdotes and events around us.  How difficult and more challenging it is to rigorously assess the evidence. 

How do you deal with this?

As a successful business person you know you must cut through this and you should understand what is important to your customers.   

But how much time and money do you devote specifically to find out what is really important to customers so you can act on it?   And if you do spend time on it, what is the best way to discover what is important to our customers?

But you may be thinking that you already know what is important to customers.  Why should you invest more money and time in finding out what is important to customers.  Just stay with us for 2 more minutes reading this ezine and we will give you the chance to assess whether you have done enough.

What we have found

We have frequently observed in project after project and study after study is that successful business people do know a lot about what is important to their customers.  Especially sales people who are talking regularly with customers and marketers who choose to spend time listening to consumers.

We have noticed that the managers in the business tend to get it 80% to 90% right.  Which sounds great.  And would that we could get everything 80-90% right!  But the problem is the thing you miss out or get wrong is often the important attribute feature or benefit that could make all the difference.

Here are some examples from our own studies

Examples where managers think something is important but consumers think is less important than other things

Healthy snacks - less than 3% fat, not embarrassing to eat in public
Gardening - used by professionals, use less peat
Reinsurance - can offer independent advice, harnesses innovation.

Examples where consumers think something is important but managers did not spot it

Healthy Snacks - is a satisfying eat
Gardening - Is attractive to wild life, forgives me if I forget to water it.
Reinsurance - Flexible to my needs, fixes problems rapidly

How can you know what is important to customers?

Inevitably the most straightforward answer is to ask them and we would be the first to say that asking them in any form is better than not asking them.  But there are a few pointers that we have learned.

• We have found the concept of an attribute is valuable to help distinguish what is more important or less important
• Don't get too tangled up in whether the attribute is a feature a benefit an emotion or an image, it does not matter.  What matters is which attributes are important
• Ask the customers/consumers to help you prepare your list of attributes.  They will often come up with some attributes that you did not think of.
• A third party conversation is more likely to reveal the truth, if you have a relationship with your customers, this can get in the way of a truly transparent conversation.  On line or paper survey tools can also do this very well
• Plan the approach so you do not lead them to give you the answer you want to hear.
• Ranking attributes from 1-10 or 1-20 is more revealing than asking for a score on a scale where 1 is not important and 5 is very important.

Attribute importance is a fundamentally important part of helping our clients understand how customers make choices between brands.  The really useful concept of Power Attributes is based around what is important to customers and how you can differentiate yourself to them.

You can download our paper on this click here

You can see our website discussion on this click here

You can see our case study examples click here

You can see our blog posts on Power Attributes click here

King Canute, ITV, BA, Easyjet, Google and Zopa

I have lost count of the number of times I have sat in meetings where King Canute reigned and new ideas were put in the trash can because of the risk that they would substitute the existing sales in the business

Meanwhile, some-one else bowls a long, creates the idea and the sales substitution is done by new competition.  The traditional business is left struggling to catch up.

Remember when ITV dominated ad spending and took more ad money than anybody else?  But see what happened last year

An analysis for The Times shows that Google generated £327 million in advertising between July and September, compared with an estimated £317 million for all of ITV1 across the UK during the same three-month period.

10 years ago just think how inconceivable it would be to suggest that on airline selling low cost seats on the internet would be the dominant short haul airline out of Gatwick.  Now Easyjet dominate short haul rather than BA.

Who could have predicted that strangers would trade and trust each other through their computers.  Many retail markets declare their growth or declines and this often excludes substantial trading volumes on Ebay and Amazon and elsewhere that are not tracked by conventional stats.

Growth orientated marketers need to be looking for new ideas to stay ahead and not be afraid to compete with themselves and create new approaches to conduct their business. 

So what are the next markets that will be transformed or at least attacked ny New Internet models.  I cannot be sure these will succeed but they are all doing something very new that could transform the way markets work.

Savings and investments     http://uk.zoba.com

 

Book buying and borrowing   www.bookmooch.com

Travel guides and hotel bookings  www.world66.com

Book and media publishing     www.lulu.com

These are all ideas that have long legs and real depth.  They are not a retail concept slapped onto the internet.  They do things that only the internet can do by using information and communications.   The have identified a real customer problem and they are solving it.

Lulu - self publishing is so expensive

World66 - how to find out what normal people think (not massaged by journalists or promoters)

Bookmooch - what to do with my old books?

Zoba - banks tend to rip me off and cannot be trusted

Whether they succeed will depend on many things, not least how well they are executed and whether people are ready for these radical new ways of doing things yet.  But the traditional industries they are attacking have to decide if they want to end up struggling like BA and ITV and EMI or if they are going to embrace a whole new world.

For us we need to keep an eye out for new models that attack our business.  or even better stay one step ahead and spot the opportunity.  In the language of the Growth game, if you know the Power attributes of your customers, then you will know what they want that traditional businesses do not supply.  So go find out about your customers' Power Attributes

How much do you help your customers through the tyranny of choice?

Two experiences in the last 24 hours have  prompted me to think about why less is often more.   What a relief it is when a supplier, manufacturer or retailer helps you to find your way through the amazing choice of products and services that confront us these days.

The first was when I was in B&Q today.  They offer a massive selection in the core home and building products, but have more limited choice in the Garden Centre area.  As some one with a limited appreciation of gardening and in search of quick convenient solutions, this proved to be a huge relief.  Their range was not just limited but very well selected to cover all the task and needs and presented in a way that made it easier to choose.  Three powerful attributes seemed to make the range work.

1.  Limited to a size I could survey and understand
2.  Covered all the tasks and needs so there was something to address each issue
3.  Merchandised by task and clearly explained how to choose.

I have to say my foray into the bathroom and kitchens section was more dazzling and confusing as the choice expanded.

These thoughts on choice were forcefully echoed by some consumers in research groups last night who when examining the array fo products available in the category we were exploring, made a straightforward and simple appeal.

Please simplify our choice, tell us what the product does for me, what type it is and put a window on the front so I can see what is inside.  All this other technical detail can go on the back.

I am sure that offering people manageable choices and helping them choose can be turned into a Power Attribute and can be used to differentiate your offer wherever you do business.

So could you do more to help your customers through the tyranny of choice?

£4.99 or £5.17 or £4.83 - which is better?

I came across this paper today. 

Title:
Do Consumers Perceive Precise Prices to Be Lower Than Round Prices? Evidence from Laboratory and Market Data

Authors:
Manoj Thomas, Daniel H. Simon , and Vrinda Kadiyali

Here is the summary of the findings

In considering price tags, do consumers perceive round numbers to be larger or smaller than precise numbers of similar value? The authors examined the prices of 27,000 homes in South Florida and Long Island, N.Y., and their results showed that homes priced with a rounded number (for example, US$550,000) sold for about 0.73 percent less on average than homes with a more precise price (say, $553,505). Furthermore, the authors found that buyers perceived precise prices to be lower, and were therefore willing to pay an amount closer to the asking price than they were when the price was a round number.

My analysis
People tend to perceive precise prices as less than round prices of similar value. This discovery could have significant implications for buyers, sellers, and pricing strategists in any number of industries.

Marketers have long since believed that £4.99 is better than £5.00.  If you take the conclusions of this report, it may be that £5.17 or £5.42 is much better. 

Further to that, maybe consumers have been well trained to think that £4.99 is really just £5.00.  But what if precise prices like £4.87 or £5.13 are seen as better value? 

This research suggests that precise prices are seen as lower than rounded prices.  they also seem like they might reflect the real cost of the goods rather than being a rounded up to make more money.

Do you promote what you do well or what matters to customers?

If you want to discover the Power Attributes that drive your customers to choose your brand rather than the competition, you have to have start by generating a list of possible attributes.  When we help clients do this, we get the initial attribute list from talking to the customers.  You can only really rely on customers to think like customers.    However, the business team can think of attributes that customers cannot even begin to imagine, so we also get some valuable attribute ideas from the client management team.

We do this through our facilitated workshop approach.  These workshop events often attract a senior audience.   When we work with these knowledgeable and experienced managers we often find that the list of attributes is a list of features or things that the company does well.   But that is not always what we need.  We know that what will be powerful for the customer is a specific benefit or a special way the business helps the customer solve a problem. 

So for example the director of a financial services firm tells us that what really matters to the customers is "we give independent advice",  which we translate  into a more customer focused benefit "has independent advice I can trust", but when we talk to the customers, this is still not good enough, the most powerful attribute turns out to be "makes my business more successful" .

Time after time, we discover that the hot power attributes are all about the customer and the cold attributes are all about the business and the brand.

Experience this week brought this home to me and showed that directors may not always be the best choice when we are generating potential insights about what matters to customers.

In one of our current projects we are trying to discover some Power Attributes in a whole new category for the business.  We ran a workshop this week where we wanted to generate a list of candidate attributes that we plan to investigate with customers.  The investigation and consumer research will establish which attributes are most powerful in influencing customers to choose a product. 

The project is being led by the sales director who helped us bring a fresh approach. Rather than directors, he invited a number of the PA's and front line team to the session and this proved to be an inspired choice.  They seemed to think more like customers and in a more natural way.  As a result, we have come up with a list I am confident is much closer to what customers will suggest.  This means when we do workshops with the customers we are already part of the way there and we will be able to spend time discovering why the attributes are powerful rather than just generating the list.

Our ezine always aims to deliver practical advice, so I would suggest you can take two things out of this When you are thinking about what is important to your customers,

1.    always challenge yourself to think "is this about the brand or about the customer"  I can pretty much guarantee that if it is about the brand it will not be that important to the customer.
2.    go and ask some customers or at least a few "real" people around the office, they might just shed some insight on your thinking.

Our Power Attributes paper discusses how you can come up with this insight in more detail click here

What is an insight? Does it matter?

Insight is a word that is often used, and abused, in business but what does it mean?  You might think that it doesn't really matter exactly what is "an insight".  But since nowadays the claim of insight is everywhere we need to make sure we recognise the real thing, so we confront it when we see it.

 

Insight is when you uncover the true nature of something.  The way things really are or the way the trends are moving.  Sometimes this can conflict with the way the business is today and so it is inconvenient or at least uncomfortable, especially if the business is doing well.  But we know we must confront it, since it it is always an uphill struggle to work against reality.  We can all name once successful businesses that failed to react to changing trends until it was too late.

 

Insight is a breakthrough.   While often "obvious" with the benefit of hindsight, at the time it causes you to stop and reassess how you do things.  There should be a bit of an "aha" moment.   Some of the most powerful insights can come from our own observations and ideas rather than formal research.  For example, the fact that people want "better for you" products is not new news.  We have been involved in developing these types of products in many food and drink markets for nearly 25 years now.  The one thing that we continually see (other!) businesses ignore is the fact that not many people will buy "better for you" if it doesn't also have "great taste".  Once you know you need both you get breakthrough ideas like smoothies.

 

Insight solves problems.  At first an inconvenient insight might seem to create problems based on the way we do business today, but true insight also highlights the way forward and how we might succeed.  Figuring out what is the minimum acceptable level of service for an airline has enabled Easyjet to strip it's business down to the essentials and recently post record profits despite a reduction in average fares and increases in fuel costs.

 

Insight is easily understood and communicated.  People "get it" straight away and easily know if what they are doing is working with or against the insight.  In fact clearly articulated insight helps everyone know whether an idea is a good one or not and so makes decision making much quicker and easier.

   

Insight creates change.  It is relevant to the business today and it's success in the future.  People know they ignore it at their peril. 

 

We have talked previously about the role of the internal entrepreneur in large organisations.  These are people who push their ideas with conviction and energy and don't let obstacles and objections get in their way.  Listen to their insights, give them the tools to create insights and you are half way to creating the growth you need.

Online research offers exciting new possibilities

Stacey and I went to the Insight Show at Earls court yesterday to have a look around and see what new methodologies and developments are on offer today.   We were focused on online research since we have been moving our own tools into the online area as it seems to save cost, allow us to reach new audiences and creates speedier delivery.

But we found consistent with our own recent experiences, the online tools are now moving from being cheaper and quicker to being better and more effective.

One of the presenters, powerfully made the point that the research business has itself to blame for the slow development of online work.  He showed an image of the Amazon website in 1996 and contrasted this with the tools and capabilities of the 2006 version.  Whereas a look at a survey in 1996 showed not much difference from one in 2006.  We are all still putting face to face techniques and paper questionnaires onto a screen.

But things seem to be changing.  We noticed three powerful trends (of which we have used one and are developing the second)

1. Introduction of flash tools to create much more intuitive survey formats that allow respondents to interact with the packs, the brands the images and the films in a way to creates a better and more useful response than can be obtained in traditional ways.
2. Significant developments in the scope and penetration of online panels allowing recruitment of previously difficult to reach markets such as wealthier consumers and business decision makers. 
3. The creation of virtual panels to allow you to have continuous and direct feedback from customers.  This is less structured and might have the purist screaming "unreliable" and "not validated" but the directness can be very powerful.  See Virtual Surveys
4. New possibilities to do qualitative in ways that are quicker easier to view and analyse.

      

Is PJ losing share because it lost the power attribute?

Marketing reported this week that PJ Smoothies have continued to lose share against Innocent. See news report.  The report states that this has happened despite a major revamp to the pack design.

So why is this?  PJ smoothies were the first into the category, they now have the marketing and distribution power of PepsiCo, a range of great tasting products and some attractive new designs.

Innocent have also suffered some adverse publicity in recent months for making excessive health claims about their products.

I suspect the answer lies in the observation that Innocent have commandeered the Power Attribute in the category whilst PJ's seem to have neglected it.

Innocent have made a big play on the fact that they are just crushed fruit and nothing else, whereas a quick study of PJ's bottle reveals fruit juices and concentrates.  This affects both taste and authenticity.  When you combine this relative weakness with the fact that many food service outlets will only stock one brand, it becomes it hard for PJ's to make headway.

This would need a consumer led view of what is important in smoothies to validate it.  But the hypothesis illustrates an important point about understanding Power Attributes so you can ensure your brand is competitive.

I remain astonished at how much discussion takes place in the marketing press about packaging and advertising and how little on whether the fundamental proposition is less attractive or uncompetitive.